Archive for the ‘Economics’ Category.

Google Must Be Destroyed

“Carthage must be destroyed.” Ceterum censeo Carthaginem delendam esse often abbreviated to simply Carthago delenda est. So ended every speech by the Roman senator Cato the Elder in the years between the 2nd and 3rd Punic wars, the latter the final war that finally accomplished what Cato and others demanded. In the years of the Republic from about 400BC to 100BC Carthage was the only power to ever seriously threaten Rome’s existence. In 216BC four years into the 2nd Punic War, the Carthaginian general Hannibal came within a hair’s breadth of destroying Rome by wiping out Rome’s legions at the Battle of Cannae. The Romans hung on and Hannibal lost his chance, but the Romans never forgot the desperation after that battle and statesmen like Cato saw Rome as never being able to rest easy as long as Carthage existed. Cato eventually got his way and during the 3rd Punic War the Romans razed the city of Carthage and sold the Carthaginians into slavery.

Fast forward 2,000 years into the future and we are faced with a different type of enemy, one that does not field armies or own navies yet poses an existential threat regardless. Companies like Google, Facebook and Amazon are amassing hundreds of billions of dollars in profit by brokering information and distorting reality. These modern companies are just as threatening to our freedom as Hannibal’s elephants were to the Romans’. Unless we recognize the existential threat we face and act soon our freedom will be lost forever.

Google Must Be Destroyed

Chances our you’ve done a search for an item you need, say a new pair of boots. Within minutes every website you visit presents ads for boots or related winter gear. By using a “free” search engine like Google you have handed Google another few data points about you. Google knows where you are (unless you are accessing through a VPN - something most people in the USA don’t do), your likely age and sex (by the choice of boots), and your socio-economic bracket (the price range of the boots you searched for, where you searched for them e.g. Walmart.com vs Nordstrom.com). The data points from that one search are collected by Google and added to those from other searches you’ve done. After a few searches Google has a very good idea who you are, what your likes are, what you hate, and more. That more is starting to get noticed.

In a 2015 The Atlantic article “People’s Deepest Darkest Google Searches Are Being Used Against Them,” Adrienne LaFrance points out how using a simple Google search as “need fast cash” can open up the user to potential fraud and financial misery. She writes, “Not only are lenders taking advantage of people in vulnerable financial situations, not only are lead generators sometimes skirting Google’s ad policies and even violating state laws, but companies are sharing individual data in a way that puts consumers directly at risk. All this comes down to the widespread availability and longevity of personal data online.” Google later banned these ads but not before investing heavily in a payday loan startup “LendUp.” A test Google search finds ads still present although interspersed with articles from government regulators and consumer agencies warning about their dangers.

Former Secretary of Defense Donald Rumsfeld was pilloried at the time for the following quote: “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.” Those who work in the IT field recognize the genius of this quote. The first things you can fix. The second things you can prepare for. It’s the “unknown unknowns” that keep sysadmins and designers awake at night.

In short we don’t know what we don’t know, and by manipulating and censoring search results Google is in fact manipulating reality. In “The New Censorship” Robert Epstein examines the methods Google employs to censor voices it disagrees with such as manipulating the auto-complete results, altering images displayed in Google Maps, and demonetizing YouTube videos its employees find offensive.Epstein writes, “If a librarian were caught trashing all the liberal newspapers before people could read them, he or she might get in a heap o’ trouble. What happens when most of the librarians in the world have been replaced by a single company? Google is now the largest news aggregator in the world, tracking tens of thousands of news sources in more than thirty languages and recently adding thousands of small, local news sources to its inventory. It also selectively bans news sources as it pleases.”

But his biggest complaint is Google’s usage of a site blacklist which even competing search engines use. Epstein writes, “When Google’s search engine shows you a search result for a site it has quarantined, you see warnings such as, “The site ahead contains malware” or “This site may harm your computer” on the search result. That’s useful information if that website actually contains malware, either because the website was set up by bad guys or because a legitimate site was infected with malware by hackers. But Google’s crawlers often make mistakes, blacklisting websites that have merely been “hijacked,” which means the website itself isn’t dangerous but merely that accessing it through the search engine will forward you to a malicious site. My own website, http://drrobertepstein.com, was hijacked in this way in early 2012. Accessing the website directly wasn’t dangerous, but trying to access it through the Google search engine forwarded users to a malicious website in Nigeria. When this happens, Google not only warns you about the infected website on its search engine (which makes sense), it also blocks you from accessing the website directly through multiple browsers – even non-Google browsers.” Epstein found his hijacked website was blocked by other browsers because these browsers were using Google’s blacklist to censor their own results.

Not only was Google manipulating the Internet through its browser, but it was also manipulating the Internet through competing browsers as well through the shared information. Epstein writes, “You may disagree, but in my view Google’s blacklisting practices put the company into the role of thuggish internet cop – a role that was never authorized by any government, nonprofit organization or industry association. It is as if the biggest bully in town suddenly put on a badge and started patrolling, shuttering businesses as it pleased, while also secretly peeping into windows, taking photos and selling them to the highest bidder.”

Earlier this week Google was sued by two former employees for being fired for their conservative views. On January 9, 2018 Bookworm Room posted internal messages of Google management discussing the internal memo by James Damore questioning Google’s Diversity Hiring program. She writes, “The complaint explains that Buckley holds a high-ranking “SRE” (Site Reliability Engineering) position. If you think he doesn’t have a say in content, I’m sure he and those who work with him will differ. By the way, proving as did Altman that it’s not just American academia that’s insane, Colm is an Irish Social Justice Warrior, hailing from Trinity College, Dublin.” Here’s one of Buckley’s messages:

https://i1.wp.com/www.bookwormroom.com/wp-content/uploads/2018/01/Google-on-tolerance-and-intolerance-2.jpg

James Damore’s and David Gudeman’s lawsuit isn’t the only one Google is facing. In October conservative radio talk show host Dennis Prager filed suit against Google for the demonetizing of his YouTube videos collectively known as “Prager University.”

