26 March 2016

Your Guide to the Yuge Differences In the Candidates' Tax Plans (with Mortgage and Housing as Metaphor)

Vox has a fascinating tool to assess what the four major candidates' tax plans will mean for your household. You can find it here. The differences are huge.

To illustrate, here is what it generates for a household with a married couple and one child making $50,000 a year. (Not arbitrarily chosen, roughly $50,000 is the median household income in the US.) Under current tax laws, this would mean taxes of about $10,000 a year. (This $10,000 includes federal taxes and payroll taxes like social security, medicare, and unemployment.)

Donald Trump's plan will let you keep an extra $3,210 (or $268 a month) and Ted Cruz will let you keep another $1,800 a year (or $150 a month).
Hillary Clinton will ask you to pay $30 more (or $3 a month) and Bernie Sanders will ask you to pay another $6,820 a year (or $568 a month).

What do you give up or get under these plans? Well, Donald doesn't have a plan to change government programs much, so the government you get will be about the same (even if more xenophobic and misogynic). Cruz will give you less government with his plan to cut programs (but not enough to completely offset the loss in tax revenue). Hillary won't change total spending much and Bernie will - of course - make government programs considerably more generous.

If we were talking housing, here is what the candidates would be proposing.

Trump: Let me slash your monthly mortgage payments! You can stay in the same house, with the same number of bedrooms and maybe even a few new cool appliances and pay $268 less each month. And it'll be a gated community. We won't let them in.
You: How does that work?
Trump: Well, there will be a little balloon payment of about $30,000 to $40,000 in 8 years but I won't be president then. Plus I can get you a deal. I mean, such a deal on the interest rates. It'll be like you're paying nothing. You are going to wish you had such a deal before. Just save a little each month to prepare for the balloon payment.
You: You mean I should save each month as much as you are lowering my mortgage payment?
Trump: That wouldn't be a bad idea.
You: Oh, and this gated community. Will my old college roommate still be able to visit?
Trump: Not if he's Muslim.

Cruz: I can cut your monthly mortgage payments. By $150 a month. Now, you will have to move from your 3-bedroom house to a 2-bedroom condo, and you'll have to take on more debt but only if that second job doesn't work out.
You: Is the place nice?
Cruz: The new place is adequate. It's not as nice but you've been kidding yourself. You can't afford your current place.
You: But where will my mother sleep when she comes to visit?
Cruz: Your child can sleep on the couch. Or get her own place. It's good to teach self-reliance.
You: She's only 13.

Clinton: You can stay here but you'll have to pay a little more each month to finance your new appliances.
You: Well, that old fridge is making a strange noise. We won't have to move?
Clinton: It turns out, given your salary, this is a pretty good neighborhood.
You: How much more will it cost?
Clinton: About the same as a cup of coffee: $3 a month.
You: So you are saying that not much will change?
Clinton: It will be a huge change. You will have a woman president.

Sanders: Your new place is going to be wonderful! You'll finally have a walk-in pantry like you've always wanted, a home office  with a great computer that will make you more productive, and a home entertainment center. With really great speakers.
You: Is this going to cost me?
Sanders: Yeah. It'll be $500 to $600 a month extra. But this is the great place that you deserve to live in.
You: It sounds wonderful but given I won't be making any more, won't that cut into my budget for things like dining out or vacation?
Sanders: You eat junk when you dine out. Not eating out so much will save you in the long run, make you healthier and thinner. Plus, with this new home office you might just generate more income. But even so, why would you want to go anywhere else? This house is going to be so great that you'll be happy just to stay at home.
You: So, it's a great place but I'll be riding the bus because I'm not going to have money for a car payment, will I?
Sanders: Didn't I mention? We will have new buses. Great buses. Finally, mass transit that works! Or you could walk to work. That will also help with your waistline.

Metaphorically, this is what the candidates are offering:
  • Smaller payments and much more debt for the same place in a gated community (Trump)
  • Smaller payments and more debt for a smaller place (Cruz)
  • The same payments and same place (Clinton)
  • A nicer, bigger place with much bigger monthly payments (Sanders)
So what will you have?

22 March 2016

Terrorism as a Sign of Progress

Terrorism in Europe represents progress.

Before you accuse me of insanity or a lack of empathy, give me a few sentences to make my argument.

Today in Europe was tragic. Roughly 30 people were killed by a fringe group with no political power in Brussels.

100 years ago in Europe was much worse. Roughly 2 million were killed in just the first half of 1916. By its end, World War 1 had killed 17 million and wounded another 20 million.Not 30 casualties. 37 million. (And a comparable portion of today's global population would be over a 100 million.)

