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Taking the Long View   Leave a comment

So, I ran into my extremely liberal former coworker in the grocery store last night. She was all in a tizzy about corporate tax reform and how it was going to “harm” her financially. Wasn’t I worried about how much more I would pay? When I said my sister-in-law (a CPA with tax experience) had checked my math and assured me we would be saving money not losing it, Michelle asked if my husband’s business had finally taken off. No, Brad is still keeping it small and enjoying being able to take time off to go fishing and hiking when he wants. We’re not rich and current tax reform should save us at least $800 and maybe as much as $2000. And, no, Brad’s business is a sole-proprietorship, not a corporation.

Image result for image of tax cuts helping the economyMichelle is a social worker, not an economist, but that’s really no excuse for ignoring the inconvenient fact that voluntary economic arrangements benefit all participants … else individuals could refuse to participate. In the absence of fraud (government’s failure to protect citizens from criminals) or coercion (government’s invasion on citizens’ rights), self-interest will guarantee a benefit to all parties, regardless of what Congressional Democrats may say at the moment.

The progressive strategy going forward will be to ignore many clear mechanisms by which the rest of us gain from improved incentives for capitalists to use their resources for others.

Corporate tax reform improves after-tax rewards for capital investments, providing tools for increased worker productivity and earnings. It further stimulates innovation, advancing techniques and improving technology, risk-taking, and entrepreneurship. This doesn’t just help company owners, but benefits workers and consumers.

Of course, there is a commonsense caveat here. It takes time for owners of capital to fully respond to improved incentives, meaning the positive effects on workers’ circumstances will appear only with time. The whole strategy of tax-reform opponents will be to focus people’s attention on the short run, before the positive labor effects appear in the data. The hope is that voters will overlook these benefits, which may not be fully realized, in fall of 2018 when they go to the polls to elect Representatives and Senators.

It might be a useful strategy because the benefits to capitalists appear immediately in the data. By comparing the limited benefits to workers in the present to both the present and future benefits to capitalists, opponents of corporate tax rate reductions can cast tax reforms as essentially just “tax cuts for the rich,” even if the vast majority of benefits actually accrue to workers over time.

This is how it works. When the tax burden on a class of assets, say corporate stock, is reduced, it will lead to an immediate increase in those assets’ prices. The asset price increase will not only reflect current gains to their owners, but also capitalize the expected increased after-tax profits that can be expected in the foreseeable future. The more durable the improvements are likely to be, due to future effects, the greater the asset price surge will be.

Additionally, most financial resources are owned by people who have greater wealth and income. Often these are older middle-class households who have had more time to convert unmeasured earning capacity into measured financial wealth, but that still leaves their middle-aged offspring not quite certain they’re seeing a benefit in the first year of tax reform. So, by focusing only on the short run (fall 2018), the results can be made to appear as huge asset gains for “the rich,” with almost no effect on American workers’ financial well-being. That lag lets tax-reform opponents assert that their claim has been “proven”. Of course, the main benefit of these short-term results accrues to older households that have had more time to convert unmeasured earning capacity into measured financial wealth.

Unfortunately for opponents’ supposed “proof”, the improved incentives of higher after-tax returns are the mechanism which produces increased worker productivity and real earnings over time. Those cumulative effects are very large, even when their immediate effect is small. But unlike financial market assets, there is no marketplace in which the higher real earnings of workers in the future (economists call that “human capital”) get capitalized into an easily-observed wage and/or benefit increase.

January’s investor- and owner- class begin to benefit workers later in the year or in January of 2019, but by emphasizing the short-run, the opponents basically just ignore that economic fact.

Michelle insisted that they should have implemented the tax reform starting in 2019 to allow people to adjust. I was stunned at first that anyone would want to delay getting to keep more of their money, but then I remembered, there’s an election in November 2018. She was probably just parroting some talking points she’d heard and taken as gospel. By implementing tax reform staring in January, the GOP gives some hope for businesses to see the benefits of tax relief immediately and to begin to pass those benefits onto their workers and consumers by late summer. As proponents of “taxing the rich” see their prospects for a political win evaporate, they will focus attention on the short-run. “Your wages haven’t gone up spectacularly yet, have they?” Banging that drum throughout the year will make excellent electoral ammunition … unless workers see an increase in their paychecks in late summer.

