Previous posts in this discussion:
Post
US Election 2016 Final (Istvan Simon, USA, 12/20/16 4:46 pm)With all the states' certified results completed, the results of the 2016 US elections are now finally known.
Hillary Clinton, 65,844,594 or 48.2 %.
Donald Trump, 62,979,616 or 46.1 %.
others 7,804,203 or 5.7 %.
More complete information broken down state by state can be found in
I'll leave the analysis of these results to the political scientists in WAIS, but still want to make a few comments here from the way I see this unprecedented election.
The indirect election system that was adopted in the United States, the Electoral College, was adopted for historical reasons. See a thorough description of these reasons in
http://uselectionatlas.org/INFORMATION/INFORMATION/electcollege_history.php
Many of the original reasons no longer apply, but to change the system requires either a new Constitutional Amendment, which is very difficult to pass and requires 75% of the states to agree, or about 10 individual states need to change how their own electors should vote, an intermediary step to eliminate the distortions of the Electoral College that is probably much easier to achieve politically.
The distortion introduced by the Electoral College as opposed to the direct popular vote comes from two sources. Each state gets as many electoral votes as their number of representatives in the House of Representatives, which is roughly proportional to their population, plus 2 Electoral votes, because each state has 2 senators. The two electors corresponding to the two senators per state heavily favors small states. California with about 40 million population gets the same two senators that Wyoming gets with about 600 thousand. The other source of distortion is that most states adopted the winner-take-all system which allowed Donald Trump to claim all the electoral votes of Pennsylvania for example, even though he won the state with only a 0.7 % margin.
It used to be very rare that the winner of the popular vote is not the same as the winner in the Electoral College, and it used to happen only in very close elections. This is surely one of the reasons why this system endured as a tolerable compromise until now. But this happened twice in the last 16 years--Al Gore also won the popular election by about 0.544 million votes while losing in the Electoral College. Furthermore, the extraordinarily large margin of Hillary Clinton's victory in the popular vote shows to my mind that the distortion of the Electoral College system is no longer acceptable.
One of the many ironies of this election is the fact that Donald Trump called for getting rid of the Electoral College a few years back, while calling it "genius" in this election. This illuminates his monumental cynicism and lack of character and honesty, as well as anything else in this election.
What should happen if the current system prevails? One look at the results gives a hint. The large states on both coasts which are also the economic engines of the extraordinarily dynamic United States economy voted heavily Democratic. These states receive back much less in federal money than they contribute to the federal government in taxes. In other words they subsidize the very states that elected Donald J. Trump. I think that if the present system is maintained, ignoring the will of the voters in these states, a tax revolt against the Federal Government is likely to eventually arise. The original Tea Party in Boston, not the fake Tea Party of today, that gave rise to the United States, was after all a revolt of taxation without representation against England, and it is likely to happen again as the states that carry the economic burden of the United States get tired of these inequities.
JE comments: This, Dear WAISers, may be the final entry in our "US Elections 2016" archive. The Electoral College has met and confirmed the victory of Mr Trump. Will it be the final meeting of the College? My crystal ball has had cataracts throughout 2016, but I'll go out on a limb one more time: absolutely not. The smaller states would never relinquish their relative political clout. In the meantime, California especially will become a non-factor in presidential politics.
SHARE:
Visits: 0
Comments/Replies
-
The Electoral College is Still Relevant
(Cameron Sawyer, USA
12/21/16 6:53 AM)
I'm not sure which "historical reasons" for the adoption of the Electoral College Istvan Simon (20 December) is talking about. The reason for this institution is quite clear, and I don't see why it's less relevant today than it was in 1789:
It is intended to give a voice to smaller states, in the electoral process, so that this voice is not drowned out by the sheer numbers of larger states. So that a strong opinion in, say, Vermont, is not made equal to a rounding error in California. This requires candidates, in order to win, to appeal to a broad section of the diverse assortment of states, rather than just sheer numbers of people in the main concentrations of population. This seems to me to be entirely healthy.
If statehood were meaningless, then this institution would not be necessary, but statehood under our federal system is not meaningless, despite the results of our Civil War.
This election showed exactly how the Electoral College was designed to work--Clinton was unable to prevail despite a narrow advantage in the aggregated popular vote, because she failed to win enough smaller states. She was not able to do it on the basis of sophisticated urbanites on both coasts.
I share Istvan's low opinion of the President-elect (and probably then some), but I cannot criticize the Electoral College. It's even showing the wisdom which went into its design.
JE comments: The historical reasons are precisely the ones outlined above by Cameron Sawyer. All this begs the question, however: why should geographical diversity outweigh a "one person one vote" principle? The truth of the Electoral College is that the vote of a Californian is worth far less than one from New Hampshire, say, or Ohio. Or unlike a Vermonter, a rural Californian's "strong opinion" is nothing but a Voice in the Wilderness.
Please login/register to reply or comment:
-
Electoral College and Democracy
(Cameron Sawyer, USA
12/22/16 4:33 PM)
In response to my post of December 21st, John E reflected on the US Electoral College: "Why should geographical diversity outweigh a 'one person one vote' principle? The truth of the Electoral College is that the vote of a Californian is worth far less than one from New Hampshire, say, or Ohio. Or unlike a Vermonter, a rural Californian's 'strong opinion' is nothing but a Voice in the Wilderness."
Sure, if you ignore the states. But this system gives some voice to communities, as well as to individuals. My statement about "strong opinion," in this context, was intended to relate to the opinions of communities.
This requires candidates to consider diverse interests of different states large and small, rather than merely raising the maximum mass of rabble. It's ironic in this particular election, but the Electoral College is also intended to make rabble-rousing harder.
JE comments: In the Old Days (prior to 2000), the Electoral College raised few protests, as the winner of the popular vote had carried every presidential contest since 1888. Now we've had two mismatches in 16 years--and had John Kerry won in Ohio in 2004, it would have been three.
So here's my "position" on the Electoral College: it's hopelessly obsolete, but there is no chance whatsoever it will be abolished.
Please login/register to reply or comment:
- More on the Electoral College,,,and Guns (Istvan Simon, USA 12/22/16 5:45 PM)
Cameron Sawyer (December 21) asked me which historical reasons no longer apply in the formation of the Electoral College. He then defended the small state versus large state argument. I agree with Cameron that the Constitution allows a diverse country to continue to be diverse. Why this has to be at the state level though, is not entirely clear.
But I digress. One of the historical reasons that no longer applies is this: The United States is a country of continental proportions. When the Electoral College was devised, a national campaign was practically impossible, because traveling the huge distances involved on horseback or carriages obviously took a long time. Similarly, the means of communication were limited, so news from one end of the country to the other took a long time as well. Today we obviously have instant communication from anywhere in the world to anywhere in the world.
Actually the small state versus big state issue is a red herring in this particular election. Donald Trump was not elected by the small states--they just have too few Electoral votes, even taking into consideration their absurd over-representation in the Senate. He was elected by large states, like Florida, Pennsylvania, Wisconsin, and Texas. What elected him though is the winner-take-all distortion that I wrote about.
Still on the small state versus large state issue. Californians have a very easy way to impose their will on small states. All they have to do is for 800,000 Californians to move to Wyoming, and presto presto, Wyoming will become a blue state. Wyoming is a beautiful state, by the the way, though a bit cold for my taste. As a bonus, the gun-crazy insane laws would also change.
To Bob Gibbs, whom I met personally. I like Bob very much, and respect and enjoy his posts in WAIS. Bob said at one point that he has five guns. I do not fear his guns, because I know Bob, nor would I take them away from him--we do have the Second Amendment after all that protects his right to have them. However, I have zero guns, and don't want any, and it does not make me feel better if my neighbor had automatic military-style weapons that can shoot dozens of bullets per minute. Nor am I encouraged by open-carry laws as in Louisiana and Texas. If I were a policeman, I'd be extremely worried about such laws.
Gun violence kills 30,000 plus Americans per year--the majority suicides. Islamic terrorists killed maybe about 20. The number of American deaths in 15 years of war in Afghanistan and Iraq combined stands at 6.8 thousand. I honor every one of them. My point of bringing it up is not at all to diminish their sacrifice, on the contrary. It is simply to point out that in the same 15 years gun violence killed about half a million Americans. It should worry us far more than it does.
Another question for Bob Gibbs, while I am at it. I am very curious about the free clinic that he mentioned in one of his posts. I am all for such clinics, but would like to know more about how it is funded.
JE comments: Bob's RN wife Rose is the hero of the free clinic. I hope Bob will give us more particulars.
A question on mobility and demographics. Nevada has turned into a blue state. Was this because of the "California
Cameron Sawyer (December 21) asked me which historical reasons no longer apply in the formation of the Electoral College. He then defended the small state versus large state argument. I agree with Cameron that the Constitution allows a diverse country to continue to be diverse. Why this has to be at the state level though, is not entirely clear.
