I genuinely, sincerely wish I believed that Brian Domitrovic’s assertions in his Forbes article about cutting taxes was right:

The big item in the Trump proposal is the cut in the corporate tax rate, reduced from 35% to 15% and expanding its definition to include small businesses. Such a cut would undermine the value of exemptions from and avoidance of the current corporate rate, things that constitute big-company strategy in this slow-growth era. Such a cut would refocus American business on making things and selling them—the stuff of real growth.

The rest of the plan, the trimming of the top personal income-tax rate, the reduction in the number of personal-rate brackets, and the cashiering of the estate tax and the alternative minimum tax, will have similar effects. These reforms will prompt Americans to pay less attention to the tax consequences of what they are doing and be themselves. And when Americans act naturally, booming growth and mass affluence is the result.

Why won’t cutting the business income tax rate result in more businesses buying back their own stock rather than “making things and selling them”? And why will cutting the personal income tax rates “have similar effects”? Why won’t people just buy more stuff made in China, France, or Germany? Which will result in negligible effects on the domestic economy. Distribution is pretty darned efficient these days. The short version: Amazon could sell a multiple of what it does now without adding many employees.

I support a cut in the business tax rate because it’s inefficient and giving companies incentives to engage in various strategies, e.g. inversions, to avoid taxes. I’m skeptical about cutting the personal income tax rate because of recent experience. Look at how short-lived the stimulative effects of the Bush tax cuts were. We just don’t have an economy in which cutting the personal tax rates will stimulate any more.

or, Government Is Hard.

At The Imaginative Conservative Bruce Frohnen muses about the “gig economy”. The post is difficult to excerpt but these two passages seem to express the kernel of his thoughts:

An old-line Social Justice Warrior and even a traditional conservative could find plenty of evidence to support the claim that the gig economy is exploitive. Ironically, if typically enough, the worst offenders, here, are the supposedly civic-minded tech companies. Corporations like Microsoft are massive promoters of the gig economy. A number of these powerful corporations have taken advantage of lax immigration rules to bring in guest workers who will toil for half the wage demanded by labor markets in the United States. They then leverage this “diversity” to force many of their remaining American workers to accept being pushed off the payroll into lower-paying, insecure contract positions that lack employee benefits. This is not the market economy at work. It is, rather, abuse of political power to undermine labor market forces for the benefit of a few very rich and powerful manipulators.

and

Many would call the new economy freer, but what I see too often in those who seek gigs is isolation and constant stress. Some might say this is what entrepreneurship requires. But many who are very good engineers, or programmers, or warehouseman, are not so good at sales. Are we not, then, rewarding people for a skill set (sales) that has little to do with actually producing useful things? Are we not devaluing yet more the skills and hard work that built our successful economy and society?

Workplaces are, or should be, communities. I mean this in a very practical sense. Most of us forge friendships at work. Sometimes we become close, sometimes that friendship is merely a kind of trust that we will look after one another on the assembly line, at the meeting, or in covering for one another’s failings to make certain the company does not lose contracts or customers. However common it may have become, workplace sabotage is known even today as something dishonorable and harmful to the company. But the common habits, outlook, and shared assumptions that make professional trust and honor possible are much more difficult to form when we become mere casual acquaintances who happen to meet up on a particular gig. As church, community, or other local associations die when we no longer actually do things together on a regular basis, workplaces die when people no longer come together at a particular place.

Let’s consider just the companies he mentions by name. Microsoft in its present form exists solely due to intellectual property law. Ironically, without the copyright protections that he freely violated, Bill Gates would still be working in his parents’ basement. As it gained wealth and power Microsoft has been able to mold the laws to suit itself.

Uber and Lyft are niche companies that exist because of bungled regulation. The taxi industry is tremendously regulated and notoriously corrupt. What the existence of Uber and Lyft tell us is that the regulated price for taxi service was set above the market clearing price.

I also think that underestimates the importance and value of sales but that’s the subject for another post.

My point in all of this is only that promoting, formulating, and maintaining effective policy is hard. However, it is necessary because the state of nature is worse. Once a policy has been adopted it won’t be set in stone. It must be changed if found ineffective or if circumstances change. And there will always be those who want to ensure that the law furthers their own, personal ends. Eternal vigilance, etc.