By the way, we’ve been here before with the Reagan tax reform. There are still people (Michelle is one of them) who will insist that the Reagan reforms had no positive effect for ordinary people. It was just “a tax cut for the wealthy.” Unless you were a worker who say a benefit before the next election, you probably thought your own experience was “proof” that Reagan’s tax reform didn’t work. A short term focus is a massive misrepresentation which diverts attention from the fact that improved incentives reveal themselves in the economy and for workers and consumers over time. If we take a longer-term view of economics, we aren’t fooled by the sleight-of-hand, but most progressive have difficulty with the concept that it can take six to 18 months for a tax cut to be reflected in the growth of real wages. I think that’s the effect generated by a bailout mentality.

Now, here’s the thing – ultimately, tax reform is only part of the picture for a healthy economy. The US economy is burdened by many things in addition to a high corporate tax rate. Unacceptably high levels of debt, private and governmental, also drag on the economy. The evisceration of the manufacturing sector doesn’t help. President Trump is making great progress on the rollback of regulations that was encouraging manufacturers to move overseas and a better tax rate might also help to protect and improve manufacturing in the US, but tax reform alone is not a magic pill. It’s just part of a compound strategy that is essential if any other parts of the strategy are going to work. At some point, government is going to have to cut spending in order to eliminate deficits and address the debt, but that only works if the economy is growing.

Unfortunately, politicians tend to see things in 2-6-year cycles, so don’t often take a long-view approach to the economy. Which begs the question –

Why do we think they should be in charge of the economy?

Posted December 21, 2017 by aurorawatcherak in economics

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Cost-Benefit Analysis   5 comments

This week’s blog hop topic is a “pro-con” list, which is really a cost-benefit analysis. This happens a lot at our house because:

  1. We’re not independently wealthy
  2. We’re debt-adverse

Currently, we have three major pro-con discussions going on, but the literary one I’m working on is probably of more interest to you than the one my son is doing on his college decisions.

Image result for image of a pro con listEvery time I publish a book, I find myself needing to do a pro-con list about what my next project will be. I have two series underway and a healthy back-list of stories that would like me to pay attention to them.

After I published Objects in View, I didn’t do this and the last six months have been … um, scattered, I guess. I revisited a literary fiction I’ve been playing with for years. Even sent it to the beta readers. The feedback I got suggests it needs more work. I wrote a short story submission for an anthology,  I’ll know in April whether that was accepted … or it could go in a book of short stories I’m considering. I have worked on A Threatening Fragility, the third book in Transformation Project, some and I have also worked on Fount of Dreams, the third book in Daermad Cycle, some. And, I’ve also dabbled with a YA and a mystery-romance that sort of want my attention.

Do you see my problem? I lost focus because I didn’t make a plan as to which project should be my primary project in this cycle. Time to correct that problem — starting with a pro-con list.

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So a basic “pro-con” list might help me to decide which book series to work on next. This is sort of a modified pro-con list because I have multiple jobs. Pro-con lists can be simple ticks in a box and the most ticks wins or the ticks can be weighted. Because I got busy and missed the deadline on this post, I’m not sharing all of my thinking with you.

Pros for working on Daermad Cycle next.

If I’m trading off on the series, it’s next in line as I published from Transformation Project last.

I thoroughly enjoy writing fantasy.

I’m at a point in the story where a lot of mystical elements and philosophic questions are coming to light.

The book cover for Fount of Dreams has already been done.

Cons for Daermad Cycle

Writing fantasy takes longer, so it will likely be another six months to a year before the book will be ready for publication, which is a long time between books

Daermad Cycle doesn’t sell so well as Transformation Project. They are different genres and fantasy sells less well than apocalyptic as a rule and I’m at a loss for marketing ideas.

Pros for working on Transformation Project next.

This writes fast. It’s set in a mostly modern world with people who think like ordinary Americans in an extraordinary circumstance.

My rabble-rousing on the blog acts as marketing for the books.

The third book really gets into the nitty-gritty of what is happening in the wake of the bombs.

Although the subjects are dark, I’m focusing on Cai more than Shane this book and Cai is a much less brooding character, so enjoyable to write.

Cons for Daermad Cycle

The cover is still in development.

I don’t want to lose momentum on Daermad Cycle.

