Dominic Pino on non-economists; David Shaywitz reviews Sunstein and also Silver; Emily Oster on ultra-processed foods; Scott Sumner on capital taxation
"In Luck Village, redistribution seems fair." And that is why Sunstein, a Progressive, wants to lay great emphasis on luck rather than accomplishment. It is a way to justify ruling class power. We heard essentially the same thing in various forms from Obama, e.g., "you didn't build that." The last thing they want is any sense of agency in the public.
Along these same lines, see N.S. Lyon's review of Auron Macintyre's 'The Total State' in City Journal, where Lyon's writes of the ruling class (the managerial class) that "... competence within a given organization is of less importance to one's career than an ability to demonstrate loyalty and acceptance within the managerial class." One reason members of the ruling elite want to argue that the success of someone like Elon Musk is due to luck rather an accomplishment is because deep down they know that their own success is due to being a conformist rather than someone of extraordinary achievement.
Yes - conformity to wokery in bureaucracy (whether in government or corporations) can be understood as an effort to replace competency as the criterion for advancement.
If you are so inclined, EVERYTHING is luck. If your father had ejaculated a second before or after he did, a different sperm would have merged with your mother's egg and you'd be a different person. It was all a matter of luck. Just today, Freddie deBoer sent out:
*Our genetic endowment lies entirely outside of our own control*, and the fact that we are born with a given genome is a matter of pure random chance, just like being born into a rich family. [The parts between the * * were italicized for emphasis.]
I love how plain yogurt is a lower level of processing than butter, despite that fact that yogurt takes a lot of processing to produce compared to butter (get cream, shake the hell out of it, drain off remaining liquid). So many of these categorical systems just boil down to "Things in the good category I think are things people should eat, and things in the bad category are things I think people shouldn't eat," with no research necessary as it is all determined ahead of time.
Yup. It seems to be largely a branch of the food industry's marketing departments, almost less reliable than tobacco research due to a lack of scrutiny.
I ran a complicated supply chain from China, other Asian countries and Europe, to three factories in North America and two in Europe during the pandemic. The most significant issue I faced was getting material off the boats and en route to my factories. The root cause was not the pandemic but US and EU regulations.
I’m increasingly impressed with Dominic Pino’s writing. He seems to have both a grasp of and enthusiasm for the intricacies of economics.
WRT to Goodman and Pino, my general impression is that lockdowns were far less restrictive than they are assuming. The mere fact that Amazon kept running deliveries is a pretty good indication that huge segments of the population were still working as normal (I suspect this is true almost anywhere, including China). Just spend a few minutes thinking about all the systems that need to be active to support a delivery network (drivers, warehouses, fuel, maintenance, energy to pump fuel and run warehouses and traffic lights, etc along with all *their* support) and then remember that hospitals kept functioning. The majority of the fights over lockdowns were directed at school closures and restrictions on non-entertainment group gatherings like church services and restaurants. "Lockdown" was simply an excuse for the laptop class to not leave their houses unless they wanted to, and to force disfavored groups into isolation (though BLM and other anti-Trump mass protests were A-OK)
I think we want to be a little careful here. The original lockdowns WERE pretty terrible and shut down production for a bit. They were so terrible that people very quickly said "No, we can't do this... uhm, sure, 70% of everyone is essential" and people went back to work. China didn't, which is why for years after 2020 it was difficult to get anything out of there. I worked for an industrial paint company in 2022 that was flying paint out to customers from China because the ports were so backlogged that they had stopped taking bookings on account of being over a YEAR out from when a ship could pick things up.
Anyway, all that to say that there was the de jure lockdowns and de facto lockdowns. In places like the US they pretty quickly separated, especially outside of blue cities, but in places like China they were quite similar and caused huge problems.
As I noted elsewhere, another piece to this is that early on the extreme lockdowns were more justifiable due to the need to reduce demand on hospitals. As that crisis subsided, I would agree we didn't reduce restrictions quickly enough.
I am not so sure they were necessary r that there was strain on hospitals. Most numbers that I have seen suggest they were well Belen capacity save for a very few.
I'd bet more than half weren't overloaded. I don't doubt the number was much less. That doesn't really tell us what we need to know. It seems to me there are three questions.
1 What is "very few"?
2 How does that compare to what I'll call "too many"?
I'm pretty sure some lockdowns started before any hospitals were overloaded. For example, canceling the NCAA basketball tournament was a surprise to me. I wasn't aware of why until a few hours/days later.
3 Ignoring whether that was the right decision, what would the demand on hospitals have been if things like that weren't canceled?
Maybe we can't know but answering these questions leaves me still thinking lockdowns to reduce demand on hospitals was reasonable over some period of time. You?
(Apologies for how terrible my previous post was... I hate using the phone.)
1: As I recall it was less than 5% that actually had full beds during the peak, and nearly all at <80%. The few that were at or over capacity were in a few cities, and still had other beds available. Most COVID overflow/excess capacity built was unneeded and unused. These numbers are rather hard to dig up today I find.
