Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1403.7 | 9.6 | 0.69% |
| Eurostoxx Index | 2537.3 | 11.9 | 0.47% |
| Oil (WTI) | 107.2 | 0.3 | 0.31% |
| LIBOR | 0.4727 | -0.001 | -0.11% |
| US Dollar Index (DXY) | 79.272 | -0.073 | -0.09% |
| 10 Year Govt Bond Yield | 2.27% | 0.04% | |
| RPX Composite | 169.79 | 0.1 |
Markets are generally higher this morning on no real news. Bonds and MBS are weaker as risk aversion continues to wane. Commodities are slightly higher.
The Chicago Fed National Activity Index came in at -.09 in Feb, down from +.33 in Jan and below expectations. Essentially the index tells you whether the economy is growing above trend (positive number) or below trend (negative number). It takes into account 85 different economic indicators. The biggest positive contributor was employment, while consumption and housing were the biggest negatives.
Meanwhile, Ben Bernake is saying the job market remains weak and the recent drops in unemployment are unlikely to continue.
Speaking of housing, KB Homes released numbers on Friday and the stock was pummeled, as the street was spooked by the lower new orders numbers. KB was blaming the number on their preferred lender (Met Life) exiting the market. Overall, the tone of the conference call was constructive, with the company noting several signs that the housing market is steadily improving.
Filed under: Morning Report |
All Things in Moderation 
The pending ACA arguments in the Supremes have no effect on the markets, apparently.
This morning’s argument can be heard about noon EST on C-Span 3.
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Mark, probably not. Until it affects cash earnings, the markets won’t care.
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I have been hanging around PL today and astonished at the return of the igrnorant fool type comments.
Did you guys see Ezra’s linked piece about a $2 a gallon gas tax? If not, is there any interest in seeing my response?
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I would like to see it.
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I had to share this classic Onion piece: http://www.theonion.com/articles/new-heart-device-allows-cheney-to-experience-love,2294/#id=I1_1332785911252&parent=http%3A%2F%2Fwww.theonion.com&rpctoken=727368375&_methods=onPlusOne%2C_ready%2C_close%2C_open%2C_resizeMe%2C_renderstart
And John, I would be interested in your take on the tax proposal.
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Adding $2 a gallon tax to the price of gas would essentially crash the economy, far worse than the last recession. The blowback implications are staggerring, but of course nobody thinks about that. It would cause massive, massive inflation, not only by driving up the cost of everything in the economy, but by causing the Fed to resume easing in an effort to refloat the damaged ship.
Allow me to quote from an equally stupid WAPO editorial on the same subject earlier:
” There would have been pain at first, but, over time, increased conservation by U.S. motorists would have moderated global oil prices, causing prices at the pump to recede as well. Who knows? By now, we might actually be experiencing lower prices — and a greater portion of the per-gallon cost would wind up in U.S. coffers, instead of Saudi Arabia’s or Venezuela’s”
Pain at first? The greatest conservation of the last 30 years occurred in 2009 when the economy crashed, but somehow the Post didn’t see THAT as a good thing! LOL
As for the moderation of prices, it’s as if these people had never seen a business model in their lives. Only a complete fool would think that oil producing nations would continue to pump out the same amount of oil at falling prices. See this year’s nat gas for what ACTUALLY would happen in that circumstance. Production shuts down, and you would also have to deal with a revolution in Saudi Arabia, where the government could no longer pay off the population supported by $100 a barrel oil.
So yes, crude prices would fall for about one year, and then be followed by a global shortage of oil for whatever businesses were left after the economic crash. Oh and if you don’t want to send MORE money to Saudi and Venezuela, then don’t raise the gas tax, because the US is NOT the low cost prducer of crude oil, nor is Canada. So as conservation begins, the FIRST producers to shut down will be our own!
You can only get a piece of stupidity like this in the laptop model of an economics professor.
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another thing I got in trouble for, but which will seem obvious to the rational people here.
Our budgetary process, the opposite of a business model, in which we decide what to spend, and then raise revenues to meet it, rests on a few bedrock assumptions.
That is this works as long as we can borrow enough at low enough rates to cover the inevitable shortfalls that will occur, AND that the Fed can increase the money supply in a manner so as to cover the borrowing but not cause a big rise in inflation.
It seems pretty obvious to me, but “tool” was the best thing I was called! LOL
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another thing I got in trouble for, but which will seem obvious to the rational people here.
What will seem obvious? That you would get in trouble? That you would get in trouble for beign rational? Or that you would get in trouble for pointing out that it’s not really budgeting if you spend the money then creat the money to meet the budget out of thin air? None of that would surprise me.
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Got link to the original Klein piece?