The New Surveillance Age

Since 2016 Google has released a series of appliances that allow hands-free querying of the Internet. Collectively known as Google Home these devices incorporate microphones to listen for the command “Hey Google,” followed by a question. The device then searches the internet and provides a spoken response. Apple was the first to come up with the spoken search/response application “Siri” on its iPhone in 2011, moving to stand-alone products known as “HomePod” in December 2017. In 2014 Amazon released the stand-alone speaker “Echo” using its Alexa search service. Although these devices are keen to emphasize their utility by using the term “speaker” or “smart speaker” to suggest the information is delivered to the user, they do not highlight these devices are always listening. The microphones in these devices are always on, although the software will only interact with the user when a key phrase such as “Alexa”, “Hey Siri” or “Hey Google” is used. In effect people are allowing their conversations to be monitored 24/7 within their own homes.

Would you allow a CCTV camera to be installed within your own home and pointed at you and your family at all times of the day? Would you allow it if Google or Amazon promised to allow you to order an item with a wave of a hand? In effect we have traded our freedom for convenience without appreciating the consequences. A friend related before Christmas how her 11 year old daughter used one of these appliances in a clever way. “Hey Alexa,” the girl said, “Tell me all the orders you’ve received over the past month.” The device dutifully listed all Amazon purchases, telling her all the presents her parents had purchased for her from the shopping site. If an 11 year old can game the appliance for her own benefit, imagine the ease a hacker of government intelligence service will have when these devices are ubiquitous.

While Google and the other makers of these appliances have promised to protect privacy, they have shown themselves to be lousy stewards of it so far. It’s true that we’ve had similar devices in our pockets for years. After all Siri’s been around on iPhones since 2011 followed in 2012 by Google’s “Google Now” assistant on Android handsets. Just because we aren’t aware of a danger doesn’t make it non-existent. There is nothing stopping a determine hacker or government intelligence agency from activating a microphone on a phone or appliance and transmitting a conversation. How long will it be before a Federal indictment against a mob boss using such a tool? I don’t worry about the usage of this tool against terrorists or mafia members. I’m worried about the usage of the tool by Google or Amazon to add to their data points for directed advertising.

Imagine a situation where you are in your kitchen with your significant other and you suggest replacing your old counter top. Then you log in to your computer to start your search only to find Amazon advertisements and Google searches pushing counter tops already there. How did it know you were interested in counter tops before you started searching? Now imagine talking about Glocks, pressure cookers or abortion and the possibilities become much more sinister. How would you prove this was happening?

Of course the companies claim they have safeguards in place to protect your privacy. But laws have not caught up to this technology and without laws and punishments in place there is nothing to stop a company like Google changing its policy. History has shown that whenever the means are available a company will exploit them for profit unless the fear of discovery and punishment outweighs the potential for profit. Ask Wells-Fargo.

Google’s parent holding company Alphabet is now one of the largest companies on the planet. Google controls a staggering 90% of all searches and as shown by Dr. Epstein’s discovery has a hand in controlling the remainder. If Google sold cars or electricity it would have long ago been broken up or regulated as a utility. So far it has avoided all attempts at federal control no doubt due to its status as top lobbyist on Capitol Hill. While other companies like Amazon, Facebook and Twitter should also face anti-trust scrutiny – and Amazon is finally seeing some after its purchase of Whole Foods – Google stands out for the danger it presents to average Americans who rely upon it for its search engine, email and mapping applications. As a conservative I’ve tried to boycott Google for its treatment of Damore and blacklisting of conservative websites. It’s not easy, and based on what Epstein found it may be pointless anyhow. The only solution is lawfare.

After the 3rd Punic War Rome was unchallenged in the Mediterranean for the next 500 years, and its golden age had begun. The threat by Google to our freedom is just as real as Carthage was to Cato’s Republic. It is time to end the dominance of Google for our own privacy and the future of a free Internet.

Google must be destroyed.

Update: Feb 4, 2018: Kevin Carty, writing at the New York Post, “Tech Giants are the Robber Barons of Our Time“:

“This means that the antitrust lawyers at the Justice Department and the Federal Trade Commission can use their existing powers to go after the biggest tech platforms.

US antitrust enforcers have all the power they need to resume the trust-busting that freed Americans from companies like Standard Oil and plutocrats like J.P. Morgan. They just need to use that power, now.”

So How Are the Philadelphia Eagles Doing This Year?

For the first time in over 20 years I don’t have any idea, nor do I care. I grew up watching football and playing street games of it. I lost interest in high school and college years, but eventually came back to the sport after returning to the USA after living abroad. Living outside of Philadelphia the Eagles were my team, and I followed the team zealously through the Andy Reid years including the disaster that was the Super Bowl appearance in 2005. In 2013 I wrote, “But every season the game seems to lose some of its appeal. Maybe there are too many penalties in an attempt to make the game safe. Maybe it’s because I’m growing older and have seen some pretty bad things happen to people. Maybe it’s because I’m just turning into a big pussy. But there’s only so many times I can see a player get hit and lay motionless on the ground while holding my breath before I begin to think something is wrong both with the sport and my enjoyment of it.”

For several years I ponied up several hundred dollars a season to the NFL and DirecTV for the NFL Sunday Pass, but as the CTE scandal grew I eventually dropped the package before quitting satellite completely and becoming a cord cutter. As I wrote in 2014, “The NFL has denied the existence of CTE the exact same way the tobacco companies denied cancer caused by smoking. Recently the league has pushed the problem into the future by calling for “more study” just as the cigarette companies called for further research on lung cancer when the Science behind the causative link between smoking and lung cancer was unequivocal. What they’ve done is criminal but not surprising given the amount of money league owners have invested in the game.”

I quit watching the sport because of conscience, but I still read about it and followed the Philadelphia (and Dallas) newspapers to read about the Eagles and their dreaded rivals the Cowboys.

Then Colin Kaepernick and his protest against black oppression happened and spread through the league. Now millionaires were protesting against the very nation that gave them the opportunity to become wealthier than nearly everyone else in the country. And their billionaire bosses supported them.

