I don’t believe that Philip Delves Broughton’s explanation, expressed in the Wall Street Journal, for the mostly meager display of talent among the candidates for the French presidency holds water:

All those graduates of Paris’s famed lycées, Henri IV and Stanislas, and the products of its vaunted grandes écoles looked at what France had to offer and hoofed it, some for New York, a few for Silicon Valley, and a great thundering herd for London.

They have earned millions as hedge-fund traders and investment bankers, or by setting up businesses free of the mind-bending constraints of French employment law. London has prospered from their presence. They have bought townhouses in South Kensington and filled the private schools with hordes of little Xaviers and Sylvies. If some enterprising PR company were to set up a cross-Channel croissant-making contest, the winner would be as likely to come from Mayfair as from the Marais.

Maybe. How then to explain how weak the Republican aspirants for the presidency were? All of the talented have become investment bankers? I don’t buy it. For one thing I don’t believe that wealth is an intelligence test. My experience has been more the contrary: if you’re so rich why ain’t you smart?

Allow me to offer an alternative explanation. The talents of years gone by just weren’t that talented. The incredible visibility and lack of anonymity in a world in which every passing stranger holds a movie camera and can publicize his or her findings instantly just reveals how ordinary they are. As Montaigne put it, “No man is a hero to his value.”

So, we find ourselves in a world in which the dangers, challenges, and complexities call for gods and heroes and we’re left with mere ordinary men and women. From my point of view that calls for better processes and institutions rather than a search for greater leaders.

As I read Laurence Kotlikoff’s comparison of the Trump tax reform outline with the Republicans in the House’s “Better Way” tax reform bill in the Wall Street Journal, it impressed on me once again what a complicated country the United States is. If the House’s plan becomes law, here’s Dr. Kotlikoff’s description of what will happen to the business income tax:

The Better Way plan transforms the corporate income tax into something different: a business cash-flow tax with a border adjustment. Notwithstanding innumerable mischaracterizations by the press, politicians and business leaders, the cash-flow tax implements a standard value-added tax, plus a subsidy to wages. Every developed country has a VAT, which is an indirect way to tax consumption. All of these levies have border adjustments, which ensure that domestic consumption by domestic residents is taxed whether the goods in question are produced at home or imported. Unlike the Better Way, Mr. Trump’s plan does not include a border adjustment, which means it effectively taxes exports and subsidizes imports. This undermines his goal of reducing the U.S. trade deficit.

Where is the progressive element to the cash-flow tax? It’s in the subsidy to wages, which insulates workers from the brunt of the VAT. They will pay VAT consumption taxes when they spend their paychecks, but they also will have higher wages thanks to the subsidy. The folks who truly pay the cash-flow tax are the rich, because they pay the VAT when they spend wealth that was earned years or decades ago.

So, let’s look at the scorecard. If enacted the United States will have a VAT (the new business border-adjusted cash flow tax), a graduated income tax (the personal income tax), and a flat tax (the payroll tax, at least it would be flat if FICA max were also eliminated as Dr. Kotlikoff mentions).

That’s reminiscent of our health care system. We have a private insurance system, a publicly-subsidized health care insurance system (the health care exchanges), the largest single-payer insurance system in the world (Medicare), and the largest fully socialized health care system in the world (the VA).

Of France Charles De Gaulle once quipped “How can you govern a country with 246 varieties of cheese?” France ain’t got nothing on the U. S.

Tyler Cowen has a good post on health care reform at Bloomberg View. The gist of it is this: health care reform that makes most people worse off while helping a few is unlikely ever to be popular.

One possible solution is to make the penalties for not signing up tougher, to ensure participation. But it is no political accident that the mandate was so lax to begin with, because such tougher pressures would have made Obamacare less popular. Furthermore, what is the point of a health-care reform that makes so many policyholders worse off by the standards of their own preferences?

Another way to manage health-care subsidies would be a single-payer system, and some commentators suggest that is where the Democratic Party is headed. I wouldn’t be so sure. Obama made his (partially incorrect) “if you like your health care plan, you can keep it” promise for a reason. The Americans who get health insurance through their jobs often enjoy privileged access to doctors and benefit from superior reimbursement rates.

If the price of covering the sick is for millions of wealthier and more influential people to give up those advantages, I don’t see that happening. The health-insurance industry and other medical lobbies will be opposed, too, with doctors fearing that a single-payer system would bargain down their reimbursement rates. Even a relatively progressive state such as Vermont could not make a single-payer system happen.

The Affordable Care Act took the form it did for good reasons, almost none of them policy reasons. Under what conditions would some future reform be any different?

