Category Archives: Economy

Legal Issues Related to the Debt Ceiling

By tmess2 | Published May 27, 2023

With the Republicans once again playing a game of chicken with the debt limit, there has been a lot of chatter about options that the Biden Administration has if the Republicans continue to make unreasonable demands.

To understand the legal issues, it is necessary to understand the different legislative actions related to the debt ceiling.  First, there are the laws related to the budget process.  There are two key aspects to these laws, the first requires Congress to annually pass a budget resolution.  The problem with this law is that one Congress is unable to bind a future Congress.  So Congress does not always pass a budget resolution.  The key thing to remember is that a budget resolution is a concurrent resolution which means that it has to pass both houses but does not go to the President.  In other words, it is not a law.  Instead, the impact of the concurrent resolution is internal to the legislative process.  The budget resolution sets the broad limits for the two Appropriations Committees in drafting the annual appropriations bills.   Additionally, if a budget resolution passes, the budget resolution triggers the reconciliation process which allows the Senate to pass budget related bills without having to overcome the filibuster.  A budget resolution (like the President’s budget proposal which starts the budget process) will typically contain estimates/target numbers for the other components of the budget.  The budget laws also restrict the ability of the President to refuse to spend or to reallocate the money allocated in the budget.

And here is where we get to the actual laws at issue.  In thinking of the budget, there are three types of laws.  In any budget, there are two sides of the equation:  1) income/revenue; and 2) expenditures.  For the most part, the laws on the income side of the equation are tax laws.  (There are certain other things like mineral leases on federal land and user fees at federal facilities, but the primary source of revenue is from taxes).  By its nature, revenue is not entirely predictable.  If every investor tomorrow decided that now was a good time to sell their current stock holdings and buy an entirely new stock, that decision would trigger a significant amount of capital gains and capital losses which in turn would dramatically alter the total income taxes received by the federal government.  But, while there is a degree of unpredictability, there is also a good amount of predictability — subject to changes in the economic climate. In other words, the revenue estimate for any given year will be close but not exact. Continue Reading...

Also posted in Disaster, Judicial | Tagged , , , , | Comments Off on Legal Issues Related to the Debt Ceiling

Unions and the Screen Writers’ Strike

By tmess2 | Published May 7, 2023

With rare exceptions, labor disputes tend to get very little media attention.  A strike at your local supermarket only impacts the workers and the customers at the supermarket, and the customers are able to shift to another supermarket.  And the ones that would have major disruptions on major products tends to get resolved quickly.  A major car manufacture and the UAW know that a long-term strike benefits neither side; so both sides work hard to resolve things without a strike.

But a strike in the entertainment industry is different.  The strike gets front and center attention quickly — a strike in sports means that games are not played; a strike in movies/tv means that nothing new gets produced and only shows/movies that are already completed can be released.  But there is no readily available replacement.  Strikes tend to be industry-wide.  So it’s not just the Tennessee Titans that are unable to field a team, but every other team in the NFL too.  Likewise, it’s not just Saturday Night Live which is unable to broadcast a new show, but every other live scripted show.  And since people are used to seeing these shows/sporting events on a regular basis, the loss of the content is instantly noticed.  But, while the networks and leagues would like to not have the shutdown, they know that their customers will come back when things restart.  So “management” can cope with  the temporary disruption of a strike to some extent.  And the workers also know that the industry will be back in full force when the strike ends.  While there may be some lost paychecks, if they have banked some money in advance of the strike, the workers know that their jobs will probably be there in two to three months.   (Of course, the disruption might kill a particular show or movie, but there will be another show or movie around to hire the workers, and the loss of a season in the prime of their careers will have some negative impact on the career earnings of athletes.)

For all that screenwriters live an entirely different universe than most other workers. the current strike shares themes with the strikes in less glamourous income with two common issues being at the center of the dispute. Continue Reading...

Tagged , , | Comments Off on Unions and the Screen Writers’ Strike

Virginia and New Jersey — Gaffes and What’s Next

By tmess2 | Published November 6, 2021

It is a quadrennial tradition.  The party in the White House has poor results in the gubernatorial elections in New Jersey and Virginia, and the pundits predict doom and gloom in the mid-term elections.  (Of course, then the party in the White House has losses in the House and maybe losses in the Senate and the pundits say “see we told you so.”  So what lessons should we take from this week’s results.