What originally had been a matter of conscience became like so much these days political.

So poof! A lifelong interest in the sport is snuffed out completely. Perhaps the Eagles can pick up fans from Antifa, Code Pink, or the Democratic Underground.

I think my Euro-centric friends are right: soccer is much more interesting.

The US could definitely fund a single payer healthcare and free college for all. Should it?

Your question combines 4 questions:

  1. Can the US fund a single payer healthcare system?

  2. If it can, should it?

  3. Can the US fund college for all?

  4. If it can, should it?

Let’s start with question #1 first: Can the US fund a single payer healthcare system? California, the largest state in the USA has a single payer healthcare system plan. Unfortunately this plan has gone nowhere. Why? Because the state cannot figure how to afford it. Single-payer healthcare could cost $400 billion to implement in California


The population of California is roughly 40 million and the US is 325 million. So extrapolating from California’s numbers, the cost for single payer to cover the entire USA would be about $3.2 trillion.


Here’s President Obama’s proposed budget for 2017.



Single payer healthcare would cost the country 3/4ths of the existing budget.


So to answer question #1. Can the US fund single payer nationwide? Not really.


Question 2: Should it? Having experienced single payer and socialized medicine first-hand I have to say that if the US could afford it, it should.


Many in the USA have idealized these systems to the point of absurdity. The poor still suffer worse care than the rich under these systems, and Americans have gotten spoiled with access to high-tech tests for minor problems and short waits that would disappear under these systems. But given the car-crash-in-slow-motion collapse of the current system I believe single payer is still worth considering.


Question 3: Can the US fund college for all? Bernie Sanders’s plan for free tuition to students of households making under $125k/year would cost $47 billion a year Here’s how much Bernie Sanders’ Free College for All plan would cost


That amount is a literally a drop in the bucket of a $4.2 trillion a year budget. Sanders proposed levying a “speculation tax” on Wall Street to help pay for it.


Can the US afford it? Yes.


Question 4: Should it? An underlying assumption of those supporting free universal college is that everyone benefits from the experience. Even in countries that have free or low cost college people recognize that not everyone must have a bachelor’s degree to become a contributing member to society.


In Germany 60% of students do not attend college after high school and instead go into vocational schools where they learn specific skills that are demanded by German employers. Called “dual training” these students become apprenticed in fields such as advanced manufacturing, IT, banking, and hospitality. Why Germany Is So Much Better at Training Its Workers


Should it? Not as envisioned by Sanders and current supporters.


Most of the benefits would go to students who already can afford it, so this government program would be yet another federal subsidy to the wealthy. It would likely contribute to growing inequality, the exact opposite of the intent of many supporters.


Americans and American employers are increasingly concerned that American higher education is failing to provide the skills students need to succeed in the workplace. Kevin James, a research fellow with the Center on Higher Education Reform at the American Enterprise Institute who researches American colleges, writes in US News, “(I)t’s becoming increasingly clear that the system often fails to deliver the high-quality educational pathways that many students need to be successful in the modern workforce. For example… a recent Gallup-Lumina Foundation survey found that only four in 10 Americans agree that colleges are changing to “better meet the needs of today’s students.” Only 13 percent of respondents felt that college graduates are “well-prepared for success in the workforce.” https://www.usnews.com/opinion/k…


Americans need to wake up to the reality that not everyone is college material and that’s okay. Reviving interest in the trades and developing a “dual training” system like Germany would be a prerequisite before universal funding should be considered.


Both the health care and higher educational systems are in desperate need for reform in the US. But making them “free” is not the solution for either.


 

The US Healthcare System Woes: It’s Complicated

I participate at Quora where I answer questions about ancient Roman history and Japanese culture, two of the great loves of my life. Quora is a multi-national forum where people can ask questions and post answers about almost anything. Most of the users are Americans but there is also a strong Chinese presence, and quite a few people ask questions about American life, culture and politics. While I tend to ignore political questions, occasionally I’ll find a question about other topics that interests me, and today one came up about the American healthcare system.

Regarding Universal Healthcare, why is it not in America’s national interest to have a healthy population, even if it means they will pay less to have it?

I don’t think anyone is arguing that Americans don’t want better healthcare at a lower cost for everyone. What we are arguing about is what system we want and more importantly, how to get there from here.

 

(Detailed chart: healthcare_system_chart_1356×1049 ” Icosystem)


What non-Americans and many Americans don’t realize is just how screwed up our system is. Most don’t realize it’s not a single system. We have Medicaid for the poor, Medicare for the elderly*, VA health system for veterans, the Indian Health System on native American reservations and private group insurance for everyone else. Then each state has a say in how Medicaid and Medicare are administered with significant differences between each of them.


Then we have the stakeholders.

  • Employers which have an interest because private group insurance is tied to employment unlike most countries in the world.

  • State governments whose priorities are different than the federal government because unlike the feds the states must balance their budgets.

  • Federal government with its own priorities and oversight of the entire structure with specific control of the VA and IHS.

  • For profit and non-profit insurance companies which have to keep the lights on by taking in more in premiums than paying out in reimbursements.

  • Medical providers like doctors and nurses who have to balance care for their patients with paying their bills.

  • Medical device manufacturers whose profits depend on purchase of their output.

  • Pharmaceutical companies whose bottom line depends on the consumption of drugs in the US and the subsidy of US drugs abroad.

  • Malpractice attorneys who reap billions in fees in lawsuits against medical providers, device manufacturers and pharmaceutical companies.

  • For profit health systems whose bottom lines depend on maximizing payments from the insurance companies and minimizing expenses from the medical providers, device manufacturers and drug companies.

  • Healthy individuals who don’t see why they need to pay for services they don’t need.

  • Sick and elderly individuals who are consuming health care services.

That’s about all I can come up with. I’m sure there are more. Each one of these groups has a lobbying group that argues on their behalf to the other stakeholders, especially state and federal governments.


So pick any system you want and ask yourself, “How do I get to this system from the current one?” Any system you pick will require impacting one of the above stakeholders, and they are going to fight it, change it and make a hash of it to the point where your original ideas are all gone.



