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Archive for June, 2017

The wife and I the other day went down to Mt. St Helen’s. This is about a 3-hour drive from where we live.

The city of Seattle is heavily Democratic (capital D). Yet once you get out of the city and drive in any direction for an hour, the political orientation changes. There are lots of Trump supporters.

Along the way down, we saw a big billboard (privately owned, I think) that said “Higher taxes create jobs how?” The unstated argument is that raising taxes is bad for the economy and doesn’t create jobs, and lower taxes is a good idea and creates prosperity.

So I thought I’d take a stab at answering this question.

First of all, nobody who wants higher taxes wants them at 100%

So let’s throw that away. Everyone knows that if the tax rate is too high, the economy stops because no one will work.

Second, it’s a matter of who is being targeted with the higher taxes

In any economy, there is the poor, the working class, the professional class, and the rich. We’re not just talking about the 1% who have incomes starting over $450,000, but the highest sliver of that whose incomes are over $5 million per year. That’s usually who is being targeted for higher taxes although typically it applies to earners over $450,000.

Third, it has to do with increasing consumer spending

The United States’ economy, and most western economies, is built upon consumer spending. Someone has to sell stuff, and someone has to buy the stuff that’s being made. If I build 10,000 widgets, but nobody buys them, that’s bad. It puts no more money in my pocket, and if nobody can afford my widgets, then they can’t take advantage of my widgets’ awesomeness.

The theory behind tax increases

The idea being tax increases is that you take some money from the wealthy and give it to the poor, working class, and professional class. This could be in the form of a direct transfer payment, but usually it’s in the form of services. So, a government might take the additional revenue from taxes and spend it on improving public transit, or on roads, or on daycare, or on health care.

The result is that a poor, working class, or professional class person that normally would have spent an extra $5 on a subway ride, or $1000/month on day care, has extra money in their pocket. They decide to spend it on something else, be it goods that are necessary (household items) or luxury goods (mid-to-upper end vehicles).

The net result is that because people are spending less on one area because the government is subsidizing it, they get to spend more on another area. That means the people that sell stuff have more customers to buy their stuff.

The theory behind tax cuts

Tax cuts have to go to the wealthiest people. The belief is that a wealthy person will take the money they receive in tax cuts and invest it to start new business and generate more wealth for everyone – new jobs, new innovation, new spending on business.

A poor, working class, or professional person doesn’t get enough back in taxes to be able to invest it. For the poor and working class, any new additional income is likely to be spent on consumer goods and services. For a professional person, the money will either be spent, saved, or invested in the markets depending their financial situation. This is similar to a tax increase on the rich in that both are intended to be stimulative. But in these cases, the tax cut money has not gone to creating more wealth in the economy by starting a new business.

No, only a wealthy person who gets a big tax cut can take it and invest directly in the economy. For you see, a wealthy person already has all (or nearly all) of their needs and luxury items. This is because of the decreasing utility of money. All of us need a certain amount of money to buy food, shelter, transportation, cat food, and other requirements. Then we all buy some luxury items. But eventually that tapers off and additional money doesn’t make us happier, that is, we don’t spend it. But given enough additional money, and then maybe a wealthy person decides to take a risk and start a business to grow the economy. It takes a certain amount of money to get started, running a business isn’t cheap. It’s difficult and requires a cushion.

That’s why you have to give tax cuts to the rich if you want them to grow the economy.

Which one is better?

Economists have measured both of these. Both are intended to stimulate the economy. A tax cut does put additional money into everyone’s pocket, and they spend it – but not equally.

The poor and working class spend their extra money. The professional class frequently does, and the wealthy sometimes do, but sometimes they save it. If someone wants to save their extra money, that’s fine. It’s a smart thing to do, Americans don’t save enough. But from macro-economic perspective, it’s bad. Our economy is built on consumer spending, not consumer saving.

