Trump And The Fed

It may be way too soon to say anything sensible about what Trump thinks about the Fed or will do  about it, but as the first person to have publicly called for appointing Janet Yellen as Chair (back in 2009), I figure I am more situated to stick my neck out to say something, especially when it looks like what is coming is a big contradictory mess.

For the moment the Fed seems to be laying low, having made almost no change in policy or projections as reported by the diligent Tim Duywww.economistsview.typepad.com/economistsview/2017/02/fed-watch-fomc-employment-report-warsh.html [trying to link to economistsview.typepad.com/economistsview/2017/02/fed-watch-fomc-employment-report-warsh.html , but not succeeding].  They remain open to maybe tightening after March if the employment report improves notably, but otherwise seem to be on a "steady as you goes" path for the moment, doing almost nothing.  This on top of a letter from Congressman McHenry demanding they stop cooperating with any international banking entities until Trump  makes appropriate appointments.  And Tim adds a comment on a recent column by former Fed gov Kevin Warsh, who indulged in criticizing the Fed by demanding that it follow policies it is already following.  In this latest post Duy suggests that perhaps Warsh is running for Fed Chair, which means one has to appear to criticize Fed policy, even if one is not really.  Which raises the question of what Trump will do.

Let us start with something that hardly anybody has noticed, but is just taken for granted: that Trump almost certainly will not reappoint Janet Yellen as Chair.  This just seems to follow from his general attitude that all incumbents are no good, and especially anybody appointed by Obama, except for FBI Director Comey.  Why she is no good is not immediately obvious, and in fact several times over the last two years he praised  her "low interest rate policies" noting that as an old real estate developer he has always been a fan of such policies.  However, in June of this past year when the Fed did not raise the fed funds target rate, he denounced her personally and the Fed more generally for not doing so, charging that their failure to do so was part of a plot to goose the economy in an effort to help elect Hillary Clinton. Given that rhetoric it seems unlikely that he would reappoint her, although it could still come to pass that if when her term comes up next year markets seem to like her as well as GOP commentators, he could change his mind.

Let me note how this expected non-reappointment is a violation of  existing norms regarding the Fed, that it mostly been above obvious partisan politics. The sign of this is that the last three Fed Chairs were each reappointed by an incoming president of a different party when that president came into office.  Thus, Republican Ronald Reagan reappointed Dem Fed Chair Paul Volcker.  Dem  Bill Clinton reappointed GOP Alan Greenspan, and Dem Barack Obama reappointed GOP Ben Bernanke.  But it is all but taken for granted that there is no way Trump will appoint Dem Yellen, and it seems that few observers are batting an eyelash over this, although as near as I can tell she has done a pretty good job and deserves reappointment.

Which brings us to the hard fact that as of now Trump's attitude towards what kind of person he might appoint to the Fed as either just an ordinary governor (and there are two current vacancies) or as Chair to replace Yellen is highly unclear.  On the one hand he has made noises about supporting hard money gold bugs, who presumably would push for higher interest rates soon.  OTOH, we have already seen that "as a real estate developer" he has long liked low interest rates, and we now have a situation where he has been bashing various foreign countries for supposedly holding their  currencies at overly low values relative to the dollar, with the dollar having risen since his election thanks to rising interest rates that happened immediately on his election in the markets, not pushed by the Fed, due to the expectation that he will  be increasing the budget deficit.  All this simply points to that he does not remotely have a coherent view yet of what his broader economic policy is or will be, much less what his preferred monetary policy.  If he increases budget deficits while appointing monetary hawks to the Fed, he may well end up with a Reaganesque mid-80s boom of the dollar to be associated with an unpleasant further hollowing out of our manufacturing sector that he has supposedly been elected to help out.

It is unclear if he is cognizant of the contradictions inherent in his current set of supposed economic policy positions, much less what he will do if and or when he becomes aware that he is facing such contradictions.

Barkley Rosser

Sawdust Caesar

The expression "sawdust Caesar" occurs in this clip from a 1945 newsreel on the execution of Benito Mussolini:

I hadn't heard that description of il Duce before. It comes from a 1935 book by George Seldes, Sawdust Caesar: The Untold History of Mussolini and Fascism. The book was completed in 1931 but publishers in England and then in France backed out of commitments. Many passages could be extracted verbatim from Sawdust Caesar to describe contemporary events. Here is a particularly apt example:

The Auerbach Tax and Automobile Multinationals

Bloomberg reports:

