I wish that Joseph Sternberg had included more perspective in his Wall Street Journal op-ed on progressivity in taxes in Germany:

The Germans specialize in devising pithy nicknames for tax problems. The “middle-class belly” describes the way in which Berlin’s income-tax code applies steep marginal rates at lower incomes before leveling off—it looks like a protruding stomach on a graph. And now comes the “whale in the bathtub.” It’s the most serious problem of all, and an illustrative one for the rest of Europe.

Europeans believe their tax codes are highly progressive, giving lower earners a break while levying significant proportions of the income of higher earners and corporations to fund generous social benefits. But that progressivity holds true only for direct taxes on personal and corporate income.

The graph above, reproduced from the op-ed shows total percentage of tax by income decile in Germany and, as you can see, for the poorest income decile taxes are around 35% (mostly VAT) while for the highest income decile taxes are around 45% (mostly income taxes). That’s a a difference of around 10 percentage points or, in other words, Germany’s tax system when taken overall is slightly progressive.

The perspective I wish had been added is a comparison with the U. S. tax system so I decided to supply it. These figures are five years old so they’re slightly dated and derive from a Washington Post column by Ezra Klein. Consider this graph:

Several things are apparent from that graph. The first is that our tax system is relatively flat. The tax rate on people in the lowest decile is around 17% while that of the highest decile is around 31%—a difference of just 14 percentage points. It also bears mentioning that the only time that total taxes have represented such a high percentage of income in our history is at the height of World War II.

Germany could makes its tax system more progressive by reducing or eliminating its VAT. That’s something it should do anyway. The only really practical way to make our system more progressive is by taking a step that is uninteresting to Republicans and which Democrats have already rejected: cutting or eliminating FICA.

One more point. Some will suggest that the substantial difference between the total taxes that Germans levy on themselves with the total taxes that Americans will accept means that there’s a lot of space for tax increases in the United States. Among the many differences between Germany and the United States is that Germans actually get value for their higher taxes. In the United States taxes are largely used to boost the income of the highest quintile of income earners. Most Americans who aren’t in that highest quintile (and some who do) don’t see that as value received.

The United States has “boots on the ground” in Yemen, reports Military.com:

A small team of U.S. Special Forces troops is on the ground in the midst of Yemen’s civil war in support of an operation against the Al Qaida in the Arabian Peninsula (AQAP) terror group, the Pentagon said Friday.

The U.S. troops are limited to advisory and intelligence work, but they could be drawn into conflict in self-defense, said Navy Capt. Jeff Davis, a Pentagon spokesman. “They certainly could be. Combat can always happen.”

The amphibious assault ship Bataan with several hundred Marines aboard is also operating in the region, but troops and aircraft from the ship are not involved in the current operation, Davis said.

Saudi Arabia’s war against Yemen is and always has been illegal. Presumably, the pretext for U. S. involvement is the Authorization to Use Military Force. The actual reason is probably to prevent KSA’s incompetent military from falling on its face.

It’s really long past time we repealed the AUMF and replace it with some much more constrained legislation, authorizing the use of force in specific present conflicts and explicitly banning other uses of U. S. military force. A lot of the people we’re fighting under the auspices of the AUMF were grammar school age in 2001. The notion that we’re fighting the same fight now as then is a strain.

Scott Sumner extends his analogy of central bankers with bus drivers:

1. Bus A is a self-driving machine, fitted with a rear-mounted camera and the latest automatic steering mechanism, designed by noted Swiss engineer Johan Taylor. When the camera sees that the bus has deviated too far to the right of the road, it automatically steers the bus to the left, and vice versa.

2. Bus B is driven by Johanna Yellen, widely regarded as one of Switzerland’s best bus drivers.

3. Bus C is a complicated human/machine hybrid. It has forward looking cameras, that feed road images into a large building, in real time. About 10,000 bus drivers sit at the controls of a simulator, and steer the bus as they think is appropriate. The average of all of their steering decisions is fed back to the bus in real time, in order to adjust the steering mechanism. To motivate good steering decisions, the 10,000 bus drivers are rewarded according to whether their individual steering decisions would have led, ex post, to a smoother and safer drive than that produced by the consensus.

I doubt that my answer will make him happy.

Dismiss Bus C immediately. Consensus can be wrong. It is not only possible but likely for 10,000 bus drivers, particularly when they all went to the same driving schools, to make the same wrong choice at the same time and it’s all but certain that at some point the average of their views will be catastrophically wrong. We have had empirical evidence of that again and again and if you don’t believe it check out surveys of economists.

Bus B isn’t a lot better. Bus driver Yellen attended that same driving school. The school’s training isn’t perfect and regularly causes drivers who attended there to veer off the road under certain conditions.

Consequently, of those alternatives only Bus A is even minimally satisfactory.

I spent last week in Toronto on business and I thought I’d share my impressions of the city with you. Toronto is obviously prospering. There’s lots of building going on and there’s a good amount of traffic on its well-maintained highways. It doesn’t have the frenetic quality I typically see in American cities.

A long time ago, possibly twenty years ago, I read an op-ed by a Canadian columnist in a U. S. newspaper that contained a passage that read something along the lines of this.

