Corporate Taxation

I ran across this Paper (pdf), and decided it is something I should act like I have read after glancing at this:
Abstract
We examine the extent to which taxes on corporate income are shifted onto the workforce in the form of lower wages. We use data on 23,000 companies located in 10 countries over the period 1993-2003. We identify two channels by which taxes can affect wages: indirectly through a lower capital stock, and more directly through wage bargaining for net of tax, location-specific rents. We find that a significant part of the effective incidence of the tax falls on wages. Our central estimate is that 54% of any additional tax is passed on in lower wages, even in the short run; other estimates are larger than this. In the longer run, a $1 rise in the tax liability results in a fall in total employee compensation in excess of $1.

I also found the Conclusion on pps. 16-17 also of immediate interest. I was seriously tempted to start at the Beginning, and read it entirely. Then I considered the liability of such a course, perhaps requiring me to adjudge the veracity of the Study, which would turn into real Work. I took the far easier Option of deciding that if it was good enough for the Oxford University Center for Business Taxation, then it was good enough for me (tis not an attitude encouraged amongst Academics). Still, I consoled myself with the knowledge that I had only to utilize the Results, not create a Defense for my own criminal misconduct. The mystified Reader can take heart in the awareness that the Study can be defended effectively by Someone.

The real value of the Study would be the assurance that Corporate taxes are very expensive to Labor Wages. This promotes an entirely erroneous belief that Business should be left to go Scot-free from any form of Taxation. The correctness of the Study should only make Us reexamine the basic types of taxation which We utilize. My evaluation of Tax theory brings the highly irreverent choice of Tariffs as the most effective type of Taxation to protect migrating Labor Wages, plus moderating diffident Production Costs; all within the context of a supervisory power for Governments to limit excessive Profits-Taking on the part of international Corporations. The Tariff also enjoys the additional benefit of forestalling the practice of Profits transfers by Corporations to escape Taxation, through the pre-charge before Retailing. lgl

Consumption Patterns

I am not alone in believing that the American Dollar will strengthen this Year. It is hard to explain exactly why I feel that way, but I think the United States is following a pattern first explored by Japan, and from which the EU is just emerging. It may mainly be based upon domestic saturation of the Consumption market combined with the savings in materials Cost associated with the new Technology; literally put, those Consumers who will utilize the new Technologies have become cognizant of the capabilities of the new Products, and will only purchase exactly those Products which serve their directed purpose. This could mean up to approximately 30% less Consumption purchases in the domestic market, as Consumers route their Consumption based upon accurate knowledge of their Needs.

Brad DeLong remains critical of the Huckabee Fair Tax plan, basically following the analysis of William Gale (pdf). This examination holds that the tax rate must be around 44% Tax-exclusive in order to remain revenue neutral (maintain the same amounts of Taxes collected). Brad adds on the Big Ticket knockdowns, and the federal prebates, and soon derives a Tax rate in the high fifties percent-wise, when moving to the Check-Out Counter. Arnold Kling brings the best argument to the table, stating that Consumption taxes reduce taxation on those people who earn more than they consume, which forces much higher taxation on those people who basically consume what they earn. The entire Movement, therefore, is in no way revenue neutral, but a probable 30% Tax Hike on Consumers.

The entire Consumption pattern would be drastically changed by such a Taxation. Consumers would rapidly learn they can adjust their Tax payments by alteration of their Consumption practices. There are both Pros and Cons to this activity: Consumers will immediately begin to demand Products of greater durability and lifespan, Consumer investigation of Product will become more concentrated and extensive, with Purchase coming only after satisfaction of those desires; an extended Business Cost for Retailers, who will be faced with larger necessary Sales staff, less Consumer traffic, and more articulated Buyers. Entertainment Products will decline in Sales, while equally being forced to exhibit extended longevity. I can go into other varied effects, but will leave it there, as this Post mainly focuses on Consumption patterns. lgl

Value Formation

I have never included a blog roll, never intent upon Anyone reaching anywhere from my articulation, though feeling somewhat guilty because Readers always desire a Second Opinion on most everything I write. Here is another of those Lists on which I am never named; included because Steve Waldman provides a crafted commentary on his personal enjoyment. I will not even present links as I evaluate his fare, being antisocial and resentful of the widespread attention which good bloggers receive. Brad Setser is good, but invariably too committed to minutiae–Some would assert such merits academic acclaim. You can find anything acceptable to read with Mark Thoma, like you can find links to these blogs in the Waldman piece. Felix Salmon is also excellent, even though he will not let me read him without a rss feed. Calculated Risk, Tanta, and Yves Smith are all Good, but often deviate from straight economic theory–Some people are so gross as to define this as Research. I enjoy Dean Baker, who like myself, is mad at the World, and just won’t take it anymore (forgot that the Kids probably never saw Network). There are People who actually think Finance is an Economics topic; if you want to go there, then you deserve the confusion you will feel. We finally arrive at Bloggers I would appreciate I can relate with, especially James Hamilton and Menzie Chinn, Tyler Cowen and Alex Tabarrok, Dani Rodrik, William Polley, Paul Krugman, Greg Mankiw, and knzn. The rest are probably equally Good, but I am fazed by big Words.