A proposed tax on imports that President Donald Trump is said to be warming to could upend the competitive landscape for carmakers, boosting Ford Motor Co. while hindering manufacturers that rely more on overseas factories including Toyota Motor Corp. House Republican leaders have proposed a so-called border-adjusted tax, which would place a levy on vehicles imported into the U.S. and fully exempt those exported. Though Trump initially deemed the idea too complicated, White House Press Secretary Sean Spicer last week said it was under consideration and could help pay for a wall along the Mexico border. The overhaul to the U.S. tax system could hand an advantage to Ford, Honda Motor Co. and General Motors Co., which rely the least on imported vehicles among major automakers. The shake-up would also undermine Toyota

Is Bloomberg assuming a fixed yen/$ exchange rate so these border adjustments boost exports and discourage imports? Greg Mankiw and Paul Krugman take a very different view. Greg breaks down this Destination Based Cash Flow tax as a three-fer:

Impose a retail sales tax on consumer goods and services, both domestic and imported; Use some of the proceeds from the tax to repeal the corporate income tax.; and Use the rest of the proceeds from the tax to significantly cut the payroll tax.

Greg is assuming the rise in sales taxes is greater than the cut in income taxes, which is not clear. But let’s hear from Paul:

Greg and I disagree on whether replacing profits taxes with sales taxes is a good idea, but agree that all of this has nothing to do with trade and international competition – because it doesn’t. I suspect, however, that Greg is being naïve here in assuming that we’re just seeing confusion because border tax adjustment sounds as if it must involve competitive games. There’s some of that, for sure, but one reason the competitiveness thing won’t go away is that it’s an essential part of the political pitch. “Let’s eliminate taxes on profits and tax consumers instead” is a hard sell, even if you want to claim that the incidence isn’t what it looks like. Claiming that it’s about eliminating a dire competitive disadvantage plays much better, even though it’s all wrong.

Alan Auerbach – the proponent of this idea – joined with Douglas Holtz-Eakin to state why this competitiveness argument is all wrong: These two (AHE) wrote:

Unlike tariffs on imports or subsidies for exports, border adjustments are not trade policy. Instead, they are paired and equal adjustments that create a level tax playing field for domestic and overseas competition; Border adjustments do not distort trade, as exchange rates should react immediately to offset the initial impact of these adjustments. As a corollary, border adjustments do not distort the pattern of domestic sales and purchases

So if this is not going to advantage Ford and GM to the disadvantage of Toyota, could something else be driving Ford’s support and the opposition from companies like Toyota. I have been looking more at the transfer pricing angle objecting to this claim from AHE:

Border adjustments eliminate the incentive to manipulate transfer prices in order to shift profits to lower-tax jurisdictions

A lot of people read this and think transfer pricing manipulation goes away. But this is clearly wrong if our trading partners have positive corporate tax rates that are sourced based. Even AHE admits this later:

Thus, the multinational would have no incentive to use transfer prices to shift profits away from the United States, even if the tax rate in the foreign country is very low. Indeed, it would benefit by shifting profits to the United States, to reduce the taxes it pays in the low-tax country.

Lawrence Summers adds:

Businesses that invest heavily, hire extensively and export a large part of their product will have negative taxable income on a chronic basis .. Fourth, the combination of a sharply lower rate, new opportunities for tax arbitrage and the fact that any revenue gains from bringing overseas cash home are one-shot means the Federal revenue base would erode. The result would be cuts in entitlement payments to consumers who spend heavily, tax hikes on individuals and reductions in government spending. Over time, this will slow growth and burden the middle class.

He is correct about the “new opportunities for tax arbitrage" which is what I referring to with my Trump Toaster Oven example where I noted:

While currently Tiffany might want to raise the intercompany price – she knows the IRS could object. Of course Auerbach’s DBCFT would change her incentives as she might want to lower this price to only $80 to eliminate the Canadian income tax – assuming the Canadian Revenue Agency does not object.

Of course the Canadian Revenue Agency would strongly object. Toyota is a lot like our example. The Auerbach proposal would raise its U.S. taxes and give it an incentive to ship their cars to the U.S. at cost costs only. Toyota’s 10-K indicates that its 2015 sales were $260 billion with over $100 billion to the U.S. Its operating margin was 10 percent with the U.S. getting about half of that on its U.S. sales. So on U.S sales, Toyota has U.S. profits near $5 billion and Japanese profits near $5 billion – both taxes at fairly high rates. The Auerbach tax would give Toyota the incentive to have all $10 billion sourced in the U.S. But one would certainly expect the Japanese tax authorities to strongly object. Summers example reminds me of Boeing which sells over $90 billion a year with 58 percent of those sales to foreign customers. It currently incurs near $1.9 billion in U.S. taxes given its 7.5 percent profit margin and the fact that it allocates over 95 percent of its income to the U.S. The Auerbach tax would cut this tax bill to zero. It would also cut the U.S. tax bill for companies such as Starbucks. So what about Ford and GM? Alas Dylan Matthews has this all wrong with:

For example, suppose that a car company — let’s just call it, uh, General Motors — makes $1 billion in profit manufacturing cars in the US and selling them domestically and exporting them to subsidiaries abroad. That would normally subject it about $350 million in taxes, since the US has a 35 percent corporate tax rate. But GM could instead have its foreign subsidiaries pay $1 billion less for the cars they buy from the US branch of the company. That wipes out GM’s US profits, leaving it with no US tax liability and shifting the profits to the subsidiaries abroad. If those subsidiaries are in countries with a low or nonexistent corporate income tax, that could wind up being a very good deal ... This makes most tax evasion schemes pointless.