2: I don't know what too many looks like, but for the vast majority of people going to the hospital seemed unnecessary and even a net negative, on the margin. (Ventilation seemed to be a big killer.)
3: I expect based on the very high rates of transmission that seemed to happen anyway (that curve didn't move around much) that demand for hospitals would have been less. Probably less still if they hadn't been busy scary the crap out of people. People who aren't worried about dying from a flu like disease don't go running to the hospital when they get a flu like disease.
How do I know that the lockdowns don't seem to have done much to stop transmission? You can see the differences in places where lockdowns were severe and those where they weren't. Or rather the lack of significant difference.
So lockdowns seem like a big cost for very uncertain, possibly zero, gains. Which is why they were not in the pandemic playbook before COVID, I am told.
The most salient and consequential thing is whether you are encouraging in some/every fashion, the people who will always live in Luck Village, to reproduce at a much greater rate than those who will continue to plod along in Effort Village.
I think greater familiarity with the IRC and its frequent changes helps when trying to critique the tax system. In the abstract, Sumner's response to the proposition of whether taxation of income is better than taxation of consumption is reasonable. However, with respect to how the tax code works for businesses and corporations (which is where the bulk of the money really is, but not the tax revenue), it's misleading to view the system truly focused on taxing income.
In practice, the IRC is a mechanism for monitoring business activity and channeling money towards modern and post-modern policy goals. The Code wants businesses to spend money on easily justifiable expenses, deductions, and depreciable assets related to employment (echoes of one half of the Fed's mandate). The taxation part assists the Treasury with the other half of that mandate in a circuitous manner by sending the money through the government in a roundabout fashion.
The Code wants to punish profit taking and saving. Businesses kind of get around this in various convoluted ways, but it mostly works to achieve those Keynsian goals of encouraging companies to dig holes and fill them in again on behalf of the government without the government directly telling them to. The convolution is the point; it's a means of subtle redistribution.
Contra Sumner, the loopholes are not a "problem" for the IRC: the loopholes are the point and the means by which the Treasury Dept. furthers its policy goals. If the Treasury just wanted to raise money, it has many other means of doing so, such as Sumner's MMT proposals. It's rather wrong in my view to say that the welfare state is limited to obvious welfare-ism: it in fact includes many, many nominally private sector jobs that mostly exist to create recurring expenses that may or may not help the company with its mission that can be cut during a downturn without too much trouble.
The activist investor or new CEO who "goes around the cubicles" looking for C players to fire to "cut the fat" looks much less heroic when analyzed through the IRC, because those useless people were in fact just the equivalent of "ordinary and necessary" golden staples or sextuple woven luxury toilet paper. The C players exist to warm the seat so as not to give the money to the government in the hopes that they may benefit the organization in some fashion beyond the tax savings.
The suggestion of finding ways to tax borrowing is not likely to go anywhere because not taxing things that are not "gains" in the legal sense is a basic principle of income tax law. Sumner is also showing a lack of awareness of the IRC by talking about business lunches, which have been greatly restricted compared to what they used to be by statute for the reasons he talks about.
As I said before, the IRC's "loopholes" are actually the point of the big fat thing: they want wasteful consumption to achieve policy goals. The Treasury does try to regulate expenses, depreciation, and deductions by various standards like "ordinary and necessary," "reasonable," and restricting expenses to enterprises clearly carried out for profit. As for his suggestion for a VAT, through the magic of the Congressional bargaining process, that would turn into an income tax *and* a VAT, as we have seen play out at the state level numerous times and in Europe as well.
There is no such thing in America as an economist just declaring a new tax regime. For a Napoleon, maybe, but you need lots of guys with guns, elan, and luck to do that. Until then, there is only the horse trading process that we have. In terms of fixing the fiscal issues, the US can sell land, sell more bonds, eliminate Medicaid avoidance trusts, or go through any appropriations bill and start deleting titles. "Have you considered not spending trillions every year pumping dried prunes full of medications to enrich hospitals, doctors, and medical bureaucrats to earn "votes" that you could just press a button to fabricate anyway?" Maybe a little too on-the-nose there...
As a couple of commenters below point out, there weren't complete lockdowns. The employees and employers were divided into parasit.........er.........non-essential and essential. The supply chains for goods and critical services were almost universally designated essential across the board.
There is a simple truth: the purpose of taxation can be viewed as 'for society' or 'for the people doing the taxing.' Intentional confusion of principal-agent is currently called 'democracy' in which we pretend that taxation is vox populi. In that sense, we are both taxing and being taxed - choosing to redistribute - but the balance is 'rent seeking' by those who process the taxes. If you tax consumption, you favor saving, and slow the velocity of currency through the system that takes a percentage of money in motion. It increases the economy and lowers the tax receipts relative to it. If you tax income... you can keep squeezing people until they need redistribution. "If it moves, tax it, if it keeps moving, regulate it, if it stops moving, subsidize it."
