In a Washington Post column today, Delaware Governor Jack Markell and Third Way President Jonathan Cowan took a swipe at the progressive wing of the Democratic Party in arguing for a set of ill-defined centrist proposals. (For example, they want better schools — great idea.) There is much about their piece that is wrong or misleading (they imply that the rebuilding of Europe and Japan impedes growth and makes us poorer, that’s not what standard trade theory says), but the best part is in the last paragraph where they tell readers:
“Nine years ago, Borders Books had more than 1,000 stores and more than 35,000 employees. Four years ago, it liquidated. Those stores didn’t close and those employees didn’t lose their jobs because the economic system was rigged against ordinary Americans. They closed because technology brought us Amazon and the Kindle.”
Actually, Border Books did close in large part because the economic system is rigged against ordinary Americans. One of the main reasons Amazon has been able to grow as rapidly as it did is that Amazon has not been required to collect the same sales tax as its brick and mortar competitors in most states for most of its existence. The savings on sales tax almost certainly exceeded its cumulative profits since it was founded in 1994.
While there is no policy rationale to exempt businesses from the obligation to collect sales tax because they are Internet based, this exemption has allowed Amazon to become a huge company and made its founder, Jeff Bezos one of the richest people in the world. Oh yeah, Jeff Bezos now owns the Washington Post.
Addendum
I see many folks have a hard time believing that sales tax mattered to Amazon’s growth. While readers here may exclusively buy books in stores or on the web. Many do both. And for most of these people it is very likely that if they had to pay 5-8 percent more for the books purchased on the web that they would have bought more in stores. If would add, that if didn’t matter to these people, then we have to wonder why Amazon and other Internet retailers didn’t just raise their prices by 5-8 percent and put more money in their pockets?
Again, the amount at stake here is almost certainly more than Amazon’s cumulative profits. That makes it a big deal.
In a Washington Post column today, Delaware Governor Jack Markell and Third Way President Jonathan Cowan took a swipe at the progressive wing of the Democratic Party in arguing for a set of ill-defined centrist proposals. (For example, they want better schools — great idea.) There is much about their piece that is wrong or misleading (they imply that the rebuilding of Europe and Japan impedes growth and makes us poorer, that’s not what standard trade theory says), but the best part is in the last paragraph where they tell readers:
“Nine years ago, Borders Books had more than 1,000 stores and more than 35,000 employees. Four years ago, it liquidated. Those stores didn’t close and those employees didn’t lose their jobs because the economic system was rigged against ordinary Americans. They closed because technology brought us Amazon and the Kindle.”
Actually, Border Books did close in large part because the economic system is rigged against ordinary Americans. One of the main reasons Amazon has been able to grow as rapidly as it did is that Amazon has not been required to collect the same sales tax as its brick and mortar competitors in most states for most of its existence. The savings on sales tax almost certainly exceeded its cumulative profits since it was founded in 1994.
While there is no policy rationale to exempt businesses from the obligation to collect sales tax because they are Internet based, this exemption has allowed Amazon to become a huge company and made its founder, Jeff Bezos one of the richest people in the world. Oh yeah, Jeff Bezos now owns the Washington Post.
Addendum
I see many folks have a hard time believing that sales tax mattered to Amazon’s growth. While readers here may exclusively buy books in stores or on the web. Many do both. And for most of these people it is very likely that if they had to pay 5-8 percent more for the books purchased on the web that they would have bought more in stores. If would add, that if didn’t matter to these people, then we have to wonder why Amazon and other Internet retailers didn’t just raise their prices by 5-8 percent and put more money in their pockets?
Again, the amount at stake here is almost certainly more than Amazon’s cumulative profits. That makes it a big deal.
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Frank Bruni has a very good column on the pay packages of presidents at universities around the country. Bruni points out that many make well over a million dollars a year and some of them make several million a year, when their pension is included.