As you no doubt have heard President Trump dismissed FBI Director James Comey yesterday. The Washington Post reports:

President Trump fired FBI Director James B. Comey on Tuesday, at the recommendation of senior Justice Department officials who said he had treated Hillary Clinton unfairly and in doing so damaged the credibility of the FBI and the Justice Department.

The startling development comes as Comey was leading a counterintelligence investigation to determine whether associates of Trump may have coordinated with Russia to interfere with the U.S. presidential election last year. It wasn’t immediately clear how Comey’s ouster will affect the Russia probe, but Democrats said they were concerned that his ouster could derail the investigation.

Early reactions serve mostly as a barometer of the views of their authors on Trump’s election and presidency. The editors of the New York Times declaim:

By firing the F.B.I. director, James Comey, late Tuesday afternoon, President Trump has cast grave doubt on the viability of any further investigation into what could be one of the biggest political scandals in the country’s history.

The explanation for this shocking move — that Mr. Comey’s bungling of the investigation into Hillary Clinton’s private email server violated longstanding Justice Department policy and profoundly damaged public trust in the agency — is impossible to take at face value. Certainly Mr. Comey deserves all the criticism heaped upon him for his repeated missteps in that case, but just as certainly, that’s not the reason Mr. Trump fired him.

while the editors of the Wall Street Journal intone:

The FBI isn’t supposed even to confirm or deny ongoing investigations, but in July 2016 Mr. Comey publicly exonerated Mrs. Clinton in the probe of her private email server on his own legal judgment and political afflatus. That should have been the AG’s responsibility, and Loretta Lynch had never recused herself.

“It is not the function of the Director to make such an announcement,” Mr. Rosenstein wrote. “The Director now defends his decision by asserting that he believed Attorney General Loretta Lynch had a conflict. But the FBI Director is never empowered to supplant federal prosecutors and assume command of the Justice Department.”

Mr. Rosenstein added that at his July 5 press appearance Mr. Comey “laid out his version of the facts for the news media as if it were a closing argument, but without a trial. It is a textbook example of what federal prosecutors and agents are taught not to do.”

Then, 11 days before the election, Mr. Comey told Congress he had reopened the inquiry. His public appearances since have become a self-exoneration tour to defend his job and political standing, not least to Democrats who blame a “Comey effect” for Mrs. Clinton’s defeat. Last week Mr. Comey dropped more innuendo about the Trump campaign’s alleged ties to Russia in testimony to Congress, while also exaggerating the new evidence that led his agents to reopen the Clinton file.

For all of these reasons and more, we advised Mr. Trump to sack Mr. Comey immediately upon taking office. The President will now pay a larger political price for waiting, as critics question the timing of his action amid the FBI’s probe of his campaign’s alleged Russia ties. Democrats are already portraying Mr. Comey as a liberal martyr, though last October they accused him of partisan betrayal.

The view closest to my own is expressed in this article at Reason:

In the short term, though, this looks very, very bad for Trump.

The three-paragraph letter announcing Comey’s firing reads like the world’s worst “the dog ate my homework” note and is hard to take seriously. Trump blames Comey’s firing on, of all things, Comey’s handling of Hilary Clinton’s classified emails last summer and makes a lame, backhanded attempt at clearing his own name (“While I greatly appreciate you informing me, on three separate occasions, that I am not under investigation…,” Trump wrote). It would be laughable if the matter were not so serious.

[…]

We don’t know whether Comey’s firing is a shrewd political calculation designed to cover-up something Trump doesn’t want the world to know—”Nixonian” has been the word of evening on cable news—or whether it was the impulsive decision of a president who appears to lack much concern for the prestige of the office he holds or for the limits of its powers.

On the question of whether Trump broke laws or whether Comey’s firing was part of a cover-up, Trump deserves to be treated as innocent until proven guilty. The same principle does not apply to the political ramifications of Tuesday’s firing.

Trump should lose any benefit of the doubt that he’s been getting from members of Congress and the general public.

All that I can add is that I believe that throughout this whole sorry mess Director Comey’s actions have been motivated primarily by a desire to protect the FBI’s reputation and his own. He rather clearly failed at both of those objectives.

