Tidbits Quotations
To Accompany the March 8, 2012 edition of Tidbits
http://www.trinity.edu/rjensen/tidbits/2012/tidbits030812.htm                        
Bob Jensen at Trinity University




How to Get the Rich to Share Their Marbles --- Clck Here
http://mindblog.dericbownds.net/2012/02/how-to-get-rich-to-share-their-marbles.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Mindblog+%28MindBlog%29&utm_content=Google+Reader

"When Agencies Go Nuclear: A Game Theoretic Approach to the Biggest Sticks in an Agency’s Arsenal," by Brigham Daniels, George Washington University, February 2012 ---
http://groups.law.gwu.edu/lr/ArticlePDF/80-2-Daniels.pdf


The American Dream ---
http://www.cs.trinity.edu/~rjensen/temp/SunsetHillHouse/SunsetHillHouse.htm

American Dream --- http://en.wikipedia.org/wiki/American_Dream
Often the goal of an American Dream is not so much betterment of your own life but betterment of the lives of your children and grandchildren.
The Hendersons featured in this article have two of their own girls plus a girl and boy that they adopted in China.

Could it be that tax revisionists in Denmark are beginning to anticipate (by reducing tax rates)
value added from something like an American Dream being introduced in Denmark?

Does the American Dream add more good than harm?

A Message from Jim Peters on the AECM

A couple of years ago, 60 minutes interview a bunch of Danish citizens because the Danes had once again topped the international surveys as the happiest people on earth. Americans, as with most international measures, were somewhere in the middle of the pack. The Dane's advice to Americans was to dump the American Dream because it caused more harm than good. The core of the American Dream seems to be equating wealth to happiness and setting off on a constant quest for more wealth. The Danes advice was to focus more on non-economic sources of happiness and learn to appreciate what you have.

Obviously, all this is an anathema to Americans and some of the reaction to the Dane's comments included epithets like "losers" and "hippies." But, the fact is that they are happier than Americans.

Jim

Jensen Comment
I take issue with Jim's quoted phrase that the American Dream in America "caused more harm than good." In my opinion, most of what we have that is good in America was built in one way or another on somebody's American Dream, a somebody willing to take financial and even physical risks, work tirelessly to build or rebuild something (possibly making creative innovations along the way), and pass the fruits of entrepreneurial labor on so that other Americans can find jobs and other Americans can enjoy the goods and services provided by the American Dreams of others.

Continued with pictures at
http://www.cs.trinity.edu/~rjensen/temp/SunsetHillHouse/SunsetHillHouse.htm

The China Dream:  Rise of the Billionaire Tiger Women from Poverty
"Tigress Tycoons," by Amy Chua, Newsweek Magazine Cover Story, March 12, 2012, pp. 30-39 ---
http://www.thedailybeast.com/newsweek/2012/03/04/amy-chua-profiles-four-female-tycoons-in-china.html

Like a relentless overachiever, China is eagerly collecting superlatives. It’s the world’s fastest-growing major economy. It boasts the world’s biggest hydropower plant, shopping mall, and crocodile farm (home to 100,000 snapping beasts). It’s building the world’s largest airport (the size of Bermuda). And it now has more self-made female billionaires than any other country in the world.

This is not only because China has more females than any other nation. Many of these extraordinary women rose from nothing, despite living in a traditionally patriarchal society. They are a beguiling advertisement for the New China—bold, entrepreneurial, and tradition-breaking.

Four standouts among China’s intriguing new superwomen are Zhang Xin, the factory worker turned glamorous real-estate billionaire, with 3 million followers on Weibo (China’s Twitter); talk-show mogul Yang Lan, a blend of Audrey Hepburn and Oprah Winfrey; restaurant tycoon Zhang Lan, who as a girl slept between a pigsty and a chicken coop; and Peggy Yu Yu, cofounder and CEO of one of China’s biggest online retailers. None of these women inherited her money, and unlike many of the richest Chinese who are reluctant to draw public scrutiny to their path to wealth, they are proud to tell their stories.

How did these women make it to the top in the wild, wild East? Did they pay a price, either in their family or their professional lives? What was it that distinguished them from their famously hardworking compatriots? As I set out to explore these questions, my interest was partly personal. All four of my subjects lived for extended periods in the West. As a Chinese-American, and now the infamous Tiger Mom, I was curious: how “Chinese” were these new Chinese tigresses?

It turns out that each of these women, in her own way, is a dynamic combination of East and West. Perhaps this is one secret to their breathtaking success.

Zhang Xin is a rags-to-riches tale right out of Dickens. She was born in Beijing in 1965. The next year Mao launched the Cultural Revolution, and millions, including intellectuals and party dissidents, were purged or forcibly relocated to primitive rural areas. Children were encouraged to turn in their parents and teachers as counterrevolutionaries. Returning to Beijing in 1972, Zhang remembers sleeping on office desks, using books for pillows. At 14 she left for Hong Kong with her mother, and for five years she worked in a factory by day, attending school at night.

“I was a miserable kid,” she told me. With her chic cropped leather jacket and infectious laughter, the cofounder of the $4.6 billion Soho China real-estate empire is today an odd combination of measured calculation and warm spontaneity. “My mother drove me in school so hard. That generation didn’t know how to express love.

“But it wasn’t just me. It was all of China. I don’t think anybody was happy. If you look at photos from those days, no one is smiling.” She mentioned the contemporary artist Zhang Xiaogang, who paints “cold, emotionless” faces. “That’s exactly how we all grew up.”

. . .

But the four women I interviewed are a new breed. Progressive, worldly, and open to the media, they are in many ways not representative of China, past or present. Perhaps they are merely the lucky winners of the 1990s free-for-all in China, a window that may already be closing. Or perhaps they are the forerunners of a China still to come, in which paths to success are far more open. Each has found a way to dynamically fuse East and West, to staggering commercial success. It may still be a long way off, but if China can achieve a similar alchemy—melding its tremendous economic potential and traditional values with Western innovation, the rule of law, and individual liberties—it would be a land of opportunity tough to beat.

The American Dream ---
http://www.cs.trinity.edu/~rjensen/temp/SunsetHillHouse/SunsetHillHouse.htm

 

Case Studies in Gaming the Income Tax Laws
http://www.cs.trinity.edu/~rjensen/temp/TaxNoTax.htm

Effective Tax Rates Are Lower Than Most People Believe
"Measuring Effective Tax Rates," by Rachel Johnson Joseph Rosenberg Roberton Williams, Urban-Brookings Tax Policy Center,  February 7, 2012 ---
http://www.taxpolicycenter.org/UploadedPDF/412497-ETR.pdf


Mexico and Chile Have the Lowest Poverty Rates South of the Rio Grande
"The Rise of Mexico's Middle Class:  A stable peso and freer trade have allowed the majority of the population to escape poverty,"
by Mary Anastasia O'Grady, The Wall Street Journal, March 5, 2012 ---
http://online.wsj.com/article/SB10001424052970203986604577257341514055760.html?mod=djemEditorialPage_t

Tales of beheadings, bloody shootouts and execution-style murders in this country have overshadowed another story that, in the long view of history, is undoubtedly more significant. It is the rise of a Mexican middle class.

This little-noticed development is thanks not to government welfare or foreign aid but mainly to the opening of markets and to the end of the central bank's practice of financing the government. Growth in the last decade has been nothing to brag about and key reforms are still needed if Mexico is to become a developed country. But as Banco de Mexico Governor Agustin Carstens told me over breakfast at the central bank here last month, institutional changes on the fiscal, financial and monetary fronts since the 1995 peso crisis have all contributed to increased price stability, a key factor in wealth accumulation.

One thing Mr. Carstens did not mention—since he is as diplomatically skillful as he is mindful of the high cost of inflation on Mexican households—is that Mexico has avoided running up huge fiscal deficits in recent years, despite a U.S. Treasury push for stimulus spending by the G-20. Mexico had been there and done that. When government goes hog-wild, markets worry that the debt will be monetized by the central bank. Mexican President Felipe Calderón of the National Action Party (PAN) wisely resisted.

It was as much a political decision as it was economic. In a recently released book "Mexico: A Middle Class Society," Mexican economist Luis de la Calle and Mexican political scientist Luis Rubio describe a nation where many politicians still think of the electorate as rural and poor but where consumption patterns reveal a trend toward urbanization and upward mobility. Judging by family incomes but also by things like housing rental and ownership, appliance purchases, Internet access and trips to the cinema, they argue that today "the middle-class population is the majority in Mexico."

