NATO Running Low on Blow-Uppable Sites

NATO commanders in Libya have asked the United States to provide more drones. That's not too surprising, I guess. But the explanation for the request startled me a little bit:

NATO commanders requested the sophisticated surveillance aircraft after concluding that they were running out of military targets in Libya after four months of bombing and missile strikes against Kadafi's military forces and command facilities, U.S. and NATO officials said.

...."It's getting more difficult to find stuff to blow up," said a senior NATO officer, noting that Kadafi's forces are increasingly using civilian facilities to carry out military operations. "Predators really enable you study things and to develop a picture of what is going on."

Modern wars certainly present brand new kinds of challenges, don't they?

How could we NOT use this image?

What is Amazon.com's biggest advantage over its competition? One-click ordering? The ability to go shopping in your pajamas? Its enormous selection? Those all play a role, but Christopher Caldwell thinks the real answer is the fact that Amazon's customers mostly don't have to pay state sales tax:

It is the tax exemption, not the technology, that most distinguishes Amazon from its rivals. Its price advantage is the most important thing about it. The ruthlessness with which Amazon is resisting tax reform might be a measure of the centrality of tax-privilege to its business model. One can look at the collapse of Borders, not to mention independent booksellers, and ask whether government policy has undermined the bricks-and-mortar retail economy to protect a will-o'-the-wisp.

At first glance this seems silly. Can a 5-to-10-percent price difference really be such a deal breaker for Amazon? But Caldwell has a point: Amazon's ferocious response to recent attempts to get it to collect sales taxes suggests a company that thinks its life depends on not paying them. So what's going on here?

The story starts in 1992, when the Supreme Court ruled that companies didn't have to collect state sales tax unless they had some kind of physical presence in the state: a warehouse, say, or the company's headquarters. At first this applied only to mail-order houses and nobody cared much. Then online retail started to take off, but as long as it was in its infancy nobody cared too much about that either. But the online world is no baby anymore: It accounts for upwards of $150 billion in sales each year, nearly 10% of the total in the United States.

With that much at stake, and growing fast, states have started to panic. Sales tax revenue is one of their main funding sources, and as more and more business goes online, that revenue starts to dry up. So they've started fighting back, only to run into an implacable buzz saw of opposition from Amazon.

Texas, where Amazon does have a physical presence, billed them for back taxes earlier this year and Amazon promptly announced that it would pull up stakes and leave. When South Carolina voted against giving Amazon a special tax exemption, Amazon announced that it would abandon a new warehouse near Columbia that was already half built. Tennessee is getting the same treatment for refusing to play ball. And when Illinois passed a law demanding tax payments based on the fact that Amazon has thousands of affiliates in the state, Amazon ruthlessly severed every one of its affiliates' contracts. In New York, which also passed a law requiring tax payments based on Amazon's affiliate program, Amazon is paying up, but only so it has standing to sue in federal court.

The latest state to insist that Amazon collect state sales taxes is California. Amazon's response? As in Illinois, they summarily severed the contracts of every one of its affiliates in the Golden State. But that's not all. Like mafia goons going to the mattresses in a gang war, Amazon immediately announced that it would spend millions of dollars to place a referendum on the ballot to nullify the new California law. And in the meantime? Law or no law, they won't be collecting sales tax in California, and that's that. Los Angeles Times columnist Michael Hiltzik explains why a ballot measure is so alluring to Amazon:

In court, Amazon would have to painstakingly muster credible legal arguments and present them to a judge who, more often than not, is no fool. In a California ballot campaign, one can try to mislead voters by deploying half-truths, outright lies and flagrant deceit. Lie to a judge, and you might end up with a stiff fine for contempt and maybe jail. Lie to the California electorate, and you might win an election. Amazon hasn't ruled out challenging the California law in court, and it might do so if the referendum fails. But is there any mystery why it preferred to start with a ballot measure?

And what is Amazon's response to all this? Their CEO, Jeff Bezos, says that they support a federal law to streamline and harmonize state sales taxes. This is, needless to say, a transparent dodge: Bezos knows perfectly well that a Republican-dominated Congress will never pass such a law. In the meantime, state treasuries are slowly but steadily being bled dry thanks to Amazon's take-no-prisoners approach to paying taxes. With most states still hammered by depressed tax collections thanks to the poor economy, this means that Amazon's remorseless resistance to collecting taxes is in direct conflict with funding for schools, parks, medical care, and street repairs.