And that’s where we are today.


*Just to add to the complexity, note that the elderly will switch from Medicare to Medicaid once their benefits are exhausted. This commonly happens after seniors have been placed into nursing homes. The cost of these facilities is staggering – more than the cost of most 5 star hotels – and quickly exhaust an average senior’s Medicare benefits. At that point they have to switch to Medicaid. The problem is that many skilled nursing facilities have limited slots for Medicaid seniors, and there are usually waiting lists – meaning that most seniors have to return to the care of their loved ones who often lack the skills and resources necessary to care for them.


No one is happy about this system. But we feel as if we are trapped without hope for true change.


 

Cord Cutting 2017

Back in Dec 2015 I wrote an update to my experience cord cutting, ending my subscription to DirecTV having cancelled my service in June of that year. Here’s an update.

So approaching two years of living without DirecTV or cable television. So how do I feel about that? Do I miss commercial pay television? That laughing you hear over the Internet is me. Having spent roughly $7,000 on pay TV till that point I reckon that since June 2015 I have saved roughly $60 a month, or over $1,300, and I still watch a ton of TV. I currently subscribe to Amazon Prime, Netflix, Hulu (although I’m about ready to ditch it), HBO Now, Acorn TV and recently added Crunchyroll for Japanese anime and drama all via a Roku 3. I probably watch an average of 3 hours of TV a day, less than most Americans, but what I do watch is much better quality, shows like Grimm, the Walking Dead, The Expanse, plus a slew of Japanese stuff that you cannot get anywhere but Crunchyroll.

Cutting the cord changed my viewing habits. I used to leave the TV on for company but replaced it with streaming music from Pandora. When I was bored I’d watch Discovery Channel but now I do other things. So when I sit down to watch TV it is to watch something good, not to avoid boredom. That wasn’t my original intent when I cut the cable, but it is a perk.

There is danger on the horizon. I’m discovering new streaming channels, so it’s only a matter of time before much of the cost savings is eaten up by new streaming offerings. For example I’m looking for more Japanese TV subtitled in English, and worst of all there is a competitor to Acorn TV for British shows that just started up, Britbox. There’s always plenty to watch even for a niche viewer like me who is hooked on Japanese dramas and British comedies.

Oh and DirecTV? I still get junk mail from them every few weeks with the same stale offer, return to paying $100+ a month for stuff I don’t watch and they’ll give me a $200 Visa gift card. Woo-hoo! Not. Ain’t happening and I really regret the holes in my roof caused by the satellite dish that remains there, gazing at the southern sky, slowly rusting away.

5/3/17 Update: Cord Cutting spikes fivefold. Welcome to the future!

United Airlines Forgets Capitalism Beats Up Passenger

Social media is ablaze with video taken of a United passenger being forcibly removed from an overbooked flight to open a seat for a United employee.

The video inspired this new United commercial by Jimmy Kimmel:

I understand that airlines need to be profitable and overbooking is a necessary evil. The airlines follow the best solution: pay a passenger to give up their seat. Evidently on this flight United personnel offered $400 + hotel, then doubled that to $800 but no one volunteered. United’s mistake was to stop there.

Offer enough money and someone will take it. There were 70 passengers on the flight. Would a $1,000 + hotel have convinced someone to volunteer? If not how about $1,200 or $1,500? Everyone of those 70 people had a dollar figure they would have accepted for the inconvenience of being stuck in Chicago for another day.The next flight was 22 hours later (why didn’t United offer to book the passenger on another airline? Was that really the next flight or the next United flight?) which is a considerable delay for most travelers but for the right price someone would have taken the cash.

United had an auction on their hands, the staff just didn’t realize it. They quit bidding before hitting the lowest price a passenger was willing to accept for another day in Chicago. Had they raised the offer by $200 increments they likely would have found someone quickly. $800 is pretty tempting to me but offer $1,200 airfare to Italy and I would have been off that plane and in a deep dish pizza restaurant, no beating necessary.

The problem is that United forgot that we live in a capitalist society. Airlines including United have been coddled since 9-11 by the government and have operated as a monopoly that competition is no longer in their DNA. When the capitalist tool of cash appeared to fail the United personnel immediately resorted to state sanctioned force in the form of the police. United is a private corporation and that knee-jerk resort to force over cash is what troubles me most about the incident. United acted like Aeroflot during the Soviet days instead of a competitor in a free market.

Every problem doesn’t need the involvement of Congress, but the problem this incident highlights is due to government intervention in the market. The federal government has limited competition in the US domestic market from foreign airlines to protect US airlines. Since deregulation in the late 1980s the US has gone from dozens of domestic carriers to just three. Foreign carriers are allowed to fly from domestic US airports to foreign destinations but are forbidden to fly from one US city to another. Allowing foreign airlines to fly routes like Chicago to Louisville would shake up Delta, United and American Airlines and discourage such heavy handed behavior as seen on that United flight. UK-based carrier Virgin Airlines bans overbooking so the incident never would have happened on one of its flights.

US airlines have forgotten how to compete. It’s up to Congress to act and allow foreign airlines to teach them in their home market.

Our Miserable 21st Century

Our good friend and fellow Watchers council member The Glittering Eye alerts us to a must-read post at Commentary magazine that explains why Americans feel their country is on the wrong track. “So general economic conditions for many ordinary Americans—not least of these, Americans who did not fit within the academy’s designated victim classes—have been rather more insecure than those within the comfort of the bubble understood. But the anxiety, dissatisfaction, anger, and despair that range within our borders today are not wholly a reaction to the way our economy is misfiring. On the nonmaterial front, it is likewise clear that many things in our society are going wrong and yet seem beyond our powers to correct.”

It’s a must read.

For generations Americans came to expect a rising standard of living. But the jobs that provided that for those without a college degree are pretty much gone, and the college degree itself has become increasingly expensive and its value debased. Many of the same trends that gutted the manufacturing sector such as offshoring in search of cheap labor and increased mechanization are now moving into the service sector. For many Americans it has become a Red Queen’s Race to maintain their current lifestyle, often they often resort to credit to do so. For others their standard of living is in decline and they know it.

