Our Next President?

[jk]

Re: Our Next President?

Conversely, debt funding universal health care at current prices without tax increase looks like $4T, which capsizes the ship. .

2 comments on just this issue of funding universal health care.

1 first, if all the dollars currently spent on healthcare were funneled through a universal program, and providers were paid for ALL their services as the medicare rate, i don't think it would add the deficit at all. it might even make a profit.

2. second, the u.s. currently spends 17.8% of gdp on healthcare, while gdp is $19.3 trillion. if the gov't prints and spends the $3.4trillion implied by these 2 numbers, it means that people and companies suddenly have an extra $3.4 trillion in their pockets. That is one huge stimulus, and gov't revenues will rise substantially. i'm not going to say it will pay for itself, though given my first consideration, it could. nonetheless, the cost is much lower than it first appears.

=================
on another, related, topic: mmt and the usd

Is US media beginning to set the narrative for the implementation of MMT or MMT-like easy money policies?
“Who’s afraid of budget deficits?”: Foreign Affairs magazine - 1/27/19
https://www.foreignaffairs.com/artic...udget-deficits
White House adviser says Fed board nominees should support easy money policies: WSJ – 1/24/19
https://www.wsj.com/articles/white-h...es-11548375931
CBO unveils apocalyptic long term debt picture – 1/28/19
https://www.zerohedge.com/news/2019-...rillion-second
TBAC is suddenly worried about who funds $12T in US deficits in next 10 yrs (assuming no recessions) – 1/30/19
https://www.zerohedge.com/news/2019-...reserve-status


Luke Gromen: The US media began setting the narrative that “China is bad” in mid-2017. Fast-forward 18 months, and voila! China is now bad. It now appears that the narrative of “US deficits are a problem but don’t need to be if we just use easier money” has begun being established among “serious people” (see Foreign Affairs, WSJ articles above.) Our guess is this is not by accident, and speaks to an understanding at a high level that the end game of a much weaker USD is now coming into sight. Let’s watch.

[dcarrigg]

Re: Our Next President?

I think what you're saying is that for there to be actual inflation, the effect of debt cancellation/money printing would have to outweigh other factors. I guess my wording could have been more precise. What I meant to say is that the effect is an inflationary force. Whether that's balanced out by other opposing forces is another question.

I will admit that the Fed has exceeded my expectations in their ability to at least maintain the appearance of the economy being ok. I fear that they are simply setting us up for a bigger disaster in the long term, but hopefully not.

Honestly, what scares me more than anything aside from war at this point is this new belief that MMT is some kind of magic wand. The basic premises of MMT seem non-controversial to me. However, the conclusions that are drawn make no sense. This story has played out before. But apparently the lessons are difficult to learn. It's like the promise of 8 minute abs, chain emails about Bill Gates giving away money, MLM schemes, playing the lottery, etc. No amount of reason can outweigh the human desire to get something for nothing (or very little).

MMT: This one weird trick that politicians don't want you to know about can fund everything you ever wanted!

You're on to one implication. But I presume the relationship is non linear. Maybe think of it as the last leg of a 20 knot wind. And a wind that's picking up.

If you think of it that way, 10 knota, a trillion fiscal either way, does one thing. 20 another. 30 something else still. Balancing the budget like in the 90s in 20 knot winds will probably be deflationary. Maybe moreso than you'd think. Conversely, debt funding universal health care at current prices without tax increase looks like $4T, which capsizes the ship. There are bounds, as you say, but they're neither linear nor obvious.

More than that, the quality of the wind matters. A brief 40 knot gust isn't the same as a sustained blow. Dropping student loan rates or even eliminating debt would mostly simply convert it to mortgage debt in my estimation. Asset prices inflate, but not most prices for real goods. Timing here is critical. Do it at a housing peak, and benefits are low. Do it at a nadir, and the opposite is true.

More than all of that? The game is on. Workers in aggregate are losing. So there's two ways that can go. Close down the hatches and flog the men more. Or promise to spread out the 2 and 20 the captain was promised.

Either way, we're nearing the point of no return. Either accommodate the crew or go down with the ship. The alternative is to better control the winds, and we've been trying to. But we refuse to accept that simple truth:

We suck at it. And moves we don't even realize will affect the winds, like changing property rules, do. Significantly. Eliminating bankruptcy for student loans in 2005 changed the winds.