This has occurred, the authors say, "by combining the income of various family members [including remittances from abroad] rather than through the increased income of an individual or couple." In other words, Mexico has not achieved the wage gains generally associated with a rising middle class.

So what's different? For one thing, the North American Free Trade Agreement has meant an opening of the retail sector, giving Mexicans access to quality products at competitive prices. Second, family incomes are no longer being destroyed by successive devaluations and bouts of inflation triggered by fiscal crises.

The gains from this fiscal and monetary restraint are likely to have major implications for North American stability because, as Messrs. de la Calle and Rubio write, "In Mexico, the middle class has felt the consequences of the financial crises more than any other social group. It's no coincidence that their political inclination is to be conservative and to reject any alternative that could destabilize their security."

Mr. Carstens describes the process of "keeping a lid on inflation" as a "balancing act" because rising international commodity costs "generate upward pressure" on prices and so can peso weakness. The bank, he says, has tried "to keep [interest] rates as low as possible given [these constraints] in order to support as much as possible the economy." It hasn't been easy. Federal Reserve Chairman Ben Bernanke's decision to flood the world with dollars has pushed food prices higher while financial scares around the globe—subprime and Europe—invariably send investors rushing out of currencies like the peso and into the dollar.

Continued in article

Jensen Comment
I wish the U.S. had a more positive attitude toward free trade and electoral concern over the inflation cannon called the trillion-dollar deficit boomer financed on a Chinese credit card. In spite of the image of lazy bandidos going back to Hollywood theater 100 years ago, Mexico has a relatively good work force. Mexico is helped by being an oil producing OPEC nation, although the comparative advantage of oil exports is waning.

Chile's economic success, including a quite good health care system, is attributed to various factors, not the least of which is free trade and capitalist work ethic ---
http://en.wikipedia.org/wiki/Chicago_Boys


Let's tax the rich, but please do not gore my ox.
For every tax action there's a reaction!

If town, county, state, and school district bonds become taxable it will clobber those government institutions and the local taxpayers that must make up the difference for higher interest expenses. Much of the difference will be made up by increases in property taxes and rents (when property taxes are passed on to renters).

If home mortgage interest is no longer deductable it could be the death knell for an already very, very sick real estate market.

If energy credits and deductions are eliminated it will destroy the alternative-energy market. One of my closest friend up here just invested $8,000  in a solar panel that heats his hot water tank. He carefully worked out the costs and returns (savings) on this investment and concluded that if it were not for the tax rebate this investment would be totally stupid because payback takes so many decades.

And then there's President Obama's proposal to limit charity deductions. When the dust settles this will be a controversial transfer from charities and non-tor profit organizations (like colleges, universities, and churches)  to the federal government.

"Less charity and more taxes, please," by Scott Walter, Philanthropy Daily, March 6, 2012 ---
http://www.philanthropydaily.com/?p=8462

For the fourth time, the President has proposed limiting charitable deductions. The proposal has received little notice from the mainstream press, though the nonprofit world continues to object. (See Charitable Deduction Central, provided by the Alliance for Charitable Reform.)

Michael Barone, Washington wiseman and co-author of The Almanac of American Politics, sees a connection between the desire to cut into charitable giving and another presidential desire, namely, raising taxes:

The clearly intended result would be a massive transfer of money from the voluntary sector of society into government.

Fewer citizens’ dollars would flow into either private charities or private investments. Instead, the central government would pick and choose who receives those dollars and for what purposes. It’s “increasingly apparent,” writes Joanne Florino of the Triad Foundation,

that attacks on the charitable deduction are based on the beliefs that the government knows how to spend money better than private citizens, that the public sector can pick winners and losers in the charitable sector, and that monolithic solutions trump diversity and experimentation. If we choose to go down this rocky and treacherous path, we send a clear message to our country that a strong civil society isn’t really that important….

And not only dollars are at stake, Barone adds. The same Government First philosophy also brings America the

mandate that voluntary-sector organizations must buy health insurance that finances procedures their leaders consider deeply immoral. Centralized government will decide what’s moral, and you’ll be forced to pay for it.

Barone warns that

Alexis de Tocqueville in the 1830s identified the voluntary sector as a unique feature of American democracy, one that gave it strength and character. He compared it positively with his own France, where centralized government stifled initiative and innovation.

The country must now choose between those who want “to make this country more like Tocqueville’s France,” and those “who want to keep it more like Tocqueville’s America.”

Tocqueville famously praised our nation in Democracy in America. Less often read are his criticisms of his beloved France, both before and after its bloody Revolution. In The Old Regime and the Revolution, Tocqueville described how a ravenous central government drained the life from civil society and suffocated the charitable impulse:

The government of the old regime had already taken away from the French any possibility, or desire, of helping one another. When the Revolution happened, one would have searched most of France in vain for ten men who had the habit of acting in common….

 Contemplating his unbalanced homeland, Tocqueville gave the same warning as Barone:

our quarrel is not about the value of freedom per se, but stems from our opinion of our fellow men … a man’s admiration of absolute government is proportionate to the contempt he feels for those around him.

 

FOOTNOTE: The director of the White House Office of Social Innovation attempted to justify its latest charitable deduction proposal here. Rick Cohen of Nonprofit Quarterly has a helpful response; he observes that the director’s justification “doesn’t address why the proposal has failed four times before this, or why the nonprofit sector [whose leaders mostly voted for Obama] seems so adamantly opposed to a tax proposal that he and his White House colleagues believe has such inconsequential impacts on charitable giving.”

 

Jensen Comment
But the question remains on how best to greatly reduce the massive budget deficits projected for the future if something drastic is not done.


"A Wichita Shocker You can beat city hall," The Wall Street Journal, March 6, 2012 ---
http://online.wsj.com/article/SB10001424052970203986604577255200049450794.html#mod=djemEditorialPage_t

Local politicians like to get in bed with local business, and taxpayers are usually the losers. So three cheers for a voter revolt in Wichita, Kansas last week that shows such sweetheart deals can be defeated.

In late 2011 the Wichita city council passed (six votes to one) a bill exempting the new Ambassador Hotel, owned by real-estate developers, from 75% of the city hotel tax, on top of at least $10 million in other subsidies. The measure was sold in the name of jobs and urban redevelopment, and the local power brokers were all for it: the Chamber of Commerce, the political class, the city newspaper. All the skids were greased and, truth be told, hotel taxes are too high in Wichita, while the money at stake, $2.25 million over 15 years, was small.

But voters were so enraged by the insider dealing that they launched a petition drive for a voter referendum. Despite hundreds of thousands of dollars spent by hotel advocates, almost 10 times more than opponents spent, voters routed the subsidy 61% to 39%.

The elites are stunned, but they shouldn't be. The core issue is fairness—and not of the soak-the-rich kind that President Obama practices. One of the leaders of the opposition, Derrick Sontag, director of Americans for Prosperity in Kansas, says that what infuriated voters was the veneer of "political cronyism."

What Americans seem to want most from government these days is equal treatment. They increasingly realize that powerful government nearly always helps the powerful, whether the beneficiaries are a union that can carve a sweet deal as part of an auto bailout or corporations that can hire lobbyists to write a tax loophole.

This is why Americans hate the Obama Administration's Solyndra handouts, or rebel when city hall abuses eminent domain to bully people out of their homes for a big business the way New London, Connecticut did in the Kelo case for Pfizer Corp. Let's hope for more such popular uprisings.

Bob Jensen's threads on the sad state of governmental accounting and accountability ---
http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting


"Republicans Blow With the Wind:  Another industry wants to keep its taxpayer subsidies," The Wall Street Journal, March 7, 2012 ---
http://online.wsj.com/article/SB10001424052970203458604577265751564200644.html#mod=djemEditorialPage_t

Congress finally ended decades of tax credits for ethanol in December, a small triumph for taxpayers. Now comes another test as the wind-power industry lobbies for a $7 billion renewal of its production tax credit.

The renewable energy tax credit—mostly for wind and solar power—started in 1992 as a "temporary" benefit for an infant industry. Twenty years later, the industry wants another four years on the dole, and Senator Jeff Bingaman of New Mexico has introduced a national renewable-energy mandate so consumers will be required to buy wind and solar power no matter how high the cost.

The truth is that those giant wind turbines from Maine to California won't turn without burning through billions upon billions of taxpayer dollars. In 2010 the industry received some $5 billon in subsidies for nearly every stage of wind production.

The "1603 grant program" pays up to 30% of the construction costs for renewable energy plants (a subsidy that ended last year but which President Obama calls for reviving in his budget). Billions in Department of Energy grants and loan guarantees also finance the operating costs of these facilities. Wind producers then get the 2.2% tax credit for every kilowatt of electricity generated.

