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Tuesday, April 30, 2013

The Solipsistic Selfishness of Not Wanting Children

A confluence of things has recently had me thinking more about children than I normally do: one of my coworkers recently became a father, four TV shows I watch had episodes that touched on the theme of children and family, and my Chinese(-American) parents have badgered me, a single twentysomething yuppie, about "expanding the family". Combine this with some of the magazines that I read (left-of-center or hardcore progressive/liberal) and all the anti-children stuff they constantly churn out and you can forgive a guy for thinking about children more than usual.

I do want kids. And I want them for very selfish reasons. Everything we do is rooted in some form of selfishness. The person who wants kids is just as selfish as the person who doesn't want kids. But the difference between the two is that the person who doesn't want kids is adhering to a form of solipsism. But the person who wants kids is somebody whose selfishness extends to those around him. His family is an extension of himself, and thus the fruits his selfishness must also extend to them as well.

There is a very popular show on HBO called Game of Thrones, and it depicts the political machinations of the great aristocratic families of a fictional kingdom called Westeros. And one of the most important themes of the show is the importance of family and the legacy that you and your family leave behind after you die. Because, inevitably, all men, their children, and their grandchildren must die. But the family name lives on.

That desire to leave something behind when you are gone is the reason why organisms procreate. Every species on the planet is genetically driven to replicate themselves. And it's what makes people who don't want children so unique. For them, the only sense of existence is literally their own self being. They actively deny their instinctual desire to leave behind a legacy because they believe in only living for themselves. Once they are gone, the show's over for them. What good is leaving behind a legacy if you never get to see your legacy?

Another show on HBO, Veep, which is a comedic take on the inside-the-Beltway happenings revolving around a fictional Vice President and her staff, has a scene in which one of the main character reiterates her desire not to have children. It's just one minor scene, but when the entire show is about incredibly narcissistic politicians willing to go to silly lengths in order to further their own individual gain, it highlights something else.

Behind the excuses and justifications of why people don't want children, the real reason is ultimately rooted in solipsistic selfishness. And I know because I have those same impulses. There are so many things that I want to buy (a luxury condo, sports cars, tailored suits, expensive watches, pricey consumer electronics) and do (travel the world, eat at fancy restaurants, pursue beautiful women). If I were to settle down, get married, and have children, most of my time and money would be spent and invested in my family and not myself.

And there are real opportunity costs, even if you become rich later on. When the kids have flown the coop and the father has suffered his midlife crisis and buys a shiny red sports car, he finds that although he very much enjoys the car, something's missing. Because he wants to buy what the sports car represented to him when he was younger. And now he only has the car, not what it represented. That is why so many upper middle class yuppies want to "live life" in their 20s by traveling the world, partying and drinking most nights, and blowing money on outrageously extravagant things because they won't get the same thrill from doing so once they're in their 30s and 40s.

Some of them will eventually settle down. Although I predict a growing number will not. Many in the media have talked about an extended adolescence and what they're really referring to is the fact that you're not truly an adult until you take care of somebody other than yourself. Almost every day in Slate or The Atlantic, I read the self-pitying lamentations of twentysomethings who express anguish at the fact that their every need and want isn't being taken care of by other people. They are incapable of taking care of themselves, let alone another person.

Another show I watch, The Americans, is about two Soviet spies who are embedded into American society. They have a secret identity as KGB field agents but to the society they live in, they are ordinary Americans with normal American children. Their children have no idea who they really are, and the parents go to great lengths to make sure they never find out.

In one episode, there is a scene where the KGB officer who oversees the spies lectures the female lead, who is emotionally stunted, about love. He asks her why he loves his dog. He answers his own question with: "He (the dog) isn't particularly smart. He isn't pretty. But I love him. Do you know why? Because I take care of him. Every day. And he, in his way, is taking care of me. If you take care of something, Elizabeth, one day you will discover that you love this creature. And that your life would be empty without it."

Again, I'm being heavy handed and liberally referring to TV shows. But you can see where I'm going with this. There was this one article on Slate that went in the opposite direction of what they usually publish. And it was about the love that a mother had for her daughter with Down Syndrome. Not that she wanted to have a child with Down Syndrome. She admits that had she known her daughter's condition while she was still pregnant, she would have had an abortion.

We are different people after we become parents. As so many wedding speeches love to remind us, love is patient; love is kind. And our capacity for love increases infinitely after we have children. I remember reading, a long time ago, an article where the author advocated cities to structure themselves around parents rather than yuppies. Among the arguments they made were that parents made their communities stronger. Because parents are much more likely to volunteer than the average twentysomething. And I suspect a strong reason for the increased proclivity in volunteering is because of the effect their children have had on them.

Don't get me wrong. I'm not saying all parents are like that. My parents certainly weren't. But I've worked with plenty of people who fit that mold exactly. Almost all of my coworkers are married with kids. And it's very humbling to be around them, knowing that they're working for more than just themselves.

The last show, Mad Men, is about New York ad executives in the 1960s, had their latest episode featuring the main character bonding with his middle child. Later, he is seen with a glass of whiskey in hand slumped over a bed. He tells his second wife about how he never loved his children. And although he went through the motions of what he thought being a good parent was, he essentially says he did it because it was convenient, not out of love. And then he bonds with his son over a day at the movies, suddenly feeling a great love for his son that he never felt before. And it felt like his heart was going to explode.

I am nowhere near that. I'm still stuck in solipsistic selfishness. I don't donate to charity. I don't volunteer. I'm focused mainly on building up my financial assets and I keep a list of things that I want to buy. And if I had a wife who was pregnant with a child diagnosed with Down Syndrome, I would probably advocate an abortion (slightly in contra to my previous musings on the subject). But I don't want this to be my entire life. I want children because I do want to leave behind a legacy, even if I don't get to live to see it. And I'm not saying it's a noble thing. It's completely selfish. It's just a different form of selfishness.

Saturday, April 27, 2013

Real Time With Bill Maher: Counterpoints (4/26/13)

This has gotta be short and sweet, as I've got some stuff to take care of this weekend. We had a good show and some good talking points. Let's hash them out.