If the government now suffers a reduction in revenue, it either has to cut services or run deficits. If it cuts services, then the poor and working class who were using them now have to use the small bit of money from tax cuts to spend on those cut services whose fees have increased. They have no additional money. So the government has to run a deficit and sells bonds in order to finance itself, but as the deficit grows, it can increase inflation. That, too, can erode the buying power of consumers whose incomes have to grow fast enough to keep up with inflation. In 2017, that’s happening for the professional class, but not the poor and working class.

So, if you compare the two:

  • A tax increase on the wealthy that results in the government providing more services for the middle class gives us more consumers who can spend money. Because of the marginal utility of money, the wealthy don’t experience a noticeable degradation of their lifestyle
  • A tax cut on the wealthy does not necessarily result in the wealthy creating more jobs. Much of the time, they save it which is good for them but not for the economy as a whole. The middle class does notice a degradation of their lifestyle as they now have to spend more money on services that they previously didn’t have to spend on

Therefore, as long as it is done right and the rates are not too high, a tax increase on the wealthy does more to stimulate the economy than a tax cut for the wealthy.

And that’s how I would answer the billboard’s question.

 

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Am I seriously doing another blog post? Yup, I guess so.

Myself and some friends were talking about President Trump the other night, I just can’t help myself. I articulated why I have problems with him.

There are many dozens, or even hundreds of reasons to oppose President Trump. But there are two meta-issues that I think undermine the United States in particular, and western society in general.

1. The refusal to divest himself from his business interests

Before the election, then-candidate Trump took a lot of heat from his business interests, and he said he would divest himself from them. But he never did; he said he would let his sons run the day-to-day business, but that he would remain invested. Unlike other members of cabinet who put their interests into a blind trust (e.g., Secretary of State Rex Tillerson), Trump did not.

This is problematic.

The office of the presidency in the United States is not supposed to be used to serve your own personal interests. The president has a lot of power, and therefore can use his office to enrich himself – at the expense of the nation.

For example, he owns a suite of hotels all across the United States, and internationally. He could push for hosting conferences, and foreign governments who travel to the US, to stay in his hotel. He can imply unfavorable treatment if they don’t. And if others want to play ball, they’ll do it. In this way, President Trump would have leveraged his position of power for personal gain, regardless of whether or not his interests align with the United States’ interests. The office of the president is supposed to align first with the US, regardless of whether they are in the interest of the office holder. In fact, even if they are opposed, the president is supposed to put the interests of the country first, not his own. Can you imagine a foreign government offering to spend a large chunk of money on Trump’s hotels in return for favorable treatment by the US government?

This is double confounded by the fact that President Trump refused to release his tax returns, and only leaked the ones that were favorable to him (the 1995 return which shows him declaring a $1 billion loss, and the 2005 return where he paid about $35 million in income tax [mostly due to the Alternative Minimum Tax which his first budget proposal wanted to do away with]).

But because he refused to release his tax returns, we don’t know all of his financial holdings.

And this sets the stage for future presidents to refuse to divest themselves of their financial interests and truly abuse the office of the presidency for personal gain. The precedent the president has set has lowered the bar for future behavior that will be more shady and nefarious. The abuse of office in this manner is how dictators in banana republics operate.

I think this is why President Trump never released his tax returns; it will show that there is something shady going on, and mostly like there is Russia involvement in some way. Perhaps it’s due to financing and special deals (as his sons have said in interviews), but my hypothesis is that the reason Trump is acting all weird when it comes to Russia (e.g., giving them favorable treatment in return for nothing geopolitically), and not disclosing his tax returns, is because he is planning to personally profit during his time in office and that he has to pay Russia back.

2. His administration’s undermining of the geopolitical order set up after World War II

The United States was viewed as isolationist – or at least non-interventionalist – during the first part of the 20th century.

And in Europe, the force driving the continent was a mixture of nationalism (“my country is better than your country”) – and the concept of the balance-of-power.

The balance-of-power was (formally) set up after the Napoleonic Wars. Napoleon changed the continent by mobilizing all of France and steamrolling over Europe before finally being defeated for good in 1815. To counter that, at the Congress of Vienna, the major powers (Russia, France, England, Austria, Prussia) established a system where entire countries would ally with each other to balance out the other, so any country that tried to invade another would be forced to deal with the other country’s allies. That is, if England and Prussia were allied with each other, then France couldn’t just invade one – they’d have to fight both. This system worked reasonably well because each country knew that a war would require massive resources and victory would incur heavy losses, making the cost/benefit ratio look unattractive.