I doubt Dylan looked at the 10-K filings of either Ford or GM when he drafted this base erosion fairy tale. Ford sources less than 17 percent of its income to foreign affiliates and GM sources almost none of its income abroad. So the Auerbach tax would represent a major reduction in their U.S. tax bills. These foreign affiliates are not in tax havens unless you think Canada, Mexico, and our European trading partners have zero corporate tax rates (hint – their tax rates are 20 percent or more). Think of their operations as having a European component and a North American component. The European affiliates produce and distribute cars paying royalties back to the U.S. parent. Under the Auerbach proposal, they might want to increase those royalties to bleed their European affiliates dry. But of course the tax authorities in France, Germany, and the UK are not stupid. In North America, Mexican maquiladoras make the components, Detroit assembles, and a Canadian distributor sells to Canadian customers. The Auerbach tax would give Ford and GM the incentives to manipulate transfer pricing to strip all Canadian and Mexican income so the last line from Dylan that I quoted is quite wrong. But it would also be wrong to assume that the Canadian Revenue Agency and the Mexican authorities would just roll over.

Marxist Economics: The Cliff Notes Edition

This week I gave my traditional pair of lectures on Marxist economics to the program Political Economy and Social Movements for which I'm one of the instructors.  Every time I do this I tweak them a bit, but this time I finally prepared PowerPoints.  (Resistance is futile.)

Some readers might be interested in these slides.  Obviously, there's a lot in these talks that I don't put in the notes, but you should get the general idea.  Let me know if you see ways they can be improved.

The first talk covers historical materialism, the second Marxist economics in particular.

Recall and the General Strike

The tradition of the oppressed teaches us that the “emergency situation” in which we live is the rule. -- Walter Benjamin, On the Concept of History, 1940

Back in December, I posted Full Employment and the Myth of the General Strike to start the conversational ball rolling about the idea of a general strike. It was the middle post in a three-part series on full employment.

Events move fast in 2017.

In the past two days, op-eds have appeared in the Washington Post and the Guardian taking up the issue of job action -- and the general strike -- as forms of resistance. On Monday, the Guardian published a Comment is Free by Francine Prose, "Forget protest. Trump's actions warrant a general national strike." This morning, "Where’s the best place to resist Trump? At work." by labor lawyers, Moshe Marvit and Leo Gertner, was published as a PostEverything by the Washington Post.

Apparently, a call has gone out for a general strike on February 17, which strikes me (no pun intended) as rather precipitous. But the conversation is rolling.

Another element I would like to throw in is "what are the demands?" That Trump stop doing nasty things? That the GOP house and the GOP senate impeach the one who is going to sign their tax cut bills? I propose recall -- total recall. Not only are the elected officials themselves corrupt, incompetent and unrepresentative but the electoral system that has installed them has been thoroughly corrupted and undemocratic. Throw the bums -- AND THE NAG THEY RODE IN ON -- out.

To give context and American (U.S.) historical resonance to that demand, it is useful to consider Populist and Progressive proposals for "direct democracy," through initiative, referendum and the "imperative mandate" (recall) from over a century ago.

What am I really talking about here? What am I doing? The narrative time dimensions of the revolutionary general strike and of the reformist recall, as conceived by Populists and Progressives, could not be more contrasting. The general strike takes place in what Walter Benjamin referred to as jetztzeit -- "not homogenous, empty time, but time filled by the presence of the now."

The traditional recall proposal is almost exactly the opposite. It refers to a process that appears almost interminable involving amendment of the constitution, enacting legislation in conformity with said amendment, petitioning, litigation and ultimately a recall election.

What I am doing, what I am talking about here, is the necessity of learning to think simultaneously in both dimensions -- to collapse the duration of the recall into "time filled with the presence of the now" and at the same time to extend now time, jetztzeit, so that it endures, becomes everyday, day-to-day.

Amgen’s Transfer Pricing (Psst – don’t got there)

The White House is boosting about this :

Amgen CEO Robert Bradway told President Trump at today's White House meeting that his company is adding 1,600 jobs in the U.S. this year.

