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31 December 2017

Good Riddance 2017!

On the whole, the year 2017 has been a dumpster fire, and I am happy to wish it adieu.

The Broncos Aren't Going To The Playoffs

The Denver Broncos lost their final game of the season today, leaving them with a 5-11 record for the year, fourth in the AFC West.

How the mighty have fallen after days in the Superbowl and with near misses.

At least we aren't the worst in the AFC or the NFL. That dishonor would fall to the Cleveland Browns who have a 0-16 record this season.

The Threshold For Disarming People Needs To Be Lower

[T]he gunman had no known criminal history, but he was well known to law enforcement.
From the Denver Post.

Five deputies were shot (one died) and two civilian neighbors were shot, before the gunman who was the source of the domestic violence call was killed.

When police respond to a domestic violence call and the gunman was "well known to law enforcement", that person should have been disarmed already and the criminal justice system is failing us.

Does The Law Of Gravity Still Apply?

One of the most stunning features of politics over the last year in the United States has been the indifference of Congress and the President to public opinion.

Gerrymandering can insulate Republicans who are in power somewhat from voter backlash, but this has limits

Will Republicans pay a political price for instances like those below in which Republicans have defied public opinion in favor of minority views of the Republican base?

* Believe it or not, the President's refusal to sincerely condemn white supremacists and neo-Nazis  has not been popular with the average American voter.

* The Republican party seriously hurt its brand by running a U.S. Senate candidate in Alabama, Roy Moore, who was an accused pedophile who insisted that the last time America was great was when slavery was in force. And, President Trump did not favors for his party by wholeheartedly endorsing this candidate after previously opposing him in the primary.

* Believe it or not, spewing blatant lies on a daily basis does not increase your credibility. It is one thing to fail to keep political promises. It is another to deny saying things recorded on videotape that you said in front of national TV audiences or that are plain to the eye to see are untrue (like your inauguration crowd's size).

* You so nor impress even your base by nominating people with absolutely no trial experience and no familiarity with the laws applied by a trial court judge, to lifetime trial court judge appointments. Republican Senators, likewise, do themselves no favors in coming elections, by voting for these nominees in committee, only to change their minds about the qualifications of the candidates in floor votes.

* Pushing a bill to make it easier to get guns in a year marred by some of the worst mass shootings in history is not a good plan to win over independent voters. Neither is intentionally inviting the NRA to a White House meeting on the 5th anniversary of the Sandy Hook elementary school massacre.

* Telling police that they should engage in brutality against arrestee's in a public speech is not politically smart.

* You do not build a reputation as a "winner" politically, by undermining court challenges to your agenda with middle of the night twitter posts.

*  You do not build credibility about your ability to govern when three months after a Hurricane, 45% of Puerto Rico is in the dark, in part because the process was slowed down by the hiring of an utterly incompetent two person electrical company in flyover country who happens to have political connections to one of your cabinet secretaries. 

* Failure to prioritize disaster relief for Puerto Rico also forces the migration of hundreds of thousands, if not millions, of people who feel like they were personally betrayed by the Republican party into states that will be swing states in 2018.

* Actively deporting "Dreamers" (whom your rhetoric on the campaign trail supported) and long time well behaved hard working parents in high profile cases is not a way to build popularity and a reputation for common sense.

* Denying climate change is a position that is increasingly unpopular.

* What the hell were Congressional Republicans thinking when, to add insult to injury, it added a tax break for private jet owners to its signature legislation for the year, and kept that provision in the Conference Committee version of the bill, in order to cut taxes by less than $5 million a year to a group of people already receiving huge tax breaks under the tax bill, in the face of immense public criticism and certain, effective, attack ads aimed at every Republican who voted for the bill in the fall based on that provision?

* Proposing a tax increase of six to eight thousand dollars on almost every graduate student in the nation is far outside the political mainstream and dramatically intensifies anti-Republican political fire in a whole generation of young people, even when it doesn't get included in the final tax bill. The long game is about building political trust with a wider base of people, not undermining it.

* Of course, Congressional Republicans didn't do the GOP any favors when it passed a tax bill that was overwhelmingly unpopular with the American public.

* Believe it or not, even though the American public is skittish about abortion, support for birth control is overwhelmingly uncontroversial among Democrats, Republicans and independents.

* Ending Net Neutrality is not an issue that a silent majority supports. It is wildly unpopular with people that otherwise might not be very politically minded.

* While Trump supporting Republicans seem to have forgotten this fact, cozy ties with Russia are not popular with the vast majority of Americans.

* Mid-term election results, at both the state and local level, are strongly driven by the popularity of the President, and no President in recent history has been as unpopular as President Trump a year into his Presidency.

