Morning Report – Consumer Confidence at post-recession highs 8/26/14

Rallies in European stocks and bonds are dragging US stocks and bonds along for the ride. Remember the PIIGS? The US 10 year yields just a touch less than Italian sovereign debt and about 20 basis points more than Spanish sovereign debt. Let that sink in.

Durable goods orders were all over the map due to a big jump in aircraft orders. The headline number increased 22.6%, however the number most pros focus on – Capital Goods Orders Non-defense / ex-aircraft was down .5%, however June was revised up big, from 1.4% to 5.4%.

The Richmond Fed Manufacturing Index rose to 12 from 7. Consumer Confidence rose to 92.4 in August, from 90.3 the prior month. This is a post-recession high and we are approaching historical normalcy. Lets see if this translates into good personal spending numbers on Friday.

Consumer Confidence Bloomberg

It is official: Burger King is buying Tim Horton’s and plans to move its headquarters up north. Expect the usual kvetching about “corporate patriotism” out of the usual suspects. That said, Walgreens was jawboned into not moving their headquarters, but the stock was slammed on the decision. I am curious as to whether the left will go after the company by threatening a boycott or will go after Burger King Worldwide’s biggest shareholders – 3G and Pershing Square. That said, 3G is a Brazilian investment firm, and who knows if Ackman holds BKW in its onshore or offshore accounts. BKW could already be more or less foreign owned to begin with.

House prices are down month-over-month and year-over-year according to Case-Shiller. These are the seasonally-adjusted numbers – the non-seasonally adjusted numbers were still up .9% month over month.

Separately, home prices continue to rise, according to FHFA, with the index up .4% from May. Prices are up 5.1% year-over-year. The FHFA index is different than Case-Shiller in that it only looks at homes with a conforming mortgage, which means it excludes distressed and high end home. It is more of a central tendency index and tends to be less volatile than Case-Shiller.

105 Responses

  1. Is it my imagination or does Dezzie simply have a blind spot about Libertarianism?

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    • Dezzie has a blind spot about all of reality. One of the few people I completely ignore. Complete waste of time and really annoying.

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  2. It’s her bête noire. She resents the amount of influence it has on the public discourse given that she despises it. As I noted, it’s amusing the amount of posting that’s done on something that is claimed to be fake, marginal, and juvenile.

    Lady MacBeth doth protest too much.

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  3. Isn’t this Barro’s theory?

    All accounts must in the end be settled, so the real rate of taxation is the rate of spending.

    http://m.nationalreview.com/article/386263/blue-voodoo-kevin-d-williamson

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  4. Scott,

    I can only think RBG was insulting our wise Latina.

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  5. This is entirely off topic, not that we actually have topics here, but has anyone ever read anything by Haruki Murakami? I just started “The Wind-up Bird Chronicle” and am really enjoying it. I have the feeling I may be stuck on his books for awhile.

    I just finished “The Goldfinch” by Donna Tartt and liked it as well but the entire time I was reading, I was trying to figure out how she knew so much about boys and men…….LOL

    Anyone have any other suggestions? I’ve really been trying to focus on reading lately as I feel time slipping by more quickly. I don’t want to miss out on any great authors.

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  6. Jeeze Scott……………….is that the kind of stuff you read? Political exposes lost their interest a long time ago unless there’s some kind of real life mystery involved. I really think I’m too old to be hanging out here. 🙂 None of that stuff matters to me much anymore.

    Have you ever spent much time in Japan? Murakami is a Japanese novelist. I’ve always been fascinated with Japanese culture, especially historically, which the book isn’t, it’s much more modern. I know you lived in Hong Kong for some time but wondered if you also spent time in Japan.

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    • lms:

      Jeeze Scott……………….is that the kind of stuff you read?

      Sometimes, although it has been awhile since I read Hayek. The last book I read, over my vacation a few weeks ago, was Ubiquity, and I am currently reading Inferno. I think Max Hastings is really good.

      Have you ever spent much time in Japan? Murakami is a Japanese novelist. I’ve always been fascinated with Japanese culture, especially historically, which the book isn’t, it’s much more modern.

      I’ve spent a bit of time in Tokyo. I almost took a job there when I lived in HK, but my wife probably would have divorced me, and we ended up going to the UK instead. If you like reading about historical Japanese culture, then I highly recommend Gai Jin by James Clavelle. I’d also recommend Tai Pan, also by Clavelle, which is a novel set in the time of the establishment of Hong Kong as a British Colony. Fantastic book.

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  7. I still love the Colleen McCullough Masters of Rome Series.

    In honor of WW I anniversary, you might find this of interest.

    Dreadnought: Britain, Germany, and the Coming of the Great War
    by Robert K. Massie

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  8. Thanks for the reminder jnc, I’ve got the McCullough series on my list. Not sure about WWI though, I’ve read a lot about WWII, but I’ll look at that one.

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  9. His Rat King is still a great read.

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    • McWing;

      His Rat King is still a great read.

      Agreed. It’s apparently semi-true, based on his experiences as a POW in Changi. (BTW, it’s King Rat.)

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  10. Is it my imagination or does Dezzie simply have a blind spot about Libertarianism?

    It’s not your imagination. And the only thing that you’ll hear (read) her expound about even more is White Male Privilege. It’s gotten really old.