If Keynes was right about one thing it's that monetary policy without fiscal policy is pushing on a string. It's putting up a big sail in still waters. You can raise the sails all you want and go nowhere. If you are worried about going too fast, the sail shouldn't be the first variable you're worried about. And the wind you can make blow from one direction might not be enough to move you the way you'd expect.

[jk]

Re: Our Next President?

I think what you're saying is that for there to be actual inflation, the effect of debt cancellation/money printing would have to outweigh other factors. I guess my wording could have been more precise. What I meant to say is that the effect is an inflationary force. Whether that's balanced out by other opposing forces is another question.

I will admit that the Fed has exceeded my expectations in their ability to at least maintain the appearance of the economy being ok. I fear that they are simply setting us up for a bigger disaster in the long term, but hopefully not.

Honestly, what scares me more than anything aside from war at this point is this new belief that MMT is some kind of magic wand. The basic premises of MMT seem non-controversial to me. However, the conclusions that are drawn make no sense. This story has played out before. But apparently the lessons are difficult to learn. It's like the promise of 8 minute abs, chain emails about Bill Gates giving away money, MLM schemes, playing the lottery, etc. No amount of reason can outweigh the human desire to get something for nothing (or very little).

MMT: This one weird trick that politicians don't want you to know about can fund everything you ever wanted!

let's set these conditions:
1. no cuts in entitlements
2. no cuts in defense
3. ongoing growth in interest expense as the deficit expands

the solution is simple: devalue the dollar. a cheaper dollar allows the gov't to meet all these conditions. mmt will be the mechanism by which a dollar devaluation will be achieved. foreign cb's stopped buying treasuries, net, in 2013-2014. instead they are buying gold.


just revalue the gold to, i don't know, $10-20k/oz. then the u.s. gold reserves are big enough to back all the outstanding debt. the u.s. balance sheet will show the huge amount of gov't debt on one side of the ledger, but an equally huge asset on the other side. [the europeans, by the way, mark their gold reserves to market- i forget if annually or more often.] the mmt-based spending will be flowing into the real economy instead of into banks' excess reserves. there will be inflation and that will be the one factor which limits how far mmt can go. but this inflation will really be controlled by fiscal policy, not monetary policy as the fed keeps raising nominal rates while keeping real rates negative. how's that for a scenario?

[DSpencer]

Re: Our Next President?

My thinking about this stuff was much more like this a decade ago. I've since revised it. Why?

1. It assumes labor's share as a constant. Most econ did. Turns out, it's shrinking.
2. This has serious implications for the relationship between unemployment rates and labor markets. If you've ever scratched your head at how unemployment can be near historic lows without wage increases, you're assuming labor's share is constant. If it's shrinking, it makes perfect sense that unemployment could drop to 0%--there could even be a labor shortage--and still real wages can stay flat or even decrease.
3. This is a fundamentally different environment than in the 1970s when labor's share was a constant and wages pushed stagflation.

I haven't quite bought into the whole MMT model. But I don't have to in order to be more skeptical of inflationary concerns. That does not mean that interest payments on the debt cannot grow so large they chew up an uncomfortably large chunk of the annual discretionary budget. But I think it does mean there's much stronger headwinds against inflation than there were before labor's share began shrinking. And I think it explains why the simple supply and demand explanation of wages never seems to pan out with much real wage growth anymore.

It's not a super complicated thing to understand. For the last 20 years the real pie's growing, albeit slowly at about 2% per annum. But over that same time, labor's total share of that pie shrunk by about 14%. Most people earn most of their money from labor income. Seems to me that's how these seemingly counterintuitive macro things can happen. It's also why I'm less hawkish about inflation--within limits roughly bounded by labor's loss. So at this point, to put a figure on it, I'd say roughly $2T per year in the US on the fiscal side before you really overcome the headwinds and face real inflationary danger. We're at about half of that.

Think what you want about the Fed, but their model projections have been pretty good. The two spots where they have been persistently and predictably off in the same direction have been that inflation and wages have remained lower than expectations. To me, this is a reasonable answer as to why.

The folk wisdom and textbook econ people have learned does not treat labor's share as a long-term shifting variable. But it is.

I think what you're saying is that for there to be actual inflation, the effect of debt cancellation/money printing would have to outweigh other factors. I guess my wording could have been more precise. What I meant to say is that the effect is an inflationary force. Whether that's balanced out by other opposing forces is another question.