We could have had everything. We could have had British traditions, French cuisine, and American technology. Instead we ended up British cuisine, American traditions, and French technology.

In some ways that encapsulates not just Toronto but Canada more generally. Canada doesn’t have the enormous proliferation of fast food joints that the U. S. does and a Tim Horton’s is significantly better than a Subway. Building and road layouts had bafflingly poor designs.

All of the people I met were tidy, pleasant, and courteous if somewhat passive. Some remarked on my accent. By U. S. standards I have a neutral, sort of All-American accent. I grew up in St. Louis but have spent most of my adult life in Chicago. I’ve done substantial stints in the South, the Northeast, and overseas and my wife grew up in California. I’ve spent a lot of time among Brits. Although my dominant accent is Midwestern, I have Southernisms and Britishisms in my speech. In other words my accent is hard to place but it’s clearly a discernibly American accent.

Demographically, Canada is very different from the U. S. and becoming more so. In some ways it’s like using the Wayback Machine to visit Kansas in the 1960s. The people I encountered were overwhelmingly of European origin or descent. More of the people were of East Asian origin or descent than you would encounter here other than on the West Coast. I met very few people of sub-Saharan origin or descent and those were other guests in the hotel at which I stayed. I didn’t meet or even see a single person of Mexican or Central American origin or descent.

Travel is becoming harder for me than it used to be. I didn’t sleep well. On the plus side I ate fish every night I was there. There was a nearby restaurant where it was fresh, good, and reasonably inexpensive and my wife doesn’t care for fish so I took advantage of the opportunity.

The Toronto airport must be my least favorite among big city airports. For some reason it has only a fraction of the amenities that are common in big city airports. There are very places where you can get a bite to eat and you’ve got to walk substantial distances to reach them from the gates. The restrooms are small, few, and inconvenient.

I’m pressed for time this morning so I can’t post about all of the bizarre things on this morning’s Wall Street Journal opinion page which has reached New York Times levels of surrealism. There’s Phil Gramm singing the same old song about tax cuts and growth. What has changed over the last 35 years that might suggest that cuts in the marginal income tax rates might not produce a great deal of domestic growth?

There’s an op-ed suggesting that the Kingdom of Saudi Arabia stop spreading its radical version of Islam in order to support moderate Islam. I’m not making this up.

There are defenses of Trump and Tillerson. It would be really nice if we had an executive branch we didn’t need to defend or apologize for.

There’s also an editorial about the health care reform proposal I wrote about earlier that I don’t have time to read now. I may get to it later.

If you’ve ever wondered why employee retraining programs are so ineffective, this story recounted by the editors of the Wall Street Journal, about massive corruption on the part of a now-deceased UAW vice president, should cause you to wonder no more:

An indictment unsealed last week claims the labor chief, who died of cancer in 2015, secretly teamed up with his bargaining-table opponent at Fiat Chrysler, Alphons Iacobelli. The feds say they and other conspirators skimmed millions from the UAW National Training Center, a tax-exempt, Fiat Chrysler-funded entity that was supposed to help union automotive workers get job training.

The indictment claims Mr. Iacobelli availed himself of National Training Center money, buying limited edition gold Montblanc pens and a $350,000 Ferrari. He also allegedly installed a swimming pool, outdoor kitchen and spa at his Michigan home, renovations that cost $375,000, and paid off a relative’s student loans.

The indictment says the training center also spent $425,000 at a swag company owned by Holiefield’s wife, Ms. Morgan, while an additional $70,000 was funneled from the fund to the union boss’s nonprofit to his wife’s photography business. More training center cash paid for Ms. Morgan’s first-class plane tickets, her $12,400 four-night stay at the luxe Beverly Hills Hotel, and the $262,000 mortgage on the townhouse she and Holiefield owned, the indictment says. Happy wife, happy life, we guess.

That’s in addition to the $924,000 Holiefield received in legal union compensation between 2009 and 2014, purportedly for representing the interests of UAW members. He and Mr. Iacobelli were responsible for negotiating contracts between Fiat Chrysler and the union over pay, bonuses and working conditions.

The editorial is full of presumably unintentional jokes and one-liners. For example:

Detroit’s FBI chief said last week that the indictment “calls into question the integrity of contracts negotiated during the course of this criminal conspiracy,” which the feds say ran for six and a half years.

Yuh think? But I laughed out loud at this:

“The UAW has zero tolerance for corruption or wrongdoing of this kind at any level,” union President Dennis Williams said of the scandal, adding that it is cooperating with investigators.

Okay, I’ll bite. What kinds of corruption and wrongdoing do they tolerate? The editorial goes on to catalogue just that and it’s a long list.

The problems revealed in this story are many. Union leaders are notoriously lightly scrutinized by the rank and file. It’s practically impossible to give sufficient scrutiny to retraining programs and, not surprisingly, a lot of the money is either siphoned away or just plain squandered. The list goes on.

