Category Archives: jobs

Democrats and Inversions

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Inversions in this context, to oversimplify, are when American companies buy foreign companies and then relocate their headquarters to that foreign country in order to take advantage of that country’s lower tax rates. That this is part of an American company’s management fiduciary duty to the owners to minimize costs and maximize profits is unimportant to the denizens of the present administration and to too many “Republicans” as well.

President Barack Obama’s Treasury Secretary, Jack Lew, had some thoughts about the evils of inversions.

These transactions erode the US tax base, unfairly placing a larger burden on all other taxpayers, including small businesses and hardworking Americans[.]

Of course, Lew and Obama carefully ignore the fact that half of us Americans already pay little or no taxes, “unfairly placing a larger burden on all other taxpayers.”

They also ignore the fact that it isn’t their money in the first place; the money belongs to the companies’ owners.

They also ignore the fact that our “tax base” already is excessively progressive and that it has the highest business rates in the world.

Lew went on:

These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether.

A better way to reduce the economic benefits of inversions would be to do the patriotic thing: lower, drastically, the tax rates on American businesses. Taxes, after all, are at the foundation of our Revolutionary War—not only the stereotypical taxation without representation, but also the point of that demand of representation: so we could keep tax rates from getting out of hand.

If our business tax rates were lowered sufficiently—Ireland, for instance, taxes businesses at 12.5%, compared to our 35% rate—a couple of things would occur. The first would be a cessation of inversions, and if our business taxes were lowered significantly below 12.5% (I’ve been advocating all along for an elimination of taxes on our businesses), foreign businesses would be attracted to the US, bringing with them the jobs they have.

The other thing that would occur involves the $2 trillion that American companies with foreign branches, affiliates, and so on are holding overseas in order to avoid our usurious tax rates. With those tax rates vastly reduced, that money would come home. $2 trillion is a lot of jobs and capital investment (which is more jobs in the nearby future) waiting to happen.

But tax rate reductions are anathema, if not inconceivable, to Democrats.  And to too many “Republicans.”

They Need to Make up Their Minds

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The Minnesota Vikings issued a statement early Wednesday saying that running back Adrian Peterson must remain away from all team activities until his felony child abuse case is settled.

The move was an about-face for the team, which reinstated Peterson to the active roster Monday after deactivating him following the All-Pro running back’s indictment Friday.

Peterson has an initial hearing scheduled for October 8 in Montgomery County, Texas on a charge of reckless or negligent injury to a child. He is accused of beating his four-year-old son with a wooden switch, leaving bruises and other wounds that were visible days later. Peterson told police that he was merely inflicting discipline and had not intended to hurt the boy.

He spanked his son with a switch. So were my brothers and I by our parents. Charles Barkley has said, without too much exaggeration,

Whipping—we do that all the time. Every black parent in the South is going to be in jail under those circumstances[.]

This pasty white blogger grew up in the Midwest, and spankings with switches, paddles, whatever fell to hand, were commonplace. We weren’t harmed, except in our pride. And we learned discipline. “Beating?” Bruises “and other wounds that were visible days later?” Based on what evidence? Besides rumors reprinted in newspapers, I mean?

The Vikings’ statement continued:

We want to be clear; we have a strong stance regarding the protection and welfare of children, and we want to be sure we get this right. At the same time, we want to express our support for Adrian and acknowledge his seven-plus years of outstanding commitment to this organization and this community.

This is hypocritical. They’re not supporting a man who’s losing a significant part of his career—even great running backs only have careers of 10 years or less. Sitting him down until his case is “resolved” will cost him this year, and the trial and appeals can go on for two or three years before the matter is “resolved.”

Pick a response and stay with it; quit the bouncing back and forth. But as the Vikings choose their final answer, they need to keep in mind a quintessentially American principle: in the end, of what is Peterson guilty? Not of what is he accused, what has he actually done? When was his trial? All the evidence isn’t available, only that subset of it that a press anxious for stories to peddle chooses to make available.

There’s also this minor contractual obligation:

Under the collective bargaining agreement, a team can only deactivate a player for non-injury reasons for a maximum of four games. The same limit applies if [a team] were to suspend [a player] for conduct detrimental to the team.

An Instructive Graph

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This one is from the Census Bureau’s Income and Poverty in the United States: 2013. The headline of the report is that American household median income stagnated for the second straight year and remains, in real terms, 8% lower than it was in the last year before the Panic of 2008. The graph below reflects that.2013MedianHouseholdIncome

What interests me about this graph, though, is not the end result snapshot, but the slopes of the graph’s separate lines, the changing levels of median incomes, as we come out of recessions and panics over the last 50 years.

Notice: coming out of nearly every one those dislocations, either immediately after it was over or shortly after, the slopes are up. Median household income recovered quickly for all groups indicated. To be sure, there were some significant lags in this—blacks often, Hispanics coming out of the 1990 mini-recession, for instance. However, even coming out of the 2000 dot-com bust, incomes “merely” stagnated overall (although with that one, incomes didn’t fall very much, either).