I will admit that the Fed has exceeded my expectations in their ability to at least maintain the appearance of the economy being ok. I fear that they are simply setting us up for a bigger disaster in the long term, but hopefully not.

Honestly, what scares me more than anything aside from war at this point is this new belief that MMT is some kind of magic wand. The basic premises of MMT seem non-controversial to me. However, the conclusions that are drawn make no sense. This story has played out before. But apparently the lessons are difficult to learn. It's like the promise of 8 minute abs, chain emails about Bill Gates giving away money, MLM schemes, playing the lottery, etc. No amount of reason can outweigh the human desire to get something for nothing (or very little).

MMT: This one weird trick that politicians don't want you to know about can fund everything you ever wanted!

[dcarrigg]

Re: Our Next President?

Sort of par for the course, right? Labor's devalued compared to assets. So there's what, about 9.2T in mortgages? Less than at the bubble peak, but not by much. Another 1.5T in student loans and 1.3T in auto loans and 0.4T in credit cards rounds out that "normal person" credit picture. Meanwhile, there's another ~9T in corporate debt all in, iirc. So that's about equal to the public debt when you add it all up. Then you have about 14T in financial debt security liabilities, largely already counted elsewhere.

Looked at as a whole, a few things are obvious since the last big recession: 1) personal debt for most citizens is still down compared to then, 2) corporate debt is way, way up compared to then, 3) federal debt is way, way up compared to then. The student loan drag is heavier than it looks, since rates are higher and terms are shorter, so the cashflow hit is more significant. 10 years at 6.8% is pretty typical. $200k on a mortgage at 4% is going to be roughly $1k per month. About $85k on a student loan at 6.8% is going to be the same $1k per month. And it's very disproportionately held by younger generations. So even if it's at 15% of total mortgage debt, it's probably about as impactful on cash flow for lots of the under 40 set.

That's one of the interesting things about dropping the rates on them or forgiving some of the or whatever. You drop the rate to 2.5% like the federal funds rate (the rate the government loans money to banks vs. the rate at which they loan money to students), and suddenly you free up $200/mo cashflow for that person. You forgive it and obviously free up $1,000. Anything in between is obviously a potential option as well. If you want to crank up interest rates without crashing the housing market, I don't see how you do it without some sort of relief on the student loan side. As it stands, you're looking at folks who maybe can get their first 30 year mortgage at 40, which is cutting it pretty damned close in an era of declining life expectancy. The other thing with the demographic retirement glut is the potential for housing to take a beating. Half of boomers have no retirement savings, or something to that effect. Reverse mortgages are probably going to be a booming business. Aging people stuck in aging homes too big and expensive for them to care for and not leaving them to their kids is probably going to be the norm for most. Have a feeling most won't be FHA loan material by the end of it. Under 40 homeownership rate has dropped to about 40%. Maybe total mortgage debt falls considerably as future generations increasingly find they don't have the opportunity to become homeowners. But it hasn't been the driver of private debt growth for the last 12 or 13 years anyhow.

[jk]

Re: Our Next President?

wages have been stagnant while the participation rate is declining. so total labor income doesn't go anywhere. i agree a lot of money could be pumped into the economy before we got inflation. debt levels are so high that a 2.5% fed rate slows the economy to the point that people start talking about recession. the total debt burden has to go down, or it has to be ignored [mmt time!]. those are the only 2 ways forward that i can see.

[dcarrigg]

Re: Our Next President?

As always, there ain't no such thing as a free lunch. Sure, the federal government can cancel debts owed to it, student loan or otherwise. However, that means they have less revenue to pay for things. The MMT crowd will point out that they can simply print the extra money they need to pay for things. That's true, but what is the result? Inflation.

That doesn't necessarily mean that plan doesn't suit your political goals, but it's not true to say that there's no effect of the government cancelling debt. Some people might say that inflation is a good thing. For example, they might look favorably on a plan to send a $100,000 bill to every US citizen. Sure, it would cause massive inflation, but if someone had zero dollars before, they will now have $100,000. Of course it won't be worth as much in terms of purchasing power, but it's better than nothing, right?

