Saturday, April 10, 2021

John Dewey on rights and government

Jonah Goldberg's article The Newest Deal in The Dispatch includes the following about John Dewey, a leader in the "progressive" Progressive movement during its formative years:

Philosophically, the New Deal drew on—or at least reflected—Dewey’s and Woodrow Wilson’s contempt for the outdated vision of the Founders. The Founders “lacked,” Dewey wrote in Liberalism and Social Action, “historic sense and interest.” The Burkean and Madisonian vision of government simply serving to protect liberties and enforce fair, neutral rules was inadequate next to what could be accomplished with a sufficient application of will by experts given the power to provide meaning to every individual.

This is what the lid-less, unconstrained universe had to offer planners. Indeed, even the idea of individual rights was a bygone relic. “Natural rights and natural liberties exist only in the kingdom of mythological social zoology,” Dewey explained. Rights can only be properly secured through “social control of economic forces in the interest of the great mass of individuals.” For Dewey, humans were “nothing in themselves”; the General Will was everything.

I have read very little by John Dewey. I don’t have a copy of Liberalism and Social Action, so I looked on Amazon to see if I could find these quotes in Liberalism and Social Action. Unfortunately Amazon does not have a "look inside" feature for the book.

Anyway, if Goldberg’s claims are legitimate enough, these quotes are enough for me to strongly disagree with Dewey’s political philosophy. The bedrock views of today's Progressives surely agree with Dewey's. The so-called General Will, even if it expresses the wants of a majority of the people subject to the government’s rules, can realistically only be wielded by politicians backed by government force.

Thursday, April 8, 2021

NY Times spreads ITEP falsehoods and propaganda

David Leonhardt of The New York Times says: Corporate Taxes Are Wealth TaxesHe adds: "And their decline has led to a steep drop in tax rates for the affluent."

I will say little about these two claims. Since the "corporate tax" is based on income, not strictly wealth (or assets), Leonhardt's word usage is very sloppy. Wealth and high income are much correlated. Thus a tax on wealth and a tax on income tax the same people (or businesses), but that is no excuse for such sloppiness. Secondly, corporate income taxes paid in part have fallen due to the base rate being cut from 35% to 21% effective 2018. Also, there are all the new tax subsidies created by legislation passed in response to the pandemic.  

My focus instead will be on Leonhardt's saying: "[A]t least 55 big companies paid zero federal income taxes last year, according to the Institute on Taxation and Economic Policy. Among them: Archer-Daniels-Midland, Booz Allen Hamilton, FedEx, HP, Interpublic, Nike and Xcel Energy."

Leonhardt thus relied on the deeply flawed reporting of the Institute on Taxation and Economic Policy (ITEP). ITEP consistently (a) treats GAAP accounting numbers as if they are cash taxes paid, and (b) ignores the cash paid for income taxes explicitly stated in corporate 10-Ks. I have written about these several times in the past:

ITEP and income taxes for 3 banks                        In the wake of ITEP’s report

ITEP and three tax topics                                       ITEP makes a myth    

Amazon income taxes addenda                             Amazon 2019, ITEP and its wake    

Netflix income taxes 2018

I also looked at the 10-Ks of three of the companies named above in Leonhardt's article to show ITEP's falsehoods and propagandizing.   

Archer Daniels Midland

ITEP: "Food conglomerate Archer Daniels Midland enjoyed $438 million of U.S. pretax income last year and received a federal tax rebate of $164 million."

ITEP ignored ADM's 10-K (p. 61) that explicitly says cash payments for corporate income taxes were $195 million.  

Also, the $164 million is not a cash rebate. It is the (negative) GAAP expense provision based on GAAP pre-tax income for 2020. ITEP also ignored the $41 million deferred part of ADM's GAAP provision for income tax for 2020. It compensates for accelerated tax deductions taken in prior years to be reversed with paying higher taxes thereafter, part of it in 2020.  

FedEx

ITEP: "The delivery giant FedEx zeroed out its federal income tax on $1.2 billion of U.S. pretax income in 2020 and received a rebate of $230 million."

ITEP ignored FedEx's 10-K (p. 144) that explicitly says cash payments for corporate income taxes were $389 million.

Also, the $230 million is not a cash rebate. It is the (negative) GAAP expense provision based on GAAP pre-tax income for 2020. ITEP also ignored the $475 million deferred part of GAAP provision for income tax for 2020. It compensates for accelerated tax deductions taken in prior years to be reversed with paying higher taxes thereafter, part of it in 2020.

Nike

ITEP: "The shoe manufacturer Nike didn’t pay a dime of federal income tax on almost $2.9 billion of U.S. pretax income last year, instead enjoying a $109 million tax rebate."

ITEP ignored Nike's 10-K (p. 59) that explicitly says cash payments for corporate income taxes were $1,028 million.

Also, the $109 million is not a cash rebate. It is the (negative) GAAP expense provision based on GAAP pre-tax income for 2020. ITEP also ignored the deferred part of GAAP provision for income tax for 2020. It compensates for accelerated tax deductions taken in prior years to be reversed with paying higher taxes thereafter, part of it in 2020.

Tuesday, April 6, 2021

Federal spending spree

In 2008 Rahm Emanuel, former Chief of Staff to President Barack Obama and mayor of Chicago, said: "You never want a serious crisis to go to waste. And what I mean by that [is] it's an opportunity to do things that you think you could not before."