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  11. Anyone have any other suggestions?

    Along the lines of jnc’s suggestion, Barbara Tuchman’s The Guns of August is always worth reading. I’m about to start McCullough’s The October Horse–it took me forever to get through Caesar, for some reason.

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  12. I’ve read both those Clavelle novels………..right up my alley. I’ll check out “Ubiquity” and “Inferno”. My list is full again for awhile………..thanks all!

    Re Dezzie, I don’t spend a lot of time at the PL but I keep wondering if her ex boyfriend or current, on again off again, BF are both Libertarian.

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  13. That’s what she brought up again today about the ex. I refrain from commenting on that, because anything remotely honest would come off as misogynist and condescending.

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  14. One of the great things about Dreadnought isn’t just the pure history per se, but the narrative of the personal relationships of the principles, specifically Churchill and Fisher and also Kaiser Wilhelm and his cousins in the British royal family.

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  15. jnc

    because anything remotely honest would come off as misogynist and condescending.

    Then again, maybe her sentiment re Libertarians comes from the same place as the reason there are so many fewer female Libertarians than male. I would be speculating why that is so, and probably be called a sexist here…………..LOL

    btw, I’ll look at that “Dreadnought” book specifically because of the players……thanks

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  16. I don’t think you’ve ever invoked any relationship with an ex as a basis for your political beliefs. That strikes me as quite a shallow basis for such a thing.

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  17. I think HHS is ready to be trused with Single Payer.

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  18. jnc

    That strikes me as quite a shallow basis for such a thing.

    I agree and didn’t know she’d actually done that, I was just guessing………..simply based on a few comments of hers I’d read over the last year or so.

    My other point was simply that my speculations re fewer women libertarians might not be very well received here so in a way I was doing the same thing you were doing with Dezzie…………..keeping my mouth shut. 😉

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    • lms:

      My other point was simply that my speculations re fewer women libertarians might not be very well received here

      I’d be interested in your theory. I have my own.

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  19. Scott

    I’d be interested in your theory. I have my own.

    Hah, you go first.

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    • lms:

      Hah, you go first.

      OK. Libertarianism requires an ability to set aside personal feelings and analyze issues with a detached objectivity, and in my experience women are generally less able/willing to do that. I think the primary appeal of libertarianism is its internal consistency and logic, but women tend to value emotion over logic.

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  20. I think women have less confidence in their ability to thrive in a Libertarian environment. Not that they should necessarily, but their perception is such that they don’t necessarily trust themselves, or for that matter men, to experience or even take advantage of the so-called freedom touted by a Libertarian society.

    I read somewhere quite awhile ago that women aren’t as competitive and much less likely to pursue raises or professional advancement. I believe women aren’t convinced they would really survive the competitive environment as well. A lot of women, perhaps mistakenly, worry they and their children are only one paycheck, one illness, one injury or pregnancy away from living on the streets.

    I don’t think it has much to do with willingness to analyze issues with objectivity and logic.

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  21. A lot of women, perhaps mistakenly, worry they and their children are only one paycheck, one illness, one injury or pregnancy away from living on the streets.

    It’s remarkable that women (or men for that matter) actually think this. There are over 300 million people in this country and the number of people that actually do, or have ever lived on the street is infinitesimal. It’s really an interesting disconnect but a very powerful motivator.

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  22. Scott, I haven’t had the time yet to read those links but I think it is interesting that the authors are all women. I think we (as a group) are curious about Libertarianism and why so many of the men in our lives have those leanings. I could be wrong though, perhaps they’re all the rare breed of Libertarian women.

    Here’s a survey from last year you guys might be interested in re Libertarianism. It also includes a comparison to Tea Party Republicans and other voting blocks of the Republican Party. I don’t pretend to know how to determine the methodology or anything but the results are interesting.

    According to a newly developed Libertarian Orientation Scale, less than 1-in-10 (7%) Americans are consistent libertarians, and an additional 15% lean libertarian. At the other end of the spectrum, an equal number of Americans are consistent communalists (7%), and an additional 17% lean communalist. A majority (54%) of Americans have a mixed ideological profile, falling in between libertarian and communalist orientations.

    Compared to the general population, libertarians are significantly more likely to be non-Hispanic white, male, and young. Nearly all libertarians are non-Hispanic whites (94%), more than two-thirds (68%) are men, and more than 6-in-10 (62%) are under the age of 50.

    http://publicreligion.org/research/2013/10/2013-american-values-survey/

    Edit………..just saw that it was linked in that New Republic piece.

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  23. Scott, here’s another one written by someone called Libertarian Liz.

    I think her premise is pretty far out there though in the land of non-reality.

    If you are violated, threatened, or otherwise feeling as though your life is in danger, you have a right to protect yourself and your family. True risk because of freedom? Actually, it lowers your risk. Rights are a funny thing; if you respect your own rights, you are likely to respect the rights of others. There is a responsibility in rights, and when given that responsibility, you know the consequences are great if you violate the rights of another.

    http://libertarianliz.com/blog/women-and-libertarianism-why-arent-there-more-of-us/

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  24. From the Forbes piece,

    Libertarianism has a hard time reconciling most of women’s lived experiences with its core tenets.