It's worth keeping in mind that who gains or loses from inflation is not necessarily clear-cut. Jeff Bezos probably wouldn't suffer too much under inflation because his wealth is mostly stock in Amazon. The stock price would go up like other prices. The prices for goods sold on Amazon would go up. However, a billionaire whose wealth is mostly in bonds (debt) is probably going to take a big hit. What about the workers in Amazon's warehouses? They better hope they can get pay raises that track with inflation or their living standards are going to plummet. Someone living on some kind of pension/fixed income stream is screwed unless it adjusts for inflation.

My thinking about this stuff was much more like this a decade ago. I've since revised it. Why?

1. It assumes labor's share as a constant. Most econ did. Turns out, it's shrinking.
2. This has serious implications for the relationship between unemployment rates and labor markets. If you've ever scratched your head at how unemployment can be near historic lows without wage increases, you're assuming labor's share is constant. If it's shrinking, it makes perfect sense that unemployment could drop to 0%--there could even be a labor shortage--and still real wages can stay flat or even decrease.
3. This is a fundamentally different environment than in the 1970s when labor's share was a constant and wages pushed stagflation.

I haven't quite bought into the whole MMT model. But I don't have to in order to be more skeptical of inflationary concerns. That does not mean that interest payments on the debt cannot grow so large they chew up an uncomfortably large chunk of the annual discretionary budget. But I think it does mean there's much stronger headwinds against inflation than there were before labor's share began shrinking. And I think it explains why the simple supply and demand explanation of wages never seems to pan out with much real wage growth anymore.

It's not a super complicated thing to understand. For the last 20 years the real pie's growing, albeit slowly at about 2% per annum. But over that same time, labor's total share of that pie shrunk by about 14%. Most people earn most of their money from labor income. Seems to me that's how these seemingly counterintuitive macro things can happen. It's also why I'm less hawkish about inflation--within limits roughly bounded by labor's loss. So at this point, to put a figure on it, I'd say roughly $2T per year in the US on the fiscal side before you really overcome the headwinds and face real inflationary danger. We're at about half of that.

Think what you want about the Fed, but their model projections have been pretty good. The two spots where they have been persistently and predictably off in the same direction have been that inflation and wages have remained lower than expectations. To me, this is a reasonable answer as to why.

The folk wisdom and textbook econ people have learned does not treat labor's share as a long-term shifting variable. But it is.

[ProdigyofZen]

Re: Our Next President?

Good call, on the surface. A newcomer with a relatively blank slate onto which bits and pieces of voter preference can be written as the campaign goes on, ala Obama, starting with "opposite of Trump" positioning of "love for each other and for our country." Ideal as a marketing campaign president for more of the same policies as Bush and Obama but without the Trump crazy.

Almost everyone will welcome a return to the regular scheduled programming, except for this: Kamala Harris’s Trump-Size Tax Plan

Warren lawyers the question of taxes: How high does Elizabeth Warren want to raise taxes? Her challenger wants to know.

It is on the question of taxation that electability hinges.

The reality of mounting federal government debt resulting from unrealistic tax policy will remain in the periphery of the conversation until after the election.

Warren if she continues to play her cards this way could win, and at least won't have to got back on a "read my lips" pledge when she's forced to raise taxes.

Kamala Harris almost sank her presidency before the campaign is started. She basically wants to eliminate all private health insurance.

Not to mention using her good looks and being a female to apparently sleep her way to the top publicly with Mayor Willie Brown? I think that is comical given the current #metoo socio-political environment.

[DSpencer]

Re: Our Next President?

If your point is that wealth redistribution will not happen short of a socialist revolution then I tend to agree. I'm expecting a financial crash and mass unemployment long before that happens. You seem to be hinting that the end game here is a feudalistic system. Well, feudalism was a response to the collapse of the roman empire.

Those conclusions are way deeper than any point I was trying to make.

[globaleconomicollaps]

Re: Our Next President?

As always, there ain't no such thing as a free lunch. Sure, the federal government can cancel debts owed to it, student loan or otherwise. However, that means they have less revenue to pay for things. The MMT crowd will point out that they can simply print the extra money they need to pay for things. That's true, but what is the result? Inflation.

That doesn't necessarily mean that plan doesn't suit your political goals, but it's not true to say that there's no effect of the government cancelling debt. Some people might say that inflation is a good thing. For example, they might look favorably on a plan to send a $100,000 bill to every US citizen. Sure, it would cause massive inflation, but if someone had zero dollars before, they will now have $100,000. Of course it won't be worth as much in terms of purchasing power, but it's better than nothing, right?