I agree readily with Greg Mankiw on this exposure of the Democratic Candidates’ positions on Energy. Any form of Carbon taxation will come down on the Consumer, as Utilities practice the Corporate Two-Step. The Readership of this blog should realize that Taxation is not part of the Evil Empire, and something around here must pay for itself. The tricky part of the Energy debate lies in the fact that the less apparent the Carbon taxation, the less effective will be that taxation. Carbon Credits provide not only plausible denial to the question of Carbon taxation, but allowed Utilities to increase Profits through gouging the Consumers; I expect Energy Costs to the Consumer to be about 17% higher in total cost with any form of Cap-n-Trade system, than it would be under outright Carbon taxation.

Mark Thoma may have missed the importance of the Zachary article, when he concentrates upon the substitution of Aid-Providers. The real impact may be the introduction of new technology, specifically geared to developing economies. The real dilemma may be that the Chinese should keep their Aid teams at home, to cancel the overreach of old-style technology in Energy production in their own economy. India cannot seem to alleviate the horrors of their own Poor, possibly attempting Model experiments far from native political resentment. One should never put down any Initiative without serious study of potential consequences, but there is something truly wrong with this experience. lgl

Ethics and the Modern Economy

Josh Ruxin gives Us a clear picture of the difference between Present-Day Kenya and the 1994 genocide in Rwanda, though his analysis of the economic consequences may be a little flawed. The root of both Conflicts remain Tribal antagonisms, and each was incited by an attempt to impose One-Party Rule by a significant Tribe. I include this Opinion because it highlights the fallacy of expecting too much Gain from the provision of Economic Aid to underdeveloped countries. Rwanda and Kenya each had a fairly stable, growing economy prior to the instigation of Violence; Kenya serving as a Pearl of African development. Tribal conflict will always destroy economic opportunity far faster than economic development can build, and economic aid must be distributed equally between Tribes, lest Tribal jealousy will lead to suicidal destruction to economic underpinnings. Such a Scenario always requires introduction of firm democratic institutions, before economic inputs can survive the rivalry.

The Chinese possess a long tradition of the suppression of Workers, and economic fuel from Developed nations can incite a prolongation of that subjugation because of its insistence on the cheapest production costs. Plant managers will always hide hazardous conditions for labor, if those same practices provide substantial savings in production costs. Business personnel from Developed nations inevitably limit their interaction with Natives to Plant management personnel, they literally aware that knowledge leads to added Costs to themselves in the final prices which they will pay. The Short-Sightedness of such polices lead to destruction of domestic Production in the Developed nations, the shift of Production Costs unto Native labor through destruction of their labor potential, and grant corrupt Native management undue wealth and control in Native societies. The sadness of the entire situation comes from the fact that such Gains will always be temporary, and only lead to the enrichment of criminal elements in the economies of both Native and Developed nations.

This article relates to the previous articles in a profound way, though most Economists will deny the connection. We have a Housing slump occasioned by the issuance of bad Mortgages, a practice engendered by an over-rapid increase in Home prices over the previous decade; a Condition created by an Imagery that Housing would pay for itself, which it won’t. The benefits of Outsoucing Production has long been canceled by higher Materials pricing, especially Oil. Business Investment has been channeled Overseas, and the business managements of Developed nations are finding that traditional labor Costs have not disappeared–only been shipped Overseas. The domestic economies of Developed nations, though, have been ripped apart by the loss of resiliency within their own Consumption markets, having disrupted their own Profit margins. The Situation faces many difficulties, and I am reminded of the old biblical story of Seven Fat Cows followed by Seven Lean Cows. We may have to trim a lot of Fat to make the Lean Cows survive. lgl

The Daily Grind of the Lazy

I am playing hockey today, so will not attempt anything more than mildly serious. Here is a link to the Fitzgerald Piece both of which should be Read. I myself am avoiding labor, after accomplishing a hefty load of Household chores, none of which were done that well. I suppose I should express that the Posts are important because of the absolute lack of Living Standards’ value in paying for increasing Cost benefits for Labor, where the discretionary power of Laborer spending is removed. Workers gain essentially no improvement, while Businesses are allowed to increase the marginal Costs of Benefit provision. Labor simply pays more to stay in the same place.

This Post at Angry Bear amplifies the corruption in the numbers, as Labor Participation is in a most definite decline. The Household Survey states there has been a 436,000 drop in employment over the last year. Actual Take-Home Wages have been relatively stagnant, while the Employment numbers have been dropping. One has to examine whether the common criteria for definition of an Recession are effective; Some (Me) could claim We have been in a Recession for over a year. My loyal Supporters of Defamation of Character should be served by this short Post, so I sleep without guilt, and attempt some solid advice tomorrow. lgl

The New Money Realm

Brad Delong provides excellent descriptions of economic activities, and did an equally good job in discussing the three basic types of financial crisis. Does it sound boring?–it is, but that is not Brad’s fault. The key point I would have my Readers understand is that liquidity issues rarely affect the structural integrity of the economy, while insolvency issues invariably destabilize some aspect of the economy, and We are cursed with attempts to correct Corrections previously put in place. Remember that Santa is a two-edged Demon, who become January’s Debt load. The Readers probably imagine such effect disappears as One rises through the ranks of the financial sector; the reality states that Santa starts out as a weak Demon, and degrades from there.

