A Brief History Of U.S. Agricultural Policy

A Daily Kos diarist sums up the history of U.S. agricultural policy, with all its absurdities, in a very large nutshell.

The extent to which our political process produces irrational results on this issue, which isn't terribly atypical, is horribly frustrating to anyone who wants to believe that democracy produces good policy.

5.56 v 7.62

A debate has been simmering for years in military circles (see, e.g., here and here and here (O.K., that one is about another feature, bayonets)) and in particular in the military blogosphere (of which I am a fringe, token liberal member). It reached a full boil when the Army was on the verge of adopting a new carbine and rifle (the XM-8), and then ebbed when the contract was cancelled for reasons of procedural missteps in the procurement process for the project.

Now, the Denver Post has finally caught on. The issue is bullet caliber. U.S. and NATO forces generally use 5.56mm rounds (i.e. .22 caliber) for their carbines and rifles (such as the M4 and M16). The Russian AK-47s and certain specialty troops (snipers with M14s and special operations commandos with the SCAR Heavy, for example) use the larger 7.62mm (i.e. .30 caliber) round.

The M4 is the standard weapon of vehicle drivers in Iraq, the M16 is the standard weapon of infantry troops. Both are automatic weapons (which means that they can fire multiple shots with a single pull of the trigger). The M4 and M16 differ mostly in length, with the M16s longer barrel making it more accurate at long ranges and more potent. The M14 used by snipers is designed for very long range, highly accurate shooting, usually with one shot at a time.

In a nutshell, the smaller round has the virtues of institutional inertia, standardization with allied forces, and lower recoil. The larger round has greater stopping power. Some participants in the discussion have urged an intermediate sized 6.8mm (0.27 caliber) round.

There are other reasons to replace the current Vietnam era M4 and M16. Newer designs are less prone to jamming in extreme conditions, for example, and can be built to be somewhat lighter than existing weapons. But, advocates for a larger round say those considerations are secondary to caliber, while advocates for the existing caliber also argue that jamming isn't a big enough concern to justify replacing the M4 and M16, since it is rare in any case.

The debate has an almost religious character. Advocates of each position are deeply entrenched. No one seriously doubts that the M4 or M16 are inadequate for most purposes, but advocates for change argue that we can do better. Supporters of the status quo argue that user training is the problem and that stopping power is not inadequate. Supporters of change argue that the current round doesn't kill with a single round as often as it should.

The absence of support for the larger round within the Department of Defense establishment, despite such a widespread call for it among former military outside critics is hard for an outsider to read. Likewise, the technical arguments are hard for someone who isn't personally a gun expert to evaluate. Too many real experts come out on opposite sides of the debate. Also, the Army's recalcitrance on providing soldiers with body armor, armoring Humvees, and deploying mine resistant vehicles in the current conflict, and unwillingness to confront evidence of the jamming problem in the current carbine and rifles relative to newer models has undermined its credibility on this issue.

While replacing the small arms used by U.S. troops would cost money, the amount of money involved is very modest. A new rifle or carbine for every soldier in the U.S. Army would cost less than $1 billion, a tiny piece of the overall defense budget, and less than the cost of a single typical naval ship or a handful of jet fighters, for something that almost all troops on the ground carry with them as their primary weapon every day. Spread over two or three years, it would be a pittance which Congress would easily agree upon if the Defense establishment recommended it.

I personally am agnostic on the caliber issue, but it is clear to me that a redesign of the M4 and M16 is in order, and it is likewise clear to me that the caliber issue ought to receive a fair hearing from experts independent of the current procurement brass.

Meanwhile, in a related story that wasn't covered in this particular pair of articles, there has been considerable dissatisfaction expressed with the standard issue Army pistol (more so than almost any other equipment used by U.S. troops in combat), but an effort to replace this has also derailed. Once again, I'm not an expert on why soldiers in the field dislike this gun. But the pistol issue would be an even cheaper problem to address because it would be easier to use commercial off the shelf replacements (since it does not require an automatic weapon and because many quality pistols are used by law enforcement), and because each gun is less expensive.