    Exactly!

    And to Scott’s point…………..LOL, from J.B. Priestly

    It is the habit of men to be overconfident in their impartiality, to believe that they are god-like intellects, detached from desires and hopes and fears and disturbing memories, generalizing and delivering judgment in a serene mid-air.

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    • lms:

      It is the habit of men to be overconfident in their impartiality…

      I understand the appeal to you of the implicit critique, but the fundamental point is that women and men tend to approach things differently, with emotion playing a bigger role for women than for men.

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    • IF “liberty” were defined as the freedom for adults to do whatever they want that does not harm the life, freedom, or property of another person and that does not coerce behavior that harms the life, freedom, or property of another person we might have a starting point for discussion, Lulu. The first independent clause is, roughly speaking, social libertarianism [similar to our Bill of Rights] and the second, to me, covers economic libertarianism.

      The second clause would cover those who see taxation as an evil because it requires the coerced taking of property.

      Lulu, in your experience, do you think women accept social liberty as readily as men? I suspect it is close. My guess is that many fewer women are enraged by taxation, however. I suspect that many more women than men are supportive of public safety, sanitation, health, and education because the burden of each of those structures failing is disproportionately shouldered by women- or has been, in the past.

      For me the interesting questions are always about where the lines are drawn. Any political libertarian who is not an anarchist will draw lines that allow for some governmentand for some respect for some functions.

      This act of line drawing is an exercise within an exercise, and I do it all the time. I suspect we all do.

      That belies notions of doctrinal purity of course. One must weigh the value of each exception to either a libertarian or a “communitarian” [whatever that is – I imagine John Stuart Mill, myself] theory.

      JNC – what’s your take?

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      • Mark:

        My guess is that many fewer women are enraged by taxation, however.

        If true, I wonder if that is a function of the fact that many fewer women are primary income earners.

        … public safety, sanitation, health, and education…

        OK, but apart from that, what have the Romans ever done for us?

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  25. The beauty or Libertarianism is that there are consequences for failure.

    Also it’s a form of government that requires the least coercion.

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  26. Scott

    with emotion playing a bigger role for women than for men.

    I get that, and don’t disagree, but it is my belief that many Libertarian men place very little, if any, value on that perspective. There is a bit of a boy’s club mentality to the entire philosophy and very little respect for the perspective of women. Just my impression.

    And then of course Democrats insult women with campaigns like the “Julia” one. Women are generally stuck between a rock and a hard place between the parties, again, IMO.

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    • lms:

      There is a bit of a boy’s club mentality to the entire philosophy and very little respect for the perspective of women.

      It has nothing to do with a lack of “respect”. It is simply a strong commitment to something that you, and seemingly women more generally, are less committed to. If the libertarian worldview is best (and obviously libertarians think it is), it makes no sense to abandon it in order to attract a demographic that does not think it is the best worldview.

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  27. Mark

    because the burden of each of those structures failing is disproportionately shouldered by women- or has been, in the past.

    I think that is only slightly changing and very slowly. When McWing said there are, in actuality, very few Americans living on the street, it’s only because of the safety net we’ve set in motion in this country. There will always be winners and losers in society and I believe the majority of the losers in a Libertarian paradise would be women and children. Edited to add minorities.

    This act of line drawing is an exercise within an exercise, and I do it all the time. I suspect we all do.

    From the conversations I’ve had here I’d say Libertarians have a line drawn already in their minds and it is a very strict one with very little wavering…………..that would be the 7% of Libertarians.

    It’s actually one of the reasons I keep coming back to ATiM. I feel compelled to define the perspective of a liberal female who is not a socialist or strict “communitarian” (not sure exactly how that’s defined either but I think the true progressive would fit the bill).

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  28. “JNC – what’s your take?”

    I’m the classic minarchist.

    “In the strictest sense, it holds that states ought to exist (as opposed to anarchy), that their only legitimate function is the protection of individuals from aggression, theft, breach of contract, and fraud, and that the only legitimate governmental institutions are the military, police, and courts. In the broadest sense, it also includes fire departments, prisons, the executive, and legislatures as legitimate government functions. Such states are generally called night-watchman states.

    http://en.wikipedia.org/wiki/Minarchism

    I do however probably fall on the broad side of that definition. For example, I don’t think that private prisons are a good idea, because the prisoners themselves aren’t “customers” thus it’s not really conducive to privatization. The number of actual legitimate government functions are minimal, but they should be done directly by the government itself, not outsourced to a third party.

    With regards to women as libertarians, the ones I know tend to have followed what’s usually considered the classic male template of having been successful in business, but at the expense of having a family. There are two in particular I know, and both of them are at the Director/VP level in Fortune 500 companies, but never got married and never had kids. Their outlook on life is very similar to mine.

    Mark, you’ll get to meet one of them if we can coordinate getting together when I come to Austin in October.

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  29. Scott

    it makes no sense to abandon it in order to attract a demographic that does not think it is the best worldview.

    It makes no sense to me to be so rigid that you’ll never be able to enact important parts of the philosophy because 78% (7% Libertarians and 15% Leaners not included) of the population finds it too narrow, restrictive and un-supportive of any safety net whatsoever.