But I digress. One of the historical reasons that no longer applies is this: The United States is a country of continental proportions. When the Electoral College was devised, a national campaign was practically impossible, because traveling the huge distances involved on horseback or carriages obviously took a long time. Similarly, the means of communication were limited, so news from one end of the country to the other took a long time as well. Today we obviously have instant communication from anywhere in the world to anywhere in the world.
Actually the small state versus big state issue is a red herring in this particular election. Donald Trump was not elected by the small states--they just have too few Electoral votes, even taking into consideration their absurd over-representation in the Senate. He was elected by large states, like Florida, Pennsylvania, Wisconsin, and Texas. What elected him though is the winner-take-all distortion that I wrote about.
Still on the small state versus large state issue. Californians have a very easy way to impose their will on small states. All they have to do is for 800,000 Californians to move to Wyoming, and presto presto, Wyoming will become a blue state. Wyoming is a beautiful state, by the the way, though a bit cold for my taste. As a bonus, the gun-crazy insane laws would also change.
To Bob Gibbs, whom I met personally. I like Bob very much, and respect and enjoy his posts in WAIS. Bob said at one point that he has five guns. I do not fear his guns, because I know Bob, nor would I take them away from him--we do have the Second Amendment after all that protects his right to have them. However, I have zero guns, and don't want any, and it does not make me feel better if my neighbor had automatic military-style weapons that can shoot dozens of bullets per minute. Nor am I encouraged by open-carry laws as in Louisiana and Texas. If I were a policeman, I'd be extremely worried about such laws.
Gun violence kills 30,000 plus Americans per year--the majority suicides. Islamic terrorists killed maybe about 20. The number of American deaths in 15 years of war in Afghanistan and Iraq combined stands at 6.8 thousand. I honor every one of them. My point of bringing it up is not at all to diminish their sacrifice, on the contrary. It is simply to point out that in the same 15 years gun violence killed about half a million Americans. It should worry us far more than it does.
Another question for Bob Gibbs, while I am at it. I am very curious about the free clinic that he mentioned in one of his posts. I am all for such clinics, but would like to know more about how it is funded.
JE comments: Bob's RN wife Rose is the hero of the free clinic. I hope Bob will give us more particulars.
A question on mobility and demographics. Nevada has turned into a blue state. Usually the growth of the Latino population is cited as the reason. But haven't many Californians moved there, too?
Please login/register to reply or comment:
-
More on the Electoral College and the US Federal System
(Timothy Brown, USA
12/23/16 5:24 AM)
I gather there are those who believe the United States of America should be transformed from its historical form of a union of sovereign states and become, as many other nations are, a unitary country à la France, Russia, China, Japan and many more. In the eyes of many that would presumably make the country better. Let me inject into this discussion something they may not have noticed. Were the US a nation not a union, the Senate would become irrelevant, since California, New York and two or three other subdivisions of the body politic would have absolute monopoly of power. The other 45 "states" would become politically interesting but basically just anomalies.
And had the 2016 election been a winner-take-all competition between Conservatives and Liberals, with the candidate that received the most votes being the winner, the nationwide number of votes received by Conservatives (Trump plus Johnson) was about 2 million or so higher than did the Liberals (Clinton plus Stein) since Johnson took 4% or so of the total national popular vote while Stein received at best 1.5%. So, may I suggest that you beware what you wish for. You just might get it.
JE comments: The conservative candidate of 2016, as in "keep things the way they are," was arguably--or not so arguably--Hillary Clinton. One of the many lessons of 2016 was the blurring of the traditional left-right distinctions. Where along the spectrum do you put a Libertarian? On the extreme right? Well, not so fast...
What is/are the United States? We no longer use the plural verb, and the "union of sovereign states" definition was dashed by 1865. Now what we have is a federation in theory, but a unitary country in practice.
Please login/register to reply or comment:
- Guns, Tea Party, and a Free Clinic in Sequim (Robert Gibbs, USA 01/08/17 4:17 AM)
Back on December 22nd, 2016, Istvan Simon asked me several questions that I'd like to address.
First, while I am glad Istvan approves of my gun ownership, I will still rely on the Constitution--no offense meant. Second, of my five guns, two are operating replica weapons--to wit, one is a .50 cal flintlock rife, which is great fun to fire and reload. The same is true of the ,44 cal navy 1854 revolver--that too is a kick, and my friends and I came to a real appreciation of our ancestors. The bite of the .44 is to be experienced. Then there is the long gun Winchester 30-30 old model (forged steel), a great deer rifle though up to about 8 years ago I only used it on wild boar. Then there is a 12-gauge shotgun used for home protection--a crook would have to have the IQ of a can of creamed corn to continue after hearing a round chambered in a shotgun. It was also my weapon of choice in my last two deployments.
And finally, there is a .45 auto pistol with a concealed carry permit. I tried to give the .45 to my son, but the legal paperwork and costs make this prohibitive. As for the above I have neither hunted nor fired any of these weapons or carried them in at least five years. I have cleaned them twice a year (give or take). Though this may sound like a lot, according to a friend of mine from Oxford, it is not. In the area where I live, I am considered almost disarmed. (My neighbor has 24 long guns alone.) I have about 12 boxes of various ammunition; my neighbor has around 1200! I know, right, and he is the liberal in our gun club. I have given up shooting as a sport for reasons of my own--except I did recently fire a friend's Barrett .50 cal. It was a great day and did entice me, but it is too expensive, like the beautiful Springfield Armory's sporterized m-14, a magnificently beautiful system. I had a pin-up of the Springfield on my wall until Rose found out the cost. The only other exotic weapon I recently fired was a 10-gauge Magnum (designed to bring down or deflect asteroids, I believe). This is a system designed by orthopedic surgeons and chiropractors--you either hold it properly or you do regret it.
Second, Istvan asked about my wife Rose and her free health clinic. On this I am extraordinarily proud of her achievements. But if the truth be known, our town (Sequim, Washington) is rather unique in many ways. But it is a very middle-class town filled with middle-class values and a lot--a lot--of retirees. And they believe in donating money and time. For example, this Christmas (the first since coming here that I could not participate), we had almost too many volunteers, who nearly numbered more than those we helped. It is a joke that to move here one is expected to join at least one volunteer organization (Kiwanis, Shriners, etc.). I joined the Coast Guard Auxiliary, and the Police reserve. So you see that the free clinic is a town effort as well.
The specifics of the Dungeness Valley Health and Wellness Center (the official name) is a product of the following:
1. The state of Washington, about 20 years ago or so, recognized that there was a real need for indigent care (basic treatment), and by law exempted all voluntary centers from liability insurance and other restrictions (the state covers the liability).
2, In Sequim, the Hospital Medical Center donates space in one of its buildings and some equipment. Everyone and everything is donated. The main donation is treatment by retired doctors and nurses. Also, there are donations by pharmacies of everything from band-aids to equipment. Many donations come from families that have lost a loved one. Wheelchairs, braces, sometimes a special bed--I even offered to take one home to see if it really works. But Rose said no (weird; she was not convinced, even when I pulled the "wounded vet" card).
3. In case you ask, there is no charge. There is a donation box, but it is usually empty.
4. Rose has run this facility for eight years, both as a volunteer and as clinic director. She now has the Med Center donating x-rays and basic outpatient care and some inpatient. She also created two special chronic-care days, and her real coup was getting the town's dentist into the donation mix, as well as getting the city to spring for more money for prescriptions and advanced dental care. In short, if you are a doctor/dentist/nurse/med tech/med clerk and you move to Sequim, you will get a call, then an appearance from a 6' weird lady that will "make you an offer you cannot refuse" --with a smile as well. Actually, Rose has this ability to bring out the best in people. The best part is that except for the minimal patient charts, there is almost no paperwork and few government forms to maintain. Real medicine for a change.
5. Rose's patient load is completely diverse, from illegal aliens, drug addicts (yes, both are a problem here), to mountain people or Constitutionalists who live in the Olympics off the grid. Also, she treats the mentally ill and the elderly who will not/cannot apply for Social Security or Medicare. Then there were the working poor without insurance, and now the largest increase has been with the working poor who have insurance but who cannot afford the deductible. There are also Medicaid patients who cannot find a doctor. As an aside, when the ACA/Obamacare appeared, the state's free clinics were deemed redundant. Yet due to very high deductibles and other problems, the traffic in her clinic has actually grown. The donation box remains--also several free clinics in Washington were enticed/ pressured to accept something called Apple Care/ Medicaid. The paperwork requirements for these programs can cost more than the reimbursement. Rose said a flat "no."
6. As such, the Sequim Free Clinic (I doubt if I did it full justice here) not only works, but it has been recognized twice now as the best in the state. It has also received national recognition. Not bad for a small town or a very intimidating lady Rose. Though I worry about the town as they have put up a memorial plaque to me in the town's veterans memorial. I tried to explain that I really did not think I was dead, but anything for the town. I will send a picture soon.
Now as this might be my last post for a while, I would like to ask John Heelan and Carmen Negrín questions on their recent posts.
