How would Frank Luntz frame Warren Buffett's Tax Debate?
The Secretary-Billionaire Tax Equality Principle
Warren Buffett wrote an op-ed recently that suggested that the top 0.3% of yearly earners were paying too little in taxes.
One of his favorite illustrations of this point is that his secretary pays a much higher tax rate that he does.
His prescription is:
undefined cuts to entitlement programs
higher taxes on the top 0.3%
The Power of Framing
The idea that a secretary should not pay a higher tax rate than their billionaire boss
is hard to argue with and shows the power of "framing".
Here's an other tax framing idea:
It is often said that we don't want to push the burden of current spending onto future generations.
Reihan Salam: During the Bush years, it was often said that the 2001 and 2003 tax cuts
represented redistribution from future taxpayers to current taxpayers.
You might reframe this as:
Those older Americans, who can afford it, should not get a better deal their grandchildren's generation
In late 2006, A List Apart had an article about "Adaptive Layout",
which they described as an improvement over liquid CSS layouts because it is optimized for multiple
screen resolutions and adjusts automatically.
I was intrigued, so I decided to experiment with an adaptive blog template that automatically
adjusts itself to different screen resolutions, from an iPhone to a 1920x1200 monitor.
The result isn't very "polished", but I finally got around to posting my own
"adaptive blog layout", which uses javascript to tell the browser to use a different body css class, depending upon the reader's screen resolution.
Future Improvements
The template could be improved by paying better attention to the most common
browser resolutions and developing grid-based versions tailored to specific
resolutions. I did the opposite -- I started with the content and defined CSS
rules to fit my text and images.
Last year the New York times had a short article proposing that instead of thinking
about fuel economy in "miles per gallon", we should think about
"gallons
per mile".
The reasoning behind this poposals is that stating fuel economy in MPG
"leads consumers to significantly underestimate the gains in fuel efficiency
that can be achieved by trading in very low m.p.g. vehicles — even for
one that gets only a few more miles per gallon."
Larrick emphasizes that his long-term goal is to get everyone into the most fuel-efficient vehicles that exist. But right now, he says, “as a national-policy question, the urgency is getting people out of the 14-m.p.g. vehicles.” And m.p.g. ratings aren’t the most useful prod, largely because the real significance of differences in m.p.g. is often counterintuitive. The jump from 10 to 20 m.p.g., for example, saves more gas than the one from 20 to 40 m.p.g. The move from 10 to 11 m.p.g. can save nearly as much as the leap from 33 to 50 m.p.g.
People often scoff at the idea of hybrid trucks or SUVs like the Cadillac Escalade that only
improve MGP from 14 to 20. But if you do the math, over 10,000 miles, this decreases
the number of gallons used from 714 gallons to 500 gallons. This is a savings of
214 gallons,
By comparison improving a Toyota Prius's mileage from 46MPG to 70MG only saves
75 gallons over 10,000 miles.
Here is the comparison of "miles per gallon" (MPG) and "gallons per 10,000 miles" (GP10K):
Vehicle
MPG
GP10K
Cadillac Escallade AWD
14
714
Cadillac Escallade Hybrid
20
500
Toyota Prius
46
217
Hypothetical Hybrid
70
143
To illustrate the point further, I put together a spreadsheet
using actual fuel economy figures for some current models, along with some extreme cases.
On the same day that I read an
article reporting that the Federal Reserve minutes from the March 17-18 meeting
showed that members expressed such great concern that the Fed decided to pump 1 trillion
more dollars into the system,
I also heard news reporting that things are looking a lot better, with some even preparing to
declare victory.
I would think the memory of Iraq should be recent enough that we wouldn't
immediately accept statements saying that we have turned the corner on the financial system,
especially without strong evidence that the fundamentals of the crisis have
changed.
Profits from Easy Money (excluding losses)
One statistic that people use to support the optimistic view is
Wells Fargo's projected $3 billion quarterly earnings, but these figures may
include temporary profits caused by refinancing, and exclude some losses.
