The Hypocrisy of the Ultra-Rich

You might find this post at ProPublica interesting. They’ve obtained IRS information on the tax returns of some of the very richest people:

ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years. The data provides an unprecedented look inside the financial lives of America’s titans, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg. It shows not just their income and taxes, but also their investments, stock trades, gambling winnings and even the results of audits.

To some degree the post is an exercise in sophistry since they keep switching back and forth between wealth and income which are two different things. Presently, we tax income but we do not tax wealth. Except in one case, of course. A tax is levied on my house based on its assessed value and it’s reassessed every three years. That is, in effect, a wealth tax. It isn’t done that way in all states. In California, for example, you pay real estate taxes based on the value of your house when you bought it. In other words we tax the wealth of the middle class, most of which is held in the form of their homes, but not that of the ultra-rich which is held in other forms.

They do provide a helpful explanation:

In 1916, a woman named Myrtle Macomber received a dividend for her Standard Oil of California shares. She owed taxes, thanks to the new law. The dividend had not come in cash, however. It came in the form of an additional share for every two shares she already held. She paid the taxes and then brought a court challenge: Yes, she’d gotten a bit richer, but she hadn’t received any money. Therefore, she argued, she’d received no “income.”

Four years later, the Supreme Court agreed. In Eisner v. Macomber, the high court ruled that income derived only from proceeds. A person needed to sell an asset — stock, bond or building — and reap some money before it could be taxed.

Since then, the concept that income comes only from proceeds — when gains are “realized” — has been the bedrock of the U.S. tax system. Wages are taxed. Cash dividends are taxed. Gains from selling assets are taxed. But if a taxpayer hasn’t sold anything, there is no income and therefore no tax.

As I noted above there are major differences in the sources of wealth depending on just how wealthy you are:

Warren Buffett has quite publicly declaimed that the rich pay too little in taxes but he has also criticized taxing capital. If that’s not hypocrisy it is, at the very least cognitive dissonance.

Ultimately, the marginal tax rates don’t matter—especially for the very rich. Whether the highest tax rate is 34%, 38%, or 90%, if taxable income is zero the tax is still zero. What matters is how income is determined.

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When You Eliminate the Impossible

Speaking of articulating arguments in an op-ed in the Wall Street Journal Steven Quay and Richard Muller argue that the science supports the lab-leak hypothesis for the origin of SARS-CoV-2. Here’s the first part of their argument which I don’t find particularly convincing:

Although the double CGG is suppressed naturally, the opposite is true in laboratory work. The insertion sequence of choice is the double CGG. That’s because it is readily available and convenient, and scientists have a great deal of experience inserting it. An additional advantage of the double CGG sequence compared with the other 35 possible choices: It creates a useful beacon that permits the scientists to track the insertion in the laboratory.

Now the damning fact. It was this exact sequence that appears in CoV-2. Proponents of zoonotic origin must explain why the novel coronavirus, when it mutated or recombined, happened to pick its least favorite combination, the double CGG. Why did it replicate the choice the lab’s gain-of-function researchers would have made?

The problem is that unlikely even remarkably improbable things happen all of the time. Here’s the second part of their argument:

There is additional scientific evidence that points to CoV-2’s gain-of-function origin. The most compelling is the dramatic differences in the genetic diversity of CoV-2, compared with the coronaviruses responsible for SARS and MERS.

Both of those were confirmed to have a natural origin; the viruses evolved rapidly as they spread through the human population, until the most contagious forms dominated. Covid-19 didn’t work that way. It appeared in humans already adapted into an extremely contagious version. No serious viral “improvement” took place until a minor variation occurred many months later in England.

Such early optimization is unprecedented, and it suggests a long period of adaptation that predated its public spread. Science knows of only one way that could be achieved: simulated natural evolution, growing the virus on human cells until the optimum is achieved. That is precisely what is done in gain-of-function research. Mice that are genetically modified to have the same coronavirus receptor as humans, called “humanized mice,” are repeatedly exposed to the virus to encourage adaptation.

which I find a lot more convincing. Here’s their conclusion:

The presence of the double CGG sequence is strong evidence of gene splicing, and the absence of diversity in the public outbreak suggests gain-of-function acceleration. The scientific evidence points to the conclusion that the virus was developed in a laboratory.

