The grand essentials of happiness are:
something to do,
something to love, and
something to hope for.
Allan K. Chalmers
Senate Approves Online Sales Tax Bill 69-27: Thumbs DOWN!
The so-called "Marketplace Fairness Act" is a euphemistically named anti-competitive measure which extends the taxing power over out-of-state businesses which do not receive benefits from said taxes. For example, if I went to neighboring Delaware, bought a big-screen TV and brought it back into Maryland, I would pay no sales tax. (Technically Maryland could argue a use tax, but it would be largely unenforceable.) But if I bought it from a Delaware online store, this legislation would force the vendor to be a tax collector for Maryland (6%)--and for every other 44 states/localities charging potentially different rates. I consider it unconstitutional because it amounts to a de facto tariff authority and discriminates against vendors from no-sales-tax states.
I have written on this issue before, most recently yesterday. We've seen similar "fairness" arguments to argue against food trucks and hot dog vendors: they don't pay the same type of taxes as a brick-and-mortar restaurant. Actually, as I have frequently mentioned, brick-and-mortar stores have advantages. For example, restaurants can shelter customers against the elements, seat them comfortably, extend hours, offer services (e.g., wireless Internet and restroom facilities), take reservations, host events, and can easily scale up or extend menu options (e.g., hot entrees or multiple-course meals vs. finger foods). Portable vendors still have to purchase licenses, secure a location to operate and collect local transaction taxes.
As for retailers, the gripe seems to be that some retailers think that some customers will window-shop and purchase online cheaper when you factor in sales tax. First of all, the local vendor has a built-in advantage of convenience; if an electronics item is defective, the customer doesn't have to go through the hassle of obtaining an RMA and ship back the item. The customer can purchase an item immediately and doesn't have to pay shipping or deal with the hassle of delivery. Note that pricing is more of a general competitive issue; local merchants also compete on price, and if the local merchant is losing sales on price despite add-on shipping, perhaps he needs to cut his prices.
But Internet vendors compete on more than prices. There's also selection. To give an example, one of my cherished childhood memories involves New England clam boils. (My grand-uncle, who was my maternal Grandfather's junior partner in their mom-and-pop grocery, was the butcher, and he made tasty sausage links.) I love steamed clams, clam cakes, etc. I found a vendor which would bundle a couple of live Maine lobsters, clams and various sides and had them ship to my folks for a special occasion; it had nothing to do with trying to evade local sales tax. This vendor was based out of New England. I suppose if I lived in a different state and had a taste for Maryland crabs I would do the same.
There are other examples from personal experience: I'm a southpaw; I often eat lower-carb foods, have wide feet and wear athletic build suits (bigger chest, shoulders, arms). It is difficult for me to buy off the rack for related items. In college, I was lucky to find one or 2 left-handed desks in a classroom. In buying shoes or suits, it's more of "do you have anything in my size?"; a typical search at a brick-and-mortar men's store might have two or 3 suits which could be tailored to my size--and the suits weren't necessarily in a color or style I preferred. Other specialty brick-and-mortar stores just can't attract enough customers to make a go of it; for example, I've heard of tall lady clothing shops closing down. It is much easier to shop specialty items via the Internet.
There are a lot of things I will buy only locally--most food and household items. Mostly I'm not going to shop on the Internet to save a buck or two on sales tax net shipping; it's not worth my time or effort. I might do something like download an occasional music track, buy some bulk stevia, or buy an out-of-print book. I'm not saying I'm not a representative Internet shopper. But the idea that local merchants are losing my business over sales tax is pure rubbish.
But let's face it--the big winners in this fiat currency rush are overextended local/state governments which make unsustainable promises to crony interests like public employee unions: trying to make this about "marketplace fairness" is pure political spin. Those 69 votes (I haven't seen a breakdown as of this post) included a number of Republicans, whom will have to answer for their pro-tax vote. We do have some hints though from an earlier 63-30 cloture vote. That was interesting, for some reason, the Delaware senators, both Democrats, voted FOR it (against their state's interest), as did Begich of Alaska, but Democratic senators from Oregon, Montana, and New Hampshire voted against. Tea Party-friendly senators, all Republicans, voted against: Paul (KY), Lee (UT), Rubio (FL), Johnson (WI), Scott (SC), Toomey (PA)--and Cruz (TX) did not vote (he was in Texas for the Bush Library opening), but issued a statement against the legislation. Obviously some votes flipped on this final vote for unknown reasons (7 didn't vote in the closure vote, but the pro-tax side got 9 mote votes).
Let us hope that the GOP House rejects this unconscionable tax grab.
Baltimore Prison Scandal
Four female prison guards impregnated by prison gang members/leaders, money laundering, drugs; dozens indicated. Corruption, pure and simply. Heck of a job you're doing, Marty (O'Malley)!
Obama, Uncertainty, and the Hidden Uncertainty Tax
Bill McNabb, CEO of the mutual fund giant Vanguard, recently wrote this in a WSJ op-ed:
Anyone hoping for signs of a healthy economic recovery was disappointed by lower-than-expected GDP growth for the first quarter of 2013—a mere 2.5%, far short of the forecast 3.2%. Today, there is uncertainty about regulatory policy, uncertainty about monetary policy, uncertainty about foreign policy and, most significantly, uncertainty about U.S. fiscal policy and the national debt.Three economists, Stanford University's Nicholas Bloom and Scott Baker and the University of Chicago's Steven Davis, have done invaluable work measuring the level of policy uncertainty over the past few decades. Their research (available at policyuncertainty.com) shows that, on average, U.S. economic policy uncertainty has been 50% higher in the past two years than it has been since 1985.