To convince me further, I would
want to know why Wells Fargo's charge-offs on bad loans and loss provisions were below expectations.
I would also want to know that the Option ARM portfolio it acquired from Wachovia isn't
about to hemorrhage losses. Housingwire says the decision to take
fewer charge-offs accounts
for a significant portion of these "profits".
Simon Johnson says that we shouldn't just be looking at the stock market. While
the stock market may be rising, the debt market is indicating a
higher probability of defaults.
Defending the Private-Public "Partnership"
I have yet to hear a persuasive response to criticism that
the "Public/Private Partnership" can easily be manipulated
in a way that allows banks to inflate the prices of assets
and offload a significant portion of losses on taxpayers. When banks and related parties
can participate in the purchase of these assets, the process is ripe for abuse.
There are several
examples
of how this could be accomplished circulating presently.
Also note that the flaws in the bailout process would likely to be a
positive for bank stocks. Newsweek says that Citigroup is buying up
more toxic assets in anticipation that they will be able to game the system.
Optimistic Assets
These critiques suggest that the loses the banks have are not likely to be recognized, meaning the
banks will likely refuse to sell unless they receive an offer
that comes close to the value they hold on their books.
Indeed, though Bank of New York Mellon may be in a different class than some of its peers
(I don't know), Robert Siegal's interview
with bank CEO Robert Kelly produced a good soundbite for what will likely be some of
his fellow banker's positions:
Robert Siegal: What are we going to call toxic assets which
banks decide are so good that they want to hang onto? Bob Kelly: Perhaps optimistic assets (7:20 min)
And to throw in another possibility: subsidized and gamed assets.
2 Views on the Crisis
Ultimately there are two views of the crisis:
A Liquidity Problem: Individuals and institutions may be short on cash,
but they're "Good for it". Their assets are worth more than their liabilities, and we
just need to "unthaw" the credit system.
A Solvency Problem: Individuals and institutions have too much debt and will be
unable to pay their debts without implicit guarantees from the government and other forms of assistance
(or to use a less generous term, more "bailouts").
Future economic growth we be reduced because these
"zombie" banks will have to be recapitalized; and
consumption won't be able to quickly recover to past levels, reducing future corporate earnings.
If this is a crisis of the first type, positive cash flow should indicate that the crisis is
abating. If it is the latter type of crisis, we won't know where we stand until we
can get a better sense of what those "optimistic assets" are worth.
Unfortunately, I don't see how we will know the value of the assets, even after they have been
"priced" by the "market" because of the presence of subsidies, gaming, and the unknown future
performance of those assets. Merely having a "price" does not solve the problem unless the
price is credible or unless the goal is simply to move the "assets" from the private
balance sheets to the the taxpayers.
Not Considered Insolvent
One final note: on re-reading the original Time Magazine
"The Banking Crisis is Over"
piece I was struck by this sentence:
"There is enough evidence
in comments from the CEOs of Citi and B of A and in the Wells Fargo earnings
to show that the idea that banks are insolvent and probably in need of
nationalization is no longer part of the consideration of how the problems with
the system will be settled."
Really? Is that sufficient evidence? Wells Fargo may have a real quarterly profit, and various
CEOs may be saying positive things, but how does that show that the entire banking industry is solvent?
Solvency is independent of quarterly profits,
especially given the circumstances under which these "profits" are projected.
It sounded to me as though the author is saying that the banks are obviously solvent,
but if you read more closely,
you will see that he is actually saying something more subtle: that the possibility the
banks are not solvent is not being considered as an option.
I'm more inclined to believe that the full extent of the financial crisis
is like a iceberg, still lurking under water. The size of the iceberg is finite
and we may even be able to say that it won't grow larger (I don't know),
but how will we know when we understand the full size of the problem?
I've traded emails with the author of the Time piece, and he seems to think that I
am missing the point of his piece: the crisis is
behind us and, although the remaining piece is large, the rest is a
multi-year $1 trillion plus "reclamation" job. I hope so, but I would be surprised.