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    • lms:

      It makes no sense to me…

      I know. So would you characterize yourself as having “very little respect” for the perspective of libertarians? If not, I don’t know why you would go on to characterize libertarians, who think your view makes no sense, as showing “very little respect” for you view.

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  30. “There is a bit of a boy’s club mentality to the entire philosophy and very little respect for the perspective of women.”

    There’s definitely a view that having a family is a personal lifestyle choice and that the costs of such should be borne by the individuals directly involved instead of being socialized to others.

    I.e. There’s little libertarian sympathy for the argument that it’s unfair for women to have a salary gap due to leaving the work force or other life considerations due having children. As women are the only ones who can bear children, I suspect this is a factor in the lack of appeal of libertarianism to them.

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    • jnc:

      There’s definitely a view that having a family is a personal lifestyle choice and that the costs of such should be borne by the individuals directly involved instead of being socialized to others.

      Interestingly, our current system largely does the opposite. The costs of raising children are mostly borne by the parents, while the fruits of having raised a productive member of society are socialized via taxation and transfer payments to the elderly.

      People who don’t produce and raise children that will go on to contribute to SS, but are able to cash out of the SS Ponzi scheme are free riders.

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  31. I doubt most Libertarians are arguing for no safety net whatsoever.

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  32. “And then of course Democrats insult women with campaigns like the “Julia” one. ”

    I’m actually pleased you found it insulting as I did.

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  33. Brent, which aspects of a safety net would you support?

    Same question to the rest of you. One of the reasons I couldn’t vote for Johnson two years ago, even though I wasn’t excited about Obama again and couldn’t stand Romney, was because of his stand on our safety net. He was much too strict of a Libertarian for me to vote for and then if he compromises too much, you guys wouldn’t vote for him probably. See the conundrum.

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    • lms:

      Brent, which aspects of a safety net would you support? Same question to the rest of you.

      I am entirely with Brent. I do not support any fed involvement. The necessary compromises between philosophical purity and political reality should take place at more local levels. And as far as those compromises go, while I would support a safety net at some level, it would have to be a true safety net. A program into which virtually everyone falls, ie SS, is not a “safety net”. And it should only provide a bare minimum for survival. It should not seek to provide a “comfortable” existence. Preferably with a significant social stigma attached to using it.

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  34. Jnc, I said so at the time it came out.

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  35. But aren’t most strict adherents of a political philosophy a minority of any electorate?

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  36. jnc

    As women are the only ones who can bear children, I suspect this is a factor in the lack of appeal of libertarianism to them.

    In that case the debate is only a philosophical one and not a political one because the reality is that Libertarians will never be able to win a large scale election without the support of a majority of women.

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  37. I do not support any Federal safety net. States can and should do as their voters please within the confines of their constitutions.

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  38. Scott, I wouldn’t still be here if I didn’t have some respect for all of you Libertarians’ views. I’ve even agreed with you on a few issues. Unfortunately for all of y’all my view wins elections, conservative views win elections, but very few strict Libertarian opinions win elections. Personally, that would give me pause that perhaps my view isn’t realistic or sustainable.

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  39. If I had my druthers, I’d whack it all but that’s not realistic given the current state of affairs after government has supplanted previous private networks:

    Two actual policy approaches:

    1. Convert Social Security into an individual account system, convert Medicare, Medicaid, TriCare, and VA into individual vouchers and merge them into the PPACA exchange system while substantially scaling back the existing low income subsidies on the PPACA. SSDA would need to be reformed to crack down on fraud, and I’d roll food stamps into TANF.

    or

    2. Eliminate all entitlements across the board and replace with a guaranteed income that’s set at what’s needed to put an individual above the poverty line, but that doesn’t scale based on family size.

    And I don’t think there was anything in Johnson’s platform about actually getting rid of existing entitlements entirely, but his reform plan was pretty substantial.

    http://www.rawstory.com/rs/2012/08/29/5-questions-for-libertarian-presidential-candidate-gary-johnson-on-tax-and-entitlement-reform/

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  40. “The costs of raising children are mostly borne by the parents, while the fruits of having raised a productive member of society are socialized via taxation and transfer payments to the elderly. ”

    No, childless families subsidize those with children, but that doesn’t preclude the elderly from being moochers either.

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    • jnc:

      No, childless families subsidize those with children,

      That’s a bit of an oxymoron, “childless families”. But in any event, the tax code is too complex, convoluted and progressive to make the general claim. If we had a flat income tax with no deductions except for children, you might be able to make a sensible case. But as it is, I don’t think you can.

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      • jnc:

        No, childless families subsidize those with children,

        Also, of course, we have the problem of what government spends tax revenues on. Even if you and I were in the exact same circumstances except that I had children and you did not, and I therefore paid lower taxes than you because of an exemption, it is not necessarily the case that you are “subsidizing” me. If tax revenues are spent on transfer payments going to a third party rather than simply on public goods, then we are both subsidizing someone else, and the most you can claim is that you have to provide a greater subsidy than me.

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  41. ” Personally, that would give me pause that perhaps my view isn’t realistic or sustainable.”

    I don’t think any of us imagine a Libertarian party that rivals Republicans or Democrats, but I do think it is possible to pull the Republican party to a more Libertarian bent, particularly on social issues. I have no illusions that the Democrats could be pulled to a more Libertarian bent.

