Friday, June 29, 2007

Fuel Mileage

I often harp on he need to institute a revenue neutral carbon tax (cut payroll taxes). That said, there are other measures that I think are also important in terms of providing incentives to develop cleaner energy sources and maximize conservation.
1. Cities should institute congestion taxes. From a fiscal standpoint for cities it makes sense. I think this could have two effects- cities would broaden their tax base in the literal sense that there is an added revenue source (even if you use it to offset a reduction in say income, property, or sales taxes levied at the local level) and you would likely broaden the tax base as I think you would encourage folks that are on the bubble economcally, the marginal case, to ditch the suburbs for the city. Obviously, by raising the cost of commuting by car public transportation becomes more palatable. To a smaller extent I expect congestion tax to shift some income from the burbs to the city and thus to shift some housing inward as well, thereby, reducing the footprint of development.
2. Horsepower taxes. I understand people want to surround themselves with a lotta steel and still have a badass ride, that said, there are some externalities associated. If you have a carbon tax a horsepower tax would be largely unnecessary, but it may be easier to pass one of these politically.


I will be in Madison for the weekend- land of deep fried cheese curds and spotted cow. For those of you that live off of my half-assed posts filled with grammatical errors and partial wisdom you will have to hold out till Tuesday. But do not despair, I will come back and truly kick your ASS!

Pres. Clinton Part Deux

The only real liability Hillary has is that she would be a Clinton following a Bush following a Clinton following a Bush. Her election at a minimum would represent 24 straight years where the president was from one of two political families. A tad monarchial. That said, I think she has to be considered the prohibitve favorite. Every time I see her on TV she comes off as smoother and more polished (without comprimising on her authenticity). I think she is going to beat whomever the republicans nominate like a drum.

Oh yeah, she has one other liability, arguably her greatest asset as well... Billy Boy. God knows how much action he has been getting. But you know what, I don't think people care.

Thursday, June 28, 2007

Thoughts on the Democratic Debate

Tavis Smiley is infinitely better than Wolf Blitzer. Blitzer just blew. I loved how he kept on shutting up Gov. Richardson. And how is it possible to make Kucinich and Gravel look good? Richardson has accomplished that. He needs to stop.

Hillary was very impressive. The basic criticism most had of her (in terms of her public appearances) was that she operated on two levels- dull and shrill. She has really rounded out her delivery. I think the only person at this point in the primary that exceeds her is Obama and he doesn't seem to have near the command of the issues.

Washington Redskins

The Redskins, while my favorite sports team (and of course Joe Gibbs is the best coach ever and should be President), the name itself is unfortunate... to say the least. It is a racial slur. I am not a terribly PC guy but it offends most sensible people. So I was thinking of some possible substitutions:

1. In honor of our beloved former Mayor Marion Barry (also prime presidential candidate)- The Washington Bitch Set Me Ups.

2. The Washington Flatulence

3. Something that has at least some chance of being realized- The Washington Lobbyists

4. To confuse people- The Washington Post

5. To reflect a dominant if receding fad- The Washington Neoconservatives

6. To reflect the state of D.C. Public Schools-The Washintin Edumacashun

I am at a loss but please feel free to add some suggestions.

Cloture Update

The senate failed to get cloture: 46-53. Thus, debate on immigration will not be limited. I suspect the bill will be tabled for awhile as a result.

Congressional Pay

Congressman Dingell (D-MI) is proposing a pay hike of $4,400 for members of congress. Currently members get around $170,000. That sounds like a lot of money but when you consider that additional costs of living in two cities and one of those cities being Washington D.C. (where the median home price is $450,000 and higher in the surrounding suburbs) it's not that much. I know this one isn't going anywhere as it is lends itself to populist dismissals. However, I think it makes good sense. We get what we pay for and to some degree that is people who are are all to eager to substitute prestige and power and access for money. As the old saying goes, it's not just the cream that rises to the top.

Frankly staffers are paid abysmal salaries. If I wanted to go over to the hill to serve on one of the committees or work for a member I would be looking at a salary half my current salary, and I am not exactly a high roller. I think it would be great if a staff position was viewed as a great opportunity for mid-career professionals without too much financial sacrifice. Then I would be priced out from the other end and that would be good for the country.

Romney Sucks As A Person

As a dog lover and as one that recently lost my wonderful dog, dog of a life time really, Taco, I am thoroughly disturbed by this story from the Boston Globe. Apparently, on a family vacation the Romney's put their dog in a carrier cage and then strapped it on the roof rack of their family wagon and frickin drove from Massachussets to Canada. Cold-hearted bastard. That is just despicable. I hope he gets whalloped.

Wednesday, June 27, 2007

Vice President Dick Cheney Not Really Vice President

So I am sure all of you loyal Pie-Eyed readers remember xtra's posting yesterday concerning how Dick Cheney isn't really part of the executive branch of the federal government.

Well here is the best commentary I have seen so far concerning this ridiculous claim...and of course it comes to us from The Daily Show.