Bill Maher 1: Isn't the fertilizer plant explosion in Texas just a wake up call to all these crazy deregulation nuts?

This is one of the perennially sore topics for libertarians. A terrible tragedy happens somewhere. The postmortem reveals that something went wrong and that the government should have investigated the issue beforehand. Cue the calls from the progressive peanut gallery for more regulation.

There are multiple problem with defending the status quo. Counterfactuals are always hard to prove: is there evidence that an investigation prior to the event would have prevented it? Opportunity costs are almost never considered: what does it cost the economy and the business to have tighter regulation/more government oversight? The emotional overrides the logical: how dare you try and trivialize the matter when the sky fell on these poor souls!

This is genuinely an ideological argument. It's next to impossible to prove the counterfactual, and the argument is never convincing unless the other party is already sympathetic to your camp. All I will say is that in the aftermath of the financial crisis, everybody supported tighter regulation on the banks. What nobody ever mentions is that there are teams of government auditors who are permanently stationed at our largest financial institutions and none of them were able to prevent the financial crisis. Giving them the power to do so effectively erodes the concept of property rights, and that is what we must keep in mind when we discuss further regulation in any matter.

Bill Maher 2: Why do chemical weapons matter? More people have died in conventional warfare but as soon as these WMDs come into play we're supposed to give a shit?

John Avlon had a very good rebuttal. The reason why conventional warfare kills more people is because we accept conventional warfare as an acceptable means to kill people. The minute we accept WMDs as an acceptable means to kill people, we will see casualties mount up at a frightening clip. It took a fleet of bombers to firebomb Dresden, but only two bombers to wipe out Hiroshima and Nagasaki.

Using chemical weapons on your own countrymen should be a red flag to anybody in the mythical international community. It is up to the powers that be (the countries with expeditionary capability)  to see that such murderous regimes are proscribed and eliminated without delay. Sending a signal that these weapons are acceptable for use will only make future casualties more numerous and horrific.

Robert Traynham: We need to see the more aggressive Obama more often. When he gave that Rose Garden speech on gun control, he was visibly angry and it was effective. He needs to do that for sequestration, immigration, and other important topics.

Wrong. This is the problem with pundits in the media. Fiery speeches rile the base but backroom dealings get things done. President Obama has nothing to show for his stern lecturing on gun control in the Rose Garden. And it's doubtful that impassioned or angry pleas for change and reform will make any progress on such contentious issues such as immigration or spending.

Speeches are for actual campaign season to fire up your supporters and getting them to the ballot box. Once the election dust settles, you need to start mending fences and normalizing relationships across the aisle in order to get the business of the Federal government done.

Anna Deavere Smith and the rest of the panel: We need to have a serious discussion as to whether our civil liberties are being eroded in favor of a police state.

This point isn't going to be countered. I just want to reveal my own thoughts on the issue.

Your position on "stop and frisk" can reveal who you are very quickly. Those who see no problem with it are mostly white and middle class or higher (who are, statistically, the least likely to be stopped and frisked) and a small subset of poor, law abiding minorities trapped in bad neighborhoods. Those who have a problem with it are a more diverse set. One group opposes it on principle: it's an infringement of our civil rights to be searched on a flimsy basis of "reasonable suspicion". Another group resents it very much, because those who are stopped and frisked are most likely going to be black or brown skinned, which feeds racial emotions.

Both groups have reasonable arguments. And it reveals your priorities. There is a good deal of evidence that stop and frisk does discourage criminals from loitering and carrying contraband on the street. The real issue is how you view the false positives (those deemed worthy to be stopped and frisked and turned out to be harmless). Is it a price we pay for safer streets or an unacceptable breach of freedom?

Life is full of tradeoffs. Unlike the dreams of many upper middle class white women, you simply cannot have it all. And the security-freedom argument is arguably the most important debate to have when it comes to defining the relationship between citizens and the state.

At a state and local level, I am adamantly against such policies. Nationwide, we have seen precipitous declines in violent crimes and homicide without any major national policing initiative to take credit for it.While crime will always exist and certain areas will be more dangerous than others, the aggressive/active strategy of policing probably is only marginally more effective than simply having a decent, passive police presence.

At a national level, I am less sure of what the proper role of government is. I have almost no qualms about the aggressive use of American power abroad to police and monitor those who wish to incite terror or fear in the US, but when they actually come to our country, I am less sure of what the proper limits of policing are.

In this manner, I am probably like the rest of the panel. There should be a discussion on the security/freedom tradeoff. But, also like the rest of the panel, I have no concrete answer for policy at the Federal level.

Thursday, April 25, 2013

Another Example of Regulation and Taxes Affecting Behavior

Apple is one of the world's richest companies. In its latest filing, the company states that it has 145 billion dollars in cash or near-cash assets. As of yesterday's close, that means that roughly 38% of the company's market value is in a cash position. Which is ridiculous. So ridiculous that investors have been clamoring for the company to return that money back to shareholders. They finally started doing so in March of last year.

Last year, Apple returned 30 billion dollars back to shareholders in the form of dividends and share buybacks. Yesterday, it announced a 15% increase in its dividend and announced another round of share buybacks. But it's not going to use its 145 billion dollar cash pile to finance these new initiatives. Instead, it's going to raise the money in the corporate bond market and then distribute it back to shareholders.

The reason why it's not touching its cash pile is because most of it, approximately 105 billion dollars, is stashed in its overseas subsidiaries. If the company were to repatriate the money back to the domestic market, it would have to part ways with 35% of it thanks to the US tax code. Because money can be stored indefinitely overseas without incurring a US tax (although it must still pay taxes in the local jurisdiction), it makes much more sense for Apple to borrow the money it uses to pay back investors than it is to use the actual cash it has on hand.

This is the tragedy of US tax law. When individuals and companies spend time and money trying to minimize their tax profile, it robs time and money that could have gone towards more productive activities. Given the fact that there is no good reason for having the US collect a tax on profits earned overseas (with taxes already paid in overseas jurisdictions) and that so many companies keep cash overseas so they don't have to pay a fee to the US government to bring it back home (either to invest or to give back to shareholders), it makes our economy less dynamic, which means slower growth and fewer jobs.

