Category: Current Affairs

Would a payroll tax cut help avoid a recession?

Right now, probably not.  Here is an excerpt from my latest Bloomberg column:

The inclination in American politics is to cut the payroll tax on the worker side, not the employer side. That is the opposite of what should be done.

In a recession, the usual problem is that too many people are seeking too few jobs. The reluctance lies on the side of the employer, not the worker. So cutting the taxes paid by the worker won’t help much. In contrast, cutting the taxes paid by the employer might at least boost the demand for workers and thus stimulate employment.

In the long run, according to economic theory, it does not matter whether you cut payroll taxes for workers or employers; eventually wages will adjust so that the true, tax-adjusted set of wage offers ends up the same. But for the purposes of fighting a near-term recession, it matters very much whose taxes are cut.

Do read the whole thing.  Do note, however, that I am not currently expecting a recession, I just don’t see enough pointers in that direction, and furthermore most of the time recessions do not happen.

A countercultural take on China

That is what I serve up in my Bloomberg column, note it is a reminder more than a modal prediction.  Here is one excerpt:

Is the rest of the world getting China wrong yet again? Maybe the country is not doomed to live out unending top-down rule. What is history, after all, but the realization of the wills of countless unpredictable human beings.

Past mistakes about China are too numerous to mention.

A list then follows.  And:

But has China suddenly become so predictable? Are events there now no longer contingent on the exercise of human will? Modern China is one of the most unusual and surprising societies humankind has created. There are no good models for it, nor are there data from comparable historical situations.

There is, unfortunately, a tendency for Westerners to impose superficial narratives on China and the Chinese, often based on scant observation.

To close:

For myself, I don’t have a coherent story about how the Chinese might move to greater liberty in the next 10 to 15 years. But I do think the actions of the current regime can be read as signs of vulnerability rather than entrenchment. Taiwan and Hong Kong, despite its current crisis, remain strong examples of the benefits of liberalization. Meanwhile, the notion of the internet — even with censorship — as a liberalizing force has been too quickly dismissed, especially in an America that has fallen out of love with Big Tech.

Which leads to a reality even deeper than China’s unpredictability: people’s continuing capacity to respond to current events and shape their futures for the better. As you listen, watch and read about China, keep in mind this essential human quality.

There is much more at the link.

The polity that is Poland

A new law that comes into effect in Poland this week will scrap income tax for roughly 2 million young workers.

It’s an attempt by the government to stop the dramatic brain drain Poland has experienced since it joined the European Union 15 years ago.

Prime Minister Mateusz Morawiecki said the tax exemption will bring new opportunities for young people “so they match those available in the West.” Poles under the age of 26 who earn less than 85,528 Polish zloty ($22,547) a year will be exempt from the country’s 18% income tax starting August 1. The allowance is generous, considering the average Polish salary stands at just below 60,000 zloty ($15,700) a year.

The government said 2 million people will qualify for the benefit.

Here is the full story. There are also baby bounties in Poland, and policies seem to be increasingly youth-oriented.  You can see this on the streets of Warsaw, which have more non-tourist young people than just about any other major city in Europe.

Is the future of Venice Chinese?

Pino Musolino, president of the Port Authority of Venice, told: “Venice port has long worked to seize the opportunities that China’s New Silk Roads strategy offers, with the aim of having positive spillovers on local business and job levels.”

On February 11, Venice signed a memo of understanding with Piraeus to improve overall capacities of the two seaports as important hubs in the Belt and Road scheme. The two port facilities had already set up a weekly ferry service last October. Venice port also has a new rail link to Duisburg, in western Germany, which is the European hub for the land-based Silk Road Economic Belt.

“In regard with the dualism between Venice and Trieste, the two ports actually service different markets,” Musolino emphasised.

“Our facility is the main gateway to industrial clusters in northern Italy, importing raw materials and exporting high-added-value products. For its part, Trieste is focused on Central and Eastern Europe.”

Musolino believes North Adriatic ports should combine their efforts to better manage increased Mediterranean trade resulting from the Belt and Road plan.

Here is the full article.

The culture that is San Francisco

The words “felon,” “offender,” “convict,” “addict” and “juvenile delinquent” would be part of the past in official San Francisco parlance under new “person first” language guidelines adopted by the Board of Supervisors.

Going forward, what was once called a convicted felon or an offender released from jail will be a “formerly incarcerated person,” or a “justice-involved” person or simply a “returning resident.”