Great New Old Blog

The American Scene is run by Reihan Salam. It used to be a joint venture between Reihan and Ross Douthat of the Atlantic and some other guy that never ever posted (sort of like this blog but better). Anyhow, Ross Douthat started his own blog on the Atlantic and Reihan has reinvented this as group blog with people all across the political spectrum spectrum.
Note: Check out this Article "The Party of Sam's Club" by Ross Douthat and Reihan Salam.

SCOTUS Watching

Court watchers love this time of the year as the Supreme Courts start issuing rulings in flurries. If you want to check out what's going on at the Court hop over to the Volokh Conspiracy or the SCOTUS blog.

iPhone Continued

I actually secretly yearn for an iPhone. It looks way cooler than about everything out there, price and crappy network aside. I have a couple of personal qualms with it which will prevent from buying one:

1. Price and Crappy network, already taken care of.
2. I am the worst type of electronics consumer (or best from the perspective of a sales person). I love gadgets. Unfortunately, while I am routinely suckered in by them or at least infatuated with them, I can't manage to get them to work. Four years ago I bought the Dell Axim (a PDA) for a couple of hundred bucks. I bought the external keyboard and thought I was going to be super clever and use it like a mini computer. Type notes in class with my tiny little gadget. Whip out emails on campus. But no, ignoramus that I am, I never quite got the thing to transcribe my handwriting into actual words. That might be because my handwriting sucks and as such the whole venture was foolish.
3. Now consider the purchase from a conspicous consumption angle. D.C. is the land of blackberries. But nonetheless, Blackberry's are uniquely cool in D.C. People pull them out at the bar and toggle through their emails mid conversation at happy hour and feign dismay to draw attention to the fact that they are so important that they are getting emails at happy hour. Essentially, unless you have one, you're a nobody. I am a nobody. That is that my employer does not value me to the extent that it does not feel that it can do without immediate access at all times of the day. The feeling is mutual. But worse than being a nobody is somebody who buys a blackberry or something of the like (read:iPhone) because they are a nobody who is paying an exorbitant amount to be somebody. Being somebody is much more expensive than having a blackberry.


Here's a review of the iPhone on the NY Times. That is if you are interested in paying $500-$600 dollars for a super duper phone that only works on the crappiest of networks around.

Note: If you have an .edu email address you can get free access to Times Select. Very Cool.

Immigration Reform

My ideal reform would look something like this:

Clear the backlogs for legal applicants.

Increase legal immigration-skilled, unskilled, family based, sex worker or what have you.

Implement border and workplace enforcement. Establish procedural metrics on the workplace side such as a minimum number of the workplace inspections per year. Establish outcome based metrics- i.e. the number of illegal immigrants coming over the border.

Then we talk amnesty and we never talk guest workers.

Driving in the Commonwealth

For those of you who aren't from VA it is not the state of Virginia but rather the Commonwealth. The Old Dominion if you will. Anyhow, the commonwealth has decided to bring its wrath on reckless drivers. If you drive 20 mph over the speed limit you will be charge $1250. It is fairly exorbitant, though, I suppose I can't be too outraged. I do wonder if this will have something of a perverse effect on speeding. I think while this fee, pigovian tax if you will, will clearly provide a disincentive for reckless driving. However, at the same time the relative cost of simply simply speeding is diminished in comparison to reckless driving. Then there is the question of enforcement. Will police officers be more selective in their enforcement? Instead of pursuing pretty much everybody that comes their way are they going to swing for the fences so to speak, go for the big get? You could see this resulting in a gradual creep up in the average speed of drivers. But probably not.

Happy Birthday

It's Anti-Everything's birthday. I don't know which one but Happy Birthday nonetheless.

TNR reporting on the NR Cruise

Some of the big political magazines have cruises where various ideological dignitaries preach before the choir and then hand out a tin cup on behalf of the hosting magazine. The National Review has been doing this for years and the folks at the New Republic sent somebody along for the ride to report. Anyhow, it's cheap fun, but fun nonetheless. I loved this line on Bill Buckley from the article: "Buckley is an urbane old reactionary, drunk on doubts."

It's a clever phrase, "drunk on doubts" but it gestures at what conservatism has traditionally been about- doubt. Doubt about the superiority of that which is new when something existing has already proven its fitness. This is one of the things that is interesting, vexing, troubling about the modern conservative movement as it no longer appears to have the organizing principle that served it well for decades- that being- "To stand athwart history and yell stop". Now, increasingly conservatives have reconciled themselves with the general thrust of what President Bush has done- making history, transforming the middle east, yada yada.

The author's point is to poke fun at crazy conservatives but his passage on the personal tension between Norman Podhoretz and Bill Buckley represents a broader friction for the movement as a whole.

Deletion Reviews

So there is a blogger that I avidly follow, Megan McArdle. She has a blog Assymetrical Information and writes for the Economist. Anyhow, her internet notoriety garnered her a bio in the Wikipedia. However, Wikipedia has a "deletion review" and apparently there is a threshold of notability which she has not met thus not warranting a bio on Wikipedia. So they are reviewing whether they should delete her bio. I hope I make it to the point where wikipedia debates deleting my bio, oh wait, I don't have one because I am not even close to notalbe.