When my wife and I left grad school after several years of very thrifty living (even back then neither of us wanted student debt) and became a 2-person professional jobs family, we didn't go on a spending spree. We eased up a little, not a lot. We invested every chance we got with the income we had.
Today we own our home, and have for many years, and are pretty well off. Wheneve asked by my students about what is important when starting a new career I always told them to continue iving like a broke student for at least 5 years and save/invest as much as you can. Ater 5 years you should have a decent cushion and some very good habits that "leak" over into other aspects of your life. i have had more than a few thank me later.
All this angst over NPI coud have been avoided if the CDC had just done ITS job of giving individual and public decision makers the information needed for THEM to make cost effective decisions about reducing the spread of the virus, and the DFA had facilitated development of screening tests for asymptomatic people.
In a comment section of laymen, it is impolite to use abbreviations that they will not immediately know. I would bet that more than half don't immediately glom that NPI means non-pharmaceutical intervention (e.g., masks). And DFA? That has me stumped, and none of the 79 possibilities at acronym.com seem appropriate.
Prolly an FDA typo. Good to politely point out slightly rude behavior, thanks for NPI.
Thomas should use edit and improve his comment. His point about govt failure to do its job is good AND important.
Had it been a private profit making company doing such a lousy job, the Dem press & academics would be full of criticisms and calls for nationalization.
Luck and effort villages are a strawman. Liberals argue we live in luck, conservatives say effort but it is neither. Or some of both. We should start with why we redistribute:
1 Most importantly, some people aren't able to care for themselves. A lot of conservatives and libertarians seem to ignore this, much like AK's strawman. Note that it can be difficult to determine whether some people qualify.
1a Regardless of reason or fault, most people aren't able to save adequately for retirement. For this reason we have SS and Medicare. Yes, having these programs reduces incentives to save but that's just part of the problem. Two other parts are delayed gratification and luck.
2 We have programs that are intended as incentives for desired behavior and/or promote economic growth. Examples include tax favored treatment of retirement savings, education, energy production/conservation, and businesses investment. How well they work is a separate can of worms. Arguably, many of these are more about rewarding interest groups.
2a Sin taxes which do the same in reverse.
3 Progressive taxes need mention.
4 We supplement incomes of people who make less than some minimum. Some of these people work hard in low paying jobs, others are "lazy" and could work more or get higher paying but more demanding jobs and chose government support instead. It is difficult to distinguish who is who.
5 No doubt some people want more redistribution than the above listed itemsmight realistically include. Some think we already have that. A little of both is true.
Re your 1 and 1a: they don’t ignore it; they believe the proven massive amounts of available charity are more than enough to care for those who can’t or even won’t take care of themselves. Stop forced redistribution and there will be even more available for voluntary charity.
I agree many believe that charity would entirely fill the need and that government redistribution replaces some or even a lot of that potential charity. It was an oversight to not in some way mention that. Thanks for bringing it up.
That said, AK's strawman accounts for luck and effort but not capability, which I still think misses a big part of what is happening.
There isn't a huge and magical difference between income and consumption- you need the former to do the latter and you need a larger income to do larger consumption. All of these plans to tax unrealized gains seem to me to be the government's attempt to consume the capital endowment of the country and it will all end with us eating the pets and sitting around the house candle at night.
"a consumption tax with a high personal exemption"
How, exactly, would such a thing be implemented? It seems to me the only effective way to tax consumption is at the time and place of consumption. In this case, how would we keep track of consumption to know how much exemption remains? (Or, for those who propose a "progressive consumption tax", how would we keep track of who has consumed more?)
The alternative seems to be requiring record-keeping for each individual or household, so they could calculate their consumption tax obligation at the end of the period (year? month?).
Or am I lacking in imagination? Is there a simple way to make such a scheme work?
This can be started as a way towards a carbon tax—making it revenue neutral, and starting out giving every adult some $200/month “gas money” and putting a carbon tax that is supposed to generate that level of money.
The result will be all prices go up, some, but those using less carbon go up less, and most folks will spend less than $200 more on the price increases.
A personal consumption tx is an income tax with deductions for documentable "non-consumption" -- asset purchase, charitable gifts, debt repayment, and whatever else we can argue about being "non-consumption."
'And despite all of that, the global supply chain that Goodman portrays as fragile and brittle was able, after a two-month drop, to deliver more goods to Americans and has continued to do so'
At the risk of being an inflation crank- this is a dubious proposition. The 'real' numbers say yes, the actual count of goods says, well maybe not. Car sales are down big and have remained down big compared to pre pandemic numbers. Fossil fuel energy use in the US is down in terms of BTUs, with all 4 post pandemic years being lower than the preceding two. AFAICT smartphone shipments were down for 2020-2024 on average compared to either 2018, 2019 or the average of the two. New single family housing units sold are currently down for 2022 and 2023 compared to 2019, but were up in 2020 and 2021 against 2019. There is more lead time for housing units, and the trend from 2011 to 2019 was up, so this one is murky and could go either way.