Parolees and people on criminal probation will be referred to as a “person on parole,” or “person under supervision.”

A juvenile “delinquent” will become a “young person with justice system involvement,” or a “young person impacted by the juvenile justice system.”

And drug addicts or substance abusers will become “a person with a history of substance use.”

“We don’t want people to be forever labeled for the worst things that they have done,” Supervisor Matt Haney said.

The resolution is non-binding, was not signed by the mayor, and it is not clear it will be implemented.  Here is the full article.

Some of those terms seem quite reasonable to me, such as “person on parole,” which for many people would be the natural term in any case.  But here is my worry.  It is we who decide how powerful language is going to be.  The more we regulate language, the more we communicate a social consensus that it has great power.  And in return the more actual power we grant to those linguistic “slips” and infelicities which remain.  It is better to use norms to regulate the very worst speech terms, but not all of them.  By regulating too many parts of speech, and injecting speech with too much power, we actually grant more influence to the people and ideas we are trying to stop.

The importance of economic growth for Italy

That is the topic of my latest Bloomberg column, they chose an appropriate image, here is one excerpt:

Decay is another problem faced by Italy, including decay of its natural and cultural heritage. The city of Venice — a wonder of mankind and also a big money-maker as a tourist destination — is threatened by rising water levels. The Roman Coliseum is endangered by traffic fumes and exhaust. Solving those problems requires (again) extra money. As it stands, Italy has some of the worst-maintained cultural heritage in the Western world, and further decay could cut into Italy’s tourist income, producing another dangerous downward spiral.

There is much more at the link.

My Conversation with Masha Gessen

Here is the transcript and audio, here is the summary:

Masha joined Tyler in New York City to answer his many questions about Russia: why was Soviet mathematics so good? What was it like meeting with Putin? Why are Russian friendships so intense? Are Russian women as strong as the stereotype suggests — and why do they all have the same few names? Is Russia more hostile to LGBT rights than other autocracies? Why did Garry Kasparov fail to make a dent in Russian politics? What did The Americans get right that Chernobyl missed? And what’s a good place to eat Russian food in Manhattan?

Here is excerpt:

COWEN: Why has Russia basically never been a free country?

GESSEN: Most countries have a history of never having been free countries until they become free countries.

[laughter]

COWEN: But Russia has been next to some semifree countries. It’s a European nation, right? It’s been a part of European intellectual life for many centuries, and yet, with the possible exception of parts of the ’90s, it seems it’s never come very close to being an ongoing democracy with some version of free speech. Why isn’t it like, say, Sweden?

GESSEN: [laughs] Why isn’t Russia like . . . I tend to read Russian history a little bit differently in the sense that I don’t think it’s a continuous history of unfreedom. I think that Russia was like a lot of other countries, a lot of empires, in being a tyranny up until the early 20th century. Then Russia had something that no other country has had, which is the longest totalitarian experiment in history. That’s a 20th-century phenomenon that has a very specific set of conditions.

I don’t read Russian history as this history of Russians always want a strong hand, which is a very traditional way of looking at it. I think that Russia, at breaking points when it could have developed a democracy or a semidemocracy, actually started this totalitarian experiment. And what we’re looking at now is the aftermath of the totalitarian experiment.

And:

GESSEN: …I thought Americans were absurd. They will say hello to you in the street for no reason. Yeah, I found them very unreasonably friendly.

I think that there’s a kind of grumpy and dark culture in Russia. Russians certainly have a lot of discernment in the fine shades of misery. If you ask a Russian how they are, they will not cheerfully respond by saying they’re great. If they’re miserable, they might actually share that with you in some detail.

There’s no shame in being miserable in Russia. There’s, in fact, a lot of validation. Read a Russian novel. You’ll find it all in there. We really are connoisseurs of depression.

Finally there was the segment starting with this:

COWEN: I have so many questions about Russia proper. Let me start with one. Why is it that Russians seem to purge their own friends so often? The standing joke being the Russian word for “friend” is “future enemy.” There’s a sense of loyalty cycles, where you have to reach a certain bar of being loyal or otherwise you’re purged.

Highly recommended.