Tuesday, June 26, 2007


Moving sucks. I mean really really sucks. There is essentially no end to the amount of crap one accumulates over the years (especially for a materialist like me). It's tremendously time consuming and it takes seemingly forever to get settled in your new place. Whine session over.

In other news the Senate made cloture on the immigration bill. The senate will vote on a second cloture to limit the debate on amendments tomorrow.

Economist blogs, continued

The Economist now host an arts blog, check it out.

hat tip: Tyler Cowen

Odd News Item of the Day

Well this is not exactly new news as opposed to recent news but Cheney is claiming the Office of the Vice President is not part of the Executive Branch. Nor does he claim to be in the legislative branch. Rahm Emanuel is responding to this interesting legal theory in a novel way, by defunding the Office of the Vice President. This is an administration that has had any number of lows and stupid assertions but this one ranks pretty high. Maybe there is a Parallel Universe Branch out there.

I sort of wonder if there isn't some credence to the rumors of Cheney getting the boot. There was a recent story about Sen. Warner (R-VA- yay for the old dominion) with other elders in the GOP going to the White House to tell Bush to boot Cheney. Maybe Cheney is sort of mailing it in to give Bush cover or something (not that he really needs any more but maybe)? Ultimately I don't see Cheney leaving for one basic reason: Impeachment. To the extent that Cheney sticks around he provides a disincentive to Democrats to try to impeach Bush. Is the spectre of President Cheney really preferable to President Bush?

For Carbuyers out There

Here is a review of the Mazda 3 in the Washington Post. I bought a VW Rabbit in the fall but seriously considered the Mazda 3. The lady bought the Mazda 3 and has been delighted with her purchase. I think both cars are about 80 times better than the Honda Civic. In fact, I would dub the Mazda 3 the new Honda Civic.

Big Pharma

There is much talk about the need to replicate Europe's pharmaceutical purchasing program. European countries' health systems bargain pharmaceutical companies prices down and pass the savings on to its consumers. The reasoning goes if Europe can do it why can't we in the U.S. do it, after all these are the same drugs. Some would go further and claim that the Pharmaceutical companies are gouging American consumers. But in fact it is not the Pharmaceutical companies that are gouging American consumers but rather European countries are free-riding on American R&D spending.

A new drug is estimated to cost somewhere between $400 million and $1 billion to bring to market. For every drug that actually obtains FDA approval dozens do not. In order to recoup the Pharmaceuticals investment they charge high prices. This comes as no surprise. Pharmaceuticals can afford to sell drugs to European countries more cheaply than it does to U.S. consumers because it need only sell the drug at the marginal cost of production. Essentially, within the global marketplace the U.S. consumer is paying for cost to develop the first pill and other developed countries are paying for the cost of production of all subsuquent pills.

So why shouldn't we bargain down the prices of drugs? Well, the answer is obvious, because fewer of those first pills will be made. We have become remarkably cavalier about the gains that we derive from pharmaceuticals. Think of HIV/AIDS. 20 years ago it is was regarded as a death sentence. Now, while hardly cured or pleasant, HIV/AIDS has become a manageable disease. To this those on the left will respond that not every drug is some treatment for HIV/AIDS but rather viagra or cialis. Well, for the most part such a response is an error of youth. I think will all thank god for Viagra as we poke about with our walkers chasing after our equally aging paramours in our retirement homes in some godforsaken swamp in Florida.

The question we should first ask, is why is it that other Countries can in fact bargain down prices for such things as pharmaceuticals? Maybe I am mistaken in my assumption that countries can't employ bargaining leverage for such consumer goods as electronics or cars. But on a proactive note, we should explore how to reduce other countries' bargaining leverage on pharmaceuticals so that the price of development can be blended across borders just as your computer is. It makes sense for the U.S. to subsidize African nations purchase of drugs, not Switzerland's. Paradoxically I think the solution here lies with drug reimportation.

Sicko Review

Here is Reason's review of Sicko. It will be interesting to see what effect Sicko will have on the debate on Health Care. Clearly there is an increasing popularity of "Single Payer" models of health care reform. I expect Sicko to nudge the debate a little further in that direction.

The Atlantic Blogs

The Atlantic hosts several big time bloggers, you should check it out:

Matt Yglesias on the Left
Ross Douthat on the Right
Andrew Sullivan in his own world (this is not meant as a pejorative)
James Fallows who blogs about technology and development
And Marc Ambinder who is blogging about the campaigns

Monday, June 25, 2007

Megan McArdle on Immigration...

and other sundry topics over at her blog Asymmetrical Information. She has some interesting thoughts. You should read her blog, regardless of your political views.

Skilled Immigration

One of the many frusturating things not spoken of in this whole immigration debate is the particulars of legal immigration. We have been told that a guest worker program is vital to American Commerce (doubtful but I wouldn't doubt that it is beneficial) and that the absence of horders of unskilled or low-skilled immigrants will cripple the economy. I tend to think that the distributional effects of unskilled immigration are not neutral and skew upward. This does not make it bad or good in and of itself. Unskilled immigration whether legal or illegal helps generate economic growth and improve our livelihood in the long term but in the short term puts pressure on the native born or recently emigrated unskilled workers. Now back to my point which I have neglected severely, consider for a moment that we increase skilled immigration by between 50%-100%. Now imagine the consequences of having dentists, doctors, accountants, IT folks, and engineers from afar flood the country. Who would be hit primarily? Professional classes. But we would all benefit, tremendously. Imagine how much you semi-annual checkup would cost if all of a sudden your family dentist had to compete with Iqbal the neighborhood pakistani dentist who is willing to charge half the mark up that your regular guy is. Just a thought.