* Proposing an unpopular bill to take away health care from tens of millions of American hurts everyone who voted for the legislation in mid-term elections, even if the bill doesn't pass because a few Republicans defect.

* Openly stating that the reason your tax bill created a deficit was to force cuts in Social Security and Medicare, which historically have been third-rails in American politics, is not wise going into a mid-term election.

* A Republican President is out of his mind to go to political war with NFL football.

30 December 2017

Radioactivity Caused Mutants Are Most Likely Flight Attendants Or Their Kids

"Flying in airplanes exposes people to more radiation than standing next to a nuclear reactor."

From here.

Flight attendants have more exposure to radiation than pilots per year, because pilot hours are limited for passenger safety reasons while flight attendant hours are not.

29 December 2017

Why Do Stores In Crappy Neighborhoods Sell Mostly Unhealthy Food?

Stores in poor neighborhoods sell mostly unhealthy food mostly (explaining 91% of the variance) because that is what people in poor neighborhoods want to eat.

Why Don't Firms Invest More?

A new economics paper compares reality with theoretically predicted amounts of private investment in capital and finds that firms invest less than predicted. Then, it tries to determine why this is the case. So, it lists some reasons (I only include the good ones) and then states its conclusion:
(ii) changes in the nature and/or localization of investment (due to the rise of intangibles, globalization, etc), (iii) decreased competition (due to technology, regulation or common ownership), or (iv) tightened governance and/or increased short-termism. We do not find support for theories based on risk premia, financial constraints, safe asset scarcity, or regulation. We find some support for globalization; and strong support for the intangibles, competition and short-termism/governance hypotheses. We estimate that the rise of intangibles explains 25-35% of the drop in investment; while Concentration and Governance explain the rest. Industries with more concentration and more common ownership invest less, even after controlling for current market conditions and intangibles. Within each industry year, the investment gap is driven by firms owned by quasi-indexers and located in industries with more concentration and more common ownership. These firms return a disproportionate amount of free cash flows to shareholders.
So, more competition leads to more investment, while oligarchy and overlapping boards of directors lead to less investment and the non-retention of earnings.

Fragmentary Facts and Hypotheses About Identity And More

This post will proceed to set forth some facts and some factually supported theories that are related to each other, without necessarily assembling the pieces of the puzzle into a comprehensive description or worldview, and without necessarily fully articulating their relationship either.

Insights From Anthropology

* It is a hypothesis that ethnicity, defined as a group of people who are part of the same cultural community, is something that really exists and profoundly influences the life experiences that a person has, even when applied in a fairly crude manner.

* It is a fact that ethnicity is significantly correlated with shared genetic ancestry associated with a a shared history of particular geographical areas, historical migrations, and admixture events.

* It is a fact that the way the boundaries between one ethnicity and another, and the content of those ethnicities has changed over time, and is not entirely uniform in different places. In other words, within larger communities containing multiple ethnic communities, the structure of the system of ethnicities that is understood on a shared basis by the members of the larger communities is socially constructed (although not within the control of any one individual).

* It is a hypothesis that the influence that ethnicity has on a person's life experiences has more to do with the culture associated with an ethnicity than it does with a person's genetic ancestry.

* It is a hypothesis that every culture is more functional in some circumstances than it is in other circumstances; at any given time and place, some cultures will be more functional for their members than others.

* It is a hypothesis that on average, women, in general, assimilate into a new culture more readily when immersed in a culture different from that of their earlier childhood or that of their parents, than men.

* It is a fact that many prehistoric and pre-modern cultures in Europe were strongly patrilocal. Hence, men stayed in the communities and extended family units where they were born, while the women they married relocated to be with their husbands moving away from their place of birth.

* But, it is also a fact that many shifts from one culture to another have involved male dominated migrations to a new territory in which the migrating men had children mostly with local women and displaced the population genetic impact of local men.

Socio-Economic Success, Education and Military Experience

* It is a fact that African-American women have much more academic success and on average attain more education than African-American men. For example, African-American women are significantly more likely to have some college, to have an associate's degree, to have a four year degree, and to have a graduate degree than African-American men. The following chart illustrates part of this trend:


African-American men are about a third less likely to earn a four year college degree than African-American women (the gap between white women and white men is about 22%). Unsurprisingly, there is also a large African-American gender gap in college enrollment: "black women hold a large lead over black men in almost every facet of higher education. Black women currently earn about two thirds of all African-American bachelor's degree awards, 70 percent of all master's degrees, and more than 60 percent of all doctorates. Black women also hold a majority of all African-American enrollments in law, medical, and dental schools. Looking exclusively to undergraduate higher education, the latest Department of Education figures show that black women account for 63.6 percent of all African-American enrollments." 