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  42. Thanks for all the info guys. I’m wondering about unemployment insurance now and employer tax credit for medical coverage. I consider one a safety net (UI) at least and the other a problem that led to such a large discrepancy in health care affordability.

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    • lms:

      I consider…the other a problem that led to such a large discrepancy in health care affordability.

      Can you explain why you think this?

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  43. “That’s a bit of an oxymoron, “childless families””

    True, childless individuals works better, and is more accurate.

    “But in any event, the tax code is too complex, convoluted and progressive to make the general claim.”

    Not once you factor in state and local taxes, especially for public education.

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    • jnc:

      Not once you factor in state and local taxes, especially for public education.

      Taken in isolation, and all else being equal, public schools can certainly be seen as being subsidized by those without children. But reality intrudes on the hypothetical. Given that most schools are funded by local property taxes and state income taxes, wealth is a far better indicator of who is doing the subsidizing than is the absence of children.

      Suppose the marginal cost of adding a pupil to a public school is $7k/year. If Bob, as a single person with no children, averages over the course of 12 years paying $5k/year in property taxes and $10k/year in state income taxes, while Jim, as the father of 3, averages $15k per year in property taxes and $25k per year in state income taxes, how can it be sensibly suggested that Bob, as a single person with no children, is subsidizing Jim? Suppose even further that Jim sends his kids to a private school. That makes the subsidy claim even more outrageous.

      While I almost certainly share your view of public education, it remains the case that our tax structure, both federal and local in most states, is simply too convoluted and progressive to make the general claim that the childless subsidize those with children.

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  44. I don’t consider the employer tax credit for health insurance a safety net program. It’s just a subsidy.

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  45. “Even if you and I were in the exact same circumstances except that I had children and you did not, and I therefore paid lower taxes than you because of an exemption, it is not necessarily the case that you are “subsidizing” me.”

    Turn in your libertarian card right now. That’s exactly the case and you cite that argument all the time in opposition to progressive taxation.

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    • jnc:

      That’s exactly the case…

      No it isn’t, and I have already explained my reasoning for why. If you think my reasoning is wrong, feel free to explain how so.

      …and you cite that argument all the time in opposition to progressive taxation.

      I don’t think so. My objection to progressive taxation is that it allows people to vote for government spending without sharing in the cost themselves. Certainly if that spending is on wealth transfer payments, then it amounts to a subsidy to someone. But progressive taxation would be objectionable to me even if all of the spending was on classic public goods and none at all on explicit wealth transfers (ie subsidies).

      I both understand and share your sense of injustice over the tax disadvantage that childless people are placed in. But in the context of a tax system in which a person with children could easily end up paying multiples more in taxes than a childless person, it is absurd to make the generalization that the childless “subsidize” those with children. BTW, I made a similar point to you before with regard to a claim that you were “subsidizing” Warren Buffet’s ego (no hero of mine, as you know) because of some tax dodge that he was able to engage in. It just makes no sense to claim that person A is “subsidizing” person B through taxes when B actually pays multiples more in taxes than A, even if the taxes owed by the “subsidizer” are unfair in some way that is not true for the “subsidized”.

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  46. jnc

    I don’t consider the employer tax credit for health insurance a safety net program.

    I don’t either but that didn’t answer my question…………..no worries. Our power seems to be going on and off today as they’re making some adjustment to our solar panels and electric panel……………….sheesh…………and I hate ATiM on my iPhone.

    See y’all later.

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  47. I’m not claiming that it’s the only subsidy, or even the dominant subsidy, but it’s true nonetheless that single people with no kids subsidize those who have them.

    It could well be swamped by other factors, but everything else held equal (the standard in economics) that’s what’s going on.

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    • jnc:

      I just don’t think framing it as a “subsidy” of those with children is at all accurate. The underlying premise of the claim is that the failure to take money from someone is the equivalent of giving that person money, and I reject that premise entirely.

      Suppose 3 people, A B and C, go out to dinner together, they each eat the same thing, and when the bill comes it is split equally 3 ways (ie all else is equal). But A only has enough money to pay half his share. B suggests that B and C split the half of A’s share that remains unpaid, and C rejects the proposal. So B ends up paying both his share and half of A’s share. According to your logic, B is subsidizing C. I think such a framing is absurd. Clearly B is subsidizing someone, but it is A, not C, who is getting subsidized.

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  48. A has kids
    B doesn’t.

    A gets a $x deduction on his taxes due to kids
    B doesn’t.

    That’s a subsidy for A.

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    • JNC – apples to apples, Medicare is largely prepaid and Medicaid is totally currently deficit funded. Although I realize the figment that is govt acctg, Medicare is collected out of an earmarked tax paid for fifty years before it is drawn.

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    • jnc:

      A has kids
      B doesn’t.

      A gets a $x deduction on his taxes due to kids
      B doesn’t.

      That’s a subsidy for A.

      Again, only if one equates “not paying taxes” with “receiving money”. Which I do not. I am surprised that you do. I’ve provided you with 2 different examples/analogs to help substantiate my thinking. It is unfortunate that you won’t address them.