Central bankers find themselves somewhat Nude at the Ball with articles like this One coming out. Traditional restorative mechanisms default under pressures of overblown Reserves held by foreign governments and the Private sector. There are already too many Dollars out there in the World, and measures to inflate for liquidity will start an avalanche of Dollars on the World market, inevitably starting a spiral Inflation. The Fed and Treasury might do best by adopting policies which would incite a Sell-off of those Dollar stocks, while introducing a Purchase program domestically for those Dollars. It would be an unusual practice of selling much control of Our banking system Overseas to gain liquidity, and would not work effectively if the U.S. Government continued deficit spending. Still, it seems the only policy option to stabilize the Dollar, and eventually appreciate it.

Readers should study this blog entry from the Director of the Congressional Budget Office. It gives an informed view of the current Tax impact within the United States. The facts can establish that the Bush Tax Cuts have did little for Taxpayers themselves, though they provided a great degree of gain for Business Profits. That Gain, though, came with a huge increase in National Debt, which has generated the Crisis of the previous paragraph. This blog points out that there has been a shift from revenues generated by Employment, to revenues earned from Capital Gains. Most Economists would acclaim this Shift as example of a expanding Economy, but I attribute to it a heavy loss of economic resiliency, with Markets being a quasi-quicksand for rapid loss of financial value. lgl

Effective Tax Policy

David Leonhardt attempts to explain the difference between Hillary Clinton and Barack Obama. There are differences, real differences, but they will never mean that much to most Americans. Why not? The Answer simply states that the differences will not make any real difference in the lives of Americans. I should someday comment on the fallacy of Marginal Tax Cuts, but here I will only say that such Tax Cuts are only absorbed by the institutional framework to which all American families are subject. Doctors, Dentists, Clinics, Discount Stores, Grocers, Utilities, Landlords, and local Tax authorities simply raise their Prices to absorb the excess funds. It does not matter how those Marginal Tax Cuts are granted; they will always be ineffectual to American households. Politicians are in favor of Marginal Tax Cuts solely because their Supporting businesses can increase their percentage Profits from these Cuts. A simple and clear Tax system (one which make Tax Preparers optional) of effective Tax percentage rates could make a difference, but We are not likely to see it in the near future.

There should only be 4 progressive Tax rates, and One of Those should apply only to businesses and Corporations. There should be no Tax exemptions, Credits, or Reductions of any type, except for a general purpose Exemption where 80% of the total Cost of accepted excess Expenses will be exempt from taxation. Accepted Expenses included in the general Exemption would be Child-Care Costs above $1000 per year, Medical Health Care Costs above $1000 per year (per individual insured for the Business tax rate), State and Local tax levies above $1000 per Taxpayer, Insurance Costs above $2500 per Individual, and Professional Service Costs above $5000 per Individual be year. Recognize there will be no personal Exemption organically granted, and actual Exemption status will be established by the IRS, not legislative action. No Tax Credits will be granted for Investment, whether for Retirement or Business growth. The boon to this program is a slashing of Tax rates by a probable half, with less chance for institutional parasites to absorb the reduced taxation.

Dean Baker expresses the hazards implicit in allowing Private sector interference in setting up Governmental programs without adequate boundaries. The splinterization of Payment systems at the local levels brings forth Cost charges like unto the Price Markups of Retail over Wholesale pricing. This adverse effect is worst at the Taxing authority level, where nominal Tax rates must be much higher than is functionally Progressive, simply to generate sufficient Tax revenues, while Tax Evaders are given free license to legalize Tax avoidance. There will never be a fair Tax system as long as Voters supercede their best interest by adopting personal bribes to gain their acquiescence to institutional Tax evasion. lgl

Long-Term Problems

Arnold Kling attempts a tour de force into the issue of climate change, and does a creditable Job. I even went so far as to read parts of the ISPM, understanding less than desired, but retaining the surety that Consensus over Global Warming is empirically impossible. Here is where I have difficulty with the Issue: Almost all Corrective programs for an effect which might not realistically exist, cost an exorbitant Price, and an actual Marginal alteration to current releases(said remission likely to equal less than 5% of current emissions). I am of the belief that We are all going to die anyway, so Who cares what is the Cause? I, as an efficient Economics thinker, will opt for the least Cost, highest Profit exit from the Earth.

I agree with Greg Mankiw on this One, but with a very hypocritical Viewpoint of ‘Thank God’. Economists express a real tendency to advocate models, instead of practical political and social programs for the betterment of society. It does no good to a Society to promote economic policies which force major segments of the labor force to retire from the labor rolls because they lack an unattainable expertise, or due to the fact they must endure an unsustainable Wage which will not pay for their Living Expenses. Economists have lost enthusiasm for a Full Employment Economy, and have hidden this distaste with statistical models which dismiss forced labor retirement from Sight. They never discuss the lack of financial resources and failure of natural talent, which precludes labor involvement in the new Economy (full participation requiring a real adjusted I.Q. of around 130, when normal labor intelligence is still around an adjusted 110). They will not comment that geographic occupations (which must be performed locally) can absorb only about 70% of this labor force. The disenfranchisement of the Remainder of the labor force remains an economic failure, though Economists are loath to admit it.