It's worth keeping in mind that who gains or loses from inflation is not necessarily clear-cut. Jeff Bezos probably wouldn't suffer too much under inflation because his wealth is mostly stock in Amazon. The stock price would go up like other prices. The prices for goods sold on Amazon would go up. However, a billionaire whose wealth is mostly in bonds (debt) is probably going to take a big hit. What about the workers in Amazon's warehouses? They better hope they can get pay raises that track with inflation or their living standards are going to plummet. Someone living on some kind of pension/fixed income stream is screwed unless it adjusts for inflation.

If your point is that wealth redistribution will not happen short of a socialist revolution then I tend to agree. I'm expecting a financial crash and mass unemployment long before that happens. You seem to be hinting that the end game here is a feudalistic system. Well, feudalism was a response to the collapse of the roman empire.

[DSpencer]

Re: Our Next President?

I've been thinking a lot about wealth redistribution today. I picked up this book the other day. It makes the case that debt cancellation was the basis of all historic civilizations. What would a debt cancellation look like today? If the debt was government debt then the government could simply declare the debt canceled and no obvious harm would be done to the public or the idea of debts as inviolable obligations. So in the case of student loans in the US. Federal student loans could be canceled. Even rescheduling student loans at current rates of interest would be an enormous improvement in the economy. This is what I think will happen if Trump runs again. Let's compare a high inflation over a short period of about 5 years ( EJ has proposed something similar once). What is the intent here? Are we trying to restore balance to the same level of wealth distribution that existed in ancient Babylon? France before the revolution? The US in 1850? 1950? 2006? What? How likely is this to succeed?

Cancelling federal debt like this doesn't change the balance much. It has a big impact on working class people with student loan debt, but retirees and people living on income from investment would not be affected. Major debt holders like banks would complain but ultimately they too would not be affected. Your typical billionaire wouldn't even notice. They might even welcome the move. The difference between inflation and limited debt cancellation is that inflation would impact banks, pension funds and wealthy individuals. If your intent is to reverse the wealth inequality than this looks like the way to do it. Inflation hits all debt not just student loans. The key here is control of the gold. If any billionaire manages to sequester a few thousand ounces of gold before the high ( note I didn't say hyper) inflation, the entire exercise fails. Debt cancellation by itself or inflation don't suffice. Wealth inequality is systemic.

This issue of wealth inequality has some levels to it. For instance I listened to Russell Napier talk about china. He said that china dictates the world inflation rate. He also predicts a much higher rate of inflation soon. This is interesting because India is predicted to surpass China as the most populous country soon. The Indian people collectively hold the largest private stocks of gold. Imagine the poorest people on earth suddenly becoming the richest. Geo-politically do you think that Donald Trump would put up with that? I can see him picking a fight with both India and China.

As always, there ain't no such thing as a free lunch. Sure, the federal government can cancel debts owed to it, student loan or otherwise. However, that means they have less revenue to pay for things. The MMT crowd will point out that they can simply print the extra money they need to pay for things. That's true, but what is the result? Inflation.

That doesn't necessarily mean that plan doesn't suit your political goals, but it's not true to say that there's no effect of the government cancelling debt. Some people might say that inflation is a good thing. For example, they might look favorably on a plan to send a $100,000 bill to every US citizen. Sure, it would cause massive inflation, but if someone had zero dollars before, they will now have $100,000. Of course it won't be worth as much in terms of purchasing power, but it's better than nothing, right?

It's worth keeping in mind that who gains or loses from inflation is not necessarily clear-cut. Jeff Bezos probably wouldn't suffer too much under inflation because his wealth is mostly stock in Amazon. The stock price would go up like other prices. The prices for goods sold on Amazon would go up. However, a billionaire whose wealth is mostly in bonds (debt) is probably going to take a big hit. What about the workers in Amazon's warehouses? They better hope they can get pay raises that track with inflation or their living standards are going to plummet. Someone living on some kind of pension/fixed income stream is screwed unless it adjusts for inflation.

[DSpencer]

Re: Our Next President?

lol. loved the anecdote.

amused but disheartened by the idea of state employees spending hours going through your invoices to make these penny level determinations.