Random Cool Thing

So I was picking up the lady at BWI (Baltimore-Washington International Airport) and as I was parking I noticed they had this really cool thing- "SmartParking". So the recent fad has been to display the number of vacant spots on each level as you are driving up. Now these can suck because say for instance there are 375 free spots in a 6 level garage and 350 of them are on levels 4, 5, and 6. The meter basically tells you that there are 375 free spots when you enter level 1 even though there may only be five on level 1 and 20 other cars are chasing those 5 spots right there with you. The parking lot at BWI told you not only the number of free spots on a given level but on a given lane so that you don't have to waste anytime trolling around for places where there aren't any. Anywhoo, more evidence that I am a dork because that just blew my mind.

Billing Practices

Professor Bainbridge talks about random unethical billing practices.

Crash Course in Constitutional Law

Courtesy of Slate's Walter Dellinger.

Interesting Article on the Netherlands

It appears the Netherlands is becoming less libertine.

Friday, June 22, 2007

Health of Nations

If you are interested in other countries' health care systems check out Ezra Klein's mini blog series dubbed the "Health of Nations". Ezra Klein writes for the American Prospect and maintains his own blog. In my view he is one of the sharper liberal bloggers out there.


Here's a review from the American Prospect.

Rudy and The Iraq Study Group

Apparently Rudy was originally on the Iraq Study Group but didn't attend a single meeting as they conflicted with his speaking tour. This type of thing I think should be an immediate disqualifier. Fred Kaplan over at Slate has more.

Older Children are Smarter

According to Will Saletan's Human Nature Blog over at Slate. This is sort of a bummer as I am the youngest child in my family. In my personal experience this is true though, my brother is smarter than me, but I definitely got the looks (if you have seen my family you will know I got the raw end of that deal).

Radley Balko

Works at the Cato institute and contributes to Reason Magazine. You should check out his blog "The Agitator". He is libertarian and blogs frequently about the militarization of the police and the destructive folly that is the War on Drugs. His reports on both are quite alarming.

Rand Part II

Health Care accounts for 16% of our GDP but surprisingly we have little information available as to what treatments are cost effective or more basic things like how different types of insurance affect health outcomes. The last major study focusing on insurance and health outcomes, and really the only authoritative study, was conducted by the Rand Corporation about 25 years ago. In the study people were randomly assigned to three different health plans with varying levels of co-insurance (level of deductible, co-payments, things of that sort). The finding was that those that had higher levels of co-insurance tended to consume less care (both effective and ineffective care) and use less sick leave but without suffering in terms of health outcomes. But the fact is the study is dated, we should be conducting longitudinal studies of this nature on an ongoing basis.

Kevin McHale: Worst GM Ever

I thought for you long-suffering Wolves fan (I like KG, not the Wolves) you might find this piece by Bill Simmons of ESPN funny: "The First Annual Atrocious GM Summit".

Thursday, June 21, 2007


There has been much hoopla over Mayor Bloomberg switching his party affiliaton from Republican to ... well nothing.. independent I suppose. Many have speculated that this is the first step in setting up a run for president as a third party candidate. I think this is possible but I tend to think this is more of a publicity stunt. I ultimately doubt Mayor Bloomberg will toss his hat into the ring but will tease the media and fan the flames of speculation so he can:

1. Get attention for its own sake
2. Get the spotlight to force the discussion on some public policy issue otherwise not discussed at the present (I have no idea what)
3. Garner consideration for the Veep slot on a Democratic ticket.

I think the chances of Mayor Bloomberg being tabbed as a Veep are slim. However, he would provide somebody like Obama cover to move very quickly to the center and posture as a New Democrat as opposed to the more old school liberal approach that he is taking now. Also it would enhance his "the enemy is partisanship" spiel by nominating somebody who doesn't neatly fit our political categories.

Regardless of whether he runs or not I suspect whoever the Democratic Nominee is will win. He will just ensure they win by a larger margin.

Wise Words about Health Care

from Peter Orzag, Congressional Budget Office Director:

"Furthermore, hard evidence is often unavailable about which treatments work best for which patients or whether the added benefits of more-effective but more-expensive services are sufficient to warrant their added costs. In many cases, the extent of the variation in treatments is greatest for those types of care for which evidence about relative effectiveness is lacking. Together, those findings suggest that better information about the costs and benefits of different treatment options, combined with new incentive structures reflecting the information, could eventually yield lower health care spending without having adverse effects on health—and that the potential reduction in spending below projected levels could be substantial. Moving the nation toward that possibility—which will inevitably be an iterative process in which policy steps are tried, evaluated, and reconsidered—is essential to putting the country on a sounder long-term fiscal path. But even if it did not bring about significant reductions in spending, more information about comparative effectiveness could yield better health outcomes from the resources devoted to health care."

hat tip: Arnold Kling

Note: I would highly recommend reading Arnold Kling's book on healthcare "Crisis of Abundance". It's a short read and I think does a great job on diagnosing some of the drivers behind spending. That said, I think his policy recommendations, while gesturing in the right direction (more cost sharing, taking employers out of health care provision), are politically untenable. He also writes for and runs a very interesting blog with Bryan Caplan (also a GMU Econ professor and author of the "Myth of the Rational Voter"): Econlog.