Based on that research, our economists at Vanguard isolated changes in the U.S. economy that we determined were specifically due to increases in policy uncertainty, such as the debt-ceiling debacle in August 2011, the congressional supercommittee failure in November 2011, and the fiscal-cliff crisis at the end of 2012. This gave us a picture of what the economy might look like if the shocks from policy uncertainty had not occurred.
We estimate that since 2011 the rise in overall policy uncertainty has created a $261 billion cumulative drag on the economy (the equivalent of more than $800 per person in the country). Without this uncertainty tax, real U.S. GDP could have grown an average 3% per year since 2011, instead of the recorded 2% average in fiscal years 2011-12. In addition, the U.S. labor market would have added roughly 45,000 more jobs per month over the past two years. That adds up to more than one million jobs that we could have had by now, but don't.Obama also procrastinated on the Bush taxes for lame-duck sessions for two consecutive elections. We have the pushing-on-a-string assaults on the private sector (ObamaCare and so-called financial reform). The Dems will try to point fingers at the GOP, but the reality is that Obama has been unwilling to negotiate on meaningful budget cuts, he failed to promote the recommendations of his own deficit reduction committee, he's been playing politics,scapegoating the opposition, threatening executive orders or vetoes when he doesn't get his way in Congress, and he endlessly procrastinates and dithers on executive decisions. He lacks Bill Clinton's ability to work with opposition leadership.
To show how Obama has such little regard for the truth, consider his populist straw man of Big Oil. An Exxon/Mobil blogger finally responded last fall, tactfully:
To hear President Barack Obama in last night’s first presidential debate, you would think he was running against ExxonMobil this November given his tendency to single us out for criticism. In a discussion of ways to address the federal deficit, the president repeated incorrect claims that ExxonMobil receives what he termed “corporate welfare.”
What the president often calls subsidies for “Big Oil” are legitimate tax provisions that apply to virtually all American manufacturers and producers. In fact, companies like ExxonMobil actually are specifically disadvantaged: The oil and gas industry deduction under section 199 of the tax code, for instance, is lower than the deduction allowed for nearly all other U.S. manufacturers.
Keep in mind, too, that ExxonMobil’s U.S. tax expense amounts to more than $1 billion per month. In 2011, our total U.S. taxes of $12.3 billion exceeded our U.S. earnings by almost $3 billion, and our effective income tax rate in the U.S. was 31.4 percentI find it embarrassing to have such an incompetent demagogue, with such a reckless, utter, deliberate disregard for the truth, occupying the White House.
The Keynesian Multiplier?
The market monetarist Scott Sumner has a short entry after the recent jobs numbers worth quoting in full:
Well you guys had a nice little run, but it’s all over now. Monetary offset stands triumphant.
PS. I should clarify that the big story is the revisions. We are adding 196,000 jobs per month this year, which is actually more than last year, despite the austerity.As I prepared this segment, I was reviewing a spat between Sumner and an Austrian School Forbes columnist John Tamny. (Heaven knows what Sumner would think of my opinions...) I will say that that I distrust central planning of policy, fiscal or monetary, I think money printing is counterproductive, lowering purchasing power. I would like to see more of a competitive market for currency, and I don't like government spending in most cases being treated as part of GDP. I think government policy obfuscates the private sector. I was somewhat put off by Sumner leading off a conservative-bashing post in response to Tamny, with a ready chorus of comments joining in. I don't think most progressive politicians could pass an Econ 101 exam.
I think Sumner makes a good point here, that Keynesian policy doesn't explain if the US has been more austere, why Europe's economy is in a funk, unless there is another explanation (e.g., US monetary policy). But he insists whatever the Fed did to offset austerity isn't enough because the proof is in the pudding: subpar economic growth. He also points out Japan has run huge public spending while NGDP has fallen.
So this explains the context of the above quote: improving job numbers he points out can't be attributed to government spending. He attributes it to monetary policy.
But even a non-economist has to wonder how past economies flourished without the manipulations of central bankers, whether there might be other explanations other than monetary policy. For example, could regulatory policy drag suppress a natural recovery?
Texas vs. The People's Republic of California
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| Courtesy of Carpe Diem |
I used to stuff greenbacks in cards to my young nephews and nieces. I mentioned this anecdote in a past post; sister #3 (with 5 boys and 1 girl) used to train her kids to throw out gift wrap, etc., right away after opening gifts. So one of my young nephews during the Greenspan era went to his mom with my crumpled greenback in his little fist: "Trash, Mommy." I couldn't have been prouder: a born economist in the family!
Political Cartoon
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| Courtesy of Michael Ramirez and Townhall |
Bruce Springsteen and the E-Street Band, "Candy's Room". WARNING: adult theme. The target of the young man's hopeless romance is in the world's oldest profession; he realizes that he'll never have her beyond their all-too-brief encounters ("a sadness all her own, from which no man can keep her safe"), he can't compete with the wealth of her other clients, but he is convinced that she knows that he's different, that his feelings for her are real. One of my top 5 favorite songs and, in my opinion, the greatest rock song ever recorded. The driving, mesmerizing arrangement is in its own league. Another track I recently featured, "Because the Night", has a similar theme (only with a real girlfriend), with another brilliant driving arrangement.