But in the late 19th century, countries started devolving into nationalism. First Germany reunited with a series of wars, culminating with the Franco-Prussian War where they became the leading power of the Europe. The balance-of-power still held until World War I when Germany, buoyed by nationalism, instigated the war to end all wars. Which it was, until nationalism reared its head again, and World War II claimed 50 million lives.

After World War II, the world powers decided that the concept of the balance-of-power wasn’t good enough, so they instituted a system of integrated alliances. By creating trade unions based upon political and economic interconnectedness, it would create less hostility between countries. Countries are far less likely to go to war if they are both part of a political union that encourages trade; why would Country A invade Country B and incur the price of war, when they could just trade for the goods they want?

This is the foundation of the United Nations, but more importantly the European Union. Greater integration has increased the unity of Europe where the two worst wars of the past 100 years started, and also increased its stability. Nationalism doesn’t make sense, and that’s why it’s important to keep the EU together. The United States helps guarantee global stability by supporting the EU.

Yet President Trump and Co. are actively undermining the European Union:

a) He has clearly preferred to align with Russia whose geopolitical goals are to be a regional power, and their geopolitical goals are to weaken Europe so they can’t be a counterbalance to Russian influence

b) He has (well, had) undermined the Europe Union by endorsing hardline nationalists like UK-independence leader (at the time) Nigel Farage and saying he should be the UK’s ambassador to United States, and endorsing French nationalist Marine Le Pen. Both of those individuals are actively working to break up the EU.

If the EU does break up, then what happens next? It means we revert back to divisions based upon national borders, which leads to nationalism in place of greater political and economic integration. And that’s what led to the last great war in Europe. Peace is not achieved lightly, and undoing one of the things that led to it (another being more democracy) is a negative.

I think that’s bad for global stability; it’s bad for Europe, and therefore bad for the United States.


And those are the two meta-reasons why I oppose President Trump’s agenda.

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I had a surprising experience the other day.

Recently, I’ve been thinking a lot about politics, no doubt due to my alarm about the current US administration. But I also want to be non-partisan, as I’ve written on numerous blog posts.

I’d heard that a lot of US political appointee positions had not been filled, so on a whim I decided to see if the US ambassadorship to France is currently open. It is.

I joke to people that my goal is to become the US ambassador to France (it could be any country, but I picked France). Even though I’m not qualified for this, let’s just assume that somehow I get the job. I then plan to serve out my term, and then since I hold dual citizenship, apply to become the Canadian ambassador to France. When they ask me for my relevant job experience, I can answer “Was previously the ambassador for France.”

I checked out the current ambassador to France’s resume as of course they would have relevant experience, and she does. I also saw that she’s on the Council of Foreign Relations. I hadn’t heard of this before but it did sort of ring a bell. It turns out to be a non-partisan group of fairly famous people who are a think-tank based in Washington, D.C. whose focus is US foreign affairs. I went through the site, browsed its contents, subscribed to the daily newsletter, and subscribed to the podcast. I also started looking through the membership, as for some reason I have this idea in my head that I want to join the US Council of Foreign Relations. After all, I’ve always had an interest in geopolitics.

I started going through the membership list of the CFR, and it’s big. I recognize a large chunk of the names, but none of them are people who I know personally (e.g., Debbie Wasserman Schultz, the former head of the Democratic National Convention; Colin Powell, former US Secretary of State). But then I recognized one name on the list for whom I did have a quasi-relationship – my member of Congress.

My congressman has a common name and I wondered if it was him. I went to his webpage and browsed his bio but I didn’t see his membership on the CFR. So, I filled out the “Contact Me” page (it has a lot of screening on it, they make sure you’re in his district before he’ll respond) and I asked him “Are you the same guy that’s on the membership of the CFR?” I left my contact information and basically forgot about it, not really expecting a response.