Then there are the young, facing college degrees that cost well into the six figures which deliver incomes only into the middle five. Education was always the “ace in the hole” for Americans, but while degrees are used to weed out candidates, unless they are in very specific niche fields they rarely justify the expense to obtain them.

I am middle aged, married and by most measures comfortable. Yet I have no retirement savings, I am still paying off my wife’s medical school loans, and I worry about the job prospects of our adult child. I feel like ours was the last generation to advance up the ladder through conventional means (hard work, sacrifice and education) and that after we arrived someone pulled the ladder up behind us.

How are people now in their teens and twenties supposed to succeed if their aren’t any well-paying jobs?

Of course there will always be entrepreneurs like Steve Jobs, but we can’t be a nation of Steve Jobs especially when Apple is the biggest company in the USA yet employs less than 70,000 people here. We need the equivalent of the old manufacturing companies that employed hundreds of thousands of people at salary levels that would be well into the six figures by today’s standards.

Sure the stock market is reaching highs, but most people don’t own stock and most that do can’t touch that wealth until they retire. Will it still be there when they do?

Americans know something is wrong, but we haven’t put our fingers on exactly what yet, and even when we do it’s not clear to me what the solution is.

How do we employ millions of people at $100k a year or better? I have no clue and neither do any of the Nobel prize winning economists.

We are entering uncharted territory. It is possible that the gap that has become a gulf between the wealthiest and the rest of of us will continue to grow, in which case the only solution might be some form of redistribution. But the wealthy are very good at protecting their wealth and can move it as a last resort should the less well off demand “their fair share.” Raise taxes on the wealthy and their money will disappear in the blink of an eye.

As an American I am supposed to be optimistic about the future, but I’ve seen too many smart people make stupid decisions that make things worse for everyone to be anything but pessimistic.

The Failure of the Davos Globalist Elite

When did people start believing that “buy American” and thinking about America first were bad?

Countries already worry about their own first. They enter deals which benefit them or their people. The Japanese enter trade deals because it creates jobs and improves the lives of the Japanese. The Chinese do the same as do the Russians. Most countries already have laws that encourage governments and their citizens to buy their own products. It’s naive to think that countries don’t put the interests of their citizens first.

What globalization proponents have failed to do is to explain how trade with other nations benefit a specific country. Free trade is supposed to be a benefit to all participating countries, not a zero sum game where one country wins at the expense of another.

Globalization proponents have failed to fully appreciate the devastation to workers and their communities when factories and businesses move abroad. This is because within a trading country free trade is a zero sum game: there are winners such as the Silicon Valley billionaires and consumers who pay less for products, and losers, such as factory workers in the Midwest and South. Many globalists don’t have any contact with or understanding of the lives of these people. For them it’s an academic argument “there will be winners and losers in the economy blah blah blah” but for a person working at the factory it’s the center of his or her existence.

For twenty-somethings with college degrees it’s easy to switch careers. For people in their forties and fifties who have mortgages, children and elderly loved ones to support, and car payments it’s nearly impossible. We haven’t found a way to take a laid off middle aged factory worker in the Midwest and train her with new skills that will immediately pay the same or more than she is currently earning in her factory job. When factories close workers usually end up finding jobs earning half of what they previously earned. The trickle down effects of this can be seen throughout communities in the South and Midwest.

Those who have suffered from globalization have found little support from the major parties. Democrat Bernie Sanders recognized them as did Republican Trump but the ruling elite of both Democrats and Republican is controlled by globalization forces. Democrats like Hillary Clinton and Republicans like Jeb Bush have supported free trade and immigration policies that have crushed the working poor. Only Sanders and Trump appreciated their plight.

If we are to maintain a free trade globalist system we must come up with a means of redistributing wealth from the winners to the losers within a country. But so far this has been completely ignored by globalists meeting in Davos Switzerland. “People talk about inequality, how it’s a major problem, the greatest threat to globalization and the global economy,” (Nobel Prize wining economist Joseph) Stiglitz said. “You have to recognize that the way we have managed globalization has contributed significantly to inequality. But I have not yet heard a good conversation about what changes in globalization would address inequality.”

Redistribution of wealth is instinctively hated by libertarians and conservatives, but the Left has remained silent, refusing to confront their globalist allies in Silicon Valley, Hollywood and New York. Free Trade has been oversold to citizens. It’s not perfect and it does damage lives. Unfortunately the ruling elite hasn’t figured out how to fix that damage and support those who lose their jobs by confiscating wealth from the few winners and handing it to the millions of losers in an economy. Until they do it will be populists like Trump, Farage and Le Pen who will write History.

Oh the Taxes You’ll Pay

Here in the US tax season has begun and my inbox is getting cluttered with offers from tax software companies. This got me thinking a depressing thought: What are all the taxes we pay, and how much do they take?

Federal income tax is the big one. Depending on your earnings you will pay between 10% and 39.6%.

FICA is a federally mandated wage tax comprised of Social Security tax (6.2% on first $127,200) + Medicaid tax (1.45% on the first $200,000). If you are employed as a W-2 employee your employer will deduct these taxes out of every check you earn. In addition the employer pays the same amount (6.2% + 1.45%) as their share of FICA to the IRS.

Then there are state income taxes which range from none in several states including Texas, Nevada and Washington to 13.3% in California. Full list here.

Localities such as cities and some counties have income taxes. For example, if you live inside the city limits of New York City you pay between 2.9–3.4% income tax. Source.

If you own a home you will pay property taxes based on the value of your home. Hawaii charges the lowest rate, 0.28% and homeowners in New Jersey pay the highest, 2.29%,

Then there is personal property tax which is levied by states and counties on property such as vehicles. These taxes are usually collected when vehicles are registered.

We also have sales taxes. Delaware and New Hampshire don’t have them but most states tax sales of goods and services and sometimes food. In my state the tax rate on food is 2%, on everything else 7.7%.