My recollection is that he’s argued for a tax-based floor of gas prices, designed to reduce volatility in prices at the pump. Certainly, slapping $2 onto the price of gas in one chunk, with little warning, would have potentially disastrous short term affects. I wonder if that’s what Klein was discussing.
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It was a link in Wonkblog, not something actually written by Ezra himself. sorry if I gave a false impression.
Here’s the whole thing:
” KOLBERT: Gas prices should be higher. “When it comes to gas prices, it’s been clear for, well, let’s just say forever that the cost of gasoline in America is actually too low. Cheap gas generates sprawl and traffic. It discourages the use of mass transit and the development of alternative fuels. It contributes to regional smog and to global climate change. The easiest and most obvious solution has long been to raise the federal gasoline tax, which now stands at only 18.4 cents a gallon. Among economists, there’s widespread support for this idea, including from Greg Mankiw, a Harvard professor who happens to be a top adviser to Romney. Writing in the Times earlier this year, Mankiw observed, ‘Economists who have added up all the externalities associated with driving conclude that a tax exceeding $2 a gallon makes sense.’ He went on, ‘By taxing bad things more, we could tax good things less.’…What the country needs–and has always needed–is an energy policy that, instead of pandering to Americans’ sense of entitlement, would compel us finally to change our ways.” Elizabeth Kolbert in The New Yorker.”
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“You can only get a piece of stupidity like this in the laptop model of an economics professor.”
I find these proposals usually come from people who have ready access to good public transportation and therefore have difficulty imagining a situation with say a daily hour commute up the Interstate and back as a job requirement.
Ezra was quoting another piece quoting Greg Mankiw. The argument was to raise gas taxes by the $2.00 amount, but then rebate it to make it revenue neutral.
Ezra’s post:
http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-absolutely-everything-you-need-to-know-about-health-reform-supreme-court-debut/2012/03/26/gIQAb7adbS_blog.html#excerpt
The piece being quoted:
http://www.newyorker.com/talk/comment/2012/04/02/120402taco_talk_kolbert
My own opinion is that the old Ross Perot proposal of raising the gas tax by $.25 per gallon over five years ($.05 per gallon per year) to fund highway infrastructure makes sense. The biggest waste of gas, money and time is sitting in traffic.
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“bannedagain5446, on March 26, 2012 at 10:55 am said: Edit Comment
I have been hanging around PL today and astonished at the return of the igrnorant fool type comments. ”
Resisting the urge to paraphrase Obi-wan Kenobi:
“Who is the more foolish? The fools on PL, or those who are surprised that they are fools?”
None of the posters here can claim to be surprised by what is posted on PL at this point.
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I would say that I regret not having had your back at PL, John, except that I don’t regret it. Your audience here is more disposed to think like jncp that a gradual modest raise of the tax to fund the Hwy Trust Fund and offset the fuel efficiency we are getting without raising the freaking tax by nearly an order of magnitude is a worthy discussion, while raising the freaking tax by nearly an order of magnitude would lead to the disaster you depict.
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jnc:
Thanks for the clarification on the Mankiw thing, though the idea of rebating a tax you just charged, economically makes no sense. It’s similar to the thinking of people who set up their tax returns to get a large refund, rather than simply limiting their payments is it not?
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” though the idea of rebating a tax you just charged, economically makes no sense.”
I suspect the idea is to answer the charge that a gas tax is regressive by allowing people with incomes under a certain level deduct it.
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I wonder, Brent, if anyone has studied whether the motor fuels tax is truly regressive. I asked Yjkt that the other day. My guess is that in the aggregate it is not, but I have no actual font of stats to back that up.
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I asked Yjkt that the other day.
Opinions vary.
It all seems to depend on whether you see not having a car as a cause or an effect of being poor. People without jobs don’t drive much because they can’t afford to. An increase in the gas tax hurts me in my Hyundai a lot worse than Ann Romney and her Cadillacs.
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yello:
An increase in the gas tax hurts me in my Hyundai a lot worse than Ann Romney and her Cadillacs.
How do you know?
Perhaps, too, we should specify what we mean by “regressive”. Strictly speaking, a regressive tax is one in which the tax rate decreases as the amount subject to taxation increases. It is in this sense that the FICA tax, with its built in cap, is regressive. In this sense it is clear that a gas tax is not at all regressive.
But regressivity has also come to refer to any tax that falls disproportionately on low income people. So taxing activities that are more prevalent among low than high income people, like smoking, is also referred to as “regressive”. If low income people are less likely to own cars, and hence less likely to drive, than high income people, a gas tax would not be regressive in this sense, either.
