changed to "wealth inequality"

[Script]

Well, I don't want to go into a discussion that has the potential to turn into an economic 'war' between the US and EU. And it's not just US companies doing it. There are many other companies within the EU doing it and EU companies doing the same in Southeast Asia.

My point is, now that the EU Commission has investigated into it and that Cook has explained to the Senate how they did it (loopholes are known), do we want to continue just watching it?

I say drain the swamp and make all these companies pay their due share to societies on all sides. I for my part would really like to see

(1) the European Commission come up with a new set of rules that oblige all companies to tax their profits where the value is created (e.g., in the country where the product is actually being sold) and
(2) the European Commission enbabled to put a strict finger on 'silly' sweetheart tax offers that, as they claim, are direct government-sponsorship of private companies.

I would also like to see
(3) changes to Subpart F of US corporate tax law, which stipulates that profits have to be taxed only in the country of the companies formation, and change that to approaching a corporation much like a 'person' and have them tax their worldwide profits (including that of all their subsidiaries and sub-companies) in the country of that corporation's headquarter.
(4) come up with a system that prevents double taxation on all profits.

I understand that the repatriation to the US of several years of profit by several companies under a special tax cut deal is a good thing.

-- Some of the money is better than no money! --

But why not hold internationally operating corporations accountable from now on to pay their full due share to all the countries and societies they operate in (like any other national company or private people for that matter) by having all of their profits taxed without delay from now on, please.

Why does the US not change their corporate tax laws to stop their huge coporations from (mis-)using Europe and other parts of the world to avoid paying taxes to US society in the first place?

All the above may not have to do much with 'wealth inequality' directly. But it is things like these that sure contribute to that special sentiment that our governments do not value their citizens much.

 

[JohnRoberts]

be careful about easy answers to complex problems...  It is kind of remarkable how well the world economies work together so far.

government force is not as effective as removing incentives for bad behavior (like widely different tax rates in different countries).

but what would I know..?

JR

 

[Script]

be careful about easy answers to complex problems... 

I don't think that the above is an easy problem. On the contrary, it is hugely complex. And I'm not even a lawyer -- that much I do understand very well.

It is kind of remarkable how well the world economies work together so far.

No doubt. And many companies operating in so-called "third world' countries sure also do good by giving people work there, work that those people really depend on. (Aside: In the case of 6,000 employees in Ireland, however,, I have my doubts.)

government force is not as effective as removing incentives for bad behavior (like widely different tax rates in different countries).

Exactly. But how ??

Who is there with the potential, influence and power to remove incentives for bad behavior on both domestic and international levels? Who?

The corporations themselves?

Our governments and their institutions and all of them cooperating on an international level? Maybe because...

I for my part, wouldn't really want to leave that up to Joe Public paroling the streets with pitchforks, bats and guns (as has been proposed in tendency by some).

but what would I know..?

Neiter would I -- just observing

 

[JohnRoberts]

I don't think that the above is an easy problem. On the contrary, it is hugely complex. And I'm not even a lawyer -- that much I do understand very well.
No doubt. And many companies operating in so-called "third world' countries sure also do good by giving people work there, work that those people really depend on. (Aside: In the case of 6,000 employees in Ireland, however,, I have my doubts.)
Exactly. But how ??

yes I've remarked before at how poverty is declining in developing countries thanks to trade.

Who is there with the potential, influence and power to remove incentives for bad behavior on both domestic and international levels? Who?

It should be common sense to pursue the mutual benefit of a level playing field, but countries are notorious for "beggar thy neighbor" policies.  It used to be currency valuation that was manipulated (arguably still is). At least the EU should be able to harmonize taxation among themselves, than other large trading partners could join... but the world has to mature some first.

The corporations themselves?

Our governments and their institutions and all of them cooperating on an international level? Maybe because...

I for my part, wouldn't really want to leave that up to Joe Public paroling the streets with pitchforks, bats and guns (as has been proposed in tendency by some).
Neiter would I -- just observing

I guess I should take my own advice about avoiding "easy" answers, but it seems responsible.