Similarly, at the high school level: "In 2013, the completion rate for black males (83.5 percent) was 5.9 percentage points lower than black females[.]" Thus, 16.5% of black males were high school dropouts, while 10.6% of black females were high school dropouts, so black males made up about 61% of black high school dropouts. As noted below, it is highly implausible that this significant gap can be explained by IQ differences.

* It is a fact that African-American women are more socio-economically successful in the U.S. than African-American men, compared to their same gender peers of other ethnicities (according to the linked source: "black women in America have for many years achieved virtual wage and employment parity with non-black women, whereas black male wages end employment status remains far behind the comparable status for non-black men.")

* It is a hypothesis that the socio-economic prospects of women who have less education and are from a lower socio-economic class suffer fewer economic opportunity costs by leaving the work force temporary to have children than women with more education from a higher socio-economic class.

* It is a fact that the education and employment opportunities of women have dramatically improved since 1970.

* It is a fact that whites and Asians, on average, are more successful socio-economically on almost every conceivable measure of socio-economic success than African-Americans in the United States.

* It is a fact that people with less education are more likely to be unemployed that people with more education.

* It is a fact that African-Americans with a given level of education are, on average, more likely to be unemployed than whites and Asian with the same level of education.

* It is a fact that the average earnings of men with a high school education have increased very little since the 1970s in excess of inflation, while the average earnings of men with a four year college degree have participated in most of the economic growth the economy has experience in excess of inflation since the 1970s.

* It is a fact that the average earnings of women at all levels of education has increased significantly in excess of inflation since the 1970s.

* It is a hypothesis that a substantial share of the disparity in earnings between men and women in the U.S. economy is attributable to the time that women spend outside of the workforce or less intensely engaged in the workforce while focusing on raising children.

* It is a hypothesis that the disparity in earnings between women who do not have children and men in the U.S. economy is quite modest, particularly after controlling for choice of occupation.

* It is a fact that occupations with a large percentage of women tend to pay less than professions with a large percentage of men that require comparable amounts of education and training. 

* It is a hypothesis that whites in "Red States" (more precisely in geographical regions more fine-grained than state lines where the white cultures and ethnicities associated with the South and Appalachia are most common) are, on average, less successful socio-economically on almost every conceivable measure of socio-economic success than whites elsewhere in the United States, and that the same distinctions can be observed by using other proxies for different white ethnicities in the United States such as ancestry and religion, even though they are more successful socio-economically on almost every conceivable measure of socio-economic success than African-Americans in the same regions.

* It is a fact that some African-American immigrant populations in the United States, for example, Nigerian immigrants, are more socio-economically and educationally successful than native born African-Americans.

* It is a fact that Cuban-Americans in the United States are more socio-economically successful than most other Hispanic populations in the United States.

* It is a fact that second and later generation immigrants to the United States are less distinguishable from the general population of the United States than first generation immigrants to the United States, on average, in terms of education, health, socio-economic status, endogamy, religion and almost every other measure.

* A not immaterial number of Americans immigrated to the United States as foreign adoptees or as prospective spouses of U.S. residents (i.e. "mail order brides").

* It is a fact that the percentage of native born Americans who earn at least high school diplomas, who have at least some college, who earn a college degree and who earn a graduate degree has increased, both for men and for women, in every ethnicity in the United States, since 1970, while the percentage of native born Americans who do not earn a high school diploma has declined, both for men and for women, in every ethnicity in the United States, since 1970.

* It is a fact that income and wealth inequality in the United States, have increased steadily, with only temporary interruptions during recessions, since the 1970s.

* It is true that the ratio of active duty military personnel in the United States military to the population of the United States is at or close to the lowest level it has been at since prior to World War II.

* The draft most recently started in the United States in 1940 and ended on January 27, 1973. The youngest men who had to register for the draft at a time when people were still being drafted are now 67 years old. People who had to register for the draft when it was instated in 1940 are now at least 96 years old. No one who was subject to conscription is now below the Social Security retirement age.

* Private sector unionization rates in the United States have declined significantly since the 1970s and are near record lows in the history of the union movement pre-dating the major national labor laws in the United States. The public sector in the United States is unionized at a much higher rate.

IQ, Genetics and Environment

* It is a hypothesis that genes associated with IQ predominantly establish a person's peak potential IQ if that person has a sufficiently favorable environment, rather than being a cause of IQ that is independent of environment.

* It is a fact that phenotypic IQ has a strong hereditary component, some of which has been associated with particular genes.