Long story short when I look at actual units shipped and sold it is not clear that the actual number of goods caught back nearly as quickly as claimed, which puts 'real' measures on dubious footing as the real calculations are not straightforward at all.
Emily Oster asks “Is the processing itself a problem?” In many cases, the answer is an unequivocal yes.
For example, the process of hydrogenating the oils and fats used in many ultra-processed foods has been linked to disease. The case was so clear that even the US FDA banned the resulting trans fats effective in 2020. However, trans fats are still present in some ultra-processed foods and may pose a health risk: https://health.clevelandclinic.org/why-trans-fats-are-bad-for-you
And, as well, ultra-processed foods are likely to have added sugars and higher levels of sodium which many consumers may have health conditions that would benefit by lowered intake.
The processing shows up in the ingredients on the label. Individuals with the least inclination to take personal responsibility for their personal health probably are already reading product labels and informing themselves about what is known and unknown about the ingredients they are consuming. Parents, in particular, might consider consulting the American Academy of Pediatrics’ policy statement on food additives: https://publications.aap.org/pediatrics/article/142/2/e20181408/37584/Food-Additives-and-Child-Health?autologincheck=redirected
Although Oster is correct that the original NOVA framework was first proposed in 2009, it is now, I believe (it is an open formulation revised via journal articles and not subject to intermediary control), in a 4th iteration undergoing changes that might clarify some of the confusion professed about what is ultra-processed or not. See for example: https://www.cambridge.org/core/journals/public-health-nutrition/article/ultraprocessed-foods-what-they-are-and-how-to-identify-them/E6D744D714B1FF09D5BCA3E74D53A185 As recommended, it really is very simple to read the label and if you come across incredients that you don’t recognize or understand to reconsider if there might not be an alternative available without such ingredients.
If one who is interested in taking personal responsibility for their health wanted to look to one source for evaluating their diet, they probably could do much, much worse than read the dietary guidelines issued by the Brazilian government: https://bvsms.saude.gov.br/bvs/publicacoes/dietary_guidelines_brazilian_population.pdf I find this document particularly appealing because not only does it explain the basis for its recommendations but it summarizes them into one, easy to remember, golden rule: “always prefer natural or minimally processed foods and freshly made
dishes and meals to ultra-processed foods.”
For those who adhere to Klingian notions of choosing whom to trust, consider that Brazil actually has a functioning and sustainable national health care system on which is expended about $1,700 PPP per capita annually versus $12,555 for whatever it is that we have in the US.
“Always prefer natural or minimally processed foods and freshly made dishes and meals to ultra-processed foods” is a religious, not a scientific, commandment. That "always" divides the world into sacred (minimally processed) and profane ("ultra-processed"). I'm not even sure there is such a thing as natural foods any more. They have all been selectively bred to be different from their pre-agricultural progenitors.
On the other hand, the general idea--"eat more of less processed foods and less of more processed foods"--is good advice for many people. Along with move your body more, brush your teeth twice a day, and look both ways before crossing the street.
Or it might also be understood as merely a heuristic. A heuristic is a pragmatic shortcut that can reduce the mental cost of making a transaction decision. It may not be perfectly correct in every situation but in general is just "good enough" to facilitate rapid decision making. Choosing to take personal responsibility for your health, on the other hand, is indeed an expression of religion.
In this totalitarian age, even the least expression of free will and self-governance is an act of resistance against the expert class and automatically condemned as an illiberal act of religious superstition.
When is the last time you measured the shelf space of a paper copy of the Code of Federal Regulations? How is outlawing Tik Tok, the roadmap the Supreme Court laid out for government suppression of dissent in the Missouri vs Biden case, and the global campaign to use all of government to shutdown Elon Musk not totalitarian? A majority of the world's population live in obviously totalitarian states like China, North Korea, Nicaragua, Cuba and the like and more and more are headed in that direction.
Taxing consumption would not eliminate all tax issues issues. Some consumption is involuntary, but the issues are so many fewer!. I do think there ought to be two different consumption taxes. One would be social insurance transfers of consumption "horizontally" between people at different stages and circumstances of life: sickness disability, unemployment child rearing, old age. This would be a VAT. The other would be progressive to finance purchase of pubic goods and "vertical" transfers like EITC. The first would be equal to the social insurance benefits and contribute nothing to a public deficit. The other should raise enough so that Deficits < Σ(expenditures with NPV>0)
The revenue of the tax on net emissions of CO2 could be redistributed pro rata.
"In Luck Village, redistribution seems fair." And that is why Sunstein, a Progressive, wants to lay great emphasis on luck rather than accomplishment. It is a way to justify ruling class power. We heard essentially the same thing in various forms from Obama, e.g., "you didn't build that." The last thing they want is any sense of agency in the public.