“Sin taxes” are extra taxes placed on the sale of alcohol and tobacco products to make them less appealing to buyers and to help recoup some of the costs these items place on society. In many places the taxes are the biggest component of the cost of cigarettes and hard liquor.

And if you drive you’ll pay gasoline tax which has both a federal and state component. These range from $.30 to $.70 a gallon depending on where you live. Think you can get around these taxes if you drive an electric car? Think again. Several states have implemented taxes on electric cars.

Here’s a summary:

Zerohedge has a list of 97 taxes Americans pay. For conservatives it makes for depressing reading but I bet it makes liberals positively giddy.

Keep Calm and Carry On

Over the past few days we have witnessed the aftermath of the Brexit vote. Stock markets have plunged and the British Pound has lost 12% of its value over two trading days. Ratings agencies have downgraded the UK from AAA to AA, to say nothing of the hysterical reactions by the the European ruling elites and their Remain camp supporters. Rachel Maddow is not even a Brit but that doesn’t stop her from claiming Brexit will lead to World War 3, and livid commentators both British and European are saying things like “Some things are too important to put to a vote,” and “Democracy doesn’t work.”

Some things are too important to put to a vote when that some thing is your pet project. Democracy doesn’t work when votes are cast and you lose. The meltdown of the progressive transnational elite isn’t surprising to those of us who have raised kids. It’s nothing more than a toddler laying down in the aisle of the grocery store to have a fit when you refuse to buy him a breakfast cereal sugar-bomb, just those freaking out are much older, better dressed and speak with pleasant accents. Many of these people truly believe that they know better than others, and they cannot believe that the ignorant masses ignored them to do the opposite. Unfortunately they are too busy making fools of themselves by peddling apocalyptic visions like Jeremiahs in tailored suits that they are blind to why the masses voted the way they did. After all, they have profited from globalization and the European project. They don’t worry about their job being shipped abroad, or watch as their neighborhoods get turned into refugee camps.

So the stock markets are jittery because they hate volatility. That’s a natural reaction because everyone would love to live in a nice predictable world and that includes stock traders. But Brexit is a scapegoat for an overvalued market in an earnings season where few companies outperformed their mediocre expectations. The drive to contain volatility that started under Paul Volcker has led to a string of market bubbles that burst every 8-10 years. We’re about due for a blow up and the increased volatility the markets are showing right now reflects traders coming to their senses more than it does an unknown impact Brexit will have on the EU. Oh, and as for S&P and Fitch downgrading the UK’s credit rating, I happened to watch a great little movie called The Big Short on the way back from Ireland last month, and these are the same outfits that were slapping AAA ratings on balloon mortgages with zero down in Florida just before they tanked the economy in 2008, so I’d recommend keeping that in mind whenever someone mentions the ratings downgrade in an important-sounding tones. Here’s a brief clip from the movie.

Although I supported Brexit and continue doing so, I see it as a step towards a better future not just for the UK but for an integrated Europe that includes the UK. That continent has 3000 years of history written in blood, and it is naive for us to think that the EU is going to fully integrate 27 nations, end all conflict and govern 400 million people effectively in 25 years. The EU as it exists today has failed and Brexit proves that, but Brexit doesn’t mean that the dream of a united Europe is dead.

Americans tend to forget that our republic’s first shot at ruling itself was the Articles of Confederation, a disaster that almost ended the experiment in democracy within a few short years after independence. The articles gave too little power to the central government and too much power to individual states, whose governors took them in different directions. Thankfully cooler heads prevailed and a second attempt was made, and in 1789, 13 years after independence and 6 years after the end of the Revolutionary War, the US Constitution was ratified. The constitution created a series of checks and balances between various branches of government as well as protected minority votes and proscribed majority votes, providing a balance of power that the articles lacked.

Europe can do the same. If cooler heads prevail, Europe can create the balance of power needed, allowing Europeans to have a say how they are governed, creating institutions that serve the people instead of dictating to them. Provide more effective governance and people will be clamoring to join just as they did in the early days instead of threatening to leave as they are now.

These are all large issues with answers beyond everyone, including the commentariat on BBC and CNBC. It will take time for tempers to cool and for sanity to be restored, but in the mean time the best course of action is to do what the British are best at: Keep Calm and Carry On. It’s about time the Continent learned this from their island neighbors.

Why I Support Brexit

25 years ago the Maastricht Treaty and the subsequent creation of the EU excited me. Now a quarter century on the EU has become a bureaucratic and anti-democratic mess. While the decision to stay or go lays solely with citizens of the UK, as a devout Anglophile and friend of the UK I believe that it is in the best interests of the UK to leave the EU and resume its role in the world as a beacon of Democracy unfettered by the laws and regulations set by Brussels.

UK Justice Minister Michael Gove said, “the laws we must all obey… should be decided by people we choose and who we can throw out… But our membership in the European Union prevents us… from being able to choose who makes critical decisions which affect all our lives. Laws which govern citizens in this country are decided by politicians from other nations who we never elected and can’t throw out.”

That’s the only reason I need to hope the people of the UK decide to leave the EU.

 

Time to Outsource the CEO?

Workers in the industrialized world have been looking over their shoulders ever since the Industrial Revolution. First automation threatened their jobs. Then with the advent of globalization and the rise of free trade cheaper labor abroad either left them unemployed or kept a lid on their wages. More recently lax immigration law enforcement coupled with legal labor dumping through programs like the H-1b and J-1 visa programs have limited wages low paid hotel maids to high paying legal and computer jobs. Decades of this competition in which the American worker or professional feels as if she is running a Red Queen’s Race have fueled the support of anti-establishment, anti-trade candidacies of Donald Trump and Bernie Sanders. These workers and professionals are told that they must constantly upgrade their skills, change careers or uproot and move in order to earn a living, often by academics who are tenured and corporate executives whose jobs are secure against those same pressures.

Trump and Sanders peddle protectionist or tax solutions to decrease the gap between the rich and poor. But what if there was another way besides raising walls and taxes to level the pay gap between the average worker and the average corporate CEO?