First, you do know that you are not US citizens? Do I complain about Brexit? No--what right do you have to comment on our election again in such a hysterical fashion? Carmen, why attack the Tea Party? The Tea Party, really? They are a group of middle-aged, middle class for the most part shopkeepers concerned with higher taxes and wasteful spending. On social issues, they are as a group rather quiet. They focus on the economy. The time they started adding 4 trillion (with a T) to the deficient is rather disturbing in some quarters--especially among those who will have to pay the bills. And you call them "monsters." Why? Besides the Tea Party is now all but gone. I will add that unlike all the left protests, the Tea Party did leave their areas clean--many times cleaner than when they arrived. In short, they pick up after themselves. On social issues they are all over the board, and prefer to leave these outside their tent to focus on economics. I am not one of them, but I do agree with many of their goals--just not enough to join a group that has no leadership as far as I can tell. I realize that the European Press has been melting down over the US election (it is my joy to watch--and a perfect definition of Schadenfreude--which explains it all).
To everyone in WAISdom, I hope the New Year is happy and prosperous for you and yours.
JE comments: Bob, who is the Schadenfreuder and who is the Schadenfreudee? In any case, WAIShood since its inception 52 years ago has always included the right to comment on the politics of other nations. This is one of our strengths. Often when you are in the eye of the storm, you cannot see what is going on.
I was already familiar with Rose Gibbs's splendid work with the Sequim clinic, but now my admiration has increased multifold. Congratulations, Rose!
Finally, I hope Bob Gibbs doesn't mind me revealing that he will be undergoing surgery tomorrow (Monday). You will be in our thoughts! Please check in with us post-op, as soon as you are able.
Please login/register to reply or comment:
-
Guns in America
(Istvan Simon, USA
01/08/17 4:59 PM)
I want to thank Bob Gibbs (January 8), who graciously answered two questions I specifically asked of him. I would like to congratulate his wife Rose on her magnificent work at the free clinic at Sequim, Washington. May her efforts proliferate, so that our healthcare problems will be smaller than they are. Unfortunately, we have deep problems in this area, problems that need solution in spite of her magnificent work.
On the subject of guns, I am less satisfied with Bob's answer. Though I appreciate very much his colorful descriptions of the guns that he owns and his much more robustly armed neighbors, I was hoping that Bob would engage me in a more general discussion about the need to address the issues that lead to 30,000 people dying every year in our country victims of gun violence, 2/3 of which are self-inflicted. I too rely on the Constitution, including the Second Amendment, though I do not see why the Second Amendment needs to be interpreted in the absurd ways that it is often interpreted by the NRA, for example.
In the last few days I have been engaged on Twitter in a rather intensive manner. In one of my tweets I mentioned the NRA, which immediately brought a bunch of trolls to write me rather idiotic messages with familiar arguments. One said: "Guns do not kill people, people kill people. Cars kill people too, should we ban all cars"? To which I answered, "Cars are licensed, and so should be guns." To which he answered, "Do you think that criminals would register their guns?" To which I answered, if they don't they need to be jailed just like people who do not register their cars. He then attacked liberal France. I pointed out to him that the rate of deaths by firearms in France was 2.8 per 100,000 population, and in the UK it was 0.23 per 100,000 population, while in the United States it is nearly 11 per 100,000 population. To which he replied that this is because we are a diverse country, and that he bets that in Switzerland, which is a white country, it is so low that they do not even keep statistics. To which I replied, you are wrong on that. Switzerland has 3.08 rate per 100,000, higher than in France. To which he replied that only white people should be allowed to have guns in the United States. I laughed so hard at this, that my 9-year-old son, the scientist in training, also started laughing. I answered him that I am white, but own no guns, and that I am also not a racist, and that I rely on the United States Constitution, including the Second Amendment.
https://en.wikipedia.org/wiki/List_of_countries_by_firearm-related_death_rate
I hope Bob Gibbs will see from this exchange that we need to have a broader discussion on this subject than simply the colorful description of his firearms and that of his heavily armed neighbors. I very much hope that he will indulge me once again, and we can continue this delightful conversation.
JE comments: Bob Gibbs will be in the hospital for a few days, but I know he'll be back in the WAIS saddle soon.
Istvan: why do you engage Twitter trolls? It is not a medium that lends itself to thoughtful or nuanced discussion. With interlocutors such as Mr White Guy Gun Owner, I would follow the eternal wisdom of Margaret Eipper (also known as Mom): Just ignore him.
Please login/register to reply or comment:
-
Guns in Switzerland
(John Heelan, -UK
01/09/17 8:46 AM)
Istvan Simon (8 January) revealed the thin veneer of knowledge of "Twits" when he reported that one of his correspondents suggested that Switzerland would have barely registrable figures for weapons kept at home. Istvan rightly commented that the Swiss figure was greater than that of France. This is not surprising given that nearly 4 million Swiss citizens (50%) are conscripted to the national militia and, as such, are empowered to keep their weapons (but not ammunition) at home.
JE comments: Istvan's "troll" interlocutor was really saying that Switzerland has no murder problem because it's a homogeneous white country. White yes, but homogeneous? Just for starters, think of the four languages.
The Swiss apparently take very seriously the flippant statement I've heard on several occasions: Guns don't kill people; bullets kill people.
Please login/register to reply or comment:
-
An Argentine Aphorism about Guns
(Rodolfo Neirotti, USA
01/11/17 3:36 AM)
John E wrote: "The Swiss apparently take very seriously the flippant statement I've heard on several occasions: 'Guns don't kill people; bullets kill people.'"
In Argentina, people would say (my translation): "Weapons are loaded by the devil and fired by a jerk."
JE comments: I was going to title this post "An Argentine Maxim," but a Maxim is also a machine gun.
One of the enduring tenets of American Exceptionalism is this nation's love affair with firearms. Thoughtful people in every other nation I know of do not understand. The Argentine gaucho was armed with a knife and a set of boleadoras, while his US cowboy counterpart carried a Winchester repeater and a revolver. Might this be the reason?
Please login/register to reply or comment:
- In Defense of Free Academic Speech (John Heelan, -UK 01/08/17 6:07 PM)
With some trepidation given his armaments and military skills, here are my answers to Bob Gibbs's questions of 8 January:
"First, you do know that you are not US citizens?" (Yes--for which I am profoundly grateful, given likely future that a Trump presidency will inflict on US citizens.)
"What right do you have to comment on our election again in such a hysterical fashion?" (The right of free speech in academic discussions--or is that also likely to be curtailed post 20 January?)
"I realize that the European Press has been melting down over the US election (it is my joy to watch--and a perfect definition of Schadenfreude--which explains it all)."
Enjoy your joy, Bob, while it lasts and before the Schadenfreuders become Schadenfreudees as the reality of a Trump presidency starts to bite over the next four years.
(By the way, I concur with John E in sending Bob every best wish for the success of his forthcoming surgery. WAIS needs Bob's wise words and memories from time to time. The word Dungeness brings back lots of memories, as I lived near Dungeness (Kent) for many years, although the only "valley" was the one excavated about 200 yards off shore to provide input/output water channels feeding the Dungeness nuclear power station. The warm water provided an excellent source of beach fishing for cod, etc.)
JE comments: Is there a proper German word for "Schadenfreudee"--meaning, the one whose misfortune provides joy for others? A schmuck?
Fishing in nuclear effluvia is an intriguing concept. I am aware that the water is heated but not radioactive, but still: there's a "yuck" factor at play, the suspicion of glowing, three-eyed fish, and the like.
Please login/register to reply or comment:
- Guns, Tea Party, and on Being a US Citizen (Carmen Negrin, -France 01/09/17 3:08 AM)
One question for Robert Gibbs (8 January): What is the use of having five guns? We only have two hands! And to be used against what? If a robber comes, aren't the guns supposed to be kept under lock and without ammunition? Considering the time it takes to get it ready, isn't it easier and faster to call the police? Just naive questions.
Besides that, I wonder why Robert considers me to be a non-US citizen, just because I don't like the Tea Partiers? For his information, I was born in New Jersey, and my maternal family descends from a certain James Chilton, as well as a certain Thomas Skillman; the wall built along the now called Wall St was ordered by an ancestor, several villages around my birthplace carry my ancestors' names, the bell on the village church was given by the family, La Fayette was hosted in a house which belonged to my Aunt and Uncle, etc. Difficult to be more American--at least for that side of me!
But even if I weren't, I think it is important to have a global view and to be able to express it. I find it disastrous that Toyota, a Japanese company, plans to drop projects in Mexico out of fear of Mr. Trump. I find it even worse that a Mexican cement company offered to build the wall (paid by Trump at least), I find it humiliating for the Mexicans to have as new Secretary of Foreign Affairs, the same person who had the not very brilliant idea to invite Trump to Mexico--and who at the time was almost immediately kicked out from his post because of the internal scandal it created. I worry about Europe being squeezed between the US and Russia. I worry about Jerusalem being the choice for the US embassy. I worry for our freedom, in the US and out of the US. I worry for Planned Parenthood, I worry for the possible lack of Obamacare since not everyone is as generous as the inhabitants of Sequim, especially not in large cities.