Here is another Post on the Conflicts in Climate data. As a previous farmer, I would claim that adverse climate and weather will be canceled by Planting reaction, and different methods of cultivation and irrigation. Farmers do not surrender to Profit-Loss easily, and are buoyed by a Market system which rewards correct agricultural decisions. I am bothered by much of the climate data currently outstanding, but not seriously worried; We will have to alter Our dedication to Fossil Fuels due to shrinking resources, long before We suffocate in Our own discharges. It is too fine a Day, and too early in the Year, to worry about climate nonsense today. Happy New Year. lgl

Roles of Leadership

Here is a Study which may be inconsequential because of the value inherent in the structure of review. Most of the Readers who have read the article imagine I am discussing the small amounts of money being utilized in the studies. I am not! Several studies have indicated that Dollars are only a yardstick guiding economic performance, with Self-Interest and Self-Promotion only entering the matrix when there is substantial Gain to the Individual to be realized. The criticism I would express is the lack of acknowledgment granted to social leadership, which is un-weighted in the studies. Small businessmen and Crew Supervisors overwhelmingly set the group consensus of society, with subordinate personnel deferring to the commentary of their economic leadership at the social level. A collegiate class does not contain such leadership, or is there existent a defined system to interview potential Recipients; there are not collateral lines of leadership to adjudge all relevant responses. The Studies define the entrance attitudes of Students into the classroom, rather than the experience of charity at the interactive level.

Cactus at Angry Bear has a Post which again plunges Us into the question of leadership, and the effect of that leadership. The instance of Bhutto only reflects the methodology of most of the World, but especially the Islamic world: even Democratic elections are expected to elect an extended family, rather than an Individual, to power. Such an attitude resounds badly in America, where the emphasis in on personal achievement. It, nevertheless, operates most efficiently in this Country, though Intellectuals can always be found to criticize the practice. Reality states that extended family leadership has built-in Consensus generation capacities which eliminates distortion from leadership. Is it a good system? That Question is debatable, but it probably maximizes survival potential with high Profits.

Here is a Post on getting leadership to work for you, and correctly identifies the corrosion of allowing real social interaction among subordinates; i.e., control the direction of social discussion in the Workplace. The manipulation of beliefs at the narrow social level curtails unproductive effort, and concentrates attention upon economically valuable discussions at the immediate levels. Management pushes a Social agenda for greatest Profitability at the localized center, and defuses any potential harmful intrusion of harmful discussion into that center. This mechanism expands to the greater Social definition of goals, if it has been successful at the lower levels. Leadership is not really a Question of propaganda, but one of focus. lgl

Fatalism

I so enjoyed Tyler Cowen’s Post on Uncertainty that I have decided to list my own Thoughts on the area in an Point/Point format. Readers should understand that this is the Means by which both Debate and Consensus becomes effective–with Individuals taking Positions which they are willing to argue and defend.

1. Medical Costs–I agree with Tyler that Means-Testing is functionally worthless; the essential Question being the provision of Medical Services, or the refusal to do so. Widespread medical provision will generate high Social Costs, which Private Sector payment will not cover; this because of increasing Medical Costs from shortage of medical personnel and equipment. The only method to limit Medical Costs effectively remains limits of medical provision.
2. School Vouchers are a non-sequitur. They will work only in experimental Cases. Universality will destroy any viability to the programs, with even mediocre performance being granted Rent-Seeking opportunity without consequential benefit.
3. Social Security funding is aided by Inflation, but only if Medical and Living Costs are suppressed. Tyler is correct in sensing no real Crisis in the numbers, and realizing that the danger lies in the extension of Services covered by the original program.
4. Tyler, like myself, doubts the efficacy of remedial correctives for global warming. We are already trapped within a matrix of damage from Greenhouse Gases, due to Capital construction already in place, when necessary alteration stays impossible because of the huge magnitudes of replacement involved. Large-scale Carbon sequestration policies appear as the only viable substance.
5. Biodiversity must be approached from the position of Replacement fertilization policies; constraint of current Food possibilities is not a viable option, noncompliance will be systemic as long as People are hungry.
6. Non-criminalization of Drugs will only guarantee of Drug use; Everyone under 30 would have tried practically all Drugs decriminalized within two decades. The only viable Option is to keep criminal penalties in place with massive publicity of the dangers.
7. I differ with Tyler on Immigration, thinking that American society is already over-populated. This may be my rural upbringing, and bias against Crowds. I do believe that exploitation of material resources could be more efficient and ecologically sound with reduced human population. Do I sound like a dinosaur?
8. Tyler and I are of one mind, I believe, concerning foreign policy. Any American foreign policy must face the traditional manner of foreign social conduct developed over Centuries, with incumbent deep resentment against America for any pressured change. We would do essentially better to exploit areas of mutual interest.
9. I also have advocated an effective Water policy for over a decade. The trouble here resides in an like sentiment towards foreign policy, with Water policy advocates facing traditional Water practices.

Do I think much will change about the listed conditions?–No! The only real Change will come through real Shortages of one type or another. I have always been a fatalist! I was once asked what I thought the human population size would be in 2100, and I replied that I estimated it would be around a billion people. There is a whale of human grief in that assessment, but I haven’t changed that evaluation. lgl

Where do you plant your feet?

I don’t agree with Paul Krugman on the need for a tighter safety net, but I also considr that Tyler Cowen’s idea of a budget surplus paid to the Trade Winners holds even less majesty for myself. I find more than a little difficulty with a Concept which would provide less protection for Labor, at greater taxation of Labor, just to pay Businesses who are making Money off Trade. Somehow Economics has lost the elemental View that Business Success should entail Business paying for itself through Profits. I believe that a far more effective Instrument would be a straight taxation formula for both Business and Labor, where only actual, real Production losses are excused from taxation. I sometimes think that there are more Tax nullifications in this Country, than there are People in this Country. Tax Reform must be the basic Corrective in any planned Alternative to Our current ad hoc compilation of economic performance retardants.

