A Flea in the Fur of the Beast

“Death, fire, and burglary make all men equals.” —Dickens

And Here’s A Clip Of Mitt Romney Praising The Power Of Cooperation As A Necessary Precondition Of Individual Achievement

by evanmcmurry

This is almost too easy:

You Olympians, however, know you didn’t get here solely on your own power. For most of you, loving parents, sisters or brothers, encouraged your hopes, coaches guided, communities built venues in order to organize competitions. All Olympians stand on the shoulders of those who lifted them. We’ve already cheered the Olympians, let’s also cheer the parents, coaches, and communities. All right! [EA]

That’s virtually identical to Obama’s “you didn’t build that” line, which Romney et al have been working overtime to turn into a gaffe. (via MSNBC)

Hey, Crime’s Getting Worse

by evanmcmurry

Seattle has already surpassed its gun-related homicide total from all of last year. As of the end of May, the city had recorded 21 gun-related deaths; at the same point the previous year, the number was three. Add this to Chicago’s 35% increase in homicides in 2012—according to the now-famous factoid, more Americans in Chicago than in Afghanistan this year—and Philadelphia’s new average of one murder a day, and you get a trend.

The Stranger points out that despite the increase, Seattle still has an overall low homicide rate, which squares with the long data: we’ve seen a two-decade long decrease in crime in the United States, one that continued through 2010, despite the recession. Perhaps we bottomed out; perhaps the stagnant economy is finally being felt in the crime statistics. Whatever the explanation(s), violent crimes are starting to occur with greater frequency. Lax gun laws, of course, don’t help, and it should also be noted that gun sales have been enflamed in the last four years due to idiotic panic over Obama. It’s possible that there are simply more guns lying around to be fired.

Guns Don’t Kill People, Lack of Proper Mental Health Treatment Kills People

by evanmcmurry

Good side note about the gun control debate:

Second, if the world is full of loons who want to kill their fellow man and we are not allowed to take away their guns (indeed, we are required to give them every possible tool for upping the body count) then I have an alternative. Congress should pass a law that anyone in the U.S., resident or otherwise, can present himself at any hospital, religious institution, or police/fire department and request immediate inpatient psychiatric care at no cost and with legal protection against job loss for missed time. People don’t snap and become killers overnight; it is usually a long process of isolation, depression, plotting, and desensitization to violence. Why not attempt to intervene when they first have the thought, “Maybe I should kill a bunch of people in a theater” rather than letting it progress to the point that the idea is palatable, even normal? Of course this wouldn’t help everyone. There are those who would not accept mental health treatment even at no cost. However, it would stop a few people who might otherwise become violent. Seems like it might be worth the cost, no?

The “guns don’t kill people, people kill people” argument assumes a functional apparatus for treating mental health problems; we don’t have that. But if, as some governors would have us believe, mentally unstable people will kill no matter the weapons, then shouldn’t we be focused on treating the mentally unstable people? If the NRA was serious about its own logic, this would be the next step, no? So we’ll be waiting for their proposal to fund advancements in mental health treatment as a means of reducing gun violence, which I’m sure is imminent. (h/t Gin and Tacos)

Charlatans on Fire

by evanmcmurry

We just found the exact temperature at which chicanery breaks the skin:

Fire officials said 21 people at an event hosted by motivational speaker Tony Robbins suffered burns while walking across hot coals and three of the injured were treated at hospitals.

The injuries took place during the first day Thursday of a four-day event at the San Jose Convention Center hosted by Robbins called “Unleash the Power Within.” Most of those hurt had second and third degree burns, said San Jose Fire Department Capt. Reggie Williams.

Walking across hot coals on lanes measuring 10 feet long and heated to between 1,200 to 2,000 degrees provides attendees an opportunity to “understand that there is absolutely nothing you can’t overcome,” according to the motivational speaker’s website.

My favorite part:

Organizers had an “open burn permit” and medical staff at the event, and there was also a fire inspector on the scene, Williams said.