Because wind-powered electricity is so expensive, more than half of the 50 states have passed renewable energy mandates that require utilities to purchase wind and solar power—a de facto tax on utility bills. And don't forget subsidies to build transmission lines to deliver wind power to the electric grid.

What have taxpayers received for this multibillion-dollar "investment"? The latest Department of Energy figures indicate that wind and solar power accounted for a mere 1.5% of U.S. energy production in 2010. DOE estimates that by 2035 wind will provide a still trivial 3.9% of U.S. electricity.

Even that may be too optimistic because of the natural gas boom that has produced a happy supply shock and cut prices by more than half. Most economic models forecasting that renewable energy will become price competitive are based on predictions of natural gas prices at well above $6 per million cubic feet, more than twice the current cost.

The most dishonest claim is that wind and solar deserve to be wards of the state because the oil and gas industry has also received federal support. That's the $4 billion a year in tax breaks for oil and gas (which all manufacturers receive), but the oil and gas industry still pays tens of billions in federal taxes every year.

Wind and solar companies are net tax beneficiaries. Taxpayers would save billions of dollars if wind and solar produced no energy at all. A July 2011 Energy Department study found that oil, natural gas and coal received an average of 64 cents of subsidy per megawatt hour in 2010. Wind power received nearly 100 times more, or $56.29 per megawatt hour.

Most Congressional Democrats will back anything with the green label. But Republican support for big wind is a pure corporate welfare play that violates free-market principles. Last week six Republican Senators—John Boozman of Arkansas, Scott Brown of Massachusetts, Charles Grassley of Iowa, John Hoeven of North Dakota, Jerry Moran of Kansas and John Thune of South Dakota—signed a letter urging their colleagues to extend the production tax credit.

Continued in article

 


Worst Fears Coming True:  Piling the Pension Debt Obligations on Top of Pension Debt Obligations
Critics say it is a budgetary sleight-of-hand that simply kicks pension costs down the road
"To Pay New York Pension Fund, Cities Borrow From It First,"
by Danny Hakim,  The New York Times, February 27, 2012 ---
http://www.nytimes.com/2012/02/28/nyregion/to-pay-new-york-pension-fund-cities-borrow-from-it-first.html?_r=1

When New York State officials agreed to allow local governments to use an unusual borrowing plan to put off a portion of their pension obligations, fiscal watchdogs scoffed at the arrangement, calling it irresponsible and unwise.

And now, their fears are being realized: cities throughout the state, wealthy towns such as Southampton and East Hampton, counties like Nassau and Suffolk, and other public employers like the Westchester Medical Center and the New York Public Library are all managing their rising pension bills by borrowing from the very same $140 billion pension fund to which they owe money.

Across New York, state and local governments are borrowing $750 million this year to finance their contributions to the state pension system, and are likely to borrow at least $1 billion more over the next year. The number of municipalities and public institutions using this new borrowing mechanism to pay off their annual pension bills has tripled in a year.

The eagerness to borrow demonstrates that many major municipalities are struggling to meet their pension obligations, which have risen partly because of generous retirement packages for public employees, and partly because turbulence in the stock market has slowed the pension fund’s growth.

The state’s borrowing plan allows public employers to reduce their pension contributions in the short term in exchange for higher payments over the long term. Public pension funds around the country assume a certain rate of return every year and, despite the market gains over the last few years, are still straining to make up for steep investment losses incurred in the 2008 financial crisis, requiring governments to contribute more to keep pension systems afloat.

Supporters argue that the borrowing plan makes it possible for governments in New York to “smooth” their annual pension contributions to get through this prolonged period of market volatility.

Critics say it is a budgetary sleight-of-hand that simply kicks pension costs down the road.

Continued in article

Bob Jensen's threads on the sad state of pension funding in most sectors in the U.S. economy ---
http://www.trinity.edu/rjensen/Theory02.htm#Pensions

The sad state of governmental accounting and accountability ---
http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting

 


The U.S. does not have a significantly smaller welfare state than the European nations. We’re just better at hiding it.

"America Is Europe," by David Brooks, The New York Times, February 23, 2012 ---
http://www.nytimes.com/2012/02/24/opinion/brooks-america-is-europe.html?_r=3&ref=opinion

We Americans cherish our myths. One myth is that there is more social mobility in the United States than in Europe. That’s false. Another myth is that the government is smaller here than in Europe. That’s largely false, too.

The U.S. does not have a significantly smaller welfare state than the European nations. We’re just better at hiding it. The Europeans provide welfare provisions through direct government payments. We do it through the back door via tax breaks.

For example, in Europe, governments offer health care directly. In the U.S., we give employers a gigantic tax exemption to do the same thing. European governments offer public childcare. In the U.S., we have child tax credits. In Europe, governments subsidize favored industries. We do the same thing by providing special tax deductions and exemptions for everybody from ethanol producers to Nascar track owners.

These tax expenditures are hidden but huge. Budget experts Donald Marron and Eric Toder added up all the spending-like tax preferences and found that, in 2007, they amounted to $600 billion. If you had included those preferences as government spending, then the federal government would have actually been one-fifth larger than it appeared.

The Organization for Economic Cooperation and Development recently calculated how much each affluent country spends on social programs. When you include both direct spending and tax expenditures, the U.S. has one of the biggest welfare states in the world. We rank behind Sweden and ahead of Italy, Austria, the Netherlands, Denmark, Finland and Canada. Social spending in the U.S. is far above the organization’s average.

You might say that a tax break isn’t the same as a spending program. You would be wrong.

The late David Bradford, a Princeton economist, had the best illustration of how the system works. Suppose the Pentagon wanted to buy a new fighter plane. But instead of writing a $10 billion check to the manufacturer, the government just issued a $10 billion “weapons supply tax credit.” The plane would still get made. The company would get its money through the tax credit. And politicians would get to brag that they had cut taxes and reduced the size of government!

This is essentially what’s been happening in sphere after sphere. Government controls more and more of the economy. It just does it by getting people to do what it wants by manipulating the tax code. Politicians get to take credit for addressing problem after problem, but none of their efforts show up as unpopular spending.

Many of these individual tax expenditures are good for the country, like the charitable deduction and the earned income tax credit. But, as the economist Bruce Bartlett demonstrates in his impeccably fair-minded book, “The Benefit and the Burden,” the cumulative effect of these tax breaks is terrible. Like overgrown weeds, the tangle of tax breaks distorts behavior, clogs the economy and deprives the government of revenue.

And because they are hidden, many of the tax expenditures go to those who need them least, the well connected and established over the vulnerable and the entrepreneurial.

The good news is that change might finally be coming. The Obama administration has always theoretically supported a simpler tax code even while operationally it has often muddied it up. Nonetheless, this week, Treasury Secretary Timothy Geithner unveiled a modest but sensible plan to simplify the corporate tax code. The plan is not perfect. The Obama technocrats love tinkering and complexity. But Geithner’s plan moves us a small step in the right direction and provides a sensible foundation for the big tax negotiations to come.

Mitt Romney has a bigger proposal, which reduces individual rates across the board and closes some loopholes. It’s more comprehensive than the Geithner approach, but it suffers from two weaknesses. First, it’s politics as usual. Romney is specific about the candy — lower tax rates — but vague about the vegetables — what loopholes would have to be closed to pay for them.

Moreover, it’s unimaginative. Republicans are perpetually trying to do what Ronald Reagan did. But top tax rates today aren’t as onerous as they were in 1980, so lowering them won’t produce as many benefits. Imagine if Reagan ran for office promising to recreate the glory days of Thomas Dewey and you get a sense of how much G.O.P. thinking is stuck in the past.

Continued in article


Video  --- http://www.youtube.com/watch?v=FYCBGSdtfN8
"David Brooks on the Dangerous Division Between Reason and Emotion, Animated,"  by Maria Popova, Brain Pickings, February 16, 2012 ---
Click Here
http://www.brainpickings.org/index.php/2012/02/16/tomas-flodr-rsa-animation-david-brooks/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+brainpickings%2Frss+%28Brain+Pickings%29&utm_content=Google+Reader

Watch the Video at http://www.youtube.com/watch?v=FYCBGSdtfN8

 

The U.S. does not have a significantly smaller welfare state than the European nations. We’re just better at hiding it.

"America Is Europe," by David Brooks, The New York Times, February 23, 2012 ---
http://www.nytimes.com/2012/02/24/opinion/brooks-america-is-europe.html?_r=3&ref=opinion

We Americans cherish our myths. One myth is that there is more social mobility in the United States than in Europe. That’s false. Another myth is that the government is smaller here than in Europe. That’s largely false, too.

