All Things in Moderation

As today is my husbands 63 and 5 months birthday celebration we’re taking the day off, JK. We’re always looking for an excuse for a holiday.

A few links to keep us going.

I found this headline from the NY Times amusing.

Europe Nears Agreement on Bailout Fund That May Be Inadequate

By the time the entire process is finished, about mid-October if all goes well, Europe’s leaders will have a newly expanded European Financial Stability Facility that most analysts say will be, at $600 billion, grossly inadequate to extinguish the crisis, since it lacks the means to cope with the larger economies of Italy and Spain.
It seems another example of too little, too late on the part of the leaders of the 17-nation euro zone. But it is also another example of sharply differing analyses of the core problem of the euro, making a solution hard to reach.

And from the Left Coast Desk
Gov. Chris Christie was here at the Reagan Library. I guess he’s still not running.

The video, on the Politico website, represented his “answers back to back to back together on the question of running for the presidency,” he told hundreds of Republicans gathered at the Ronald Reagan Presidential Library in Simi Valley — several of whom asked him to run.

Among the responses on the video: “I’m 100% certain I’m not going to run,” “I don’t want to run” and “I don’t feel ready in my heart to be president.”

And my favorite DFH David Dayen points to this. Apparently the USPS is required to pre-fund future retiree benefits of postal workers who aren’t even born yet.

The USPS economic crisis is the result of a provision of the Postal Accountability and Enhancement Act of 2006 that requires the Postal Service to pre-fund the health care benefits of future retirees—a burden no other government agency or private company bears. 

The legislation requires the USPS to fund a 75-year liability over a 10-year period, and that requirement costs the USPS more than $5.5 billion per year. Guffey also pointed out that “the federal government is holding billions of dollars in postal overpayments to its pension accounts.” 

All of the USPS losses over the past four years come from this mandate. You cannot find another organization in the world, AFAIK, that pre-funds 75 years of benefits over a 10-year period. And it’s not just the overpayments, it’s the opportunity costs of having to hold that much reserve capital that cannot be used when times are tough, or to invest in more attractive services. This results from a 2006 law that was one of the last time bombs of the Denny Hastert-Bill Frist Congress. That needs to change.

— LM

Apropos of nothing: Using a 3D Printer to print food. That’s cool, but I saw a talk (I think it was a TED talk) where the guy talked about using the same sort of technology in laser printers to print nutritious wafers. Couldn’t find that, but that also sounded exciting. Not quite to the point of having Star Trek food replicators. But close. — KW

Illinois likely to appeal dismissal of charges against man facing 75 years for “eavesdropping” by recording a public official. – NoVA. They want to throw him in jail essentially for life.

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This topic came up in a bit of back and forth recently, so I thought I’d hold forth and dodge a few soft tomatoes. Sauce!

There seem to be two sharp divisions between conservatives and liberals on taxation. The first of these is what kind of taxes people should pay. I have heard the refrain from conservative economists that taxes such as capital gains and estate taxes are the worst and consumption taxes are the best. I’m sure it’s pure coincidence that the wealthy pay the former taxes whereas lower wage earners are hit more heavily by the latter. I see this division as a philosophical one. I support taxing capital gains as ordinary income with indexing for inflation. Or perhaps a rate lowered by the inflation rate.

The flat tax vs. graduated rates is more interesting to me. As it has been proposed, the flat income tax is reasonably progressive due to the large personal exemption that is attached to it. But how do they compare? I took as a proposition to compare the current tax rates with a hypothetical flat tax. I put in a significant exemption for the flat tax and required it to raise roughly the same revenue as the current system. I even went to the census to get the income distribution. It’s a little tricky as 26% of households earn $100k or more and that wasn’t broken out. I assumed a gradually falling fraction from $100K upwards (using a Lorentzian distribution). It misses those earning $1M+, but I’ve heard enough times that this is a small fraction of the total. Anyway, this is a thought experiment, so my theoretical America has an income cap of $1M.

The requirements on my flat tax are that it has a $25K personal exemption and must raise the same amount as the current system. Turns out that you need a 32% rate. Here’s the plot of the two rates compared and the difference.

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