POURING GASOLINE ON THE FIRE

There seems to be optimism that the tax plan considered by the Senate will be approved.  I don't know about you, but I am one of those that will come out thousands of dollars behind in the Senate version.  Perhaps my problem (healthcare deduction) will be removed in Conference Committee.  I can hope, can't I?

Well on this news, the stock market is going crazy today (so far).  The attempt in this tax plan is to give corporations even more money when they are rolling in money as it is.  They have been told that about a third of the corporations will actually improve their plants and hire workers (and give raises?).  Most corporations have said that they will mainly buy back stock, do some mergers and acquisitions (M&A), boost dividends, and maybe reduce debt.

Major companies including Cisco Systems Inc., Pfizer Inc. and Coca-Cola Co. say they’ll turn over most gains from proposed corporate tax cuts to their shareholders, *
................................................................... 
Robert Bradway, chief executive of Amgen Inc., said in an Oct. 25 earnings call that the company has been “actively returning capital in the form of growing dividend and buyback and I’d expect us to continue that.” Executives including Coca-Cola CEO James Quincey, Pfizer Chief Financial Officer Frank D’Amelio and Cisco CFO Kelly Kramer have recently made similar statements.

“We’ll be able to get much more aggressive on the share buyback” after a tax cut, Kramer said in a Nov. 16 interview.

Yet congress proceeds as if they feel what these companies are telling them is false and that companies actually will increase plant and employees and maybe increase wages.

Meanwhile, the stock market rises like a roaring fire (also called a bubble).  I have started to put floors on some of my stocks like 3M that are up 50% this year.  Remember the saying, "Buy on the rumor and sell on the news."  When the bill is actually passed, watch out.

Incidentally, a lot of bills die in Conference Committee, though I doubt this one will.  It may look quite a bit different from what either the House or the Senate approved, however.

Repatriated Overseas Profits A part of the bill regards a tax holiday for repatriated profits from overseas.  when this was done before in 2004, over 90 of the money went to stock buybacks.**   Repatriation of profits might even slow the economy"
Kleinbard  [Edward Kleinbard, professor at the University of Southern California's Gould School of Law.] notes that the Republican bill leaves one thing conspicuously unchanged: "A U.S. multinational looking to build a factory to serve foreign customers and choosing between a U.S. and low-taxed foreign location will still have a big incentive to locate that business abroad."***
...................................................................

 [Clausing at Reed College suggests that] Unemployment is at a 16-year low of 4.2 percent. Economic growth has come in at a healthy annual rate of 3 percent or better in each of the past two quarters. If the tax bill managed to heat the economy much more, the Federal Reserve might have to accelerate its pace of interest rate increases to cool things off.

That would make loans costlier for individuals and businesses and might slow the economy.***

* https://www.bloomberg.com/news/articles/2017-11-29/trump-s-tax-promises-undercut-by-ceo-plans-to-reward-investors
** http://stopcontinentaldrift.blogspot.com/2017/09/tax-holiday-for-repatriation-of.html
http://stopcontinentaldrift.blogspot.com/2017/11/corporate-taxes-cuts-unintended.html
*** https://www.cbsnews.com/news/gop-tax-plan-repatriate-offshore-profits-may-not-work/

"PURE AS THE DRIVEN SNOW"

"Pure As The Driven Snow" is a phrase that has been around since the 1500s, but not used much anymore.   It means very pure, i.e., sinless It probably will be coming back, however.  Nancy Pellosi says there should be zero tolerance for sexual improprieties.  In other words people, principally men, should be pure as the driven snow.  To apply this retroactively will be Armageddon for men.  I doubt you will find many men as pure as the driven snow.

For what it's worth, I don't recall my mother ever having conversations with me about the ways to treat women.  She definitely worried that some woman would get her clutches on me and marry me ending my educational career prematurely.  That I heard many times.  I also took a course in manners at the age of 12 where quite a bit of time was spent on the proper way to shake hands with a woman.