The U.S. does not have a significantly smaller welfare state than the European nations. We’re just better at hiding it. The Europeans provide welfare provisions through direct government payments. We do it through the back door via tax breaks.

For example, in Europe, governments offer health care directly. In the U.S., we give employers a gigantic tax exemption to do the same thing. European governments offer public childcare. In the U.S., we have child tax credits. In Europe, governments subsidize favored industries. We do the same thing by providing special tax deductions and exemptions for everybody from ethanol producers to Nascar track owners.

These tax expenditures are hidden but huge. Budget experts Donald Marron and Eric Toder added up all the spending-like tax preferences and found that, in 2007, they amounted to $600 billion. If you had included those preferences as government spending, then the federal government would have actually been one-fifth larger than it appeared.

The Organization for Economic Cooperation and Development recently calculated how much each affluent country spends on social programs. When you include both direct spending and tax expenditures, the U.S. has one of the biggest welfare states in the world. We rank behind Sweden and ahead of Italy, Austria, the Netherlands, Denmark, Finland and Canada. Social spending in the U.S. is far above the organization’s average.

You might say that a tax break isn’t the same as a spending program. You would be wrong.

The late David Bradford, a Princeton economist, had the best illustration of how the system works. Suppose the Pentagon wanted to buy a new fighter plane. But instead of writing a $10 billion check to the manufacturer, the government just issued a $10 billion “weapons supply tax credit.” The plane would still get made. The company would get its money through the tax credit. And politicians would get to brag that they had cut taxes and reduced the size of government!

This is essentially what’s been happening in sphere after sphere. Government controls more and more of the economy. It just does it by getting people to do what it wants by manipulating the tax code. Politicians get to take credit for addressing problem after problem, but none of their efforts show up as unpopular spending.

Many of these individual tax expenditures are good for the country, like the charitable deduction and the earned income tax credit. But, as the economist Bruce Bartlett demonstrates in his impeccably fair-minded book, “The Benefit and the Burden,” the cumulative effect of these tax breaks is terrible. Like overgrown weeds, the tangle of tax breaks distorts behavior, clogs the economy and deprives the government of revenue.

And because they are hidden, many of the tax expenditures go to those who need them least, the well connected and established over the vulnerable and the entrepreneurial.

The good news is that change might finally be coming. The Obama administration has always theoretically supported a simpler tax code even while operationally it has often muddied it up. Nonetheless, this week, Treasury Secretary Timothy Geithner unveiled a modest but sensible plan to simplify the corporate tax code. The plan is not perfect. The Obama technocrats love tinkering and complexity. But Geithner’s plan moves us a small step in the right direction and provides a sensible foundation for the big tax negotiations to come.

Mitt Romney has a bigger proposal, which reduces individual rates across the board and closes some loopholes. It’s more comprehensive than the Geithner approach, but it suffers from two weaknesses. First, it’s politics as usual. Romney is specific about the candy — lower tax rates — but vague about the vegetables — what loopholes would have to be closed to pay for them.

Moreover, it’s unimaginative. Republicans are perpetually trying to do what Ronald Reagan did. But top tax rates today aren’t as onerous as they were in 1980, so lowering them won’t produce as many benefits. Imagine if Reagan ran for office promising to recreate the glory days of Thomas Dewey and you get a sense of how much G.O.P. thinking is stuck in the past.

Continued in article

Case Studies in Gaming the Income Tax Laws
http://www.cs.trinity.edu/~rjensen/temp/TaxNoTax.htm

Effective Tax Rates Are Lower Than Most People Believe
"Measuring Effective Tax Rates," by Rachel Johnson Joseph Rosenberg Roberton Williams, Urban-Brookings Tax Policy Center,  February 7, 2012 ---
http://www.taxpolicycenter.org/UploadedPDF/412497-ETR.pdf


The Zimbabwe School of Economics:  In effect printing $2 trillion
"The High Cost of the Fed's Cheap Money Encouraging consumption at the expense of saving inhibits long-term economic growth," by Andy Laperriere, The Wall Street Journal, March 5, 2012 ---
http://online.wsj.com/article/SB10001424052970203753704577255641618477730.html#mod=djemEditorialPage_t

During the past three years, the Federal Reserve has tripled the size of its balance sheet—in effect printing $2 trillion—something it had never done in its nearly 100-year history. The Fed has lowered short-term interest rates to zero and signaled that it will keep them at that level for years. Inflation-adjusted short-term rates, or real rates, have been in the minus 2% range during the past couple of years for the first time since the 1970s.

The unfortunate fact is, as Milton Friedman famously observed, there is no free lunch. After the Fed's loose monetary policy helped spur the boom-bust in

Artificially reducing Treasury yields provides a near-term benefit as federal borrowing costs are lower, but this unusually low cost of borrowing is enabling Congress and the president to run an unsustainable fiscal policy that could eventually lead to an economic calamity. Governments like Greece and Italy benefited from artificially low rates for years, and those low rates undoubtedly played a key role in those governments not confronting their serious fiscal imbalances.

Low rates have helped those who have been able to borrow or refinance their debts at lower rates, especially homeowners. But this has come at a high cost to savers. Zero rates are a major problem for any saver, but it is especially difficult for those in or near retirement. Government bonds are investments that now offer return-free risk.

The Fed is hoping the lack of return in certificates of deposit and bonds (or more accurately, negative returns, adjusted for inflation) will prompt investors to take on more risk by investing in stocks, high-yield corporate bonds and other investments. This is pushing people who have a low risk tolerance to take on more risk than may be advisable.

Moreover, QE and ZIRP are specifically designed to discourage saving and encourage people to consume more now to boost near-term gross domestic product. But saving is deferred consumption—people save to earn a return so that they may consume more in the future (say, for retirement or a major purchase). Scores of economists have testified before Congress for decades that Americans don't save enough and that this inhibits long-term economic growth. Prosperity does not come from spending; it comes from work, saving and investment.

Defenders of QE and ZIRP would say that rather than borrowing economic growth from the future, these policies merely smooth the economic cycle and reduce the economic dislocation associated with deep recessions or weak recoveries. Of course, that was the rationale for the exceptionally low rates during the 2002-2004 period, which, like today, were specifically aimed at depressing saving and encouraging consumption. Rather than smooth the economic cycle, that strategy helped create an historic boom-bust.

Some say we must encourage higher consumption because it accounts for more than 70% of GDP, and the recovery is too fragile to risk allowing a rise in the savings rate. But the recession was officially over two years ago. For at least the past decade, monetary policy has consistently punished prudent savers.

Worse, the Fed is promising to keep these policies in place for years to come. When do we ever get to the point where we allow interest rates to return to some kind of natural equilibrium and allow the economy to gradually rebalance in a way that would boost long-term economic growth?

There is no doubt the Fed is doing what it believes is best. But in addition to the risk of inflation inherent in QE and ZIRP, which Chairman Ben Bernanke has said he is 100% confident he can prevent, Fed officials are dismissive of the notion that there are significant costs or trade-offs associated with the policy they are pursuing.

This is disconcerting. Is there really no chance, zero chance, the Fed will be late to pick up signs of inflation? What accounts for such confidence—given that the Fed dismissed criticisms from 2002-2004 that its policies would distort economic decisions and cause hard-to-predict imbalances, that it was oblivious to the housing collapse well into 2007, and that to this day many Fed officials refuse to accept that monetary policy played any role in creating the housing bubble?

During the bubble, Fed officials argued they couldn't spot bubbles in advance, but that an aggressive monetary policy response could limit the downside impact if a bubble were to burst. As it turns out, the dislocation from the housing bust and the financial crisis have been far more costly than almost anyone imagined. Shouldn't that cause policy makers inside and outside of the Fed to ask hard questions as it pursues its unprecedented campaign of quantitative easing and zero rates?housing, it's remarkable how little attention has been devoted to exploring the costs of Fed policy.

A few critics of quantitative easing (QE) and the zero interest rate (ZIRP) have correctly pointed out that these policies weaken the dollar and thereby reduce the purchasing power of American paychecks. They increase the risk of future inflation, obscure the true cost of the unsustainable fiscal policy the federal government is running, and transfer wealth from savers to debtors.

But QE and ZIRP also reduce long-term economic growth by punishing savers, reducing saving and investment over the long run. They encourage the misallocation of resources that at a minimum is preventing the natural rebalancing of our economy and could sow the seeds of another painful boom-bust.