      Anyway, I will grant you this…If:

      1) All people pay the exact same $ amount of taxes (note, not the same rate, but the same flat amount)

      2) All benefits towards which the taxes are used are public goods (ie no wealth transfer payments)

      3) A tax exemption/credit is introduced only for those people with children

      Then, it is fair to say that the childless are subsidizing those with children.

      But in a system in which someone with a child can pay literally 10 times more in taxes than someone without children despite the child tax exemption, while tax revenues are being used to fund individual, non-public goods, then the blanket claim that the childless are “subsidizing” those with children is totally unjustifiable, and almost certainly untrue in many specific instances.

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  49. @jnc4p: “I’m not claiming that it’s the only subsidy, or even the dominant subsidy, but it’s true nonetheless that single people with no kids subsidize those who have them.”

    While true, it doesn’t subsidize them very much. Kids are insanely expensive purchases where the ultimate price tag is hidden until well after you’re stuck in a legally binding contract to maintain the dang things. 😉

    The subsidy, alas, is a drop in the bucket. I’d be happy to kick the deduction for having children for a nice fat cut in my overall income tax rate, BTW.

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  50. Also, those with children who attend private schools are, to some extent, subsidizing those with children who attend public schools.

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  51. Though one can reduce the subsidy somewhat if they choose to live with their parents. In most places, it’s property taxes that fund public education (plus, of course, a lot of federal dollars, these days, though those are generally targeted at specific schools in areas where poverty meets a certain level).

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  52. @lmsinca: “Brent, which aspects of a safety net would you support?
    Same question to the rest of you. One of the reasons I couldn’t vote for Johnson two years ago, even though I wasn’t excited about Obama again and couldn’t stand Romney, was because of his stand on our safety net.”

    A) Johnson would have been an awesome president. That’s why it was never going to happen. His ability to drawn in the safety net would have been minimal. But he was never going to win, anyway, we’re a two party country at this point.

    B) I would support as robust and complete a safety net as we can realistically afford at any given time. This might be luxurious accommodations and food and clothing, etc., when such things can be spit out by nano machines for prices that will be the equivalent of fractions of fractions of pennies. Right now, that ain’t the case.

    I would put it at a fixed percentage of deficit spending, something less than whatever it is now (preferably much less) and go from there. No baseline budgeting, either.

    Programs like SS would have to be actual programs with a managed budget and discrete funds.

    No new entitlements even considered until the national debt was below a certain level. The same could be applied to defense spending.

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  53. “markinaustin, on August 27, 2014 at 3:08 pm said:

    JNC – apples to apples, Medicare is largely prepaid and Medicaid is totally currently deficit funded. Although I realize the figment that is govt acctg, Medicare is collected out of an earmarked tax paid for fifty years before it is drawn.”

    No, Medicare is not largely prepaid.

    “Our recent analyses of lifetime contributions and expected benefits in Medicare show that, over a wide range of scenarios, beneficiaries retiring at age 65 in 2011 can expect to receive dramatically more in total benefits than they have paid in dedicated taxes. For example, single beneficiaries and dual-earner couples who had earned the average wage throughout their working careers can expect to receive about $3 in Medicare benefits for every $1 paid in Medicare payroll taxes. If only one member of the couple had worked, we calculate a six-fold difference between contributions and benefits since both spouses are eligible for Medicare yet only one has paid taxes. Higher earning workers will have paid somewhat higher Medicare taxes, but their expected lifetime benefits still far outpace their lifetime contributions.”

    http://www.urban.org/publications/1001553.html

    If total Medicare spending per beneficiary had some sort of lifetime cap based on what was paid in, then you would have a case.

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    • Again, JNC, apples-to-apples, the Medicare Trust Fund remains in positive territory. It could go negative in 8 years or so if current trends continue. Thus it has not yet been a drain on general revenues. I realize I am according weight here to government accounting, but it does mean something. Additionally, Medicare recipients continue to pay $105/mo to $320/mo; means tested. Additionally, Medicare has a 20% copay unless one buys a Plus or Advantage policy like I have with Scott & White. IOW, it is not at all like Medicaid. We paid and we keep paying. If your point is that at sometime general revenues will be tapped, mine is that Medicaid taps general revenues and deficit financing all the time. It remains possible to put off the GR contrib to Medicare with higher taxes or lower payouts, it does not seem feasible to ever get to that point with Medicaid and no one except Cef and his 95% income tax bracket thinks it is.

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  54. “Which I do not. I am surprised that you do.”

    I do when it’s the explicitly stated goal of the policy to encourage one type of social behavior over the other.

    And again if there are two people in the same bracket (i.e. all other things being equal) then it’s perfectly valid..

    A has kids and pays less taxes. B doesn’t and pays more.

    B is subsidizing A.

    Same thing when renters subsidize those who have mortgage deductions in the name of encouraging home ownership.

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    • jnc:

      Nope

      Nope to what?

      two people in the same bracket (i.e. all other things being equal).

      Nope. Two people in the same bracket but with different incomes do not necessarily pay an equal amount of taxes. All things, therefore, are not equal.

      And still you are totally ignoring the uses to which taxes are being put. Just because you are paying more than someone else doesn’t mean the extra amount you pay is going to that someone else.

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  55. Mark, do you dispute the Urban Institute’s estimate that on average Medicare beneficiaries will receive back three times more in benefits than they paid into the system?

