Tag Archives: political economy

Misunderstanding

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It’s surprising that so many so-called journalists misunderstand, but it’s a widespread failure, and it includes too many economists, as well. For good or ill, there is a loophole in the 2018 tax law that’s providing windfalls for American companies.

The loophole is a mismatch of critical dates between that law’s Section 245A and Section 78. The former lets US companies bring home their foreign profits without paying US taxes, with an effective date of 1 January 2018; the latter was intended to prevent inappropriate tax breaks in the old international tax system, with an effective date of 31 December 2017. Those 24 hours are a loophole far beyond the size of a single day. Three companies, for instance, are claiming—and one has already won in court—tax refunds:

[Varian Medical Systems won its case for] $150 million in deductions. The electronics manufacturer Kyocera and the food distributor Sysco have similar court cases pending, each involving more than $100 million in deductions.

Others are putting together their own refund filings that, in their aggregate will be worth several tens if not hundreds of millions of dollars more.

The misunderstanding is not about the Congressional gridlock blocking reconciliation of those two dates, as the writer of the Wall Street Journal article went on about, even though she got it right in her lede.

That [loophole] is now allowing big companies to save tens or hundreds of millions of dollars that otherwise would have gone to the government.

The misunderstanding—an understanding which goes to the core of our tax system and its and its constitutionally mandated purpose—is this:

The Varian case highlights how gridlock in Congress can cost the public….

No. Leaving money in the hands of our private economy, or returning money to those hands, is not a cost to the public—we American citizens and our enterprises are that public—but a benefit to the public, to us. Leaving the money or refunding it does reduce the amount of money accruing to Government, but that also could be a benefit to the public by restricting the money available to government to misspend. That latter, though, puts the onus on us in the public to elect politicians who will honor that restriction by not borrowing to spend more than government takes in and by not raising taxes to match excess spending.

Then there’s this:

A recent ruling by the Supreme Court will put more emphasis on the literal text of laws….

Literal text of the laws: the text of a law is what Congress intended the law to say, else Congress would have passed a different law saying something different.

And that’s as it should be, since the American system of governance restricts legislation to Congress and judicial action to the limits of those laws’ text. Judge Emin Toro, writing in his ruling on the Varian case, was quite clear on this:

Congress “spoke clearly” when it selected the mismatched effective dates. “Appeals to policy and Congress’s overarching purpose cannot overcome these choices[.]”

Activist judges—and that’s the only kind that presumes to legislate from the bench, that presumes to Know Better than the rest of us what a law should be—are broadly held as Truth Sayers by the Left and its Progressive-Democratic Party. These unelected representatives judges writing law rather than ruling within it are the bane of American liberty.

Kamala Harris’ Tax Policies

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And misallocation of those tax collections. Progressive-Democratic Party Presidential candidate Kamala Harris wants to raise taxes on Americans and our corporations by some $5 trillion over the next decade and cut other taxes by more than $4 trillion. Or so she claims, especially regarding the latter. The former can be taken as gospel; raising taxes, especially on those Evil Rich Americans, is what Party does.

Under her plan, taxes would go up sharply on some high-income households, and top marginal tax rates would reach their highest point since 1986. The wealthiest investors and company founders would encounter sizable s that they don’t face under current law.

That capital-gains tax bill is made the more sizable by her plan to tax capital gains that haven’t been realized—i.e., gains that don’t exist.

Her claim to not have any tax increases on households making under $400,000 is shown to be a sham promise by her decision to ignore the effect her corporate tax increase to 28% and her increase in the diktated [sic] minimum corporate tax to 21% would have on middle-income workers and shareholders. The impact includes that tax on phantom capital gains that Harris wants to impose on us middle class workers who own shares of companies in our own, however miniscule, portfolios.

Left unanswered, so far, is what Harris intends to do with those tax revenues. Her silence here stands against the backdrop of the Biden-Harris administration’s years long cuts, in real terms, to funding for our defense establishment, leaving us the weakest we’ve been in decades at the moment of greatest national security danger we’ve faced in decades.

This tax policy also is one of the reasons Harris floated her price controls proposal—to try to distract us from the policies she’s serious about slipping past, a squirrel maneuver which a compliant press is actively aiding her with its concentration on price control proposals while minimizing coverage of the rest of her ideas.

Don’t Only Blame Gensler

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The Wall Street Journal‘s editors have their panties in a twist over SEC Chairman Gary Gensler’s imposing $393 million in fines on 26 companies that fail[ed] to track employee “off-channel” [personal] communications.

It’s certainly true that Gensler badly overstepped his bounds with those fines. The SEC, and no one in it, has any authority to surveil or to require surveillance of private company’s private employees’ personal communications. Gensler and his SEC should be swatted down—hard—in court for that excess.

However.

A major part of the blame for this overstep belongs on the management teams of those 26 companies. Those worthies demonstrated deeply disgusting cowardice when they meekly acceded to the fines. They’ve done a disservice to the companies of which they’re in charge, they’ve betrayed their shareholders, and they’re right next door to betraying the fiscal duties those managers have to their companies’ shareholders. Their meekness serves only to expose their companies to further government overreach, and it exposes their employees to further unwarranted (in both senses) surveillance by an overreaching government.

