The Great Compromise

In their post at RealClearMarkets, Sita Slavov and Alan Viard provide a valuable insight. The U. S. tax system is the result of a grand compromise between our two major political parties:

Our smaller, more progressive tax system has emerged as a compromise between the two parties. Republicans would probably prefer a smaller and less progressive fiscal system. That approach would promote economic growth by imposing smaller penalties on earning income, saving, and investing, but it would also reduce redistribution and harm those with lower incomes. Democrats would probably prefer a larger and more progressive tax system with larger benefit payments. That approach would reduce income inequality, but it would also impede economic growth. Neither of these extreme combinations is likely to be politically feasible.

In addition there’s something that cannot be emphasized too much. If you think that the purpose of our tax system is to raise the money necessary to fund the federal government, to restrain the growth of government, to redistribute from the rich to the poor thereby reducing income inequality, or some chimera of those three, our system is a failure. The deficit, the amount that we’re borrowing or creating to fund the government, continues to rise without bound. The federal government continues to grow. Income inequality is the highest it’s been in a century.

Most actual federal revenue is produced either by income taxes (58% including individual and corporate taxes) or payroll taxes (33%). By comparison in Germany about 40% of federal revenue is from individual and corporate income taxes while 32% is from consumption taxes.


The Source of the Conflict

The key to any good magic act or con game is misdirection. At the Boston Globe Canadian diplomat and entrepeneur Scott Gilmore while noting that there are a lot of Muslims at war fails to connect the dots:

The end of war in the Americas is part of a larger global trend. According to data collected by the Human Security Project, since the end of the Cold War, the number of armed conflicts has fallen by almost half. Peace is breaking out everywhere.

Everywhere, that is, except in the Islamic world. According to the Council on Foreign Relations’ Global Conflict Tracker, now that there is peace in Colombia, there remain only six civil wars in the world. Five of those are in Islamic nations. Similarly, all four of the current sectarian wars involve Islamic groups, and all five of the ongoing transnational terrorism conflicts involve militant Islamic groups. All told, of the 28 remaining global conflicts of all kinds being tracked by the council, 22 involve an Islamic state or faction.

He then proceeds to drag a number of red herrings across the trail including homicide rates, the “resource curse”, and Islam itself.

Let’s start with Islam itself. The five largest majority-Muslim countries in the world are Indonesia, Pakistan, India, Bangladesh, and Nigeria, accounting for just about half of all Muslims. Although all of them have internal problems with radical Islamists, Indonesian terrorists aren’t raising hell in non-Muslim countries.

Norway, Canada, and North Dakota are all enjoying a boom in oil production. Nonetheless Norse terrorists aren’t setting off bombs in Norway let alone in the United Kingdom or the United States.

What do Syria, Iraq, Afghanistan, Yemen, Chechnya, Bosnia, and even Pakistan have in common? I would submit that it’s the influence of wealthy Gulf Arabs. Which is where the “resource curse” comes in, too. I would further submit that isolation and lack of economic are the consequences of a pathology rather than its causes.

Rather than looking at where the problems aren’t, perhaps it might be more productive to look at where they are. When you do it’s blindingly obvious that radical Islamism, being fomented from the Philippines to Nigeria by wealthy Gulf Arabs, is the source of the conflict that’s spilled over from the Middle East into Europe and the United States. To deal with the problem you’ve got to deal with its source.


The Dream

I had the strangest dream last night. I dreamt that the Chicago Cubs won the National League pennant:

One drought down, one to go.

Wrigleyville erupted in a joyous celebration Saturday night when the Cubs’ 71-year World Series wait at long last came to an end. When Yasiel Puig hit into a double play for the final outs of Saturday night’s 5-0 victory over the Dodgers in Game 6 of the National League Championship Series, the Cubs sealed a date with the Indians in the 2016 Fall Classic, beginning Tuesday night in Cleveland.

It’s OK to say it out loud now, Chicago. The Cubs are National League champions. The Cubs are in the World Series for the first time since 1945.