JR

 

[Script]

I guess I should take my own advice about avoiding "easy" answers

Like
  8)

Because it point to CSR, and we don't see much of that.
And it points to governments being more effective, and we don't see much of that either.

So maybe we do indeed need a whole set of new regulation -- not to pump up our governments beyond proportion , but -- to make them more effective.

Could be done little by little and who says that new regulations have to be of one-size-fits-all nature?

 

[JohnRoberts]

Like
  8)

Because it point to CSR, and we don't see much of that.
And it points to governments being more effective, and we don't see much of that either.

So maybe we do indeed need a whole set of new regulation -- not to pump up our governments beyond proportion , but -- to make them more effective.

  a regulation to make government more effective***.  ;D ;D ;D

Could be done little by little and who says that new regulations have to be of one-size-fits-all nature?

It is the nature of regulation to reduce choices and consolidate power in established companies.

JR

PS: Speaking of effective government a DC court just blocked an executive order making it easier to fire government workers for poor performance. This is considered a win for government unions. Not a win for taxpayers.

 

[dmp]

It is important not to confuse two different categories of government interventions on business.

One is the government putting its hand on the scales, picking winners and losers.  Like subsidizing certain industries. Being a buyer of last resort. Bailing out certain businesses or industries. Dictating prices for items. These attempts often  go down in flames or are deeply unfair under examination.  This is the category that is most susceptible to lobbying, political influence,  and bribery. Leads to crony Capitalism & market capture.

The second is regulating business (setting rules) for the greater good that are applied evenly. Like limiting tailpipe emissions from cars (that cause asthma and cancer), prohibiting asbestos due to cancer causing, etc... regulating the amount of hours people can be compelled to work, setting rules on how industries can discriminate against people (i.e. health insurance pricing for pre-existing conditions).  These regulations work best when the a written as simple as possible. The corruption of this second category often manifests as lobbying to make the regulations ambiguous.  Much money is spent trying to undermine this second type to turn it into an advantage for certain players.    When the free market has clear rules that everybody has to follow, companies can innovate and improve and the regulatory effort can be successful.

 

[Banzai]

One is the government putting its hand on the scales, picking winners and losers.  Like subsidizing certain industries. Being a buyer of last resort. Bailing out certain businesses or industries. Dictating prices for items. These attempts often  go down in flames or are deeply unfair under examination.  This is the category that is most susceptible to lobbying, political influence,  and bribery. Leads to crony Capitalism & market capture.

A perfect example of crony capitalism is for the largest buyer (the government) to voluntarily give up its immense bargaining power, or even ban itself from negotiating prices altogether.

Would a private corporation ever give up its leverage to negotiate or dictate prices to a supplier, at the expense of its own shareholders?

 

[Script]

It should be common sense to pursue the mutual benefit of a level playing field, but countries are notorious for "beggar thy neighbor" policies.

I take your idea of a 'level playing field' to mean that corprate tax rates should be the same, or at least comparable, in all countries? Why? That sounds like over-regulation to me. I just claimed that the US government has most probably missed out on a lot of corporate tax money over the years from the stipulation in Subpart F. Some might even consider that deferral of tax payments (yes, taxed on repatriation, but under a 'sweet' tax cut deal -- and really not the same deal for private people and expats !!) as a clear form of government subsidy.

It is the nature of regulation to reduce choices and consolidate power in established companies.

A perfect example of crony capitalism is for the largest buyer (the government) to voluntarily give up its immense bargaining power, or even ban itself from negotiating prices altogether.

--(I don't really know what that second quote wants to say.) --

Anyway, exactly why I proposed a flexible corporate tax rate to allow start-ups for instance to pay considerably less (let's say for five years to tap into innovative potential and allow them to establish themselves), make all mid-sized companies pay according to a progressive norm rate, and then have huge companies and big corporations face a tax rate that gets gradually steeper, mainly with the idea to counteract conglomeration and thus secure competition (and to neutralize/pay back state debts).

And I don't see how such a regulation would 'consolidate power in established companies'. This is one of the few instances, where government could easily excert their bargaining power more. In light of massive state debts (and I really do not care at all who or which government caused those debts -- I leave that up to petty politics discussions), they might want to try in the opposite direction than they do now. And as for my part, nothing has to be chiseled in stone. 