Economists of all stripes will readily agree that higher taxes will reduce the incentives to save and invest. Those who are also progressive will make the argument that if the government can put money to a better, more efficient use, it should raise taxes to do so. But given the fact that we live in reality, where the Federal government has shown itself to be utterly incapable of doing anything efficiently (look as Federal bureaucrats testify before Congress that key parts of the PPACA is not going to be fully functional by the deadlines stipulated by law), it makes more sense to keep that money in the hands of the private sector.

At this point, additional taxes and regulation will first trigger a scramble for moneyed and connected interests to find ways of avoiding them. If they can't avoid them, they will simply cut back and do less. The end result is that the country collectively wastes a bunch of time and money.

Tuesday, April 23, 2013

Putting the "Hard Work" Myth to Rest

The beauty of the modern economy is that it is built on a foundation of massive amounts of capital. The most financially successful in society are those who, through any combination of luck, willpower, and intelligence, leverage that capital as much as they can.

Nowhere is this phenomenon more apparent than in the entertainment industry. Before the invention of the radio and television, entertainers, performers, and actors were regarded mostly as oddities and grotesques. They would travel from town to town, performing for a crowd of curious people that dwindled as the novelty wore off. The hours were long. The pay uncertain. It was an extremely unglamorous profession.

Nowadays, entertainment is vastly more lucrative. The radio and television made it possible for people to broadcast their voices and actions out to millions of people all at once. Traveling from town to town was no longer necessary. All you needed was a radio transmitter or a camera to reach a vast audience. In fact, our entertainment distribution systems are so sophisticated and widespread that it's possible for a viewer watch a music video, tv show, movie, or short comedic skit on the toilet of a public restroom.

Because the barrier to gaining a massive audience (and thus advertising/endorsement dollars) has never been lower, it's created a whole subsegment within the entertainment industry called reality TV. People of no real distinguishing talent or ability have cameras following them, while producers put them in hyper-contextual circumstances and then watch what unfolds. This has given rise to the conceit of "being famous for being famous".

Perhaps the first person widely regarded for being famous for being famous is Paris Hilton. And her situation isn't hard to deconstruct. She is a young, blonde woman (always a hot commodity) who, by sheer dint of birth, happens to be the heir of a vast fortune. The only difference between her and other heiresses is that she had a sex tape. What's the hook? That she is a young, blonde woman who happens to be heir of a vast fortune who made a sex tape that got "leaked". That's the extraordinary circumstance. In an alternate reality, it would have been the b-plot of a soap opera.

What had to exist in order to make that a marketable thing? The internet, an entertainment industry (and everything that entails) increasingly reliant upon mindless content, a large audience, and a vast heritable fortune. Paris Hilton only had one of those things, the heritable fortune, and she only has that because she's the daughter of a man who's the son of another man who happens to be the son of an iconic business mogul.

She was responsible for none of that. But because she could indirectly leverage all that capital, she's now worth a hundred million dollars on her own. Before you snort and say that she's just the spoiled scion of a famous family, look at your own circumstance and see how much you owe your own good fortune to something you had nothing to do with.

The single biggest correlation with socioeconomic success is your parents. The reason why is because your parents determine which schools you go to, which neighborhood you grow up in, whether you're well fed, intellectually and socially stimulated in a positive way, etc. And they're leveraging things available in American society. The internet. TV. Public schools. Public roads. Various retail stores. Construction firms. All of these things are capital that gets leveraged into shaping your childhood and who you will become in the future.

That is the principle reason why the average person being born in America will be more materially prosperous than the average person born in Zimbabwe. That person in America, through no effort of their own, was born in vastly more fortunate circumstances and is able to leverage much more capital. Even in America, we have vastly different starting circumstances. The person who is born in the inner city has a much lower chance of socioeconomic success than the person born in an upper middle class suburban enclave.

American politicians like to talk about the American dream. And the standard refrain of the American Dream is that, in America, if you work hard and play by the rules, you can achieve all of the major benchmarks of material success (a house, a car, and a myriad of various consumer electronics). As the relative poor of America know very well, that sentiment is horseshit. Hard work doesn't guarantee anything.

When I hear a politician wailing about the travails of the working class "I met a single mother of two, who works over 80 hours a week at 3 different jobs....", I'm disinclined to listen any further. The purpose of their remarks is to engender sympathy to a person in an unfortunate situation. Why? Because they're trying to convince a group of suckers with cheap rhetoric. Because their intended audience believes that hard work is the ticket to success. It is anything but.

Throughout history, the hardest workers were usually the least fortunate members of their society. Whether you were a slave (in Egypt, Rome, Antebellum US), an early industrial age factory worker, or a single mom stuck at a dead end job, your job was to work for other people. Instead of leveraging capital, you were the capital being leveraged.

So let's put the hard work myth to rest. Chinese workers in Foxconn factories in the southern coast of China who put in 80 hours a week assembling iPhones to sell to spoiled Americans work really hard. But they're dirt poor. Meanwhile, I spend my work day in a well conditioned office at my own cubicle doing 4 hours of real, actual work per day and I make at least 15 times as much as they do.

The ticket to success is to leverage as much capital available to you in the most efficient manner possible. Sometimes that involves hard work. More often, it involves a lot of luck. Things that have nothing to do with hard work or merit, such as height, physical attractiveness, skin color, legal residency status, your parents, are much better predictors of success than the amount of hours you put in. That should put to rest to any notion that our society is a meritocracy where the only things you need to succeed are talent and hard work.

Saturday, April 20, 2013

Real Time With Bill Maher: Counterpoints (4/19/13)

 We had a relatively strong panel this episode, with no real idiot or showboat there to ruin things. But the discussion was pretty muted, and I seriously dislike Salman Rushdie's arrogance. But let's get to the counterpoints.