On top of that we had our accountant billing by the hour to sit there with them during the audit. Definitely funny but sad.

In the same way, how are citizens and politicians supposed to meaningfully debate and discuss the tax code when even a single tax is filled with endless minutiae? I'm convinced that we could achieve nearly identical results if we simplified the tax code down to 1/10th the current size.

As mentioned by thrifty, there's all kinds of lobbying potential as well. Who has time to make closing the frappuccino loophole a priority?

[dcarrigg]

Re: Our Next President?

Though nothing like as extensive, my travels between Washington DC and New York via railway confirm the same viewpoint; everything in a very poor state of repair. Best was Houston, where a quarter mile from the centre you can find wooden hovels, streets of them. It was, in large part, these experiences that drove my own thinking towards the concept of recapitalisation of the grass roots economy.

Yeah, Chris, I've often thought about your capital spillway idea. The need for it, or something like it, grows more apparent by the day. It does't surprise me that your travels here kicked off some of your thinking. Death, but for the grace of a few federal dollars that keep the roads and post office alive, becomes a good chunk of this country's towns.

The truly terrible thing is that these are some really good places with really affordable homes and that were built in good places with good resources. These are exactly the types of places one might imagine a younger generation locked out of housing markets by high prices might move into and make something out of. The type of place where you can still buy a big old house for $150k or rent a big old storefront on one of the main corners in the neighborhood or town for $200/mo and turn it into something interesting. And lots are built on rail lines or ports or other infrastructure that still exists. Real potential is there.

But capital's so concentrated that these places simply become poor, and it drives demand so low that the main street corner commercial real estate's all empty. What index fund or VC or PE firm or hedge fund or mutual fund ever gave a crap about the smaller companies that made these places? Lots of money funnels into the S&P 500. Much less for the 501st on the list. And so on. More sophisticated players know that, and so the prophecy self-fulfills.

I also got to drive around most of Germany, at least most of the west of the country. It's night and day compared with the US. You may know the country better than I. But they too talk about a rust belt, 'Rhurgebiet.' Maybe one of their most famous rust belt towns is Bochum. They've got their own sad songs about it. But here's the truth that would stand up and smack any American in the face: Bochum looks a lot more like Boston or one of the 'winner cities' in the US than it looks like Cleveland or Buffalo. And Germany's a poorer country overall! They're simply better at structuring their corporate and finance law to promote mid-sized businesses rather than winner-take-all, and generally they spread things out a little more evenly. So their "Rust Belt" looks like a tech hub in the US. I don't know if this holds true in the former East Germany, and I suspect it does not from everything people have told me. Never got to rightfully travel the byways over there.

The real shame of it is there's a lot of potential going untapped in America. But we're so hooked on winner-take-all systems, defending monopolies and duopolies, and prone to believing lies, that as a people we refuse to realize it.

One other thing I noticed about the mid-size towns that are doing relatively okay in the US (at least on the east side of the continental divide), is that they're not only clinging to a university or an industry (often Defense-related), but they all have fought hard to keep most of the national retail and restaurant outlets out of town. Conservative places, liberal places, doesn't rightfully matter. If they successfully fended off the vultures and kept local businesses with local owners maintaining economic activity in the local economy rather than shunt it all down to Bentonville to move some heirs and heiresses a few spots up the Forbes list, they tend to have done better. I'm not sure if it's the chicken or the egg. But I am pretty sure if you give a damn about your town, unless you live in the orbit of a major metro that's teeming with capital anyways, fighting those suckers tooth and nail at the local level is probably a smart move. These places simply weren't designed to handle some absentee executive from 1,500 miles away who has never even heard of the town owning the only grocery store.

GRG's right in that Americans are good at scaling things up. But the method doesn't have to be centrally planned monopoly. At least the McDonalds on the exit ramp might have a local franchisee. People got so used to national branding they've come to accept far off central command and control ownership of local resources.

[Chris Coles]

Re: Our Next President?

It's absolutely true. Other problem is that since existing treatment centers are down the gravity stream, lots of them flood out, and it increases the overall property damage of extreme weather events exponentially, along with tap water disruptions due to fecal coliform contamination. If former 100 year floods start coming at intervals closer to 10, it just compounds the problem. It's not only filtration and treatment methods that have improved either. Old pumps are wildly inefficient and use much more electricity than necessary. I think you're absolutely right that it's another spot where there has been underinvestment. We've set up a system in which there's trillions of dollars to invest in apps and luxury condos and weapons and advanced cruise control systems, but basic infrastructure gets no love.