The American people deserve complete, impartial, and de-politicized investigations of Hillary Clinton’s use of a private email server, the hacking of the DNC’s email, and any connections of Donald Trump or his subordinates with Russia. As of this writing it does not appear that we will get any of those.

Sometimes I think that a little perspective is in order. Take this article by A. Q. Smith in Current Affairs:

Here is a simple statement of principle that doesn’t get repeated enough: if you possess billions of dollars, in a world where many people struggle because they do not have much money, you are an immoral person. The same is true if you possess hundreds of millions of dollars, or even millions of dollars. Being extremely wealthy is impossible to justify in a world containing deprivation.

Even though there is a lot of public discussion about inequality, there seems to be far less talk about just how patently shameful it is to be rich. After all, there are plenty of people on this earth who die—or who watch their loved ones die—because they cannot afford to pay for medical care. There are elderly people who become homeless because they cannot afford rent. There are children living on streets and in cars, there are mothers who can’t afford diapers for their babies. All of this is beyond dispute. And all of it could be ameliorated if people who had lots of money simply gave those other people their money. It’s therefore deeply shameful to be rich. It’s not a morally defensible thing to be.

I think that Mr. or Ms. Smith is missing something basic. The world median household income is under $10,000. The U. S. median family income is nearly five times the world median and more than three standard deviations above normal, rich by any reasonable standard. In other words an ordinary U. S. family is rich.

There’s an interesting article by Nathan Heller at the New Yorker on the gig economy. I can’t quite decide whether it’s a lament for the jobs the Millennials’ grandparents had or not:

The reason for Perez’s visit was an unusual feature of Hello Alfred’s model: although the taskers can work part time, on a schedule they determine, all are full W-2 employees. Perez considered the company to be a model—creative, well-intentioned, and kind toward its employees—and praised it between pulls on his Coke heavy. “I appreciate that you’re understanding the high road is the smart road,” he said. “This is not an act of charity! This is an act of enlightened self-interest.”

He would have been more correct to call it self-interest tamed. Sapone told me later that it’s expensive to carry a staff of W-2 workers on a gigging schedule. The tax burden is greater for Hello Alfred than it would be on a 1099 model, the hourly rate is high, and the required human-resources infrastructure drives up the cost. Attrition is low, but W-2 companies are also vulnerable to various employee lawsuits from which 1099 employers are insulated.

For now, however, companies such as Hello Alfred, going above and beyond market demands out of principle, may be the gig economy’s best hope. And, occasionally, the principles travel. Blake Hinckley has already moved the most senior three of his six Happy Host staff cleaners onto W-2 status. The reason, he told me, is Sapone: they knew each other in Boston, and she convinced him that any honorable company owed its workers employment benefits.

There are a couple of things I found conspicuous by their absence in the article. The first was any real understanding of what working conditions of a half century ago were like. Since that was the working world in the early part of my career, I think I can sketch a picture of it.

You showed up at work on time and you stayed at work until the end of the day. Unless you were in shift work everyone worked the same schedule. In Germany bells actually sounded when you should start work, when it was time for a coffee break, when it was time to return from coffee break, when it was time for lunch, when lunch time was over, and when work was over. The company told you how to dress, how you should groom yourself, how you should speak and comport yourself on the job (in some cases off as well).

There were no cubicles. If you were a manager, you had an office. If you weren’t, you sat in a bullpen. In the bullpen there was no personalization of workspaces.

You didn’t have a computer on your desk. Unless you were a secretary you didn’t even have a typewriter. If you had a phone, it was a company phone. You didn’t make personal calls or long distance calls.

It was a severely hierarchical world. You reported to a superior and in the big business world, there was layer after layer of structure. Generally, your opinion was neither asked for nor wanted.

You corresponded in writing. You didn’t send memos up the chain. I’ve known people who were discharged for writing a memo to their boss’s boss. All of that means that you were dependent on other people for even basic business communications.

I think that most Millennials today would find that intolerable. I don’t believe they have the equipment to handle it.

The other thing I missed is that there did not seem to be any recognition that benefits, taxes, and administrative load figure in employee compensation. The more rules are imposed on the employer-employee relationship, the less predisposed employers are to add new employees.