PS: Speaking of effective government a DC court just blocked an executive order making it easier to fire government workers for poor performance.

Yes, I too think that governments should be run more like a company. One of the reason the current POTUS got elected. However, that hasn't worked out too well so far, but my hope is that it does have the potential of triggering a shift in paragigm.

---------
The overarching problem is that QE, which arguably has been inevitable, needs to be unwound softly. So far, the bill has been paid and is still being paid to a large part by infamous Joe Public, who is doing better today than in 2009/10, but could do still better.

Anyway, I really don't believe that having the very same mechanisms that had contributed to the last two finacial crises will now, all of a sudden, do the magic trick. I do not believe that history repeats itself, but believing that those mechanisms, and those alone, will do it might be naive.

 

[JohnRoberts]

I have a tendency to look at all regulation as bad (like some consider them all good).

Of course as the economy creates new kinds of businesses there are needs for new kinds of regulation (like bitcoin). I don't really care about bitcoin but cringe every time I read about another bitcoin exchange being hacked and all those hopeful young people losing their optimistic investments.

Regulation has been around longer than the US government, Back in the 11th century they were called trade guilds presumably to control the quality of craftsmen's work product, but in effect controlled who could work in a given occupation.  A more modern example is the state of Louisiana that requires  occupational licenses for "florists" (yes flower arrangers  ).  A classic case of established business co-opting government to hinder competition. This seems like an almost too silly example but its real. https://www.usnews.com/news/best-states/louisiana/articles/2018-05-01/effort-to-end-louisianas-licensing-of-florists-falls-short

I like the idea of every new regulation requiring the sunset of one or more old unnecessary regulations.

JR

 

[dmp]

A perfect example of crony capitalism is for the largest buyer (the government) to voluntarily give up its immense bargaining power, or even ban itself from negotiating prices altogether.

Would a private corporation ever give up its leverage to negotiate or dictate prices to a supplier, at the expense of its own shareholders?

Medicare comes to mind. The US Gov has negotiated for prices and ends up paying less to health suppliers. Those health suppliers also negotiate deals with big insurance companies. But finally, the little guy ends up paying 10 or 100 times as much. A highly distorted system. So would be more effective if the gov shifts to a single payer system or opens medicare to all so individuals could benefit. This will probably happen eventually but not under the current Republican leadership.

Similar but even more effective is the Government regulating industries as utilities. For instance, power companies are regulated as utilities and local areas typically only have one provider.  If it were a free market with multiple competitive companies trying to serve an area, the costs would be much higher to sustain the infrastructure and profit motive. As it is, this system of government regulated power utilities has been immensely successful for consumers in delivering affordable reliable power. 

 

[Banzai]

--(I don't really know what that second quote wants to say.) --

The US government voluntarily banned itself from negotiating drug prices, to the immense benefit of Big Pharma. Co-authors of the bill passed in 2003, left the government in 2004 for high-paying lobbyist jobs at PhRMA. The US remains the only developed country with a 3rd world healthcare system. Drug prices keep rising.

(For an analysis of how corrupt the process was: https://www.nejm.org/doi/full/10.1056/NEJMp068116#t=article)

In Europe + Canada, governments use their immense leverage as the largest drug buyers, to dictate and fix prices. They all have universal or single payer healthcare systems. Drug prices keep dropping.

Government intervention benefitting its shareholders (the taxpayers), clearly isn't all bad.

 

[dmp]

The US government voluntarily banned itself from negotiating drug prices, to the immense benefit of Big Pharma. Co-authors of the bill passed in 2003, left the government in 2004 for high-paying lobbyist jobs at PhRMA. The US remains the only developed country with a 3rd world healthcare system. Drug prices keep rising.

The Republican party became anti-government starting with Reagan, at this point there is no possibility of discussion with them.
It's hard to believe anyone can look at the corruption and scandals coming out of the Trump administration and not realize the irony of their belief system.  They are actively making the government bad to fulfill their own delusions.