But coming out of the Panic, this administration’s policies have set a new record for holding back a recovery—incomes have not stagnated (would that we’d done that well); they’ve been pushed down.

In Which a Judge Gets It Right

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…but is forced to rule wrongly.

The SEIU sued University of Pittsburgh Medical Center, alleging “unfair” labor practices in that, claimed the union, UPMC management interfered with employees’ right to organize. In connection with that suit, the NLRB issued three subpoenas demanding “highly confidential and proprietary information” be released from UPMC to the union.

Federal District Judge Arthur Schwab found the NLRB’s subpoenas, among other things, over broad and unfocused, and so illegitimate. He also found the subpoenas fundamentally irrelevant to the underlying case (which itself would have rendered the subpoenas inappropriate). He went further. In noting that the NLRB itself made no serious effort to argue the relevance of its subpoenas, he wrote [emphasis added]

The Court does not see how these requests have any legitimate relationship or relevance to the underlying alleged unfair labor practices; instead, the requests seek highly confidential and proprietary information…and, the requests seek information that a union would not be entitled to receive as part of a normal organization effort. Indeed, the scope and nature of the requests, coupled with the NLRB’s efforts to obtain said documents for, and on behalf of, the SEIU, arguably moves the NLRB from its investigatory function and enforcer of federal labor law, to serving as the litigation arm of the Union, and a co-participant in the ongoing organization effort of the Union.

But he was forced to the wrong outcome and to uphold the subpoenas; although he stayed his upholding pending appeal.

However, the practical effect of case law as to enforcement of subpoenas of federal government agencies is that this Court is constrained to essentially “rubber stamp” the enforcement of the Subpoenas at hand.

The Third Circuit, the appellate court for Schwab’s district, can overrule Schwab and strike down the subpoenas. The appellate level is the normal place where Federal agency subpoenas get struck. Schwab also, though, has given the Third an out.

If the practical effect of this legal predicament is to be altered, it is not the District Court’s role to do so, but the role of the appellate court. The Court is at a loss of how to adequately address the above issues of whether the matter under investigation serves legitimate purposes, whether the inquiry is relevant to that purpose, and not unduly broad or burdensome, while still conforming to the extremely narrow and limited nature of the proceedings at hand. If the United States Court of Appeals for the Third Circuit finds that the District Court has the authority to conduct a meaningful and/or thorough review of the three (3) Subpoena[s] at issue here, the Court is prepared to do so.

Schwab’s opinion can be read here.

Scottish Independence

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The view of a poor, dumb colonial.

Suppose the Scottish referendum next week goes in favor of independence. What would be next for Scotland?

Among the complexities of separation is the matter of pensions provided by employers. Most such pensions are not fully funded; although, most such pension providers have apparently viable plans for curing the shortfall, over some number of years. However, the EU (and we’ll assume Scotland succeeds in joining the EU for this bit) requires all pension funds with members in two or more countries to be fully paid up. Moreover, funds that are not have only two years to get fully paid up. There are quite a number of large-ish UK companies, employing thousands each, whose pension funds have members in both countries, and whose pension funds are on one of those “some number of years to fund” plans.

There’s some chatter in the UK about splitting the pensions in two, one for the UK and one for Scotland, as a means of ducking this problem. I see a possibility of splitting the companies themselves in two, each with its own pension scheme. Either course, though, is fraught with complexity.

A larger complication is the UK national debt, some £1 trillion ($1.62 trillion): how would this be divided, and based on what criteria? I’ll elide whether the new Scottish economy could handle its new debt.

That sort of thing is trivial, though, compared with a couple of larger questions. Scotland has some serious economic problems, including that debt, a risk of sharp inflation, lack of clarity on what it would use as a currency, what sort of trade arrangements a settled-on currency would imply, and so on.

The economic problems will have their impact on independent Scotland’s near- and mid-term stability.

Too, accession to the EU requires a unanimous vote of the existing members, and that’s not a done deal. Which means Scotland would not be able to count, soon, on any EU…assistance.

Frankly, I think Scotland would be better off outside the EU than in it (recall the EU’s treatment of Ireland and Iceland), but this is a move Scotland has to make, and properly so, without my sage advice.

Regardless of EU membership and those “larger problems” just mentioned, though, independent Scotland will need to broaden its economy. 80% of its national income is from North Sea Oil which, aside from questions of how to divide that with the UK, is a declining asset value [sic], and the bulk of the remaining 20% is from tourism. A self-sustaining independent Scotland will need a more broadly based economy in order to function without the UK subsidies it currently gets.

Finally, I don’t know that Scotland would be better off independent from the UK. Certainly, there are advantages for a nation that’s free to chart its own course without having to say, “Mother, may I” to a higher-up. I think, though, given Scotland’s socialism and those subsidies, the UK would be better off with an independent Scotland.

The aftermath also will be fun to watch. Northern Ireland? Catalonia? Basque Country? Sicily?