If you’re a long-time reader of The Glittering Eye, there’s nothing in Michael Schulman’s Bloomberg View op-ed, “China Has World’s Biggest Productivity Problem”, that you won’t have read here:

China, like other economies in Asia, is facing the consequences of its past success. The region’s economies achieved eye-popping growth rates by tossing their poor and primarily agrarian workers into industry and global supply chains. That unleashed a torrent of productivity gains, as peasant farmers started making everything from teddy bears to iPhones.

In other words, China propelled its rapid development by shifting underutilized labor and capital into a modern capitalist economy.

Maybe somebody living in China will have more authority to say it.

I quibble with his prescription a bit:

Of course, what China really requires is the sort of free-market reform that the current leaders in Beijing have been so reluctant to implement. The state needs to allow market forces to allocate money and talent to the country’s most competitive and productive industries and companies.

I don’t think that greater producer efficiencies are the key to China’s future growth. I think that the Chinese authorities need to stop subsidizing exports (done in any number of ways), weed out corruption (mostly theirs), let wages grow, and rely on domestic private consumption much, much more for economic growth. Magic 8-Ball says “Outlook not so good”.

Nate Silver is skeptical that the Trump-Russia story is a scandal with any legs and is looking for a gauge for that:

So if you want to track the progress of the Trump-Russia story, the most important benchmark is how Senate Republicans are behaving. Are Republicans, especially those who have a reputation for being loyal to the administration, taking concrete steps toward forming a select committee, for example? Or are they following Majority Leader Mitch McConnell’s lead and blowing the Comey story off? I don’t mean these as rhetorical questions; we’re in the midst of tracking down Republican senators’ positions on Russia and how they’ve evolved over time. But these will be the most important indications of whether the story has legs.

I would say that a significant gauge is whether Trump’s approval falls through the roughly 40% floor he’s had since his election. The members of Congress are sheep. They’ll bolt if Trump’s approval rating goes below 30%.

Leon Mangasarian and Jan Techau provide an interesting critique of German foreign policy at Handelsblatt:

One of the problems with German foreign policy today is that it is strategically frivolous. This frivolity is a stance of comfort and convenience. Germany prefers to leave the tough decisions and dirty work of foreign and defense policy to others, in order then to criticize its allies from a moral high horse in a tone of smugness and complacency.

You know, I’d like for the United States to be in that position and I think that most ordinary Americans would, too. The irony is that the reason the U. S. can’t do that is Germany.

My own critique of German foreign policy would be somewhat different.

• I don’t think that “soft power” means what the authors think it means. Both military force and economic pressure are hard power.
• Germany has shown no reluctance to use economic pressure to further its foreign policy objectives.
• Far from being frivolous German foreign policy has had the same strategic objectives for the last 150 years (or, possibly, the last millennium depending on how you reckon things) and has pursued it systematically and consistently, primarily using hard power. From 1870 to 1945 they used military power. Since then (and since recovery) they’ve used economic power.
• The problem with Germany’s foreign policy objectives is that they are injurious to the rest of the world, particularly Europe and within Europe especially for small countries that want to preserve their own cultures.

There’s a nice summary of the movement of population in the United States at the Mises Institute:

When we look at the net number of residents moving in from other states, we find that the destination for most of these 7.5 million migrants was states in the South and in the West — excluding California…

The map, however, fails to account for just how large was the migration out of certain states, specifically, New York, California, Illinois, and New Jersey. When we ignore foreign migrants and look at just state-to-state flows, we find that more than 191,000 people left New York while more than 129,000 people left California. The top destinations for migrants were Florida, Texas, and North Carolina…

The short version: Illinois is screwed.

I’m full of questions this morning. These questions are about health care reform.

1. How can you have a free market in health care without changing both the consumer and producer sides of the equation?
2. How can health care be internationalized while still protecting patients from quacks and medical malfeasance?

In his commentary at Investor’s Business Daily James Dorn says something I agree with:

Tax reform is necessary to make America great again

and something I’m skeptical about:

so are effective limits on the size and scope of government

The reason for my skepticism is in an equation:

or in words gross domestic product is equal to consumer spending plus business investment plus government spending plus net exports. Our economy is not the economy of the 1980s. We make far less of what we consume than we did then and import a lot more. Big businesses depend for their profits much more on their overseas operations than they used to.

There’s another even more crucial question. Should the objective of policy be to increase GDP? Or should it be to increase median income? I don’t see any practical way of effecting either objective without government playing a role.

I also hasten to point out that neither major political party is much interested in limiting the size and scope of government. They just want to spend the money having the government do different things.