Amgen had $21,662 million in sales in 2015 with $7978 million in profits. Its worldwide taxes were only $1039 million for an effective tax rate of only 13 percent. How did they pull the trick off? Their 10-K filing is a little sparse in information but does admit:

The effective tax rates for the years ended December 31, 2015, 2014 and 2013, are different from the federal statutory rates primarily as a result of indefinitely invested earnings of our foreign operations. We do not provide for U.S. income taxes on undistributed earnings of our foreign operations that are intended to be invested indefinitely outside the United States.

Did the White House discuss this massive base erosion to tax havens with no repatriation of earnings? Of course one has to wonder about their transfer pricing profile. All I could get from their 10-K was:

We perform most of our bulk manufacturing, formulation, fill and finish activities in our Puerto Rico facility and also conduct finish activities in the Netherlands. We also utilize third-party contract manufacturers to supplement the bulk, formulation, fill, and/or packaging of certain Amgen principal products ... We operate distribution centers in the United States—principally in Kentucky and California—and the Netherlands for worldwide distribution of the majority of our commercial and clinical products. We also use third-party distributors to supplement distribution of our products worldwide ... We have major R&D centers in several locations throughout the United States (including Thousand Oaks and San Francisco, California and Cambridge, Massachusetts), Iceland and in the United Kingdom, as well as smaller research centers and development facilities globally.

So we have three basic functions here: (1) production offshore; (2) local distribution; and (3) R&D done in the U.S. Amgen’s profit margin is near 37 percent, which should tell us most of its profits are attributable to its product intangibles, which were developed here. And yet most of the profits are sourced to tax havens. As we spend so much time debating the various aspects of the Destination-Based Cash Flow Tax, multinationals like Amgen are very happy that we are not discussing their transfer pricing.

The "Imperative Mandate" -- Recall: An Annotated Bibliography

Recall of elected officials is both the essence of Populism, the "imperative mandate" and consistent with good business principles.

"You're fired!, the voters' version of "The Apprentice": An analysis of local recall elections in California." Rachel Weinstein, Southern California Interdisciplinary Law Journal, Vol , 15. 2005-2006.

The title of this 2005 article contains the delicious irony of referencing Resident Dump's reality T.V. show, "The Apprentice." As the title indicates, the article analyzes the characteristics of local recall elections in California, looking specifically at such elements as community size, property values, signature requirements, campaign spending, motivations of elected officials, interest groups and the ability of citizens to monitor government activity. There is a brief comment in passing on the notion of national recall elections:

At a national conference on direct legislation organized by the Populist Party in 1896, delegates affirmed their commitment to direct legislation at the municipal, state, and national levels of government, but after a prolonged debate they withdrew a motion to include the recall, which they termed the "imperative mandate" as part of direct legislation. 

"Functions of the Initiative, Referendum, and Recall," Jonathan Bourne, Jr. The Annals of the American Academy of Political and Social  Sciences (September, 1912).

Jonathan Bourne, Jr. was the Republican U.S. Senator from Oregon when he wrote this article. The Republican Party did not nominate him to run for re-election in 1912 and ran instead under the Popular Government banner, coming in third. The preamble of this article, dealing with the initiative and referendum is a rousing denunciation of the extent to which popular sovereignty has been usurped by political manipulation and the commercialization of politics. Bourne argued that recall was a precautionary measure and that its existence "will prevent the necessity for its use." "Adoption of the recall," he wrote, "is nothing more than the application of good business principles to government affairs."

Every wise employer reserves the right to discharge an employee whenever the service rendered is unsatisfactory. The right of the employer to discharge his employee rests upon exactly the same basis as the right of the employee to quit. The principle is recognized throughout the business world, and it is put in practice by every large and successful corporation. Consider the absurdity of the recognition of the right of a public officer to quit his position at any time and the denial of the right of his employers to discharge him. To assert the right in one instance and deny it in the other is to maintain a one-sided contract, the discrimination being against the whole people and in favor of the individual. If we can trust an individual to deal justly with the people when he considers tendering his resignation, we can also trust the people to deal justly with a public servant when they consider discharging him.

Bourne stopped short of prescribing the recall for national office, stating somewhat ambiguously, "I think no one proposes, at present, to extend the recall to any federal official except those elected by the people of the several states," even though he had preceded that demurral with an explicit reference to the election of the President:

It is generally conceded that the American people have intelligence and honesty enough to be trusted with the power to select their public servants, even to choose a President of the United States. If it be granted that the people have intelligence enough to choose a President of the United States, no man can consistently contend that they have not the intelligence to act wisely upon the question of discharging a state, county, or municipal officer. 

"Presidents, Impeachment, and Political Accountability." MC Havens, DM McNeil - Presidential Studies Quarterly, 1978.