One intended effect of a loose monetary policy is a weaker dollar, which can help gross domestic product by boosting exports. But a weaker dollar also raises import prices (such as oil prices) for American consumers. For the average American family, this adverse impact has likely outweighed any positive impact from QE and ZIRP.

The cost of a weaker dollar for most people is not offset by temporarily higher stock prices for two reasons. First, most Americans don't own much stock. Second, stock prices are not going to be higher 10 years from now because of the Fed's policies, so the effect is to bring forward equity returns, not increase long-term returns.

Bob Jensen's threads on the pros and cons of the bailout as it evolved ---
http://www.trinity.edu/rjensen/2008Bailout.htm


"Why the super-rich love the UK:  It's obviously not for the weather, so what is it about Britain that the obscenely wealthy find so attractive?" by John Lanchester, The Guardian, February 24, 2012 ---
http://www.guardian.co.uk/society/2012/feb/24/why-super-rich-love-uk?cat=society&type=article

Here's something you definitely shouldn't do if you're even a tiny bit leftwing and suffer from high blood pressure: look at a document called the Forbes cost of living extremely well index. Forbes is an American business magazine, and its cost of living extremely well index is an annual survey of price trends for things popular at the very, very top end of the income distribution. The riveting thing about the CLEWI isn't the headline attached, because that tends to be the same every year. The headline news is usually that very expensive things have gone up at a rate higher than the rate of inflation – often by as much as double. Common sense leads us not to be surprised at that, since people who don't care what stuff costs will logically not mind too much if the cost of that stuff goes up. What's gripping about the index – a basket of 40 goods and services targeting the super-rich – is the detail of what's on it.

In fact, that's always true for these indices. The fun is in the specifics. The UK Office for National Statistics publishes my favourite one. This measures inflation using a basket of goods in common use – a category that is constantly shifting, and at the moment includes mobile phone downloads, sparkling wine and long-sleeved cotton shirts. There is, in a wonky way, something moving about the close attention the resident stattos give to detailing the realities of ordinary lives; it's like a novel about British domestic life in 2012. Oven-ready joints of meat, for example, burst on to the index last year with this explanatory note: "Replaces pork shoulder joint reflecting a longer-term movement to prepared food and replacing an item which was sometimes difficult to collect since joints are sometimes only available towards the end of the week and on weekends." Someone has really thought hard about that. It's reassuring to contemplate a household that has managed to buy every single thing on the index, from hardback fiction to hair conditioner, from a provincial newspaper to women's high-heeled shoes to dried fruit (all those being new additions in 2011).

The super-rich index is made up of items that are, let's say, different. A Russian sable coat at $240,000, a facelift for $18,500, a thoroughbred yearling racehorse at $319,340, a Sikorsky helicopter at $14.8m, an arrangement of flowers changed weekly for six rooms at $98,100 or a year's tuition at Harvard at $52,652. It is, in a dark way, hilarious that a Harvard education counts as a luxury good. If all that starts getting too much, you can always decompress with a week at the Golden Door Spa in California, $6,750, or 45 minutes with an Upper East side shrink for $325. This, too, is like a novel, a novel about people whose lives are full of stuff you don't want to own and things you don't want to do. It's a novel, I find, that I don't particularly want to read.

I also didn't want to write it. A few years ago, when I set out to write a novel about contemporary London, my point of departure was to think about who I wanted to be in it. I wanted to have characters who were lucky and unlucky, immigrants and natives, mindful and oblivious, poor and rich – but the question there quickly became, just how rich? London is full of the 1%, the people at the top of the income distribution, whose circumstances are at the moment so much on the agenda for the other 99%. But the thing is that while the 1% are rich by everyone else's standards, they are not rich by the standards that rich people use themselves. To be in the 1%, in income terms, you have to earn – or, as the Socialist Worker has it, "earn" – £150,000 a year. That's a lot, to most people's way of thinking – but not to the way of thinking of the rich. I've asked quite a few people in the world of money, the kind of people who know properly seriously rich people, what counts are being properly, seriously rich. The consensus figure is that you need $100m. At that level, even the seriously rich agree that you are rich. Anyone with that amount of money is obviously way, way past the point where they will never have to think about any of their material needs, ever again.

There are more of these people in the UK than there used to be, and they have more money, too. In 1990, to come in the top 200 of the Sunday Times's annual rich list, you needed £50m. Now you need £430m. Income levels for most social groups have stagnated in the last few decades, but the super-rich have continued to get sharply richer, and to own an ever increasing share of the economic cake. This reverses the trend of the preceding few decades – and by the way, the fact that the process has continued in that direction, even as the economy contracts and average household incomes decline, refutes the whole rationale for the laissez-faire attitude to high incomes. The argument for allowing the rich to grow richer is that it starts a process where everyone else grows richer, too – but this simply hasn't happened. In fact, they're growing richer while everyone else grows poorer. "Economic imbalances and social inequality" were the top global risks cited at the World Economic Forum this year; there were 70 billionaires in Davos, so it's a subject they know something about.

As for what this has got to do with London, the answer is, perhaps too much. The capital of the UK has one of the world's largest concentrations of the super-rich, and the reason for that is that we have chosen to have them here, as a matter of deliberate government policy. The relevant policy is the notorious provision in relation to "domicile", as a definition of an individual's tax status. Every other civilised country in the world taxes its inhabitants on their income and capital: the basic rule is that if you live in a place, you pay its taxes. But it's different in the UK. Here, if you come from overseas, and can prove strong links with overseas, and can prove that you are going to return to overseas, and can therefore establish a "domicile" overseas that is different from your "residency" in the UK – well, in that case, you are treated entirely differently for tax purposes. You pay tax on your income in the UK, like the rest of us; and you can remit capital to the UK; but your overseas income, as long as you keep it overseas, is out of the reach of the Inland Revenue.

What this policy amounts to, in practice, is that the UK has a gigantic sign hanging over it saying, "Rich People! Come and Live Here! You Won't Have to Pay Any Tax!" It is an extraordinary policy for any developed nation, and not one that anyone else has been tempted to adopt. Other countries have low tax rates to attract businesses – in the EU, Ireland and the Netherlands stand out – but the only countries that have anything even vaguely resembling the British policy towards the super-rich are places that are openly accepted as tax havens, such as Monaco and Switzerland. (And even in Switzerland the tax policies vary canton by canton, and are regularly put to the vote.) Tyler Cowen, a respected American economist with a popular blog, Marginal Revolution, describes Britain quite simply as a "residential tax haven". A glance at any list of this country's richest residents will not confirm this fact, because it's impossible to know the private details of individual tax arrangements, but it is striking that of the 12 families and individuals at the top of the Sunday Times rich list, only two are citizens of the UK. The others, clearly, are attracted here by the weather.

The remarkable thing about this policy is twofold: first, it has been consistent across government after government, for decades; second, nobody ever defends or explains it in public. Every few years there's a small populist flurry of complaint against the domicile laws, and the government mutters something, and even very occasionally does something, such as introduce the £30,000 annual fee for domicile, rising later this year to £50,000. But to the super-rich such sums are – as a brief glance at the CLEWI will show – significantly less than the florists' bill at any one of their many properties. Parties deplore the domicile policy when they're in opposition but leave it intact in office.

Why? Because they think the super-rich bring more than they take away. The Treasury documents on domicile don't tell us much, and they sum up the benefits of the policy in a single sentence. "The government recognises that non-domiciled individuals ('non-domiciles') can make a valuable contribution to the UK economy – through the money they spend here, the funds they invest, the skills they bring as employees and the tax they pay." Leaving aside the huge question that immediately raises – why are we the only country which sees it that way? – the most important of those criteria is the first of them: "through the money they spend here."

"Funnily enough, though everyone remembers the Arabs, it started out with Greek shipping magnates," Michael Wilson, an accountant, told me. "That was when the Treasury first latched on to the fact that we could attract these sorts of people through the non-domicile rule. Then Arabs started coming here after the oil price shock of 1974. Then it was Asians, then Russians. It's to do with the amount they spend here."

Why doesn't it bring Americans here?

"Because American citizens pay tax on their worldwide income, wherever they are," he said, then shrugged, and added, "If every government in the world followed that policy, things would look very different."