 

[JohnRoberts]

Some interesting opinions, everybody has one.  ;D
-------
The last time Zuckerberg testified before congress he all but begged them to regulate him..... because if they do he wins.. : He can afford to pay for the extra regulation that will provide an effective moat against smaller competitors.

Google and others are in line for similar regulatory moats.  They literally want the regulation, to thwart competition.

====

Drug prices are "complicated" and some of the worst offenders have already been voted off the island.

The current poster boy for unwarranted price increases (epi-pen), just got a generic competitor approved (Teva, not shipping yet), but at the moment there are shortages of the current (expensive) models... The most expensive one, literally stopped selling their expensive version for a cheaper (but still expensive) generic version , for less bad PR.  The market solution is more competition that Teva, and others will hopefully bring , but there are supply shortages of the expensive poop. 

Mom and pop don't want to send little Johnny back to school with expired epi-pens... but better than no epi-pen. 

Sorry, remember what I said about easy answers. This is another very old discussion.

JR

PS I think I shared recently, the actual cost for knee replacement surgery is $7-$11k. Typically billed out at $50k. I have a bum knee so pay attention to stuff like that. 

 

[Script]

Yes, I'm sure there are quite a few old regulations that no longer do what they were supposed to do. And some might have been questionable in the first place. Governments work slow, too slow for market developments. But subsidising all and every huge corporation too smells of a (modern) guild system that we know tends to kill competition.

But now I repeat, regulations don't necessarily have to be one-size-fits-all. They better be flexible. FB begging to be regulated indeed smells fishy... Problem is how flexible regulations can be without getting too complicated or starting to do harm on some other end. And implementing new regulations is a very slow process in the first place.

The question is how to make an immensely complex system work (better?) with as few rules and as little maintenance work as possible. Every government has to find a balance between giving companies incentive to innovate and serving its citizens by securing supplies and livelihood. They don't always succeed and they always seem to be lagging behind beyond hope.

What we have seen over the last couple of decades is a lot of deregulation that fired innovation for sure, but it has also favored the creation of huge corporations, played a role in at least two financial crises, and led to an explosive increase in state debts. Full stop.

And I still maintain that QE has changed the economic playing field (for now). So old recipes might no longer apply, like more deregulation or piling up new regulations, or lowering taxes to unleash more 'magical' power.

Unlike regulations, the most flexible instument that any government has is taxation. They are flexible already and can be changed more easily almost any time. Nothing to be chiseled in stone.

We could probably have fewer regulations to set the fundamental course and more flexible taxes for all the fine-tuning.-- more flexible on the scale and time axes. Maybe taxes could even be adjusted more flexibly every year or two years based on a bunch of economic indicators -- we do have computers already that should have the processing power.

-------------
Anyway, if I were government, I'd probably skip fining companies like FB etc entirely (-it's a waste of time-) and instead first threaten them with, and then nonetheless install, exorbitantly high corporate taxes to hit them where it hurts most. Let's say 65%+. I know, I'm a simpleton  : And then promise and give them flexible tax breaks where and whenever they do what is indeed for the 'benefit' of all. Now that last part is where opinions vary a lot.

Companies like FB (or let's say Starbucks etc) are not really a 'necessity in modern life' -- I'm sorry to say. Did I mention I'm a simpleton But I suspect that governments too might have an eye on the data that FB is collecting (and apparently has been willing to share -- albeit illegally, as is being claimed) and I'm also sure some in government like a lot of 'sweet' milk with as little 'bitter' coffee in it as possible...

 

[dmp]

I have a tendency to look at all regulation as bad (like some consider them all good).

Of course as the economy creates new kinds of businesses there are needs for new kinds of regulation (like bitcoin). I don't really care about bitcoin but cringe every time I read about another bitcoin exchange being hacked and all those hopeful young people losing their optimistic investments.

Regulation has been around longer than the US government, Back in the 11th century they were called trade guilds presumably to control the quality of craftsmen's work product, but in effect controlled who could work in a given occupation.  A more modern example is the state of Louisiana that requires  occupational licenses for "florists" (yes flower arrangers  ).  A classic case of established business co-opting government to hinder competition. This seems like an almost too silly example but its real. https://www.usnews.com/news/best-states/louisiana/articles/2018-05-01/effort-to-end-louisianas-licensing-of-florists-falls-short

I like the idea of every new regulation requiring the sunset of one or more old unnecessary regulations.