One aspect to this issue that Bruni neglects to mention is that these pay packages come largely at the public’s expense. In the case of public universities, the school are largely financed with public funds, so the taxpayer involvement is quite direct. However even at a private university like Yale, which Bruni reports gave an $8.5 million going away president to its retiring president Richard Levin, the taxpayers subsidize the cost through its tax exempt status. Insofar as money is given to Yale from high income earners, the tax deduction means that the government is losing more than 40 cents on the dollar.
Clearly there is a failure of governance at these institutions where the boards that control them have little incentive to restrain pay at the top. This is likely the case because there are often personal ties between the boards and the presidents and hey, why wouldn’t they want to give someone else’s money to their friends?
It is striking that pay of these university presidents is not more of an issue at a time when there has been a great effort to highlight the pay and especially the pensions of public sector employees. The deferred pay given to Yale’s former president would be equal to roughly 500 pension years for the retired Detroit municipal employees.
The pay of university presidents should also be an issue in plans to make college free or at least less expensive. If college is to be affordable to students or the public, if taxpayers end up footing the bill, then it will be difficult to support such outlandish pay packages for those at the top. The excessive pay for college presidents does not only directly imply substantial costs, it leads to inflated pay for other top university administrators.
The president of the United States gets $400,000 a year. That seems a reasonable limit for public universities or private ones that benefit from tax exempt status. If a school can’t attract good help for this pay, it is probably not the sort of institution that deserves the public’s support.
Frank Bruni has a very good column on the pay packages of presidents at universities around the country. Bruni points out that many make well over a million dollars a year and some of them make several million a year, when their pension is included.
One aspect to this issue that Bruni neglects to mention is that these pay packages come largely at the public’s expense. In the case of public universities, the school are largely financed with public funds, so the taxpayer involvement is quite direct. However even at a private university like Yale, which Bruni reports gave an $8.5 million going away president to its retiring president Richard Levin, the taxpayers subsidize the cost through its tax exempt status. Insofar as money is given to Yale from high income earners, the tax deduction means that the government is losing more than 40 cents on the dollar.
Clearly there is a failure of governance at these institutions where the boards that control them have little incentive to restrain pay at the top. This is likely the case because there are often personal ties between the boards and the presidents and hey, why wouldn’t they want to give someone else’s money to their friends?
It is striking that pay of these university presidents is not more of an issue at a time when there has been a great effort to highlight the pay and especially the pensions of public sector employees. The deferred pay given to Yale’s former president would be equal to roughly 500 pension years for the retired Detroit municipal employees.
The pay of university presidents should also be an issue in plans to make college free or at least less expensive. If college is to be affordable to students or the public, if taxpayers end up footing the bill, then it will be difficult to support such outlandish pay packages for those at the top. The excessive pay for college presidents does not only directly imply substantial costs, it leads to inflated pay for other top university administrators.
The president of the United States gets $400,000 a year. That seems a reasonable limit for public universities or private ones that benefit from tax exempt status. If a school can’t attract good help for this pay, it is probably not the sort of institution that deserves the public’s support.
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Washington Post columnist Ruth Marcus is unhappy with Senator Elizabeth Warren’s opposition to the trade agreement. In particular Marcus is upset that Senator Warren has complained that the deal is secret, calling this a bogus argument. I won’t go through the whole piece (this stuff has been addressed many places), but I do want to deal with one point Marcus raises.
She noted that Warren pointed out that President Bush had made the draft text of the Free Trade Area of the Americas agreement public, but then tells readers:
“the countries involved in the Free Trade Area of the Americas agreed to make initial proposals public.”
This gets us to the Incredible Hulk theory of international relations. For those not familiar with comic book story or movie, the Incredible Hulk is the huge green monster that mild mannered physicist Bruce Banner turns into when he gets angry. This captures Marcus’ theory of international relations.
When the United States really wants something, for example if it wants European countries to crack down on bank accounts that might be used to launder money for Al Qaeda, the administration makes demands and gets them met. This is the Incredible Hulk part of the story. But then we get a situation where President Obama would really like to make the draft text of the Trans-Pacific Partnership available to the public, but our negotiating partners just won’t let us. This is the story of mild-mannered physicist Bruce Banner.