This article contains a brief historical note on recall and discussion of the implications of recall for the U.S. Presidency:

The idea of the recall election found its greatest popularity in the period between 1910 and 1920 when progressive politicians were interested in "cleaning up government."24 At that time, the recall election was viewed as the most effective means available for insuring the accountability of public officials and particularly executives. The first proponents of the argument concentrated their efforts on local and state officials, but by extending the scope of the concept national recall elections might be used to remove a malfeasant or incapacitated President. The thrust of this argument is that this means of removal leaves the ultimate responsibility for the unseating of a President in the hands of his national constituency. This would, of course, mean that many of the people who voted to put the President into office would be required to reverse their position and vote to oust him. Theoretically, this would insure that the President's crime, malfeasance, or incompentency would be of sufficient degree to erode not only his professional political support but his popular and party support as well. Such action could not be taken lightly. Second, it could be argued that the recall would decrease the trauma involved in the impeachment/removal process. Presumably by exercising their own political power through the vote, people would feel an increase in their sense of efficacy rather than a decreasing of their faith in government as the result of the ouster of a President. 

The article follows the above by noting the principle defects of recall, which would include the prolonged time that would be required to effect a recall petition and election and the ability of the incumbent to manipulate national crisis in order to defeat the recall.

"The 2003 California gubernatorial recall." Floyd Feeney, Creighton Law Review,Vol. 41, 2007.

This article deals primarily with the mechanics of the recall of California governor Gray Davis, including the more than twenty lawsuits that were initiated during the recall effort. The article also contains a brief historical note on the recall idea

In the America of the late 1800s, hard pressed farmers and workers, particularly in the Western states, viewed their legislatures as being under the thumb of special interests, especially the railroads. To cure this problem, Populists in the late 1890s and Progressives in the early 1900s advocated more direct control by the people themselves— through the initiative, the citizen-initiated referendum, and the recall. Although there were antecedents going back as far as ancient Rome, this agenda was clearly borrowed in major part from Switzerland, particularly Zurich where the Socialist Karl Buerkli was using the initiative and the citizen-initiated referendum to push reforms aimed at helping workers. Although the recall had existed in canton Schaffhausen, perhaps since the 1820s, even in Switzerland the recall was more novel and less developed than the citizen-initiated referendum and the initiative. The recall idea, however, had early American roots that helped to create a fertile climate. In 1776, Pennsylvania recalled its delegates to the Continental Congress when they refused to sign the Declaration of Independence.  And in 1778, even before they had completed winning their independence, the thirteen American colonies included in the Articles of Confederation a provision specifically authorizing the recall of delegates. Because these home grown procedures relied primarily on local legislative bodies to trigger the recall, however, the Swiss idea of using citizen signatures was an important innovation.

Gaslighting

EconoSpeak has been receiving comments from an anonymous troll who is gaslighting. I will delete those comments on sight. Gaslighting is not about having contrary opinions. Gaslighting is not about "free speech." Gaslighting is abuse and manipulation.

Stephanie Sarkis posted a concise and useful analysis, "Gaslighting: Know It and Identify It to Protect Yourself" at Psychology Today. "Gaslighting is a manipulation tactic used to gain power," Sarkis writes there, "And it works too well." She enumerates and explains eleven gaslighting techniques. Each of these techniques could be illustrated with a video clip or tweet from Resident Dump but for now I will just post the list, abstracted from Sarkis's article:

1. They tell you blatant lies.
2. They deny they ever said something, even though you have proof.
3. They use what is near and dear to you as ammunition.
4. They wear you down over time.
5. Their actions do not match their words.
6. They throw in positive reinforcement to confuse you.
7. They know confusion weakens people.
8. They project.
9. They try to align people against you.
10. They tell you or others that you are crazy.
11. They tell you everyone else is a liar.

See also The War on Facts Is a War on Democracy at BillMoyers.com. "But it’s not just absence of facts that’s troubling; it is the apparent effort to derail science and the pursuit of facts themselves."

If The Popular Vote Winner Was In The White House

Yes, she has been a crook and a liar, and if she were in the White House she and her money grubbing husband might be plotting which pieces of White House silverware and furniture they might abscond with when they leave, much as they did back in 2001, oh horror of horrors.

But as it is, if she was there, well, I do not think we would have people crying in airports as we have have had in the last few days.

OTOH, she might be using an unsecured phone, although that would not be any different from what is going on now, although heck, now it is just fine if the Russians hack the White House phones.

Exclusive: Inside the Access Hollywood Locker Room Bus!

On October 7, 2016 the Washington Post published a 2005 recording of Donald J.Trump engaging in lewd conversation with Access Hollywood host, Billy Bush. “When you’re a star, they let you do it.. You can do anything... Grab them by the pussy... You can do anything.”

What Trump described is, of course, sexual assault. Subsequently, though, Trump insisted that he didn't commit the sexual offenses he described, it was all just locker room talk.

Well, that certainly was reassuring.