“Once they (the medical staff) became overwhelmed, our inspector called for us,” Williams said.

In short, Robbins created a problem that literally could not be overcome by the medical staff at his event. Good thing the people of San Jose pay their taxes for fire departments and roads and whatnot, so all that power within could get to the hospital. (h/t Erik Loomis)

The fiscal cliff is all about tax cuts for the wealthy (in chart form)

by pdxblake

Any claim that there is some substantive difference involved that does not involve preserving tax cuts for rich people is fooling themselves (or trying to fool you).

(ht Talking Points Memo)

Joe Paterno Sentenced To Haunt College Football Coaches Forever More

by evanmcmurry

Well, we’ve all been wondering what’s “worse than the death penalty,” and here it is. But something tells me this stings the most for those with a Nittany Lions hoodie in their closet:

All of Penn State’s victories from 1998 through 2011 will be vacated. Coach Joe Paterno’s record will reflect the vacated victories, meaning he no longer will be recognized as the NCAA’s all-time winningest coach. Paterno won 409 games in 46 seasons as Penn State’s coach. The vacated wins remove 111 victories from his total, dropping it to 298 and leaving him well behind new leader Eddie Robinson of Grambling (408 wins).

This is the crucial symbolic twist. The logic at the heart of the Sandusky cover-up was that the football program comes before anything else. Vacating Paterno’s wins during the years Sandusky was using the eminence of the football program to obscure his crimes replaces football as paramount activity of those years. The most important thing Joe Paterno did from 1998-2011, officially, was aid in the cover-up of a crime, not win 111 games. If the Ghost of Reputations Future visited Paterno in 1998 and told him this, the coach might have concluded that the best way to protect his precious football program was to report Sandusky’s activities, not hide them.

That’s as sad a commentary on college football culture as anything else in this foul drama, but at least it’s a motion toward reform: there’s now an example, in the form of 111 absent wins from Joe Paterno’s record, of what happens when you place the football program above morality. In other words, Joe Paterno’s restless ghost has been sentenced to wander the earth, haunting college football programs forever more. To be worse than the death penalty, the NCAA had to extend Penn State’s punishment into the afterlife.

Why We Can’t Have Nice Things, Gun Control Edition

by evanmcmurry

Colorado guv John Hickenlooper on whether stricter gun regulations could have stopped the Aurora shooting:

If there were no assault weapons available and no this or no that, this guy is going find something, right? He’s going to know how to create a bomb.

There you have it: if a regulation on the sale or purchase of a firearm won’t 100% stop all gun massacres from ever occurring, it’s invalid. Never mind that ordering the ingredients necessary to build a bomb is a good way to draw attention to the fact that you’re up to something, and that the government uses these exact methods to prevent terrorist plots all the time, and thus the fact that restricting sales of assault weapons would force would-be shooters into more nefarious areas would actually be a good way to stop their attacks. Nope: that James Holmes could have conceivably killed 12 people in one fell swoop using an explosive device that exists only in John Hickenlooper’s imagination means he gets all the assault weapons he can hold at one time.

One of two things is at play here: either Hickenlooper doesn’t understand the concept of incremental reform, which would make him a pretty lousy executive, or he understands it just fine and also knows he’s a Democratic governor of a swing state during a recession, and the last thing he wants to do is piss the NRA off. So he makes a blatantly ridiculous statement and everybody nods as if he had just advanced a cogent argument. This is exactly how the proverbial emperor comes to wear no clothes.

Save the economy, free the Fed

by pdxblake

The idea of quantitative easing (QE) is poorly described in the best of times and its effects even worse explained.  When Rick Perry threatened Ben Bernanke with being treated “pretty ugly” in Texas, he was basing his comments in part on the common misunderstanding that QE is printing money, which he believes will turn America to Weimar Germany or Zimbabwe, countries where inflation has turned into hyperinflation.  On a strictly literal point, the whole idea of QE as ‘printing money’ is totally wrong and confuses how the Federal Reserve’s balance sheet works (QE increases its assets by buying bonds, funded by issuing money, which are liabilities of the Fed).  This point is immaterial, but it bugs me that even this point is wrong.