So the question everyone should ask themselves is, “do we think that if President Obama called our negotiating partners in the TPP and said that he really wants to make a draft public (it will be public soon anyhow), that all or any of them would refuse?”
My answer to this question is “no,” but if you want to believe otherwise, I have lots of comic books for you.
Washington Post columnist Ruth Marcus is unhappy with Senator Elizabeth Warren’s opposition to the trade agreement. In particular Marcus is upset that Senator Warren has complained that the deal is secret, calling this a bogus argument. I won’t go through the whole piece (this stuff has been addressed many places), but I do want to deal with one point Marcus raises.
She noted that Warren pointed out that President Bush had made the draft text of the Free Trade Area of the Americas agreement public, but then tells readers:
“the countries involved in the Free Trade Area of the Americas agreed to make initial proposals public.”
This gets us to the Incredible Hulk theory of international relations. For those not familiar with comic book story or movie, the Incredible Hulk is the huge green monster that mild mannered physicist Bruce Banner turns into when he gets angry. This captures Marcus’ theory of international relations.
When the United States really wants something, for example if it wants European countries to crack down on bank accounts that might be used to launder money for Al Qaeda, the administration makes demands and gets them met. This is the Incredible Hulk part of the story. But then we get a situation where President Obama would really like to make the draft text of the Trans-Pacific Partnership available to the public, but our negotiating partners just won’t let us. This is the story of mild-mannered physicist Bruce Banner.
So the question everyone should ask themselves is, “do we think that if President Obama called our negotiating partners in the TPP and said that he really wants to make a draft public (it will be public soon anyhow), that all or any of them would refuse?”
My answer to this question is “no,” but if you want to believe otherwise, I have lots of comic books for you.
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Paul Krugman addressed the question of whether the decline in manufacturing employment can be attributed to the trade deficit. He rightly points out that most of the decline is due to productivity growth, but notes the trade deficit has been a contributing factor. It is worth adding a bit more to the discussion.
The manufacturing share of employment has been declining for more than half a century. The story is that productivity growth is generally faster in manufacturing than the rest of the economy. If, as a first approximation, our demand for manufactured goods increases at the same pace as our demand for all goods and services, then this means we will see a declining share of employment in manufacturing over time.
However, a trade deficit adds to this loss by having a substantial share of manufactured output produced elsewhere. This means that in addition to needing fewer workers to produce the manufactured goods we consume as a result of productivity growth, we also need fewer workers in the United States since a portion of our manufactured goods are being provided by workers in other countries.
This not very pretty graph shows the percent change in the share of manufacturing employment compared to the non-oil, non-agricultural deficit in goods trade as a share of GDP. Note the sharp in decline in shares in the 2000s when the trade deficit was increasing rapidly. In 1997, when the trade deficit in goods was 2.0 percent of GDP, manufacturing accounted for 17.2 percent of total employment. When the deficit peaks at 4.6 percent of GDP in the first quarter of 2005, manufacturing employment was down to 11.5 percent of total employment. This is a decline in share of almost one-third in the span of just eight years. That was not due to productivity growth.
It is incredibly dishonest for proponents of TPP to try to pretend that imports don’t displace manufacturing jobs. They do. This doesn’t necessarily mean that TPP is a bad pact, it is just one of the factors that has to be considered in assessing the deal. If the TPP proponents don’t think they can acknowledge this simple fact and still sell their trade pact, then they must not think they have cut a very good deal for the country.
Paul Krugman addressed the question of whether the decline in manufacturing employment can be attributed to the trade deficit. He rightly points out that most of the decline is due to productivity growth, but notes the trade deficit has been a contributing factor. It is worth adding a bit more to the discussion.
The manufacturing share of employment has been declining for more than half a century. The story is that productivity growth is generally faster in manufacturing than the rest of the economy. If, as a first approximation, our demand for manufactured goods increases at the same pace as our demand for all goods and services, then this means we will see a declining share of employment in manufacturing over time.
However, a trade deficit adds to this loss by having a substantial share of manufactured output produced elsewhere. This means that in addition to needing fewer workers to produce the manufactured goods we consume as a result of productivity growth, we also need fewer workers in the United States since a portion of our manufactured goods are being provided by workers in other countries.