“You say you want a revolution…”

That was actually a conservative Beatles song of course, and these days the conservatism is popping up in the American lack of enthusiasm for the Hong Kong protestors.  That is the focus of my latest Bloomberg column, here is one excerpt:

Since the protests in Hong Kong started two months ago, I have been struck by the coolness of the American response. I am referring not just to President Donald Trump, who has reiterated that the dispute is an internal Chinese matter. Both the social media I sample and the people I know have been fairly quiescent. I haven’t seen that much cheering and rooting for the protesters, nor have the major Democratic presidential candidates made a show of stressing their dissent from Trump on this issue [there is one Elizabeth Warren tweet]…

The relative indifference may be especially hard to explain when it comes to Americans. After all, the U.S. owes its existence to a rebellion against the British Empire, and against especially long odds. America probably would not have won independence without direct French assistance, while Spain and other nations helped to distract the British on the broader global stage.

Remember the enthusiasm we used to have for the Soviet dissidents, or for Solidarity, also movements facing apparently long odds?  In sum:

…Americans are preoccupied with fighting each other over political correctness, gun violence, Trump and the Democratic candidates for president. To be sure, those issues deserve plenty of attention. But they are soaking up far too much emotional energy, distracting attention from the all-important struggles for liberty around the world.

It’s 2019, and the land of the American Revolution, a country whose presidents gave stirring speeches about liberty and freedom in Berlin during the Cold War, remains in a complacent slumber. It really is time to Make America Great Again — if only we could remember what that means.

There is more at the link, including a discussion of recent demonstrations in Russia as well.

Canadian jubilee

Finally, a good news story about credit card debt.

U.S.-based Chase Bank is forgiving all outstanding debt owed by users of its two Canadian credit cards: the Amazon.ca Rewards Visa and the Marriott Rewards Premier Visa. The bank retired both cards last year and said it’s wiping out cardholders’ debt to complete its exit from the Canadian credit card market.

Affected customers can’t believe their luck.

“I was sort of over the moon all last night, with a smile on my face,” said Douglas Turner, of Coe Hill, Ont., after learning he’s off the hook for the $6,157 still owing on his now-defunct Amazon Visa. “I couldn’t believe it.”

After 13 years in the Canadian market, Chase decided to fold its two Visa cards in March 2018.

The bank — which is part of global financial services firm JPMorgan Chase & Co. — wouldn’t say how many Canadians had signed up for the cards or how much debt was outstanding.

Here is more, via Shaffin.

Has anyone said this yet?

Consider the right-wing, conservative, and libertarian movements — is there a good word for them as a general collective?  For now I’ll use “conservative,” while recognizing that the lack of generally recognized standard bearers means that “conservative” and “radical” these days blur into each other, and furthermore conservative and libertarian views have areas of real and significant conflict.

Who is today the most influential conservative intellectual with other conservative and libertarian intellectuals?  (I once said Jordan Peterson is the most influential intellectuals with the general public.)

It seems obvious to me that this is Peter Thiel (admittedly I am a biased observer, for a number of reasons, one being that the Thiel Foundation is a supporter of Emergent Ventures).  Quite simply, if Peter gives a talk with new material in it, it gets discussed more than if anyone else does.

What else might his qualifications be for “most influential conservative intellectual”?

He has had a major hand in the tech revolution, and with his later view that technology is stagnating more generally.

He is the talent spotter par excellence, having had a hand in the rise of Mark Zuckerberg, Elon Musk, Reid Hoffman, Eric Weinstein, and others.

A major hand in Trump/populism/nationalism, or whatever it should be called.  I should note that Peter is often highly influential with those who disagree with him about Trump.

Spoke/wrote/co-authored a bestselling book — Zero to One — which also was a huge hit in China.  And the samizdat lecture notes, from Peter’s Stanford talks, were a big hit in advance of the book.

A major hand in the critique of political correctness, and the spread of that critique.

He foresaw that globalization might contract rather than keep on expanding.  The final answer isn’t in yet on this one, but so far Peter is looking prescient.

A major hand in causing people to rethink higher education, through his Thiel Fellows program.

A major hand in stimulating the interest of others in Girard and Strauss, and maybe someday Christianity?

This point has nothing to do with how much you agree with Peter or not.  It simply occurred to me that no one had said this before, or have they?

By the way, here is David Perell on Peter Thiel on Christianity.

Has the time come and passed for negative interest rates?

That is the topic of my latest Bloomberg column, here is one excerpt:

Step back and consider the cultural context. Germany is still scarred by the memories of two world wars, fascism, communism, deflation and hyperinflation: in general, huge instability. Since the end of World War II, however, personal savings and the banking system have been an oasis of predictability and a driver of growth. Many Germans treasure their frugality, perhaps excessively or irrationally, and it has become an important part of the narrative Germans tell themselves about the economic order they have built.