I’m surprised that they didn’t mention what is to me the more convincing evidence: that in the hundreds of thousands of animal samples tested nothing particularly close to SARS-CoV-2 has been identified. As I’ve pointed out before the similarity between SARS-CoV-2 and the closest bat virus they’ve identified as potential relatives is more like the difference between a human and a cat than it is like the difference between a human and a chimp let alone the genetic similarity between two different humans. Evolution just doesn’t work that way.

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Are There Actually Shortages?

I’m afraid I couldn’t quite follow the logic of Heidi Shierholz in this New York Times op-ed. It’s not that I don’t understand economics or business or the Bureau of Labor Statstics’s Employment Situation Report. Here’s the meat of what Dr. Shierholz says:

As we sift through the latest jobs report, which showed the economy gained 559,000 jobs in May, three key findings rise to the surface. Bona fide labor shortages are not pervasive. The main problem in the U.S. labor market remains one of labor demand, not labor supply. And unemployment insurance — which many commentators say is keeping workers from returning to work — is bolstering the economy.

After the Great Recession, reports about employers unable to find the workers they needed were pervasive. Everyone from the U.S. Chamber of Commerce to the Obama White House joined in. Growth was slow because workers didn’t have the right skills for the available jobs, the story went.

But they had it completely wrong. At its peak in the Great Recession, the unemployment rate was 10 percent, but it ultimately got down to 3.5 percent — without a hugely expanded national training program to accelerate skills attainment. What actually slowed growth? Insufficient demand for goods and services, which, in turn, meant low demand for workers — not that there weren’t enough qualified workers. It was a labor demand problem, not a labor supply problem.

This is also true today. Wage growth decelerated in May in most sectors. And in a large majority of sectors, wages are growing solidly but not fast enough to raise concern about damaging labor shortages, given that job growth is also strong. Further, we still have 7.6 million fewer jobs than we did before Covid, and there are large employment gaps in virtually all industries and demographic groups. The good news is that unlike in the wake of the Great Recession, today’s labor demand problems are likely to be resolved relatively quickly, thanks to the American Rescue Plan.

While we haven’t seen widespread labor shortages, there is one sector where wage growth points to the possibility of an isolated one: leisure and hospitality. For typical workers in this sector, which includes restaurants, bars, hotels and recreation, the current weekly wage translates into annual earnings of $20,714. With that figure so low, there is little concern recent pay increases will generate broader pressure on wages. In addition, wages in this sector plummeted in the recession and have largely returned to where they’d be if there were no pandemic. And these job reports also take tips into account, which means that wage changes in this sector are most likely driven by the impact of customers returning, en masse, to in-person dining. On top of all this: Rising wages in leisure and hospitality don’t appear to be stymieing job growth, which has been by far the strongest of any sector, contributing three-quarters of the total jobs added in the past two months.

If anything that understates the job losses in the leisure and hospitality sector. At a first approximation that sector shed more jobs than all other sectors combined.

Again, please help me out here. I don’t understand her argument. I’m open to being persuaded but I need to understand how she arrives at her conclusion. I understand the conclusion itself.

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Should Religion Be Taught in the Public Schools?

I think that either the editors of the Washington Post are engaging in sophistry or they haven’t thought through te implications of the position they’re staking out in their most recent editorial:

“We can’t just choose to learn what we want to know and not what we should know. We should know the good, the bad, the everything,” President Biden said at this week’s 100th anniversary of the Tulsa race massacre, the annihilation of a prosperous Black neighborhood by a White mob that was long overlooked in the history books. Oklahoma is one of the states that has enacted legislation that aims to limit what students learn about racism, and its role in shaping American laws and institutions — making Mr. Biden’s rebuke of those who want to whitewash history all the more powerful.

Supporters of the statewide bans claim that public schools are indoctrinating students with “Marxist” or leftist groupthink; use of the New York Times’ prizewinning but controversial 1619 Project has become a frequent target. Clearly, schools shouldn’t teach ideology, and educators should be mindful of parental concerns. But credence shouldn’t be given to the cynical notion that teachers can’t be trusted. “I give the students the facts and let them draw their own conclusions. That’s what learning is,” said a Dallas middle school teacher, articulating a core principle of pedagogy that should be animating the debate about how history is taught.