This not very pretty graph shows the percent change in the share of manufacturing employment compared to the non-oil, non-agricultural deficit in goods trade as a share of GDP. Note the sharp in decline in shares in the 2000s when the trade deficit was increasing rapidly. In 1997, when the trade deficit in goods was 2.0 percent of GDP, manufacturing accounted for 17.2 percent of total employment. When the deficit peaks at 4.6 percent of GDP in the first quarter of 2005, manufacturing employment was down to 11.5 percent of total employment. This is a decline in share of almost one-third in the span of just eight years. That was not due to productivity growth.
It is incredibly dishonest for proponents of TPP to try to pretend that imports don’t displace manufacturing jobs. They do. This doesn’t necessarily mean that TPP is a bad pact, it is just one of the factors that has to be considered in assessing the deal. If the TPP proponents don’t think they can acknowledge this simple fact and still sell their trade pact, then they must not think they have cut a very good deal for the country.
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There is much that is wrong with former Clinton and Obama aide (and J.P. Morgan executive) Bill Daley’s NYT column arguing for the Trans-Pacific Partnership (TPP). First, there is the obvious that he is equating the TPP and past trade deals with “free trade.”
Of course they are not the same, these deals have been about putting manufacturing workers in competition with low-paid workers in the developing world, while protecting doctors and other highly paid professionals from the same sort of competition. They also impose a business friendly regulatory structure. And, they increase protectionism in the form of stronger and longer copyright and patent protection.
But this is not new. What stands out in Daley’s piece is the ungodly silly assertion that:
“today, of the 40 largest economies, the United States ranks 39th in the share of our gross domestic product that comes from exports. This is because our products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination.”
Can you see the problem with this one? Think about how much the U.S. might export compared to a country like France. How much would it export compared to a country like Belgium or Luxembourg?
Yes, smaller countries are likely to have a larger share of their economy go to exports because they are smaller. To take advantage of economies of scale, countries like Luxembourg, Belgium, and even France have to integrate their economies with other countries. Because the much larger size of the United States, many economies of scale can be captured entirely by serving the domestic market. That is the main reason that we rank 39th out of Daley’s 40 countries in the export share of GDP, not barriers to our products.
You have to wonder if these folks don’t ever get tired of these sorts of cheap tricks. Do they really think the TPP is such a bad deal that they can’t sell it with honest arguments?
Note: Spelling of “aide” was corrected.
There is much that is wrong with former Clinton and Obama aide (and J.P. Morgan executive) Bill Daley’s NYT column arguing for the Trans-Pacific Partnership (TPP). First, there is the obvious that he is equating the TPP and past trade deals with “free trade.”
Of course they are not the same, these deals have been about putting manufacturing workers in competition with low-paid workers in the developing world, while protecting doctors and other highly paid professionals from the same sort of competition. They also impose a business friendly regulatory structure. And, they increase protectionism in the form of stronger and longer copyright and patent protection.
But this is not new. What stands out in Daley’s piece is the ungodly silly assertion that:
“today, of the 40 largest economies, the United States ranks 39th in the share of our gross domestic product that comes from exports. This is because our products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination.”
Can you see the problem with this one? Think about how much the U.S. might export compared to a country like France. How much would it export compared to a country like Belgium or Luxembourg?
Yes, smaller countries are likely to have a larger share of their economy go to exports because they are smaller. To take advantage of economies of scale, countries like Luxembourg, Belgium, and even France have to integrate their economies with other countries. Because the much larger size of the United States, many economies of scale can be captured entirely by serving the domestic market. That is the main reason that we rank 39th out of Daley’s 40 countries in the export share of GDP, not barriers to our products.
You have to wonder if these folks don’t ever get tired of these sorts of cheap tricks. Do they really think the TPP is such a bad deal that they can’t sell it with honest arguments?
Note: Spelling of “aide” was corrected.
