Tag Archives: economics

A Thought on SALT Deductions

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New York Republican Congressman John Tamny had an op-ed in the Wall Street Journal early last week in which he advocated enthusiastically for raising the ceiling on the deduction of State and Local Taxes from Federal income taxes. That deduction currently is capped at $10,000, and Tamny worries that that works a hardship on his constituents, since despite their high incomes, those folks aren’t really all that rich. New York’s high taxes and prices already work to reduce those folks’ relative wealth.

A WSJ reader responded in WSJ‘s Sunday Letters section.

The five New York Republicans in Congress take a page from the Democratic playbook to defend changing the SALT cap (Letters, Aug. 15), “especially since New York continues to be a donor state, paying more in federal taxes than it receives from Washington.”
When did that become the objective? They make it sound like the role of the federal government is to redistribute all funds in a fair and equitable manner. Sorry guys, we send our tax dollars to Washington to pay for essential services like national defense, not to have it parceled out again to the states in equal portions.

It’s true enough that Tamny and his fellow New York Republican Congressmen (all Congressmen, come to that) have to represent his—their—constituents first, and even as Federal Congressmen, our nation second. But as Federal Congressmen, they do have to represent all of us at some stage.

That tension makes the Congressional Tamnys’ collective and individual jobs hard, but if they wanted cushy jobs, they should have taken positions as mattress demonstrators.

That’s not all. Another Letter writer disagreed with Tamny in a different direction.

The New York lawmakers’ argument bears considerable similarities to Mayor Eric Adams’s demands for federal assistance to take care of the illegal immigrants his city invited. Talk about moral hazard. Both amount to pleas from politicians for federal relief from the consequences of their own state or local governments’ policies and, as such, should be summarily denied.

What the letter writers said is spot on, and their words carry national, and moral, weight.

Inflation

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The learned Emeritus Profess (Roanoke College) Robert Stauffer, in his Sunday letter to The Wall Street Journal‘s Letters section objects to the inclusion of “owner equivalent rent” (OER) in standard inflation measures on the grounds that “real” inflation is much lower than it’s represented to be, and this exclusion would make the measures more reasonable. (Oh, and no one pays that rent anyway.)

Stauffer’s beef is irrelevant.

Stauffer worries about OER, but he studiously ignores energy and food, whose inflation numbers are excised from those standard measures to leave so-called core inflation on the rationalization that food and energy pricing is so volatile.

However, real consumers, us ordinary Americans, pay actual dollars for that food and energy, and the prices we pay keep on going up, however variably from time to time, and those price increases, smoothed over a few periods, remain higher than “core” inflation, and especially so regarding Stauffer’s “corrected” inflation.

Private Enterprises as Government Jobs Welfare Programs

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That’s the position of the Pennsylvania Progressive-Democratic Party’s Representative G Roni Green. She’s proposing, with an absolutely straight face, a State law that would require businesses with 500 or more employees to cut their employees’ 5-day, 40-hour work week to 4-day, 32-hour work weeks—with no change in pay. That’s a government-mandated 25% pay raise.

Jobs welfare doesn’t get much better than that.

Green’s rationalization centers on two premises. One is that society looks and operates differently than it once did in 1938 (when the government-mandated 40-hour work week was enacted). That’s true enough. Society has grown more complex, more technologically capable, and consumers’ needs (consumers being, after all, at the core of society) have grown quite a bit.

All of that, though, requires continued and increasing employee productivity to enable us Americans to continue, and continue to improve, our standard of living. That growing productivity isn’t possible with the proposed 25% reduction in hours of productivity Green is proposing.

That last brings us to Green’s second rationalization.

Technological advancement alone have [sic] significantly increased the productivity of workers allowing more work to be accomplished in less time.

That’s also true. Indeed, technological advancements have advanced to the point that entire worker jobs have been replaced. Technology does a lot of things that employees currently do at least in part. One result of Green’s move, were it to become law, likely would be a further reduction in employee hours, this time on business’ initiative: to substantially less than 32 hours, converting full-time employees to part-time, with commensurate reduction in pay and in most cases reduction or outright elimination of benefits. The eliminated hours of work would be done by robots…technology.

Green further claims (as cited by Fox Business) research [that] has shown that companies have been able to adopt a shorter workweek without compromising productivity. What isn’t looked at in such “research” is the degree to which such a shorter work week caps productivity growth so that there is no longer any improvement, merely maintenance. So much for keeping up with “society’s” increasing complexity and consumer needs.

Technological advancements—spurred by this government interference—will accelerate this trend in reducing human employment and reducing human income.

Go Ahead On

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IBM was interested in buying the Israeli chip maker, Tower Semiconductor, and the acquisition might have raised antitrust concerns in Israel, the US, the EU, and elsewhere around the world. Each of those antitrust concerns, if acted on, would have had effect only inside the nation raising the concern, however, making the matter purely a business decision whether to go through with the merger and simply not do business in the objection nation. Nobody objected, though, except the People’s Republic of China.

The PRC’s State Administration for Market Regulation balked and withheld approval, so IBM meekly quit the deal altogether, apparently in order to appease the PRC and preserve—IBM hoped—its other business concerns there.

Slow walking or outright blocking tech and other mergers with, or acquisitions by, American companies is part of the PRC’s economic aggression against us as that nation objects to our objecting to the PRC’s economic aggressions and to its tech and intellectual property extortion and theft. IBM is working, it seems, at cross-purposes with our struggle against the PRC.

Other moves by the PRC have included blocking

  • Qualcomm‘s acquisition of Netherland’s chip maker NXP Semiconductors
  • DuPont‘s acquisition of electronics-materials specialist Rogers Corp, an Arizona-headquartered company
  • certain PRC domiciled companies from buying memory chips from US chip giant Micron

It would have been better for IBM—and those other companies, too; IBM‘s managers don’t have a lock on timidity—to proceed with the acquisition and to eliminate the PRC’s antitrust concerns by not doing business associated with the acquisition’s chips inside the PRC or with businesses domiciled inside the PRC. Or for IBM, et al., to stop doing business with the PRC altogether.

It would have been a beneficial twofer had IBM gone ahead on with the acquisition: IBM and Tower merge, Israel, the US, the EU, and most of the rest of the world would reap the benefits of the merging, and IBM and Tower would be out from under the PRC’s regulatory thumb.

It would be beneficial for our nation, too, if the managers of our businesses had the courage to stand up to our enemies and walk away from them.

Chip Manufacturing

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The Biden administration is bent on bringing computer chip manufacturing back into the United States. On its face, that would seem beneficial. However, the administration team he’s formed to oversee the matter and its $39 billion of taxpayer dollars allocated to the program is populated with

investment bankers, private-equity investors, and management consultants.

And apparently no chip engineers or anyone familiar with supplying chip factories.

Uh, huh.

The Manhattan Project and the crash program to develop treatments for the Wuhan Virus were populated, strongly preferentially, with experts in the field, and they just as strongly deemphasized the moneybags experts.

That’s not the case with Biden’s nightmare dream team of money allocators. This isn’t a true crash program, certainly, but it’s still an effort to rapidly guts something up. It needs experts in the field to do the gutsing, it does not need politically connected money handlers.