It brings me that much closer to the dark turn in the series, which is artistically gratifying, but I suspect it will be depressing to write.

 

My decision?

The third book of Transformation Project – A Threatening Fragility — is my primary project for the next six months.

Because I always have a secondary and usually a tertiary project that I can go to when I get bored (so as to avoid writer’s block), Daermad Cycle 3 – Fount of Dreams – will be secondary and the rewrite my literary fiction What if Wasn’t will be the tertiary. My goal is to have A Threatening Fragility ready for publication mid-summer.

Gross Arrogance & Gross Miscalculation   Leave a comment

Since 2008, conservatives and libertarians have been told by progressives that the demographics of the country were changing and not in our favor. We were told that we should change our values or face being marginalized because “nobody thinks like you anymore.”

I remember pointing out that just one month before the election of Barack Obama, Rasmussen Polls surveyed voters and found that 42% self-described as “conservative”. When the most liberal president ever was elected, it seemed reasonable to assume that Rasmussen had been wrong. The problem with that was everywhere I went, I ran into conservatives. And, I do mean everywhere. When visiting the very blue East Coast, I had people ask me admiringly if I had met Sarah Palin. Which I have. And, no, I can’t explain what happened to her after she lost the Vice Presidential bid. Greed … corruption … overreach and inability to deal with it? Sarah now is not the Sarah I knew then. Not that we were close friends, but she was a GREAT governor who banked money for the rainy day we’re in today, as opposed to Parnell, who spent all that money … with a lot of help from our legislators. Anyway, she’s not the topic here.

In the run up to the 2016 election, Democrats and progressives were particularly gleeful, certain that they would prove their assertions once and for all. Here are some examples:

On August 8, 2016, Mark Siegel of the Huffington Post averred:

The votes of the Electoral College states that consistently vote Democratic has now swelled to a reliable 244, just 26 electoral votes from the majority needed to win. For Republican presidential candidates to prevail in the Electoral College, they must thread the needle of marginal “purple” states, needing to win ALL of them to succeed.

Current demography makes a Republican win increasingly difficult, exacerbating recent historical trends. In the last six presidential elections Republicans have lost the popular vote five times. They prevailed in the Electoral College in 2000 and 2004 with 284 and 286 Electoral College votes, a margin of 14 and 16 electoral votes out of 538. In the last four elections won by Democrats, they received 370 Electoral College votes in 1992, 379 in 1996, 365 in 2008 and 332 in 2012, margins of victory ranging from 52 to 109. Democrats can afford to lose almost all purple states and still top 270.

The Trump-ization of the Republican Party in 2016 makes the future of the party even more problematic. The outlook for Trump’s candidacy points to the same losing Electoral College pattern — or worse — with even the “red” states of NC, AR, GA and MO now in play. And demographic projections currently predict that Texas, the most critical Republican prize of all, with 32 electoral votes, will slip from “red” to “purple” to “blue” within two cycles as a result of of the rapid acceleration of the Hispanic electorate. When — not if — Texas turns blue, the Republicans, under the best of conditions, will cease to be a competitive national political party in presidential elections.

On November 6, 2016, Stan Collander wrote in Forbes:

 

[A] realignment has to be evident at the bottom as well as the top of the ballot. To be considered real, the change in voting behavior has to occur for governor, mayor, sheriff and dogcatcher as well as for president.

That is why any absolute declaration any time soon that the 2016 election shows that there is a new and unstoppable Trump movement will be nonsense. A proactive declaration of a realigning election at best will be “premature,” and that’s using very polite language.

I tend to agree that realignment elections take several election cycles to prove themselves, which was why I was skeptical there was a political realignment underway when Barack Obama won in 2008. In 2012, when he won again despite a very poor performance in foreign policy and the economy, I began to wonder if the progressives might be right.

Wondering if someone is right does not obligate me to change my principals. I remain who I am regardless of what you think of me or what some expert tells me is going to happen to people who hold my values.

Apparently there are a lot of people who agree with me and they’ve been very busy in their respective states making Democrats look like blue-bubble dwellers.

This is the electoral composition of state Legislatures across the country.

Image result for image of states controlled by republican legislators in 2016

Republicans control both chambers in 32 states, including 17 with veto-proof majorities. Those 32 states cover 61 percent of the U.S. population. Democrats, meanwhile, control the legislature in just 13 states, amounting to 28 percent of the country’s population; only four of those chambers have veto-proof majorities.

