• Who Needs Corporate Taxes, Anyway?

    Kevin Hasset, currently CEA chair in the Trump administration, claims that a corporate tax cut would raise wages by $4,000. Laura Tyson, CEA chair during the Clinton administration and economic advisor to the Obama administration, says that Hasset’s claim is “disturbing” and “dishonest.” If you look at all the evidence, not just a few cherry-picked outliers, the most likely effect on wages is…zero.

    This should surprise no one. Hassett’s claim is ridiculous on its face. Nevertheless, Tyson supports the idea of cutting corporate taxes:

    My general view is a corporate rate tax cut with move to territoriality would increase investment in the United States. A lot of economists believe that….The original proposal from several years ago was for a revenue-neutral corporate tax cut. So a tax cut for corporations paid for by going after all the special deductions and special credits to broaden the base enough to generate revenue. The general view of that was that would eliminate distortions in the corporate tax code. There are wild differences in tax rates for retail, energy companies, etc.

    Roger that. A lot of people support tax reform like this—at least in theory. It’s getting them to support it in practice that’s hard.

    Here, however, I’m going to reveal my vast ignorance about corporate taxation. I basically think of taxes as just another input, like the cost of steel or transportation. What happens when those costs fall? In a normal market, competition forces companies to lower the prices of their goods until they are once again operating at the same level of profit as before. Lower prices produce higher sales, which in turn requires more workers.

    So yes: lower corporate taxes should have a modestly beneficial effect on employment. In a tight labor market, this will even lead to temporarily higher wages until a recession comes along to loosen up the labor market.

    But why should lower corporate taxes benefit capital? If, say, the widget industry operates on an expected return to capital of 10 percent, competition will keep it there even if taxes or other costs go down—but only as long as they go down for everybody. Thus, corporations should be eager for tax loopholes that benefit them exclusively, since that really does produce extra profits that can be put in the hands of shareholders and executives, but they shouldn’t care very much about overall tax rates that affect their entire industry equally.

    In other words, overall tax rates don’t matter much. It’s the loopholes and special subsidies that produce unjustified rents based on disparate tax levels. And sure enough, that’s what corporate lobbyists spend most of their time on. Getting rid of all this crap in the tax code is therefore a great idea, but the problem is that it will all just accrete again even if we manage to do it. The only way to get rid of it permanently is to eliminate the corporate income tax altogether.

    The overall effect of eliminating corporate taxes should thus be (a) higher employment and (b) fewer opportunities for non-market profits that benefit the rich. What’s not to like?

    Is this correct? If not, what’s wrong with it? Am I assuming that competition is too perfect? Or what?

    In any case, if this is close to right, it’s why I’ve long thought I’d support doing away with the corporate income tax entirely and swapping it for a carbon tax. We’d stop taxing stuff we like (corporate output) and instead start taxing stuff we don’t (carbon output). In the jargon of business, it’s a win-win.

  • Trump: ISIS “Gave Up” Because He’s President

    When I wrote yesterday about Donald Trump planning to take all the credit for the defeat of ISIS, I didn’t realize that he had been on the Chris Plante show a few hours earlier and had already done so:

    President Donald Trump took credit for the fact that ISIS is in retreat during an interview Tuesday, claiming that ISIS wasn’t on the run before because “you didn’t have Trump as your president.”

    ….”ISIS is now giving up, they are giving up, there are raising their hands, they are walking off. Nobody has ever seen that before.”

    When Plante asked why that hadn’t happened before, Trump took the bait. “Because you didn’t have Trump as your president,” he said. “It was a big difference, there was a big, big difference if you look at the military now.”

    Trump did nothing. The plan to take both Mosul and Raqqa was initiated under Obama, and Trump famously refused to approve a new plan for months because the military kept telling him that Obama’s approach was working. So he put them off and put them off until he finally approved a plan in August that was mostly the same as the plan we already had. And now he’s claiming that this new plan turned things around in eight weeks.

    I know we don’t expect anything else from Trump. But he can always be even worse than you think, can’t he? Hell, he didn’t even give the military any credit, let alone Obama. What a jackass.

  • Women in Sacramento Call Out Culture of Sexual Harassment

    Frank May/DPA via ZUMA

    Women who work in the state capitol in Sacramento have had enough:

    The groundswell over sexual harassment that has rocked Hollywood moved into California’s capital on Tuesday as more than 140 women — including legislators, senior legislative aides and lobbyists — came forward to denounce what they describe as pervasive sexual misconduct by powerful men in the nation’s most influential legislature.

    Women complained of groping, lewd comments and suggestions of trading sexual favors for legislation while doing business in Sacramento. Their grievances, contained in a public letter and detailed in a series of interviews, mark the latest fallout from the Harvey Weinstein sexual abuse scandal.