Three months ago, Educating for American Democracy, a scholastic initiative to redesign K-12 history and civic education for the 21st century, released a road map for states and school districts to strengthen the teaching of civics and history, and make it more inclusive. It didn’t set out a specific curriculum. It didn’t choose between a view of America as a land of glory or one that sees only racial injustice and exploitation. Instead, its message — the result of two years of study by more than 300 historians, political scientists and educators from diverse backgrounds and different political viewpoints — was to embrace and celebrate the contradictions, tensions and paradoxes in the country’s past, challenging students to think critically and form their own judgments. States should stop the misguided political interference that is already having a chilling effect on teachers and follow the lead of this thoughtful initiative.

Let me provide an example so you can see what I’m getting at. Should public schools be able to teach that Donald Trump won the 2020 presidential election but was denied his rightful victory by unscrupulous Democrats?

Let’s cut to the chase. The issue is the 1619 Project. I don’t have a problem with the fact that it was published and that a Pulitzer Prize was won for it being taught in the public schools or even having it assigned as reading. I do have a problem with it being presented as the truth or even being a fact-based position. It has been refuted. It has been refuted more times than I can count.

Phenomena come in three varieties: the verified, the falsified, and the unverifiable. The 1619 Project has been falsified. I recognize that for some it’s “their truth”&mash;unverifiable. I place that in the same category as religious believes. You can teach that Christianity exists in the public schools but you ought not to teach that it is true. The same should be the case with other unverifiable religious believes regardless of how heartfelt the belief of their adherents.

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Does Wisdom Come With Age?

I materially agree with the view of the editors of the Wall Street Journal on visas for our Afghan interpreters and their families:

Last month Gen. Mark Milley, chairman of the Joint Chiefs of Staff, hinted that the military could evacuate translators and others who worked with the U.S. A Milley spokesman later clarified that “an evacuation is not imminent,” and the Biden Administration doesn’t seem interested. A mass evacuation wouldn’t create the optics the White House wants to see—especially as it insists the U.S. will remain committed to Afghanistan diplomatically. But it could save countless lives, and Guam could be a temporary haven as the visa process plays out.

Congress has a role to play. It likely will include legislation for more visas for the SIV program in this year’s National Defense Authorization Act. But President Biden as Commander in Chief can press Congress to simplify the visa rules or order an evacuation.

“The United States has no obligation to evacuate one, or 100,001, South Vietnamese,” then-Sen. Biden said in 1975 as the U.S. withdrew from Vietnam. The result was the exodus of the “boat people,” many of whom died in the open ocean, that was a stain on America. Mr. Biden has an opportunity—make that an obligation—to do better by thousands of Afghans.

If a plan hasn’t been developed for this it would be a grave omission. Let’s see if at 78 Joe Biden has more compassion and prudence than he did when he was in his 30s.

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Unspeakable Truths

I want to share with you Glenn Loury’s “Unspeakable Truths about Racial Inequality in America” at Quillette. I both agreed with it wholeheartedly and found it unutterably sad. Let me share a few brief snippets.

My responsibilities as a black man, as an American, and as an intellectual are not in conflict.

and

Where is the self-respecting black intellectual to take his stand? Must he simply act as a mouthpiece for movement propaganda aiming to counteract “white supremacy”?

and

“Structural racism” isn’t an explanation, it’s an empty category.

That is the view that I have enunciated here. If it’s not an “empty category”, it’s worse. It’s either a powerful argument for strict segregation of the races or an argument for minority rule.

Confronted by someone who is constantly bludgeoning me about the evils of colonialism, urging me to tear down the statues of “dead white men,” insisting that I apologize for what my white forebears did to the “peoples of color” in years past, demanding that I settle my historical indebtedness via reparations, and so forth—I well might begin to ask myself, were I one of these “white oppressors,” on exactly what foundations does human civilization in the 21st century stand? I might begin to enumerate the great works of philosophy, mathematics, and science that ushered in the “Age of Enlightenment,” that allowed modern medicine to exist, that gave rise to the core of human knowledge about the origins of the species or of the universe. I might begin to tick-off the great artistic achievements of European culture, the architectural innovations, the paintings, the symphonies, etc. And then, were I in a particularly agitated mood, I might even ask these “people of color,” who think that they can simply bully me into a state of guilt-ridden self-loathing, where is “their” civilization?

and

If we blacks want to walk with dignity—if we want to be truly equal—then we must realize that white people cannot give us equality. We actually have to actually earn equal status.