In recognition of the Cubs’ achievement the Trib re-published its front page new article from the last time the Cubs won the pennant on September 30, 1945.

To place the upcoming World Series between Cleveland and Chicago in some perspective, it’s been 108 years since the Cubs last won the world series. We had never heard of a world war. The first Ford Model-T had yet to roll off Henry Ford’s revolutionary assembly line. The world was dominated by empires (British, Austro-Hungarian, Russian, Ottoman, Japanese, and metropolitan France’s colonial empire). The average life expectancy was 47 years. Only 8% of home had a telephone. About 230 murders were reported in the entire country. There was no such thing as television and there was no such thing as commercial radio—radio itself was a curiosity. It wasn’t just a different time. It was a different world.

My own commemoration will be to treat you to the late, great Stevie Goodman’s classic, “A Dying Cubs Fan’s Last Request”:


Not So Expert

At The Guardian Sebastian Mallaby presents what I presume is an extract from his recent book on Alan Greenspan, illustrating rather neatly how experts are failing. Here’s his peroration:

Two decades ago, in his final and posthumous book, the American cultural critic Christopher Lasch went after contemporary experts. “Elites, who define the issues, have lost touch with the people,” he wrote. “There has always been a privileged class, even in America, but it has never been so dangerously isolated from its surroundings.” These criticisms presciently anticipated the rise of Davos Man – the rootless cosmopolitan elite, unburdened by any sense of obligation to a place of origin, its arrogance enhanced by the conviction that its privilege reflects brains and accomplishment, not luck and inheritance. To survive these inevitable resentments, elites will have to understand that they are not beyond politics – and they will have to demonstrate the skill to earn the public trust, and preserve it by deserving it. Given the alternative, we had better hope that they are up to it.

In the past I’ve expressed my distaste for the phrase “rootless cosmopolitan” and my reaction was the same in this instance. It has a bad pedigree.

The whole article is a long read but well worth it.


Those Were the Days

The ideas presented in Ben Domenech’s review at Modern Age of Yuval Levin’s book, The Fractured Republic: Renewing America’s Social Contract in the Age of Individualism, are so intriguing that I may haul off and read the book.

The gist is that the primary impulse that unites progressives and conservatives in the United States is nostalgia. For conservatives it is a sort of reactionary, irredentist longing for a 19th century that never existed; for progressives for the 1950s—when manufacturing formed the largest part of the U. S. economy and trade unions were strong, viz.:

Whether rooted in a need for a system of governance that still runs on earmarks and smoke-filled rooms or a desire for a shared culture where everyone says “Merry Christmas,” Levin identifies a crippling sentimentality that is hardly monopartisan. His opening chapter cites the same from Paul Krugman’s The Conscience of a Liberal (2007), which opens with “a characteristic example of the sort of homesickness, or longing for a time that got it right.” The economist is referring to his childhood in the 1950s, “a paradise lost.” It is the cultural dominance of this vision—not as a period that breaks with the rest of the nation’s history, but an apotheosis of our greatness—that has skewed politics to the point that many citizens long for a time when schools were segregated, taxes were high, and you had to save for a year to buy a refrigerator.

He continues:

In Levin’s telling, America began to grapple with the fact that you can’t go home again—that the global economy was here to stay, for good or for ill—beginning in the 1970s, only to cast the challenge aside. He writes: “The lesson many Americans implicitly learned in the 1970s was that the emergence of a new national ethic of liberation and fracture could not be reversed, and so had to be channeled to the good.” But after twenty years of wrestling with these challenges under first Republican and then Democratic administrations, decades in which every household of every race experienced significant income gains, the nation turned toward the softer appeal of nostalgia.

Levin’s explanation is that Americans have suffered a disconnect from the traditional core institutions that make life in America better—family, faith, work, and neighborhood. At the same time, the failure of our policies to mitigate or moderate the dramatic changes in our economy and culture have left Americans feeling abandoned by their government. Levin identifies many examples of this, particularly when it comes to the experience of workers who no longer benefit from the security of employment in the postwar economy. Our entire system of welfare, health care, and entitlements is built for a bygone era that was the exception to the American economic experience.