Marketing to Geeks and Dorks

I fashion myself as more of a dork than a geek (I lack the IQ to be a true geek, not that I don't aspire to geekdom). Anyhow, Tyler Cowen, Econ professor at GMU and blogger extradonaiire has a new book out- "Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist". It is obviously riding the freakonomics wave by using the tools of economics (I would expect in this book more theory as opposed to fancy regressions) as applied to everyday life. Mr. Cowen has set up and advertised the existence of a secret blog. To gain access to the secret blog you need to pre-order the book and then email Mr. Cowen @ that you purchased the book and he will send you the site address. He has clearly built an honor system because he doesn't advertise that there is a secret password and his blogs ask all participants to keep the blog postings and such under wraps.

Anyhow, being the massive dork (sometimes douchebag) that I am, I am going to pre-order the book so that I too can read Mr. Cowen's secret blog. More interesting than the fact that I am a dork/douche is the fact that Mr. Cowen has set up this incentive blog that is underpinned by an honor system, namely: that people are honest about their book purchase and they do not release the contents or address of the blog to the public. I am not trying to game the system and gain access to the "secret blog" illegitimately but I wonder how representative I am. It could just be that Mr. Cowen can rely on the honor system as this type of incentive is pretty self-selecting (cool people need not apply_dorks only) and the targeted public (dorks like me) are fairly honest or entirely risk averse.

Wednesday, June 20, 2007


While we are on the topic of Basketball I think it has to be said that K.G. deserves to be traded. He has been held captive to a mediocre team (thank you Kevin McHale world's worst GM) for too long. He still has a couple years left of total badassness. Let him go.

Miller Lite

I am a recovering beer snob. I was that guy that chortled every time that somebody ordered a major domestic beer. However, somewhere along the way I decided that all mass produced beers weren't all that bad, and in fact some rather decent. But until recently I would never stoop to drink a light beer. But as my waistline expands and I get older I am slowly reconciling myself to light beer. The turning point occured occured while I was in Dallas and had just finished a 5k run (I actually ran the entire time, not that is an accomplishment for most people but if you have ever seen me in person you will recognize it as such). The 5k was sponsored by Michelob Ultra and thus this lightest of light beers was abundant and free. In the hot Dallas weather and my body still teetering on the brink of cardiac arrest, I found Michelob Ultra to be the perfect refreshment. It was cold, had some body but not too much for the setting, and actually sorta tasted like beer. While I still prefer full bodied beers, a light does just fine in the right situation. That said, I don't understand the reverance that some show for Miller Lite. It has no taste, none, absolutely none. People that drink Miller Lite honestly do not like beer. They claim to but this is impossible as they only drink Miller Lite which in no way resembles the taste of beer. It tastes like decent tap water and looks like the urine from somebody that is pretty well hydrated. Which makes the obsession with Miller Lite baffling to me. When people order a Miller Lite they almost do so with a sense of pride. I must be missing something. Is this code, or maybe some cruel hoax operated by a vast non-partisan conspiracy (you know, like how art historians have for years been able to persuade the viewing public that Leonardo's Mona Lisa is in fact amazing or that anything by Mark Rothko is worthwhile). I don't know, I am missing something here.

Best and Most Apropriate Sports Name of All Time

CBA's Atlanta Crunk. Dig it.

Pie-Eyed Endorsement

Not yet, but I say we endorse any candidate who selects Journey's "Don't Stop Believin'" as their campaign song.

Celine Dion and Politics

Some of you may have noticed that Hillary held a contest for the campaign song. I thought this was a cute idea and her ad launching it was a good attemtpt (notice attempt) at humanizing Hillary (almost there, lotta progress made, though). Anyhow, the winner is in: Celine Dion's "You and I". Hillary is still the Democrat I find the most tolerable, which is good, since she will be President. However, she could have picked a better campaign song. My personal vote Justin Timberlake's "Bringing Sexy Back".

Tuesday, June 19, 2007

Google Blog

Google now has a public policy blog.

The Best Argument for Abolishing the Corporate Income Tax

Courtesy of Megan McArdle from

Why I'm in Favor of Abolishing the Corporate Income Tax

How many times have we heard columnists or activists foaming at the mouth about those evil corporations that don't pay their "fair share" of taxes? Well, since I have to wait for the copier repairman to finish up some work, I'm going to take this opportunity to plug one of my pet causes: abolishing the corporate income tax.