The last two numbers in the movie value url represent the start and end time (253/399) in seconds.
The important part of this syntax is that it allows anyone to go back to the previous part of the clip to see
it in full context. It also allows the viewer to continue on to view the rest of the video. It becomes clearer
where the truth lies when someone argues about misquoting.
Now the next step in referenceable "television" is a way to combine a series of embedded clips together and retain the links back to the original.
That would allow anyone to create mashups similar to the ones produced by the Daily Show.
But after seeing clips from a June 1, 2010 CNN report, in which the harsh realities of life at Foxconn are revealed, Stewart quickly changes his tune. According to the segment, Foxconn employees work up to 35 hours at a stretch for $.31 an hour. If they try to form a union they could get 12 years in prison, which Stewart points out wouldn't be much of a difference from life at the factory where workers live in 8-person dormitories.
"This is an abomination and yet I am complicit," admitted Stewart, who goes on to say he must abandon his gadgets
.. Siri informs Stewart that were Foxconn to implement humane conditions, his iPod would cost 23 percent more.
Stewart is aghast: "Wow! I would expect if we were working people to death, we'd be getting like 30 to 35 percent savings," he joked.
Not long after the iPad went on sale in early April, the Ilinois Institute of Technology announced that it would be providing each member of next fall’s freshman class with one of the new Apple devices. School officials said that the iPad would allow students to take notes, check email, and read books. Which books they had in mind is not precisely clear except for this: they are not likely to be textbooks. While a number of publishers, like McGraw-Hill and Houghton Mifflin, have signed on with software developer ScrollMotion to produce textbooks for the iPad—works that would exploit its multimedia capabilities with video lectures, historical film clips, educational games, and interactive quizzes—almost none of those books yet exist.
The most contentious example of postmodern design, however, is the AT&T building in New York which was completed in 1984.
.. “The terrible roar of objection centred on the top—the broken pediment,” she explained. “They hated it. There were people fighting each other in the pages of the press: aggressive, personal, vindictive, often nothing to do with architecture. Some people petitioned. Others denounced us. A lot of people attacked the authorities that had allowed construction… it went on and on.”
.. Postmodernism aimed further than merely calling for a re-evaluation of power structures: it said that we are all in our very selves nothing more than the breathing aggregate of those structures. It contends that we cannot stand apart from the demands and identities that these structures and discourses confer upon us. Adios the Enlightenment. See you later Romanticism. Instead, it holds that we move through a series of co-ordinates on various maps—class, gender, religious, sexual, ethnic, situational—and that those co-ordinates are actually our only identity. We are entirely constructed. There is nothing else. And this, in an over-simplified nutshell, is the main challenge that postmodernism brought to the great banquet of human ideas because it changed the game from one of self-determination (Kant et al) to other-determination.
.. we are all becoming more comfortable with the idea of holding two irreconcilable ideas in our heads: that no system of meaning can have a monopoly on the truth, but that we still have to render the truth through our chosen system of meaning. So the postmodern challenge, while no less radical, somehow feels less powerful to us. We are learning to live with it.
.. A lack of confidence in the tenets, skills and aesthetics of literature permeated the culture and few felt secure or able or skilled enough or politically permitted to distinguish or recognise the schlock from the not. And so, sure enough, in the absence of any aesthetic criteria, it became more and more useful to assess the value of works according to the profits they yielded.
.. So, paradoxically, we arrive at a moment where literature itself has become threatened, first by the artistic credo of postmodernism (the death of the author) and second by the unintended result of that credo, the hegemony of the marketplace.
.. The postmodern solution will no longer do as a response to the world we now find ourselves in. As human beings, we avowedly do not wish to be left with only the market.
.. If we tune in carefully, we can detect this growing desire for authenticity all around us. .. We can recognise it in advertising campaigns such as for Jack Daniel’s, which ache to portray not rebellion but authenticity. We can identify it in the way brands are trying to hold on to, or take up, an interest in ethics, or in a particular ethos.