Mark Perry comes up with another reason why I worry about the current state of economics. I believe there is a greater coincidence in the Readings of the Study he cites which account for the Results; demographic movement definitely affects Business rotation, and People follow Job opportunities, but many other factors often impinge on demographic movements–the greatest being Lifestyle choice. This is only one side of the Question, though, as I ask myself what is the Result if the Study effectively pans out. The basis model states that a 1% reduction in State taxation leads to a 0.23% increase in Population. Proponents of the Study consider this Population growth to be an undefined Good, with no residual mathematical evaluation of the effects of that Growth. How much will Population Growth of that magnitude increase the social welfare Costs of the State? What is the loss of Tax revenues brought on by the 1% reduction in State taxation? What is the total Cost of Utilities provision and capitalization increase due to the Population Growth of 0.23%? Economics can take nothing for granted, unless We are willing to accept acute Shortages of Living Necessities down the Road.

Here is an sensible evaluation, but is it the correct one? The Krugman thesis may be better expressed as "If all elements of the Production Cost Schedule are identical except for Labor Wages, has the Pareto optimal for Trade been passed?" Of course, I am putting words into Paul Krugman’s mouth, and he can speak for himself; and may be a little resentful of my own rattles. Can there be a Comparative Advantage, when such advantage is based solely on Wages? The Answer is obviously Yes, but only with an introduction of monopoly pricing. Can the Reader make the Jump on that one? The Monopoly happens to be Capital formation, and Economic Profits are demanded above Normal Business Profits; Countries have to accept low Wages and high Product prices in order to obtain Jobs. Now the Economists can start yelling at me. lgl

Overworked Concepts

When are Markets being Overworked? I possess an innate sense that there are natural flow rates to any Market existent, and that current Money managers are attempting to set Market prices which do not actually exist, in hopes of making a quick Profit. The current Runup of Oil prices are a Case in Point, where there was $1.20/barrel drop in Price in transfer from the London market to the opening U.S. market in a World of electronic trading in nanoseconds. Hedge fund and Money managers are manipulating Market transactions to establish Stock positions, all at effective Cost to Investors, to say nothing of the residual Costs to Consumers. Exchange rules need alteration to forestall deviant purchase practices, though exactly how this is accomplished remains in doubt.

The residual Costs to Consumers may best be exhibited by Japan. They must Export to achieve economic success, unlike the United States, and thereby more directly reflect Changes in Oil prices. The Price surge in Energy was actually far less than in the United States over the year, due to previous high Pricing, but the accumulated damage was a probable One-Third greater; remember, this is the second largest economy in the World. The Reader should understand that the United States cannot retain its immunity to Oil pricing, as Oil imports grow in quantity and Price. Current Import practices will transfer the volatility of the Japanese economy to the United States within 40 months in my admittedly poor calculation.

Paul Krugman has an effective argument about the type of Trade which is positive, and the direction of Wealth distribution coming from that Trade. Is he Right? Yes! The humor of the situation, macabre as it is, lies in the refusal of all Economists to even contemplate the natural corrective of such disordered events–Tariffs. Economists analyze all aspects of Economics for the effects of macroeconomic action, but refuse to touch Tariffs with any mathematical evaluation. The ills of all World economies would be reduced with a uniform 11% tariff upon all Import Products–including Oil and Food. This is what I believe, but Who can get anyone to work the Numbers? lgl

Do I sound like an old Farmer?

Tyler Cowen implies that Growth theory clearly expresses a degree of failure, when he forwards Charles Kenny’s closing argument. I have always held the suspicion that real Growth comes only with technological innovation, which impels development of a new industrial sector, or radical change in an older sector. The rest I term ‘Paper Booms’ which is a nonsensical name for financial marketing efforts for the purpose of absorbing Profits derived from previously successful economic sectors. Most Economists would assert this does not apply to fundamental economic growth theory, where the focus is most generally on development of poor Countries. The fact exists that Developed nations show little interest in developing economic resources in Undeveloped nations when the economies of Developed nations are generating only mediocre Profits, and then only in pursuit of material resources under the influence of a Paper Boom. The key element, here, is that real interest in Development policies ends where the Profits of a Paper Boom disappear, which will always happen without technological invention propelling all economies.

The next relevant Question would be why the Profits of a Paper Boom always disappear. These Profits are basically only marginal excess Profits of the Technological Boom, which are limited in size once the market for the Technological innovation has been fully exploited; this is the source of Investment for the Paper Boom, and cannot be exploited from Undeveloped economies because of the lack of financial capital to provide the technological Profits–the original source of Investment in Growth development. The Reader must understand that the economy stands upon a foundation of Production–whether physical Good or some form of labor Service. Paper Booms are based upon provision of Imaginary Goods, which in some way leech off the Profits of Production in some manner; personnel needs for Employment ensuring this creation of Imaginary Goods will always exceed the real Profits to be drained. This later fact brings forth the loss of momentum known as Recession, as the drain of Profits from the Production process actually retards the Production.