It's strange that the Treasury doesn't publish any studies on the amount spent in the UK by affluent non-doms, but the effects are everywhere apparent in London, and are compounded by the presence of a second group, that of the international super-rich who don't live full-time in the UK but who own a property here. This group are a big part of the reason London, at least in its central areas, is so insulated from the economic troubles affecting the rest of the country. They are buying in London for a number of linked reasons, including the robustness of the legal system and the stability of the political system, but the crucial reason for the current boom at the top end of the capital's property market is sterling's decline in value. Central London property might seem insanely expensive to us, but we aren't paying for it in euros. At its nadir, sterling had lost 30% of its value against both the dollar and the euro – that's amazing, considering that a devaluation of only 14% destroyed the Labour government's reputation for economic competence in the late 1960s. The euro has weakened a bit since, but London property is still, for anyone paying with foreign currency, a bargain. Last year, half a billion pounds of property was bought in London by Greek and Italian buyers alone. A large part of their motive, we can be sure, was simply to get their money out of their own country and out of the euro; the acquisition of a bolt-hole here is a pleasant way of hedging against troubles at home. It was buyers of this sort, mainly targeting super-premium areas such as Mayfair and Knightsbridge, who last year made London property prices rise more than those in New York, Paris or Hong Kong.

It's these two groups, non-doms and the internationally mobile, who mainly make up the London super-rich. They aren't the 1%, or even the 0.1%, but the 0.01% – the few thousand richest people in the country. We go out of our way to entice them here: that's what the non-dom rule is for. But there are almost no studies of their effect on the UK; of their impact on the debate about inequality and fairness; of their impact on the capital of having a group of people who simply don't have to pay any attention to what things cost. One of the salient qualities of life in London, remarked on by long-term residents, by newcomers and by tourists, in short by everybody, is how expensive everything is. City pay is a big part of that, but the international super-rich contribute to it, too. The money they spend is obviously welcome, but it seems to me possible that it comes at too high a price to the rest of our polity. Inequality feeding down from the top of the income distribution is provably linked to a whole range of negative consequences for society, from higher rates of mental illness and incarceration and family breakdown to alcoholism, drug abuse and suicide. By choosing to have the tax system we have, we are choosing to make these problems worse; and we are concentrating the top of the inequality range in our capital city. The consequences of this need some real study. And yet it's infinitely better to live in a country where people want to be, rather than a country that people want to flee – and these people's presence here reflects that fact, too.

"Community", that loaded word so beloved of politicians, is simply not a reality in most people's lives. It's normal for us to be cut off from each other. The super-rich, however, are so cut off that they are barely living here at all. Everything that can have the word "private" attached in front of it, they have: schools, hospitals, jets, islands. Even things like the shops, which you'd have thought was one of the attractions of London for people who can afford it, function differently for the 0.01% – for the most part, they prefer to have stuff brought to them.

Continued in article

Jensen Comment
Two of the Big Four accounting and auditing firms moved their headquarters from the USA to the UK. KPMG moved its headquarters to Holland. Only Deloitte remains headquartered in the U.S.


The Unseen and Ever Changing Enemy

Hi Dick,

I'm not familiar with this author, but it is interesting how warfare changed over the past few hundred years.

Remember the 1600s when red and blue armies met in the field like war was little more than a sporting event?

In the Civil War the armies still met on playing fields such as at Gettysburg.

Then in WW I the enemies talked with one another in the front line trenches.

In WW II things got a bit murkier due in great measure to air power that dropped bombs if armies assembled on playing fields.

Viet Nam commenced war with one side that remained pretty much invisible in the jungles.

From Viet Nam we proceeded to wars in the Middle East where the enemy hides amongst civilians --- making it more difficult to find and then destroy the enemy.

The biggest sick joke is the Afghanistan where the your enemy is your friend on Monday, your enemy again on Tuesday, and your friend again on Wednesday depending upon who is paying the most money for friendship. Afghans switch sides on a dime. We're now bogged down in mostly conducting wars with drug lords --- the Taliban and the drug gangs throughout Africa and Latin America.

Bob Jensen


Here's an opportunity for you to be creative as a liberal or conservative, get a prestigious publication, and win a prize from Harvard.

"Reimagining Capitalism." by Polly LaBarre, Harvard Business Review Blog, February 27, 2012 --- Click Here
http://blogs.hbr.org/cs/2012/02/reimagining_capitalism.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date

Jensen Comment
The comments following this article range across the entire spectrum of reactions we've seen for years about social responsibility accounting for business. Milton Friedman, of course, argued that the only responsibility of business is to obey the letter and spirit of the law without losing sight of the main goal of profit maximization.  Friedman argued that it's not the responsibility of business firms to make externality resource allocation decisions best left to government. This is reflected in the comment of Kozarms.

The concepts herein are very disturbing. This strikes me as socialism, and a socialist mentality. "How do we build the consideration of social return into every conversation and every decision at every level in the organization?" That's easy - see any communist country, and ask yourself if those are great societies full of innovation despite their professions of acting for the common good. Who decides what is a good social return - everyone all at once? The government? And: "inspire sacrifice, stimulate innovation" - why would an innovator also being willing to contribute his/her work as a sacrifice to the masses? The problems attributed in this article to capitalism are problems are not related to capitalism at all, but are problems of the mixed up ideaology of this mixed economy. We need to return to the correct ideas about what capitalism really means, not an ideaology where the true innovators/leaders first ask permission from the masses.

Ian Ford-Terry replies:

Have you talked to Howard Bloom at all? His "Genius of the Beast: A Radical Revision of Capitalism" laid out some very similar concepts in 2009...

Jensen Added Comment
The supposed refutation of Friedman rests mainly on the idea of long-term versus short-term profitability. This refutation proceeds along the lines that short-term profit maximization may become self-defeating if constrains or destroys the long-term profitability. For example, a company that strips the tops off mountains in West Virginia to get at cheap coal (which is now technically feasible and a controversial proposal) might maximize short-term profits but destroy long-term profitability as such monumental degradation of the earth triggers massive lawsuits for the destruction of human health (e.g. leaching of heavy metals into water supplies), destruction of tourism, and the putting off of research for alternative energy alternatives.

However, the long-term versus short-term "refutation" of Friedman is not legitimate since, in my viewpoint, Friedman was more interested in the long-term profitability and is falsely accused of being too short-term minded. I don't really think Milton Friedman would've advocated mountain top removal mining for the sake of short-term profits and then declaring bankruptcy before the environmental lawsuits commence.

Mountain Top Removal Mining --- http://en.wikipedia.org/wiki/Mountaintop_removal_mining

Critics contend that MTR is a destructive and unsustainable practice that benefits a small number of corporations at the expense of local communities and the environment. Though the main issue has been over the physical alteration of the landscape, opponents to the practice have also criticized MTR for the damage done to the environment by massive transport trucks, and the environmental damage done by the burning of coal for power. Blasting at MTR sites also expels dust and fly-rock into the air, which can disturb or settle onto private property nearby. This dust may contain sulfur compounds, which corrodes structures and is a health hazard.

A January 2010 report in the journal Science reviews current peer-reviewed studies and water quality data and explores the consequences of mountaintop mining. It concludes that mountaintop mining has serious environmental impacts that mitigation practices cannot successfully address.[7] For example, the extensive tracts of deciduous forests destroyed by mountaintop mining support several endangered species and some of the highest biodiversity in North America. There is a particular problem with burial of headwater streams by valley fills which causes permanent loss of ecosystems that play critical roles in ecological processes. In addition, increases in metal ions, pH, electrical conductivity, total dissolved solids due to elevated concentrations of sulfate are closely linked to the extent of mining in West Virginia watersheds.[7] Declines in stream biodiversity have been linked to the level of mining disturbance in West Virginia watersheds.

Published studies also show a high potential for human health impacts. These may result from contact with streams or exposure to airborne toxins and dust. Adult hospitalization for chronic pulmonary disorders and hypertension are elevated as a result of county-level coal production. Rates of mortality, lung cancer, as well as chronic heart, lung and kidney disease are also increased.[7] A 2011 study found that counties in and near mountaintop mining areas had higher rates of birth defects for five out of six types of birth defects, including circulatory/respiratory, musculoskeletal, central nervous system, gastrointestinal, and urogenital defects. These defect rates were more pronounced in the most recent period studied, suggesting the health effects of mountaintop mining-related air and water contamination may be cumulative.[37] Another 2011 study found "the odds for reporting cancer were twice as high in the mountaintop mining environment compared to the non mining environment in ways not explained by age, sex, smoking, occupational exposure, or family cancer history.”

A United States Environmental Protection Agency (EPA) environmental impact statement finds that streams near some valley fills from mountaintop removal contain higher levels of minerals in the water and decreased aquatic biodiversity. The statement also estimates that 724 miles (1,165 km) of Appalachian streams were buried by valley fills between 1985 to 2001.[5] On September 28, 2010, the U.S. Environmental Protection Agency’s (EPA) independent Science Advisory Board (SAB) released their first draft review of EPA’s research into the water quality impacts of valley fills associated with mountaintop mining, agreeing with EPA’s conclusion that valley fills are associated with increased levels of conductivity threatening aquatic life in surface waters.