.. Go deeper still and we can see a growing reverence and appreciation for the man or woman who can make objects well.. We uncover a new emphasis on design through making in the hand-crafted work of the Raw Edges Design Studios, say, with their Self-Made collection, objects that are original, informed by personal stories and limited edition.
This being the WEF, there was lip service paid towards the idea that a group of smart and powerful people, if you get them all in the same room, could come up with ways for the international community to improve the state of the world. But the actual participants didn’t show any sign of believing that: they were insightful with respect to diagnosing the state of the world, tentative in proposing solutions, and downright skeptical when it came to handicapping the likelihood that any of those solutions might actually be implemented.
Certainly there seems to be no belief at all, even among the well-intentioned technocrats at Davos, that coordinated international action will or should solve this particular crisis. And the inevitable conclusion is that the crisis is not going to be averted: it’s only going to get worse. It’s a very scary prospect — but one which it’s very important for global elites to come to terms with. And that’s exactly what they’re doing in Davos this week.
Technological innovation was at the heart of Schumpeter’s vision, and no one today objects to the role of venture capital in financing tech start-ups or to the re-engineering of businesses to take advantage of new technology. Reorganizing firms to exploit special provisions in tax, securities, and bankruptcy laws is a different proposition. That kind of restructuring can be immensely profitable, transferring wealth to investors while making no positive contribution to growth and employment.
The standard operating procedure for private equity has been to buy firms, take them private, and load them up with debt. By taking them private, the new owners escape from the securities laws, which apply only to publicly traded companies. By loading them with debt, they cut the companies’ taxes because the interest is fully deductible from profits, and they use those tax savings to pay themselves generous fees and dividends. If an overleveraged enterprise then fails, they take it into bankruptcy, firing workers and stiffing creditors even though their own firm has already pocketed large gains. And because private-equity partners can receive those gains as “carried interest” (taxed only at 15 percent), they benefit from special legal advantages in yet one more way.
I went to one session on executive compensation yesterday, which was filled with global CEOs of various stripes. And a couple of questions that Lance Knobel would like to ask were, amazingly, raised: should there be some kind of cap on CEO compensation? Maybe in terms of the ratio between the CEO’s pay and that of the average employee? The answer came swiftly and unanimously: no.
.. That panel really helped me understand the general Davos attitude towards Occupy. The delegates here don’t feel threatened by it, so much as they just feel a bit indignant at how misguided it is. Obviously, in a big inchoate sense, inequality is a problem. And maybe Occupy is a manifestation of that problem. But the Davos crowd is not even close to listening carefully to what Occupy has to say: they’re evidence of the problem, but they’re not remotely helpful when it comes to solutions.
As Lance says, “an organization that is at heart a grouping of the world’s largest corporations isn’t necessarily in the best position to improve the state of the world, particularly in an era of the Arab Spring and Occupy”. It’s another way in which Davos feels past its prime.
For the first time in his 60-year career, Soros, now 81, admits he is not sure what to do. “It’s very hard to know how you can be right, given the damage that was done during the boom years,” Soros says. He won’t discuss his portfolio, lest anyone think he’s talking things down to make a buck. But people who know him well say he advocates making long-term stock picks with solid companies, avoiding gold—“the ultimate bubble”—and, mainly, holding cash.
“The collapse of the Soviet system was a pretty extraordinary event, and we are currently experiencing something similar in the developed world, without fully realizing what’s happening.” To Soros, the spectacular debunking of the credo of efficient markets—the notion that markets are rational and can regulate themselves to avert disaster—“is comparable to the collapse of Marxism as a political system.