This loss of faith in mediating entities—churches, schools, unions, fraternal organizations—whether founded in the community or buttressed by government, to meet the needs of the people has generally accelerated levels of distrust for large bureaucratic institutions as well. Today the American people view many of them as irresponsible or corrupt, stagnant dinosaurs incapable of responding to the speed of an advancing and evolving society. Coupled with a decline in shared values and cultural experiences—moving from an era when two-thirds of television sets were tuned to I Love Lucy to one where highly developed subcultures thrive without any overlap—we see the disintegration of our common vision. We no longer share what it means to be American, instead viewing the pursuit of happiness as a purely individual act of self-actualization.

There are differing views, as one would expect under the circumstances, on how we can continue without tearing ourselves apart. My preference would be for devolution of power, subsidiarity, a more networked society that is tolerant of differences. Others, much more influential than I, look forward to increasing centralization of power, presumably to be followed by forcing their views on the reluctant.

That has been tried in many countries and at many times. It has invariably resulted in violent repression and catastrophic failure. Maybe it will be different this time.


Hillary Clinton Will Carry Illinois

The most recent poll of voter opinion on the presidential race in Illinois, the Simon/SIU poll, taken just two weeks ago, show Hillary Clinton with a 25 point advantage over Donald Trump in her run for the presidency here. Barring some cataclysm, she will carry Illinois.

We do not elect presidents at large. We cast votes for electors and the electors cast their votes for president. In general and on the first ballot, electors vote for the candidate to which they were pledged. Not to do so is referred to as being a “faithless elector”. Such action is relatively rare. There has been one faithless elector to date in this century and five in the last.

The law in Illinois is that whichever candidate receives the greatest number of votes is awarded Illinois’s 20 electoral votes.

That means that if I vote for Hillary Clinton, she will carry Illinois and receive 20 electoral votes; if I vote for Donald Trump (something I cannot envision doing), Hillary Clinton will carry Illinois and receive 20 electoral votes; if I vote for either of the other two presidential candidates on Illinois’s ballots, Gary Johnson or Jill Stein, Hillary Clinton will carry Illinois and receive 20 electoral votes.


Assessing the Political Campaigns

At The National Interest in an assessment of the two political campaigns Will Marshall remarks on Hillary Clinton’s campaign:

All in all, Stronger Together is a workmanlike compendium of small-to-medium-sized proposals for helping working and middle-class Americans buffeted by economic change, anemic wage growth, and growing disparities of wealth and income. There is little to fire the political imagination here—few if any bold innovations, radical changes in existing policy, or ideas that might discomfit any Democratic constituency.

As an unreconstructed “New Democrat,” I can’t help being struck by how different this is from Bill Clinton’s 1992 campaign. In the years running up to the race, Clinton worked hard to develop new and often counterintuitive ways to advance progressive goals. His novel approaches recast Democrats as a reforming and modernizing party.

The issues and political context are very different now, of course, but there are two lessons Hillary Clinton might usefully have drawn from her husband’s electoral and governing successes. One is the primacy of economic innovation and growth for the aspiring American middle class. Reflecting contemporary liberals’ fixation on inequality, Stronger Together offers little fresh thinking about how to revitalize the U.S. economy following a long spell of slow growth and meager wage gains. Instead, it prescribes more government redistribution as the answer to the markets’ failure to provide good jobs and mass upward mobility.

The second lesson is that progressives should reform government, not just expand it. An especially pernicious effect of today’s paranoia-drenched populism is to deepen the public’s already profound mistrust of Washington. Bill Clinton’s push to “reinvent” government acknowledged that mistrust, and sought to make government more responsive to citizens and more results-oriented. He reinforced this theme by making radical changes in underperforming public systems—ending the welfare entitlement, shutting down crime-ridden public housing, supporting public charter schools to break the traditional districts’ monopoly, turning the Federal deficit into a surplus. By the end of his second term, public confidence in government was actually rising.

or, in other words, politics by focus group with all the sincerity and passion of a marketing campaign for a bar of soap.