* It is a fact that twenty-two and a half chromosomes of African-American women are no different than those of African-American men, on average.

* It is a fact that IQ is massively polygenetic and that genes correlated with IQ are not exclusively or predominantly found on sex chromosomes.

* It is a fact that phenotypic IQ appears to be less of a function of heredity in people who are in poverty than in people who have more comfortable lives.

* It is a fact that average IQ in countries changes over time in what is known as the Flynn Effect when it rises, although overall declines in a country's IQ over time have also been observed.

* It is a fact that exposure to certain environmental factors such as lead, and the absence of certain nutrients during a mother's pregnancy and a child's infancy, can depress IQ, sometimes to the point of a developmental disability operationally defined primarily by a child's low IQ.

* The gap in SAT math section scores between African-American boys and African-American girls is much smaller than for all other ethnicities (8 points v. 24-32 points for other ethnicities). 

* It is a hypothesis that immigrant populations from a country to the U.S. are frequently very atypical in IQ of residents of the source country as a function of the basis for their migration to the U.S.

* It is a fact that there are currently significant differences in average measured IQ scores between members of different ethnicities in the United States (see, e.g., here). The reasons for these disparities is hotly disputed, although some of the differences are a product of recent immigration history (e.g. policies mostly allowing the immigration only of college educated STEM professionals from certain countries at certain times in recent history).

* It is a fact that there are currently significant differences in average measured IQ scores between residents of different countries in the world. The reasons for these disparities is hotly disputed.

* It is a fact that the population genetic history and historical migration history of essentially all ethnicities in the United States is reasonably well understood from both historical and genealogical records and from DNA testing with large sample sizes and high coverage.

* It is likewise a fact that all Americans except pure blooded Native Americans (including indigenous peoples of any of the Americas), have a most recent ancestor to arrive in the United States within the last 525 years, and only a fairly small minority of Native Americans in the United States are "pure blooded" in the sense of not having any genetically discernible post-Columbian ancestry from outside North America and South America. Furthermore, even "pure blooded" Native Hawaiians and "pure blooded" Inuits in Alaska have most recent ancestors in the Americas on the order of 2000 years ago or less.

* It is a hypothesis that the time depth of the most recent ancestor to arrive in the United States for the median American is probably less than 140 years.

Crime

* It is a fact that African-American men are much more likely to have criminal records, to have been convicted of felonies, and to have been incarcerated, than men in any other major U.S. ethnicity and than women in any other major U.S. ethnicity.

* It is a fact that African-American males who are juveniles are much more likely to be subject to official discipline in school and to have run-ins with the juvenile justice system.

* It is a fact that African-Americans are treated more harshly at pretty much every level of the criminal justice system for comparable conduct, from exercises of discretion by police officers to criminal sentencing following convictions for crimes, than whites.

* It is a fact that state murder rates are much more strongly correlated with the percentage of the population that is African-American than with any measure of the state's socio-economic health (e.g. poverty rates or median income), the percentage of the population that is foreign born, the percentage of the population that is Hispanic, the adoption of the death penalty, or the adoption of gun control measures. The percentage of the population that is African-American is the first order predictor of a state's murder rate.

* It is a fact that most African-Americans who are murdered are murdered by other African-Americans and that most whites who are murdered are murdered by other whites.

* It is a fact that women are much less likely to have criminal records, to have been convicted of felonies, and to have been incarcerated then men of the same race and ethnicity in every culture on Earth.

* It is a fact that men of every ethnicity commit far more violent crimes than women of the same ethnicity.

* It is a fact that a significant share of crimes for which women are punished in the criminal justice system are crimes in which they were co-participants with adult or young adult men who played significant roles in their lives.

* It is a fact that almost everywhere in the United States, crime rates have fallen precipitously between 1990 and the present.

* There is a correlation between the decline in the crime rate in the U.S. and both the availability of legal abortion and declining exposure to lead in the environment (deferred by the time those changes needed to reach young adult men), although causation and magnitude of those effects, if any, is not definitively established.

Life Expectancy

* It is a fact that the life expectancy of Native Americans who live on or near Indian Reservations is at least as low as the life expectancy of people in any other geographic regions in the United States.

* It is a fact that the pockets of the lowest life expectancy in the United States outside of Indian Reservations are in "Red States".

* It is a hypothesis that these differences in life expectancy are strongly mediated by different cultural practices which are associated significantly with ethnicity, with cultural differences playing a particularly important part in life expectancy differences associated with infant mortality, diet and deaths from accidents, homicides and suicides.

* It is a hypothesis that differences in life expectancy due to hereditary vulnerability to diseases associated with the genetic makeup of members of an ethnicity is not a significant source of differences in life expectancy between members of different ethnicities in the United States.