A few days later, I got a phone call from an unknown number. I let it go to voice mail because I get so much unsolicited spam on my cell phone now (some idiot organization or two clearly leaked my phone number). I was surprised to see they left a message (so few spammers do), and I was even more surprised to hear it was a staff member of my congressman!

He did, indeed, confirm that my congressman was the same person listed on the CFR! So I was right, I kind of figured he was. But I was suitably impressed that he took the time to get back to me on this rather obscure question.

I wonder if anyone’s every asked him that before?

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The wife and I hand wash our dishes.

This means that instead of using the dishwasher, we pop them in the sink and do them by hand. I don’t mind doing this, it only adds perhaps 10-15 minutes to clean up. Plus, the dishwater often leaves ugly water stains which don’t come off.

The drawback of hand washing dishes is that we break a lot of them. I’ve broken several plates and glasses, and so has the wife. But it accelerated this past week.

I was washing a plate in the sink when it slipped out of my hand and fell against the bottom of the sink. It didn’t drop far, maybe 3 inches. But it left a chip and a crack in the side of it, rendering it unusable because it could cut you if you weren’t careful (most people won’t be careful).

Then a few days later, I was washing a wine glass. We had bought two inexpensive wine glasses from an estate sale a few weeks ago to replace the previous wine glasses that we had broken. Well, the wife broke one of those. So anyhow, I had the other wine glass in the sink and was washing a frying pan. It slipped out of my hand and landed on the wine glass, breaking it.

Argh!

The next day I decided to head down to the store to pick up two new wine glasses to replace the pair that we had broken. I went after work and had my backpack with me. I bought the two glasses and the clerk wrapped them in paper and put them in a shopping back (I didn’t put them in my backpack). I headed to my car and tossed in my backpack. I then got into the car, and brought the other bag into the car… and whacked the bag of wine glasses against the side of the car, breaking one.

I had broken yet another wine glass on the very same day I bought it!

Argh, again!

Washing dishes by hand is getting more and more inconvenient the more clumsy I get.

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I’ve loosely been tracking the trial of Bill Cosby – the TV star from the 1980’s and 1990’s. He’s had a whole stack of sexual harassment allegations spanning multiple decades, and his accusers have accused him of giving them drugs and engaging in unwanted sexual acts with them. There’s not just one or two women accusing him of this, but dozens.

Cosby’s on trial, but because so many of the cases are so old, he can’t be prosecuted for them due to the statute of limitations (or so I’ve heard). Instead, he’s being tried for one incident that occurred in 2004.

The prosecution brought multiple witnesses, whereas the defense wrapped up their case in a few minutes, only bringing in one witness (a police detective). They went to closing arguments, and the jury went into deliberations. That was last Monday or Tuesday (it’s the following Sunday as I write this).

There’s still no verdict, and the jury has asked to review lots of the evidence presented at trial.

I’ve read some commentary by so-called jury experts who say that it’s not indicative of it being either good or bad (for Cosby). But in my view, I think it’s bad news for the prosecution and good news for Cosby.

Now, personally, I think Bill Cosby is guilty. I know he has a wholesome image, but he’s had dozens of accusers come forward and say more or less the same thing. Why he would ever feel the need to give these women drugs – relaxants – to get them to agree to have sex with him is beyond me. He’s a rich and famous celebrity, I would think he wouldn’t have had that much difficulty in finding willing participants. And the circumstances of the story being told is suspicious.

I think he did it.

But I don’t think he’ll be convicted.

For you see, a couple of months ago I was on a jury, and it was a sexual assault case. In the case, it resulted in a guilty verdict. But I feel like the case was really obvious that the guy did it. There was evidence that was too strong to ignore.

In this case, there are a bunch of complicating factors:

First, it comes down to he said, she said

This is unfair, but this ultimately comes down to a he said, she said debate, and which one has more credibility. There isn’t any physical evidence, so the jury has to decide which one they want to believe. Both agree that there was a sexual encounter, and both agree that there was relaxant drugs involved. But one says it was consensual while the other says it wasn’t.