Now, I know what you're thinking. If you're a conservative, you're thinking "Right on!" If you're a liberal, you're thinking "typical pro-business yuppie." (You make more money than I do. Trust me. I'm currently the executive copy girl in a construction trailer.) If you're one of those activists, you're thinking "When the revolution comes, she'll be the first one with her back against the wall." Too true, and it will save me a lot of time waiting for common sense to wither away and true Naderism to arrive. And probably I'm not going to convince you. But the rest of you, listen up, because I've got compelling arguments with which to convince you, or your friends, if you're already a believer.

Background: How the Corporate Tax Works
Corporations are taxed on their revenue minus their expenses. This is different from the way people are taxed, because the government assumes that the expenses necessary to operate a person are roughly the same from person to person. You may think you need a widescreen TV with picture-in-picture and dolby surround sound in order to support basic life functions, but the government doesn't. Therefore, it taxes you on your revenue -- the money you make for selling your services -- and leaves it to you to figure out the expense part.

The problem with doing likewise with corporations is that they are very different from each other. An aluminum smelter, for example, may have very high revenues, but because there is a lot of competition in the market, it may cost the smelter 99.5 cents to make every dollar it earns. Since the corporate tax rate is 35%, the aluminum smelter would be making an after-tax profit of -34.5 cents for every dollar in revenue. This would quickly put the smelters out of business, and we'd all have to go back to shingling our houses and desperately gulping Mountain Dew out of our hands before it all ran through our fingers.

My old consulting firm, on the other hand, by my rough calculations experienced a 450% return on the cost of my labor and associated overhead (although that figure leaves out the various layabout nephews, current and former mistresses, and assorted friends' children employed by the owner of the company to write reports nobody read. I view those as a personal expense, although the IRS, unfortunately, did not.) 35% of revenue hardly makes a dent in the profits. That is why the government takes into account expenses as well as revenues when calculating taxes.

Argument One: Corporations aren't People
As my favorite macroeconomics professor pointed out, it is impossible to tax a corporation because the corporation is just a fictional entity designed to pass profits back to its owners. When you say you're going to "tax a corporation", the corporation doesn't go to the money farm to harvest some more cash to give to the government so we can expand job training for unwed mothers -- some real person is going to pay that tax. When you put a tax on wages, such as social security or the unemployment tax, the employer doesn't say, "oh, well, profits dropped 15% this year; better tell Merrill Lynch to issue a 'sell' rating" -- they pay their employees less, both to lower the tax burden and to recover the lost profits. They hire fewer employees, because each employee is now more expensive. This costs real people money. When you up the corporate tax, either the employees pay, because the firm can't afford as many of them; the customers pay, because the firms have to raise their prices to cover the taxes; or the shareholders pay because dividends are lower and the company is worth less. And before you liberal types start rubbing your hands in glee at the thought of those pained shareholders, keep in mind that the largest shareholders in companies are insurance companies, which invest in stocks in order to make the money they need to pay off when your house burns down; and pension funds, making the money to take picketing US Steelworkers off the streets and put them into good homes. The other big holders are mutual funds, which is what most of us have our 401(k)'s in. So when you say "I want to tax corporate profits", try silently saying to yourself "so that Mom can sell the condo in Florida and move in with me."

Argument Two: The Corporate Income Tax Costs the Economy More than it Earns
The Corporate Income Tax brought in $204.9 billion in 1998. My tax professor (a Democrat) estimated the cost of corporate compliance in that year to be $300 billion. That's just the direct cost -- what corporations paid tax lawyers and accountants.

This labor is unproductive. It adds no new wealth to the economy; we are paying people simply to transfer money from one place to another, a net economic loss. Particularly so because the money isn't being transferred into any sort of wealth producing investment, such as a store or manufacturing plant. This doesn't mean that we shouldn't have any government or regulations -- the police add no new wealth to the economy, but I still want them around. It just means that we have to weigh the cost of the regulations against the benefit we get out of them. In this case, we make $204.9 billion off the corporations, but at the expense of taking $300 billion worth of resources out of the economy which could have been building widgets or thinking up a new recipe for fat-free muffins.

Nor is $300 billion the only cost. Remember, those corporations won't stump up on their own: you need IRS agents to check on them. And congressional staffers to write laws closing "loopholes". And courts to take corporations you think aren't complying. And reporters to write foamy-mouthed editorials about how corporations aren't paying their "fair share". More importantly, there is a hugely distortionary effect on the economy, because corporations spend an enormous amount of time and money trying to structure transactions to get around taxes. All of this activity is economic dross, and its so widespread I've given it its own section.

Argument 3: The Corporate Income Tax is Extremely Distortionary
I've talked elsewhere about the lengths that companies go to in order to avoid, among other things, taxes. One of the most egregious of these is the way that taxes favor debt. Now, corporations prefer debt to equity anyway, for the same reason that you'd rather take a loan from your parents than sell them part of your house. What makes this preferance so compelling, however, is that while corporations have to pay dividends or repurchase shares out of their after-tax profits, they can deduct any interest on debt. Suppose I have a project that is projected to return 8% -- every dollar I invest yields me $1.08 at the beginning of the year. We'll posit 0 inflation and a risk-free environment so that we don't have to get into tiresome concepts like the time value of money. Now assume that I don't have the cash to make the investment, but I can borrow money at 9%. In a tax-free world, this would give mea return of -1%, and I would pass up the opportunity to own my very own fur-bearing trout ranch. However, if I am a corporation, I can deduct that 9% -- call it $9 annual interest on a $100 loan. Since the corporate tax rate is 35%, I have just lowered my tax bill by a little over $3. Add that $3 to the $8 I'm getting off the trout, and suddenly it's an attractive business opportunity. The trout are no more fruitful, their pelts no more soft and lustrous -- the tax status makes all the difference.