First, Terry McAuliffe did make a gaffe.  Using the classic definition of a gaffe, he told the truth that nobody wants to hear.  In his case, in response to questions about education, he noted that parents do not get to dictate to the schools what the schools teach.  This statement is partially true.   But as with most sound bites, explaining what was meant takes a lot of time and does not overcome the gut reaction to the original statement.

What is absolutely true is that public schools are not a system of private tutors.  Teachers are responsible for teaching a class of students.    For the system to work, Johnny has to be using the same books and Kathy.  So Johnny’s parents do not get to decide the materials that Johnny has to read for the course. Continue Reading...

Also posted in Elections | Tagged , , , , , , | Comments Off on Virginia and New Jersey — Gaffes and What’s Next

The Future of Energy

By tmess2 | Published October 24, 2020

With very little time left in the campaign, President Trump is trying to exploit the comments that Vice-President Biden made about the future of energy in Thursday night’s debate.  Vice-President Biden’s statement meet the classical definition of a gaffe — when a candidate actually speaks the truth.

The reality is that whomever wins the election the oil industry is in trouble.  And the major oil companies have known this for years and have made adjustments to compensate.  It’s the folks on the ground relying on the oil industry for their jobs that do not know what the suits in the offices have already come to terms with.

I grew up in the oil belt in the 70s and 80s.  Even then, the U.S. oil industry was in trouble.  The simple reality is that we have a lot of foreign competitors who also have vast oil reserves.  The health of the U.S. oil industry is closely linked to the price of oil.  When oil is over $60 per barrel, the U.S. oil industry is in good shape. When oil gets down to $30 per barrel, it is really not cost-effective to drill for new wells in the U.S.  And, as time goes on, old wells also become less cost-effective as all of the “easy” oil has been removed and it is more expensive to coax the last drops of oil out of the well. Continue Reading...

Also posted in Elections | Tagged , , , | Comments Off on The Future of Energy

The End of Capitalism?

By DocJess | Published September 7, 2019

In looking at the 2020 presidential candidates, one of the considerations is whether someone is “a capitalist” or “a socialist”. But we might be using the wrong lens for evaluation, because there is a chance that no matter who wins the election, and what kind of economic changes are enacted, capitalism may well be dying of natural causes.

Actual capitalism isn’t inherently bad, but the evolution of capitalism into corporatism is a disaster in all regards, and is hastening the death of capitalism in addition to the underlying trends making basic capitalism unsustainable.

Let’s take a simple example. You and I go into the chair business. You are a great carpenter, and make beautiful, sturdy wooden chairs. I market and sell them. We do well. And then we do TOO well – more people want our chairs than you can build. So, we hire a couple other carpenters and a couple trainees from a vocational program. Things are great until even MORE people want our chairs. We don’t have the cash flow to hire more people, so we issue stock. Not a unicorn IPO, but rather we go to friends and family and ask, basically, for a loan. If they will give us money to build our business, we will repay them as the business grows. They buy our stock, and we pay them dividends. As business owners, we realize that to buy our chairs, we need good trainees to teach as our business goes, and we need roads to deliver them, and infrastructure, so we gladly pay our taxes. We pay our employees well because we need them to be able to afford the chairs they produce. (Go read about Henry Ford’s approach on this.) This is fundamental capitalism, and it’s a win-win. Continue Reading...

Comments Off on The End of Capitalism?

Tax Cuts vs. Tax Reform

By tmess2 | Published October 30, 2017

The Republicans have set themselves the goal of passing tax legislation by the end of the year.  They took a major step by passing a budget resolution this past week which authorized tax legislation as long as that legislation had a net cost of less than 1.5 TRILLION over the next decade.  As such, as long as the CBO scores any legislation as complying with that cap, it is exempt from a filibuster.

That cap reflects a significant part of the current debate inside the Republican party — do they want a tax cut (reducing the overall tax burden) or tax reform (a revenue-neutral rewrite of the tax law).  This debate will be significant because the Republican approach is that those who make the most money pay the most taxes and therefore should get the most relief.  Thus, their proposals will be very top heavy on who gets the relief and the deductions most at risk will be those that benefit the middle class.