Bill Maher: There is no other religion in the world today that has the ability to inspire hatred as Islam does.

This is a problematic position to have. And I wonder why it doesn't cause any cognitive dissonance because although Bill realizes that Christianity once had a similarly checkered past of violence towards other people, he dismisses it out of hand because it's not happening today. Religion doesn't kill people. People kill people. And they will use whatever they can to justify and facilitate their hatred. Instead of blaming religion, you should blame the conditions in which these people grow up in.

And just because most Muslims polled probably wouldn't care if a person who insulted the prophet Mohammed died doesn't mean something's wrong. Our political system works fine despite the fact that 40% of Republicans think that President Obama was born in another country.

Bill Maher 2: In our post 9/11 world, I feel like this incident represents a maturation of the American people in its response to acts of terrorism.

They shut down Boston and its surrounding suburbs for the entire day to catch one person, even when they were sure that they had him confined to a 20 block radius. I don't think our response matured at all. And it's a complete joke to compare this incident to 9/11, which killed 1200x more people and destroyed billions of dollars of wealth in a single day.

Bill Maher 3: How does our country have a political system where a position that 90% of the people support doesn't get turned into law?

90% of the country also wants cheaper cars, free money, prestigious jobs, and prime real estate. That doesn't mean they expect to get it or expect that they have a realistic chance of getting it. The fact of the matter is that Amy Holmes was right. Support for this position is a mile wide and an inch deep. This issue doesn't drive people to the polls because people tacitly realize that gun violence is not a huge problem in this country.

Salman Rushdie: Every other modern country in the world has simple majority rules. *glares at America*

I hate foreigners who come to our country and criticize the fact that we're different. Simple majority rules is a huge reason why other countries have political systems that are often more dysfunctional than ours. There are much weaker checks and balances and much less minority protection which is why governments overseas often have erratic changes in policy enforcement, which leads to greater instability and more economic uncertainty.

Colin Goddard: A ban on high capacity magazines would prevent the body count for mass shootings from piling up so high.

This is pretty backwards logic. The vast majority of these mass shootings occur on ostensibly "gun free" zones where other people aren't legally allowed to carry firearms. And magazines are such simple objects (literally a metal box with a spring mechanism) that it would take no time at all for a person to circumvent a low capacity magazine.

I've said it repeatedly in the past but we can't let these exceptions right the rules that other people live by. If some idiot goes on a rampage with an F350 and runs over 50 people in a crowded walkway, are we going to ban heavy duty trucks to civilian ownership? No, we would write off the incident as some mentally disturbed person trying to kill as many people as possible and then go about our business.

At the same time, when Bill Maher expressed his disbelief at Gabby Giffords still supporting individual gun ownership, it's completely baffling. If you get into a car accident, are you going to be against individual car ownership once you finish your physical rehab?

Concurrence

There is one point that Bill mentioned which I do agree on, that I feel is important enough to warrant a separate concurrence, and that's this:

Bill Maher: It is completely unfathomable that a Senator from California has the same status as a Senator from Wyoming.

I dislike the Senate. It is grossly unrepresentative of the American people. And it makes it possible for sparsely populated states to extract huge concessions from states where people actually live in. There should be an additional cost associated with living in the sticks, not a political material benefit.

We should amend the Constitution to abolish the Senate and only have the House as the legislative branch of the US. In order to give consideration to states, each state will be guaranteed at least 3 representatives. To me, this represents a much more equitable and sensible distribution of political power in the legislature, because right now small state Senators wield power disproportionate to their electorate, and it hurts the overall legislative process.

Friday, April 19, 2013

I Love the Smell of Privilege in the Afternoon. Smells Like....vindication.

On Monday, I wrote about the real enemy of education reform and put the blame squarely on the upper middle class. And today, as fate would have it, we have a writer in the Atlantic who starts off his article all but admitting his membership in the UMC with a sop to how lucky he is and then fiercely defending the status quo of not allowing poor kids to come into his neighborhood's admittedly "good public school".

He writes:
Where I take issue with Yglesias is his suggested remedy. In what he calls a "zoning-free Yglesiastopia," no weight would be given to local residency in school enrollment. Yglesiastopia must be a place with infinite resources, one in which the good schools are large enough for all, and where no allocation process whatsoever—financial, racial, ethnic, linguistic, or residential—need be implemented. Let students flock to the quality schools and the problems in our educational system will disappear. Hail Yglesiastopia!
In reference to Yglesiastopia, he cites a snippet by Matt Yglesias, Slate's perennially naive economics blogger, who at least has an intellectually honest observation that good public schools with an extremely high private barrier to entry (an expensive home districted with that good public school) are effectively private institutions. Don't mistake that for giving Yglesias any credit for his position. He probably just doesn't have any kids eligible for K12 education yet. I fully expect his position to "evolve" when that happens.

The Atlantic writer, Theodore Ross, has an incredibly selfish motivation for deriding Yglesiastopia. In the status quo, his child is guaranteed a spot in the good public school within his residential district. How would he support a system in which his kids would have to mix in with the poor kids from the wrong side of the tracks?
The busing and desegregation of the 1970s, by most accounts, worked, and could again in this situation, by placing students from poor neighborhoods into my son's school. I would welcome that, assuming a place for my son remained. That's the part I shouldn't be asked to give up—a good education for my children.
Yes, he's all for reforming the system and making it more equitable provided that his interests are not hampered in any way whatsoever.

I have no idea who Theodore Ross is, but I bet he's another "progressive" writer (just about every writer on The Atlantic is, this is not a huge leap of faith to make) unwittingly revealing that he and people of his ilk are just as nakedly self interested as the billionaire Republican caricatures that they love to deride.

Until we, as a society, get buy-in from people like Theodore Ross (who, for better or worse, mostly worse, is part of the opinion-shaping media) for education reforms with real teeth (vouchers, breaking collective bargaining for teachers, decoupling local property taxes from education funding), we will never see a national system that delivers the real goal of progressives: an excellent education for children of every socioeconomic background.