Lucky

I am lucky, this Memorial Day.

I can think of only one relative who died while serving in this country's military, out of many dozens of them. I've been to the Vietnam Memorial, been told of the relationship, looked at the name engraved in stone. He was a cousin of my father. But I never knew him, and he is a relatively distant relative. A large share of my ancestors came to the U.S. after the Civil War, and good share were the wrong age, the wrong gender, or had essential occupations (mostly in farming) that kept them out of World War I, World War II and Korea. They made sacrifices in wartime, but not of their lives. Many of my relatives were drafted in peace time, but that rarely kills you.

My family tradition does not include military service as an important virtue and obligation that one must volunteer for as a matter of duty in the absence of a draft. I can't name a living relative who ever told war stories, bragged about his military service or extolled the value of becoming a soldier or a military officer of any kind. If my relatives expressed any sentiment that I recall, it was relief at having escaped the draft or having mustered out as soon as possible after having been drafted. I grew up never seeing service as a military officer as a path that I was under any pressure to pursue or consider, although I was never expressly discouraged from doing so either. I grew up with a strong sense of honor, but that sense had little to do with bearing arms.

In law school, I investigated the Judge Advocate-General's Corp. The physical fitness requirements, the expectations of spit and polish, and a prevailing belief at the time that military justice was corrupt quickly dissauded me. (The pay and benefits, as well as the opportunity to see the world, actually seemed rather decent at the time.)

My peers were mostly college bound small town kids from the Midwest and didn't sign up (or even seriously consider doing so) either. I knew as many consciencious objectors as I did people who signed up. I wasn't either. I registered for the Selective Service and read the rules and felt a great relief the day that registration expired. I actively opposed the first Gulf War from a seat as an intern in Congress, but I was opposed to that war, not all wars. My peers and I exaggerated the danger and assumed that if you signed up to serve in the military that there would probably be a war and that you would probably get shot.

Honor as a war hero is something that it never occurred to us to crave. I still have mixed feelings about war heros. While they often did the right thing at a given moment and saved their buddies at great risk to their own lives, acts of heroism are usually made necessary by somebody else's incompetence. Heroism is usually a symptom of failure. Respect for what the hero did is often tempered in my mind by rage at our other guy's deadly mistake.

I am hardly atypical of my generation. No U.S. military action since Vietnam has involved a draft or killed U.S. service members on a similar scale. Vietnam was in its final days before I had even a glimmer of a notion that it had ever happened. For me, it is a piece of history I have heard retold vividly but never experienced myself. Hearing the American Top 40 played looms larger in my memories of those early years of my life, than the war, although I recall seeing a glimpse or two of it on the TV news.

The current Iraq War has come with the highest price in our soldier's lives since Vietnam, but it is an order of magnitude smaller in scale and because it has been fought by a volunteer force, very few of my peers have had connections to it. Some of my high school friends and some friends of friends in my adult life have been involved in the enterprise, but thankfully, have been spared so far, like 99% of their peers who have served in the military during the Afghanistan and Iraq Wars period. Certain units have paid much higher prices, but my friends haven't been in those units. I suspect that we are in the last half of these wars, although one can never really know for sure until it is over.

The most personal it has gotten for me was sharing a home with a distant cousin in Washington D.C. as her beloved was deployed to the Gulf War, feeling her anguish, fear and uncertainty. Fortunately, in the end, the Gulf War turned out to be the most lopsided military victory that the world has ever seen, and Bush the elder didn't push to turn it into a prolonged insurgency. No one we knew died.

I have received the benefits of the service of those who have died for their country, while paying a low price among my friends and family. I am lucky and I know it. Civilized people should feel gratitude for benefits conferred upon them, even when they didn't ask for the sacrifices that brought them about.