Watching everyone bow at Trump's wishes of the day makes me think of Ionesco's Rhinoceros.
Well, in spite of all these worries, I wish all the WAISers a very happy and peaceful New Year!
JE comments: Likewise to you, Carmen! If your ancestor built the (real) Wall of America, as in the wall of Wall Street, that makes you more American than anyone in WAISworld. Or I'll speak just for myself and my hardscrabble German ancestors who washed up on these shores barely 120 years ago. The first Eipper landing spot was also in New Jersey: Hoboken.
Aficionados will tell you that guns are like golf clubs or screwdrivers: you need many different sizes and applications. You can't use all your golf clubs at the same time, either. (One clarification to Carmen's post: most cities in the US have no laws against storing your weapons loaded.)
Please login/register to reply or comment:
-
Guns, Tea Party and... James Brown
(Robert Gibbs, USA
01/27/17 11:42 AM)
I truly regret the long and regrettable delay responding to Istvan Simon, Carmen Negrín, John Heelan, et al. The delay was unavoidable but I'm back now.
To Carmen Negrín, I respond by saying:
1. As John E pointed out, I am not required by law to keep my arms unloaded in a locked box. The shotgun and .45 are rather easily accessible, as is the 30-30 but not so much. To follow your advice to call the police for an intruder would mean giving my stuff to a scum robber and/or killer. This is not going to happen, as it would take the police or sheriff at least 25 minutes to respond. Even so it is my stuff--Rose and I worked hard for our stuff. The shotgun has two types of rounds, a regular double .00 buck shot and I also carry 4 rock salt loads just in case they are kids on a lark. (You have not felt pain like a butt full of rock salt--I got 4 pieces when I was 15 and still feel the pain). Also, as John said, each weapon has a use and a specific purpose for me. The flintlock rifle is for fun, experiencing shooting as it was 200 years ago. The ball and cap are just fun at the shooting range. The 30-30, though called a "deer rifle," is/was used mainly for hunting wild boar (Hey, John story). The .45 is for personal protection (once upon a time). Now it is just something to fire occasionally.
2. However, and most importantly, you (Carmen) still have not said why you called the Tea Party "monsters." Most of the points you raised were never a part of their agenda as far as I know. They are/were mainly a loose grouping of fiscal and economic policy protestors. Very individualistic, especially on social issues. But I ask again, why are they monsters? Because they might disagree with you?
Along with this--I hope you realize that that your obvious designation and disdain for anyone who disagrees with you is one of the reasons Trump won. The same is true for John Heelan and Istvan Simon. Of course, you and John H live in countries where free speech is limited and regulated. Also your idea on American healthcare is quite skewed, to say the least
3. And no, I was totally unaware of your connection to and birth in the US--To that I say: Welcome home! As it says in the Psalms (Randy Newman):
It is great to be an American
Ain't no lion
ain't no tiger
ain't no mamba snake
Just the sweet watermelon
and the buckwheat cake
It's great to be an American
Psalm 151
Or see:
https://www.youtube.com/watch?v=2yrT0DpvfVI&sns=em
4 To John H, I am challenging not your right to say anything, but I protest the non-academic, near hysterical fashion in which you posted your disdain for President Trump. Of course you and many EU elites are having fits and hysteria over him. Get over it. He won.
5. In all sincerity I say I would not censor anything you said. I do not believe in any form of censorship. There is no illegal speech. I am committed to the Constitution wholly and fully. I spent 31 years defending it. You have a right to your opinion and to express them, no matter how vile or hysterical. I will defend your right to say them. I just questioned they way you addressed you feelings on WAIS. I realize you live in a country like Carmen that regulates so-called "hate speech." What is that, and who determines what is hate speech? No, there is free speech or not. And I say this knowing that I do have a great debt to England, the UK, and Oxford. The only thing I questioned is the rather unWAISly fashion of your postings. Also, you do realize that if all you seem to hope for comes true and the US fails--there is no more UK? Not as we know it?
If none of this works for you I have serenade for you and with apologies to our colleague David Krieger and a smile:
https://www.bing.com/search?q=randy+newman+political+science+youtube&qs=AS&pq=randy+newman+political&sk=AS3&sc=8-22&cvid=7E2B69654B6543B2A50DA872E7449284&FORM=QBRE&sp=4
6. To Istvan, first, I do not understand you argument for total gun registration. You compared it to automobile registration, But all that is is one big expensive and totally redundant bureaucracy costing billions a year. And has it stopped drunk drivers? Automobile accidents? Save any lives? Don't think so, So what is the purpose? Curio Bono? I do not mind certain restrictions if they were sincere and realistic and not meant to chip away from gun owners' rights. All registration would do is add cost and more cost to gun ownership. In short, I do not trust those going after "reasonable" regulations to leave it at that.
7. Another point is all these ridiculous calls for bans on assault rifles. Civilians (except with special permission) cannot own or operate genuine assault rifles. People are going after the AR-15 for the way they look as much as how they operate, as if it were some weapon of doom. It is no different from any other rifle--but it is black and looks bad ass but hey, it is still a 223 firing mostly for target shooting. My 30-30 has a bigger round and is more lethal than the AR. But now that it comes in pink and weird purple and orange, does it still qualify as an assault rifle?
8. And finally for Istvan, did you ever consider that the person you mentioned "debating" on the Internet was doing to you what you were doing to him? We all know and acknowledge that you are smart, but like a watch you do not have to take it out every five minutes to show people you have one. Maybe you could engage people and find out what they really feel, educate them and not just put them down for your own amusement. After all, aren't you a teacher? Again I suggest that one of the reason Trumps won is due to people ignoring and looking down upon and finding their fellow Americans beneath their notice, But not now.
JE comments: Bob! I'm pretty sure Randy Newman's Drop the Big One is an exercise in irony, rather like Kubrick's "How I Learned to Stop Worrying and Love the Bomb."
Whew, this post will get the WAIS circuits buzzing. Can I squeeze off one question edgewise: What mischief were you up to when you got the rock salt blast?
(Don't try these things at home, folks.)
Please login/register to reply or comment:
-
Guns, Taxation, and the Trump Economy; from Ric Mauricio
(John Eipper, USA
01/28/17 4:19 AM)
Ric Mauricio writes:
And here's a rock salt shotgun blast across WAISworld. And an attempt to address some of the issues that Robert Gibbs has brought up on January 27th.
1, 6, and 7. Keeping arms unloaded in a locked box defies logic. After all, isn't a gun for self-defense? Imagine having an intruder invade your home, you need to find the gun locker key, unlock it, load the weapon, and threaten or use it against the intruder, all in a timeline that may or may not be available for your safety. By the way, the best weapon for defense is the shotgun. Anybody can point a shotgun, pull the trigger and most likely hit the target. Revolvers take some skill. Most law-abiding citizens will not utilize their weapons in a negative manner. Some, though, are stupid enough to leave a loaded weapon where children can get to them. Only criminals will utilize weapons in a negative manner. And yes, true assault weapons are illegal. So, in order to purchase a weapon, one must fill out the paperwork, then a background check is done. This is to weed out the criminals. But, of course, no system is perfect. Just like the DMV, it is not perfect. It doesn't stop drunk drivers. In fact, I have a idea that in addition to the blue placards for handicap drivers, they should have yellow placards for terrible drivers. But I am not ready to allow unlicensed and uninsured drivers on the road.
2. Carmen Negrín calling Tea Party members "monsters" is the danger of generalization. People will take some of the negative factors of a group of people and broad-brush paint the whole group. We must be vigilant in not falling into this trap. Liberals. Conservatives. Muslims. Catholics. Academics. All labels. I hate labels. As for Obamacare, it was once again a great idea, but got hopelessly mired in complexity. All one had to do was adapt the Medicare single-payer system to include those under 65 and everything would have been better, much better. Not perfect, but better.
4. I like, John Heelan, am not an admirer of Trump. I can't believe that they used the Darth Vader march as his entrance music to the inauguration. I also can't believe they used as the entrance music to one of his pre-inaugural celebrations the Rolling Stones' "Heart of Stone." Take a look at the lyrics. Mick sings about predatory sex. However, having said that, I was asked the question on why the executive orders are being done at warp speed. TPP should have been killed, even though the basic idea was to expand the US economic influence in southeast Asia to thwart the Chinese economic influence. It was a good idea that became flawed. But the speed with which President Trump is doing this illustrates what most successful people do. They set a goal. They set mini-goals. They set steps to reach those mini-goals. They delegate. Every day, they have a to do list, prioritized. And, wham, bam, they do it. People ask me how I work in taxes, run a business, manage my real estate holdings, and manage my stock investments. Every day I have a prioritized to do list ... a day planner. My daughter does too. And wham, bam, we do it.