Why wage a brutal, unpopular, scorched-earth campaign like this over a few percentage points? Probably because Caldwell is right: For all its talk of technology and convenience and selection, Amazon basically stays in business because it can charge slightly lower prices than brick-and-mortar stores. A level playing field might be good for state coffers and the schools and police officers they support, but to Amazon that doesn't matter. It's nothing personal, mind you. Just business.

Money in Politics

Why do tabloid press barons have so much power in Great Britain? The Washington Post offers an explanation that never really occurred to me before:

In Britain, money plays a smaller role in politics than it does in the United States, and politicians have few ways to communicate effectively with the public outside the media filter. Television advertising plays no significant role in campaigns; for the most part, it is not allowed.

An American politician who feels aggrieved by the media can buy television spots to answer them. His British counterparts have no such option. Elected officials must depend on the good graces of newspapers for favorable coverage.

File this under "watch what you wish for," I guess. In America, vast pools of money in politics give the business community enormous power to influence elections. That's bad. But the alternative, apparently, is to get the money out and instead give media moguls enormous power to influence elections. Pick your poison.

Four Programs

A reader points me to a critic who thinks that in yesterday's post about the debt ceiling I played fast and loose with budget numbers:

To me, the most damning part of this article was what the Author determined that our Government would fund. Mainly, Social Security, Medicare, interest debt, and some defense spending. According to the article, these items would take up the entire revenue stream? Yet, by the design of the programs, Social Security and Medicare are supposed to be self sufficient....The truth of course, is that the left is simply being loose with the facts. Social Security and Medicare do not use up as much revenue as this article would like you to believe.

Actually, they use up more. In fact, this whole post is worth a response since most people don't have a very good understanding of where federal revenue comes from and where it goes. But the basic figures are all easily accessible from the OMB and a few other sources, so here's a quickie summary for 2011:

  • Social Security: Roughly speaking, Social Security is self sufficient. So yes, we can assume that even if the debt ceiling isn't raised, dedicated payroll taxes will be enough to keep the program going.
  • Medicare: Medicare gets about half its financing from dedicated payroll taxes and premiums. However, the non-hospital portion, which costs about $250 billion per year, comes out of the general fund.
  • Defense + Veterans Benefits: Using the narrowest definition of national defense, this costs about $900 billion per year.
  • Interest on the debt: About $200 billion per year.

So excluding the parts of Social Security and Medicare paid for out of dedicated payroll taxes, here's what comes out of the general fund: $250 + $900 + $200 = $1,350 billion.

Now for taxes. Excluding dedicated payroll taxes for Social Security and Medicare, here's roughly where our money comes from:

  • Individual income taxes: $950 billion.
  • Corporate income taxes: $200 billion
  • Other taxes: $200 billion

That comes to $1,350 billion. In other words, aside from payroll taxes, our entire tax base — income taxes, excise taxes, estate taxes, customs duties, everything — is just barely enough to pay for our military, the non-hospital part of Medicare, and interest on the debt. Finis. If you want to fully fund those parts of government, as most tea partiers do, and if you also want to force an immediate balanced budget by not raising the debt ceiling, as most tea partiers do, you literally have to zero out the entire rest of the federal government. No Medicaid, no FAA, no border patrol, no FBI, no embassies, no highways, no disaster relief, no SEC, no court systems, no prisons, no national parks, no CIA, no school lunches, no medical care for children, no SNAP, no flood control, no student loans, no medical research, no nothing. You get Social Security, Medicare, the military, and interest on the debt. That's it.

Capiche?

Gridlock on Greece

Tyler Cowen takes a look at the latest European stitch-up for saving Greece:

If you had told me it was an Onion-like satire of all the previous plans, and not an actual serious plan at all, I would have believed you.

And here's Paul Krugman:

The Serious People are determined to destroy all the advanced economies in the name of prudence.