What if business executives including CEOs and entire corporate boards felt that same pressure? Is it possible to outsource the corporate board, replacing it with a more effective and cheaper solution? After all, a company doesn’t exist for its workers nor for the benefit of society. A company exists to make money for its shareholders. Shareholders own the company not the CEO or the board of directors, so they work for the shareholders just as a minimum wage employee does. So why shouldn’t corporate officers face the same pressures as rank and file employees?

The Economist notes, “Boards are almost exactly as they were a hundred years ago: a collection of grey eminences who meet for a few days a year to offer their wisdom.”The past 100 years have witnessed assembly lines and mass production, automation, the rise of suburbia and the demise of rural life, free trade regimes, the death of labor unions in private industry and its expansion in the public sector, liberal immigration policies, offshoring, outsourcing, specialization and numerous other changes that have remade the American economy several times over. Yet corporate boards function as they did when most cars were hand built and women couldn’t vote.

Is this what our economy needs? Corporations run by boards packed with cronies like “the former headmistress of (former Disney CEO Michael Eisner’s) children’s school and the man who designed his house.” Why shouldn’t the top leadership be subject to the same economic Darwinism of the lower ranks?

In the May 2014 issue of the Stanford Law Review Professors Stephen M. Bainbridge & M. Todd Henderson suggest shareholders replace their corporate boards with “board service providers.” They advocate that  outsourcing the board of a company “will increase board accountability, both from markets and from courts,” improve corporate transparency, boost efficiency and lower the cost of corporate governance. In summary outsourcing the board would deliver the same promised results as offshoring production or outsourcing departments. Bainbridge and Henderson believe that all it would take would be a simple change to state corporate law requiring directors to be “natural persons.”

There are times when companies have truly visionary CEOs. Apple’s Steve Jobs or Microsoft’s Bill Gates come quickly to mind. But most companies don’t have anywhere near that level of talent, and would do well with experienced, efficient and competent leaders who also happened to be paid far less than they were in the past. It’s easy for those of us who have worked in IT for a generation and seen the changes in the field brought by outsourcing and offshoring to support such a change as replacing the board of directors with a board service provider. If we have to look over our shoulders and constantly upgrade our skills just to remain employed at the same salaries, why shouldn’t the decisionmakers at the top?

Free Trade: I Want to Believe

Bloomberg has an article showcasing the winners and losers of a manufacturing company’s move from southern Kentucky to northern Mexico. First the losers. “Randall Williams and his wife, Brenda, were two of those workers. For three decades, they helped assemble the hermetically sealed motors that power air conditioners sold all across America. At the end, they were each making $16.10 an hour. That kind of money’s just a dream now: Randall fills orders at a local farm supply store; Brenda works in the high school cafeteria. For a while, he said, their combined income didn’t even add up to one of their old factory wages… ”

Then there are the winners. “Just as the Williamses were being informed by A.O. Smith that they’d be let go, a young Mexican woman named Zoraida Gonzalez was hired some 1,200 miles away in the hardscrabble town of Acuna, just over the Rio Grande from Texas. To replace its Kentucky output, A.O. Smith was ramping up production in lower-cost Mexico, a move facilitated by the signing a decade earlier of the North American Free Trade Agreement. Gonzalez was brought in to help handle phone calls. Now 30 years old and in charge of payroll, she makes about $1.75 an hour…”

In theory free trade should make more winners than losers. A company that offshores manufacturing should save money. This money will go into hiring other employees  whose jobs cannot be sent abroad, or be paid to investors in the form of dividends. This money will stimulate demand or be used for more investment, creating jobs that will replace those lost by the Williams’s while at the same time lowering the cost on the things they buy, though the Williams’s might have to relocate to get those jobs.

Unfortunately the theory isn’t working that way in practice as a recent paper by M.I.T.’s David H. Autor, UCSD’s Gordon H. Hanson, and the University of Zurich’s David Dorn of the University of Zurich found. “Instead, unemployment rose both among manufacturing and nonmanufacturing workers, suggesting that the ill effects of increased trade had a spillover impact on the larger local economy. On top of that, average weekly wages declined. In general, places like Tennessee were very slow to adapt to the new economic reality—their elevated unemployment rates and diminished wages persisted for a decade, the paper’s authors estimate. The workers there are also saw a lower lifetime income.”


Even the free trade cheerleader The Economist takes American companies to task for hoarding cash saved by offshoring and other job cutting measures instead of plowing it back into the economy. “Abnormally high profits can worsen inequality if they are the result of persistently high prices or depressed wages. Were America’s firms to cut prices so that their profits were at historically normal levels, consumers’ bills might be 2% lower. If steep earnings are not luring in new entrants, that may mean that firms are abusing monopoly positions, or using lobbying to stifle competition. The game may indeed by rigged.”


One of the theories of Karl Marx’s insomnia cure, “Das Kapital” is that under capitalism money tends to accumulate as winners take all and leave scraps for everyone else. When it accumulates it is less useful than when it is spent. It then becomes up to the government to step in and redistribute it – at least until money is completely abolished. Or something like that. I think that’s as far as I ever got in that billion page long book, required reading in my Marxist Economics class taught by a real honest-to-goodness Israeli Communist.


Free trade is supposed to improve the economic prospects of everyone in aggregate. For losers like the Williams’s, there should be winners not just in the USA but in their own communities. But that is not happening. Instead of leading to greater prosperity, free trade has created stagnant wages and diminished prospects for American workers. The economy booms when a company opens, and everyone in the area prospers as the wages filter through the economy. Then the jobs are lost in one area, but gained by another as the wave of prosperity crosses borders and improves the life of those like Ms. Gonzalez.


But the wave will not stop in Mexico. As prosperity descends on northern Mexico, wages will increase and reach a point where there will be an economic incentive for companies to find cheaper labor elsewhere. This has already happened in Latin America as many of the jobs created by NAFTA move from there to China. And even the Chinese are feeling pressure from lower wage nations such as Vietnam, Cambodia and others. People float in an economic sea, and become prosperous as the wave of prosperity raises them up, but then makes them less so as the wave moves on. The question then becomes: Are the people better off after the wave recedes? Will another follow it?