* It is a fact that foreign born immigrant populations in the U.S. have better health outcomes by almost every measure than people in the country from which they immigrated.

Fertility and Marriage

* It is a hypothesis that best first order predictor of whether a heterosexual couple gets married, and stays married, is whether a woman believes that her husband or prospective husband is able to add economic value to the marriage. Operationally, this is well measured by whether the husband or prospective husband is employed and earned more than the wife, or is likely to be employed and to earn more than the wife upon entering the work force. There are second order and yet less important factors that also influence whether people get married and stay married, but the first order analysis is enough to explain most of the general trends that are observed.

* It is a fact that African-American women are much less likely to be married than white and Asian women, and are much more likely to have children outside of wedlock.

* It is a fact that out of wedlock child bearing has become much more common for all races and ethnicities since 1970.

* It is a fact that exogamy across ethnic lines is more common among women than men for second generation Hispanics in the U.S., second generation Asia-Americans in the U.S., and non-Hassidic Jewish women in the U.S.

* It is a fact that interracial and interethnic marriage rates are rising.

* It is a fact that median age at first marriage has increased steadily in the United States since 1970.

* It is a fact that the average number of children per woman per lifetime has decreased significantly in the United States from the Baby Boom in the 1950s and 1960s to the present.

* It is a fact that the rate at which women under the age of 30 have children in the United States is at an all time low.

* It is a fact that teen birth rates have declined for every ethnicity in the United States since 1970 and are near an all time low.

* It is a fact that more than 90% of women have children during their lives, and that they have their first child between the ages of 15 and 44.

* It is a fact that most women who have children, either leave the work force for a significant period of time, or reduce the intensity of their participation in the work force for a significant period of time, to focus on raising their children.

* It is a fact that more than 90% of men in all but a handful of countries and all but a tiny subset of highly differentiated ethnicities in the U.S. have children during their working lives.

* It is a fact that most men who have children do not leave the work force for a significant period of time, or substantially reduce the intensity of their participation in the work force for a significant period of time, when they have children.

* It is a fact that men who are incarcerated, men who have low levels of education such as dropping out of high school, and men who have weak success in the employment markets have at least as many, or almost as many, children over the course of their lifetimes as men with no criminal records, men who have high levels of education such as four year college degrees and graduate degrees, and men who are very successful in the employment markets.

* It is a fact that couples with only high school levels of education are much less likely to marry and more likely to divorce if they do marry, than couples with four year college degrees or more, and that this holds among whites, among African-Americans and among Hispanics.

* Abortion rates in the U.S., both relative to the number of fertile women and relative to the number of live births peaked around 1980 and have more or less steadily declined since then to today's levels which are comparable to those in 1973, the same year that Roe v. Wade was decided by the U.S. Supreme Court.

* African-American women obtain abortions at significantly higher rates than white women.

Religion

* It is a fact that a significant share of adults in the United States change their religious affiliation to a different religion or a different denomination or sect of the same religion during their lifetimes.

* It is a fact that in the United States, people who identify as non-Christian are more likely to have a liberal or Democratic party political leaning than people who identify as Christian, for almost every variety of non-Christian (considering Mormons, for this purpose, to be Christians).

* It is a fact that in the South and Appalachia (apart from Florida, Louisiana and Texas which were historically part of Spain or Mexico or France and have significant Catholic populations, and in the case of Florida, also a significant Jewish population), people who are Catholic, Lutheran, Orthodox Christian, Jewish, Mormon, Unitarian-Universalist, Muslim, Sikh, Hindu, Jain, Shinto, Buddhist and neo-pagan are all much less common than in the United States as a whole. Put another way, almost everyone in those places who is not non-religious is a Protestant Christian, and those who are Protestant Christian are predominantly adherents of conservative historically white Christian denominations (basically Evangelicals).

* It is a fact that the number of adherents of historically white mainline Christian denominations in the United States has plummeted over the last several decades.

* Most U.S. Protestant religious denominations split along mainline and conservative lines in connection with the North-South fights over race and slavery in 19th and early 20th centuries.

* Almost all Christian religious denominations in the United States are historically white or historically black, although this is slightly less true with respect to Roman Catholicism (in recent history, it was, of course, historically Mediterranean if one goes back far enough).

* It is a fact that the number of white Catholics in the United States has plummeted over the last several decades, a decline comparable to that of native born whites in other Christian denominations that are historically white that has been masked by Catholic immigration most of which has been Hispanic.

* It is a fact that the number of adherents of historically white conservative Christian denominations has fallen over the last several decades, although not as fast as the number of historically white mainline Christians and native born white Catholics.