Thank you, those of you have have died for our country, and even more so, those of you who have been left with holes in your lives as a result of their absence. I fly the flag before my house today for you.

Millions of people in our country today weren't so lucky. The latest war has produced thousands of orphans, widows and parents who have lost children. Prior wars left even more behind, their lives shattered by the loss of a son, husband or father, or sometimes (rarely until the recent war) a daughter, wife or mother. Ten times as many still have their loved ones, but those loved ones are maimed in mind or body or soul. All those losses are not easy to bear. We have a government agency, a big one called the Veteran's Administration, to console you and give you what you need. But government benefits can never be enough. Tragic losses can never truly be repaid.

Their losses have nothing to do with the politics that brought about the wars that they died in. Soldiers do what they are told. They don't decide whether or not to engage in the wars that produce their sacrifices. Those decisions, we leave to another caste, politicians. The soldiers didn't make those choices. They didn't choose to uphold our values or to betray them. They made a simple act of submission to the needs of their country and the wisdom of its leaders. Their sacrifices were an investment in our future, placed in trust for management by others who never knew them. Our country needs their gifts of obedience to survive. We betray their memory when we mismanage what they have offered us.

War seems to make heros out of some men, demons of others, and hardens most of the rest. The line that divides these men can be paper thin.

Of course, not every hand has been dealt yet. I could still lose a friend, a son or a daughter, a son-in-law or a daugher-in-law, or a grandchild to war. I long for peace from 2017 to 2027 or so. But there are no guarantees in life. It is a possibility every parent faces and feels differently about. I refuse to think very hard about it until it becomes reality, or at least, until it becomes probable. There is no reason to borrow worry. Like prior generations, I am unlikely to encourage or discourage service, and I suspect that my children are unlikely to seek it out, although they might.

My parents took that chance when they let me participate in the proto-military culture of the Boy Scouts (that part always spooked me a little, as did the anti-gay culture of the military and later the Scouts). But nothing came of it. I don't know if the service minded generation of my children will influence them towards this end. The soldier's life gets better press now than it did when I was a child in the immediate aftermath of Vietnam. I will have to wait and find out the hard way.

Until then, I will remain lucky and thankful.

Mixed Feelings About The FLSA

It may be Memorial Day, but my thoughts are currently more in a Labor Day mode.

The Fair Labor Standards Act primarily sets the federal minimum wage and imposes overtime requirements on "non-exempt" employees.

FLSA cases tend to be small

The Department of Labor pursues some of the most serious cases it can locate, usually in an effort to change the customary practices of an industry or a large employer.

In several recent years (before new regulations under the FLSA) the number of actions (and the number of employees impacted) has been as follows:

2003 - 29,425 (342,358)
2002 - 40,264 (263,593)
2001 - 31,772 (195,257)

Average number of employees per action:

2003 - 12
2002 - 7
2001 - 6

Average back wages per employee (per action):

2003 - $621 ($7,222)
2002 - $666 ($4,361)
2001 - $569 ($3,497)

Average civil penalties as a percentage of back wages awarded:

2003 - 1.5%
2002 - 1.3%
2001 - 2.7%

Of course, most of these cases would not be cost effective for private attorneys to pursue. There is a private cause of action under the FLSA, and a win can provide attorneys fees awards, but in a private action there is also a risk of a less than the anticipated outcome, such as an attorneys' fees award for an amount less than actually earned on a billable hour and expenses basis.

The largest half a dozen settlements over the past few years (involving millions or tens of millions of dollars), largely involve misclassifications of low level employees who are called managers as exempt rather than non-exempt for overtime purposes at major franchises or national companies.

Most FLSA actions involve agricultural workers, day wcare workers, restaurant workers, garment manufacturing workers, private security guards, health care workers, hotel and motel workers, janitors, and temporary help.