Along these same lines, see N.S. Lyon's review of Auron Macintyre's 'The Total State' in City Journal, where Lyon's writes of the ruling class (the managerial class) that "... competence within a given organization is of less importance to one's career than an ability to demonstrate loyalty and acceptance within the managerial class." One reason members of the ruling elite want to argue that the success of someone like Elon Musk is due to luck rather an accomplishment is because deep down they know that their own success is due to being a conformist rather than someone of extraordinary achievement.
Yes - conformity to wokery in bureaucracy (whether in government or corporations) can be understood as an effort to replace competency as the criterion for advancement.
If you are so inclined, EVERYTHING is luck. If your father had ejaculated a second before or after he did, a different sperm would have merged with your mother's egg and you'd be a different person. It was all a matter of luck. Just today, Freddie deBoer sent out:
*Our genetic endowment lies entirely outside of our own control*, and the fact that we are born with a given genome is a matter of pure random chance, just like being born into a rich family. [The parts between the * * were italicized for emphasis.]
Thanks for putting your finger on the rat I smelled when I read this.
The other "rat" is people who think nobody needs help. We hear little from people who acknowledge any need for a little of both.
I love how plain yogurt is a lower level of processing than butter, despite that fact that yogurt takes a lot of processing to produce compared to butter (get cream, shake the hell out of it, drain off remaining liquid). So many of these categorical systems just boil down to "Things in the good category I think are things people should eat, and things in the bad category are things I think people shouldn't eat," with no research necessary as it is all determined ahead of time.
As far as I can tell, having observed it for years, most "nutrition science" any any spinoffs doen't really even approach junk science status.
Yup. It seems to be largely a branch of the food industry's marketing departments, almost less reliable than tobacco research due to a lack of scrutiny.
I ran a complicated supply chain from China, other Asian countries and Europe, to three factories in North America and two in Europe during the pandemic. The most significant issue I faced was getting material off the boats and en route to my factories. The root cause was not the pandemic but US and EU regulations.
I’m increasingly impressed with Dominic Pino’s writing. He seems to have both a grasp of and enthusiasm for the intricacies of economics.
WRT to Goodman and Pino, my general impression is that lockdowns were far less restrictive than they are assuming. The mere fact that Amazon kept running deliveries is a pretty good indication that huge segments of the population were still working as normal (I suspect this is true almost anywhere, including China). Just spend a few minutes thinking about all the systems that need to be active to support a delivery network (drivers, warehouses, fuel, maintenance, energy to pump fuel and run warehouses and traffic lights, etc along with all *their* support) and then remember that hospitals kept functioning. The majority of the fights over lockdowns were directed at school closures and restrictions on non-entertainment group gatherings like church services and restaurants. "Lockdown" was simply an excuse for the laptop class to not leave their houses unless they wanted to, and to force disfavored groups into isolation (though BLM and other anti-Trump mass protests were A-OK)
I think we want to be a little careful here. The original lockdowns WERE pretty terrible and shut down production for a bit. They were so terrible that people very quickly said "No, we can't do this... uhm, sure, 70% of everyone is essential" and people went back to work. China didn't, which is why for years after 2020 it was difficult to get anything out of there. I worked for an industrial paint company in 2022 that was flying paint out to customers from China because the ports were so backlogged that they had stopped taking bookings on account of being over a YEAR out from when a ship could pick things up.
Anyway, all that to say that there was the de jure lockdowns and de facto lockdowns. In places like the US they pretty quickly separated, especially outside of blue cities, but in places like China they were quite similar and caused huge problems.
Good points.
As I noted elsewhere, another piece to this is that early on the extreme lockdowns were more justifiable due to the need to reduce demand on hospitals. As that crisis subsided, I would agree we didn't reduce restrictions quickly enough.
I am not so sure they were necessary r that there was strain on hospitals. Most numbers that I have seen suggest they were well Belen capacity save for a very few.
I'd bet more than half weren't overloaded. I don't doubt the number was much less. That doesn't really tell us what we need to know. It seems to me there are three questions.
1 What is "very few"?
2 How does that compare to what I'll call "too many"?
I'm pretty sure some lockdowns started before any hospitals were overloaded. For example, canceling the NCAA basketball tournament was a surprise to me. I wasn't aware of why until a few hours/days later.
3 Ignoring whether that was the right decision, what would the demand on hospitals have been if things like that weren't canceled?
Maybe we can't know but answering these questions leaves me still thinking lockdowns to reduce demand on hospitals was reasonable over some period of time. You?
(Apologies for how terrible my previous post was... I hate using the phone.)
1: As I recall it was less than 5% that actually had full beds during the peak, and nearly all at <80%. The few that were at or over capacity were in a few cities, and still had other beds available. Most COVID overflow/excess capacity built was unneeded and unused. These numbers are rather hard to dig up today I find.
2: I don't know what too many looks like, but for the vast majority of people going to the hospital seemed unnecessary and even a net negative, on the margin. (Ventilation seemed to be a big killer.)
3: I expect based on the very high rates of transmission that seemed to happen anyway (that curve didn't move around much) that demand for hospitals would have been less. Probably less still if they hadn't been busy scary the crap out of people. People who aren't worried about dying from a flu like disease don't go running to the hospital when they get a flu like disease.