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    • Mark, do you dispute

      1] IDK – for example I have no idea – not having read it – whether it is based on exemplars or averages. It sounds as if it is based on exemplars, in which case it is misleading in the extreme. I have no idea from what you quoted if the monthly premiums I continue to pay after age 65, or my actual taxation after age 65, is included.

      2] It doesn’t speak to the history of the program or its near future, according to the Trust Fund numbers.

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  56. Sorry, I reedited the post to make my point clearer.

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  57. “And still you are totally ignoring the uses to which taxes are being put. Just because you are paying more than someone else doesn’t mean the extra amount you pay is going to that someone else.”

    But it does mean that they are paying less at your expense.

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    • jnc:

      But it does mean that they are paying less at your expense.

      Definitely not. Your premise is that all expenses would otherwise be equally shared by all, but this is a premise that is explicitly rejected not only by our current tax system, but any system other than a straight per capita tax.

      And notably, it makes no sense under any expenditure system that includes individual rather than strictly public goods.

      Consider again persons A, B and C.

      A is a lawyer with 1 child who earns $100k per year.

      B is a banker with no children who earns $100k per year.

      C is a waiter with 1 child who earns $15k per year.

      With the exception of the children, both A and B are equally situated, and both of them pay the same exact tax rate of 15%, or $15k, each year. C pays no income tax

      Then the government decides to implement a new welfare policy, namely, it wants to provide income assistance of $1k to anyone who make less than $20k per year. In order to finance this, the government raises the tax rate on all incomes over $50k by 1%, but in order to protect families from rising taxes, it also puts in place a $1k child tax credit for any family making more than $50k. So what happens the following year?

      A still pays $15k in taxes, ie no change whatsoever in his circumstances.

      B pays $16k in taxes, so is now paying $1k more in taxes than he was previously.

      C still pays no taxes, but also receives a $1k check from the treasury.

      According to you, B is subsidizing A, because apart from the child tax credit, all other things remain equal, and B pays more tax than A. But in my view, A’s position is entirely unchanged, ie he is not getting a single thing more than he was getting, and he is paying no less for it, and since he wasn’t getting a subsidy before, he is still not getting a subsidy. B, who’s position has changed, is actually subsidizing C, who’s position has also changed by, not coincidentally, the exact mirror amount of the change in B’s position. In fact, I would say that both A and B are subsidizing C, albeit by different amounts, since C not only receives the $1k check, but he also gets to enjoy all the public goods that the government provides without pay anything at all for them.

      While it is certainly fair to say that B is being treated unjustly and is being disadvantaged by the new tax laws, I don’t see how it makes any sense at all to claim that B is subsidizing A simply because B pays more than A, when it is actually C who is receiving the benefit of the additional amount.

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  58. It seems to me that in the case of childless couples or individuals it’s still a transfer of wealth no matter how you look at it. Our tax system is so full of tax advantages for select individuals, corporations, couples, home owners, employers, etc etc I don’t really know how it would be possible to sort it all out without starting over. When a country has one of the highest corporate tax rates in the civilized world with a corporate effective tax rate of one of the lowest, you know something’s wrong in Denmark. Everyone in Congress knows it too but there’s no will to change it.

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    • lms:

      When a country has one of the highest corporate tax rates in the civilized world with a corporate effective tax rate of one of the lowest you know something’s wrong in Denmark

      If it is true that the US has one of the lowest effective tax rates in the world, why would US corporations being doing these inversions? So that they can pay higher effective tax rates overseas?

      Like

  59. Scott

    lms:

    “I consider…the other a problem that led to such a large discrepancy in health care affordability.”

    Can you explain why you think this?

    It’s one of the things that led to small group vs. large group differences and priced the individual out of the market. It goes back to the hidden costs of health care you guys are always touting as the problem with the insurance industry. I don’t think it’s so much that the insurance/government model are either necessarily bad if set up correctly with regulations that work, but that the rise in cost is from over utilization and less personal cost sharing. Those Cadillac plans that Brent had and maybe others of you still have, that you don’t actually pay for, and are subsidized by the government via your employer, definitely added to the rising costs of health care…… .I believe.

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    • lms:

      It’s one of the things that led to small group vs. large group differences and priced the individual out of the market.

      I’m still not sure I understand. Can you explain how the employer tax credit produced this result?

      Like

  60. If the Trust Fund is liquid cash instead of Treasury Notes then Mark is right. If there are T-Notes similar to the SS ones, and the Fed Govt’s running a deficit, how can it not be coming out of general revenue?

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  61. Scott

    So that they can pay higher effective tax rates overseas?

    Taxes are probably a wash but they’re definitely saving money on tax preparation….LOL. Do you think my statement is false? I’ve read it in several places. I’ll try to look the sources up again if I have to. Maybe you could explain why the 12.6% effective rate I’ve read is untrue.

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    • lms:

      Maybe you could explain why the 12.6% effective rate I’ve read is untrue.

      I imagine that, given the complex tax code that we have, the effective rate varies widely from one corporation to another. Also, as suggested in my previous, intuitively it just doesn’t make any sense to me that corporations would be doing these tax inversions if it meant that their effective tax rate would increase.

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  62. Scott

    Can you explain how the employer tax credit produced this result?