At best, then, the President of the United States, at the age of 59, had the emotional maturity of the cartoon characters Beavis and Butthead. In his first week in office, Trump has demonstrated that he has not grown up since the days he boasted and snickered about molesting women.

At last Sunday's Women's March, pink, knitted "pussy" hats became the ubiquitous symbol of resistance to the misogynous, racist and deranged administration that has been inaugurated the previous day. This got me to wondering: what did that now, yes, historic conversation look like inside that Access Hollywood locker room bus?

The video below is an exclusive artist's reconstruction of that locker room "banter" escapade:

Emails from the "Voter Fraud" Crypt

Why, oh why is there not an effective opposition party in the U.S. Congress? 

The last time "voter fraud" was as high on the GOP's agenda as it now is on Trump's, it led to the politically-motivated firing of nine U.S. Attorneys, which caused a scandal that resulted in the resignation of Attorney General Alberto Gonzales.

During the Congressional investigation into the firings, it was revealed that millions of emails were missing, some of which were germane to the issue at hand. They had been stored on a private RNC email server. 

Here is some relevant detail from a Newsweek story published September 12, 2016:

The supposedly lost emails also prevented Congress from fully investigating, in 2007, the politically motivated firing of nine U.S. attorneys. When the Democrat-led Senate Judiciary Committee subpoenaed related emails, Bush’s attorney general, Alberto Gonzalez, said many were inaccessible or lost on a nongovernmental private server run by the RNC and called gwb43.com. The White House, meanwhile, officially refused to comply with the congressional subpoena. 

Senate Judiciary Chairman Patrick Leahy (D-Vt.) called the president’s actions “Nixonian stonewalling” and at one point took to the floor in exasperation and shouted, “They say they have not been preserved. I don’t believe that!” His House counterpart, Judiciary Chairman John Conyers (D-Mich.), said Bush’s assertion of executive privilege was unprecedented and displayed “an appalling disregard for the right of the people to know what is going on in their government.” 

In court in May 2008, administration lawyers contended that the White House had lost three months’ worth of email backups from the initial days of the Iraq War. Bush aides thus evaded a court-ordered deadline to describe the contents of digital backup believed to contain emails deleted in 2003 between March—when the U.S. invaded Iraq—and September. They also refused to give the NSA nonprofit any emails relating to the Iraq War, despite the PRA, blaming a system upgrade that had deleted up to 5 million emails. The plaintiffs eventually contended that the Bush administration knew about the problem in 2005 but did nothing to fix it. 

Eventually, the Bush White House admitted it had lost 22 million emails, not 5 million. Then, in December 2009—well into Barack Obama’s administration—the White House said it found 22 million emails, dated between 2003 and 2005, that it claimed had been mislabeled. That cache was given to the National Archives, and it and other plaintiffs agreed, on December 14, 2009, to settle their lawsuit. But the emails have not yet been made available to the public. 

The Senate Judiciary Committee was operating on a different track but having no more luck. In a bipartisan vote in 2008, the committee found White House aides Karl Rove and Joshua Bolten in contempt of Congress for refusing to comply with subpoenas in the investigation of the fired U.S. attorneys. The penalties for contempt are fines and possible jail time, but no punishment was ever handed down because a D.C. federal appeals court stayed the Senate’s ruling in October 2008, while the White House appealed. Rove’s lawyer claimed Rove did not “intentionally delete” any emails but was only conducting “the type of routine deletions people make to keep their inboxes orderly,” according to the Associated Press. 

By then, Obama was weeks away from winning the election, so the Bush administration basically ran out the clock. And neither the Obama administration nor the Senate committee pursued the matter.

Trump’s Errant Mouth and What to Do About it

The motive for Trump’s unending stream of blatant falsehoods is obscure.  It might be mental illness, or maybe it’s a Schelling-style hostage strategy in response to principal-agent issues in his administration.  I don’t know.  What matters most, however, is how the rest of us respond to it.

The losing strategy was artfully employed by Hilary Clinton: paint the Donald as abnormal, a caveman outside the normal bounds of respectable politics.  Even if it works—and as we saw it can fail in the face of competing narratives—it has a limited objective, taking down this one man.  A better approach would be to craft a straightforward and honest narrative that links Trump’s crass dishonesty to his political goals.

I’d go for the most basic version: Trump’s real plan is to enrich the wealthiest people in the country and allow the continued fleecing of the vast majority through deregulation, deunionization and defunding the public watchdog.  If he were open about this he wouldn’t be able to get to first base.  So he has to lie constantly, creating a fictitious parallel universe in which exploitation can be decked out as a crusade for justice.

Repeat this at every opportunity.  The army of the Right wants an America hardly any Americans actually want, so they have to lie.  They can do it with magic asterisks like Paul Ryan or whoppers about millions of hidden fraudulent voters, but the one thing they can’t do is tell the truth.