Secondthe prosecution has to prove that Cosby is guilty; the defense doesn’t have to prove he is innocent

This is a high bar to clear in a case like this where there is no physical evidence. As a jury, you can’t just say “Well, she said it so it must be true.” The jury has to find that Cosby is guilty beyond a reasonable doubt. This doesn’t mean that there can be zero doubt, but rather that a reasonable person would find the defendant guilty given the evidence and that alternative explanations are simply implausible.

Third, I suspect that the jury does not know that much about Cosby or the other allegations against him

When I was on the jury, there is a pre-trial process where the lawyers will weed out any juror who they think should not be on the jury. This includes people who have heard about the case on the news, and you are given strict instructions to not read about the case in any way, shape, or form; or to discuss it with anyone in any detail. When you go home for the evening, you can’t discuss what case it is or even what it’s about.

During the trial I was on, we were only given the facts of the case in isolation. I had heard that Cosby had numerous sexual complaints against him, but this probably didn’t come into the trial because it’s not part of this particular case. I say that because the defendant in the case I was on had a long criminal history. That didn’t come up during the trial since it was outside of the context of the case, and I’m sure the defense lawyer argued that it shouldn’t be part of the evidence the prosecution could bring up (and he succeeded).

Cosby’s lawyer would have argued the same thing (if he didn’t, he’s a bad lawyer and there’s no way Cosby would have gotten a bad one). That means that the trial jury would most likely be made up of people who weren’t that familiar with Bill Cosby (celebrities are not universally known) and were unfamiliar with all the other complaints against him. Or, if they did know about Cosby, would have been instructed to put all of their biases aside. But anyone familiar with Cosby’s other sexual misconduct allegations would probably have been excluded from the trial jury.


So with that out of the way, why do I think Cosby will not get convicted?

Guilt beyond a reasonable doubt is hard to define, but it can be attained with the word of a credible witness. That’s the one thing this entire case likely rests on. Is Cosby’s accuser credible?

There will be some on the jury who think she is, but some who don’t. The reason the jury is asking to review her testimony is because they are trying to see if there were any inconsistencies in it. Did all the facts line up? Do they contradict at any point? Because if they do, that will undermine her credibility. There are going to be some on the jury that don’t think her testimony is credible enough to secure guilt beyond a reasonable doubt.

I say that because it’s what happened in my jury room. I’d say between 1/2 to 2/3 of us believe the defendant was guilty, even though the accuser had some minor gaps in the testimony. But the jurors who were unsure were not that willing to find a guilty verdict because they knew the implications, and believed that there was room for reasonable doubt. Reasonable doubt differs from person to person.

In the trial I was on, there was physical evidence on the victim, and there was security footage that caught the two on camera about a half hour after the incident took place. And, there was testimony from friends of the victim. But, the friends’ testimony was not enough to convince the jury, only the physical evidence on the victim and the video camera footage. Had it not been for that, I don’t think we could have gotten a unanimous verdict.

And that’s what I think is happening here. I think that 1/2 to 2/3 of the jurors think Cosby is guilty, and the rest do not – at least not beyond a reasonable doubt. Those jurors will want more than he said it was consensual, she says it was not, in order to say guilty unless they find the accuser credible.

There will be an internal debate going – why would she make it up? The defense argued that it is grandstanding, or trying to get revenge after a consensual sexual encounter, or something like that. And some jurors will hold out that possibility even though it’s not that plausible. It’s true that some men will be falsely accused of sexual assault, but it happens far less than they actually commit sexual assault, and far less than they are accused of it but are acquitted.

So I think that the jury will probably come back as a hung jury, or return a verdict of not guilty, and that’s why it has taken so long. The jury I was on took about 5 hours, and this one is now at least four days (maybe three). They will review the testimony, but you can take notes during the trial and everyone can discuss it. You can bring your own personal experience into the trial, too.

But I think Cosby is, unfortunately, going to get away with it.

Update – June 20, 2017: I found out on CNN today that the result was a mistrial, just like I predicted.

 

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