I thought that the big subject right now is Judge Roy Moore who is running for interim Senator from Alabama for two years who is accused of improper advances to teenage girls when he was in his early 30s.  I had thought that if he had shown contrition rather than saying all the stories were false, and said something like, "I saw the evil in my ways and reformed many years ago," that he would have disposed of the problem. Now I am not so sure.

I'm sure we are just seeing the tip of the iceberg, but for the current record on notables accused of sexual harassment , NBC has published a list.**  Note that not all those on the list involve men and women, but a couple are men and men.

Al Franken repeatedly has shown  contrition for seemingly putting his hand on women's bottom in taken a picture  together.  But it is turning out that he can't show contrition enough as he repeatedly apologizes for past actions and says he will be more careful.  Also I wonder how many women told him to get his hand off my butt (or equivalent) or just walked away?  It seems some women equate a man putting his hand on her butt is the equivalent to rape.  Apparently former President H.W. bush is also accused of putting his hands on women's bottoms.

I don't know that I ever put my hand on a woman's posterior, but I may have, perhaps as a joke to get a rise out of her.  I do recall slapping the behind of a girl I knew well  when I was in high school.  I did it for no particular reason except that she was bending over to look at something.  I remember doing this particular thing, because is was so not like me.

It seemed to me that things really started to heat up with the accusations against men in Venture Capital firms inducing women to "visit the casting couch" in order to get aid for their company 's start**  Of course things really exploded with Harvey Weinstein use of the "casting couch" tor women to get acting jobs.  Though Weinstein was a prominent Democrat, Republicans got into the act as well  e.g. Roger Ailes and Bill O'Reilly of Fox News.  Trials of Bill Cosby have been going on for years over shockingly drugging women to have sex.

I have to admit that I dearly miss both Charley Rose and Mark Halpeirn.  Charley Rose seems to be known among women for exposing his, um, equipment upon getting out of the shower.  I guess he was very proud of it, but it is a seerious charge (I once was on a jury of a man accused of "indecent exposure with lascivious intent.").  I watched his midnight show on TV almost every weekday.  It is not replaced although I believe NBR is trying to. (Oprah was apparently invited, for example).  Halperin, my favorite political reporter, is accused of making unwanted sexual advances to women when he was with ABC News.  Both these men have apologized for their very serious actions, but no matter.

Note: As this item was going to press, I heard that a principal at  NBC News Matt Lauer  (Co-host of the TV Today show)has been dismissed on charges of sexual harassment.  Quite a few people have said they are heart broken over this announcement, including a number of women like NBC Savannah Guthrie, who says she is very surprised and heartbroken.  Hoda Kolb also of NBC Today show also expressed her surprise and said she has known Lauer for 15 yrs.  As of this moment Lauer has not made a comment.  Before the day is over, Garrison Keillor is also added to the list of predators.

So maybe Roy Moore and Donald Trump are right that it is better to deny accusations than to be contrite.  Up to now, there is little to support that sexual improprieties effect political  campaigns.  We will see if things are changing in two weeks and see if Moore survives his widely accepted inappropriate harassment accusations with teenagers.

* https://www.nbcnews.com/storyline/harvey-weinstein-scandal/weinstein-here-s-growing-list-men-accused-sexual-misconduct-n816546
** http://stopcontinentaldrift.blogspot.com/2017/07/women-entrepeneur-harrassment.html
http://stopcontinentaldrift.blogspot.com/2017/07/women-entrepeneur-harassment-ii.html

GDP AND THE FED 2017 UP TO 3rd QUARTER

A recent CNBC post contains a figure showing the GDP vs the year.  I found it instructive and reproduce it below and reproduce a similar figure from Tableau using information from BEA (Bureau of Economic Analysis) updated to include the 3rd quarter of 2017.*  To remind us, GDP is a spending metric composed of personal consumption, business spending, Government spending, and net exports.**

Net exports have been negative since, I believe, 1977 so that it  always is a drag on the GDP.