Now the real reason why I am writing: border adjustments. I was asked several questions that since I am an accountant, investment analyst and a tax advisor, people feel I would be able to explain what is going on. Border adjustments are simply an attempt to balance international movement of goods between countries. You can do this with taxes on goods or tariffs. However, these have a tendency to start trade wars. And of course, President Trump will have quite a challenge with Congress on these. However, there is one strategy that has a very good chance of becoming law, because of its stealth nature. This is the limitation of the COGS deduction on imported goods. COGS by the way, stands for Cost of Goods Sold, and this new accounting (tax) regulation would not allow any US company to deduct COGS on any product that it imports.
How does it work? Let's say that a company imports goods to sell in its stores. Yes, we're talking Walmart, Amazon, Target, Sears (which will soon go bankrupt). Let's say that they sell you a product that retails for $100. Let's say that their profit margin is 5%. Let's further say that the product costs $30 to import from the foreign manufacturer. Normally, you would deduct the cost, plus the cost to hold it in inventory cost (interest costs), plus the cost of paying your employees and the landlord of your store. Thus, your profit is $5. And you would pay $1.75 in taxes (this is a simplified 35% example because state income taxes would differ from state to state). Thus, your net profit after taxes is $3.25. However, if you could not take the COGS as a deduction, your taxable profit would be $35 and your tax would be $12.25. Now your net income after taxes is really a negative $7.25. There is no way that Walmart or Target or Ford or GM is going keep the price at $100. They would need to raise the price to $112.25 just to keep the same profit (this again is simplified). Thus you will have a 12 1/4% inflation rate.
But won't this force the retailers to buy American-made goods, you ask? But can they buy the American-made goods for the same price that they buy it from overseas? The answer of course is no. As our minimum wage moves towards $15, that is 3 to 5 times the wage overseas. However, there is some movement by some American companies to onshore some manufacturing processes. So that should be good for the American worker, right? Not so fast. You see, some companies have indicated that with the tax holiday of repatriating overseas profits at 10% (Trump proposal), they will be building manufacturing plants in the US staffed by robots.
Conclusion: buy whatever you are hoping to buy now. And to paraphrase The Graduate phrase: "Robotics" is where you want to be.
By the way, one of my predictions is in danger of coming true: China's massive slowdown. A few weeks ago, McDonald's sold a large portion of its Chinese business for $2.1 billion. That is less than the cost of one Big Mac per person in China. China will be forced to devalue its currency. The last time that happened, the global investment markets cratered. By the way, Yum Brands, owner of KFC and Taco Bell, quietly did the same thing the year before. Yes, the big boys are seeing something and they are getting out, in a big way.
JE comments: My smart and hard-working nephew is set to graduate from U Texas/Austin this May with a degree in mechanical engineering and robotics. Anyone have a job for him? I've never been in a position to practice nepotism in the literal sense, but perhaps someone in WAISworld can send a lead?
End of pitch. Ric Mauricio's crystal-clear explanation of COGS should be required reading for everyone in the Trump administration. Think of the impact on inflation, and the potential to destabilize Mexico and (especially) China. And a chaotic China, it seems to me, could become a very dangerous China.
I have heard on the news that the proposed 20% tariff on Mexican goods would raise the price of a US-assembled vehicle at least $700.
Please login/register to reply or comment:
-
Trump's Taxation Policy
(Jordi Molins, -Spain
01/29/17 7:53 AM)
Ric Mauricio wrote on January 28th:
"Let's say that a company imports goods to sell in its stores. Yes, we're talking Walmart, Amazon, Target, Sears (which will soon go bankrupt). Let's say that they sell you a product that retails for $100. Let's say that their profit margin is 5%. Let's further say that the product costs $30 to import from the foreign manufacturer. Normally, you would deduct the cost, plus the cost to hold it in inventory cost (interest costs), plus the cost of paying your employees and the landlord of your store. Thus, your profit is $5. And you would pay $1.75 in taxes (this is a simplified 35% example because state income taxes would differ from state to state). Thus, your net profit after taxes is $3.25. However, if you could not take the COGS as a deduction, your taxable profit would be $35 and your tax would be $12.25. Now your net income after taxes is really a negative $7.25. There is no way that Walmart or Target or Ford or GM is going keep the price at $100. They would need to raise the price to $112.25 just to keep the same profit (this again is simplified). Thus you will have a 12 1/4% inflation rate."
Jordi Molins replies:
According to standard economic theory, the end result of such a policy would not be inflation, but an increase in the value of the dollar. Exports would become more competitive (increasing the demand for them), while imports would be discouraged (decreasing the demand for them), with both effects leading to a stronger dollar.
Even more, an increase in tax receipts could finance a reduction of the corporate tax rate, from 35% to 20% or 15%. A reduction of the corporate tax rate would increase the cash flow available to companies to service debt, and since the tax shield benefit would diminish, companies would have the incentive to deleverage. Both effects would lead to a decrease in financing costs for companies, a positive second-order effect, which would even be stronger if the deductibility of interest rate payments is removed, as it has been discussed publicly.
The US has two big and unique economic problems: America is the only developed country without a VAT, and it has the highest corporate tax rate in the developed world. Addressing both problems is urgent, and the solutions proposed above go in the right direction.
The main issue for a Trump administration is a Fed trying to move towards a neutral monetary policy. The key question here is: Will the American economy be strong enough to withstand a monetary policy headwind? The answer to this question is strongly related to the low growth anomaly during the Obama administration, whether it is transient, or not.
JE comments: Two (perhaps simplistic) questions from this Humanist: Aren't VATs classic examples of regressive taxation? (Not that Mr Trump would shy away from a regressive tax.) And how could financing costs for corporations go any lower than they are now? Interest rates are trending upward.
Please login/register to reply or comment:
-
Tax Policy, Imports, and Currency Values
(José Ignacio Soler, Venezuela
01/30/17 8:18 AM)
In response to Ric Mauricio´s post, Jordi Molins (29 January) wrote the following: "According to standard economic theory, the end result of such a policy [eliminating the Cost of Goods Sold tax deduction--JE] would not be inflation, but an increase in the value of the dollar. Exports would become more competitive (increasing the demand for them), while imports would be discouraged (decreasing the demand for them), with both effects leading to a stronger dollar."
Maybe I am wrong, but I have always had the understanding that when a currency "increases in value" (supposedly related to other currencies), then the goods produced in the country become more expensive to foreign consumers, therefore the exports would become less competitive, thus decreasing the demand. On the other hand, imports would become more attractive, instead of being discouraged. That would explain why monetary policies are usually used by governments to make foreign trade more or less competitive, and they prefer to have independence and autonomy.
I would be very grateful to Jordi if he could clarify what standard Economic theory he is referring to.
JE comments: I understood Jordi's point differently, reversing the cause and effect. The reduced demand for non-dollar currencies by US companies buying fewer imported goods would drive up the price of the dollar. Of course, as José Ignacio Soler writes above, the effect would be to make US exports more expensive, and bring down the price of imports, perhaps even to the point where it makes economic sense to buy them without the COGS tax deduction.
(A big WAIS apology for today's late start. The WAISworld.org website was down this morning. In technical terms, we might say "on the fritz." Our IT guru Roman Zhovtulya is looking into the causes.)
(I'm pressed for time at the moment, but I'd like to return to this very colorful expression: On the Fritz.)
Please login/register to reply or comment:
- Tax Policy, Imports, and Currency Values; from Ric Mauricio (John Eipper, USA 01/30/17 11:27 AM)
Ric Mauricio writes:
I find Jordi Molins's economic theories (29 January) to be very interesting.
First of all, there is no such thing as "standard economic theory," as Jordi writes. There are several schools of economic thinking. The two most prevalent are the Keynesian and Austrian schools. They are two very distinct thoughts on the why and what of global economics. Keep in mind that most economists who are employed by Central Banks and the banking and brokerage industries have been taught the Keynesian method in their Ivy League schools (as well as the less-than Ivy Leagues). In one of the most recent Epoch Times, the question was raised, "Why can't economists get it right?" In fact, statistics show that in a given year, 9 out of 10 economists are wrong and that in subsequent years, the one that was right joins the group that is wrong.
But back to Jordi's economic theory. In his theory, "the end result of such a policy would not be inflation, but an increase in the value of the dollar."
Let us examine a simple illustration on why this theory may or may not be flawed. The Widget retails for $10. The cost to manufacture a Widget is $3. Then you have shipping, inventory and marketing costs (yes, the landlord needs their rent for the stores and you have to pay your employees and the employer taxes). That comes to about $3 per Widget, so the company still makes a good profit of $4 per Widget. At today's corporate tax rate, the company a profit of $2.60. Not bad, since you can multiply the number of widgets sold by millions.
In my example of the removal of COGS as a business deduction, the profit would be increased by $3, and therefore, the tax would $2.45 (7 x .35), thus the net profit after taxes would be about $1.55. That is a 40% decrease in profit. Oh, that would definitely have an impact on the stock price and if this happened to the companies in the S&P 500, who have most of their products or its components coming from overseas, you would have a profound investment impact.