America's left-wing Occupy movement and right-wing Tea Party are just two examples of the world's new wave of activists, a diverse and dispersed collection of movements that also includes Spain's Indignados (the "Indignant") and the rebellious youth of the Arab Spring. What these disparate groups have in common is a desire to challenge a system that favors a wealthy and powerful elite, often at their expense, whether that takes the form of opposing bailouts for the banking giants or attempting to take down longtime despots like Libya's Muammar Gaddafi. Many in this new wave of activists feel left behind by globalization. Coming of age in the Great Recession era of rising inequality and high unemployment, they seem determined to remain outside the system - or in the case of the Tea Party activists, to take over the system but remain as unpaid outsiders. Many look upon mainstream NGOs as part of the establishment and therefore part of the problem. They have a point. Over the past few decades, NGOs founded by the activists of decades past have become increasingly domesticated. The chief executives of these highly respectable groups receive invitations to attend the World Economic Forum's annual meeting in Davos alongside the world's powerful and wealthy elite, and the hefty salaries of some top nonprofit executives put them in the top 1 percent of American earners targeted by the Occupy movement.
I think that money spoils most things, once it becomes the primary motivating force.
If I can get you to laugh with me, you like me better, which makes you more open to my ideas. And if I can persuade you to laugh at the particular point I make, by laughing at it you acknowledge its truth.
The Republican candidates for president have some major differences in their policies and their personal lives. But they have one striking thing in common—they all say the federal government is responsible for the financial crisis. Even Newt Gingrich (pilloried for having been a Freddie Mac lobbyist) says: “The fix was put in by the federal government.”
Question A: If the US replaced its discretionary monetary policy regime with a gold standard, defining a "dollar" as a specific number of ounces of gold, the price-stability and employment outcomes would be better for the average American.
Pandit, 55, is one of six co-chairs of the World Economic Forum’s annual meeting in the Swiss ski resort this week, the first from a U.S. bank since JPMorgan Chase & Co.’s Jamie Dimon in 2008. Pandit leads a delegation that includes top officials of five of the six biggest banks, including Dimon and Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan.
.. Some of Pandit’s critics at home question whether he should take a bigger role at Davos given his bank’s underperformance. Shares in the lender, which received a $45 billion government bailout during the financial crisis, have plunged 94 percent in the past decade, the most of the 24 companies in the KBW Bank Index (BKX), and 91 percent since Pandit became CEO in 2007.
CEO Moynihan will join Carlyle Group LP co-founder David Rubenstein on a panel to discuss whether capitalism is failing society. Moynihan, 52, also turned down an interview request through Larry DiRita, a spokesman for the bank.
The worst thing about Newt is what political economist Thomas Ferguson pointed out in a paper for the Institute for New Economic Thinking – namely that Newt was the key architect of the current pay-to-play system in Congress. More than anyone else, he is responsible for building the system in which members of Congress who bring in the most cash get the plum and powerful committee appointments. It was not always thus. Before Newt and his buddy Tom Delay saw the potential for pay-to-play, committee appointments came through seniority. But after Newt & Co. came to power, influence in Congress was nakedly up for sale. Today, both parties actually post prices for key positions, as Ferguson noted in the Financial Times.
So we have one Republican candidate that represents everything wrong with the financialized business culture and its tax favoritism, and another who epitomizes how leading Republicans service that business culture as power brokers.
.. Seldom have Democrats had more vulnerable Republicans to epitomize how the GOP harms the average person.
Translation, if any was needed: In the near future, with the Europeans out of the mix, virtually none of Iran's oil will be traded in dollars.
But consider 2012 the start-up year as well for a possibly massive defection from the dollar as the global currency of choice. As perception is indeed reality, imagine the real world - mostly the global South - doing the necessary math and, little by little, beginning to do business in their own currencies and investing ever less of any surplus in US Treasury bonds.
It’s a little unseemly, but not unusual for political campaigns to quash disruptions and otherwise manage their events. But it’s one thing to keep people from interrupting the candidate, and something else entirely to rely on insults, intimidation, and force.
The authors fail to tell you what this means: changing a production design that late in the game is bad management, period. It’s the sort of stunt you see in a craft manufacturing business like the movie industry, not in one that deals with factory production. But the flexible near slave Chinese workers bailed out Apple’s ass.