That point, and most about what the Fed does and how it operates are largely misunderstood by people, but the impacts of the Fed policies are important.  There was no need to explain it all when normal moves up and down in interest rates were sufficient to prod the economy up and down to smooth the economy (either by acting as a drag when growth was strong but inflation was rising, or as a push when inflation fell along with growth).  However, the bursting of a real estate and financial bubble that happened in 2007-2008 put a huge weight on the economy which is still struggling to grow, and traditional ways for the Fed to act are closed with interest rates at 0 (well, technically between 0 and 0.25%, which is the same in practice).   Interest rates could go negative, but it is not an area where central banks operate (Japan is an exception and has recently opened up the possibility of negative rates again; it’s been struggling after its dual financial-real estate bubble burst in the early 1990s).

Current Fed chair Ben Bernanke has a history of studying the Japan central bank , and so you’d expect he’d be well prepared to deal with an economic depression triggered by the same factors as the Japan’s (his analysis of Japan led him to get the nickname “helicopter Ben”). But, when it comes to how he has led the central bank, it has been much more timid than his predecessor Alan Greenspan, who had a much more dictatorial approach that may have caused some of the Fed’s dithering between the rounds of QE (and that is the nicest thing I will ever say about Alan Greenspan).  Bernanke’s more consensus-based approach with much more clarity in his statements is good, and will be an important legacy of his time at the Fed, but is not great for the economy where it is with a Congress that is held captive by Republican ideologues who have the same prescriptions for economic policy as they always have (tax cuts for the rich, cutting regulation and shrinking the size of government as long as it doesn’t touch anything that will help them get re-elected).

That consensus-based approach, as well as the greater openness from the Fed does let them launch trial balloons, for instance, this past weekend, when John Williams, a voting member of the Fed Open Market Committee (FOMC) was interviewed by the FT, he

“forecast that unless “further action” was taken, there would be a lack of progress in boosting the jobs market – where the unemployment rate has been stuck around 8.2 per cent since the start of the year – over the next 18 months”.

“He added that there would also be benefits in having an open-ended programme of QE, where the ultimate amount of purchases was not fixed in advance like the $600bn “QE2” programme launched in November 2010 but rather adjusted according to economic conditions.”

Williams is viewed as near the center among the FOMC on moving forward on QE3 and so his words are similarly taken as guidance for future Fed action, just as Greenspan’s incoherent ramblings were while he was Fed chair.  Hopefully, the Fed will move forward on something as big and open-ended as Williams describes because what kept Japan in its no-growth mode for so many years was not that the policies it tried were failed policies.  It was, instead, that they were done in fits and starts.  The same can be said in the US for fiscal stimulus.  The $787 billion stimulus was done, and had a positive effect on the economy, but was not large enough to offset the scale of the depression we remain in.  QE1 and QE2 were also successful policies, but had fixed end dates that were not enough to offset the additional headwinds that came afterwards (like the European debt crisis, which is back with a vengeance).

The Fed coming out with a “do whatever it takes, as long as it takes” approach is overdue and will be decried by the party that has spent 2 years killing the economy to beat Obama in 2012.

UPDATE (7.23.12, 4:30pm): A chart from the Wall Street Journal (ht Menzie Chinn) shows excellently why the Fed’s own dual-mandate (maximum employment with price stability) is not being fulfilled, which should compel the Fed to act.

The 2% inflation target is well known and Bernanke has made it explicit, but I don’t know where the 6% level came from.  Presumably that is what the WSJ believes the NAIRU, or the non-accerating inflation rate of unemployment, is.  A Federal Reserve Bank of San Francisco paper co-authored by John Williams leans more toward a 5% NAIRU, while noting that the Congressional Budget Office estimates the NAIRU at 5.2%.