JR

Does anyone think all regulations are good? Try finding one person that thinks that.
The reverse however, thinking all regulations (and government) is bad, is a real cancer on the USA. It is allowing the erosion of the rule of law, reasonable protection of the environment, protection of the voting system, protection of workers, etc.

Pointing out straw men examples of overzealous regulations like licensing florists or shutting down lemonade stands is missing the huge problem staring us in  the face.

Regarding ways to regulate Capitalism to try to right the nearly sinking ship: another idea: prohibit non-compete contracts & forced arbitration that erode worker's competitive ability to switch jobs and negotiate higher wages. 

 

[JohnRoberts]

Does anyone think all regulations are good? Try finding one person that thinks that.

seriously??

The reverse however, thinking all regulations (and government) is bad, is a real cancer on the USA.

I noted my personal tendency as a way to say I acknowledge the merit of "some" thoughtful regulation.

It is allowing the erosion of the rule of law, reasonable protection of the environment, protection of the voting system, protection of workers, etc.

sky must be falling soon...

Pointing out straw men examples of overzealous regulations like licensing florists or shutting down lemonade stands is missing the huge problem staring us in  the face.

not straw men, when I offer actual examples...

my point is that it has been going on since 11th century to thwart competition. Facebook sounds like that old brer rabbit folktale where he begged to not be thrown in the briar patch that he could easily escape.

When Br'er Fox reveals himself, the helpless but cunning Br'er Rabbit pleads, "please, Br'er Fox, don't fling me in dat brier-patch," prompting Fox to do exactly that. As rabbits are at home in thickets, the resourceful Br'er Rabbit uses the thorns and briers to escape. The story was originally published in Harper's Weekly by Robert Roosevelt; years later Joel Chandler Harris included his version of the tale in his Uncle Remus stories.

Regarding ways to regulate Capitalism to try to right the nearly sinking ship:

far from sinking, but your personal movie looks different than mine.  :

another idea: prohibit non-compete contracts & forced arbitration that erode worker's competitive ability to switch jobs and negotiate higher wages.

full employment for lawyers.

The low unemployment, and improved housing market** gives workers more opportunity to change jobs, than they had for years.

JR

** housing is starting to soften as an (should be) expected consequence of removing economic stimulus.

 

[dmp]

seriously??

yes
I find it hard to believe anyone would say they like all government regulation. Most people favor some kinds of regulation and vehemently dislike other kinds.

not straw men, when I offer actual examples...

Straw men are actual examples that do not accurately characterize the point under discussion.

"an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent's real argument. "

my point is that it has been going on since 11th century to thwart competition. Facebook sounds like that old brer rabbit folktale where he begged to not be thrown in the briar patch that he could easily escape.

I am not disagreeing that companies actively trying to increase their market capture by lobbying gov for favorable regulation. There are huge problems with that in several industries.  But regulation prohibiting monopolies is a key accepted necessity to preserving competition in a free market. Adam Smith wrote about it in the Wealth of Nations two hundred years ago.

https://machineryofpolitics.wordpress.com/2012/01/04/adam-smith-on-the-crisis-of-capitalism-2/

Deleting old, unnecessary, or poor regulation is something that should be actively done. Unfortunately, the regulations that are most often targeted by anti-government conservatives have been important environmental protections.  Not unnecessary regulations at all.

full employment for lawyers.

The opposite, the lawyers work to help business strengthen their position of power through these kind of contracts. Prohibiting non-competes would take it away.  Simple.
A common anti-regulation / anti-government tactic is to say there aren't simple solutions, etc etc in an effort to prevent the kind of powerful, good regulation this country needs to help regular working people.

The low unemployment, and improved housing market** gives workers more opportunity to change jobs, than they had for years.