That betrayal vastly outweighs any financial “savings” from agreeing to pay the SEC fines…because it’s less costly than resisting in court. And it interferes with that necessary swatting-down, an interference that potentiates the likelihood of those future costs.

Two Questions…

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…that answer themselves.

Can the US and its allies deter all these rivals—including Iran and North Korea—at the same time, given the decay in the West’s military-industrial base and the unwillingness of voters to spend dramatically more on defense?

Of course we can, and the path to that is in that last bit: spending more on defense (while keeping in mind that a Critical Item for defense is a strong offense) and refurbishing our military-industrial base. Convincing us average Americans to spend more on defense is simpler and more straightforward than it apparently seems to the journalist crowd. It’s necessary and simple to explain the nature and depth of the threat posed by our four primary enemies, listed in my order of risk: Russia and the People’s Republic of China tied at the top; the one as demonstrated by its active shooting war of invasion and steady threats to continue west if its current land grab is successful. The other because of its active invasion and occupation of the South China Sea, seizing territory owned by other nations around the rim of the Sea and controlling sea lines of commerce that are critical to Japan and the Republic of Korea and extremely important to us, its increasing threats to invade and conquer the Republic of China, and the cyber war it’s already inflicting on us.

In third place is Iran, with its near production of nuclear weapons, which it will use promptly to destroy Israel and then shop to its terrorist surrogates and to any others who’ll have the purchase money. This nation already shops its conventional weapons—at heavily discounted prices—to its surrogates attacking Israel and commercial shipping on the Gulf of Oman and the Red Sea.

A distant fourth is northern Korea, whose rhetoric makes them worth watching carefully along with shoring up RoK’s and Japan’s defenses and our own in the northern and western Pacific, but not much more than that.

And then it’s necessary and simple, except for those politicians of both parties, to reallocate spending away from the billions of froo-froo already in the budget and toward the defense establishment. The only really hard part (and we all know what “hard” means) is getting rid of the deadwood, both civilian and in uniform, in the Pentagon and streamlining development and acquisition.

For our allies, it’s slightly more complicated (but only slightly). If they don’t want to spend more on defending themselves—especially in Europe and particularly those European NATO members who already are betraying their fellow members with their sloth—then it will be time to stand up a separate mutual defense arrangement among the US, the Three Seas Initiative nations, and Great Britain (for starters), and then walk away from NATO altogether.

And

And if not, should, and could, an accommodation be sought with one of the rival great powers? If so, which one—and at what cost?

There can be no accommodation with enemy nations whose solemn goal, often stated, is to conquer us. This is the goal of Russia and the PRC. Nor can there be an accommodation with an enemy nation whose oft-stated goal is to destroy Israel and then us. An accommodation with northern Korea is almost irrelevant, and wholly unnecessary—just do the watching and regional plussing up.

The cost of accommodating nations with those goals should be obvious—such a step would only be a step closer to their goals for those enemies. Too, that would only be the first step of a short path to our functional destruction: having accommodated our enemies once, they’ll only seek a further accommodation, and then another, then…, until we’re no longer capable of effective self defense.

Starliner and Dragon

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NASA has decided to bring Boeing’s allegedly passenger-rated capsule Starliner (so characterized by me because the thing is so robotic, its “crew” are merely passengers with extremely limited authority even to vet the robot’s decisions) back to the surface and leave the passengers it brought to the ISS on the ISS to await a flight next winter by SpaceX’s Dragon, running up there on one of SpaceX’s reusable rockets.

We’ll see if the robot, whose thrusters often malfunction (“often” in the context of rocket flight where a couple of mistakes, or even just one, kills the crew), can make it back to the surface in one piece. Oh, and remain in that one piece, undamaged, when it regains contact with that surface.

The two Boeing crewmen will remain on the ISS until February when SpaceX is scheduled to send its Dragon up with a new load of supplies for the station. That resupply mission, though, has had to be rejiggered: it will fly with only two crewmen in order to have room for the two Boeing crewmen on the ride back down.

Which gives me an idea.

SpaceX should accelerate its schedule for refurbishing and preparing for (re)launch its Falcon rockets and Dragon capsules, and get a Falcon/Dragon mission configured and ready to go by the end of September. Then petition NASA and the FAA for licensure to launch. Put the onus for quick reaction back on the government, and show Boeing how it’s done. And show the Boeing/Lockheed-Martin’s ULA how it’s done with reusable rockets.

Come to that, I challenge Elon Musk to do that. It would be more than a one-up feather in Musk’s and SpaceX’s cap, and it would be more than a demonstration of the advantages private enterprise has over quasi-private enterprise partnered with government—in which each partner has captured the other, limiting both.

No, doing so would be a demonstration of the near-emergency capability of SpaceX to get a mission launched under the tight time constraints of an in-orbit emergency.