Rich people’s investments are ‘small businesses’

by pdxblake

When it comes to rhetoric about the high-end Bush tax cuts, the conservative rhetoric tends to focus on the impact on “small businesses” (that is when they are not using the shield of “job creators” instead of the more appropriate “stinkin’ rich folk”).

For example, you see things like this (from NPR):

But when you look at small businesses that actually hire sizable numbers of workers — 30, 50, or 100 people — many more of those businesses would see a tax increase.

The National Association of Manufacturers says 73 percent of its member companies file taxes as individuals. Their average profit is close to $600,000. So many of them would see their taxes go up. By another measure, about 50 percent of all small-business profits would be affected by the expiration of the tax cut.

At another factory outside Boston, Carl Pasciuto runs his family business called Custom Machine with his brother Michael. Their factory, which makes everything from fly-fishing reels to aerospace gear and medical devices, employs about 90 people.

Like many small businesses, Custom Machine files its taxes in a way that its profits are treated as the owner’s personal income and taxed at personal rates. So if the company shows $1 million in business profit next year and the Bush tax cuts are repealed, the business will get hit with a tax increase as if it were a person.

“There’s a big difference between a guy on Wall Street making a million dollars and a company like this making a million dollars,” says John Donnelly, the chief financial officer for Custom Machine.

The way this comes across is that a small business owner who runs their business (and pay their taxes) as if it were them alone, who happen to hire workers to help them (specifically, they have an S-Corp business).  So if their business makes $600,000, they will be treated like an individual who makes $600,000, and tax rates on incomes above $600,000 will rise letting the Bush tax cuts expire.  In 2010, the efforts to let the tax cuts expire failed in part because some Democrats asked for people with incomes up to $1 million be exempted from any Bush tax cut expiration (instead of $250,000 as Obama wanted).  It appears that this will not be as much of an issue this time around, but it misses the big point: what the hell is a small business?

Using anecdotal examples like Joe Custom Machine and then saying that “about 50 percent of all small-business profits would be affected by the expiration of the tax cut” makes it sound like that most of the impact will be felt by companies who employ people to build stuff, but are taxed as if they were individuals.  The Treasury counters with analysis expertly described by the Center on Budget & Policy Priorities showing that:

“only 2.5 percent of small business owners, and 7.9 percent of filers with any income from small businesses that employ people, face the top two tax rates”

What accounts for the big difference?  The definition of what is a small business.  The raw definition is that a small business is “any taxpayer who receives any income from any “pass-through” entity”.  There are four problems with this definition:

  1. I can set up a pass-through entity that has nothing to do with a small business.  If I have $100 million lying around to invest, I might want to invest $1 million into 100 properties, and want to keep each of them separate, so I will set up 100 “small businesses”, that is, corporate entities that pass all the rental income to me.  Those would be counted as 100 small businesses, which is fine, but not something that we need to give tax breaks to (they are investment vehicles for one rich person).  If each of them is generating 6% annually for their owner, then are confusing 100 small businesses earning $60,000 each with one multi-millionaire earning $6 million a year.
  2. A similar type of ‘small business’ that is not really a small business is if that $100 million were invested into 100 businesses.  The income that gets passed through each of the 100 investment vehicles will still represent income for 1 wealthy individual, not 100 small businesses, so we should view an increase in their taxes as increasing taxes on a ‘small business’.
  3. Included in the definition of “small business owners” are people who earn anything from a small business.  Suppose I am an executive at XYZ Corp, making a $3 million salary, and I also help small businesses by providing advice to them on how to increase sales.  If I am not doing it on a charitable basis, but instead charging a nominal fee, it is most likely going to be a separate, pass-through entity, which would count as a small business (and I would be the owner of that small business).  That $5,000 in income would make me a ‘small business owner’, even though I made $3,005,000 last year.
  4. The final issue is with how NPR described the impact of the expiration in terms of the share of total profits that would be affected.  As CBPP describes: “In 2009, only 0.3 percent of S corporations had incomes exceeding $50 million, but they accounted for 35 percent of all S corporation income.”