100 years ago, widespread, destructive violence was national policy across Europe. It was on-going for years and was institutionalized by groups who held power and had hopes of seizing even more territory and power.

Today, destructive violence is the policy of terrorist groups who have no hope of seizing power anywhere in Europe.

Violence is being marginalized.

If we look at today's events in light of the months immediately prior, it is obvious that things are getting worse. Last week, no one was killed in a bomb blast in public places in Europe. Today was a terrible day.

If we look at today's events in light of decades prior, it is obvious that things are getting better. A century ago the first world war was creating casualties at an unprecedented rate. 70 years ago, the second world war was killing and wounding people in even larger numbers. 30 dead would have been a relatively great day (or, more precisely, a relatively less awful day). During the six years of World War 2, there were an average of nearly 30,000 casualties per day. Not 30. 30,000. Every day. For years.

People like Donald Trump seize on our lack of perspective and ignorance of history to claim that things are bad and getting worse. Because of deteriorating events we have to radically change and give up power to leaders who will keep us safe in return for that power, they tell us. That narrative is nonsense. Don't listen to aspiring leaders who tell you that things are getting worse and that the only route to safety is to become more violent ourselves and to give these aspiring leaders more power. That's the sort of story that starts with a lie and ends with bad policy.

20 March 2016

What Mitch McConnell is Really Thinking

It's hard to imagine what more Obama could have done to win over social conservatives than to have chosen a Supreme Court nominee from the 19th century. (In what other century would a couple name their newborn Merrick?)

And yet, Mitch McConnell has announced that Congress will take no action on Obama's Supreme Court appointment. This means that the Supreme Court will have only 8 members until after the next president is sworn into office.

From this simple fact we can conclude one of two things.Either the GOP Congress has had enough of democracy giving power to Americans they disagree with (that is, the Americans who decided that Obama ought to serve 8 years) or McConnell has a bet with someone that Trump will appoint Judge Judy to the Supreme Court.

14 March 2016

Another Little Step to Changing the Corporation

I rode home from San Francisco last week beside a guy who had been at a web developer conference. He told me that one thing that has changed since he started in the field nearly twenty years ago is the approach to projects.

Twenty years ago, he would get hired to execute on a defined project. "We need you to do ..."

Now, increasingly, they ask him, "What project would you like to work on?" He gets to define the project he'll work on.

In the Fourth Economy, I argue that employees will gain more autonomy within the corporation, a dispersal of power patterned after the change made within the Western church between 1300 and 1700 and the nation-state between 1700 to 1900. This "What project would you like to work on?" is just another step in that direction. And because it's a "revolution" that will play out over decades and involve no bloodshed, it might escape notice. But it's changes like this that will change the experience of work, something that does so much to define our quality of life, our options and even who we are.

13 March 2016

What to Do About Working Class Resentment of Government Programs

What should we do about working class resentment of government programs? Be fair. We should invest as much in the careers of the working class as we do the careers of knowledge workers.

Knowledge workers are doing pretty well in the US. The unemployment rate for engineers and programmers is close to zero and corporations compete for Science, Technology, Engineering, Maths (STEM) graduates with things like valet parking (seen here at Google's Mountain View campus).
Big data is now a thing and by some reports, the leaders in this field are commanding NFL quarterback range salary packages.

It's not just that knowledge workers have it pretty good in 2016. The community around them has invested heavily in their success. From kindergarten to the world's most reputable public universities, knowledge workers are beneficiaries of extensive public support. Additionally, many of the great breakthroughs that have created the fields they work in are the product of government initiatives. Aviation, satellites, computing, the internet, genomes, and particle physics are all areas that have been heavily funded by government programs. Industries and their employees are beneficiaries of government programs that have helped to develop these fields.

By contrast, the working class have not much benefited from government programs. For them, government first forced them into schools that didn't much seem accommodating to their way of thinking, then taxed them in their jobs in order to fund programs that would benefit the above mentioned knowledge workers and then signed trade agreements that shipped their jobs overseas, leaving them to stock shelves at a Walmart that sold products made overseas for half the pay they'd made before.

It's good and proper that we've invested in knowledge workers. The world is better when we have apps that make it easy to find a new address or a medical procedure that lets us heal more quickly. That's not the problem. The problem is that making these investments in fields that benefit only knowledge workers is unfair.

It is not just that we need a more developed career development track for folks whose talents and interests won't take them into STEM careers. There should be parity. It doesn't matter if you are in retail or robotics, there are certain things that will make you more productive. Those things can be taught. And given those things will make employees more profitable and lead to higher wages, it is irresponsible to ignore those investment opportunities.