With a firm grip on the presidency, Congress, and soon the Supreme Court, Republicans have won more political power in 2016 than in any election since at least 1928, when Herbert Hoover was elected to the White House. Democrats now face a deep hole they need to climb out of if they ever hope to be competitive in the future.

For blue islanders, it becomes even more terrifying when you look at governors:

That’s 34 states with a Republican governor (up 3 states since 2015), not including Alaska’s independent Governor Bill Walker who used to be a Republican and only dropped his party membership after he realized the GOP primary in Alaska is rigged.

As shown above, Republicans now control the governor’s office in 33 states, amounting to 60 percent of the population, while Democrats control just 16 states with 40 percent of the population. (Alaska has an independent governor supported by the Democrats.) Republicans now hold a greater number of governor’s offices than they have in several generations.

This transition has been underway for some time. It picked up speed under Obama’s capricious policies that seemed designed to build up the blue regions at the expense of the red ones.

It’s important to understand that Donald Trump pierced the Democrats’ vaunted “blue wall” of reliable states, carrying the Midwest states of Iowa, Wisconsin and Michigan (recount notwithstanding). Barack Obama carried all three of these states in 2012, when he was running against a white male candidate, suggesting these states are not chockful of racists. In fact, after those white voters supported Obama, they were praised, by leading Democratic voices and media wise men, for being enlightened, broad-minded, unselfish and patriotic Americans.

So, right now, the Democrats are struggling with the outcome of this election. I’m not really happy with it myself. I’m glad Clinton didn’t win and dismayed Trump did. But here’s a friendly suggestion to Democrats. Learn something from Hillary’s “deplorable” misstep. If you demonize the people who supported the other party’s candidate as moral lepers, mental midgets or ethical eunuchs, you’re probably not going to win their goodwill and their future votes.

This election ended where elections always do: with the voters. … and the voters are angry.

  • Voters are angry at the failure of elected officials in Washington to listen to them and act.
  • They are angry at the arrogance of the rich and well educated who don’t seem to know — much less care — that working people’s standard of living has been declining for a generation.
  • They are angry at the media, at journalists they think, look and sound too smug, too certain and too aloof.
  • They are angry at the ‘new economy’ that trumpets apps and functionality and brags about the ‘costs’ (read: jobs) that are being eliminated.
  • They are angry about being mocked and vilified as rubes, racists and ‘deplorables.’
  • They are white-hot angry that their children don’t have reasonable prospects for advancement.

Until the Democrats stop addressing social issues that divide moral people from their values and start addressing economic and trade issues, they will remain a fringe party. Yes, they have the cities … but the cities aren’t everything, even if their residents think they are.

Until elites learn that they are not the center of the universe and stop treating people who don’t live in the blue bubble zones as if they’re idiots, they will find themselves in the shame corner.

This election was about a lot of things, but more than anything it was about respect … or the “blue” lack of respect for a substantial portion of the population that feeds them and mines their energy and repairs their stuff.

Gender Betrayal   3 comments

Image result for image of hillary clinton in defeatThere are all sorts of reasons given for why Hillary Clinton didn’t win the presidency and Trump did. Prior to the election, I was pretty certain that Trump’s disgusting behavior toward women would cost him the election. I was wrong. Trump won white women by 53%.

What?! Yeah! You read that right. White women. by 53%.

Many progressives are venting their spleens on Huffington Post, Slate and elsewhere, claiming these women are traitors to their gender.  I’ve even been told I’m a traitor to my gender for voting for Gary Johnson. How dare a woman vote for a man when there was a woman running!

“White women sold out the sisterhood and the world by voting for Trump.” Slate Headline

A former communications director for the Clinton campaign told MSNBC that “internalized misogyny” led white women to support Trump.

Wow, climb out of your safe spaces and confront reality. If progressives want to blame women for Clinton’s lost, they should start with Hillary Clinton.

Clinton repeatedly misled the public about her off-the-books email system and became the first candidate in history to be under FBI investigation while campaigning to be president. That’s her fault. I didn’t do that. She did!