And that’s where the Williams’s come in. Ask them if they are better off. Then pull the lens back and look at the communities in America’s rust belt cities and see whether cities like Pittsburgh, Detroit and Gary are better off today than they were forty years ago. As the paper by Autor, Hanson, and Dorn proves that next wave of prosperity may never come for some.


Marxist Economics class aside, I was educated to believe in the free trade. Even after I suffered the indignity of training my foreign replacement at my tech job, I wanted to believe that my community was better off under the free trade than it would be without it. I remember talking with a reporter about how America’s real religion was free market capitalism, and that our nation had embarked on a great experiment based on the faith that the the free trade would benefit everyone.


But after decades of trade deficits, wages that haven’t changed since the 1970s and the American worker’s Red Queen’s Race, I think it’s fair to ask, has our faith been well-placed?

Ammo Tax? How About an Abortion Tax?

One of the posts at The American Interest suggests the tactic of gun grabbers should switch from gun confiscation, which the writer says is unlikely to ever happen, to taxing ammunition. He even tries to make it more palatable by saying ammo could be tax free at shooting ranges and for police but in the free market a 10,000 percent tax – making a $.19 9mm round $19 – would curb gun usage and ultimately, gun ownership. Chris Rock raised the same argument, saying gang-bangers would shoot more carefully if each round cost $5,000.

Legally it would be much easier to raise the taxes on ammunition than ban its sale completely. A similar tactic could be used by pro-Lifers to discourage abortion.

For the sake of argument I’m going to make the following assumptions: The wealth spent on raising a child would be spent on other goods and services, making the economic activity from a social perspective the same whether a child is born or not. The expenses in retirement are covered by social taxes paid earlier in life – a big assumption on my part I know.

From Society’s point of view a child consumes resources until adulthood, at which time s/he generates income by working and paying taxes until s/he retires. For argument’s sake let’s assume the aborted child would have held a job. started earning at the age of 25 and stopped at the age of 65, a total of 40 years of productivity. S/he would then die 15 years later, assuming the current life-expectancy of around 80.

So 40 years of productivity. The average income in the United States is roughly $50,000. Multiplying the two together we get $2 million in lost earnings. Earning $50,000 means contributing about $10,000 a year in taxes, making a total tax bill during the productive years of $400,000 in lost tax revenue.

So each abortion costs the government roughly $400,000. In 2014 there were roughly a million abortions, meaning the potential lost revenue of $400 billion. Since abortion was legalized in the US over 25 years ago, this means that the US government today is missing out on the taxes that would have been paid by the “lost taxpayers” who were aborted in 1991 – about 1.4 million. Just this cohort could have contributed $14 billion in taxes this year. There were nearly 23 million abortions in the US from its legalization in 1973 until 1991. Applying our numbers to these lost taxpayers and we find that abortion has cost the state, local and federal governments in the US $230 billion in 2016.

Shouldn’t the government recoup that cost somehow? Perhaps if a woman had to pay a $40,000 tax she’d be more careful about getting pregnant just as gun grabbers claim extreme taxes on ammunition would discourage people from shooting others.

As a pro-Life, gun owning libertarian who supports legal abortion I believe such taxes whether on abortion or ammunition prohibit liberty instead of enhancing it. But the above little “thought exercise” shows how easy it is to take a tactic used to curb one freedom and use it to justify curtailing another. Gun-grabbing Pro-Choicers take note.

 

 

The NFL: Not For Long

As a former St. Louisan I’m not sad to see the Rams leave town. They’ve always been the Los Angeles Rams to me, even when they won the Super Bowl. Football in St. Louis always came second to baseball, and St. Louis is destined to forever be a baseball town with its beloved St. Louis Cardinals.

St. Louis Rams fans can at least take some consolation in the fact the tax deductions they see in their weekly paychecks aren’t going to line the pockets of billionaires. Using public funds to build sports stadiums is a bad investment by communities, yet that doesn’t stop civic boosters from taking money from their poor and middle class citizens and showering it on billionaire team owners and real estate investors. But hey, at least it’s not as bad as tobacco growing states like my homestate of North Carolina handing cash to the cigarette companies.

Or is it?

A century ago boxing was  tied with baseball as the most popular sport. Today boxing is tied with “Not Sure” at the bottom of the country’s top 10 most popular sports. Football only edged out baseball to become the nation’s most popular pastime in the mid-1980s, and recently its popularity has leveled off. Movies like Concussion which chronicle the NFL’s cigarette company-like stonewalling the investigation into chronic traumatic encephalopathy (CTE), and the publicized deaths of players such as Junior Seau might have something to do with this cooling of interest on the part of sports fans.

What will send the popularity of football plummeting? It will likely take a drastic event, and the only such event I can think of will be a player getting killed on the field. It’s only a matter of time. In fact one player has already died on the field, Detroit Lions wide receiver Chuck Hughes who suffered a heart attack while running back to the huddle and died on the way to the hospital in 1971.

Some Sunday in the future a player is going to take the gridiron and be killed on it in front of tens of thousands of screaming fans, an event not unlike the gladiator bouts in the Colosseum of Ancient Rome. Fans will have to ask themselves was his life worth their momentary joy? Was his life worth the billions the billionaire owners make from the sport? Fans will be faced with some hard and disturbing questions and their fervor for the sport will wane.

After all, it’s not like there aren’t alternatives out there already. Soccer’s popularity is growing in the US, driven by changing demographics. Basketball, both college and professional, continues to sell jerseys and sell out venues. And even venerable old baseball still manages to enthrall during the playoffs and World Series.

NFL players know their shot at fame, glory and millions is fleeting, leading them to understand the acronym NFL as meaning “Not For Long.” It’s about time the owners wake up to the same realization.

Update: “Right now, I wouldn’t be surprised if football isn’t around in 20, 25 years,” Former Washington Redskins and Pittsburgh Steelers wide receiver Antwaan Randle El.