I like to drive. I've never made it west of Iowa by car (not without flying and renting). But I've made it up and down the eastern seaboard from Nova Scotia to Florida, out through the midwest, everywhere in between. The lack of capital is plainly noticeable. Just looking around at the state of people's roofs and out buildings, the railroad ties holding up rusty bridges, the aging sewer systems still stamped with those letters W.P.A. There are little bubbles of wealth around the whole foods with new luxury condos and McMansions and new infrastructure, but a mile down the road it's decrepit again, and you're lucky to get a price rite or a dollar general, luckier still for walmart. There's still a few places that are in between, clinging to universities or some odd industry that's still there despite some long odds. But even these places are starting to look rougher, and the lack of investment is creeping from the outside in. And it's interesting to me how much of it is obviously political. Took a ferry across Lake Champlain a couple years ago. Vermont side was very posh and up to date. New York side was very...not. Same beautiful landscape, rolling hills and farms. But rotten farmhouses. Bombed out silos. Abandoned schools. Terrible roads full of cracks and holes. Vermont's kind of the opposite on the other side. No money in the northeast part. Very old towns and very old people maybe keep one grocery store and restaurant alive--moldy siding, stop signs faded to white, one corner of a fence still standing, blue tarp on the roof, bars on the windows of the convenience store with broken old gas pumps out front, rusty old railroad bridges--that type of thing. Cross into Quebec and there's investment again. It's not that the land's useless.

Though nothing like as extensive, my travels between Washington DC and New York via railway confirm the same viewpoint; everything in a very poor state of repair. Best was Houston, where a quarter mile from the centre you can find wooden hovels, streets of them. It was, in large part, these experiences that drove my own thinking towards the concept of recapitalisation of the grass roots economy.

[Chris Coles]

Re: Our Next President?

I understand what you're saying. But what is the goal in progressive taxation? Do we really object to people earning too much money or having too much money? If it's the latter, then why not just get rid of the income tax and only tax wealth? Or stop offering tax-free bonds and categorize all income the same so that if you earn returns on your wealth they are all taxed. Or tax spending through a higher sales tax.

I just have a hard time believing that achieving a specific tax goal for society requires having a small tax on basically everything.

The tax code is just insane. Here's a little anecdote:

My company had a sales tax audit a few years ago. One of the findings was that our vendor for coffee and tea wasn't collecting sales tax. Strangely, in Ohio at least, even though the vendor is required to collect the sales tax, it's still the customer who owes it if it's not collected. So they had to go back through our invoices to determine what we owed. Sounds simple enough, but not quite that simple.

Food isn't taxed in Ohio. Well, it is taxed if you dine-in at a restaurant, but carry-out and grocery is not taxed. So why do we owe taxes? Aren't coffee and tea considered food? Yes, they are! But...only sometimes. Bottled/canned coffee, without milk (or milk substitute), is not food. But if you add milk, now it is food. But a CUP of coffee IS food, even without milk. Unless, it's artificially sweetened, then it's not food. Unless it also contains milk, then it is food.

You can serve a customer a cup of coffee and it's not taxable. You can provide them with sugar and it's still not taxable. If you add the sugar for them, now you've created a soft drink which is always taxable. If you then add some milk, you've turned the soft drink back into food and it's no longer taxable.

So they had to go through every invoice, line by line, to determine whether 10 pods of hazelnut or whatever contained sweetener and/or milk and then assess the tax accordingly.

I'd love to hear the precise social purpose achieved by taxing those who drink their coffee with sugar, but not those who drink it black or those who drink it with cream and sugar. I'd also like to understand how long I could survive drinking only a "food" such as black coffee vs a "non-food" such as a juice drink containing less than 50% juice.

Everything is designed to increase GDP, use any method imaginable to increase the need for debate and or prevarication; this is how you slowly establish bureaucratic feudalism. Here in the UK we have a law called Tree Preservation; today, a bureaucrat walks into your garden, you have no recourse to stop him, and he lists trees for preservation; from that moment you have to ask him for permission to even trim a small branch that has tips on the ground.....

When bureaucrats take control of the law; you lose control of your nation.