Although U.S. mountaintop removal sites by law must be reclaimed after mining is complete, reclamation has traditionally focused on stabilizing rock formations and controlling for erosion, and not on the reforestation of the affected area. Fast-growing, non-native flora such as Lespedeza cuneata, planted to quickly provide vegetation on a site, compete with tree seedlings, and trees have difficulty establishing root systems in compacted backfill. Consequently, biodiversity suffers in a region of the United States with numerous endemic species.[41] In addition, reintroduced elk (Cervus canadensis) on mountaintop removal sites in Kentucky are eating tree seedlings.

Advocates of MTR claim that once the areas are reclaimed as mandated by law, the area can provide flat land suitable for many uses in a region where flat land is at a premium. They also maintain that the new growth on reclaimed mountaintop mined areas is better suited to support populations of game animals.

Continued in article

Jim Martin's MAAW threads on social responsibility accounting ---
http://maaw.info/SocialAccountingMain.htm

Bob Jensen's threads Triple-Bottom (Social, Environmental, Human Resource) Reporting --- "
http://www.trinity.edu/rjensen/Theory02.htm#TripleBottom


A Comparative Analysis of State Tax on Business, Tax Foundation, 2012 ---
http://www.taxfoundation.org/files/lm_2012_proof_08.pdf

. . .

Table 7 on Page 14

Overall Results

                                                                            Mature Firms                                   New Firms

                                                    Index Score        Rank                    Index Score     Rank

             Alabama                                 86.0                13                             86.4             19

Alaska                                    97.7.                23                            81.1             17

Arizona                                   86.2                 14                          114.9              31

Arkansas                               102.8                 30                            69.6               8

California                              105.8                 34                          133.8              45


Colorado                                105.4                33                          135.1               47

Connecticut                               93.9                21                          109.3               30

Delaware                                   98.1               24                             80.5               16

Florida                                       90.6               19                           122.8               36

Georgia                                      71.8                 3                            66.7                   6


Hawaii                                      142.6.              49.                         151.4                50

Idaho                                         111.7               38                          116.0                32

Illinois                                         126.4               45                            94.2                24

Indiana                                        122.7               43                            80.1                15

Iowa                                            116.5              40                          126.8                 41


Kansas                                        133.5               47                          141.6                 48

Kentucky                                        88.4              18                             69.4                   7

Louisiana                                       84.1              10                             52.8                   2

Maine                                            100.4              27                              87.3                 20

Maryland                                        82.4                8                           134.7                  46


Massachusetts                              123.6               44                         128.2                   43

Michigan                                            98.8               25                           96.6                   25

Minnesota                                         112.7              39                         119.6                   35

Mississippi                                         109.2              37                           89.3                   21

Missouri                                             108.8              36                           97.0                   26


Montana                                               93.1               20                           93.8                  23

Nebraska                                             82.5                 9                           31.7                    1

Nevada                                                 77.7                 4                          124.8                 38

New Hampshire                                     99.7                26                           91.0                  22

New Jersey                                         121.1                41                         104.9                 27


New Mexico                                            97.4               22                           80.0                  14

New York                                               121.1              42                         124.4                   37

North Carolina                                         80.8                 7                           79.9                   13

North Dakota                                            87.0               15                          83.5                    18

Ohio                                                         78.1                 5                           58.7                      3


Oklahoma                                                 87.1               16                          65.3                       5

Oregon                                                     100.5               28                       106.3                     28

Pennsylvania                                           145.1               50                       145.9                     49

Rhode Island                                           129.1               46                       128.4                     44

South Carolina                                           103.8               32                       119.4                     34


South Dakota                                              56.0                 2                         77.7                      11

Tennessee                                                   101.3               29                       108.7                      29

Texas                                                            85.9              12                       127.7                       42

Utah                                                              80.2                 6                        76.7                       10

Vermont                                                       103.7                31                       79.2                       12


Virginia                                                           84.4                 11                     125.9                      39

Washington                                                     87.2                 17                     126.3                       40

West Virginia                                                140.2                 48                     118.5                       33

Wisconsin                                                    107.7                  35                       59.8                         4

Wyoming                                                       48.3                    1                       73.3                          9

Continued in article

Jensen Comment
Of course there are many other factors to consider when running a business in a given state. First there are markets to consider. For example Wisconsin and Ohio look attractive from a tax standpoint but these states are unattractive to labor intensive business firms because of union power within those states. Such firms may prefer moving into Alabama, Arkansas, or Mississippi in spite of having to pay higher taxes. Many firms have moved from New England to the south because of higher wages and taxes in New England. Taxes and wages have been a disaster for some states. For example, Hawaii was at one time a thriving grower of pineapples. Now most of the pineapple growers have moved elsewhere because of taxes and wages.

Another thing to consider are subsidies to business firms that offset taxes and wages. For example, when threatened with a huge movements of business firms out of Illinois (including huge firms like Caterpillar and Sears), Illinois commenced to offset its high business taxes and wages with business subsidies.

Bob Jensen's threads on taxation are at
http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation


"Protecting Endangered Farmers A tale of modern California," The Wall Street Journal, February 29, 2011 ---
http://online.wsj.com/article/SB10001424052970203918304577239472081683362.html#mod=djemEditorialPage_t

Rick Santorum may have had a point the other day when he said that some environmentalists care more about animals than people. Take the water restrictions the federal government has imposed on California farmers to protect the three-inch delta smelt.

Environmentalists have long complained that the San Joaquin-Sacramento River Delta's pumps, which send water to Central Valley farmers and southern California residents, trap and kill fish. In 2006 the Natural Resources Defense Council sued the U.S. Fish and Wildlife Service for issuing a biological opinion that supported pumping more water south because the agency didn't analyze how the pumping might affect the smelt. A federal court ordered the agency to be more mindful of the smelt.

So the agency demanded that water regulators reduce pumping. The National Marine Fisheries Services joined the fun by recommending that regulators restrict pumping to protect salmon, sturgeon and steelhead too. These opinions have superceded the water contracts of farmers and resulted in 3.4 million acre-feet of fresh water flowing into San Francisco Bay each year—enough to irrigate over a million acres of land.

More than 10,000 farm jobs have been lost as a result, and regional unemployment stands at about 15%. Environmentalists blame the water shortages on drought, but even in wet years farmers aren't getting the water they're due.

The kicker is that the biggest threat to the smelt might be other fish. The National Academy of Sciences noted in a 2010 report that factors other than the water pumps appear to be contributing to the smelt's decline, namely nonnative predatory fish and pollution from wastewater treatment plants. Environmentalists still blame the pumps since they want to shrink the state's corporate agribusinesses, which produce more than half of America's fruits and vegetables. Maybe farmers should petition the Interior Department for protection against predatory environmentalists.

At any rate, even the same federal court now thinks the feds have gone too far. In a lawsuit brought by the water districts against the Fish and Wildlife Service in 2010, the court scored the agency for not considering "reasonable and prudent alternatives" that minimized the impact on humans and for attempting to "mislead and to deceive the Court into accepting what is not only not the best science, it's not science."

The court ordered the agency to revise its biological opinion, but the Natural Resources Defense Council has appealed. Meanwhile, regulators have told farmers to expect only 30% of their contractual water allowance this year. Good grief.

GOP Congressman Devin Nunes of Fresno is trying to restore some certainty to farmers and sanity in the water wars. He's introduced legislation that would cap the amount of water that annually flows into the Bay at 800,000 acre-feet per year, which is what Congress agreed to in 1992 before environmentalists started suing.

The House is expected to pass his bill Wednesday, but its prospects in the Senate are less sanguine. California's Democratic Senators Dianne Feinstein and Barbara Boxer have dismissed it as "overkill" and called for "consensus-based solutions that respect the interests of all stakeholders."

Funny, that's what the environmentalist groups are saying too. Trouble is they seem to think that the most important stakeholders are the fish.