The corrosive effect of wealth has been part of the common core of European belief for, literally, thousands of years, e.g. “It is easier for a camel to enter the eye of a needle than it is for a rich man to enter the kingdom of heaven” and we’ve inherited that view, at least aspirationally, from our European forebears. In an op-ed at the Washington Post scholars Charles Matthewes and Evan Sandsmark lament that we’ve lost that view:

The point is not necessarily that wealth is intrinsically and everywhere evil, but that it is dangerous — that it should be eyed with caution and suspicion, and definitely not pursued as an end in itself; that great riches pose great risks to their owners; and that societies are right to stigmatize the storing up of untold wealth. That’s why Aristotle, for instance, argued that wealth should be sought only for the sake of living virtuously — to manage a household, say, or to participate in the life of the polis. Here wealth is useful but not inherently good; indeed, Aristotle specifically warned that the accumulation of wealth for its own sake corrupts virtue instead of enabling it. For Hindus, working hard to earn money is a duty (dharma), but only when done through honest means and used for good ends. The function of money is not to satiate greed but to support oneself and one’s family. The Koran, too, warns against hoarding money and enjoins Muslims to disperse it to the needy.

[…]

How did we lose sight of the ancient wisdom about wealth, especially given its ample evidencing in recent studies?

Some will say that we have not entirely forgotten it and that we do complain about wealth today, at least occasionally. Think, they’ll say, about Occupy Wall Street; the blowback after Mitt Romney’s comment about the “47 percent”; how George W. Bush painted John Kerry as out of touch. But think again: By and large, those complaints were not about wealth per se but about corrupt wealth — about wealth “gone wrong” and about unfairness. The idea that there is no way for the vast accumulation of money to “go right” is hardly anywhere to be seen.

I think they’re underestimating how long the adulation of wealth has been part of the standard American package of beliefs. It goes back well into the 19th century and probably earlier.

The United States has a Calvinist soul and part of that soul includes the idea that the possession of wealth demonstrates the favor of God. You cannot read a Horatio Alger novel without coming away with the idea that the wealthy are virtuous. They’ve been called “luck and pluck” novels and the “luck” part largely consists of marrying the boss’s daughter and the boss is generally portrayed as a) fantastically wealthy and b) virtuous.

The Great Gatsby was written in 1922. One of its central themes is the admiration, even fascination with the rich.

The Autobiography of Benjamin Franklin is the story of how a man with just the shirt on his back pulled himself up by his bootstraps and became wealthy. That is the essential American myth and Benjamin Franklin is greatly admired.

The United States is and always has been a plutocracy. Go back and check out the net wealth of the Founding Fathers if you don’t believe that was the case. Admiration of the wealthy is part and parcel of that.

Congressmen Josh Gottheimer and Tom Reed who head the House Problem Solvers Caucus have proposed a bipartisan health care reform plan in an op-ed in the New York Times:

Our proposal first focuses on the most urgent crisis: the skyrocketing cost of individual health insurance premiums. The Trump administration is considering suspending cost-sharing payments that defray out-of-pocket payments like deductibles and co-payments for people earning less than 250 percent of the poverty line. Because of uncertainty about this subsidy, insurers have said premiums could rise by 15 percent or more. On Aug. 16, insurers must submit their 2018 rates to state regulators for approval; many may be forced to leave the individual marketplace altogether.

Our plan would stabilize markets by making the cost-sharing payments mandatory and thereby prevent rates from rising sharply.

Second, we provide a relief valve to help states deal with the high cost of pre-existing and chronic conditions. The costliest 5 percent of patients account for nearly half of all health care spending in the country. We propose a dedicated stability fund — essentially a form of reinsurance — that states could use to reduce premiums and limit losses for providing coverage for these high-cost patients.

Third, our proposal provides relief to certain businesses from the mandate that they provide insurance to full-time employees. It also defines “full time” as a 40-hour workweek to discourage businesses from manipulating employees’ weekly hours to skirt the mandate. More than 90 percent of large businesses offered health care before the Affordable Care Act, and studies show that they would continue to do so under this change; others would move to find employee coverage in the individual marketplace.

Fourth, our plan eliminates the Medical Device Tax, an excise charge of 2.3 percent that is often passed onto consumers and reduces funds for research and development. And finally, we provide states with additional flexibility to enter into agreements — such as enabling the sale of insurance across state lines — that would provide more choice and lower costs.

If that states its form fairly, it’s a plan that both parties should jump on. While essentially giving Democrats the win it provides Republicans with a few fig leaves and would enable them to put the health care debacle behind them.

As I predicted it basically throws money at insurance companies which should keep them quiet for a while. Removing mandates from certain businesses and giving states more flexibility would let some Republicans claim that they’ve replaced the hated Obamacare.

If the Democratic leadership smells blood in the water, they won’t go for it and what looks like a reasonable plan for digging out of this hole will go down in flames.

If the Republican leadership is more committed to actually repealing the PPACA than it is to keeping their jobs which I doubt, they’ll oppose it, too.

Sadly, it doesn’t do much to address the underlying problem in health care which is rising costs. And if it’s enacted, there are no real prospects for the Congress returning to health care reform any time soon.

Read this article at Seeking Alpha and tell me how long you think Tesla can keep running losses at this level. At this point they’re burning through more than $1 billion a quarter.