** housing is starting to soften as an (should be) expected consequence of removing economic stimulus.

Hopefully the low unemployment can last and wages can rise.
Rising interest rates are cutting into auto and housing. Both appear to have softened as well as emerging markets. In previous business cycles, softening rippled through the economy and employment softened shortly after. Figuring out how to create a 'soft landing' is a major macro economic challenge. We'll see if this time is different.

 

[JohnRoberts]

Straw men are actual examples that do not accurately characterize the point under discussion.

"an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent's real argument. "

But those are "real" examples of the excesses of regulation.

I repeat, I am not arguing against "all" regulation, just too much regulation.

I am not disagreeing that companies actively trying to increase their market capture by lobbying gov for favorable regulation. There are huge problems with that in several industries.  But regulation prohibiting monopolies is a key accepted necessity to preserving competition in a free market. Adam Smith wrote about it in the Wealth of Nations two hundred years ago.

https://machineryofpolitics.wordpress.com/2012/01/04/adam-smith-on-the-crisis-of-capitalism-2/

Deleting old, unnecessary, or poor regulation is something that should be actively done. Unfortunately, the regulations that are most often targeted by anti-government conservatives have been important environmental protections.  Not unnecessary regulations at all.

The opposite, the lawyers work to help business strengthen their position of power through these kind of contracts. Prohibiting non-competes would take it away.  Simple.
A common anti-regulation / anti-government tactic is to say there aren't simple solutions, etc etc in an effort to prevent the kind of powerful, good regulation this country needs to help regular working people.

Hopefully the low unemployment can last and wages can rise.
Rising interest rates are cutting into auto and housing. Both appear to have softened as well as emerging markets. In previous business cycles, softening rippled through the economy and employment softened shortly after. Figuring out how to create a 'soft landing' is a major macro economic challenge. We'll see if this time is different.

This time is surely different. I don't recall ever seeing the economy this distorted with excess liquidity for this long (over a decade).  There are many rocks just below the surface to deal with.

Housing has been in bail out mode for over a decade so softening is expected as interest rates normalize (they are still low). Automotive is suffering from multiple issues. Most significant is the "sharing" economy where kids don't even want to own cars anymore. When I was a kid, I was counting days for years before I could get a drivers license.

Car makers are also acknowledging the reality that small cars are not profitable and shifting focus to pick-up trucks (that have protective import duties). This is why we have foreign car makers building truck factories here. 

The trade re-negotiation in process, could really change the landscape. One subtle point about the Nafta revisit is imposing controls over content for vehicles coming in from Mexico and presumably Canada. I great deal of Chinese auto components get used in these Mexican/Canadian factories skirting US import duties.

If President Trump was ever able to reach his end point goal of zero tariffs coming and going, this would become moot, but this is unlikely to happen anytime soon, so look for more incremental changes.  If we can properly recognize and deal with Chinese auto content, this will likely help domestic auto industry suppliers.

That said the entire auto industry is in flux due to self-driving, ride sharing, etc. We have probably seen peak auto (at least peak private auto ownership). We live in interesting times.

JR

PS: Interest rates are still historically low... I am becoming painfully aware as I sell stocks and try to rotate into fixed income securities. I am still down around 20% in a modest gold position I bought years ago, and already up 70% in a Canadian pot stock I bought months ago... I probably need to ring that bell, but pot is hot at the moment as large beverage companies are trying to replace lagging beer/wine sales.  I am too old to be trading, but some investments seem like no-brainers (pot humor). I need to be careful about chasing return in fixed income, since the tide going out will reveal more too-low quality debt.

 

[Script]

PS: Interest rates are still historically low...

I think POTUS would really like to keep them low for a bit longer, I read.

try to rotate into fixed income securities.

Bond market is not attractive enough yet. Completely distorted by QE. In the EU, it's hopeless and will most likely stay like that for longer, while yields of EU CDs are still below (hidden) inflation rate.

I am still down around 20% in a modest gold position I bought years ago

Historically high amount of short positions on anything gold at the moment. Might be counter-indicative. Or not.

already up 70% in a Canadian pot stock I bought months ago...

A smoking hot investment Not recommendable to most people cos very high risk(!), unless they really know what they are doing.