    ….Cristina Garcia, a Democratic member of the state Assembly who signed the letter, said Tuesday she has been routinely accosted by men who harassed her and made comments about her appearance while she was trying to discuss legislation. “Multiple people have grabbed my butt and grabbed my breasts,” she said. “We’re talking about senior lobbyists and lawmakers.”

    ….Pamela Lopez, a partner at a Sacramento lobbying firm, said that for years she has dealt with inappropriate suggestions from male officials, but the most disturbing episode came early last year, at a social gathering of lawmakers and lobbyists in a Sacramento bar.

    As Ms. Lopez walked into the restroom, she said, she felt a large body pressing behind her. When she turned around, she saw that a lawmaker had locked the door behind him, had undone his pants and asked her to touch his genitals. “He had exposed himself and begun masturbating,” she said. “All I was thinking was what do I do, what do I do. And of course, I didn’t want to cause a scene.”

    I imagine things are roughly the same in every state capitol and in Washington DC. I hope that the groundswell of disgust about this eventually puts everyone on notice that in the future, names will be named when men engage in behavior like this. That’s quite likely the only way to put a serious dent in it.

    My guess is that the three biggest cesspools of sexual harassment are entertainment, politics, and finance. So far we’ve heard from the first two. When are we going to hear from Wall Street?

  • The Decline of Manufacturing Has Not Turned America Into a Hellhole

    According to the Washington Post, President Trump’s resident protectionist has drawn up a Trump-friendly slide to explain the consequences of a declining manufacturing sector. This comes from trade advisor Peter Navarro:

    I can’t address all of these things, but off the top of my head I know that the crime rate has been dropping since 1991. As a result, the incarceration rate began dropping about 15 years later. It’s been dropping steadily for the past decade and has dropped by more than half for young black men since 2001. Child poverty is at an all-time low. The abortion rate has declined 50 percent since 1980. The homelessness rate has dropped steadily since HUD began keeping statistics a decade ago, and is now down 20 percent since 2007. Domestic violence, like other violent crime, has dropped dramatically over the past two decades. The mortality rate varies among different demographic groups, but has been dropping steadily since 1960. The teen birthrate is down, but overall fertility has been basically flat since 1970. The divorce rate has been dropping since 1980, and is now at a 40-year low. Hell, even the marriage rate has stabilized over the past decade.

    In other words, Navarro is wrong about nearly everything. However, opioid use is up and single-parent households have increased. I guess two out of twelve isn’t bad.

    Oh, and one other thing: manufacturing employment has been dropping in every rich country. This is hardly unique to the United States:

    And it’s worth noting one other thing: In the entire OECD, manufacturing employment is down 2 percent since the end of the Great Recession, but in the United States it grew 6 percent during Obama’s presidency.

    Bottom line: if a declining manufacturing base is bad for all the things Navarro says it’s bad for, how has the rest of the world escaped turning into the alleged hellhole that America has become? And if manufacturing employment in America has increased over the past decade, does this mean that things turned around under Obama? And anyway, America hasn’t become a hellhole. On most socioeconomic measures, things have gotten steadily better over the past few decades.

    So none of this makes any sense. But I don’t suppose anyone in the White House actually cares. I expect Navarro’s slide to become a favorite over at Fox News.

  • How to Build a Future Scientist

    Here’s an ad that Vodafone is running on billboards around here:

    I’m not trying to pick on Vodafone, but I sure see a lot of ads like this. I wish instead that I saw a few more ads like this:

    I know, I know. It’s just an ad, and the future doesn’t look all that exciting in mine. I’m just a little weary of endless ads telling us that inspiring children to become scientsts is all a matter of fun and games. That’s part of it, for sure, but our future scientists better become proficient in math and research too. Proficient enough that they don’t get scared away the first time they take a real science class, anyway. That means getting used to a bit of routine drudgery.

    Yeah, I’m just griping. Get off my lawn blah blah blah. Still.

  • The War Against ISIS Is All But Over. Thanks, Obama.

    From the Wall Street Journal:

    U.S.-backed forces said Tuesday they have captured Islamic State’s de facto capital of Raqqa, Syria, wrenching away the terror group’s last major urban stronghold in the Middle East. The Kurdish-led Syrian Democratic Forces, backed by U.S. airstrikes and American special forces on the ground, said they had completed their four-month battle for the city Islamic State used as a nerve center to plan and stage attacks on the West.

    ….Preparations for the recapture began nearly a year ago, with the SDF and U.S. special forces on the ground—supported by American airstrikes—taking the hinterlands of Raqqa to inch towards the city.