Now enter the ECB, in essence telling Germans (and others) that savings are a bad thing, to be taxed and penalized. The very word “negative,” as in “negative interest rate,” makes the policy hard to sell politically. The German word “Strafzinsen” refers to a penalty rate, but the root “Straf” also refers to punishment, and it was used effectively by Franz Kafka in his famous torture-laden short story “In the Penal Colony” (the German title is “In der Strafkolonie”). One German newspaper referred to the “final expropriation” of the German saver, noting that the ECB’s decision to deviate from its inflation target carries “grave consequences.”

More generally, a significant segment of the German population is upset or outraged by the policy. There is even a claim that the revenue from the negative interest payments will be used to finance other EU countries.

Most economists and central bankers view negative interest rates as an acceptable tool of macroeconomic management. Maybe so. But in an era when trust, including trust among nations, is much lower than previously thought, it probably isn’t a good idea to place a punishing new tax on the German national virtue of saving. Central bankers must also be sensitive to public relations.

I find it striking how many people are responding to this column by insisting that Merkel should do more fiscal stimulus.  She should (though I don’t find “stimulus” to be the most instructive word here), as I suggest in the piece, because the Germans have been letting their infrastructure run down for a good while now — internet speeds anybody?  But at the end of the day, I don’t think that spending will eliminate the basic macroeconomic problem facing the EU, nor is most of that spending likely to land on the doorstep of the countries which most need it (though Huawei may benefit a good deal).  There is also this:

So if a policy of negative interest rates is just a Band-Aid, it is one that should be ripped off. And if monetary policy is insufficiently expansionary, that is going to require an increase in the ECB’s inflation target, or a move to nominal GDP targeting, not a jerry-rigged tax on deposits.

There is also an argument that Germans are saving too much. But by some measures, they have a level of national wealth relatively low for their per capita income, in part because Germans are less likely to own their own homes. According to the OECD, Germany’s near neighbors Sweden, Denmark, the Netherlands, and Switzerland all save more in percentage terms than Germany does.

German savers: underrated.

The Entire German Yield Curve is Trading Below Zero

The German government could today borrow billions of Euro and in a decade they could give back to investors less than they borrowed and the investors would be happy. Does the German government have no net positive investments to make?

The global savings glut which drives asset prices higher and makes them more volatile is very much still with us. Around the world there is now over 15 trillion in negative interest debt.

From the FT.

How carbon-unfriendly is the act of flying?

That is the topic of my latest Bloomberg column, with a focus on Greta Thunberg, whom I admire but I wish she would endorse nuclear power and other practical possible solutions to climate change problems.  At this point, I don’t think the returns to “simple moralizing” are that high, and they may be a substitute for concrete actions.  Excerpt:

Or think more broadly about how to choose one’s symbolic commitments to combat climate change. Buying a carbon offset, verifiable by an independent third party, seems like a good practical step. Thunberg also could take a stand in favor of nuclear power — a feasible source of green energy — except that she opposes it. Nuclear power has worked quite well for France for about 70 years, even if it is not suitable for earthquake zones.

Another way to show one’s dedication to limiting global temperatures would be to educate the public on carbon sequestration, which recently has made a good deal of real progress. How about a strike or demonstration to call people’s attention to the possibilities of this new technology, and to ask for additional funding?

There is much more at the link.

Gun policy suggestions from Jennifer Doleac

Several programs are at least worthy of consideration. Summer jobs programs for teens reduce mortality by 18 to 20 percent among participants. This effect is driven by a reduction in young men killed by homicide or suicide. Cognitive behavioral therapy for at-risk young men lowers violent crime arrests by 45 to 50 percent for participants. Access to Medicaid in early childhood decreases suicide by 10 to 15 percent later in life. Mandating that health insurance cover mental health benefits at parity reduces the suicide rate by 5 percent. Access to antidepressants also reduces suicide rates: An increase in antidepressant sales equivalent to one pill per capita reduced suicide by 5 percent.

In addition, repealing duty-to-warn laws for mental health providers—which require that they report a patient’s violent threats, perhaps causing patients to be less honest—could reduce teen suicides by 8 percent and decrease homicides by 5 percent. Repealing juvenile curfews could lower urban gunfire by two-thirds. And if the goal is to reduce mortality in general—not just gun deaths—then there are many more options policymakers should consider.

Here is more.  I don’t read her as endorsing all of those uncategorically, simply as noting that many available options are on the table.