Almost all Economists would have difficulty with the Above argument, but almost Everyone can accept the prime basis for Recession remains too many hogs at the Feed trough. The hogs of Imaginary Goods chew the same feed as the hogs of Technological Growth, and eat too much feed that is needed to keep the hogs of Tech Growth well-fed and maintaining their weight. The worst aspect of this Process lay in the inability to identify the hogs effectively; the Must-Feed hogs cannot be realistically separated from the unnecessary hogs. lgl

What's Your Poison?

A Trade War will arise over the issue of Bt corn. Normative reaction to genetic modification would be study of the effects of the new creation in a Test area. The Seed companies insist that sufficient observation has been conducted in the United States, where about 40% of the Corn planted uses the genetic modification, with some areas having planted the Corn for over a decade. At the center of the argument are Seed company Patents, but not mentioned in the article, which are likely the most-engendered species at this Point; the EU unlikely to endorse the new Seed until such Time as the Patents are extinct. One could empathize with the Seed companies, unless One happens to purchase the new Seed; the Seed companies attempt to imitate the pharmaceutical industry on Pricing. Genetically-altered natural Products will continue to be utilized in any case, and eventually like all activity of Mankind, will be overused to the point that We will poison Ourselves. It is the nature of the Beast!.

Dani Rodrik’s has found the beauty of politicalization of his Commentary on economic issues. Everyone tends to draw Stock from whatever is said, and teaching Economics provides the Source material for Propagandists. A lowly personage such as myself derives great comfort in knowing that I am always characterized as being in error on most everything, due to the benefits of the practice. The only consolation in the practice lay in its concentration on the arena of immediate Events, so you can spout about the immediately unimportant with some degree of prestige. Again, it has to do with the suicide practice of Self-Poisoning.

Felix Salmon finds some value in buying lottery tickets. He may miss the great value of lottery tickets to the working Public. Most of new Labor feels some guilt as the great amount of taxes drawn from the Poor, and the lack of taxation on their own true Proceeds from their occupations. They cannot be Revisionist, and state that taxes should be increased for the greater value of Society. They rationalize that lottery tickets can be considered an Entertainment, with Purchases being contemplated as Entertainment Costs. They suddenly possess a mechanism to assuage their guilt over the plight of the Poor by directing their Entertainment allowance in a manner where tax revenues replace the reduction in their own personal taxes; some Studies already confirm that lottery winners have a serious emotional letdown after the initial flash of Winning large in a Lottery, this could be attributed to a massive influx of guilt. Most People would doubt, but History is replete with instances of resentment against Wealth expressed by People who receive great Riches without effort. lgl

Merry Christmas

Here are academic centers devoted to pure research, but may be better suited to commercial applications. Posing the proper Questions may clarify the economic possibilities which could open up environmental issues to Profits exploitation. We need better understanding of the transmission process of Pesticides and Petrochemical residues to Food products. Vast expansion of agricultural lands could be entertained if this transmission process could be genetically stopped. Think of planting the sides of Road ditches to potatoes, where the harvesting process could not only make the United States a World exporter of potatoes, but also reconstruct the form of the ditches; the very form providing the additional levels of water necessary for successful growth of potatoes. This one initiative could alter the World Hunger situation, and even potentially turn Petrochemical exhaust into a form of Fertilizer by genetic engineering. Much Research is limited by the lack of imagination of the Participants in that Research. The new effort described in the article might alter the World, if Exploration is allowed free rein and debate.

Here is an article where People take their religion too seriously. Alms for the Poor necessitate that One is not Poor himself. The other side of the Question states Politicians from a High Income bracket do set the Tax rates for both Rich and Poor, and by the way, spends the Tax revenues derived; think of a millionaire possessing about $3-4 million in Assets, who can suddenly spend some billions of Dollars, by the simple process of gaining Consensus from a small group of Peers. One might wonder at the sincerity of claimed desire to curb Spending, or willingness to cut Taxes, especially on Those of lesser Income. I can empathize with Those looking to the Bible for Relief, but One must be realistic; the last major Conflict between religion and the Wealthy was when Jesus drove the Money-Changers out of the Temple. Since that time, both Sides had decided to make an accommodation with each other. These Rabble-Rousers are trying to upset the longest Accord in history.

Dean Baker provides Us with his traditional "Bah, Humbug" for the Christmas season, and like always, it is perfectly true. Crony Capitalism is destroying the Market system, and if allowed to continue and expand, will eventually result in the Resource Misallocation associated with the Soviet system of Communism; this also true, but don’t ask me to defend that assertion as I prepare to eat Christmas dinner, ruining my appetite. I will do my gig as well, and wish All a Merry Christmas–a somewhat hypocritical position, as I believe Coroners suffer from serious underemployment. Merry Christmas, anyway. lgl

Food for Thought

I wish to recommend this article by Brad Edmonds, though I have a real issue with the complete remission of the duality of liability for the Stockholder. This reminds too much of the Nazi excuse that they were only following Orders. Liability should pensively resume at such point that Stockholders become aware of structural Wrongdoing. Such a position insists that Stockholders themselves share the responsibility to ensure obedience to the Law. It is nonsensical to protest that beneficiaries to the commission of a Crime, should be absolved of liability for that Crime, it being actually committed by individuals in their employ; tacit acceptance of the commission of the Crime for the Profits from it, returns the liability to the Crime. Edmonds also denies the real existence of a link between Corporations and the State, but the link does exist, and is identical to the Stronghold banditry and Letters of Marque of Old, though the substance of the agreement is limited to the nonviolent.