You seem to be using the term “regressive” to refer simply to the amount of tax owed relative to income for any individual (hence, the tax “hurts” you more than Ann Romney, presumably simply because she has more money than you, regardless of the number of cars you each have or how much each of you drive). In this sense, quite literally any tax that is applied uniformly regardless of income would be “regressive”. Sales tax, value added tax, gas tax…any tax that is applied based on the thing being taxed rather than the income of the person paying it would, by definition, represent a heavier burden on a lower income person precisely because it is applied regardless of income level.
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‘By taxing bad things more, we could tax good things less.’
Seems reasonable to me. If a $2/gal tax hike is offset by an income tax cut, would calamity result? Perhaps not.
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My own opinion is that the old Ross Perot proposal of raising the gas tax by $.25 per gallon over five years ($.05 per gallon per year) to fund highway infrastructure makes sense. The biggest waste of gas, money and time is sitting in traffic.
Given the volatility of gas prices that sort of gradual stepped increase would be nearly invisible. Much more so than 1992 when gas was under a buck a gallon.
The economic losses associated with lost transportation productivity are mind boggling and can justify about any major infrastructure improvement.
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Thanks for the links, YJ.
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“bannedagain5446, on March 26, 2012 at 2:08 pm said: Edit Comment
jnc:
Thanks for the clarification on the Mankiw thing, though the idea of rebating a tax you just charged, economically makes no sense. It’s similar to the thinking of people who set up their tax returns to get a large refund, rather than simply limiting their payments is it not?”
Correct. And I suspect you are well aware of exactly how many Americans budget around their tax refund every year. See also renting vs owning.
The economic premise of the rebate is that the tax itself will shift people away from the behavior you want to discourage (gas consumption/driving) but make them economically “whole” by replacing the lost income through the rebate to spend on other things. As you noted, this is based on an individual model of gas consumption and ignores the embedded gas “tax” in all other goods throughout the economy through transportation costs, although I suspect justifications could be offered on buying local, bulk purchases vs one box of toothpaste from Amazon at a time, etc.
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In this sense, quite literally any tax that is applied uniformly regardless of income would be “regressive”.
Precisely.
Increasing taxes on capital gains and carried interest wouldn’t hurt me nearly as much as they would the Romneys. Which is why I am in favor of raising them.
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yello:
Precisely.
It might be useful in the future if you note when you are using a word (regressive, in this case) to mean something other than what it is generally understood to mean.
Increasing taxes on capital gains and carried interest wouldn’t hurt me nearly as much as they would the Romneys. Which is why I am in favor of raising them.
An interesting principle of “fairness”, that.
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to mean something other than what it is generally understood to mean.
That is not uniquely my definition. From Wikipedia:
Since Wikipedia is open source, you are welcome to correct it.
An interesting principle of “fairness”, that.
Your word not mine. I have no qualms about soaking the rich. Within reason.
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yello:
I deleted my original before seeing your response. I think I was being overly ornery about it. I will re-post it, to give yours context, if you want. let me know.
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yello:
[From wikipedia] In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich
This simply renders the term “regressive” to
notmean “not indexed to income/wealth”. Quite literally any tax that is not indexed to income or wealth would, by the definition above, be “regressive”. That is not what the term has traditionally meant.Your word not mine. I have no qualms about soaking the rich.
Just so I am clear, fairness is unimportant to you with regard to tax laws?
[edited to fix incomprehensible sentence structure]
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Either way. I took no offense, so let it stand.
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That is not what the term has traditionally meant.
That is not how you have traditionally used the word. It has always been my understanding of it.
Just so I am clear, fairness is unimportant to you with regard to tax laws?
There was an ATiM post about ‘fairness’ recently I studiously avoided. The word is so loaded as to be less than meaningless. I believe that ability to pay should be a major but not necessarily overriding factor in the tax structure. That concept is the basis of the progressive tax structure as well as for luxury taxes on inelastic high-value goods. Regressivity is the reason food is exempt from sales tax in most states which have one.
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yello:
The word is so loaded as to be less than meaningless.
Actaully, fairness is simply another word for justice. (Today’s quotation of the day was no random coincidence.) And the whole point of law (ie a justice system), is, well, to codify and implement notions of justice. It is pretty much impossible to talk about what should or should not be law without initially, or at the very least implicitly, establishing principles of fairness. To refuse to engage the subject of fairness on the grounds that the notion is “meaningless” is to implicitly declare that your own notions of what should or should not be law are not rationally, er, justifiable.
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Actaully, fairness is simply another word for justice.
So then what does justice mean? Somehow I doubt you have the same definition of justice as,say, liberation theologists. Which then just traps us in an endless loop of circular definitions. Philosophers have spent centuries debating the concept. It’s good to know you have finally have resolved the issue. But then, parsing definitions is really one of ATiM’s signature strengths.