How do I know that the lockdowns don't seem to have done much to stop transmission? You can see the differences in places where lockdowns were severe and those where they weren't. Or rather the lack of significant difference.
So lockdowns seem like a big cost for very uncertain, possibly zero, gains. Which is why they were not in the pandemic playbook before COVID, I am told.
Bingo.
The most salient and consequential thing is whether you are encouraging in some/every fashion, the people who will always live in Luck Village, to reproduce at a much greater rate than those who will continue to plod along in Effort Village.
I think greater familiarity with the IRC and its frequent changes helps when trying to critique the tax system. In the abstract, Sumner's response to the proposition of whether taxation of income is better than taxation of consumption is reasonable. However, with respect to how the tax code works for businesses and corporations (which is where the bulk of the money really is, but not the tax revenue), it's misleading to view the system truly focused on taxing income.
In practice, the IRC is a mechanism for monitoring business activity and channeling money towards modern and post-modern policy goals. The Code wants businesses to spend money on easily justifiable expenses, deductions, and depreciable assets related to employment (echoes of one half of the Fed's mandate). The taxation part assists the Treasury with the other half of that mandate in a circuitous manner by sending the money through the government in a roundabout fashion.
The Code wants to punish profit taking and saving. Businesses kind of get around this in various convoluted ways, but it mostly works to achieve those Keynsian goals of encouraging companies to dig holes and fill them in again on behalf of the government without the government directly telling them to. The convolution is the point; it's a means of subtle redistribution.
Contra Sumner, the loopholes are not a "problem" for the IRC: the loopholes are the point and the means by which the Treasury Dept. furthers its policy goals. If the Treasury just wanted to raise money, it has many other means of doing so, such as Sumner's MMT proposals. It's rather wrong in my view to say that the welfare state is limited to obvious welfare-ism: it in fact includes many, many nominally private sector jobs that mostly exist to create recurring expenses that may or may not help the company with its mission that can be cut during a downturn without too much trouble.
The activist investor or new CEO who "goes around the cubicles" looking for C players to fire to "cut the fat" looks much less heroic when analyzed through the IRC, because those useless people were in fact just the equivalent of "ordinary and necessary" golden staples or sextuple woven luxury toilet paper. The C players exist to warm the seat so as not to give the money to the government in the hopes that they may benefit the organization in some fashion beyond the tax savings.
The suggestion of finding ways to tax borrowing is not likely to go anywhere because not taxing things that are not "gains" in the legal sense is a basic principle of income tax law. Sumner is also showing a lack of awareness of the IRC by talking about business lunches, which have been greatly restricted compared to what they used to be by statute for the reasons he talks about.
As I said before, the IRC's "loopholes" are actually the point of the big fat thing: they want wasteful consumption to achieve policy goals. The Treasury does try to regulate expenses, depreciation, and deductions by various standards like "ordinary and necessary," "reasonable," and restricting expenses to enterprises clearly carried out for profit. As for his suggestion for a VAT, through the magic of the Congressional bargaining process, that would turn into an income tax *and* a VAT, as we have seen play out at the state level numerous times and in Europe as well.
There is no such thing in America as an economist just declaring a new tax regime. For a Napoleon, maybe, but you need lots of guys with guns, elan, and luck to do that. Until then, there is only the horse trading process that we have. In terms of fixing the fiscal issues, the US can sell land, sell more bonds, eliminate Medicaid avoidance trusts, or go through any appropriations bill and start deleting titles. "Have you considered not spending trillions every year pumping dried prunes full of medications to enrich hospitals, doctors, and medical bureaucrats to earn "votes" that you could just press a button to fabricate anyway?" Maybe a little too on-the-nose there...
As a couple of commenters below point out, there weren't complete lockdowns. The employees and employers were divided into parasit.........er.........non-essential and essential. The supply chains for goods and critical services were almost universally designated essential across the board.
There is a simple truth: the purpose of taxation can be viewed as 'for society' or 'for the people doing the taxing.' Intentional confusion of principal-agent is currently called 'democracy' in which we pretend that taxation is vox populi. In that sense, we are both taxing and being taxed - choosing to redistribute - but the balance is 'rent seeking' by those who process the taxes. If you tax consumption, you favor saving, and slow the velocity of currency through the system that takes a percentage of money in motion. It increases the economy and lowers the tax receipts relative to it. If you tax income... you can keep squeezing people until they need redistribution. "If it moves, tax it, if it keeps moving, regulate it, if it stops moving, subsidize it."
“Thrift” is an underused word and an underappreciated virtue.
When my wife and I left grad school after several years of very thrifty living (even back then neither of us wanted student debt) and became a 2-person professional jobs family, we didn't go on a spending spree. We eased up a little, not a lot. We invested every chance we got with the income we had.