There is a single sentence in Lawrence Summers’s Washington Post op-ed, cautioning the Fed governors, that tells us an enormous amount. Here’s the sentence:

Given how little the administration has actually changed policy, recent economic performance was pre-determined before Donald Trump took office.

Contrast that with this passage from John Maynard Keynes’s seminal work, The General Theory of Employment, Interest and Money:

Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.

That comparison illustrates why Keynes was the greatest economist of the 20th century while Summers is an enormously lesser figure. Keynes understood that economics is a science of human behavior and can only be understood in the context of enormously variable and mercurial human behavior. It is not mathematics; it is not physics.

As long as prominent economists insist on treating economics as though it were mathematics or physics rather than a science of human behavior, we should be very cautious in taking their advice.

Economic behavior is not determined by underlying physical factors. It is subject to random and even irrational variations from what those factors would dictate.

One of the reasons for the Clinton boom was that Bill Clinton was a cheerleader for the economy. One of the reasons that the economy has not had as robust a recovery following the financial crisis of 2007 as it might have was that Barack Obama wasn’t that kind of a cheerleader.

We ignore animal spirits at our risk.

German Chancellor Angela Merkel won big twice yesterday. As reported at Deutsche-Welle her Christian Democratic Union party won the state elections in Schleswig-Holstein:

Chancellor Angela Merkel’s conservative Christian Democrats (CDU) easily defeated the ruling Social Democrats (SPD) in state elections in Schleswig-Holstein on Sunday, exit polls and early returns broadcast by public service TV stations show. Provisional results show the CDU received some 33 percent as compared with around 26 percent for the SPD. The SPD has been governing in coalition with the Green party and the regionalist SSW in the northern state for the past five years.

The anti-immigrant Alternative for Germany (AfD) will enter the state parliament for the first time. The populist party garnered 5.5 percent of the vote, clearing the 5 percent hurdle needed to enter a German legislature. Although receiving just 3.5 percent of the vote, former junior coalition partners the SSW – a party representing the interests of Danish and Frisian minorities in the state – will keep some seats, as it is not subject to the same hurdle as other parties.

and Macron was elected French president. As Marine Le Pen quipped in anticipation of the election whoever was elected a woman would rule France.

I think we’re going to see majorities of both the Germans and the French voting to maintain the status quo. That the status quo cannot be maintained is irrelevant. They’ll try to kick the can down the road.

What is not being mentioned sufficiently is that the right-wing parties, the FN in France and the AfD in Germany, both showed increased strength yesterday. The Eurocrats have received their reprieve but it looks like it’s only temporary.

So, Macron won the French election as expected and as I suggested would happen yesterday. I don’t have much to say about it since I tend not to get into other countries’ politics for a simple reason: politics doesn’t travel well.

Some Republicans here backed Le Pen because she’s the “right wing” candidate without digging into what that means in France. Some Democrats backed Macron because he’s the center-left candidate, equally without learning what that actually means. IMO that’s incredibly short-sighted. You can’t understand another country’s politics without getting an in depth understanding of its economics, history, current events, and culture or, in other words, unless you’ve lived there, speak the language, and immerse yourself in it. Even then you probably won’t appreciate the nuances.

Yesterday I spent some time with a dear old friend who, coincidentally, happens to be one of the country’s foremost health care attorneys. We had brunch at a fabulous place called the Bryn Mawr Breakfast Club, a walkable distance from here if you’re into that sort of thing. I recommend it enthusiastically. It’s a joint, something I like, and I think I’d call its cuisine “fusion”.

After exchanging pleasantries about wives (one each), kids (his), and dogs (multiples), he asked me if I’d read the House’s health care bill. I responded that I was waiting for the ink to dry and to see what the Senate would do. For him that’s his job and I suspect he’s digging into it today.

We then started to talk policy. I think that he and I are largely in agreement although I think I’m more cynical about the prospects for reform than he. I think we’re in agreement that there are more questions than “who pays”, the primary topic under discussion over the last eight years. My view is that as long as prices rise at a multiple of increase in GDP, other prices, incomes, etc. in the final analysis it doesn’t matter who pays: it will be unaffordable and the system will need to change.