But first, GDP can be complicated as not all spending is counted.  A LOT of spending can go on that isn't counted.  For example on business spending:
Business investment includes purchases that companies make to produce consumer goods. But, not every purchase is counted. If a purchase only replaces an existing item, then it doesn't add to GDP and isn't counted. Purchases must go toward creating new consumer goods to be counted.**
So a lot of equipment replacement spending could be going on, and it would not be reflected in the GDP.
..................................................................
Fixed investment also includes residential construction, which includes new single-family homes, condos and townhouses. Just like commercial real estate  the BEA  doesn't count housing resales as fixed investments.**
So a lot of existing home sales could be going on, and they would not be reflected in the GDP.  In fact, there is a shortage of new homes now.
...................................................................
The example of government spending includes state and local governments as well as the Federal government:
Government spending [has decreased also putting a drag on the GDP] was $3.27 trillion in 2016. That's 18 percent of total GDP.  It's less than the 19 percent it contributed in 2006. In other words, the government was spending more when the economy was booming before the recession. That's exactly when it should have been spending less to cool things off**.
I think state and local government spending has not fully recovered since the Great Recession.  Federal spending has been hampered by the sequester.

For more details, see the reference.  The figure on GDP by quarter is given below:

(Click on figure to enlarge)

Here is the table from the reference.**  I had to piece the table together in two pieces and apologize that they don't fit in perfect vertical alignment.

(Click on table to enlarge)

* https://www.cnbc.com/2017/11/24/the-fed-launched-qe-nine-years-ago--these-four-charts-show-its-impact.html
https://www.statista.com/statistics/188185/percent-chance-from-preceding-period-in-real-gdp-in-the-us/
https://www.bea.gov/newsreleases/national/gdp/gdphighlights.pdf
** https://www.thebalance.com/components-of-gdp-explanation-formula-and-chart-3306015
***

MY POSTS AND CORPORATE TAX CUTS - II

For awhile I thought that my average page views on items in this blog had risen into the 30-40 range, but this may not be true.  I've been writing this blog for 8 yrs now and haven't the slightest idea why some of my posts will get hundreds of page views and others less than 20.

For example, I think my post Corporate Tax Cuts; Unintended Consequences was one of the most important I have written (http://stopcontinentaldrift.blogspot.com/2017/11/corporate-taxes-cuts-unintended.html).  It has gotten 61 page views which is nice, but why isn't this one of my posts that has gotten in the hundreds of page views?

For example I point out in Corporate Tax Cuts that, if we lower our corporate tax cuts, there is nothing to prevent other countries from lowering theirs.  So far as I know, no one else has mentioned this possibility.  There was a time when I attended a lot of congressional hearings, and I was quite impressed by the general intelligence of Senators (but not so much Representative).  I can't believe that they haven't thought of this possibility.  Are we being lied to?

There is something weird with our Republican political leaders.  It appears that Gary Cohn, the top economic adviser, feels there is some direct relationship between corporate  tax cuts and increasing investments:

President Donald Trump's top economic adviser, Gary Cohn, looked out from the stage at a sea of CEOs and top executives in the audience Tuesday for The Wall Street Journal's CEO Council meeting. As Cohn sat comfortably on stage, a Journal editor asked the crowd to raise their hands if their company plans to invest more if the tax reform bill passes.

Very few hands went up.

Cohn looked surprised. "Why aren't the other hands up?" he said.*

Was Cohn faking his surprise at the lack of corporate interest in more investing by corporations with a decrease in corporate tax rates?  Do they really not realize that we are in a very good economy, that companies are supplying our needs with current plant and equipment, with current employment, and at current wages?  Do they not realize that corporations are rolling in money and could well expand if they thought the expansion would bring more business?