    It skewed the cost of insurance coverage by expanding the pool of large group vs small group vs individual, and so the buying power of the individual became cost prohibitive without the benefit of tax credits or subsidies.

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  63. So then, perhaps the companies paying above the average (for whatever reason) are the ones doing the inversions?

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    • lms:

      So then, perhaps the companies paying above the average (for whatever reason) are the ones doing the inversions?

      Possibly. BTW, I just read an article that pointed out that the 12.6% number excludes foreign, state, and local taxes paid. It also is based on aggregated data, ie total sum of all corporate profits vs total sum of all corporate taxes paid, but it excludes firms that didn’t make a profit. Including firms that lost money would reduce the denominator and hence increase the effective rate.

      Like

  64. Scott

    Including firms that lost money would reduce the denominator and hence increase the effective rate.

    Perhaps I’m mathematically challenged (not out of the realm of possibilities) but firms that don’t make a profit would be paying an even lower effective rate, correct? How would that then raise the effective rate of profitable firms if the losers were included in the average?

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    • lms:

      Let’s take 10 firms that combined made a total of $100 million dollars, and paid a combined $20 million in taxes. The effective tax rate, then, would be 20/100, or 20%. Now suppose we add an eleventh firm that lost $20 million, and paid 0 taxes. Now the combined profit is only $80 million, with combined taxes unchanged, for an effective tax rate of 20/80, or 25%.

      Anyway, have a read of this for an analysis of the study you are talking about. In addition to excluding foreign and local taxes paid, it also used a single year, which happened to be an outlier due to recession, for its data. When accounting for these and some other problems, the rate goes up to the mid 20% area.

      http://taxprof.typepad.com/files/140tn0197.pdf

      Like

  65. Uhhhh Scott,

    Now suppose we add an eleventh firm that lost $20 million, and paid 0 taxes. Now the combined profit is only $80 million, with combined taxes unchanged, for an effective tax rate of 20/80, or 25%.

    I think you’re cooking the books here. We’re looking, I thought, at average effective rates paid by profitable companies. I don’t see any reason why a profitable corporation’s effective tax rate, one they actually paid, would go up because some other corporation, one they have no connection with, paid ZERO in corp tax because said corp took a nose dive. Seriously? That would be like saying if I paid an individual rate of 20% and my neighbor paid 0% then my effective tax rate is actually what…….30% or something?

    Also, I’ll read the article you linked later but we’re talking Federal tax rates, not state or local, and I don’t think it’s fair to blame the Federal government for anything other than Federal tax rates or the IRS for loopholes that force companies to find them and pay to have them applied. Whatever state rates are is exactly what you guys want the states to do, and then they can sink or swim on their own based on those rates, and companies choosing to leave the state because of them. Also, what year did they use, and did the profits actually go up or down on average?

    And btw, talking economics with you or Brent is like talking legal crap (sorry guys) with Mark or QB, I really shouldn’t do it as I’m neither an economist or a lawyer.

    Like

    • lms:

      I think you’re cooking the books here. We’re looking, I thought, at average effective rates paid by profitable companies.

      I’m not cooking anything. I am just explaining how your source came up with its number. If it doesn’t seem sensible, blame them, not me.

      As I said, it’s average was derived not by calculating the effective tax rate paid by each corporation, and then averaging them all together, but rather by aggregating all of the taxes and income together, ie totaling up all of the taxes paid and dividing that number by the sum total of all income reported, excluding any negative income reported.

      Also, I’ll read the article you linked later but we’re talking Federal tax rates, not state or local, and I don’t think it’s fair to blame the Federal government for anything other than Federal tax rates or the IRS for loopholes that force companies to find them and pay to have them applied.

      There is no “blaming” going on. We are simply trying to answer a question: how much does a company incorporated in the US pay in income taxes relative to what it would pay if it was incorporated elsewhere. To answer that question sensibly, you cannot simply ignore all taxes except federal taxes.

      Also, what year did they use, and did the profits actually go up or down on average?

      They used 2010, which was an atypical year to use because profits for that year had largely bounced back to their pre-recession levels, but many corps had reported huge losses in both 2008 and 2009 that they were able to carry forward and apply against their taxable income in 2010. As a result of this ability to carry forward previous losses to offset current profits, taxes paid in 2010 were unusually low relative to the reported profit levels. It would have made more sense to look at several years worth of data.

      For example, suppose the corporate tax rate is 25%. In 2008 a given corp makes $20 million in profit, and pays $5 million in taxes. Then in 2009 it has a horrible year and loses $20 million and therefore pays $0 taxes. Finally, in 2010 it makes $20 million. But by applying it’s carried forward losses from 2009 to it’s 2010 income, it would have taxable income of $0, and so therefore would pay $0 in taxes in 2010.

      Now, if one just looked at 2010 data, it appears that the corp has a 0% effective tax rate on $20 million of profit. But if one had looked at all three years of data, it would show that over the course of 3 years the company had made a total of $20 million in profit, and had paid a total of $5 million in taxes, for an effective rate of 25%.

      Always remember, lms: there are lies, there are damned lies, and then there are statistics.

      Like

  66. Thanks for all the clarification Scott. I don’t have time to respond more this morning…..another busy day.

    Statistics……………….blech.

    Like

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