Oh, and one final tidbit:
 And Yglesiastopia doesn't address that root problem—why there isn't high-quality education in poor neighborhoods.
So really, Ross' endgame is pretty simple. Separate but equal. Keep the poor kids on their side of the tracks and away from his, just as long as they get a "good" public school. The worst kind of selfish person is the person who doesn't realize they're selfish. This is an example of that kind of person.

Wednesday, April 17, 2013

Eliminating the Corporate Income Tax

Megan McArdle, my favorite blogger, came out with a brilliant piece advocating the elimination of the corporate income tax.

Reducing or eliminating the corporate income tax has been the province of libertarian-leaning economists for a long time. But there was another dimension I hadn't considered along with eliminating the corporate income tax: treat all individual income equally regardless of source. Which means eliminating the reduced rates on qualified dividends and long term capital gains.

From a tax "fairness" standpoint, the vast majority of Americans support a somewhat progressive tax code. But given the complexity of the tax code, many of them have the sneaking suspicion that many rich people pay less in taxes (relative to their income). The two biggest contributions to this suspicion are the dividend/gains tax rates and the hideously bloated deductions and subsidies found within the Internal Revenue Code.

If you eliminate the corporate income tax and instead tax the individuals who receive the profits of the corporations, it makes it impossible for a person like Mitt Romney (with his notorious 14% effective Federal tax rate) to pay less than a middle income worker like me (with an effective Federal tax rate of 20.54%). And because we've gotten rid of the corporate income tax, we also eliminate the double-taxation that occurs when a corporation pays taxes on its profits and then also having the individual pay taxes on the after-tax dividends that the corporation then issues.

We also make it more economically efficient for firms to raise capital, eliminating the relative disadvantage companies experience when they seek to raise capital via the stock market. Because interest on capital loans are tax deductible, it usually makes it more attractive for companies to raise money on the bond market. Since there isn't a compelling economic argument in favor of companies taking on debt to raise capital instead of selling equity, eliminating corporate income taxes (and thus the capacity to deduct interest costs from the firm's tax liability) also makes a firm's capital structure less dependent on government regulation.

This also eliminates a vast portion of corporate lobbying at the Federal government. Much of the lobbying done is to carve yet another deduction or subsidy in our brobdingnagian tax code, which is currently over 3.4 million words long (about 6 times the length of Tolstoy's War and Peace). Now the only thing corporations can lobby for are changes to the Federal Register (economic regulation) and the US Code.

From a long term view, there is no significant downside to eliminating the corporate income tax. In the short run, the progressive bloggers at Slate, TNR, The Atlantic, and other assorted periodicals might have an aneurysm at the sudden increase in net worth of households who already have significant stock holdings (an all stock portfolio would see an average increase of about 25% in nominal net worth), but this is offset in the long run by making it relatively cheaper for lower income households to own stock (currently, depending on the tax bracket, it's either as cheap or significantly more expensive for middle income households to own stock).

That collective aneurysm would be fun to watch, though.

Monday, April 15, 2013

The Real Enemy of Education Reform

I'm a huge fan of student vouchers. The basic gist of it is that school funding gets attached to enrollment, not school districts or individual schools. So if a high school has 2000 students, then that high school gets operational funding for a defined per-pupil rate multiplied by 2000. Money follows the student, even if the parents choose to enroll their kid in a private school.

This increases competition amongst schools, brings to bear the innovative capacity of the private sector, and will ultimately help to cap the escalating costs of K-12 education in the US. Unfortunately, the enemies to voucherized public education are many. Political standard bearers for vouchers tend to focus on the teachers' unions, but they never mention the real enemy of vouchers: the upper middle class.

Because the upper middle class already have their own version of school choice: buying a home in a district that's zoned with an excellent public school system. A district with a good public school has elevated real estate prices. The end result is that the people who make good money cloister themselves into these upper middle class communities with good public schools and everybody else gets left to fend for themselves in districts with mediocre or bad public schools.

The paradox is that while money can buy a home districted with an excellent public school system, money can't buy a good public school system. According to the Census Bureau, DC Public Schools spent an eye popping 18,600 dollars per student while simultaneously having the lowest graduation rate among all the states (plus the District of Columbia). Think about what that implies. An average class size of 27 has half a million dollars in annual funding and only 16 will graduate high school.

The current system, where your address determines which school you go to, has shunted poor inner city families into wretched school systems while the upper middle class burrows itself in communities with great public schools that have a proven track record of getting kids into the best universities. Everybody else (excluding the rich, who send their kids to private school) languishes in mediocre public school systems where kids simply don't learn what they need to learn.

There are two takeaways from this. If we can't be bothered with any significant reform of schools, the most important of which is to restructure the way money gets distributed from state and local governments to school districts, then we should just slash the education budget and lower taxes accordingly or redirect that funding to other programs starved for revenue. Education is the biggest expense in every state and local government and the primary driver in tax revenue growth. But we've thrown money at the problem for years with nothing to show for it.

Democratic/liberal/progressive apologists for the nation's dropout factories will say that poor, ignorant minorities can't do well in school because it starts with the parents. I agree with them on that fact. But instead of keeping the status quo, we should take money out of the school system and put it to good use elsewhere. With current trends, to educate a child in the DC public school system (or NYC's, LA's, Chicago's) from kindergarten to 12th grade, if current rates stay constant (which they don't, they always grow with each passing budget), taxpayers will spend 240,000 dollars over the course of 13 years to give these kids slightly better than a coin flip's chance of graduating high school.

The thing is, the intransigence of the public teachers' unions could be easily overridden were it not for the fact that the upper middle class also protects the status quo with ferocious tenacity. Go to any local rezoning meeting open to the public and you can witness firsthand how adamant these parents are about keeping their houses within a good school district. If you ask them to decouple school attendance from residential addresses, the values of their homes would drop precipitously.

The upper middle class already has what they want: A good, clean, safe community that keeps the riff raff out via high property values and high property taxes with good public schools for their children. They have absolutely no incentive to change the system. Meanwhile, the rest of America is allowed to rot just so their kids can have a significantly better chance of getting into a 1st tier public university or an elite private university.