I am not alone in saying that corporations are likely in this economic environment to buy back stock and increase executive rewards as they did in the 2004 tax holiday for repatriating foreign profits. and maybe give a special dividend or raise their dividend.  Surely congress and the administration know this.

There are those who say the stock market will crash if we don't have a big tax reduction for business and the wealthy.  Companies are making excellent profits in recent years and the wealthy have done extremely well.

I'm cynical enough to think the whole reason for doing these tax cuts is to take money away from Medicare, Medicaid, food stamps and the like:
The G.O.P. budget would cut $5 trillion in spending over the next 10 years, with a trillion of those dollars coming from the Medicaid program and half a trillion from Medicare. (“Entitlements” like housing assistance and food stamps wouldn’t fare much better.) Meanwhile, the Pentagon’s budget would increase to $620 billion.**

That GDP has been under 3% for most of the post Great Recession years, is pointed to, to say we are in a slow economy.  But GDP is a spending metric.  One reason that GDP isn't higher is that corporations are not spending, but hoarding their profits and buying back stock.  Certainly the consumer is doing their part and household debt is at record highs.***

I certainly will be very, very surprised if the tax cut and tax holiday on repatriated profits result in much increase in the economy.  Also as I pointed out long ago, tax cuts for individuals is an inefficient way of stimulating the economy.****

* http://www.chicagotribune.com/business/ct-biz-trump-tax-plan-corporate-investment-20171115-story.html
** https://www.vanityfair.com/news/2017/10/republicans-propose-slashing-medicaid-to-pay-for-tax-cuts
*** http://stopcontinentaldrift.blogspot.com/2017/11/household-debt-at-new-high.html
**** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html

HUMAN BEINGS AND SEX

Numerous reports are accumulating on men with super aggressive sexual behavior, something that does not surprise me.  The initial thought is that men with super aggressive behavior have unusually high levels of testosterone; however that is too simplistic as studies have found that many men with very high levels of testosterone are not violent or sex offenders.  There is also some indication that child molestors tend to have low testosterone.

Yes, it seems reasonable that  social behavior can be inhibited through civilizing forces.  Then it can also be true that certain drugs, like alcohol, can lower those inhibitions.

So what is it that drives sexual predators like Bill Cosby, Harvey Winestein, Ray Moore and Donald Trump, among many, many others?  Whatever it is, is very common as many men (and some women) show aggressive sexual behavior.

There seems to be no one answer, but to some extent it may be learned.

Jack and Ted Kennedy may not have been sexual predators but they certainly weren't monogamous.   They had "IT" (personality as well as being rich and famous) as I like to say, and many women were quite willing to have sex with them.   Then there is the case of Bill Clinton who was not rich, but of a certain fame and personality who was also promiscuous. They may have learned some of their sexual promiscuity from their fathers.  Yet they weren't polygamous.  They were so used to having compliant females that they may have had forcible sex on occasion which was inexcusable.

If you are serious about wanting to understand aggressive sexual behavior, below are listed some references.*  In this technological age, it is not surprising, I guess, that even robots get into the sex act.**

Women also have testosterone but at much lower levels than men.  In the Olympics, there are a number of tests a woman must obey to be classed as a qualified athlete beyond having a vagina.  One is the level of their testosterone.  If is too high they are disqualified.

* https://pdfs.semanticscholar.org/191b/1515db4f27e4c736a476542934ad2e01698d.pdf
https://pdfs.semanticscholar.org/191b/1515db4f27e4c736a476542934ad2e01698d.pdf
https://www.psychologytoday.com/blog/insight-therapy/201204/why-do-we-have-sex
https://www.youtube.com/watch?v=KNZmmdwZ5iY
https://www.shmoop.com/animal-behavior/common-mistakes.html
https://www.webmd.com/sex-relationships/guide/why-people-have-sex#3
** https://www.express.co.uk/news/uk/732912/Sex-robot-human-sexual-pleasure-Real-doll

SEN. AL FRANKEN, ETC.