So why is this bad? Partly because it encourages companies to make investments that have a negative economic return -- the actual economic return of 8%, with an actual economic cost of lending the money of 9%. (Yes, this is simplistic. Work with me.) But mostly because it allows companies to take on more risk than they otherwise would. As I said in the above-referenced post, debt makes the company riskier in ways that equity does not, because corporations, not being people, can't borrow money from their parents and therefore get into real trouble when they can't meet their interest payments. The tax exemption, added to the innate preference for debt, means that companies will leverage themselves right up to the point where Moody's threatens to drop their rating to "run for the hills!". People are always over-optimistic about the outcomes of the projects they are pursuing, as you know if you've ever attended a budget meeting or a bridal shower. Add in a little shoddy accounting and you get Enron.

There are numerous other ways in which companies engage in distortionary behavior; entire firms exist for the sole purpose of arranging asset swaps between firms or entities that can't deduct the assets, and firms or entities that can -- every major investment bank has several groups pretty much solely devoted to this purpose. This makes money for the corporation, but it doesn't create new wealth; it merely transfers money from the government's pocket to its own. Meanwhile, all those people and resources that could be utilized to actually produce something are paid instead to engineer the transfer.

The standard activist response is to close the "loopholes." This is discussed in our next section:

Argument 4: It is Impossible to Close the Loopholes
I am all for closing loopholes that are special breaks generated by friendly legislators. Most loopholes, however, do not fall under that category. Most loopholes have to do with items that are legitimately treated as expenses for some purpose. For example, if you eliminated the debt deduction, you would get rid of a lot of fur-bearing trout ranches -- but there are companies that require a high level of capital investment in order to operate, such as automakers. They finance their physical plant with debt, partly for the tax break, but also partly so that they can match the financing cost of the equipment to the life of the equipment. During a bad year, with those debt payments coming in, it wouldn't be a good idea to slap them with an enormous tax bill too -- not unless we've decided as a nation that we'd rather drive Yugos. Many of the "loopholes" decried by Nader and his ilk fall into this category -- corporations engaged in clearly distortionary, but legal behavior, in order to minimize their taxes.

So why can't we eliminate this? There are several reasons. The first is the same reason that it's impossible to entirely eliminate computer hacking, or burglary -- they've only got to find one way in, while you have to close all the doors. As fast as you write the new laws, an army investment bankers, accountants, and tax attorneys will get busy seeking a way around it. I'm sure Nader would like to outlaw this as well, but since this would amount to a law against thinking, it would be impossible -- although he may not realize this, given how successful he's been at implementing such a plan among his own followers.

The second reason is that there's a fine line between necessary and unnecessary transactions, and picking where that line falls will remain more of an art than a science. The harder we try to crack down, the more time and money we waste arguing whether the trout pelts really need to be stored at the dry cleaners before they're sold.

And the third goes back to those costs we talked about in Argument 2. The more laws we write to try to close loopholes, the more congressional staffers we need to write them, judges to interpret them, IRS staffers to enforce them, tax lawyers to brief companies on them, etc. And the effect is geometric, not arithmetic -- the more tiny, specific laws we write, the more impossible the tax code becomes to comply with, as complexities generate ever more conflicts and gray areas, and the code itself passes beyond the comprehension of a single person, thereby making it impossible to completely tell whether or not you're in compliance. This unpredictability adds risk, raising the cost of capital and reducing the willingness of companies to invest. This latter cost is impossible to quantify, but we could quantify most of those direct compliance costs -- and I would be willing to bet that they far exceed any revenue generated by "closing the loophole".

Argument 5: Eliminating the Corporate Income Tax Makes Corporate Welfare Harder
At last, an argument even a Naderite could love. Much of that corporate welfare consists of tax deductions, credits, or what have you, that the public perceives as "free" because we're not handing them a fistful of cash. Eliminating the corporate income tax will force voters to ask themselves whether we actually like Chiquita bananas enough to hand them a wad of our hard earned cash every April 15. When we think about all of the unproductive activity we'd be eliminating by eliminating the corporate tax, lets not forget all those high-priced lawyers eating tax deductible dinners with your congressman in order to convince him that his latest client desperately needs a tax break for the Good of the Nation.

The corporate income tax costs the economy much more than it produces in revenue. Eliminate it and watch a flood of economic activity be unleashed as all those unemployed accountants, tax lawyers, and IRS agents get to work inventing the next Furby. Recoup any lost revenue by eliminating the capital gains tax and treating capital gains as ordinary income in order to equalize the tax treatment of debt and equity, and it will be a long time before we see another Enron.

Summary for Those Who Started to Nod off in the Third Paragraph and Skipped to the Bottom
The corporate income tax is very bad. You should be against it. Email this link to any of your friends who question this.