Here is a Post which is most informative, but has a totally erroneous attitude to the current Trend. The basic fallacy resides in the thinking of Economists, who believe that absolute maximized full Consumption fulfills all requirements for the Economy. It first stretches the Consumer, leaving them without the financial reserves to sustain setbacks. It encourages such Business practice which makes inferior, short-life Product, where more durable Product would consume less material resources in Production, less energy in usage, and actually increase Consumer financial reserves. The perfect Scenario is a Consumer who buys three Houses per lifetime, all of which have already been built, and about an equal number of vehicles for Transport. We need Houses which last for 125 years, vehicles which last 15 years, and Computers and TVs which provide 20 years of Service without maintenance. Clothing should last 20 years, or survive through 1,000 Washings: Second-Hand Clothing stores should sell approximately 70% of all Clothing by volume.

How to obtain such Visionary desires? Property taxes on Housing should be set at the time of construction, a definite finite amount defined by 60% of the original Cost, and made an integral element of the Mortgage; paid within the same Installment system, and coming due in full with payment of the Mortgage. Purchase of already-constructed Housing will have an identical Property tax based as 60% of the price of the home, paid in the Installment plan of the Mortgage. The Ringer, here, is that the Property tax decreased in Cost to all Homeowners with longer residence in the Housing; the worst scenario is paying off the Property tax twice, and still paying off a third allotment of Property tax. Motor Vehicle manufacturers should receive Tax Credits based solely on the number of their vehicles still on the Road after Twelve years. This would impel design for endurance of vehicles, because it would provide Incentive to Car companies. Regulation could insist on a Clothing Buyback program for Retail clothing stores, where new Clothes could be returned within 3 years for 50% of the Purchase price, and second-hand Clothing could be returned for 50% of the Purchase price within 3 years. Clothing Retailers would get very interested in the Resale value of Clothing. lgl

My Basic Attack on the Affluent

Greg Mankiw tells Us the Fed is doing an excellent job, and We should allow it to do its duty. His entire article in the NY Times suggests that a natural Cost of Money does not exist, or if it does exist, the Fed is the natural instrument to nullify that Cost. Greg also mentions that loss of Currency value (which some fools would even consider to be Inflation--well me, with the Inflation simply pushed off on the Consumer) does not matter, as long as Business has a cheap access to funds with which to pay off their rising debt (he lacks entrance to the deep Question of whether this attitude fueled the Credit Crisis through provision of deeply inadequate real returns on the Money). I suppose Greg holds to the Fed reaction that overall Inflation numbers can be ignored, as long as Core Inflation remains low (even when the Volatile sector begins to absorb a much greater share of the finance of the Economy). Perhaps my greatest criticism of Greg’s actually good article lay in the assumption of a Intellectual aristocracy, remembering that a great part of the success of Hitler, Stalin, and Mao Zedong lay in the excellent intellectual advisors they had in abundance; come to think of it, the Saudi family is probably the most excellently trained Intellectual family in the World, and may even surrender Third World Slave practices if Americans apply high levels of bad PR to such activity.

Here is an article which should be titled ‘Tax Evasion for the Affluent’. I enjoy the term of ‘Tax harvesting’ as used in the article, which for Those slow to understand such terms, can be translated as Measures to cheat on your Taxes, so the Middle Class will wind up with more of the Tax Bill. This title, though, may cloud the Issue with Class Conflict issues. Maybe the title should be ‘How to utilize Tax discounts which your Employees are forbidden to use’. No, that will still not do it! Let’s go with the title ‘How to Draw your own Tax Bill, using the Pencil set of Tax Discounts built just for you’. Remember, this article is written only for Those owing more in Taxes higher than the Income levels of most Labor.

Mark Thoma finds an article from Gregory Clark which claims We can survive the experience of cheap Oil. I have nothing against that View believing it myself, but detest the avoidance of true discussion of what must be done to obtain such an idyllic state of being. Things like Federal prohibition of Property Tax exclusions, coupled with a progressive, graduated Property taxation based on square footage. Vehicle taxation set by Miles traveled, adjusted by the MPG enjoyed by Vehicle type. Legal enjoinment of Home Delivery of all Purchases, making Public Transportation more attractive. Legal requirement of Local and State Governments to fully fund Public Transportation facilities, based upon a national grid of Public Transportation. A federally-mandated Public Parking tax of $2 per Space, collected immediately and good only for a 24-hour period; think on how many Meter Maids could be employed collecting taxes. Employers could pay up to $2 per Day for Employee Parking, but going out for Lunch will cost the Employee. An Energy Tax will be mandated which will be set by Building Temperatures determined by Utility monitors based on an internal Temperature between 68–78 Degree F, with Tax frequency based upon Hours at each Temperature (square footage not adjusted because of the graduated Property tax based on footage). It is only these measures which will change American preference patterns, and lose the desire for high Energy use. lgl

Getting Out the Vote in Two Ways

Cactus at Angry Bear asks a good question, but could it possibly be rephrased to attain a more positive Answer? Is this not a Question of correct and efficient Parenting skills? A dysfunctional family probably exhibits less success than an institutional framework, while the Later could maximize potential success to the point as it provides real leadership cadres. Under all Cases the process of Parenting relies upon statistical Averaging, which comes into competition with the Concept of personal attainment, concurrent with all systems producing Duds of personal achievement. Should We not be asking whether social mobility ever surpasses the Heredity component of proper Parenting skills however produced?