Clinton positioned herself as the anointed inheritor of President Barack Obama’s third term. She didn’t craft her own identity in an obviously anti-establishment year. She ran on all the policies Republicans opposed in previous elections, policies that led to the GOP winning record numbers of state legislative chambers, governors’ races, and control of Congress. That’s her fault. White women didn’t do that. She did!

Clinton never set foot in the state of Wisconsin, even though it’s home state to the Republican National Committee Chairman, the well-liked GOP speaker of the House and a governor who beat the labor unions in a contentious right-to-work battle. According to NBC News, Trump spent 50% more time in battleground states in the last 100 days of the election. That’s her fault. Nobody else did that.

Clinton ran a misguided campaign filled with miscalculations. Don’t say Clinton was disadvantaged because she was a woman, because as a Clinton she had every advantage possible. She had money, the staff, the ads and institutional support needed for a successful run. She squandered all those advantages and she lost.

Instead of reflexively blaming women, Democrats should ask themselves what they did to make Clinton more competitive.

While, both candidates and their campaigns were deeply flawed, there is a gaping difference between the way Republicans and Democrats.discussed those flaws. You can do a media study to prove this to yourself. Many Republicans spoke out consistently and repeatedly about their candidate’s flaws, using their public platforms to challenge the party to be better. The Democrats didn’t.

Even Clinton’s chief primary rival Bernie Sanders stood on the debate stage and refused to hold Clinton to account for her “damn emails.” And let’s face it – a 70-odd-year-old SOCIALIST senator made a credible run and beat the heavily favored front-runner in critical Midwest states. That should have jolted the Clinton team out of their “it’s my turn” stupor, but it didn’t. The Democratic Party protected Clinton like a fragile butterfly every step of the way. In hindsight, it’s no wonder she didn’t break the highest, hardest glass ceiling. She was treated as if she wasn’t strong enough to do so.

Maybe the Clinton camp honestly believed disgust for Trump would magically propel Republican voters to her. They underestimated conservative voters dislike of Clinton. She was a non-starter with actual conservatives a long time before she announced her candidacy. I knew I wouldn’t vote for her for President when she was still the First Lady. I was never tempted to vote for her just because I didn’t like Trump.

I’ve been asking why some of my friends who disliked Trump voted for him instead of her and this is what they say:

  • Clinton refused to call anything a terror attack even as the murderers yelled, “Allahu Akbar!” while committing heinous acts around the world.
  • She, and the Democrats, kept saying, “Obamacare is working!” while American families were being slammed with huge premiums and deductibles increases along with shrinking networks.
  • She didn’t seem to realize that the US economy has only “recovered” if you’re a member of the elite, really wealthy or a government-benefit recipient. For all the rest of us, the recession is still going on.
  • She refused to enforce US laws by promising amnesty to those who flout them.
  • She promised more taxes, spending and regulation even though our government is awash with debt, waste and bureaucracy.

This election proved that voters had bigger problems than Trump’s sexism, such as genuine fear of the future for themselves and their families. The “suck it up, buttercup” caucus prevailed and yes, our country will survive.

I’m not saying I’m not unsettled by Trump’s treatment toward women and minorities. It bothers me to know that a man who has displayed such disrespect for women in both his personal and professional life will soon be leader of the free world. I worry about my daughter, trying to make her way in this world, with a misogynist at the helm.

On the other hand, politics are full of compromises and ups and down and every 2 to 4 years, we get to correct the direction of the country … if it turns out the collective wisdom of the electorate was wrong. Trump won for reasons other than his misogyny and maybe we just need to wait a while and see. If he’s a sexist whose policies pull the economy out of the eight years of morass it’s been stuck in … all, then sexism is a tolerable flaw. I’m not married to him, after all.

The way I look at it, I’m not a traitor to my gender because I didn’t vote for Clinton. Alaska’s electoral votes wouldn’t have changed the election outcome anyway. I voted the way I voted because I have bigger issues than sexism to deal with. I worry about surviving in the coming economy, about whether my son is going to have to march off to war along with his sister. The black President proved what I already knew. The outside package of a candidate means a whole lot less than their policies do in how they will be as President. We need a President who wants to fix what’s wrong. We need a President who … isn’t Donald Trump or Hillary Clinton, but we didn’t get that this time, so ….

What will we decide to do in 202o? I hope we’ll be wiser than we are this time, but I doubt it.

Posted December 2, 2016 by aurorawatcherak in Political Philosophy

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