A good share of the actions have roots in overtime regulations that are not always clear regarding how an employee is classified, coupled with employers taking aggressive stances knowning that the consequences of getting it wrong are modest.

The Economic Impact of the FLSA

Something on the order of 90-160 million U.S. workers are non-exempt, and the vast majority make well above the minimum wage (since the minimum wage is so low), so overtime is the only major benefit that they receive from the FLSA.

Since overtime is simply 1.5 times base pay, and the FLSA does not regulate base pay, any employer who wants employees to work more than 40 hours a week on a predictable basis can control total compensation to the employee simply by adjusting base pay. Employers who pay a base rate more than 1.5 times the minimum wage are capable of restructuring their affairs to avoid the economic impact of overtime entirely.

Overtime only has mandatory economic effect that can not be eliminated by juggling base pay based upon hours worked, for employers who pay less than 1.5 times the minimum wage and have employee who work more than 40 hours a week. This group of employees turns out to be quite small, perhaps because low wage jobs have been structured to avoid any risk of overtime pay. Suggestive of this fact is the knowledge that in 2005, about 1% of workers who worked full time or overtime were paid no more than the minimum wage (and some were tipped employees who actually made quite a bit more after tips). In contrast, about 6% of part-time employees (less than 35 hours a week) made the minimum wage or less. In raw numbers, there were 67,000 workers paid overtime who were paid minimum wage or less in 2005, of whom about three-quarters were tipped employees, out of 75.6 million hourly employees for the nation as a whole in the same data set.

The FLSA's tendency to encourage employers to fashion low hourly wage jobs as part-time also tends to give workers, like teenagers and people working "second jobs" for their families, who have the luxury of being able to work part-time and survive economically an edge in the labor market over those people who need to have a full time job to get by, possibly increasing unemployment for low skilled primary breadwinners. (Although, teen employment, in a long term trend, is at record lows, with only about one in three teens working, compared to almost half a few decades ago).

The FLSA is a bit like the laws which prohibit discrimination on various prohibited grounds in hiring (as opposed to wrongful termination and failure to promote for discriminatory reason). Enforcement is absolutely anemic, and is hardly enough to overcome major economic opposition to its policies. But compliance has a negligible negative economic effect (other than the costs of figuring out the law itself) on employers, and establishes social norms that probably have far greater effects than the legal rights established by the laws themselves.

I'm not entirely sure that the norms created by FLSA overtime rules help those whom it is designed to help at a macroeconomic level. Despite the fact that it is easy to pay overtime without increasing overall payroll, employers do tend to avoid employing rank and file workers more than forty hours a week in practice, while the norm for managerial and professional employees who are exempt is far greater, probably on the order 50-70 hours a week. More hours means, on average, greater productivity per employee, and greater productivity per employee means, on average in a competitive market for the services an employee offers, greater compensation.

Thus, the exemption for managerial and professional employees leverages even modest per hour differences in productivity between exempt and non-exempt employees into big differences in productivity per employee. This, in turn, may be an important reason why there are meaningful social class divideds in the U.S., rather than merely gradual gradations. A 25%-50% difference in hours worked can greatly amplify the effect of even a dollar or two difference in productivity per hour.

An employee making $14 an hour will earn $28,000 a year working full time at 40 hours a week. If that employee is equally productive and works 60 hours a week and is classified as exempt, a $42,000 a year salary will have the same economic impact on the employer and will create less fuss, since there is no need to keep track of hours and there are two-thirds as many employees to manage, so there may be room to pay the salaried employee even a little more than that amount, perhaps by matching 401(k) contributions of the salaried employee to some extent. This is the difference between a working class life and a middle class life.

If, in fact, the hourly employee's productivity gives rise to a $13 per hour rate of pay, while the exempt employee's productivity gives rise to a $15 per hour rate of pay, the non-exempt employee may make $26,000 per year, and the exempt employee may make more than $45,000 per year and probably a few extra benefits as well.

