"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Monday, February 20, 2017


4chan: The Skeleton Key to the Rise of Trump

It was still a group of hikikomori — a group of primarily young males who spent a lot of the time at the computer, so much so they had retreated into virtual worlds of games, T.V., and now the networks of the internet. This was where most or all of their interaction, social or otherwise took place. The real world, by contrast, above their mothers’ basements, was a place they did not succeed, perhaps a place they did not fundamentally understand.

Sunday, February 19, 2017


The lessons of 1937 by Christine Romer

Krugman 38 depression, Bernstein dynamic scoring

New Deal economics by Krugman

NOVEMBER 8, 2008

INSERT DESCRIPTIONLimited fiscal force

Now, you might say that the incomplete recovery shows that “pump-priming”, Keynesian fiscal policy doesn’t work. Except that the New Deal didn’t pursue Keynesian policies. Properly measured, that is, by using the cyclically adjusted deficit, fiscal policy was only modestly expansionary, at least compared with the depth of the slump. Here’s the Cary Brown estimates, from Brad DeLong:
Net stimulus of around 3 percent of GDP — not much, when you’ve got a 42 percent output gap. FDR might have been more of a Keynesian if Keynesian economics had existed — The General Theory wasn’t published until 1936. Note in particular that in 1937-38 FDR was persuaded to do the “responsible” thing and cut back — and that’s what led to the bad year in 1938, which to the WSJ crowd defines the New Deal.
If only we could apply dynamic scoring to the rest of life by Jared Bernstein

Baker on taxes, Reich on Republican plan, Weregild, Corey Robin

A Progressive Way to End Corporate Taxes by Dean Baker

Republican tax sham by Robert Reich

It’s time to start thinking about a realignment: 2 things for the left to do by Corey Robin

Thursday, February 16, 2017


They say don't feed trolls so I guess I shouldn't feed you and your constant need for attention.

Sunday, February 12, 2017

Baker on Tax reform, Fernholz on DBCFT

Neil Irwin Warns of Financial Crisis from Corporate Tax Reform by Dean Baker

This is the Republican plot to kill the US corporate income tax as we know it by Tim Fernholz
Yet border adjustment—and the consumption tax behind it—deserves consideration because it is what Trump might propose if he were interested in crafting policy not with the aim of offending trade partners, liberals, and the Republican establishment, but rather with the goal of bringing investment back to the US while still conceding the reality of a globalized economy. It also would fit with the world view of his trade advisor Peter Navarro, who is eager to tear down the global supply chains that undergird the success of US multinationals today. And, together with the other big changes under consideration in Congress, it might actually shift more investment toward the US without the negative consequences of punitive tariffs or the ad hoc cronyism of Trump’s twitter bullying.

Atrios, DBCFT, Buttigieg

Your Moment Of Zen

Liberals Can’t Wait for Republicans to Adopt the Border-Adjusted Tax by VERONIQUE DE RUGY

Deluded Republicans are accidentally pushing for progressive corporation tax reform by Ben Chu

Everything You Ever Wanted to Know about Border-Adjustable Taxation, but Were Afraid (or too Bored) to Ask by Dan Mitchell

Trump Calls House GOP Tax Plan ‘Too Complicated.’ He May Be Right. by Dan Mitchell

Indiana Mayor Running for D.N.C. Chairman

Joseph A. Buttigieg, professor at Notre Dame.

"He is also the editor and translator of the multi-volume complete critical edition of Antonio Gramsci's Prison Notebooks, a project that has been supported by a major grant from the National Endowment for the Humanities. Several of his articles on Gramsci have been translated into Italian, German, Spanish, Portuguese, and Japanese. He was a founding member of the International Gramsci Society of which he is president. The Italian Minister of Culture appointed him to a commission of experts to oversee the preparation of the "edizione nazionale" of Gramsci's writings. Buttigieg serves on the editorial and advisory boards of various journals, and he is a member of the editorial collective of boundary 2."