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Mr. Arithmetic was wondering after seeing an article in the Chicago Sun Times that analyzed the distribution of pensions among former employees of the City of Chicago and the State of Illinois. The article began by telling readers:
“One of every four retired workers from the state of Illinois, the city of Chicago and the Chicago Public Schools is getting a pension of more than $60,000 a year.
“That’s 80,365 people in all.”
It then went on to say that 13,240 of these workers had pensions of more than $100,000 a year and 20,004 had pensions between $80,000 and $100,000.
So this group of retirees seems to be doing reasonably well, but what prompted Mr. Arithmetic’s interest was the statement:
“In all, the state’s five pension funds, Chicago’s four pension funds and the Chicago teachers pension fund are paying a total of $12.7 billion a year to more than 310,000 people.”
Here’s the problem. We apparently have total payments of $12,700 million. If this was just divided evenly among all 310,000 beneficiaries it would come to a bit less than $41,000 a head, but we know that many retirees get much more than this figure, so the rest must get much less. We can try to figure out how much less by doing some arithmetic and making some assumptions.
We’ll assume conservatively that the average pension for people who get more than $100k a year is $105k, the average pension for people who get between $80k and $100k is $85k, and the average pension for people who get more than $60k and less than $80k is $65k. That gets us:
13,240 * $105k = $1,390 million
20,004 * $85k = $1,700 million
47,121 * $65k = $3,063 million
Taken together this gives us $6,153 million going to these retirees. If we subtract that from $12,700 million being paid out in total, that leaves $6,547 million going to the remaining 229,635 retirees. That comes to an average pension for this group of $28,500 a year. This doesn’t seem too high, especially since most of these workers are not covered by Social Security so this will be the bulk of their retirement income.
As far as who pulls in these higher pensions, many of them are police and firefighters. The city reports that the average pension for 2,900 retired firefighters is $67,000. The average pension for 9,200 police officers is $59,000. Obviously there are others who fall into the Sun Times high pension group, but that’s a significant part of the story.
Note: My mother is one of these pension beneficiaries, although she is not among the Sun Times’ high income group.
Mr. Arithmetic was wondering after seeing an article in the Chicago Sun Times that analyzed the distribution of pensions among former employees of the City of Chicago and the State of Illinois. The article began by telling readers:
“One of every four retired workers from the state of Illinois, the city of Chicago and the Chicago Public Schools is getting a pension of more than $60,000 a year.
“That’s 80,365 people in all.”
It then went on to say that 13,240 of these workers had pensions of more than $100,000 a year and 20,004 had pensions between $80,000 and $100,000.
So this group of retirees seems to be doing reasonably well, but what prompted Mr. Arithmetic’s interest was the statement:
“In all, the state’s five pension funds, Chicago’s four pension funds and the Chicago teachers pension fund are paying a total of $12.7 billion a year to more than 310,000 people.”
Here’s the problem. We apparently have total payments of $12,700 million. If this was just divided evenly among all 310,000 beneficiaries it would come to a bit less than $41,000 a head, but we know that many retirees get much more than this figure, so the rest must get much less. We can try to figure out how much less by doing some arithmetic and making some assumptions.
We’ll assume conservatively that the average pension for people who get more than $100k a year is $105k, the average pension for people who get between $80k and $100k is $85k, and the average pension for people who get more than $60k and less than $80k is $65k. That gets us:
13,240 * $105k = $1,390 million
20,004 * $85k = $1,700 million
47,121 * $65k = $3,063 million
Taken together this gives us $6,153 million going to these retirees. If we subtract that from $12,700 million being paid out in total, that leaves $6,547 million going to the remaining 229,635 retirees. That comes to an average pension for this group of $28,500 a year. This doesn’t seem too high, especially since most of these workers are not covered by Social Security so this will be the bulk of their retirement income.
As far as who pulls in these higher pensions, many of them are police and firefighters. The city reports that the average pension for 2,900 retired firefighters is $67,000. The average pension for 9,200 police officers is $59,000. Obviously there are others who fall into the Sun Times high pension group, but that’s a significant part of the story.
Note: My mother is one of these pension beneficiaries, although she is not among the Sun Times’ high income group.
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