Why is Donald Trump Covering Up ALIEN ABDUCTIONS?

"We're gonna launch an investigation to find out. And then the next time, and I will say this: Of those votes cast, none of 'em come to me, none of 'em come to me. They would all be for the other side. None of 'em come to me. But when you look at the people that are registered: dead, illegal and in two states, and in some cases maybe three states. We have a lot to look into." -- Donald J. Trump

I regret to inform you that the nincompoop quoted above is President of the United States. When told that his claim of voter fraud had been debunked, the congenital fantasist-in-chief cited a 2012  Pew study. When the interview pointed out that the author of that study, David Becker, said they had found no evidence of fraud, the wack-doodle accused Becker of "groveling." Say what? Here is the transcript:

Muir: You say you’re going to launch an investigation into (voter fraud). 

Trump: Sure. Done. 

Muir: What you have presented so far has been debunked. It’s been called false — 

Trump: No it hasn’t. Take a look at the Pew report. 

Muir: I called the author of the Pew report last night. He told me they found no evidence of voter fraud. 

Trump: Really? Then why did he write the report? 

Muir: He said no evidence of voter fraud. 

Trump: Excuse me. Then why did he write the report? Look at the Pew Report. Then he’s groveling again. You know, I always talk about the reporters that grovel when they wanna write something you wanna hear. But not necessarily millions of people want to hear, or have to hear 

Muir: So you've launched an investigation. 

Trump: We're gonna launch an investigation to find out. And then the next time, and I will say this: Of those votes cast, none of 'em come to me, none of 'em come to me. They would all be for the other side. None of 'em come to me. But when you look at the people that are registered: dead, illegal and in two states, and in some cases maybe three states. We have a lot to look into.

This is not even about lying. It is about mental incompetence at lying. The jackass refutes his own alibi two sentences after presenting it.

The Pew report is not the only research paper on voter fraud out there. There are two others. It only gets worse.

One paper by Richman and Earnest was based on an online survey of citizens. It included a question about citizenship. Nearly 19.000 people completed the survey. A relative handful -- probably fewer than 100 -- non-citizens took the survey. The minuscule number of people who reported both voting and being non-citizens 4 (four!) is extremely likely to be entirely a classification error resulting from less than .1% of the 18,878 citizens checking the wrong box for citizenship status. In short, Richman and Earnest's estimate was based on a very small sample of non-citizens and was probably entirely an error artifact. The methodological flaw was described in detail in two-page 2015 article titled, "The perils of cherry picking low frequency events in large sample surveys."

Let me repeat the substance of the Richman and Earnest finding: 4 people among nearly 20,000 who completed an online survey identified themselves as non-citizens who voted in either 2010 or 2012. The statistical likelihood of that having resulted from a citizenship classification error is virtually 1 out of 1.

There is a third study of voter fraud that is worth mentioning, "Alien abduction and voter impersonation in the 2012 US general election," It employed a technique called "survey list experiment" to try to elicit survey responses regarding sensitive or illegal behaviors that people may ordinarily be reluctant to report on a survey. Instead of admitting specific actions, respondents are only asked to report a number of items from a list. Sensitive items are tested for by having a control group that is given only innocuous items while the experimental group is given the innocuous items plus a sensitive one.

The list experiment found that about 2.5% of their sample reported have voted under a name that wasn't their own. Although a relatively small number, this might seem to be a significant factor in a close election, especially if the impersonations were predominantly on behalf of one party. However, the researchers argued that the result is most likely to be explained by respondent error. Most of the respondents reporting impersonation is accounted for by respondents choosing the maximum number, possibly to complete the survey more quickly. To test whether choosing the maximum number explained their voter impersonation results, the researchers conducted a second experiment, this time including an "impossible event," namely being abducted by an alien.

The second experiment found that more people reported having been abducted by aliens than having voted using a name that wasn't theirs. In fact, nearly the same percentage of respondents (2.4%) reported having been abducted by aliens and being audited by the IRS during the past twelve months as had reported having voted under a false name (2.5%). This was despite the fact that the IRS audit rate for 2013 was a little less than 1%! In short, survey respondent were two and half times as likely to be both abducted by aliens and audited by the IRS in the same year as the general public was to be audited by the IRS. Period.

Donald Trump claims that he is under audit by the IRS. Donald Trump claims that there was massive voter fraud in the 2016 which denied him the popular vote victory. Donald Trump claims that the Pew report is evidence for his accusation of voter fraud. But notably, Donald Trump is SILENT on the vital national security aspect of this whole episode: ALIEN ABDUCTION!

Why is Donald Trump covering up ALIEN ABDUCTIONS?