Today we own our home, and have for many years, and are pretty well off. Wheneve asked by my students about what is important when starting a new career I always told them to continue iving like a broke student for at least 5 years and save/invest as much as you can. Ater 5 years you should have a decent cushion and some very good habits that "leak" over into other aspects of your life. i have had more than a few thank me later.
All this angst over NPI coud have been avoided if the CDC had just done ITS job of giving individual and public decision makers the information needed for THEM to make cost effective decisions about reducing the spread of the virus, and the DFA had facilitated development of screening tests for asymptomatic people.
https://thomaslhutcheson.substack.com/p/covid-policy-errors
In a comment section of laymen, it is impolite to use abbreviations that they will not immediately know. I would bet that more than half don't immediately glom that NPI means non-pharmaceutical intervention (e.g., masks). And DFA? That has me stumped, and none of the 79 possibilities at acronym.com seem appropriate.
Prolly an FDA typo. Good to politely point out slightly rude behavior, thanks for NPI.
Thomas should use edit and improve his comment. His point about govt failure to do its job is good AND important.
Had it been a private profit making company doing such a lousy job, the Dem press & academics would be full of criticisms and calls for nationalization.
Luck and effort villages are a strawman. Liberals argue we live in luck, conservatives say effort but it is neither. Or some of both. We should start with why we redistribute:
1 Most importantly, some people aren't able to care for themselves. A lot of conservatives and libertarians seem to ignore this, much like AK's strawman. Note that it can be difficult to determine whether some people qualify.
1a Regardless of reason or fault, most people aren't able to save adequately for retirement. For this reason we have SS and Medicare. Yes, having these programs reduces incentives to save but that's just part of the problem. Two other parts are delayed gratification and luck.
2 We have programs that are intended as incentives for desired behavior and/or promote economic growth. Examples include tax favored treatment of retirement savings, education, energy production/conservation, and businesses investment. How well they work is a separate can of worms. Arguably, many of these are more about rewarding interest groups.
2a Sin taxes which do the same in reverse.
3 Progressive taxes need mention.
4 We supplement incomes of people who make less than some minimum. Some of these people work hard in low paying jobs, others are "lazy" and could work more or get higher paying but more demanding jobs and chose government support instead. It is difficult to distinguish who is who.
5 No doubt some people want more redistribution than the above listed itemsmight realistically include. Some think we already have that. A little of both is true.
Re your 1 and 1a: they don’t ignore it; they believe the proven massive amounts of available charity are more than enough to care for those who can’t or even won’t take care of themselves. Stop forced redistribution and there will be even more available for voluntary charity.
I agree many believe that charity would entirely fill the need and that government redistribution replaces some or even a lot of that potential charity. It was an oversight to not in some way mention that. Thanks for bringing it up.
That said, AK's strawman accounts for luck and effort but not capability, which I still think misses a big part of what is happening.
I believe those who are capable are counted as lucky.
There isn't a huge and magical difference between income and consumption- you need the former to do the latter and you need a larger income to do larger consumption. All of these plans to tax unrealized gains seem to me to be the government's attempt to consume the capital endowment of the country and it will all end with us eating the pets and sitting around the house candle at night.
"a consumption tax with a high personal exemption"
How, exactly, would such a thing be implemented? It seems to me the only effective way to tax consumption is at the time and place of consumption. In this case, how would we keep track of consumption to know how much exemption remains? (Or, for those who propose a "progressive consumption tax", how would we keep track of who has consumed more?)
The alternative seems to be requiring record-keeping for each individual or household, so they could calculate their consumption tax obligation at the end of the period (year? month?).
Or am I lacking in imagination? Is there a simple way to make such a scheme work?
Just give every family a check for 5k per person
This can be started as a way towards a carbon tax—making it revenue neutral, and starting out giving every adult some $200/month “gas money” and putting a carbon tax that is supposed to generate that level of money.
The result will be all prices go up, some, but those using less carbon go up less, and most folks will spend less than $200 more on the price increases.
A personal consumption tx is an income tax with deductions for documentable "non-consumption" -- asset purchase, charitable gifts, debt repayment, and whatever else we can argue about being "non-consumption."
Keep track of individual income and savings and tax the difference.
That way you don't have to keep track of actual consumption. Just income and non-consumption (which, of course, have their own problems).
'And despite all of that, the global supply chain that Goodman portrays as fragile and brittle was able, after a two-month drop, to deliver more goods to Americans and has continued to do so'
At the risk of being an inflation crank- this is a dubious proposition. The 'real' numbers say yes, the actual count of goods says, well maybe not. Car sales are down big and have remained down big compared to pre pandemic numbers. Fossil fuel energy use in the US is down in terms of BTUs, with all 4 post pandemic years being lower than the preceding two. AFAICT smartphone shipments were down for 2020-2024 on average compared to either 2018, 2019 or the average of the two. New single family housing units sold are currently down for 2022 and 2023 compared to 2019, but were up in 2020 and 2021 against 2019. There is more lead time for housing units, and the trend from 2011 to 2019 was up, so this one is murky and could go either way.