Mark Thoma brings up an interesting Question: Should Voting be Made Compulsory? He says No, but after reflection, I decided the Answer should be Yes–but with Qualifications. Just like the omnibus bills of the Congress, where the evil is in the fine print of the Conference Reports; the hook should be in the Qualifications to mandatory Voting. The later should alter the entire direction of Voting in the democratic context. The first rule need be that all Candidate are voted upon; in the Primary, Voters will be asked to signify which Candidates are acceptable to Run for the Office, and signify with a No vote those Candidates who the Voter finds unacceptable. Candidates will have to prove their worth as a Candidate; this best spelled out by definition of a clearly outlined program if elected, which the Voters will have the power to review in the upcoming Election.

The last Sentence to the last paragraph holds an essential key to the success of the new Voting process. Candidates will have to articulate a definite program for implementation, Voters will be voting upon Initiatives rather than Candidates, and Voters will cast their Votes for the Candidates themselves by voting No on Candidates found unacceptable. The Winner will be the one with the most Yes votes (least No votes), and the voting Public will make known what Initiatives they would approve, no matter which Candidate advanced the proposals, with expectation that the Winner must adopt all successful proposals, or convince the voting Public that proposal elements are unacceptable or unworkable. Does this sound somewhat like the No Confidence Vote of the British Parliament? lgl

China and the American Way

Here is the lead Story of the Day, though Most are not likely to recognize it for some 3-6 years Why? Well, the actual numbers realistically equal the new numbers put out by the World Bank, but there is little recognition of the coming crisis–something like the current Credit Crunch in the West. Other nations, both Undeveloped and Developed, will eventually match and probably exceed the competitive advantage currently enjoyed by China. They have consistently denied development of Consumer-Role institutions in the Hinterland of their Country. They possess only a very inadequate replacement Consumer population (no Cash and lacking Stores). Once China loses the Export Trade, all those Bad loans become bad commercial paper. China has become addicted to the Imports they currently will accept, but will wind up without ability to purchase them. The West will also suffer, and Western Investment will turn into empty, shutdown Plant.

The Free Exchange highlights another danger for China, who does not possess sufficient technical advantage to design and build clean-burning Coal for electrical generation, when it is yearly increasing its electrical generation at a vast magnitude. Electrical Power Plants and Smelting Furnaces have a Life Expectancy of 30 years, and the magnitudes of Coal-burning utilizing inadequate technology remains relatively locked-in within that Period. Alteration of these Plants to utilize clean-burn practices typically equal or exceed the initial Cost of Construction. The Time to get Chinese compliance with World environmental standards is Now, not after another Ten years of Coal plant construction.

This Post, like all from this blogger, knows no boundaries, but it does have a graph which Readers should look at. It reminds Us that it is not only China where Ignorance is Bliss. Consumers are still building Credit debt in the midst of a Credit Crisis, and much of it is coming from Households where Mortgages will fall into Foreclosure. Economists might ponder these events with some degree of Pleasure, though sensible men might wonder at the sanity of it all. The World gets more confused and confusing, as it becomes more complex. One has to ask whether it is the Common Man, or the Experts, who need therapy. lgl

An Economic Forecast (Maybe?)

This article implies that there was a sharp Braking action last Fall in the Economy, to which aim is an attempt to press for the remedial action of easy Cash. The spate of economic activity of the summer was actually a basic Contract fulfillment on basic Orders already negotiated the previous year, and in the 1st Quarter of this year. Contract Orders had already been slowing since the start of this year, and will only speed up upon appearance of Profits-making potential, easy Cash or not. Reality presents a picture where Land values are too high, Residential and Commercial Properties are too expensive, Utility Costs are too extreme, Advertising for Market capture more expensive than Oil, and a saturated Consumer market possessing reduced Consumer Demand. Fundamentals restrict Business expansion at Present, and no amount of Government Fuel will alter this Fact.

I mention this Post by Menzie Chinn because it is excellent, and cancels the Propellent claimed for State and Local Government Spending. This Spending has always presented a counter-Keynesian bias, local legislators of the realization that the limited Revenue-generating capacity of their Taxing arms would not get them Preferred Status from Money lenders. State and Local Governments simply lack the Size and Capacity for Pro-Keynesian policy.

I will discuss the prior Four rationales listed in Menzie Chinn’s piece. The Fed is currently afflicted by an over-sized Economy, already over-packed with Cash. More Cash will not provide greater Productivity, only secure temporarily the Profit ratios of earlier years. A Monetarist approach to the current Economic trend will only generate Stagflation. The Housing downturn has not even started its retardation of economic growth as yet, because of Government and Banking intervention. Foreclosures will come; it is simply a question of how much Money We will waste trying to prevent the Foreclosures, before We allow the Mess to clear. The Job market is a bright spot because of the lean and trim Job Hiring of the Boom; Business cannot exercise Layoffs and Downsizing without losing productive capacity. Exports will not fuel the Economy as long as Imports increase faster than Exports; the Equation here remains Production Costs continue to rise faster than effective Export pricing in real terms. The Hedge against Recession is more illusionary than fact, but We should still get another Quarter of real growth, and Spring will cut Energy Costs next year (I predict that the current decline in Miles traveled will continue throughout the next year). lgl