Read the whole thing.

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Absence of Mandate

In her Wall Street Journal column Kimberley Strassel makes a significant observation:

The president has repeatedly claimed a mandate for action despite knowing better. Even with the Democratic Party’s twin Georgia runoff victories in January, it ended the election with a 50-50 Senate and the narrowest Democratic House majority since before the New Deal. The prudent course would have been to govern from the middle, working with Republicans on incremental change.

Democrats instead decided to “go big” with a strategy that had no margin for error and relied on two big bets. First, that they could juke or blow up the Senate rules to get around the 60-vote filibuster. Second, that they could force or cajole every member of their razor-thin majority to adopt one of the most progressive agendas in U.S. history.

Joe Biden had a single clear mandate: not to be Donald Trump. In that he has been successful. Last week the first alternative noted by Ms. Strassel was vetoed by the Senate parliamentarian. Whether the Democrats can “force or cajole” a majority of their caucus to vote for the administration’s agenda remains to be seen. It may well prove the case that the Congressional leadership will need to cultivate skills that nothing in their backgrounds has granted them experience with: compromise, moderation, and consensus-building.

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When You’re Worrying Ruy Texeira

In 2002 Ruy Texeira and John Judis wrote The Emerging Democratic Majority. It was the book of the year, discussed by practically everybody—left, right, and center. It has been widely interrupted a predicting an inevitable new progressive era, a consequence of demographic shift. In a recent post at Substack he cautions Democrats that they can’t depend on demographics alone. Here’s his conclusion:

Finally, the long-range effects of rising diversity are also an all-else-equal proposition. While cycle-by-cycle voter preference shifts can be volatile and even out over time, sometimes they result in a long-term shift against a party like the Democrats—think of the move of white non-college voters toward the Republicans in the 2000s. This can cancel or even swamp the pro-Democratic effects of demographic change over a lengthy period.

In short, demographics set the playing field, but they are not destiny unless all else remains equal. And all else almost never remains equal. Therein lies a challenge for the Democrats that the simple fact of rising racial diversity cannot solve.

or, said another way, the “progressive centrism” that he and Mr. Judis advocated in their book is a necessary prerequisite for that progressive triumph.

Is that what’s happening? Or is what we see presently more like the neo-feudalism that other both on left and right, starting with John Kenneth Galbraith sixty years ago and most recently Joel Kotkin, have been warning about?

My own view has been that demographic shift doesn’t work exactly as Mr. Texeira has imagined. Blacks and Hispanics tend to be much more conservative than would be required for the sort of progressive parousia that he imagined and today’s progressivism is focused far more on Harvard Yard and Silicon Valley than it is on Back of the Yards and the Salinas Valley.

Consider the 2020 presidential election, for example. Contrary to what you might gather from listening to the Democratic leadership, Hispanic voter turnout in 2020 was actually higher than in 2008, 2012, or 2016 and a lot of those votes went to Trump. Black voter turnout was higher than in 2016. Many of those votes, too, went to Trump.

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The Arguments They Keep Making

Former U. S. ambassador to Afghanistan Ronald E. Neumann makes his pitch for the U. S. military remaining in Afghanistan forever in an op-ed in the Washington Post. He emphasizes the risks of leaving:

Since they had no warning of the direction Biden would choose, neither the U.S. military staff on the ground nor their colleagues in the Pentagon had plans ready to replace the contractors or lessen the impact of their speedy and unexpected departure. Some contractors say they asked after Biden’s decision was announced whether they should prepare to manage operations from locations outside Afghanistan, but were told no.

Some of the gap might be bridged by hiring trained, non-U.S. personnel. Some U.S. companies have indicated a possible willingness to remain — for example, if they were hired by Afghan authorities. Some training and support might be maintained from outside Afghanistan.