It isn't that non-exempt workers a lazy. They simply have employers reluctant to put them to work for the kind of hours that they do exempt employees, and as a result, non-exempt workers produce less per year (indeed, non-exempt workers frequently have productivity that is more obviously a function of hours worked than exempt workers).

The tendency of employers to honor the forty hour a week expectations for hourly workers also leads to the greater frequency with which working class families have bread winners who work two or three jobs. Yet, working multiple jobs generally doesn't produce overtime pay. Instead, someone who works two jobs usually earns less per hour at their "second" job than they do at their first one, essentially earning negative overtime pay, and must endure a more complicated life as a result of juggling more than one work schedule.

The forty hour week for non-exempt employees may also help explain why self-employed constructive and maintenance contractors like plumbers and carpenters are often economically comfortable compared to employees in big companies and government agencies doing comparably skilled work.

The fact that employers tend to structure jobs that require only a high school education as hourly, while structuring jobs that call for college educations as managerial or professional, a division more or less embedded in the FLSA regulations, which look to education as a key factor in a "professional" designation, also impacts how employees are managed. The route of least resistance for a work place that has hourly employees under the FLSA is to micromanage work hours and breaks in a way that can manifest itself as a paternalistic lack of trust that can be socially demeaning. A salaried workplace, in contrast, almost necessitates a more hands off management style that implicitly trusts the worker. This puts one more brick in the wall of class separation between the working class and the middle class.

Overtime, ironically, is one employee benefit that economically rational people stuggle to be denied.

Limitations

This post isn't an economics journal article and includes only intuition, not econometric estimates, although I have no doubt that there is a whole literature out there that attempts to quantify these amounts and, in all likelihood, not much consensus within that literature.

But there is real reason to wonder if the FLSA doesn't contribute to, rather than mitigating, the serious problem of the social class divide in the United States.

Moving Gitmo To Afghanistan?

The U.S. is building a new prison, in Afghanistan, for up to 1100 terrorists and terrorism suspects. The existing prison, in Bagram air base, holds 610 inmates. Apparently, the U.S. wants to transfer the 270 prisoners held at the at Guantánamo Bay, Cuba prison.

From here.

Given the source, I'd count this as a credible rumor, but not a sure thing.

Merchants Love Pictures

I have a credit card with my picture on it. I am continually amazed at what a strong and positive reaction this draws from merchants, from proprietors to cashiers, of all types. They are impressed by the technology of it, and heartily endorse its value in preventing credit card fraud, a problem which even cashiers and grocery store baggers are remarkable sensitive to, even though they personally face little harm from it.

In commercial practice, almost all credit card fraud is born directly by the credit card company, that generally reverses fraudulent charges incurred with customer cards and often waives "deductibles" that its contracts allow it to impose, and indirectly by merchants, who generally receive charge backs for fraudulent charges at their premises from the credit card company.

Reducing credit card fraud with photo ID cards would both reduce time and money spent processing disputes arising out of these incidents for customers, credit card processors and merchants alike, and would also save merchants money.

About 23% of credit card fraud takes place in lost or stolen card transactions that could be prevented with photo ID credit cards. Fraud is actually surprisingly low, however, at least in Canada where:

In the end of 2005, MasterCard and Visa generated a sales volume of more than $190.6 billion, from the circulation of approximately 56.4 million credit cards across Canada. Credit card fraud statistics show that about $2.8 million was lost due to credit card fraud, from fraudulent use of MasterCard and Visa alone.

Thus, credit card fraud produces about $1.47 of losses per $100,000 of sales.

Another source suggests that fraud losses are higher overall, with net fraud losses of $70 per $100,000 of sales, for a total of just under $1 billion per year, although it doesn't identify how much of that loss is in face to face transactions.