Long story short when I look at actual units shipped and sold it is not clear that the actual number of goods caught back nearly as quickly as claimed, which puts 'real' measures on dubious footing as the real calculations are not straightforward at all.
Emily Oster asks “Is the processing itself a problem?” In many cases, the answer is an unequivocal yes.
For example, the process of hydrogenating the oils and fats used in many ultra-processed foods has been linked to disease. The case was so clear that even the US FDA banned the resulting trans fats effective in 2020. However, trans fats are still present in some ultra-processed foods and may pose a health risk: https://health.clevelandclinic.org/why-trans-fats-are-bad-for-you
And another example, curing meat with sodium nitrate has been linked to cancers. https://www.medicinenet.com/how_bad_is_sodium_nitrate_for_you/article.htm
And, as well, ultra-processed foods are likely to have added sugars and higher levels of sodium which many consumers may have health conditions that would benefit by lowered intake.
The processing shows up in the ingredients on the label. Individuals with the least inclination to take personal responsibility for their personal health probably are already reading product labels and informing themselves about what is known and unknown about the ingredients they are consuming. Parents, in particular, might consider consulting the American Academy of Pediatrics’ policy statement on food additives: https://publications.aap.org/pediatrics/article/142/2/e20181408/37584/Food-Additives-and-Child-Health?autologincheck=redirected
Although Oster is correct that the original NOVA framework was first proposed in 2009, it is now, I believe (it is an open formulation revised via journal articles and not subject to intermediary control), in a 4th iteration undergoing changes that might clarify some of the confusion professed about what is ultra-processed or not. See for example: https://www.cambridge.org/core/journals/public-health-nutrition/article/ultraprocessed-foods-what-they-are-and-how-to-identify-them/E6D744D714B1FF09D5BCA3E74D53A185 As recommended, it really is very simple to read the label and if you come across incredients that you don’t recognize or understand to reconsider if there might not be an alternative available without such ingredients.
If one who is interested in taking personal responsibility for their health wanted to look to one source for evaluating their diet, they probably could do much, much worse than read the dietary guidelines issued by the Brazilian government: https://bvsms.saude.gov.br/bvs/publicacoes/dietary_guidelines_brazilian_population.pdf I find this document particularly appealing because not only does it explain the basis for its recommendations but it summarizes them into one, easy to remember, golden rule: “always prefer natural or minimally processed foods and freshly made
dishes and meals to ultra-processed foods.”
For those who adhere to Klingian notions of choosing whom to trust, consider that Brazil actually has a functioning and sustainable national health care system on which is expended about $1,700 PPP per capita annually versus $12,555 for whatever it is that we have in the US.
“Always prefer natural or minimally processed foods and freshly made dishes and meals to ultra-processed foods” is a religious, not a scientific, commandment. That "always" divides the world into sacred (minimally processed) and profane ("ultra-processed"). I'm not even sure there is such a thing as natural foods any more. They have all been selectively bred to be different from their pre-agricultural progenitors.
On the other hand, the general idea--"eat more of less processed foods and less of more processed foods"--is good advice for many people. Along with move your body more, brush your teeth twice a day, and look both ways before crossing the street.
Or it might also be understood as merely a heuristic. A heuristic is a pragmatic shortcut that can reduce the mental cost of making a transaction decision. It may not be perfectly correct in every situation but in general is just "good enough" to facilitate rapid decision making. Choosing to take personal responsibility for your health, on the other hand, is indeed an expression of religion.
Pretty much agree on the heuristic idea.
But what does this mean, "Choosing to take personal responsibility for your health, on the other hand, is indeed an expression of religion."?
In this totalitarian age, even the least expression of free will and self-governance is an act of resistance against the expert class and automatically condemned as an illiberal act of religious superstition.
Totalitarian? I do not think that word means what you think it means.
Or consider NS Lyons substack today: https://theupheaval.substack.com/p/the-total-state-and-the-twilight
When is the last time you measured the shelf space of a paper copy of the Code of Federal Regulations? How is outlawing Tik Tok, the roadmap the Supreme Court laid out for government suppression of dissent in the Missouri vs Biden case, and the global campaign to use all of government to shutdown Elon Musk not totalitarian? A majority of the world's population live in obviously totalitarian states like China, North Korea, Nicaragua, Cuba and the like and more and more are headed in that direction.
Taxing consumption would not eliminate all tax issues issues. Some consumption is involuntary, but the issues are so many fewer!. I do think there ought to be two different consumption taxes. One would be social insurance transfers of consumption "horizontally" between people at different stages and circumstances of life: sickness disability, unemployment child rearing, old age. This would be a VAT. The other would be progressive to finance purchase of pubic goods and "vertical" transfers like EITC. The first would be equal to the social insurance benefits and contribute nothing to a public deficit. The other should raise enough so that Deficits < Σ(expenditures with NPV>0)
The revenue of the tax on net emissions of CO2 could be redistributed pro rata.
https://thomaslhutcheson.substack.com/p/socia-insurance-20