So, while most small businesses who are S-corporations (itself only a portion of quote-unquote ‘small businesses’) are actually small businesses, a few very large ones (3 in every 1000) account for over one-third of profits.  So, while 50% of the total profits would be affected by the Bush tax cut expiration, 2/3rd of this number would be from just 0.3% of ‘small businesses’, and only 2.5% of the total number of ‘small businesses’ would be affected at all.  That’s doesn’t really square with the Republican argument that letting the high-end Bush tax cuts expire would decimate small businesses.

Adding tax insult to injury for the poor (state sales taxes)

by pdxblake

There is a lot of ink spilled on the Federal tax code and its equity or inequity, but much less that gets the headlines about state taxes, which makes sense because it is more of a local issue.  However, Jared Bernstein at the Center on Budget & Policy Priorities has a few fascinating charts on his blog that show that state taxes are regressive (they are more of a burden as a percentage of income on lower-income people).  Here’s one example.

What is important to look at is the “State & local taxes” column, which shows the taxes paid as a percentage of total income.  This is the most important number, not the statutory tax rate (i.e. what the law says you pay at a given level of income) because it factors in the deductions from income, and looks at what comes out of people’s pockets for taxes.  It incorporates income taxes, sales taxes, payroll taxes, property taxes, estate taxes, etc. In a progressive tax system, the percentage paid would rise as a person’s income rises.  A flat tax (not surprisingly) would have an equal percentage across income levels.

What the data shows is that rich people pay lower taxes as a percentage of their income than poor people, which is perverse, but entirely understandable since many states rely on sales taxes to raise revenue.  Unless rich people suddenly decide to start spending more of their income on goods, they will pay less in taxes than poor people, which is inequitable since the people with the highest ability to pay are asked to pay less than those to whom the dollars are more needed.  This applies to all states with sales taxes, but some states add inequity further in sales taxes.

To take a specific example, Tennessee has sales tax rates that decline with the size of the purchase.  If you buy something under $1,600, you pay a sales tax of 9.25% (a 7% state sales tax and 2.25% maximum in local sales taxes).  Between $1,600 and $3,200, the sales tax rises to 9.75%, but above that level, only the 7% sales tax applies.  Here’s an example (from Tennesseans for Fair Taxes)

Example 1: A $3,000 used car is taxed at 9.5%

  • The first $1,600 of the purchase is taxed at 9.25% ($148).
  • The next $1,400 of the purchase is taxed at 9.75% ($137).
  • In the end, the total tax of $285 is an effective tax rate of 9.5%.

Example 2: A $40,000 SUV is taxed at 7.2%

  • The first $1,600 of the purchase is taxed at 9.25% ($148).
  • The next $1,600 of the purchase is taxed at 9.75% ($156).
  • The remaining $36,800 of the purchase is taxed at 7% ($2,576).
  • In the end, the total tax of $2,880 is an effective tax rate of 7.2%.

From this example, it shows how the regressiveness of the sales tax is accentuated to put an even higher burden on the poor.  If you buy a beater car, you are going to pay a 9.5% tax rate, but if you buy a new SUV with all the bells and whistles, your tax rate is 7.2%.

Making  the tax system work better is not just about closing the loopholes, it is also about picking and choosing between the types of taxes, as well as whether the state should adjust the rates to avoid taxing those who are least able to afford it the heaviest.  Sales taxes are much more regressive by their structure, and while theoretically you could find ways to offset the regressiveness (by setting a lower limit on the amount of spending that is subject to taxation) but in practice that is nearly impossible.  If a sales tax is going to be used, the least we should expect is that it will not be made more regressive, like it is in Tennessee.