I don't really have the heart right now to go through the entire plan and try to make sense of it. Others can do a better job than me anyway. Broadly speaking, though, it demonstrates yet again that European leaders simply aren't willing or able to deal with the eurozone's problems, and probably won't be until something genuinely catastrophic happens. There's really no partial restructuring that has the slightest chance of helping Greece, but as the difficulty of getting this agreement shows, even partial restructuring is a tough sell. At some point everyone is going to have to come to grips with an all but total default from Greece, but apparently we're still some ways off from that day of reckoning.

Watching both the United States and Europe careen recklessly toward fiscal oblivion simultaneously is not something I thought I'd see in my lifetime. Just goes to show my lack of imagination, I guess.

Quote of the Day: Hating on Dave

From Felix Salmon, who doesn't like the government finance = family finance comparison no matter who's making it:

I’m beginning to think that the most politically corrosive movie of the past 20 years was Ivan Reitman’s Dave, from 1993, where the president, armed with nothing but his neighborhood accountant and a couple of bratwursts, manages to fix the budget over dinner.

Hey! We like that movie around this house. But yeah, like so many other Hollywood versions of politics, it sure does make things look a lot easier than they really are.

Fun With Numbers!

The chart below is dedicated to the Heritage Foundation. Thanks go to Matt Yglesias, Karl Smith, and Stan Collender.

Less Lead, Better Kids

Matt Yglesias points to a welcome bit of good news reported in the New York Times today. The EPA, it seems, is field testing a new way of using fish bones to clean up lead contamination in urban areas:

Today, there is more lead contamination in America’s cities than any federal or state agency could ever afford to clean up and haul away. So scientists and regulators are trying a new strategy, transforming the dangerous metal into a form the human body cannot absorb, thus vastly reducing the risk of lead poisoning.

The principle is straightforward, said Victor R. Johnson, an engineer with Civil & Environmental Consultants Inc. “The fish bones are full of calcium phosphate,” he said. “As they degrade, the phosphates migrate into the soil.” The lead in the soil, deposited by car exhaust from the decades when gasoline contained lead or from lead-based paint residue, binds with the phosphate and transforms into pyromorphite, a crystalline mineral that will not harm anyone even if consumed.

Evidence mounts almost daily about the damage that the modern environment does to our children. Lead, small particulates in the air, phthalates and other endocrine disruptors, sugar-heavy diets that promote Type 2 diabetes, and lousy conditions in the home all combine to make our children far more vulnerable to chronic problems, both physical and cognitive, than they need to be. It's nice to see that at least one of these things is being addressed in a creative new way.

Rick Perry's Team Takes Shape

Texas Gov. Rick Perry, based on everything I've read about him, is not very bright. Not merely incurious or overly reliant on his gut, like George Bush, but genuinely just sort of dimwitted.

Andy McCarthy of National Review, based on everything I've read of his, ought to be locked up in a mental ward somewhere. I really, sincerely, don't understand why NR continues to associate itself with him. There's gotta be a line somewhere, after all.

But guess what? Perry and McCarthy have apparently teamed up! If Perry decides to run, this really has the makings of an epic disaster. I can hardly wait.

Wall Street Starts to Hear Footsteps

The New York Times reports that Wall Street folks are really, truly, finally starting to come to grips with the fact that Republican lunatics in Congress might actually refuse to raise the debt ceiling on August 2nd:

Even though many on Wall Street believe that a default remains unlikely, the financial markets are starting to become agitated. Volatility in stocks has soared, and some investors say stock prices are falling because a United States default could severely raise companies’ costs of doing business. In the Treasury market, investors are starting to sell, fearing that the government will not make good on some interest payments that will be due next month. And complex financial instruments that will pay out if the United States defaults have become twice as expensive to buy as they were at the start of the year.

....“The metaphor is a pile of sand,” said Mark Zandi, the chief economist at Moody’s Analytics. “You keep putting one piece of sand on the pile, nothing happens, and then, all of the sudden it just caves.”

Wall Street helped elect 'em, and only now are they finally figuring out what they got themselves into. Who knows? If the GOP wackos really do run the train off the cliff, maybe rich people will finally figure out that paying a few more percentage points in income taxes isn't such a high price to pay for sanity after all.