* Many people whose ancestors identified with a historically white conservative Christian denomination now identify as non-denominational Christians.

* It is a fact that the number of people who identify as non-religious has surged over the last several decades.

* It is a fact that religious denominations associated with "Red States" and the white cultures and ethnicities associated with the South and Appalachia have members with less education on average, lower college admission test scores on average, and lower earnings on average, than religious denominations associated with other white cultures and ethnicities.

* It is a fact that Europe saw a significant decline in the intensity of religious activity by native born Europeans and in identification with the respective historical established churches of the various European countries after World War II, but several decades before the United States experienced a similar decline.

* It is a fact that adherents of Evangelical Christian denominations or other Christian denominations comparable to white conservative Christian denominations in the United States, do not make up a large percentage of the population of any European country. 

* It is a fact that adherents of Christian denominations comparable to white conservative Christian denominations in the United States are, however, a significant share of Christian populations in Latin America, sub-Saharan Africa, parts of Oceania and parts of Southeast Asia and East Asia, and that these adherents are ultimately traceable to U.S. missionary efforts.

The Big Apple Has Never Been Safer

Just days from the end of 2017, New York City is set to tally a record low number of murders for the year and serious crime, more generally, will have declined for the 27th straight year. As of Wednesday, 286 murders had been committed in the city, putting New York on pace to dip below its previous homicide low of 333 in 2014. To give some perspective to how far the murder rate has dropped in the city over the past several decades, the New York Times notes this year’s murder rate is on the verge of being “the lowest since reliable records have been kept,” an unthinkable turnaround from 1990 when there were 2,245 killings in New York City. 
Other types of major felony crimes — manslaughter, rape, assault, robbery, burglary, grand larceny, and car thefts — have fallen since last year and, put together, are also likely to close out the year at historic lows. The nearly 95,000 major felony crimes committed so far this year is on pace to best last year’s record low of 101,716. In 1990, by contrast, there were 527,000 major felony crimes recorded in New York City.
From here.

28 December 2017

Not All Industries Are Created Equal

Despite a strong theoretical basis and conventional wisdom in economics that the extent to which a sector of the economy influences the business cycle is strictly a function of its size in terms of GDP, the empirical evidence shows convincingly that some sectors of the economy are more influential relative to the size in terms of GDP than others, with the oil and gas sector being the most influential. This is because the detailed relationship of one sector of the economy to another matters.

The Oil and Gas Industry
[R]apid increases in the price of oil have preceded almost all U.S. recessions (see Hamilton’s papers) and such increases appear to be much more important than the size of the oil sector would allow.…It turns out that for a large negative shock, the “oil and gas” industry produces the largest negative response in GDP – this despite the fact that the oil and gas industry is not the largest industry in the economy.

What is special about the oil and gas industry? 

One point that I hadn't been aware of was how much of the overall capital expenditures of the U.S. economy are related to the oil and gas industry.

In 2015, which wasn't particularly unusual, 13.3% ($218.9 billion) of all capital expenditures by U.S. firms in that year ($1,638.6 billion) were made by the oil and gas industry. See here and here

Yet, total employment in the oil and gas industry is about 180,000 people compared to a total labor force in the U.S. of about 140,400,000 people using comparable statistics from the same source. So, the oil and gas industry employs only about 0.13% of the total U.S. work force.

Thus, the oil and gas industry is roughly 100 times as capital intensive per employee as the U.S. economy as a whole. 

Also, who makes all this capital? The manufacturing industry, which is neck and neck with the oil and gas industry as the source of the most capital investment in the U.S. economy, although the manufacturing industry employs far more people than the oil and gas industry does so it isn't nearly as capital intensive per employee as the oil and gas industry. (The construction industry also provides a lot of the capital for the oil and gas industry.)

So, a material chunk of the capital investment in the manufacturing industry, on a statistical basis, supports the capital needs of the oil and gas industry.

Coal Compared

The coal industry, in contrast, is not very special.

Capital investment by the coal industry in 2015 was $2.6 billion (about 0.16% of the U.S. total) and the industry employed about 68,000 people (about 0.05% of the total U.S. workforce) (a number that has fallen significantly to about 53,000 people since then), so the coal industry is only about 3.2 times a capital intensive as the U.S. economy as a whole and is not a significant part of either the U.S. market for capital investment or the U.S. workforce.

Coal is used predominately by electrical utilities to generate power and by manufacturing companies to make "coke" an intermediate component of the metal manufacturing process.

Moving coal makes up a substantial share of freight rail and river barge freight traffic, but neither freight rail nor freight barges are a huge part of the U.S. economy.