It may not sound as exciting to fund research and development for retail as it does to fund R&D for robotics, but retail sales will continue to be a huge part of our economy. It's not just fair to invest in every level of worker in this economy. It's good policy. Median wages don't go up until the person who makes less than half of workers - and more than the other half - sees her income rise. Right now, the median worker is not a STEM graduate and is unlikely to be for a long time.

08 March 2016

Free Trade - a Simple Thought Experiment

Economists argue a lot but rarely about the benefits of free trade.
Here's a poll result that is typical of economists' opinions about free trade (from here.)
No economist disagreed with the claim that Americans have benefited from major trade deals.

Of course Bernie Sanders and Donald Trump don't have economic degrees. Bernie talks derisively about American workers having to compete with low-paid Mexicans and Chinese. Donald warns that when he is president, Apple will be made to manufacture their iPhones in the US instead of China.

If anyone actually took them seriously, this would be dangerous talk. Fortunately, their worldviews are unlikely to be translated into policy.

There is so much that could be said about this but do this thought experiment.

Imagine that you live in a block of 100 people in a town of 10,000 people in a metropolitan area of a million people in a state of 10 million people in a country of 100 million in a world of 10 billion.

At one extreme, you can only trade with people on your block. The best food will be something someone on your block can raise, harvest or slaughter, and cook. If you can't raise cilantro in your neighborhood, you can't include it. No trading for spice like pepper or cinnamon. Or vegetables that won't grow on your block. Oh, and that's just the food. Clothes are the same thing. Keep in mind, it's not just that you can't trade for clothes. You can't trade for looms or sewing machines. And if we're going to be really strict, you can't even trade ideas because those, too, are a form of intellectual property. You have to figure this all out.

The homes on your block? Well, they are made of whatever materials you have in the vicinity. You might live in a mud hut. Or under branches. Or just out in the open. You can't put up a tarp unless you have the technology to make it.

And on it goes. The odds are infinitesimal that you have enough geniuses on your block to be able to make all the components needed for a radio, much less a TV or computer. Your quality of life is going to be terrible.

At the other extreme, you would have access to the best across the whole world, all ten billion people and their unique talents. The team that came up with the great high-definition googles that let you "walk" through virtual reality spaces real or imagined. And by the way, those googles depend on software from another part of the globe, another team. And the many, many, many pieces of the puzzle that go into such a complex product as the virtual reality experience come from dozens of nations and hundreds of companies and thousands - possibly millions - of people.

With free trade, you have access to the best across the whole world. The music. The food. The ideas, The technology.

At the one extreme, you live a life little different from cave men. At the other extreme, you live a life that offers you the best the world has to offer.

And as the circle enlarges, from your neighborhood block to your town to your country and so on, there are more benefits to enjoy.

Free trade takes you from an isolated, Robinson Crusoe existence to the wonder of the modern world.

04 March 2016

Calling the Market

Through the 12th of February, NASDAQ had fallen roughly 13%. It was a miserable start to the year.

On the 15th of February, after the market's 12 Feb close, I wrote a blog post arguing that fundamentals all pointed to a strong economy and that reality was going to register and stock prices would start rising. (Yellow highlight below shows the close before the blog post.)

Since then, the NASDAQ is up 7.3%.

Could Be Serious - But How Would Anyone Know? The Collapse of the Absurd and Serious in American Politics

This week at the client site, I met a guy who works remotely from the UK. We chatted a little.

Later, I was waiting for him to move so I could get by him in a tight space and finally cleared my throat. He quickly apologized and quipped, "Sorry. Those immigrants just come over and get in the way."

"Yes," I replied. "But we are trying to figure out how to build a wall along the Atlantic Ocean."
One of the other Americans said, "And you know who will pay for it."
I nodded. "The good news, Steve, is that you'll have the French to help you to pay for it."

A number of guys laughed but Steve looked genuinely disoriented. As I walked away it hit me, "How would a foreigner know any longer what we consider to be absurd humor and what we genuinely think of as good policy?" In the politics of the right, those two have collapsed.

Donald Doing Worse Than a Loser - comparing Trump's Super Tuesday w/ Romney's Primary Wins

Donald claimed that he did great in Super Tuesday. "Record turnouts," he claimed. "It's a movement," he assured us. He also called Romney a lightweight this week, adding the party's last presidential candidate to his list of people he's insulted.