He also makes some observations about Donald Trump. What is there to be said? Trump is Trump.


The Battle For Mosul So Far

The BBC has what appears to be a pretty good summary of the battle for Mosul so far:

Between 17 and 19 October, Iraqi army units moved towards Mosul from Qayyarah airbase, in the south, and the town of Kuwayr, in the south-east, and took back several villages. The Peshmerga also captured a string of villages near Khazer, to the east.
Then on Thursday, Kurdish fighters launched a large-scale operation east and north of the city, while Iraqi forces re-captured the town of Bartella, less than 15km (10 miles) east of Mosul.

Government forces said on Friday they had regained control of a further two villages – al-Awaizat and Nanaha – south of Mosul, evacuating 65 displaced families and killing 15 IS militants.

Meanwhile, IS militants mounted a ferocious counter-attack in and around the city of Kirkuk, killing at least 19 people.

Lots of maps.


Disturbance in the Force

There has been a major multi-site cyber attack today. USA Today reports:

SAN FRANCISCO — At least two successive waves of online attacks blocked multiple major websites Friday, at times making it impossible for many users on the East Coast to access Twitter, Spotify, Netflix, Amazon, Tumblr and Reddit.

The first attacks appear to have begun around 7:10 am Friday, then resolved towards 9:30 am, but then a fresh wave began.

The cause was a large-scale distributed denial of service attack (DDoS) against Internet performance company Dyn that blocked user access to many popular sites.

I’ve noticed unusual problems with several other major sites today and I don’t believe in coincidences, at least not when it comes to computers. Either more sites have been affected by the attacks or there have been secondary effects from the initial attacks against Dyn DNS. My minor researches have suggested problems affecting sites that use AWS. For several of the sites mentioned in the article the problems don’t seem to be over as of 2:00pm CDT.

I’m a bit puzzled about the motive for the attack. Plain mischief? What could they be going after?


The Third Not Given

At Bloomberg Noah Smith outlines two competing theories of economic stagnation, secular stagnation:

One model that gives this result comes from a 2014 paper by economists Gauti Eggertsson and Neil Mehrotra. The source of the negative demand shock comes from people’s attempt to deleverage after a big increase in private debt. That simultaneous deleveraging pushes down interest rates until they hit zero and can go no further. With interest rates unable to go below zero, economic activity slows down, meaning people can never pay off their debts. But they keep trying, and their continued attempts to do so keep the economy in its atrophied state.

and technological stagnation:

Technological stagnation is a different beast. According to Gordon and others, humanity has simply picked most of the low-hanging fruit of science and technology. Airplanes and cars travel no faster today than they did 50 years ago. Electricity, air conditioning and household appliances have made our homes about as pleasant as they’re likely to get, and so on. That doesn’t mean advances stop, but it means that each one is less game-changing than the last.

I have basic problems with technological stagnation as an explanation for what’s happening now. As a start most of the “low-hanging fruit” was picked 70 years ago. We haven’t seen much in the way of major breakthroughs but we’ve seen an enormous amount of elaboration. I see no reason that elaboration can’t continue indefinitely.

Even more basic is that I think it reflects a fundamental misunderstanding of value.

I think there’s an even more likely candidate explanation for what’s happening now: deadweight loss. There comes a point at which all of the growth in the economy is being absorbed by inefficiency. Our societies are very different from those of the 1930s. Grover Norquist’s macabre fantasy of drowning the federal government in a bathtub was much more practical then.

It’s also possible that all three are true in varying degrees.

How would you go about disproving that we’re in a period of secular stagnation, that technological stagnation has set in, or that deadweight loss is just too high? If a theory cannot be disproven, it is not science. It is metaphysics.

I can see why it might be difficult or even impossible to prove whether any of those was the case but is it possible to disprove that one or more are a factor? For example, doesn’t Japan’s experience disprove the secular stagnation theory, at least in the case of Japan? There has been no lack of stimulus there.