Wal-Mart Compared

As a further comparison, a single firm, Wal-Mart employed 1.4 million people in the U.S. (and 2.3 million people globally) in 2016. It had $478.614 billion in sales from U.S. operations (about $480 billion globally) in 2016.

Thus, Wal-Mart employs almost eight times as many people in the U.S. as the entire oil and gas industry and about twenty-one times as many people in the U.S. as the entire coal industry.

Retail trade, however, is not very capital intensive. The entire retail trade industry made $85.8 billion of capital investment in 2015, about 5.2% of the total U.S. capital investment, but the retail trade industry, of which Wal-Mart is a part, as a whole, employs 15,845,000 people, about 11.3% of the total U.S. work force. So, retail trade is about 46% as capital intensive per employee as the overall U.S. economy.

Wal-Mart accounts for about one in eleven employees in the retail trade industry. The total capital investments made by Wal-Mart are probably on the order of about $7.56 billion per year (applying its share of industry employment to industry-wide capital investment0.

So, despite being in a not very capital intensive industry, Wal-Mart's annual capital investment is 2.9 times as great as the entire coal industry in the U.S. 

What Should A Democratic Response To H.R. 1 Look Like?

What should a Democratic response to H.R. 1 look like?

Some possibilities (excluding the international provisions of H.R. 1 to be dealt with separately).

Tax Rates For Ordinary Income

1. Corporations, trusts and estates: a flat 40%. 

But, corporations receive a new 100% deduction for dividends paid to shareholders subject to U.S. income taxation (the dividends paid deduction would not apply to shareholders not subject to income taxation such as non-profits and foreign investors). Special treatment for dividends received is abolished. Abolish the accumulated earnings tax and the various personal holding company taxes. 

Deny a deduction for distributed income for income distributed by trusts and estates to beneficiaries not subject to income taxation such as non-profits and foreign investors. Trusts with beneficiaries not subject to income taxation also cannot be taxed as "simple trusts".

2. Ordinary income: top rate 36.2% (plus a 3.8% Medicare surtax for investment income that is unchanged). Leave marginal rates of H.R. 1 up to 32% in place (which are capped at $200,000 for individuals and $400,000 for joint filers) and tax all income in excess of the 32% bracket (currently taxed at 35% and 37%) in the top 36.2% bracket.

3. Qualified dividends: Treated as ordinary income to taxpayer.

4. Repeal the 20% (with limitations) Section 199A deduction for passthrough income.

Taxation Of Capital Gains

1. Tax rate for long term capital gains 

Set the rate based upon ordinary income tax rates normalized based upon average holding period in months stacked below other income. 

For example, suppose a taxpayer has a $100,000 capital gain on the sale of an asset that was held for sixty months (i.e. five years). The tax rates that apply would be the tax rates due on $20,000 of ordinary income multiplied by five, plus the 3.8% Medicare surtax, if applicable, under current law. Tax rates for non-capital gains income would be the same as the rates that would apply if the taxpayer had $20,000 of ordinary income in addition to the non-capital gains income. 

Regulations would clarify the application of these rules.

No other special capital gains tax rates would apply except for grandfathered special programs with phase out dates such as the Opportunity Zone tax credit created by H.R. 1.

2. Treat lump sum distributions from retirement accounts that are income in respect of a decedent and other deferred income as capital gains for purposes of determining their tax rate.

3. Repeal the Section 1031 exclusion for like-kind exchanges of real estate prospectively.

4. Retain the exclusion of gain on the sale of a personal residence but increase the holding period from two of five years own ownership and residence, to four of eight years of ownership and residence to make it less useful to house flippers. Fill out the regulations for hardship exceptions with proration.

5. Treat death as a taxable sale of all of a capital assets of the decedent subject to certain exceptions:

* Evaluate the exclusion of gain on the sale of a personal residence without regard to holding periods.

* Allow an election to declare a carryover basis for a specific asset if it is an illiquid asset that is used in an active trade or business, or is a residence.

* Exclude the first $100,000 of capital gains arising due to death (indexed) from income taxation.

6. Treat a gift of a capital asset as a taxable sale of the capital asset subject to one exception:

* Allow an election to declare a carryover basis for a specific asset if it is an illiquid asset that is used in an active trade or business, or is a residence.

Undo Or Modify Select Income Tax Provisions Of H.R. 1

1. Increase the age for the child tax credit from under age 17 to unmarried dependents under age 26, and allow it to include children who don't live with the taxpayer. Make the per child and per dependent tax credits fully refundable. Do not phase out these credits.