    The war against ISIS isn’t completely over, but it’s pretty close. As you can see in the latest map from the Institute for the Study of War, ISIS still controls some territory, but it’s mostly lightly occupied and nonstrategic:

    ISW is already talking about the “War After ISIS,” which currently pits Iraqi Kurds against the Iraqi central government.

    ISIS is hardly Barack Obama’s finest moment. He was late to understand what was happening and slow to do anything about it. But in the end he did do something about it, and he did the right thing: he kept the US footprint light; he avoided rules of engagement that would inflame the very people we were trying to liberate; and he understood that the only route to victory lay in a slow but steady campaign. It wasn’t sexy, but it worked.

    In a few weeks or months, Donald Trump will announce that we’ve won the war against ISIS. Will he give Obama any recognition for this? Of course not. So that means the rest of us will have to do it for him.

  • Lunchtime Photo

    This is the ceiling of the Cupola Room at Kensington Palace. If you’re interested, you can rent it: “The Cupola Room can hold a reception with un-amplified music for up to 90 guests. Or, if you prefer, you can host up to 70 guests for the wedding supper in this historic room.”

  • Donald Trump Saves the Coal Industry!

    The LA Times tells the story today of a coal-fired power plant in Homer City, Pennsylvania:

    “Everyone gets concerned when they wake up and don’t see smoke coming out,” said Rob Nymick, manager of the 1,700-resident borough that he says will be economically “crushed” if the plant goes dark.

    ….The plant remains an albatross to investors, and a source of increasing anxiety to the hundreds of Pennsylvanians who rely on it for their livelihood. It is likely to remain a loser financially no matter how far Trump goes in rolling back regulations.

    “I’m not sold on the fact that the war on coal is putting that power plant out of business,” said Nymick, pointing to struggles to compete with cheaper natural gas, solar and wind energy. “You don’t know what to believe or who to believe.”

    This is all true. And yet, oddly enough, Trump has missed a chance to boast about what he’s done for the coal industry. Check out this chart:

    In reality, this blip is meaningless. Coal mining employment has experienced four substantial upward bounces since 2000 even as overall employment stayed flat during the whole period. But that’s never stopped Trump before, so what’s the problem this time? The proposal of the Clean Power Plan in 2014 really does seem to be associated with a big drop in coal employment, and that drop stopped in mid-2016 and then turned around when Trump was elected: employment in the coal mining industry has risen from 50,000 to 52,000 since November.

    Coincidence? Who cares! Given all the other nonsense Trump brags about, how is it that he’s missed bragging about this?

  • Progressives Should Be Fighting Back on Obamacare

    Albin Lohr-Jones/Pacific Press via ZUMA

    Donald Trump a few minutes ago:

    Obamacare is finished. It’s dead. It’s gone. You shouldn’t even mention it. It’s gone. There is no such thing as Obamacare anymore.

    Needless to say, this is just the latest part of Trump’s campaign to prevent people from signing up for Obamacare. Cut the signup period in half. Eliminate outreach. Eliminate advertising. Shut down the website periodically on weekends. Cut CSR subsidies in a way that makes people think benefits have been cut. Tell everyone Obamacare is dead.

    When Republicans started passing photo ID laws, progressives fought back with campaigns to get people registered to vote. Because of this, ID laws probably had only a very small effect on the election. Are progressives doing the same thing for Obamacare? It sure seems like there ought to be a huge campaign to publicize the Obamacare signup period and help people get through it. This might help fight some of Trump’s doomsaying and keep signups high. This in turn will keep Obamacare healthy despite Trump’s best efforts.

    Is this happening anywhere?

  • Lunchtime Photo

    ATTENTION! Our previously scheduled lunchtime photo has been postponed to bring you breaking news. EXCLUSIVE MUST CREDIT MOTHER JONES. Armageddon hit London today as the skies turned brown and the sun blazed a sullen orange at midday!

    The Gherkin was so brown it looked like a cigar!

    The Monument looked as if the city were on fire again!

    The view from Earl’s Court tube station was Satanic!

    These photos are unretouched, and no, I did not forget to reset the white balance on my camera. So what was going on? Apparently it was due to Britain catching the edge of Hurricane Ophelia:

    According to the Met Office, the red sun is caused by winds pulling up Saharan dust….BBC weather presenter Simon King said: “Ophelia originated in the Azores where it was a hurricane and as it tracked its way northwards it dragged in tropical air from the Sahara….Because the dust is so high, light from the sun is scattered in the longer wavelengths, which is more the red part of the spectrum, so it appears red to our eyes.”

    Ophelia has pulled in unseasonably warm air up from Spain and North Africa, bringing temperatures in the early 20s over the weekend….The air is safe to breathe, according to the Met Office, as the particles are high up in the atmosphere.

    So there you have it. From London, I’m Kevin Drum reporting.