But this will not happen. You see, the Walmarts or Targets or Sears have even lower profit margins than the above examples, and they would adjust their prices higher to compensate for loss in profit. That is inflation, plain and simple.
But Jordi states that "Exports would become more competitive (increasing the demand for them), while imports would be discouraged (decreasing the demand for them), with both effects leading to a stronger dollar." Exports are competitive when they are cheaper for buyers in other countries. This is why the Chinese continue to devalue their yuan, not strengthen it. But perhaps Jordi is thinking that the demand for our domestically produced products would increase because the imported products are now more expensive. If Walmart or Target were to buy the same product from the US as they now import, that product would cost 6 times more. Why? Because workers in other countries work for 6 times less than workers in the US.
I really cannot fathom American buyers paying 6 times more for the same product. They will just pay more for the imported product. That is inflation, plain and simple. And if the dollar strengthens, it just makes our products more expensive for foreigners to buy, so not good for our export industries.
As the Swiss found out, a strong currency is not always a good thing, especially if you would like to be an exporter of goods or have citizens of our other countries visit your country. They had to dramatically devalue the Swiss franc a couple of years ago to save their travel industry.
By the way, it appears that China will soon devalue the yuan in big way. They are caught between a rock and hard place and will have no choice. That's why McDonald's sold a big piece of their China operations for the price of a Big Mac per person.
JE comments: We're on the eve of a new branch of the Dismal Science: Trumponomics. To my mind, it's taking on the look of old-fashioned import substitution on the Brazilian or Argentine model. Am I wrong?
Please login/register to reply or comment:
-
Tax Policy and Currency Rates in Trumponomics
(Jordi Molins, -Spain
01/31/17 7:41 AM)
This is my reply to the recent posts from Ric Mauricio and José Ignacio Soler:
Current corporate tax in America depends entirely on the country of incorporation of a given firm. A US firm pays corporate taxes irrespective of where sales take place and where costs originate. The new border adjustment proposal turns around this situation: corporate taxes are paid where the free cash flow takes place. For example, costs outside the US cannot be used to reduce taxable income. But also, foreign sales are not taxable.
Let us assume a US firm with domestic sales of 80 and domestic costs of 50. Taxable revenue is 30, and with a corporate tax rate of 20%, taxes are 6. The after-tax profit is 24.
So far, the numbers above are exactly the same, irrespective if sales and/or costs happen domestically, or in a foreign country.
However, under the new plan, if a firm starts to sell 20 in a foreign country (and 60 domestically), while keeping domestic costs at 50, taxable revenue goes down to 10 (while pre-tax profit remains at 30), and taxes become only 2. After-tax profit is then 28.
Instead, if a firm with domestic sales of 80, has domestic costs of 30 and foreign costs of 20, its taxable revenue becomes 50 (while pre-tax profit remains at 30), and taxes become 10. After tax profit is then 20.
Now, let us imagine a "partial exporter," which is currently competitive vis-à-vis an equivalent "full domestic firm." Under the new tax regime, the "partial exporter" enjoys extraordinary profits. Market clears, so this means lots of competitors to the "partial exporter" appear, to arbitrage away that market advantage. These new competitors increase supply, which reduces prices for the product in the foreign country, increasing foreign demand. The market clears through increasing the value of the dollar. A simple mathematical calculation shows a 25% increase in the dollar would again make the "partial exporter" reach market equilibrium with the "full domestic firm."
Equivalently, the "partial importer" becomes less competitive. A similar argument suggests the dollar also needs to increase in value, to clear the market. But with the suggested numbers, a 20% dollar increase will suffice.
Standard economic theory is wrong. But not because theorems fail, but because the underlying hypotheses of the theorems do not apply to the real world. Standard economic theory assumes all representative agents in the economy are the same. In that case, a single revaluation of the dollar clears the market. But as we see in the examples above, agents are heterogeneous, and different increases in the dollar are necessary to clear the market.
As a consequence, in the real world the dollar will revalue somewhat (maybe 22%?), but also there will be a "real economy" impact, with losers and winners. For example, semiconductor producers (who are "partial exporters") will benefit from the new tax regime. Retailers with global dominance will probably suffer (a retailer cannot fully increase prices, since if they could, they would have done it before the regulatory change).
A probable outcome is that some companies will merge, especially those enjoying tax credits which they cannot fully internalize in their P&L.
To end up, and answering John Eipper, a tax by itself is neither progressive nor regressive. One needs to see where the tax receipts go. For example, a "regressive tax" could be used to help the poorest people in the country. Most likely, the net effect would be quite progressive. Instead, if the proceeds of a "progressive tax" are used to say finance wars, the final result will be regressive.
Having said that, VAT is a very efficient tax, much better than income taxes, corporate taxes or capital gains taxes.
JE comments: I'll have to read this a few times to make it click--but Jordi Molins clearly knows his economics. Just one observation about VAT. Is it a European assumption that taxes actually go to help people? There is no such implicit belief in the US--perhaps because what we do is pay for wars? The American understanding of progressive vs regressive taxes applies only to the paying end, and VATs therefore hit poorer people disproportionately. You always have to buy things.
Please login/register to reply or comment:
-
Taxes, Tariffs, Trump: More Thoughts from Ric Mauricio
(John Eipper, USA
02/01/17 2:40 AM)
Ric Mauricio writes:
As a tax and accounting consultant to many of our global companies and venture capitalists in Silicon Valley, I need to keep up with the myriad of tax and accounting regulations that govern our businesses.
Thus, I am always curious when statements are put forth that seem to not be in keeping with current tax accounting regulations. For example, Jordi Molins stated on January 31st: "A US firm pays corporate taxes irrespective of where sales take place and where costs originate." This is partly true. Corporate taxes are paid to the government where the sales took place, but only pays taxes to the US upon repatriation of those profits into the US. If the profits are retained overseas, it is not taxed by the US.
Jordi further wrote: "The new border adjustment proposal turns around this situation: corporate taxes are paid where the free cash flow takes place. For example, costs outside the US cannot be used to reduce taxable income. But also, foreign sales are not taxable." I would like the source of this information. My research shows that the border adjustment does not make foreign sales non-taxable.
But let us analyze Jordi's example. "Let us assume a US firm with domestic sales of 80 and domestic costs of 50. Taxable revenue is 30, and with a corporate tax rate of 20%, taxes are 6. The after-tax profit is 24." This is an example, if I am reading this correctly, of an American company exporting its goods overseas. So far so good. I agree with this example.
However, Jordi goes on to say, "So far, the numbers above are exactly the same, irrespective if sales and/or costs happen domestically, or in a foreign country." Jordi, I disagree. If such sales occurred in a foreign country and the costs of manufacturing were incurred overseas, then the profits retained in the foreign country would not be taxed in the US until repatriated. I've established subsidiaries in Ireland, Hong Kong, Singapore, Tokyo, Melbourne, and KL (Kuala Lumpur), with explicit instructions to the controllers there not to send the parent company in the US any money until specifically requested.
Jordi then stated, "However, under the new plan, if a firm starts to sell 20 in a foreign country (and 60 domestically), while keeping domestic costs at 50, taxable revenue goes down to 10 (while pre-tax profit remains at 30), and taxes become only 2. After-tax profit is then 28." Jordi is assuming that foreign profits are not taxed, when there is no such provision even put forth in the Trump/Republican plan. It seems that there seems to be a mashing together of border adjustment regulations and a new corporate tax structure. The two are separate. While one can be implemented, it doesn't necessarily mean the other will be.
I am going to shorten this discussion by pointing out that many American consumables (the kind sold in retail stores like Walmart and Target) are manufactured overseas and thus would not be a viable example in Jordi's scenario. 90% of the shoes purchased by Americans are made overseas, and to manufacture them here would make them very expensive.
Yes, the ordinary American will be impacted by higher prices under the border adjustments put forth under Trumponomics. Like sales taxes or VATs, these taxes have a greater impact on the lower and middle-income population. If a person is earning $40,000 buys a $20,000 car and pays an 8% tax, which comes to $1,600, that would be 4% of his/her income, whereas if a person earned $160,000 and bought the same car, it would be 1% of his/her income.
Now do you realize that most of the products actually made in the US are the big stuff? Stuff like tractors, turbines, airplanes, etc. We are largest exporter of refined fuels in the world. We buy oil cheap from the Saudis and Mexico, refine it and mark it up. This is what makes America great. Not making inexpensive little widgets.
But border adjustments would make widgets expensive for the ordinary American. And we enjoy these widgets (yeah, shoes). It enhances our quality of life. Don't mess with that.
JE comments: It doesn't seem possible, but tax gurus like Ric Mauricio are going to get even busier in the coming years. Ric, have you had any customers ask for the Deluxe Trump Package: pay no tax at all?
Please login/register to reply or comment:
-
Taxes and Trade: Paul Ryan's "Better Way"
(Jordi Molins, -Spain
02/02/17 8:03 AM)
I wrote on January 31st: "The new border adjustment proposal turns around this situation: corporate taxes are paid where the free cash flow takes place. For example, costs outside the US cannot be used to reduce taxable income. But also, foreign sales are not taxable."