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Like the author of the article I posted, I think objective fairness can sometimes be discerned. I do not think it is the same thing as justice. I think it is a business ethic, only. I pose that an honest day’s work for an honest day’s pay is an example of fairness. I pose that equal pay for equal work is an example of fairness. Certainly, honest weights and measures are fair. I suggest that this kind of ethical understanding can be stretched, but not far. Thus, to have all persons treated according to the same rules in a courthouse is akin to fairness.
However, from each according to his ability to each according to his need is not a fairness argument. One might think that social outcomes would be preferable with this standard, and a whole society might adopt such a standard for itself, but it would confuse the hell out of any meaning to call that a fairness argument. So it is with taxes. Treating all earned dollars the same might be fair to dollars, if they were animate, but it has nothing to do with treating people fairly. Neither does a flat tax, nor a progressive tax, nor a regressive tax. Arguing tax policy from fairness is a trivial pursuit, IMO.
Scott understands my linguistic distinction and will make tax arguments with me about justice. I think he is right to do so. Justice is complex, taking into account so many variables.
Fairness is simple and only applicable to like kind transactions, but we use it from childhood when we think we have received the short end of the stick, and it is that subjective sense that most folks rely upon in politics. It is emotionally evocative. Nevertheless, it has nothing to do with the life of our emotions. In fact, a marriage counselor who suggested that relationships were marked by fairness would be out of his depth. What I do for you in a personal relationship bears no reasonable expectation of what you will do for me in a trading sense. The relationship simply depends on mutual trust and respect, not counting favors.
By now you see my drift. Finding objective fairness in commerce is possible, I believe. I do not think it is even relevant to most other situations.
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yello:
Somehow I doubt you have the same definition of justice as,say, liberation theologists.
Probably a well-founded doubt.
Which then just traps us in an endless loop of circular definitions.
Only if you are a liberation theologist.
All definitions are necessarily circular. True communication ultimately rests upon the ability to point to or describe some thing and say “That is what i mean” in the hopes that some shared understanding exists. It is of course possible that no such shared understanding will exist in this particular instance. But if we do not start with some agreement on some principles of justice first, any debate about higher level concepts that are grounded in those principles, such as law, is an utter waste of time. Rational debate about anything can only proceed from shared premises or first principles.
Philosophers have spent centuries debating the concept.
Yes they have, and for good reason. Most humans are imbued with some intuitive sense of justice (including, almost certainly, you, which is why I don’t buy your claim to believe that notions of fairness/justice are “meaningless”). And the organization/survival of any society is dependent upon notions of justice being generally shared among the population. What philosophers do is simply try to justify in reason what most people accept by defaul or intuitively.
It’s good to know you have finally have resolved the issue.
As I said, almost all people have an intuitive sense of justice, and have resolved to their own satisfaction that some things are just and others are not, including, i am willing to bet, even you, despite any claims you might make to the contrary.
But then, parsing definitions is really one of ATiM’s signature strengths.
Actually I think ATiM is little different to most discussion forums, in which any examination of strongly held premises is often studiously avoided, lest it be discovered that longstanding opinions aren’t particularly coherent or consistent.
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Mark:
Scott understands my linguistic distinction…
I suppose I do, but I don’t think you should apply your distinction to others who might use the word. For example, when Obama talks about someone paying his “fair share”‘, i think he is making a claim about justice, not a claim about “objective fairness in commerce.”. Your distinction helps us understand claims you might make, like that “fairness” is not applicable to taxation, but it doesn’t change what others might mean when they use the term.
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Let me push my musing a bit further, Scott. You might even agree with me.
When BHO talks about someone paying “his fair share” he is actually making a heartstring argument to the little kid in all of us. Little brother is getting hindmost teat because he is not being treated fairly. I think it is for him and for everyone who uses “fairness” to argue for a tax overhaul a blatant emotional call. However, you are kind and give him the benefit of the doubt and think he might mean it is just for someone else other than his voters to pay more. I understand that raw honesty – we need more revenue, in a low employment period we want to get the revenue from where there is the most liquidity – just doesn’t have any sex appeal.
And here is where his rhetorical ploy of calling for fairness fails him, and us. There is not enough revenue to be had from the wealthy without screwing the economy. Laffer really works when you get to confiscatory tax rates, like we had post WW2. Assuming, as all DC pols do, that we will never under any circumstances cut spending to 16% of GDP, and assuming we need tax revenues of say, 20% of GDP, then the middle class will have to pay more, too. By couching his argument as one from “fairness”, or even “justice”, he can never face the facts. And he is not alone. No one wants to tax the middle class more.
That is where the votes are.
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Mark:
I do want to respond to this, but can’t do it justice tonight. Will try to do it tomorrow.
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