First, some Taxes 101 to set the background.  Both at the corporate level and at the personal level, calculating taxes begins with defining income.  Then there are certain authorized deductions from income that lead to a smaller income that qualifies as “taxable income.”  There are then income brackets in which you pay x% for the first $Y amount of income, than pay a slightly higher rate on the additional income above that amount (and just that additional income).  (E.g., If the top tax bracket is 40% and kicks it at $500,000, the taxpayer is only paying 40% on the income above $500,000 — so on an income of $700,000 that 40% only applies to the last $200,000 of income and the first $500,000 is taxed at a lower rate. )  After taxes are computed, the taxes can be reduced by tax credits. Continue Reading...

Also posted in Federal Budget, Politics | Tagged , , , , | Comments Off on Tax Cuts vs. Tax Reform

Deciphering the Federal Budget

By DocJess | Published February 28, 2017

Tonight 45 will speak about the budget plan his folks leaked out yesterday.  He’ll likely speak about other things, also, but that budget is all over the news and he’ll capitalize on that.  However, it’s rare that Congress actually passes a budget (the last time was in 2015, and that was the first time in six years) and rarer still that the presidential framework made it through the process.

So, let’s take a look at what was proposed, where it falls apart, and then what the process actually involves. Go get a cup of coffee, you’re going to need it.

First, the good news. Appropriations come from Congress, not from the Executive branch.  Per the Origination clause in the Constitution, all appropriations bills must start in the House, although the Senate may concur and/or offer amendments. In real life, normally this leads to negotiations between the Chambers prior to anything being enacted. Thus, nothing is happening quickly. That means there is time to lobby your reps for things that matter to you. Continue Reading...

Also posted in Donald Trump, Federal Budget | Comments Off on Deciphering the Federal Budget

What Now?

By DocJess | Published November 9, 2016

As it all sinks in….at the polls yesterday, I heard from Democrats who were voting for Trump for a variety of reasons. I have looked at the preliminary exit poll data and the turnout numbers and think I have an idea of how this happened. The final cross tabs might change things but bottom line — people who NEVER vote came out in droves. And what they voted against was the same thing that gave Britain Brexit — their hatred of modernity.  So what do we do? While we organize (and re-read James Madison’s Federalist Paper #10) we wait somewhat quietly to see if in his first hundred days he DOES:

  • deport massive numbers of undocumented human beings,
  • ban Muslims,
  • repeal the Affordable Care Act,
  • add a Supreme who will vote to keep Citizen’s United, repeal gay marriage, ban all abortions even to save the life of the mother
  • cut taxes for only the weathly
  • leave NAFTA
  • et, al.

Because if he does, THEN we know the plan.

Also posted in Civil Rights, Disaster, Donald Trump, Elections | Comments Off on What Now?

Labor Day: Trade and Immigration

By tmess2 | Published September 5, 2016

minersOne of the basic concepts of economics is that the production of goods and services are a product of both capital (equipment) and labor (the work to turn raw material into finished goods or to provide the services).  Some industries are what economists call “capital intensive” — meaning that relatively speaking it takes a lot of capital to purchase the equipment needed to operate (think the automobile industry).  A capital intensive industry is difficult for new competitors to enter.    Other industries are labor intensive — meaning that it takes little to capital to purchase the basic equipment and labor is the main input (think almost any profession).  The only restrictions on entering these industries is any licensing requirement for workers.   The degree to which an industry is capital intense (and how much skill the labor requires) in turn has an impact on the degree to which it is vulnerable to foreign trade and immigration poses a threat to existing workers.

Also posted in Holidays | Tagged , , | Comments Off on Labor Day: Trade and Immigration

Messaging Economics: How to Win, How to Lose

By DocJess | Published August 1, 2016
Economy

(L – R) Felicia Wong, Joseph Stiglitz, Rana Foroohar, Stan Greenberg

While at the DNC, I attended an event hosted by the Roosevelt Institute, As they say on their site: “Inspired by the legacy of Franklin and Eleanor, the Roosevelt Institute reimagines America as it should be: a place where hard work is rewarded, everyone participates, and everyone enjoys a fair share of our collective prosperity. We believe that when the rules work against this vision, it’s our responsibility to recreate them.”

The panel discussion was between Joseph Stigliz and Stan Greenberg, moderated by Rana Foroohar. You can see their bios here.  The primary part of the discussion centered on looking at two economic messages put forth by Hillary Clinton and how the ideas polled relative to election outcomes. The two messages were not all that different, they just took two different approaches. Interestingly, one will win the election, and the other will lose. If one is implemented, it could potentially change the course of American economics.

Also posted in DemsinPhilly, Elections, Polls | Tagged , , | Comments Off on Messaging Economics: How to Win, How to Lose