Smart Words From Dan Drezner

"The most basic decision any immigration bill needs to make is this: How many immigrants does the country need and want? Bizarrely, this was the one question that the debate over the Senate bill did not seem to concern itself with."

Wednesday, June 13, 2007

More Random Notes

So I saw bits and pieces of the Democratic debate and the part that sent me through the roof was not anything that the Democrats said but rather one of Wolf Blitzers questions. It went something like this "What would you do as a president about high gas prices?" Now the correct answer is nothing but this questions conveys a total ignorance on Mr. Blitzer's part. At least in the short term, the President has very little ability to influence things such as price (they are driven by supply and demand). Clinton released some fuel from the strategic reserve to ease the price of gas by a nickel or so but that is about all that can be done. Ostensibly the President could lobby congress to give the President authority to set gas prices and we could all return to fuel shortages, gas lines, and even and odd numbered fueling days. That would be assanine. There is only so much that can be done. The candidates to be honest, acquitted themselves quite poorly. John Edwards muttered something inane about investigating oil companies (cuz gee whiz, they are making so much money) and almost pretended that gas prices operated in a vacuum. Chris Dodd said something stupid. Yet they all proceeded to move from gas prices to two things: Energy Independence and Environmental Protection. If you champion the latter then high gas prices have to be viewed as an unmitigated good. People's behavior is being influenced in a direction towards your policy goal (via purchasing autos that have a higher fuel economy, driving less, etc.).

Now on to energy independence. I was listening to C-SPAN radio on the way home from work and there was some subcommittee hearing (it was like the catchall subcommittee of current big fads- global warming, energy independence, tinky winky, etc.) and the chairman (rep. Markey (D-MA)) was bitching at the head of NHTSA (National Highway Traffic Safety Administration or something rather) for not mandating higher a fuel economy for Auto Manufacturers. So he goes on to talk about Europe and how they have very high fuel economy standards there (it's 35 mpg right now, which is what is being proposed here for ten years hence) and how Ford and GM are able to meet these standards in Europe, how come they don't here. Then he did his bit about how there is no reason the American manufacturers can't meet these standards today and cited the Ford Escape hybrid as an example (it manages 36 mpg v. 26 mpg for the standard model) of how the American manufacturers can meet a higher fuel economy without sacrificing safety. But his example is telling, the Ford Escape hybrid is several thousand dollars more expensive than the equivalent standard engine version.

In Europe where energy is expensive (i.e. where they tax the bejeezus out of gas) cars are smaller, much smaller. I drive a Volkswagen Rabbit (the Golf in Europe). In the U.S. the Rabbit VW's entry level car. In Europe it is considered a full-size car, there are two cars below it in horsepower and curbweight- the Polo and the Lupo. A car that weighs 2000 pounds and has 80 horsepower is unthinkable in the U.S. but it is quite standard in Europe. There are reasons other than gas prices (smaller families, greater population density provides for greater economies of scale vis-a-vis public transport, urban running as opposed to highway driving, etc.) but ultimately gas is expensive there and cheap here, ergo, we have gaz guzzling cars. If you want to change that, change the market incentives. Fuel Economy mandates may have some effect but ultimately the consumer will chase the exemption (read: Minivan, SUV, CUV).

Thursday, June 07, 2007

Immigration Bill

The support for the immigration bill has me utterly flummoxed. Though, I should qualify my use of the term support, this is clearly an issue where there is a stark elite/base divide, and this goes for both sides of the aisle. We have been told that we are in an intolerable state, that there is a burgeoning underclass of illegal immigrants and something must be done to rectify this situation. The proposed something is amnesty for the 12-20 million illegal immigrants (though the actual language of the bill proposed implies the deportation of about 2 million recent arrivals), a guest worker program that will provide for 200,000 slots, and eventual border enforcement (thus far not coupled with workplace enforcement).

For those that support the "we have to do something now, and it must be comprehensive" approach, I have some questions.

1. Will blanket amnesty not beget more illegal immigrants, or put in other words, will amnesty not beget a futue amnesty?

2. Have temporary guest worker programs been successful in other industrialized countries?

3. Have temporary guest worker programs created a new underclass in other countries? If so, does this not replicate the problem legislation is purportedly designed to solve?

4. Is the status quo really worse than the alternatives?

Wednesday, June 06, 2007


Can we change the damn poll?

Silver Bullets in Health Care

One of the obnoxious features in the debate about health care is the notion of silver bullets whether it be preventative care or information technology. These things may in fact improve health outcomes though I am skeptical that they will ultimately achieve significant cost savings. If we want to achieve cost savings there are a very limited number of options- increased coinsurance- i.e. you pay more for your treatments, limiting treatment through qeueing and rationing or like HMOs did (until government intervened), battering suppliers (doctors and big Pharma). That's your toolkit. None are popular but that's what you got.


I am curious as to what corporate social responsibility advocates think of Google. I think there is a compelling case that Google is at this point one of the worst companies on the face of the earth when one considers their different forms of privacy invasion to the abetting the Chinese in censorship of the internet. I understand it is a young company and they contribute to Democrats but I wouldn't think those things are enough to placate CSR-types, or are they?