2. End the SALT deduction dollar cap.

3. Restore the home mortgage interest deduction to $1,000,000 but don't restore the deductibility of home equity loan interest.

4. Reinstate the personal casualty loss itemized deduction.

5. Reinstate the moving expense deduction and the exclusion for employer paid moving expenses. Indeed, liberalize it.

6. Reinstate the alimony deduction and expand it to include child support as well.

7. Reinstate the following miscellaneous itemized deductions with a 2% floor:

* expenses for the production or collection of income
* tax preparation expenses
* unreimbursed expenses attributable to the trade or business of being an employee, 
* repayments of income received under a claim of right (only subject to the two percent floor if less than $3,000)
* repayments of Social Security benefits
* the share of deductible investment expenses from pass-through entities. 

8. Limit NOL deductions to 80% of income per year (from 90% under H.R. 1) and reinstate the 20 year limitation on carry forwards of NOLs. Establish anti-evasion rules limiting "parked" NOLs.

9. Repeal the interest expense limitation of H.R. 1.

10. Repeal the disallowance of deductions for FDIC premiums.

11. Repeal the exclusion for management of private planes.

12. Make the employer credit for paid family and medical leave under H.R. 1 permanent.

13. Reinstate the employee appreciation award exclusion as it was prior to H.R. 1.

Undo Or Modify Select Non-Income Tax Provisions Of H.R. 1

1. Repeal the excise tax on private college endowments.

2. Reinstate the ACA Individual Mandate penalty.

Reforms Relevant To Estate Planning

1. Reduce the lifetime gift and estate tax exclusion to a flat $5,000,000 and end inflation adjustments of this amount.

2. Close many key loopholes in the gift and estate tax regime:

* End minority interest discounts/control premiums for entities; tax them on pro-rata of entity value.
* Deny the annual exclusion for gifts of interests in entities.
* End the gift tax exclusion for unexercised powers of appointment that lapse (i.e. Crummey powers).
* Include life insurance proceeds in the estate of the decedent, regardless of title, unless no portion of the premiums were paid for by decedent or the decedent's family members with anti-evasion rules.
* Treat taxes paid by grantors of irrevocable trusts that are taxed as grantor trusts as taxable gifts to the irrevocable trust.
* Treat gifts made via grantor retained interest trusts as incomplete until their term expires, and as made upon the sooner of a distribution or the end of the term.
* Repeal the QPRT safe harbor.
* Prohibit gift and estate tax exclusions received from a deceased spouse from being inherited by the new spouse of the person who received a deceased spouse's gift and estate tax exclusion.

3. Repeal the Medicaid estate recovery system and Medicaid liens and mildly relax the allowable assets other than real estate to qualify for the Medicaid nursing home program (and the asset requirements to qualify for other Medicaid programs as well). Eliminate the intent to return requirement for residences.

4. In the case of income in respect of a decedent from retirement type accounts, eliminate non-spousal rollovers and stretch distributions.

New Income Tax Provisions

1. Eliminate or phase out assorted tax breaks for the fossil fuel industry.

2. Add an itemized deduction for home owner's insurance and mortgage insurance to the mortgage interest deduction.

3. Add an itemized deduction for rent paid and renter's insurance for one personal residence for taxpayers (whether individual or filing jointly) who do not own a home up to $30,000 a year (indexed).

4. Repeal the EITC and replace with with a full refundable tax credit against employee/self-employed taxpayer income tax equal up to $1,530 of employee FICA tax paid, with any unused amount doubled an applied to self-employment tax paid up to the remaining amount. This would be applied on a per earner basis, rather than a per tax return basis. Establish a fully refundable employer FICA tax paid credit against employer income tax of up to $1,530 per employee.

New Non-Income Tax Provisions

1. Apply the self-employed health insurance deduction to self-employment tax as well as income tax.

2. Treat tips as self-employment income of the person earning the tips, rather than wage and salary income. Require 1099 reporting of tip income controlled by the employer.

3. Increase gas taxes sufficiently to cover all current highway spending now made out of general funds and convert these taxes from a fixed number of cents per gallon to a percentage of the price of gasoline.

4.  Disallow private activity bonds for sports stadiums.

5.  Create a (mostly symbolic) election allowing religious groups to elect to be taxed under I.R.C. § 527 and to be exempt from the Johnson Amendment as a result.

6.  Increase the FICA taxation cap from $127,200 to $270,000 (the maximum amount considered for 401(k) contributions) with assurance of the solvency of the trust funds without retirement age increases as the first and foremost consideration. Make parallel adjustment in self-employment taxation and the Obamacare tax dollar thresholds.

7.  End the taxation of Social Security benefits.