Their apathy (and, at times, active resistance) is what enables the teachers unions to keep their lock at the local ballot box. Because the vast majority of funding for public education comes at the state and local level, reform has to be done at the state and local level. And it's a street brawl that has to be won block by block. For the local politician who just wants to climb the ladder without getting a target put on their back, that makes it impossible to defy entrenched interests in the state legislature or the local school board lest their political careers get nipped in the bud.

The unions are the obvious roadblock, but it's the upper middle class that is the real problem to meaningful education reform.

Saturday, April 13, 2013

Real Time With Bill Maher: Counterpoints (4/12/13)

It's back! Or rather, my sleep schedule has finally gotten back to its baseline. But now it's time for Real Time Counterpoints. And I'm pretty glad I chose today to start it because we had a really good panel with a lot of really good subjects to dig into.

Interview Guest (forgot his name): Changes in cow pasture management will help us stop anthropogenic climate change!

That is, quite frankly, not a very smart thing to say. What we have been noticing is that as global temperatures have risen, the frequency of algal blooms and algae growth in general have been increasing. Given the fact that algae is responsible for around 70% of oxygen production by converting CO2, that dreaded greenhouse gas, to O2, the interview guy clearly is a moron.

If CO2 really did cause global warming, it would be reversed because warmer water temperatures and abundant CO2 would just cause a spike in phytoplankton growth. The earth really can heal itself!

Bill Maher: Hydraulic fracturing of natural gas is only cleaner than coal, the most polluting energy source on the planet.

It's actually significantly cleaner. And given the fact that coal is responsible for 40% (although that figure has declined precisely because of increased natural gas production) of the country's energy needs and 40% of the world's power, if we can replace dirty coal with cleaner natural gas, it will be vastly better for the country's air quality.

Bill Maher 2: The Weekly Standard claimed that offshore oil spills are a thing of the past. A day later Deepwater Horizon exploded and put the equivalent of 15 Exxon Valdez' tankers of oil into the water.

While it is true that the oil industry is obviously interested in overstating the claims of its safety procedures and technologies, the real problem is that it is much harder to operate in deep water conditions. Deepwater Horizon was in the middle of the gulf and the base of the well was over 35,000 feet deep. It becomes incredibly hard to contain any oil spill when you have to do it 35k feet underwater.

The reason why oil companies have gone to such lengths to extract oil is partly because of a ban on drilling in the Outer Continental Shelf, which contains billions of barrels of oil at vastly shallower ocean floors. Given the insatiable market demand for oil, no government can ever afford to shut down drilling, so if the drilling must happen, we should encourage them to drill in the safest places. That means on land (ANWR) and in shallower waters (the OCS).

Bill Maher 3 and Bob Costas: Why the hell are gun owners so looney? Even Gabby Giffords got shot in the head and she's still a supporter of gun ownership. What gives?

If a person gets into a car accident, would you expect them to stop driving automobiles altogether? It's a truism that people, not guns, kill other people. But it's a truism for a reason. A mentally ill person used a gun in an attempted assassination. Crazy people are responsible for mass shootings. Not guns.

Gun crime has halved since 1993. And if you want to halve it again, you should end the War on Drugs. It will do far more to tame gun violence than increased gun control ever will.

Bill Maher 4: Just look at all the great things government spending has brought us. The Interstate Highway System, the Internet....WE NEED TO CUT DEFENSE SPENDING.

They were conceived by defense spending. Eisenhower looked at the Autobahns and their effectiveness at moving Nazi war machines around the country and decided that the US needed such a system as well. And the internet was a result of ARPANET, which was developed by universities using DOD grant money.

David Stockman brought up a great point in that government obviously has to do some things. And that the funding of basic research and infrastructure should be among those things. There is a huge difference giving grant money to universities to come up with completely new technologies and the government playing venture capitalist.

That makes sense. Because when government money is tied up with idealistic college scientists, it tends to create new technologies and innovations because that's how scientists make a name for themselves. Companies tend to focus on existing technologies and finding ways to commercialize them. And because government grant money can so easily be captured by lobbyists, it's better to steer it in the direction of the cutting edge research labs than an entrepreneur's latest venture.

Stockman also brought up another good point. Fisker Automotive builds 100k dollar toy cars for rich people. Why does that deserve government money? Even if the DOE can't get out of venture capital altogether, at least focus on the companies that could provide good products to the mass market instead of a bunch of rich assholes like Bill Maher (who actually owns a Tesla, another 100k electric car).

Sayu Jayaraman: We should increase the minimum wage for restaurant workers.

No we shouldn't. Again, David Stockman had a great answer for this. Forcing restaurants to pay more money to workers will just lead restaurants to cutting jobs. Personally, I would welcome this. Because I hate tipping servers. And if a higher minimum wage for tip-based workers happens, you're definitely going to see less waiters and bartenders.

Frankly, I wish every restaurant had salaried minimum wage food servers or allowed me to order my own food and let me bring it to my own table so I don't have to tip 20% of the bill to what is essentially a glorified intermediary between me and my food.

Bill Maher said that Stockman's wrong. That you can't automate a waiter's job? Well if you raise the cost of a waiter high enough, there's going to be some entrepreneur (possibly using government venture capital) who's going to try.

Bill Maher 5: Special interests are ruining government. And they keep writing new tax loopholes for the corporations and keep the Drug War going and keep the prisons full and....

This is what infuriates me about progressives. They keep railing on and on about the abuses of special interests and then they point to the activities of government. Special interests don't call the shots within the government. Lobbyists don't instruct the DEA to raid pot farms. Lobbyists don't sentence non-violent drug users to years in prison. Lobbyists merely petition the government. They are people, just like you and me, advocating on behalf of somebody's interests. Just because they're getting paid to do it doesn't make their cause worse than yours.

In the end, it's the government that is at the heart of all these abuses. In life, we hate the seducer for seducing us. But we were the ones who broke the trust in a relationship. In the same vein, the lobbyist can cajole and threaten all they want, but it's up to the politician or the bureaucrat to ignore their advances. If they fail to do that, we should blame those most directly responsible. Not a convenient scapegoat.