So is Trump doing so much better than Romney did four years ago? Based on Super Tuesday, the answer would seem to be, "No." If there is a lightweight in the fight between Romney and Trump, it would seem to be Trump.

Simply put, Trump got 16% fewer votes than Clinton in the Super Tuesday states.
4 years ago, Romney won 40% more primary votes than Obama in these same states.

Although Trump and Clinton did not run against each other, they were each competing for votes in the same states. It's easy enough to compare their vote totals from Tuesday night.

Unsurprisingly, Trump won more primary votes in Tennessee and Alabama than Clinton. He won 36% more votes than Clinton in TN and 20% more in Alabama. While Romney got only 8% more votes than Obama in Ala, he got 75% more votes than Obama in TN. Here you could say that a slight edge goes to Romney.

But Romney also won more votes than Obama in Massachusetts, Arkansas, and Georgia. These were all states where Clinton won more votes than Trump on Tuesday. Here, the edge clearly goes to Romney.

Even though Sanders beat Clinton in Oklahoma, Clinton still won more votes there than Trump did. By contrast, Romney won more primary votes than Obama in OK in 2012.

Counting up the states from 2016's Super Tuesday (excluding Virginia, which wasn't a part of Super Tuesday in 2012) Romney won 32% more votes than Obama in 2012. By contrast, Clinton won 16% more than Trump. That's a big swing for states that show such strong Republican support.

Trump is doing considerably worse in 2016 than Romney did in 2012.

Will Trump win the general election? Maybe. But if he does, he'll win it in spite of performing more poorly than did the GOP's 2012 front-runner, a man who never did move into the White House.

01 March 2016

Super Tuesday Primary Results - Why the Fractured GOP so Misses Reagan

Donald and Hillary have emerged as the clear front-runners.

It's curious that the GOP establishment has had such a visceral reaction to Donald, the only Republican candidate voters refer to by first name. The GOP might actually split if he arrives at the convention just short of the delegate count he needs to outright claim the party's nomination. But give him credit for his: who else could make the GOP establishment actually feel relieved to see Hillary win in November?

Given the two are likely to face each other in the general, it is curious to compare how well they did in the same states.

In Super Tuesday's primary elections, Clinton consistently edged out Trump.  Each lost two states (Clinton lost Vermont and Oklahoma and Trump lost Texas and Oklahoma), but Clinton got more votes than Donald in 6 states and Donald got more votes than her in just 3. He barely edged out Hillary in Vermont even though in Vermont Bernie Sanders got about 6 votes for every 1 that Clinton got.

Clinton Trump Clinton edge
VA 504 356 148
Vermont 18 19 -2
Texas 931 757 174
Tennessee 245 333 -87
Oklahoma 139 130 9
Massachusetts 589 299 290
Georgia 536 501 36
Arkansas 143 130 13
Alabama 310 372 -62
total 3415 2897 518
Where Donald Won
573 724 -151
Where Hillary Won
2842 2173 669

If we're just looking at the ability to collect votes, Clinton seems to have a distinct edge. For all the talk of record turnouts on the Republican said, she got 18% more votes than Trump Tuesday night. In all, Clinton won half a million more votes than Trump on Super Tuesday.

As it now stands, Donald is likely to win the GOP nomination but lose the party's support. And that could make for a dream scenario for Hillary Clinton in the general election. Who wouldn't want to run against a candidate promising to bring the country together while breaking his own party apart?

But tonight is another reminder of why Ronald Reagan is so idolized in the party. Reagan was a celebrity and a professional politician. He'd been a famous actor and a popular governor of California. He was an ideological icon and pragmatist. He spoke out against communism and big government but he also raised taxes more than once and presided over the creation of more government jobs (1.4 million) in his second term than any president since.

Now, the GOP seems to be choosing between those identities. It can go with celebrities like Trump or Arnold Schwarzenegger. Or it can go with professional politicians like George Bush or George Bush or even Jeb Bush. Or it can go with ideological purists like Ted Cruz or Paul (Rand or Ron). Or it can go with pragmatists like governors Kasich or Christie. The inability to find one candidate who deftly combines all of the impulses found in Reagan (and indeed, in the party) is either fracturing the party or making those fissures more obvious.

The GOP remains an odd assemblage of religious, fiscal, and social conservatives who will likely cobble together lots of successful candidates to win state elections and swaths of Congress for decades more. It's not obvious that they any longer have a clear enough sense of identity or complex enough candidates to be able to put forward a national candidate ever likely to win the White House.

[Having made this big claim, your blogger feels obliged to point out that he dismissed Donald's chances of winning the GOP primary. He seems to have been wrong about that. Just so you know.]