Tuesday, February 07, 2017

Setser on Germany

Brad Setser:
I suspect the politics around trade would be a bit different in the U.S. if the goods-exporting sector had grown in parallel with imports. 
That is one key difference between the U.S. and Germany. Manufacturing jobs fell during reunification—and Germany went through a difficult adjustment in the early 2000s. But over the last ten years the number of jobs in Germany’s export sector grew, keeping the number of people employed in manufacturing roughly constant over the last ten years even with rising productivity. Part of the “trade” adjustment was a shift from import-competing to exporting sectors, not just a shift out of the goods producing tradables sector. Of course, not everyone can run a German sized surplus in manufactures—but it seems likely the low U.S. share of manufacturing employment (relative to Germany and Japan) is in part a function of the size and persistence of the U.S. trade deficit in manufactures. (It is also in part a function of the fact that the U.S. no longer needs to trade manufactures for imported energy on any significant scale; the U.S. has more jobs in oil and gas production, for example, than Germany or Japan).

demagogues and stagnation

We’re re-learning today what we should have learned in the 30s…economic stagnation breeds reaction and intolerance
Chris Dillow

how Vancouver got its housing bubble under control

How Vancouver got its housing bubble under control: a lesson for cities like London and San Francisco

Saturday, February 04, 2017

General Strike

Whose Strike? by Alex Gourevitch

Trump voters

The Fight in the Borderlands by Josh Marshall
We hear people constantly saying 'Nothing will change his supporters' minds. They're with him no matter what.' First of all this is enervating defeatism which is demoralizing and loserish. But it also misses the point. It is factually wrong. For the supporters those people have in mind, they're right. They're true believers, authoritarians who are energized by Trump's destructive behavior. But there are not that many of those people. A big chunk of Trump's voters voted for him in spite of their dislike. Those people can be carved away. But Democrats will regain power by winning it in what amount to our 21st century internal American borderlands, not in the big cities or rural areas mainly but in between. So what's happening now to lay that groundwork for 2018?

Friday, February 03, 2017

how to disagree

How to Disagree by Barry Ritholtz

Monbiot on neoliberalism

Neoliberalism – the ideology at the root of all our problems by George Monbiot

When, in 1947, Hayek founded the first organisation that would spread the doctrine of neoliberalism – the Mont Pelerin Society – it was supported financially by millionaires and their foundations. 
With their help, he began to create what Daniel Stedman Jones describes inMasters of the Universe as “a kind of neoliberal international”: a transatlantic network of academics, businessmen, journalists and activists. The movement’s rich backers funded a series of thinktanks which would refine and promote the ideology. Among them were the American Enterprise Institute, the Heritage Foundation, the Cato Institute, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. They also financed academic positions and departments, particularly at the universities of Chicago and Virginia.