Ric Mauricio asked me for the source of this information. See Paul Ryan's "A Better Way":
"This Blueprint eliminates the existing self-imposed export penalty and import subsidy (...) by providing for border adjustments exempting exports and taxing imports."
Probably there are newer versions of the document, but at least the following link is public:
https://abetterway.speaker.gov/_assets/pdf/ABetterWay-Tax-PolicyPaper.pdf
I agree with Ric Mauricio that profits in a foreign country are not taxed until repatriated. I left that implicit in the discussion. WAIS comments should be as short as possible.
JE comments: Has Ryan's "way" become law? I am in over my head here, but I do appreciate Mr Ryan's flair for hyperbole: either we change our tax code now, or we watch as the "sun sinks ever lower on the age of American excellence." I also know that outward appearances aside, there is no love lost between Donald Trump and Paul Ryan, who placed all his Republican chips on ABT (Anyone But...).
Please login/register to reply or comment:
-
Paul Ryan's Tax Plan; from Ric Mauricio
(John Eipper, USA
02/04/17 4:47 AM)
Ric Mauricio writes:
In response to Jordi Molins (February 2), let us examine Paul Ryan's "blueprint" and attempt to explain in layman terms what indeed is happening. I moved things around to provide a more cohesive phrasing.
Ryan wrote: "This Blueprint eliminates the existing self-imposed export penalty and import subsidy by moving to a destination-basis tax system. Under a destination-basis approach, tax jurisdiction follows the location of consumption rather than the location of production.
"In addition, border adjustments mean that it does not matter where a company is incorporated; sales to US customers are taxed and sales to foreign customers are exempt, regardless of whether the taxpayer is foreign or domestic. This Blueprint achieves this by providing for border adjustments exempting exports and taxing imports, not through the addition of a new tax but within the context of the transformed business tax system."
Did you get that? Sales to us are taxed and sales to foreign customers are exempt. Forgive me for asking, but why are you taxing me and not them? Does one really think that not taxing them will provide the incentive for them (them being non-US customers) to buy our more expensive products?
Also he states that it eliminates the self-imposed export penalty. But isn't a tariff or elimination of COGS writeoff an import penalty, again resulting in a higher price to the American consumer?
Further: "Taken together, a 20 percent corporate rate, a switch to a territorial system, and border adjustments will cause the recent wave of inversions to come to a halt. American businesses invert for two reasons: to avail themselves of a jurisdiction with a lower rate, and to access 'trapped cash' overseas. Those problems are solved by the lower corporate rate and the territorial system, respectively."
I totally agree with a competitive tax rate, i.e., a 20 percent corporate tax rate. This alone will bring "trapped cash" overseas back to the US. However, the blueprint does not address border adjustments that seek to increase the cost (by either tariff or disallowing the deduction of COGS of foreign made components) of goods that are purchased by Americans. Funny, now whenever I purchase something, I am looking at where it is made. Yes, "Made in China" seems the most prevalent, but if I were buying a 777 or a John Deere tractor, that would be "Made in America," although I am not sure if some of their components are made overseas.
Nevertheless, Paul Ryan does state that taken together, the border adjustments and the lowering of the corporate tax rate (I am sure there are those that is against the cut in the tax rate), this should make the US more competitive. However, the bills put forth in Congress (actually, some of the blueprint are just in the idea stage) do not tie the border adjustments nor the tax rate cut together.
JE comments: Ah, US tax season is almost here, as Ric Mauricio knows better than anyone in WAISworld. As for the import-export dynamic, isn't a tried-and-true currency devaluation the single best way to make your exports more competitive? I am not advocating this, mind you, as I enjoy traveling internationally, and I do so with dollars. When they are dearer, I get more tourism bang for the buck.
So what about the 20% corporate tax rate? How much of a difference will this make? Trump would be accused of coddling Corporate America, of course, but I don't think it would bother him.
Please login/register to reply or comment:
-
A Trump Cartoon
(Istvan Simon, USA
02/06/17 4:44 AM)
I agree with Ric Mauricio (4 February), who basically confirms what I already said previously. Trump's plan to tax Mexican or Chinese-originated imports will increase inflation in the United States without achieving any benefit for the United States whatsoever. If China is penalized, they will retaliate heavily against US companies. For example, instead of buying commercial aircraft from Boeing, they will buy instead from Airbus.
So-called-President Trump is the stupidest man ever to occupy the White House. As I tweeted recently, since he did not pay any rent for about 20 years, he owes about a billion dollars in rent, and should be evicted as soon as possible.
There is one major accomplishment of the Trump administration so far: He is now the laughing stock of the entire civilized world. A recent cartoon in Der Spiegel depicts him with a bloody knife in his hand, holding the severed head of the statue of liberty. I found it actually in the Brazilian newspaper O Estado de São Paulo, one of the best newspapers in Brazil.
http://linkis.com/estadao.com.br/nVA0L
JE comments: Do bad policies make a stupid person? What Trump does has worked very well so far--for Trump. I'm going to stand by my earlier choice of adjectives: he's wily.
See below. Note the not-so-subtle ISIS reference.
Please login/register to reply or comment:
- Thoughts on Trumponomics (Istvan Simon, USA 02/01/17 2:28 AM)
I am not an economist, but I think I know enough to say a few words about this. A stronger dollar, as Jordi Molins says, means a bigger balance of trade deficit. Imported goods become cheaper, and exported goods harder to sell abroad. So the very opposite of what Trump trumpeted in his campaign will happen. Namely, in the campaign he promised more exports--we will win all the time and so-on empty rhetoric, but the stronger dollar will produce the exact opposite. There is more.
The increased imports and the import taxes that he is now proposing on goods from Mexico (and God forbid, China) will lead to two things: Higher prices, thus inflation, and goods that are exported to third countries and then re-exported to the United States without the import taxes imposed on Mexico (or China).
The higher inflation will lead to the Fed raising interest rates. This in turn will cause an influx of capital into the United States from abroad, further strengthening the dollar. The higher interest rates will lower growth. Once again, the exact opposite of what Trump promised. Inflation + lower growth = stagnation.
JE comments: Wily entrepreneurs are no doubt preparing the "Third Country" terrain as we speak. Adding some negligible "value" to a Chinese product, say, in Taiwan or S Korea, could perhaps allow it legally to evade the tariff. Can anyone walk us through the technicalities?
Please login/register to reply or comment:
- Why the American Obsession with Guns? (Istvan Simon, USA 01/28/17 6:01 AM)
My thanks to Bob Gibbs (27 January) for engaging me on the issue of guns. If WAISers don't mind, I would like to continue the conversation.
First, about engaging those who did not agree with me on Twitter. I have done so, and Bob accused me of something unjustly, without having read anything of what I wrote, or what they wrote. I did not put down anyone on Twitter. Rather it was the other way around. I expressed my views, protected by the First Amendment, to say that I want guns registered, and my opposition to the NRA. I got a ton of ill-mannered responses from gun enthusiasts. I very patiently replied to their ill-mannered responses, trying to educate them, just as Bob asked me to do. I responded to their ill-mannered attacks on me, ganging up on me, calling me stupid without calling them stupid. Rather, I responded with facts. I pointed out to them that the rate of deaths from gun violence per 100,000 population in the UK is 0.23. It is nearly 11 in our country. More than one child is killed every single day in America by gun violence, and several more are seriously wounded. Yet Bob defends the NRA like those who insulted me on Twitter (though no insults of course came from Bob.)
Bob asked what an expensive bureaucracy would accomplish with gun registration. First, it would not be expensive at all. We manage to register cars without any of the expense Bob talks about. Second, if the weapon is later used in a crime, the registered owner would need to explain why his or her gun was used in a crime. If a felon is found in the possession of a gun, and if the gun is unregistered, the felon would go to jail. If the unique identifiers on the gun are found to have been sanded off or altered, the person in possession could be prosecuted. So, as you can see, there are many many benefits to registration. If your shotgun is used by someone to kill a neighbor of yours, you would be responsible. You would need to explain how the shooter came to be in possession of your shotgun.
Bob is a gun enthusiast, and more power to him, but as I explained earlier, I do not own a gun, and do not desire to have one. If a violent felon invades my house and murders me and my family, I won't have a gun to defend myself with. But on the other hand, my 9-year-old little scientist will not accidentally kill my neighbor's 6-year-old child, by playing with a dangerous object, as happens day after day after day in the United States. Bob did not express any remorse for the more than 400 children that are murdered this way every single year in the United States. Nor did Bob express any remorse for the 30,000 Americans who are killed by gun violence, every single year in the United States--2/3 of them suicides. I do express regret for these lives tragically lost. I want to do something to bring our death rates closer to that of the UK. 10.6/0.23 is about 46. That is, the UK has a rate which is 46 times smaller than in our country. I do not want to live in Dodge City or the Wild West, in which everyone is armed. I think that is insane.