Another tool, password protection for credit cardsand ATM cards using the same kinds of personal identification numbers used by ATM cards verified by "smart chips" on the card that are not revealed to the vendor, has reduced fraud in face to face transactions in the U.K. by two-thirds from 2004 to 2007. Credit card PINs will be near universal by 2010 ion Europe. Similar declines have been seen elsewhere in Europe (also here).

Any way you cut it, losses in credit card transactions to fraud pale compared to losses by credit card companies due to defaults by credit card holders.

In the U.K. for instance:

[B]etween 2007Q2 and the same quarter a year earlier the write-off rate for credit card debt rose from 5.6% to 7.5%. Each write-off rate is calculated by dividing the amount written-off over the latest four quarters by the average stock of debt over the same period. Write-off rates are increasing. At the start of 2000 the write-off rate for credit card debt was below 2%.

On a comparable basis with the numbers mentioned above for fraud, that means that write offs produced losses of $5,600-$7,500 per $100,000 of sales, and approached $2,000 per $100,000 of sales the less debt stressed year 2000.

Merchants pay on the order of 1% to 3% of their sales as a service fee to credit card companies, which works out to $1,000 to $3,000 per $100,000 of sales, which is similarly far more significant than merchant losses from fraudulent charges which they are required to bear through charge backs.

Bad debts are 100 times more important to credit card system bottom lines than fraud.

Drinking Like A Prosecutor.

In an amusing feat of hard hitting investigative journalism, the staff at the Colorado Springs Independent spent a day copying the drinking habits of El Paso County District Attorney John Newsome to see how drunk they would become.

Not surprisingly, the evidence overwhelmingly established that drinking as much as alcoholic attorney Newsome is enough to make anyone legally unable to drive, which Newsome did after his binge (which isn't out of the ordinary for him).

Newsome faces a Republican primary challenger. No Democrat stepped forward to run in Colorado's most conservative city.

Peak Oil Gets Personal

As recently as 2004, trucks and SUVs accounted for 70 percent of Ford's sales volume . . . . Retail sales of trucks and SUVs accounted for just over 30 percent of sales in April. . . Ford's smallest offering, the Focus sedan, saw sales jump 29 percent in the first four months of this year.

From here.

All of the big three automakers have cut truck and SUV production as a result of recent sales trends, and reduced their overall sales forcasts. Small cars are doing well in the used car market. Another parent at my children's school often drives to school in a neighborhood electric vehicle (picture above), which looks like a Smart car but smaller.

If gasoline prices continue to rise, truck and SUV sales will presumably fall even further. The lemonaide side of the equation is that this shift will produce a reducing in U.S. oil consumption as a result of increased fuel efficiency for another decade.

Obama On Taxes

According to F. Patrick Brown, writing for the Kansas City Star (hat tip to the Tax Profs Blog), Obama's key tax proposals are as follows:

Obama will reinstate the individual income tax rates established in 1994.

While the difference between the highest tax rate in 1994 (39.6 percent) and the highest tax rate in 2008 (35 percent) is less than 5 points, that figure is misleading, because tax brackets increased faster in 1994. For example, in 1994, the maximum rate on taxable income started at $250,000, while in 2008 it doesn’t start until $357,700. . . .

Congressional leaders want to lower corporate income tax rates to be more competitive with our trading partners. Obama wants to redirect corporate tax incentives (credits, deductions and exclusions) to achieve economic and social policy objectives. . . .

Obama will tax dividends at marginal income tax rates and will raise the tax rate on long-term capital gains to 1994 levels (28 percent). . . .

The prior Republican Congress lowered the tax rate and raised the amount of the exemption, but did not repeal the taxes on the transfer of property between generations. With the expiration of the Bush tax cuts in 2011, the higher rates and lower exemptions will be reinstated. The Democratic Congress has also adopted the policy of “mend it, don’t end it.” . . .

American taxpayers pay a Social Security payroll tax on earned income at the rate of 12.4 percent, plus a Medicare payroll tax on earned income at the rate of 2.9 percent. Self-employed individuals pay the entire 15.3 percent, while employees split the tax equally with their employers.