"James Q. Wilson in His Own Words Excerpts from the late social scientist's op-eds in The Wall Street Journal," The Wall Street Journal, March 2, 2012 ---
http://online.wsj.com/article/SB10001424052970203986604577257441657700290.html?mod=djemEditorialPage_t

Editor's note: James Q. Wilson, who died Friday at age 80, was one of America's most consequential political scientists and a frequent Journal contributor. An editorial appears nearby, and here are some excerpts from his Journal writing over the years:

 

"A Life in the Public Interest," Sept. 21, 2009:

The view that we know less than we thought we knew about how to change the human condition came, in time, to be called neoconservatism. Many of the writers [for The Public Interest], myself included, disliked the term because we did not think we were conservative, neo or paleo. (I voted for John Kennedy, Lyndon Johnson and Hubert Humphrey and worked in the latter's presidential campaign.) It would have been better if we had been called policy skeptics; that is, people who thought it was hard, though not impossible, to make useful and important changes in public policy.

"A Cure for Selfishness," March 26, 1997:

Perhaps the most powerful antidote to unfettered selfishness is property rights. If we are grazing cattle, we will conserve the land if we own it. If we are catching lobsters off the Maine coast, we can restrict over-fishing by allocating space to groups who informally "own" each space. If we want to conserve elephants, we should let people own the elephants. If we wish to water our rice in Bali, we do better if each village has ownership in a part of the water. If we want to conserve our country's oil reserves, we do better if the reserves are owned by firms than if the government "controls" the whole deposit.

 

"Democracy and the Corporation," Jan. 11, 1978:

It's no surprise that academics in this country have been generally suspicious of business or that in a time like this, when general public confidence in the corporation has fallen, the expressions of hostility grow sharper. But there's rarely been a better example of this than Charles E. Lindblom's recent book "Politics and Markets: The World's Political-Economic Systems." . . .

The argument, stripped of its (minor) qualifications, can be simply stated: The large private corporation is a threat to democracy and, indeed, has no place in democratic theory. . . . [B]usinessmen have superior organization, enjoy disproportionate access to elected officials, dispose of vast political contributions (legal and illegal), control the appointment of government regulators and are capable of molding "human volitions" through advertising, ownership of the mass media and influence on school curricula. . . .

The contrary hypothesis is easily stated. Since the 1930s, and especially since the 1960s, the drift of public policy has been increasingly hostile to business. Public confidence in the corporation has fallen (indoctrination?), the national media are increasingly critical, capital formation is inhibited by taxes and inflationary policies, the profit margins of corporations have declined, social and economic regulations proliferate almost faster than the Federal Register can print them. . . . The student reading this book will learn nothing of the professions, the bureaucracy, the courts or the public interest law firms, and next to nothing of the mass media, intellectuals, "experts," universities and foundations that have a large effect on American public life.

 

"Killing Terri," March 21, 2005:

[The] moral imperative should be that medical care cannot be withheld from a person who is not brain dead and who is not at risk for dying from an untreatable disease in the near future. To do otherwise makes us recall Nazi Germany where retarded people and those with serious disabilities were "euthanized" (that is, killed). We hear around the country echoes of this view in the demands that doctors be allowed to participate, as they do in Oregon, in physician-assisted suicide, whereby doctors can end the life of patients who request death and have less than six months to live. This policy endorses the right of a person to end his or her life with medical help. It is justified by the alleged success of this policy in the Netherlands.

But it has not been a success in the Netherlands. In that country there have been well over 1,000 doctor-induced deaths among patients who had not requested death, and in a large fraction of those cases the patients were sufficiently competent to have made the request had they wished.

Keeping people alive is the goal of medicine. We can only modify that policy in the case of patients for whom death is imminent and where all competent family members believe that nothing can be gained by extending life for a few more days. This is clearly not the case with Terri Schiavo. Indeed, her death by starvation may take weeks. Meanwhile, her parents are pleading for her life.

 

"Mr. Clinton, Meet Mr. Gore," Oct. 28, 1993:

Mr. Clinton's Health Security Plan contains not the 293 pages of the 1991 transportation act but 1,300 pages. It calls for the construction of vast new public and quasipublic bureaucracies.

Untested new state "health alliances" are to be created. They will, in many cases, be monopoly providers of benefit packages with the power to set the fees physicians can charge and to decide whether consumers will be allowed to select their own doctor on a fee-for-service basis. These alliances will be overseen by a National Health Board that will define the standard benefit package, set and implement a national health budget, and establish and manage a system of "quality management." . . .

Beyond this, the secretary of health and human services will determine the number of training positions (internships, residencies) in each medical specialty, ensure that at least half of all new doctors are trained in primary care, and increase the diversity of the health care work force by giving special incentives to minorities.

All this, of course, is to be done in a way that is "standardized," "simplified," "accountable" and "streamlined." The reality will be very different. . . . The organizational chart of the system will look very much like that created to manage the savings-and-loan bailout. It will link so many entities together in such complex relationships as to resemble a map made by a drunken spider with inky feet.

 

"Reforming Criminal Trials," Nov. 20, 1995:

Many Americans have lost confidence in the way our criminal courts assess guilt and innocence. Whatever one thinks of the verdicts, the recent trials of O.J. Simpson, Erik and Lyle Menendez, and various defendants in preschool molestation cases have been lengthy, lawyer-dominated soap operas in which the search for truth has been subordinated to the manipulation of procedures. . . .

Let me suggest four changes that might help:

1) Have the judges select the juries without any participation by the lawyers except for a right to exercise challenges for cause. . . . In federal courts the judges already do this, and so jury selection is both faster and fairer.

2) Authorize and direct the judge to take charge of the trial by, when he or she deems it appropriate, calling witnesses, questioning witnesses called by the lawyers, relegating lengthy motions to nighttime or weekend hearings, and summarizing and commenting on the evidence when the case is given to the jury for deliberation. . . . [T]he lawyers could still deliver their summations—but it might make the presentation of the evidence more intelligible. . . .

3) Allow witnesses to give their initial testimony in narrative form. . . . Each witness would still be subject to cross-examination, and the difference between what he heard and saw and what he presumed or inferred would be made clear.

4) Experiment in a few jurisdictions with the use of a nonspecialized private bar to try cases on behalf of both the people and the defendant. . . . Doing this would . . . reduce the extent to which wealthy defendants could hire attorneys not available to the average person.

 

Review of "Traffic," by Tom Vanderbilt, July 31, 2008:

Men like to complain about what bad drivers women are, but the evidence about highway fatalities suggests that testosterone causes twice as many deaths (per 100 million miles driven) as female driving does. And women can help men drive better. When teenage boys pull out of high-school parking lots, they drive much faster when another boy is in the car than when a girl is. (This gender-correlation does not hold true with my wife; when she rides shotgun, she loves high speeds.) And women may be better traffic cops. Mexico City replaced its corrupt male officers with females (they are called cisnes, or swans), who tripled the number of traffic tickets.

 

"Christmas and Christianity," Dec. 24, 2004:

Those who are alarmed by the extent of religious belief in this country have roused themselves to make the so-called wall of separation between church and state both higher and firmer. . . . They would be well advised to let matters alone. We have been a free country even though "In God We Trust" is printed on our dollar bills, even though sessions of Congress begin with a prayer, and even though chaplains paid for by our tax dollars are part of our military forces. Our freedom does not depend on eliminating these acknowledgments of the power of religion; it relies instead on the fact that for many generations we have embraced a secular government operating in a religious culture.

That embrace will be weakened, not strengthened, by silly attacks on religiosity, stimulating the spiritual to question the seriousness of people who profess a concern for civil liberties.

 

 

 


 




Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

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http://www.trinity.edu/rjensen/tidbitsdirectory.htm 

Bob Jensen's Pictures and Stories
http://www.trinity.edu/rjensen/Pictures.htm

Summary of Major Accounting Scandals --- http://en.wikipedia.org/wiki/Accounting_scandals

Bob Jensen's threads on such scandals:

Bob Jensen's threads on audit firm litigation and negligence ---
http://www.trinity.edu/rjensen/Fraud001.htm

Current and past editions of my newsletter called Fraud Updates ---
http://www.trinity.edu/rjensen/FraudUpdates.htm

Enron --- http://www.trinity.edu/rjensen/FraudEnron.htm

Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm

American History of Fraud --- http://www.trinity.edu/rjensen/FraudAmericanHistory.htm

Bob Jensen's fraud conclusions ---
http://www.trinity.edu/rjensen/FraudConclusion.htm

Bob Jensen's threads on auditor professionalism and independence are at
http://www.trinity.edu/rjensen/Fraud001c.htm

Bob Jensen's threads on corporate governance are at
http://www.trinity.edu/rjensen/Fraud001.htm#Governance 

 

Shielding Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm

·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1

Bob Jensen's threads on accounting theory ---
http://www.trinity.edu/rjensen/theory01.htm

Tom Lehrer on Mathematical Models and Statistics ---
http://www.youtube.com/watch?v=gfZWyUXn3So

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/