JE comments: Just this week, I happened to have a conversation with a local gun dealer. He said his sales have declined significantly since November 8th. There's an irony here--or maybe there isn't. When Americans fear restrictions on gun rights, they stock up. About three or four years ago, at the height of the Obama era, there was a national shortage of ammunition. The same merchant referred to a poster he had seen in another shop: "Salesman of the Year, Eight Years Running." It was a picture of Obama.
All this is of peripheral significance. The heart of the matter is this: why are guns such a part of the American psyche? Do "we" love guns because of the Second Amendment? My guess is the other way around. We love the Second Amendment because of guns.
Tim Brown used to carry a .38 while on diplomatic assignment. Stay tuned.
Please login/register to reply or comment:
-
A Gun Tragedy in the UK
(John Heelan, -UK
01/28/17 4:15 PM)
Istvan Simon (28 January) reminded me of a tragedy that happened to some friends when he commented that because he has no guns, "my 9-year-old little scientist will not accidentally kill my neighbour's 6-year-old child, by playing with a dangerous object, as happens day after day after day in the United States."
Not just the US! The nine-year-old son of our friends, having a row with one of his older brothers, found his brother's .410 shotgun, loaded two cartridges and pointed it at his brother. The brother told him not to be stupid and pulled the muzzle of the gun away from him. The safety catch was off and youngster's finger was on the trigger. The older brother died instantly.
We can criticise the parents for not keeping the gun and cartridges locked away safely. However they never recovered from this tragedy and died themselves within a few years. With four regularly fighting boys in our family, we banned shotguns from our house from that day forward.)
JE comments: Such a sad story. What became of the surviving brother, John? I'm sure he never fully recovered either.
Please login/register to reply or comment:
- Carrying a Pistol on Diplomatic Assignment (Timothy Brown, USA 01/28/17 6:43 AM)
A question for my WAIS colleagues about carrying a weapon.
When, after bombing my office, a terrorist organization put my name on an assassination list, for my own protection I began to carry a concealed .38 pistol when my bodyguards weren't with me while I was serving in France. In Vietnam (during the Vietnam war), as a District Senior Adviser, unless I had an armed escort or a helicopter gunship escorting me, I carried either a .45 pistol, a carbine or a grease gun (a submachine gun), even though none was of much use when a sniper put a bullet in the right front fender of my vehicle or when a (thankfully relatively small) explosive device exploded beneath it and tossed my vehicle and me two or three feet into the air. Thankfully, after the dust cleared and I was able to check, I hadn't lost any body parts.
Thus my question. Was it morally wrong for me to carry a weapon in these cases, or was I just being a warmongering minion of what some of my colleagues like to call The Empire?
JE comments: Is that an either/or question? Shouldn't it be "was I morally right..."?
Tim: I cannot imagine a regular citizen acquiring a "concealed carry" license in France. Do other rules apply to foreign diplomats, or did you have some sort of special gendarme status? For that matter, what are the general norms about Marine embassy guards and their weaponry? Are they country-specific?
Please login/register to reply or comment:
-
Guns, Bodyguards, and Self-Defense: My Time in Gaza
(Carmen Negrin, -France
01/29/17 4:46 AM)
While working with the Palestinian National Authorities, the Palestinian Ambassadors in France that I worked with were entitled to carry guns. But they all had bodyguards and didn't bother to carry their own.
When in Gaza, I would be escorted, a car in front, another in the back, with soldiers holding rifles through the open windows of the cars. I must say that I felt much more uncomfortable with the escort than without it. Maybe I wasn't really aware of the potential risks.
As a child, there were at least a dozen guns at home, I suppose none had been declared; they were reminiscences of the Spanish War, and except for two, my grandfather's and his companion's, they all ended up in a big bundle in the Seine after he passed away.
While living in France, they never carried arms although they were both encouraged to do so by the French authorities, since Franco's police was still active in the 1950s. I kept those two guns for the Fundación Juan Negrín (one of them is a silver miniature), I had to declare them to the police and had them "conditioned" so they don't work anymore. Until they go to Spain, they are kept in a safe, where they were before, with no ammunition.
If I had wanted to keep them functioning, I would have had to take shooting courses at the police station and be given a special permit, since the police makes a distinction between owning, carrying and using.
Frankly I prefer delegating the use of arms to authorized and official specialists! Can you imagine a long-time-no-see friend showing up by surprise and being mistaken for a burglar, or a 2-year-old picking up a gun and shooting someone by accident just to see what it's like? Dramatic.
JE comments: I understand safety concerns, but Juan Negrín's discarded guns would be historically very significant today--not to mention worth a lot of money. Out of curiosity, what model was the Prime Minister's other (the non-miniature) gun? Perhaps a Basque-manufactured Ruby? These pistols were a very common sidearm among French officers in the Great War.
I'll close with a line from the great Johnny Cash: "I shot a man in Reno just to watch him die." Could there be a more profound reflection on guns and American Exceptionalism?
Please login/register to reply or comment:
-
Disposing of Juan Negrin's Guns
(Carmen Negrin, -France
01/30/17 5:32 PM)
To answer John E's question I would have to check, and I am away from home. But I'm almost sure my grandfather's handgun was a Browning. The others were definitely not, in different shape and much older looking. Historically they might have been interesting but my father decided they were useless and too dangerous to keep.
My brother and I accompanied him to the Seine, just to make it look innocent. This was only 11 years after the war and all guns had to be registered or disappear, and the owner was not there anymore to justify having them. As I was a child, it was very adventurous. I felt like Mata Hari!
JE comments: Thanks, Carmen! This is quite the cloak-and-dagger story, and a fascinating denouement to the Spanish Civil War saga. I frankly had no idea what "topic" line to put on this post--France? History? War? For searchability purposes I settled on "Spain," although the events did not take place there.
I suppose Juan Negrín had a model 1900 or 1910 Browning .32, which was the preferred pistol of many heads of state. (Teddy Roosevelt carried one, and Gavrilo Princip started a world war with one.)
Please login/register to reply or comment:
- Trump and Gump (John Heelan, -UK 12/22/16 6:37 AM)
Perhaps our Editor will allow one final comment on President Trump's corrections to President Gump?
"Stupid is as stupid does." (Global opinion on 2016 Election)
"My mama always said, ‘Life was like a box of chocolates. You never know what you're gonna get... but no worries now; I have got rid of all the black, brown and yellow ones.'"
"Run, Trump Run!"--KKK Khoral Union
"My Mama always said you've got to put the past behind you before you can move on...or what my advisers call 'future historical revisionism.'"
"What's normal anyways?" (For months we've been warned about the dangers of "normalizing" Trump--of treating him as anything other than a deviant.) WSJ 9/27/2016
"The best thing about visiting the President is the food... and all the pussy within reach, of course!"
JE comments: Trump, Gump...or Drumpf? We're down to the one-month countdown until the dawn of the Trump Era. Is the "normalization" process now complete? The media used to treat him as a curiosity, even an aberration. Now he's simply the President-Elect.
Please login/register to reply or comment:
- Trump and Gump (John Heelan, -UK 12/22/16 6:37 AM)
-
Disposing of Juan Negrin's Guns
(Carmen Negrin, -France
01/30/17 5:32 PM)
- Carrying a Pistol on Diplomatic Assignment (Timothy Brown, USA 01/28/17 6:43 AM)
- Thoughts on Trumponomics (Istvan Simon, USA 02/01/17 2:28 AM)
-
A Trump Cartoon
(Istvan Simon, USA
02/06/17 4:44 AM)
-
Paul Ryan's Tax Plan; from Ric Mauricio
(John Eipper, USA
02/04/17 4:47 AM)
-
Taxes and Trade: Paul Ryan's "Better Way"
(Jordi Molins, -Spain
02/02/17 8:03 AM)
-
Taxes, Tariffs, Trump: More Thoughts from Ric Mauricio
(John Eipper, USA
02/01/17 2:40 AM)
- Tax Policy, Imports, and Currency Values; from Ric Mauricio (John Eipper, USA 01/30/17 11:27 AM)
-
Tax Policy, Imports, and Currency Values
(José Ignacio Soler, Venezuela
01/30/17 8:18 AM)
-
Trump's Taxation Policy
(Jordi Molins, -Spain
01/29/17 7:53 AM)
-
Guns, Taxation, and the Trump Economy; from Ric Mauricio
(John Eipper, USA
01/28/17 4:19 AM)
- In Defense of Free Academic Speech (John Heelan, -UK 01/08/17 6:07 PM)
-
An Argentine Aphorism about Guns
(Rodolfo Neirotti, USA
01/11/17 3:36 AM)
-
Guns in Switzerland
(John Heelan, -UK
01/09/17 8:46 AM)
- Guns, Tea Party, and a Free Clinic in Sequim (Robert Gibbs, USA 01/08/17 4:17 AM)
- More on the Electoral College,,,and Guns (Istvan Simon, USA 12/22/16 5:45 PM)
-
Electoral College and Democracy
(Cameron Sawyer, USA
12/22/16 4:33 PM)