Paul Ryan’s Two-Faced Comments on Auerbach’s Tax

Page 15 of the tax portion of A Better Way makes this claim:

This Blueprint represents a dramatic reform of the current income tax system. This Blueprint does not include a value-added tax (VAT), a sales tax, or any other tax as an addition to the fundamental reforms of the current income tax system. The reforms reflected in this Blueprint will deliver a 21st century tax code that is built for growth and that puts America first.

A few lines later, it makes this claim:

The focus on business cash flow, which is a move toward a consumption-based approach to taxation, will allow the United States to adopt, for the first time in history, the same destination-based approach to taxation that has long been used by our trading partners. This will end the self-imposed unilateral penalty for exports and subsidy for imports that are fundamental flaws in the current U.S. tax system. The new tax system also will end the U.S. taxation of the worldwide income of American-based global businesses

So is the Destination-Based Cash Flow Tax, an income tax or a consumption tax? And why is Speaker Ryan contradicting himself within the same page? I earlier praised Joel Trachtman for articulating the legalese of whether this proposal would violate WTO rules:

The ability to tax imports and exempt exports –known as border tax adjustments—is permitted under World Trade Organization rules, but only for taxes on a product, such as a sales tax (as opposed to income taxes). Many of the U.S.'s major trading partners tax imports while exempting exports because they have a system of what are called value-added taxes, which act like a sales tax on goods (but are collected in stages along the production chain). Value-added taxes are understood to be taxes on a product and are eligible to be border tax adjusted: they are rebated on exports and applied to imports as the product crosses the border. Relying on corporate income taxes has precluded the U.S. from applying similar border adjustments—a fact the GOP blueprint aims to rectify. But, whether the border tax adjustments in the blueprint are deemed legal from a World Trade Organization perspective will depend on a core interpretation: Is the tax in question an income tax or a tax on a product? While some argue that the business cash flow tax is economically equivalent to a value-added tax, legally it does not seem possible to characterize it as a tax on a product under the World Trade Organization rules. It is a tax on a firm, calculated by reference to firm-based attributes under a new and simplified definition of net income, but a definition of net income nonetheless. Moreover, imports would face 20% tax on their price with no deductions while domestic producers would be able to deduct most expenses — including payroll — from the tax base. This discriminatory treatment could also make the import border adjustment illegal under the international rules.

Reuven Avi-Yonah and Kimberly Clausing have a longer discussion that reaches the same conclusion. These authors also wondered why Speaker Ryan does not simply call this a consumption tax with a labor subsidy. The answer might be simply politics – Speaker Ryan has always wanted to get rid of the corporate profits tax replacing it with a consumption tax. But of course Speaker Ryan does not have the political courage to just say so. No wonder President Trump finds this too confusing. The tax’s main political proponent has never been exactly honest about what his agenda is. I stand by my second post on this topic:

I think the real issue here is that this proposal smooshes together two very different ideas sort of like how shimmer was a floor wax and a dessert topping

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What are the "Alternative Facts"?

The lies of Sean Spicer, Kellyanne Conway and Donald J. Trump are not meant to deceive. They are manipulative displays that operate at a pre-linguistic level of communication. Conway's "alternative facts" are best understood as the equivalent of chimpanzee poo-flinging:

In short, what appears to be the main reward for throwing is the simple ability to control or manipulate the behaviour of the targeted individual (ape or human). For example, in our laboratory, chimpanzees will patiently wait for strangers or visitors to approach and then will throw at them. They do not conceal their intentions and they will often stand bipedal and threaten to throw by cocking their arm with the projectile in their hand in preparation for throwing. The passers-by can see this and will often try and negotiate with the chimpanzees to put down the projectile, or they will try to trick the ape by stopping, then dashing rapidly past the ape enclosure. This seems to be the reaction the apes hope to get from the humans and, in operant conditioning terms, is the only ‘reward’ the chimpanzees receive for throwing. 

Neurologically, throwing is complex because it demands coordinated precision in timing the velocity and release window of a projectile in relation to the speed of movement and distance of the target (i.e. prey). Some have suggested that the increased selection for neural synchrony of rapid muscular sequencing routines associated with actions such as throwing are similar to the motor programming demands of language and speech, and therefore engage similar neural systems, notably Broca's area. 

Kellyanne Conway demonstrating how to put extra "spin" on a fecal projectile. 

Cognitively, we believe that the development and acquisition of throwing skills by chimpanzees operates in a manner similar to the emergence of manual gestural communication. As noted previously, the motivation for throwing in chimpanzees is largely to alter the behaviour of other individuals (be it human visitors or conspecifics). For this reason, the apes that have learned to throw have acquired an ability to understand how their behaviour affects the behaviours of others. 

People really need to learn to stop trying to "refute" the "alternative facts" that are being flung. Shit is shit. You cannot refute feces.