It has become a common catchphrase. Emanuel repeated it last year amid the coronavirus pandemic (link). Spendthrifts Joe Biden and the "progressives" and leftist radicals of the Democratic party have strongly embraced it 

FEE: Federal ‘COVID’ Spending Just Hit $41,870 Per Taxpayer Signed by Biden last month, the 
American Rescue Plan Act of 2021 called for spending $1.9 trillion on the Covid19 crisis, with a large part of the $1.9 trillion not directly related to Covid19. It includes, among other things, spending on
  • agriculture and nutrition programs;
  • schools and institutions of higher education;
  • child care and programs for older Americans and their families;
  • mental health and substance-use disorder services;
  • emergency rental assistance, homeowner assistance, and other housing programs;
  • payments to state, local, tribal, and territorial governments for economic relief. (Link)
The $6 trillion stated in the FEE article includes the $4.1 in relief measures passed while Donald Trump was President (link).

Still far from satisfied, Biden and his cronies propose another spending spree called the American Jobs Plan. It proposes spending another $2 trillion on infrastructure and jobs (link). Of course, it includes lots of "pork", such as subsidies for buying all-electric vehicles and charging stations for them. In other words, it is a down-payment -- merely a down-payment -- on the so-called Green New Deal.

The $2 trillion would increase total spending to about 8/6*$41,780 = $55,707 per taxpayer.

As usual, the the promoters of such legislation hype how many jobs it will create while ignoring how many jobs it will destroy.

This proposed legislation also includes tax increases to pay for some of it. The corporate tax rate would rise from 21% to 28%, half way toward the 35% pre-2018 tax rate. It would mostly raise personal income tax rates for people with incomes exceeding $200,000 for single filers and $400,000 for married filing jointly. However, it will very likely hit a lot of people with incomes lower than those.

Of course, all this spending (over 10 years) will increase the federal debt and sow seeds of inflation. Much of the debt will likely be funded by the accommodating Federal Reserve.

Saturday, April 3, 2021

Medicare Advantage analysis

It's time for a balanced conversation about Medicare Advantage spending

When a person becomes eligible for Medicare, he or she has two main choices. 

1. Original or traditional Medicare with or without supplemental coverage via a prescription drug policy, Medicaid, purchasing a Medicare supplement policy (sometimes called Medigap), or from an employer. The model is fee-for-service.  Medicare pays providers for claims for medical services.

2. Medicare Advantage. The insured person chooses one insurer (not Medicare) among many and various plans the insurer offers.  One policy from a private insurer, which pays providers. The Centers for Medicare & Medicaid Services pays each private insurer on a per capita basis, the rates varying geographically. The model is managed care or HMO or PPO. 

In either case, he or she pays the Medicare Part B premium. 

The author of this article favors Medicare Advantage over original Medicare with or without supplemental coverage. She believes it is more cost effective. I don't have the expertise to opine on the thoroughness of her case, but it seems she presents a good and unbiased case for favoring Medicare Advantage.

P.S. Sellers of Medicare Advantage policies often advertise "$0 premium." While this is true regarding the amount of premium the insured person pays to the insurer, it is at least misleading since the insured person must pay the Medicare Part B premium. Rarely does "$0 premium" advertising include this caveat, or it is in fine print (which on tv can appear too briefly to read).


Thursday, April 1, 2021

Bitcoin and freedom

Today I indulge in a little self-congratulations. Today is the 5th anniversary of this blog.

My posting the following articles is not an April Fools joke.

Bitcoin unleashes the sovereign individual

How Bitcoin Provides Freedom


Tuesday, March 30, 2021

Bitcoin and Walmart

What happens when Walmart buys $1billion of bitcoin? 

On March 2 here I wrote about, or at least hinted, how a cryptocurrency such as bitcoin could make international transactions easier. Presently to buy goods from foreign sources, Walmart likely faces cross-currency transactions of many kinds -- Euro, Japanese yen, Chinese yuan, India's rupee, etc. Imagine how much simpler it could be for Walmart if all these transactions could be done with only bitcoin, with the foreign trading partner pricing what it sells to Walmart in bitcoin rather than its local currency. That would greatly simplify matters for Walmart and probably require far fewer man-hours. 

Making transactions easier and simpler is not limited to current ("spot") transactions. Futures and options contracts are available for bitcoin. Walmart could use them to "lock in" prices for things it steadily buys or sells for weeks ahead of time. In other words, such contracts facilitate planning and reduce uncertainty.

Of course, the Bitcoin magazine article is speculative, not about how things are now. But if the speculative situation were to become real, it could be quite revolutionary.  

Addenda 4/1/2021Bianco Research CEO Says Next Reserve Currency Will Be a Cryptocurrency Can crypto actually take on the $US’s reserve currency role around the world?

Federal Reserve and home prices

Federal Reserve under fire as home prices soar  The following quotes are from this CNBC article.

The Federal Reserve is one of the largest, if not the largest, source of money for getting a home mortgage. "It now owns more than a third of the MBS market."

"Home prices nationally in January rose 11.2% year over year, according to the latest S&P CoreLogic Case-Shiller Index. That is the largest annual gain in nearly 15 years."

"Mortgage rates loosely follow the yield on the 10-year Treasury note, which fell dramatically during the pandemic. ... Mortgage rates are [as far below] 10-year Treasury yields as they have been for the past decade."

So rather than raise mortgage interest rates in step with the 10-year Treasury yield, the Fed has kept rates low, which has fueled demand for house buyers and thus higher house prices. A lower interest rate implies a lower monthly payment, which permits borrowing more, which often means paying more for a house. 

My personal experience agrees with higher prices for houses during the past year or so. Zillow.com publishes z-estimates of home prices on its website. The z-estimate of our house has risen about 24% since Jan 2020. Luckily for us, we got a contract to sell it for more than the asking price. We are buying a brand new house for which the builder probably set the price months ago. So our timing seems good and/or lucky.