One U.S. official has assured me that the Pentagon is doing all it can do for the Afghans, including developing bridging strategies. And there may be exaggeration in some of the stories coming out of Afghanistan, as that country’s government and military, installed and supported by the United States, reel from the shock of the U.S. decision to leave and cope with their own internal problems. But whatever is being planned inside the Beltway does not seem to be getting down to the field.

The only thing that contractors are being told is to get all their personnel out of Afghanistan. A memorandum from the Army Contracting Command at Bagram air base near Kabul reminds them that “the base closure timelines are set for every base at this time and it is imperative that each individual has a ticket and knows the date they are departing.” The Defense Department is requiring contractors to submit detailed plans for leaving Afghanistan for every one of their American employees, on pain of being held in noncompliance of their contract.

In principle, maintenance will be turned over to the Afghans. But they have not yet received any U.S. funding to pick up the operations, and setting up new procedures or contracts takes time. Perhaps we and the Afghans will find ways to manage the problem, but in the meantime, balls seem to be dropping right and left as the U.S. military (or the White House, or wherever the orders are flowing from) pushes to get out of Afghanistan months sooner even than the Sept. 11 date given by the president.

It may well be that feverish work is going on behind the scenes. But on the ground, the withdrawal of contractors is messy, confused and damaging, a process that is not only not continuing to support the Afghan security forces, but is actually weakening them.

Confusion is famously a byproduct of military operations. But this confusion is happening as fighting is intensifying and observers and analysts predict major Taliban offensives. As Afghans look for visible signs that Biden’s promised support will continue, what they see is a rush to the door — and silence about the details that would make the promises real.

Morale is as much a part of combat power as equipment and technology. The current uncertainty undercuts morale and could gravely weaken the Afghan army just as major Taliban attacks begin. And if the army crumbles, it will be the women of Afghanistan, the journalists, judges, democracy activists and the like — the same people now being regularly assassinated — who will be left to the Taliban’s mercy.

Everything he says was as true in 2001 as it is now and, indeed, IMO it’s a powerful argument for not invading Afghanistan in the first place. I find his stance morally vacuous. Where was this blunt assessment while he was serving as ambassador to Afghanistan? That was the point at which he should have made his case for staying permanently. Over the past 20 years we’ve had four different administrations, each of which was publicly committed to leaving Afghanistan. There was no public debate of the prudence of an indefinite military commitment to Afghanistan before the invasion or since. Have career diplomats like Mr. Neumann simply been assuming such a commitment the entire time?

Additionally, I’m skeptical of his claim that the U. S. military is unprepared for withdrawal. That just doesn’t sound like the military that has contingency plans for just about everything, even remote contingencies like an invasion of Canada. Is he mistaken or has the U. S. military been assuming that the commitment to leaving was phony, for the rubes? It all sounds like mutiny on the parts of the State Department and Department of Defense to me.

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A Better Policy

Republican Rep. Dan Meuser states the entire meat of his op-ed at The Hill in its opening paragraph:

Simply put, inflation occurs when there is too much money chasing too few goods. In the last 15 months, federal spending on COVID-19 relief totaled $5.9 trillion, a quarter of U.S. GDP. This level of spending, paired with the Biden administration’s unwise fiscal and regulatory agenda, poses risks to our economy in the long run and is a wrong-headed approach at the onset of recovery from the pandemic.

In Keynes’s time stimulating consumer spending using the simple expedient of extending credit to ourselves could be an effective strategy for pulling the economy out of recession not because it promoted aggregate demand but because it promoted aggregate product. That remained true as recently as 40 years ago.

It’s no longer true. Today the net effect of using borrowed or printed money to stimulate consumption is to stimulate the economies of the countries from which we import consumer goods and we import more consumer goods from China by far. While there are reasonable economic and geopolitical arguments for stimulating the Mexican and Canadian economies and even more tenuous arguments for stimulating Japan’s economy, there is no similar geopolitical support for stimulating the Chinese economy. It’s the opposite if anything.

There is no longer any practical way of stimulating the U. S. economy in the near term by increasing consumer spending. It can still be accomplished in the long term using carefully crafted policies that will increase domestic production but that is not apparently within the wheelhouse of today’s elected representatives.

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