Thursday, April 11, 2013

The Blinds of Privilege

A few years back, I had a conversation with a friend about the show The Wire. I had never seen the show and he swore by it. He cited a bunch of people saying that it was the most realistic depiction of gang/drug activity in the inner city and that Harvard even offered a course that was dedicated to watching and discussing The Wire. I replied that it doesn't matter how accurate the depiction of The Wire is, because it's one thing to watch a TV show, an hour's length at a time, and quite another to live the actual life.

What people forget in the process is that television, even the most accurate portrayals, is about showing the most interesting aspects of human life in a condensed time frame. Nobody would ever watch a show that was just a guy holding a camera and filming the lives of inner city drug dealers 24/7. Hours and hours would pass before anything remotely interesting would happen.

People forget the tedium and the monotony. In the movie Saving Private Ryan, arguably one of the greatest war films of all time, the opening scene depicts the invasion of Normandy and is about 20 minutes long in a movie with a running time of 169 minutes. Although it's only the first of many scenes depicting combat, it already eats up about an eighth of the film. In reality, no soldier will ever spend more than 5% of his time engaged in actual combat, even in the most ferocious of war zones.

The audience doesn't want a realistic depiction of anybody's life when they're watching a movie. If war films were true to life, three quarters of the scenes would be showing soldiers drilling, marching, and sleeping. The running joke for the show 24 is that Jack Bauer never uses the restroom in the entire course of the day (or conveniently does it off-screen when the show cuts to another character's scene).

And this is why it's useless for lauding The Wire for being extremely realistic. Yes, it is realistic in depicting a very tiny slice of street life, but the average day of a drug dealer consists of standing around on a street corner for hours at a time, sleeping, and watching TV. Although the show heavily implies all of this, it can't show it in real time. Which is why the audience can never fully appreciate "life on the streets" just by watching The Wire. You can portray certain aspects of life accurately, but you can never portray life accurately, unless you create a show that nobody is going to want to watch.

That is one of the things that always bothered me about the lavish praise that the media bestowed on the show. It's a weird feeling you get when you read about a bunch of upper middle class white journalists and writers figuratively high fiving each other because they appreciate a certain TV show. What they're really high fiving is their own privilege. They don't live in the ghetto and they would never visit the ghetto on their own time, but by golly they'll watch shows about the ghetto and then say it's the greatest thing since color TV.

I've brought up Macklemore before in one of my other posts. And I referenced a portion of the song's lyrics. But immediately after that bit, there's another lyric coupling (bolded below) worth talking about:
Or Rodney King was getting beat on
And they let off every single officer
And Los Angeles went and lost it
Now every month there is a new Rodney on Youtube
It's just something our generation is used to
And neighborhoods where you never see a news crew
Unless they're gentrifying, white people don't even cruise through
This is essentially what happened with The Wire. Because the media is overwhelmingly white and upper middle class, they naturally focus on things that appeal to white upper middle class people. When it comes to their opinions on TV shows, food, politics, and culture in general, they only represent a small subset of America's preferences, but it's what dominates the front pages of the newspapers and magazines we read.

A show like Mad Men gets disproportionately large media coverage while a show like The Big Bang Theory gets almost no coverage despite it being one of the most highly rated TV shows in the US. The reason why is because the upper middle class loves Mad Men and dislikes The Big Bang Theory (for the record, I seriously dislike The Big Bang Theory as well).

These are the blinds of privilege. Where members of the upper middle class talks about the things they want to talk about while everybody else reluctantly listens in or tunes them out completely. And if they do the latter, we'll sneer about their fixation with sports news or celebrity gossip. 

Wednesday, April 10, 2013

The Excuses of Low Net Worth Individuals

Long time readers of this blog know that I like to read websites like The Atlantic and Slate, both of which have markedly biased opinion writers when it comes to topics like politics and finance. When they write articles highlighting the wealth gap between the richest and the poorest Americans and using that as a justification for their advocacy of programs that redistribute wealth and income from high net worth individuals to lower income households, it infuriates me.

Being the glutton for punishment that I am, I usually leave a comment along the lines of:
This is not a tale of corporations and the rich versus everybody else. It's a tale of financial literacy of the few, who are rich precisely because they're the ones saving and investing while everybody else is making excuses on why they can't save and invest.
Regular workers can invest in deferred-tax accounts (which have contribution limits). Their wage income is taxed at lower rates than the vast majority of high earners. And the barriers to retail investing have never been lower.
The two most common replies look like:
  1. We don't save money because we have no money to save.
  2. Wall Street is just a casino. It's not investing; it's gambling.
 But when you decode these responses into what they're actually saying, it reads more like:
  1. I don't make enough money to save AND support the lifestyle I am accustomed to.
  2. I don't know jack shit about investing.
Nobody really wants to learn how finance actually works. Using rhetoric to uphold convictions feels good, but it just perpetuates the state of finance ignorance that most people live in. Because if you don't learn about finance, you will never be able to become rich (unless you found a start-up business which takes off, although that is a form of savings/investment).

And the reason why nobody wants to learn about finance is because everybody is too busy spending money. And it's understandable. Spending money is awesome. Exchanging bits of paper or zeros and ones for tangible goods and services is so satisfying. And immediately gratifying. We don't show off how awesome we are by some numerical representation of our wealth. We do it by buying flashy clothes, cars, jewelry, and houses. We don't have fun by looking at a numerical representation of our wealth. We do it by attending concerts, sporting events, bars and clubs, and movies.

Consequently, most of us aren't wealthy because we've all succumbed to our baser instincts. Which is, paraphrasing Chris Rock, to spend money (intangible, dubious value) like we think the shit's going to rot if we don't buy goods and services (tangible, "real" value). The few individuals who have suspended or tamed that baser instinct (often by channeling another base instinct: avarice) are the ones who become rich.