Thursday, February 02, 2017



The Auerbach Tax and Automobile Multinationals

Bloomberg reports:
A proposed tax on imports that President Donald Trump is said to be warming to could upend the competitive landscape for carmakers, boosting Ford Motor Co. while hindering manufacturers that rely more on overseas factories including Toyota Motor Corp. House Republican leaders have proposed a so-called border-adjusted tax, which would place a levy on vehicles imported into the U.S. and fully exempt those exported. Though Trump initially deemed the idea too complicated, White House Press Secretary Sean Spicer last week said it was under consideration and could help pay for a wall along the Mexico border. The overhaul to the U.S. tax system could hand an advantage to Ford, Honda Motor Co. and General Motors Co., which rely the least on imported vehicles among major automakers. The shake-up would also undermine Toyota
Is Bloomberg assuming a fixed yen/$ exchange rate so these border adjustments boost exports and discourage imports? Greg Mankiw and Paul Krugman take a very different view. Greg breaks down this Destination Based Cash Flow tax as a three-fer:
Impose a retail sales tax on consumer goods and services, both domestic and imported; Use some of the proceeds from the tax to repeal the corporate income tax.; and Use the rest of the proceeds from the tax to significantly cut the payroll tax.
Greg is assuming the rise in sales taxes is greater than the cut in income taxes, which is not clear. But let’s hear from Paul:
Greg and I disagree on whether replacing profits taxes with sales taxes is a good idea, but agree that all of this has nothing to do with trade and international competition – because it doesn’t. I suspect, however, that Greg is being naïve here in assuming that we’re just seeing confusion because border tax adjustment sounds as if it must involve competitive games. There’s some of that, for sure, but one reason the competitiveness thing won’t go away is that it’s an essential part of the political pitch. “Let’s eliminate taxes on profits and tax consumers instead” is a hard sell, even if you want to claim that the incidence isn’t what it looks like. Claiming that it’s about eliminating a dire competitive disadvantage plays much better, even though it’s all wrong.
Alan Auerbach – the proponent of this idea – joined with Douglas Holtz-Eakin to state why this competitiveness argument is all wrong: These two (AHE) wrote:
Unlike tariffs on imports or subsidies for exports, border adjustments are not trade policy. Instead, they are paired and equal adjustments that create a level tax playing field for domestic and overseas competition; Border adjustments do not distort trade, as exchange rates should react immediately to offset the initial impact of these adjustments. As a corollary, border adjustments do not distort the pattern of domestic sales and purchases
So if this is not going to advantage Ford and GM to the disadvantage of Toyota, could something else be driving Ford’s support and the opposition from companies like Toyota. I have been looking more at the transfer pricing angle objecting to this claim from AHE:
Border adjustments eliminate the incentive to manipulate transfer prices in order to shift profits to lower-tax jurisdictions
A lot of people read this and think transfer pricing manipulation goes away. But this is clearly wrong if our trading partners have positive corporate tax rates that are sourced based. Even AHE admits this later:
Thus, the multinational would have no incentive to use transfer prices to shift profits away from the United States, even if the tax rate in the foreign country is very low. Indeed, it would benefit by shifting profits to the United States, to reduce the taxes it pays in the low-tax country.
Lawrence Summers adds:
Businesses that invest heavily, hire extensively and export a large part of their product will have negative taxable income on a chronic basis .. Fourth, the combination of a sharply lower rate, new opportunities for tax arbitrage and the fact that any revenue gains from bringing overseas cash home are one-shot means the Federal revenue base would erode. The result would be cuts in entitlement payments to consumers who spend heavily, tax hikes on individuals and reductions in government spending. Over time, this will slow growth and burden the middle class.
He is correct about the “new opportunities for tax arbitrage" which is what I referring to with my Trump Toaster Oven example where I noted:
While currently Tiffany might want to raise the intercompany price – she knows the IRS could object. Of course Auerbach’s DBCFT would change her incentives as she might want to lower this price to only $80 to eliminate the Canadian income tax – assuming the Canadian Revenue Agency does not object.
Of course the Canadian Revenue Agency would strongly object. Toyota is a lot like our example. The Auerbach proposal would raise its U.S. taxes and give it an incentive to ship their cars to the U.S. at cost costs only. Toyota’s 10-K indicates that its 2015 sales were $260 billion with over $100 billion to the U.S. Its operating margin was 10 percent with the U.S. getting about half of that on its U.S. sales. So on U.S sales, Toyota has U.S. profits near $5 billion and Japanese profits near $5 billion – both taxes at fairly high rates. The Auerbach tax would give Toyota the incentive to have all $10 billion sourced in the U.S. But one would certainly expect the Japanese tax authorities to strongly object. Summers example reminds me of Boeing which sells over $90 billion a year with 58 percent of those sales to foreign customers. It currently incurs near $1.9 billion in U.S. taxes given its 7.5 percent profit margin and the fact that it allocates over 95 percent of its income to the U.S. The Auerbach tax would cut this tax bill to zero. It would also cut the U.S. tax bill for companies such as Starbucks. So what about Ford and GM? Alas Dylan Matthews has this all wrong with:
For example, suppose that a car company — let’s just call it, uh, General Motors — makes $1 billion in profit manufacturing cars in the US and selling them domestically and exporting them to subsidiaries abroad. That would normally subject it about $350 million in taxes, since the US has a 35 percent corporate tax rate. But GM could instead have its foreign subsidiaries pay $1 billion less for the cars they buy from the US branch of the company. That wipes out GM’s US profits, leaving it with no US tax liability and shifting the profits to the subsidiaries abroad. If those subsidiaries are in countries with a low or nonexistent corporate income tax, that could wind up being a very good deal ... This makes most tax evasion schemes pointless.
I doubt Dylan looked at the 10-K filings of either Ford or GM when he drafted this base erosion fairy tale. Ford sources less than 17 percent of its income to foreign affiliates and GM sources almost none of its income abroad. So the Auerbach tax would represent a major reduction in their U.S. tax bills. These foreign affiliates are not in tax havens unless you think Canada, Mexico, and our European trading partners have zero corporate tax rates (hint – their tax rates are 20 percent or more). Think of their operations as having a European component and a North American component. The European affiliates produce and distribute cars paying royalties back to the U.S. parent. Under the Auerbach proposal, they might want to increase those royalties to bleed their European affiliates dry. But of course the tax authorities in France, Germany, and the UK are not stupid. In North America, Mexican maquiladoras make the components, Detroit assembles, and a Canadian distributor sells to Canadian customers. The Auerbach tax would give Ford and GM the incentives to manipulate transfer pricing to strip all Canadian and Mexican income so the last line from Dylan that I quoted is quite wrong. But it would also be wrong to assume that the Canadian Revenue Agency and the Mexican authorities would just roll over.

DBCFT and Gorsuch

The Prospects For Tax Reform in 2017 Are Dimming by Howard Gleckman