A Taxing New Year

Another new year, and I fear it may be quite taxing.

Our nation started the year by temporarily avoiding the fiscal cliff, but we can expect a year of constant arguments over the fisc. We will become a nation of cliff dwellers. Those who hope for something else don’t understand how politics works.

The big change this year is higher taxes on “the rich”. It is almost always true that when “the rich” are taxed more, everyone else suffers. Economists can explain why. Think of it as trickle down austerity. Even the designation of “the rich” is misleading: our new higher taxes reach much farther down the income scale than is apparent. To see why, search for “PEP” and “Pease”. These back door tax increases will probably snag the unwary. Numerous other changes, often overlooked in the popular press, will ensure that most everyone feels some pain.

No one likes taxes, but lots of economists are especially concerned these days. Why? Because they know that if too much is taken by government, society suffers a decline in relative standard of living. They don’t know exactly where that threshold is, but there is troubling evidence that the US has reached or even breached that level. While much of the federal tax increase has been avoided, we still have relentless tax increases at the state level, the world’s highest corporate tax (which is built into most everything you buy), and the national debt which, to economists, is simply deferred taxes and interest. Taxes are a very big factor in determining everyone’s standard of living and the news isn’t good.

Of course, the impact of taxes could be totally eclipsed by stronger forces in the economy. No one really knows the direction our economy will take. But higher taxes have historically been bad news and too many of us are deluded in believing that “someone else” pays. For better or worse, we’re all going to take the hit. We’ll also see some benefits from government spending – the question is, as always, are the benefits worth the cost?

Tax

Tax (Photo credit: 401(K) 2013)

 

The Public Has Spoken – Sort Of

Once you understand public choice theory, watching politics unfold becomes less of a frustration and more a source of amusement.

I just heard President Obama lay out his near term agenda. He was elected by a decent majority and will fight for the issues for which he campaigned. The people have spoken, and the people want a Democratic agenda implemented.

But the House of Representatives was also just elected. It is firmly Republican. The people have spoken, and the people want a Republican agenda implemented.

Same voters. Two conflicting agendas.

Some pundits say that voters want compromise. I don’t understand how you compromise between raising taxes and lowering taxes, for example.

I can only conclude that what voters actually favor is gridlock. This restrains both Democrats and Republicans and preserves the status quo. The last several presidents, when given a compliant Congress, have moved the country in unhappy directions. Gridlock forces politicians to take a “timeout” and allows only actions which are broadly acceptable to voters.

voting day in a small town

voting day in a small town (Photo credit: Muffet)

Don’t expect a lot to happen in a gridlocked political system – the public has spoken and inaction seems to be our preference as a nation.

What I Learned Last Week

US FTAs

US FTAs (Photo credit: Wikipedia)

Tsunamis can occur in lakes.

Within 12 -24 months of retiring, 75% of NFL players will be alcohol or drug addicted; divorced; or bankrupt.

The Federal government takes in about $2 trillion a year, spends $3 trillion and is $16 trillion in debt.

The U.S. has 6 major shipyards. China has over 100.

The Pilgrims originally proposed settling in Manhattan, but were denied permission by the Dutch.

More people die world-wide from chronic hunger than malaria, tuberculosis, and AIDs combined.

The US government mandates that we convert 40% of our corn into ethanol.

Since 9/11, more Americans were crushed by falling furniture or televisions than were killed in terrorist attacks.

In the last 6 years, Canada has negotiated 6 free trade agreements. Canada 6, USA 0.

What I Learned Last Week

Cuba landscape

Cuba landscape (Photo credit: RHTRAVELER)

China’s labor costs are now as high as Mexico’s.

U.S. birth rates are the lowest in history and still declining.

The U.S. is ranked 42nd among nations in life expectancy. But if you factor out murders and auto accidents, we are ranked #1!

Japan is about to replace China as the U.S.’s largest creditor.

Marines still use bayonets.

The government did not save GM or Chrysler from bankruptcy – both went bankrupt, but with a rare 363(b) bankruptcy rather than a standard bankruptcy.

It wasn’t until 1971 that medical researchers began to understand how aspirin works.

40% of the EU budget is spent on the common agricultural policy.

The average income in Cuba is $20/month.

A Tangled Solar Web

So, our government just placed a tariff on low cost Chinese solar panels, making them not so low cost. I thought our energy policy was, in part, to encourage the use of alternative energy sources, particularly wind and solar. Government has certainly spent enough money funding alt.energy projects that experienced technology developers found too impractical. Adding tariffs/taxes to raise the cost of solar, making it less cost effective, seems at odds with our policy goals. Right wing partisans might think that there is some deeper sinister plot at work. Perhaps there is, but our government seems to be so big and complex that the right hand destroys what the left hand creates. Ineptitude and inefficiency may be baked into the cake. Would we be farther down the solar path if government had just done nothing?

English: Solar panel installation at an inform...

English: Solar panel installation at an information center adjacent to Ögii Lake (Photo credit: Wikipedia)

Things I Learned Last Week

Thomas Alva Edison

Thomas Alva Edison (Photo credit: Wikipedia)

U.S. businesses need to hire 120,000 new Computer Science graduates this year. U.S. colleges and Universities will produce 40,000 Computer Science graduates.

The State Department still flies DC-3s!

Minnesota is the only state to make free online education illegal. A fix is in the works.

The Big Three auto makers need 40 labor hours to build a car. Toyota and Honda need 30.

Two thirds of community college students never finish.

Thomas Edison, light bulb inventor, was afraid of the dark.

During your lifetime, you’ll eat about 60,000 pounds of food. That’s the weight of about 6 elephants.

One in every 4 Americans has appeared on television.

The average American will eat about 11.9 pounds of cereal per year.

Over 1,000 birds a year die from smashing into windows. I’ve taken out three this year!

Stupid Politicians May Be Smart

Disturbed by political distortions (which some would call lying), some earnest commentators make some wonkish proposals. I haven’t reviewed them, but I can almost guarantee that they are DOA. Yes, yes – politicians do some stupid things and stretch the truth like Silly Putty. You might want to read Why Politicians Lie. But more fundamentally, all you need to know is that politicians lie and do other stupid things because such activities win elections. Are voters really that stupid? Yes and no. Modern behavioral psychology explains a lot: most voters are simply neither terribly engaged nor well informed because that would be an inefficient use of their mental energy – they have other things, like families and jobs, to worry about. Politics and policy only gets whatever mental cycles are left over after higher priority needs are serviced. Thus, for politicians, a winning strategy is to portray a simple message which is sympathetic and easy to digest. It’s hard to see democracy working any other way – and it’s hard to see a better system than democracy.

English: Library of Congress summary: "Ca...

English: Library of Congress summary: “Caricature showing politicians and people representing different professions revolving around head of Richard “Boss” Croker as the Sun.” (Photo credit: Wikipedia)

I write this not to express cynicism. Instead, I find it helpful to remember that whenever a see some politician as stupid and venal, it’s just the way it has to be. Lighten up! This ought not to discourage us from thinking about issues and policy – instead, we should manage our expectations and focus where we can make a difference, not where we can’t.

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