The amount of earned income subject to the Medicare tax is unlimited. The amount of earned income subject to the Social Security tax is limited. . . . in 2008 you will pay $12,648 (12.4 percent times $102,000). . . . Obama would remove any limit on the amount of earned income subject to the Social Security payroll tax. . . .

[Obama proposes an] oil windfall profits tax.

The article fails to note the Obama proposal to "create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family." The credit would be available to the extent of employee payroll taxes paid by the taxpayer on their first $8,100 of earned income.

Some other notable Obama tax proposals not mentioned are:

* "eliminate all income taxation of seniors making less than $50,000 per year."
* "a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief,"
* a reform of "the Child and Dependent Care Tax Credit by making it refundable and allowing low-income families to receive up to a 50 percent credit for their child care expenses,"
* a "universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students," and
* a proposal to "increase the number of working parents eligible for EITC benefits, increase the benefits available to parents who support their children through child support payments, increase benefits for families with three or more children, and reduce the EITC marriage penalty, which hurts low-income families."

Last year, Obama introduced legislation in the Senate to establish "a tax credit to companies that maintain or increase the number of full-time workers in America relative to those outside the US; maintain their corporate headquarters in America; pay decent wages; prepare workers for retirement; provide health insurance; and support employees who serve in the military."

Obama favors giving "the Treasury Department the tools it needs to stop the abuse of tax shelters and offshore tax havens" and "eliminating special-interest loopholes and deductions, such as those for the oil and gas industry."

Finally, Obama also proposes to allow the IRS to generate a starting point tax return for them based upon information returns already filed with the IRS.

The overall design of the tax plan resembles that of the Clinton administration, with moderately high taxes on the well to do, although not in any purist fashion that, for example, equates earned and unearned income as a matter of principle, accompanied by many targeted tax credits.

Would These Proposal Be Enacted?

If Obama wins the general election, it is likely that he would do so with Democratic majorities in the House and the Senate. The Democratic majority in the Senate would likely be largely than it is now, although a 60 vote filibuster proof majority would be a stretch and even with 60 Democrats in the Senate compromise may often be necessary with conservative Democrats in that chamber.

While a President Obama is likely to get some semblance of his tax agenda enacted, Congress is particularly strong vis-a-vis the President on the issue of tax policy, and indeed, democratic government in England, France and the United States was strongly motivated in each case by a desire to give democratically elected representatives a say over tax policy. Thus, Obama is unlikely to get precisely what he proposes, even though all of his proposals will receive a fair hearing.

For example, I suspect that it is unlikely that Obama will actually secure elimination of the earnings cap on Social Security payroll taxes, if elected, although he would probably secure a substantial expansion of that tax base.

Similarly, while Obama is likely to secure a return of the 1994 income tax brackets (including the 39.6% bracket), it is likely that the brackets would largely track the existing income cutoffs, rather than those in place in 1994.

In all likelihood, some, but not all, of the tax credits proposed will become law.

My best guess with regard to the gift and estate tax is that Congress will decide to lock in the tax rates and exemptions in place in 2009 (i.e. 45% of the taxable transfers in excess of $3,500,000 of taxable gifts and bequests in a lifetime).

Does Short Sale Regulation Cause Bubbles?

[I]n volatile markets, defined by a wide divergence of opinion on a new event, the bears sit on the sidelines and the bulls buy -- leading to a buying frenzy. Why do the bears sit on the sidelines? It is hard to short.

One of the reasons it is hard to short is government interference (which was recently reduced with the repeal of the up tick rule] . . . Government should get out of the way of shorts--let the market devise cheaper ways to short (not the modern ultra short ETFs) and we might have fewer bubbles.

From here.

While I don't necessarily agree, and the post is a stray throught attacking an issue of massive economic importance, it is empirically and theoretically well motivated and deserves greater attention.