That old saying, "a penny saved is a penny earned" did us a great disfavor. Because nothing could be further from the truth. A penny earned is a penny earned. Because even profligate spenders earn money. They just don't save it. They earn the money and then they go out and spend it. That is the entire difference between the rich and everybody else.

Tuesday, April 9, 2013

....Louisville....

*shakes fist angrily*

I had a lot of money riding on Michigan to win...

Friday, April 5, 2013

Inside the Yuppie Bubble

Bill Maher used to do this segment on his show called "Inside the Bubble" where he shows a video of some Republican politician saying something cringeworthy. But this article highlights the bubble that progressives live in.

Matt Yglesias, an extraordinarily naive economics writer for Slate, marvels at a newly opened Walgreens in DC. The stuff he writes about is fairly embarrassing. Here's an example.

IMG_032_1
His words: "futuristic soda machine"
For those of us living in 2010, when Coca-Cola first rolled out their Freestyle machines (in fast food and fast casual restaurants), this would not be a cause for wonder. But mainly he's struck by the fact that they have a decent selection and a different layout than what he's used to (CVS).

His article is titled "I Have Seen the Future of Retail". And this is perhaps the best example of the liberal yuppie bubble. These writers cloister themselves into fauxhemian enclaves in urban hotspots like New York, DC, San Francisco and put up with all of the inconveniences in order to live closer to other urban yuppies. And then they marvel why the rest of the country doesn't want to live, think, and act like them.

Wednesday, April 3, 2013

The Next Recession

The Atlantic is out with an interview of David Stockman, a former Director of the OMB during the Reagan Administration, and he's predicting doom and gloom due to a myriad of factors, some decades in the making. Unfortunately, his tone comes off as arrogant, cocky. He's entirely too self-assured and it doesn't work well when you're giving one paragraph responses while being instantly dismissive of people you don't agree with.

But if you go through it, you can find some good pieces to chew on. Here's the most salient point:
No. They're caught up in this Keynesian fog -- The economy is going through a disappointing recovery but if we just keep working at it, everything will work out for the better. The latest OMB and CBO forecasts show no recession through 2023. Well, the latest recession ended in June 2009. Their forecast implies that 14 years are going to go by and there aren't going to be any accidents, hiccups, and dislocations in our economy or in the world. That's nuts. It's never happened in recorded history. We're going to have recessions. There will be a crisis.
This is a pretty sobering point. Although the Democratic Party and the White House in particular are keen to point out any signs of economic progress, the fact of the matter is that we are 4 years out of the recession and we still aren't back to even. Unemployment is still higher. Labor force participation is still lower. Although we're barely over the nominal highs in the Dow and S&P pre-crisis, on an inflation adjusted average, we're still about 10% below the real high.

Household wealth is still vastly lower. Americans are deleveraging but still taking on student loans (which is just about impossible to discharge in bankruptcy). Given the fact that about half of consumer debt reduction has been in the form of write-offs and charges taken by corporations, this hasn't exactly improved the overall debt picture of the average US household.

So we're out of the recession but it doesn't feel like we're out of it. The only question is, what's going to happen during the next recession? Because it's coming and, if you look at historical trends, it's probably knocking on our doorstep. Take a look at this chart:

http://research.stlouisfed.org/fred2/data/GDP_Max_630_378.png
Source: St. Louis Fed
During a 72 year span from 1940 to 2012, we have been in 12 recessions. That's one recession every 6 years. The last recession ended in June 2009, 4 years ago. Given the fact that it seems like the entire European periphery is near or on the verge of economic collapse, the developed world's mounting debt issues and worsening demographic profile, and a 0% interest rate policy that has existed for about 4.5 years and is planned to continue for another 18 months, it's become increasingly clear that we've stoked an asset bubble somewhere.

Some people say it's happening in agricultural real estate, others say bonds (of all flavors, municipal in particular), and don't forget emerging market equities, the perennial price swings of the commodities trade, and consumer debt. Markets were in free fall in 2008. The next recession is probably not going to be as severe, but a weakened economy suffering another blow is the last thing we need.

The problem is we already used up most of our gunpowder. Public debt increased from 40% of GDP to 70% in 4 short years from 2007 to 2011. The Federal government is not going to be able to borrow at ultra low interest rates (unless the Fed wants to trigger some sort of rampant inflation similar to what we saw in the 70s or even worse) in the next recession.

What we saw during the financial crisis here and in Europe is that the government punted the fundamental issues down the road. Because although the acute crisis was brought up by auxiliary factors, the real issue is that our current fiscal structure cannot support the amount of government we want. At some point we will either need to cleave spending with a battleaxe or raise taxes at levels even California Democrats would balk at, or both, or experience a drastic bout of inflation that will ultimately have the same effects.

The next recession is coming. And it's gonna get ugly.

Tuesday, April 2, 2013

You're Welcome

And I'm not just talking about the return of Game of Thrones. Today's post has to be short and sweet. And I'm going to take the time to toot my own horn, kinda.

After the election, I wrote about what the Republican Party needs to do in order to win future national elections. And in the intervening period, high profile Republicans have come out in favor of marijuana decriminalization (Paul), comprehensive immigration reform (Rubio, Christie, others), gay marriage (Portman, Christie).

Now, what I've said isn't radically different than any other post-election analysis of the GOP. There are numerous challenges that the GOP faces on a national level. And, like many other analyses, I'll cite their strength at the state and local level. They have a deep gubernatorial bench to draw from. But the fact remains that the biggest Republican names have all "evolved" on issues once considered third rails in the national Republican party.

The biggest piece of advice that the Republicans must take to heart is to not revert back to their old ways when they see their electoral gains in 2014. Low turnout and a (likely) demoralized electorate will shift the electoral advantage towards the GOP, but it won't repeat in the 2016 general.

I've been a libertarian for a very long time. And I'm pretty excited, because I think the thought leaders within the GOP have finally been convinced that they can no longer rely on a predominantly white male demographic to win elections and must therefore start appealing to other demographics. That means a more inclusive GOP. And it also means a more libertarian GOP. There are plenty of issues that the GOP can outflank the Democrats on. They just need to sack up and roll the dice.