One of my favorite jokes was Republicans pull their shades and draw their drapes at night but probably don't need to.  Democrats don't pull their shades and draw their drapes at night but probably ought to.   But things have changed, and it turns out that Republicans are at least as sex crazed as Democrats, if not more so.

The joke was ruined during the call for impeachment of President Clinton by Idaho Republican Representative Helen Chenowith who, it turned out, had a 6 yr relationship with a married man.  The charge was led by Republican Representative Henry Hyde who had a 5 yr “youthful indiscretion" when he was in his 40s.  Of course these individuals found excuses claiming their cases were different.  The story continues.  When I turned 40 I thought I was middle aged.

Democrats are really bending over backward and going after former comedian and current Sen. Al Franken who 6 yrs ago had a picture taken in Afghanistan of a pretend grope (his hands weren't touching her) of a woman's breasts as she was napping while wearing a flack jacket.  Who would do such a grope?  It would be like groping a wall.  I think it was kind of funny, but it is the type of thing that, if you have to explain it, you might as well not bother.

At any rate Franken, the “groper,” has effusively apologized for the not-funny joke.  She also said he French kissed her without her permission which is more serious, but he has apologized for that too although he says he remembers the incident differently  The woman who brought up the incident has forgiven him, but certain Democrats say that is not enough as he has committed a crime.  Give me a break.  Well the woman involved has now got her revenge.  If it should turn out that Franken is expelled from the Senate, women will have lost a strong male advocate for women's rights.  That's the way these things go.

Personally IU think they should go after the "major league" sexual predators like Harvey Weinstein, Donald Trump and Judge Moore.

Why was the picture released anyway?  I wonder if someone was trying to blackmail him, but no matter.

I am certainly not a member of the current "hook up" generation.  In my day, the man-woman thing involved the giving of subtle hints.  As I have Asperger's Syndrome, I was never good at guessing what people were thinking.  When I thought I had a "hint" figured out, it turned out that I was wrong.

I probably never would have gotten married except I had people coach me.  On my first wife, there was a woman who was bound to get me married and a physicist graduate student who was not married.    They gave me some suggestions that I couldn't believe, but they worked.  On my second wife, I was coached by a woman I was interested in but who was "taken.  She too gave me some suggestions that I thought would be repelled, but they weren't, much to my surprise.

When my second wife died of a stroke, I was on my own.  There was a woman I was interested in who had a stroke and was learning to talk again.  I was trying to help her, and we became fond of each other.  Several times I did things that I thought had ruined our relationship, but I guess she was interested in me which helped getting over these faux pas.

Democrats are going after Bill Clinton* again and saying he should have resigned.  I feel that his case is quit different.  I don't understand it as the young woman came onto him so it was a consensual relationship as she admitted.  There was a hazard to his marriage, but it was a matter for his wife to decide.  There were those who were upset that Hillary didn't get a divorce., but the Clinton's worked it out  Whatever happened to "Until death do us part?"  I have covered all this before (See the references.).

But I feel there is something disturbing about women saying that it is immoral for a powerful man  to have an affair with a young woman of 22, even if she came onto him.  They talk about the young woman as if she is a child.  At what age are women grown up?   It's as if women have a fatal attraction for a powerful man?  Is that true?  Was my problem that I wasn't rich or famous (It aklso helps to be handsome.)?  If anyone told me that I was still a child at 22, I would have wanted to bust them in the nose.

* http://stopcontinentaldrift.blogspot.com/2013/08/politicians-and-sex.html
http://stopcontinentaldrift.blogspot.com/2014/05/monica-lewinsky-still-with-us.html
http://stopcontinentaldrift.blogspot.com/2016/10/some-men-have-it-most-dont.html

HOUSEHOLD DEBT AT A NEW HIGH

Household debt hits its highest level and close to the high since the Great Recession (see figure).*  Thoughts are that it will even go higher.  Student loan debt spiked in 2012 and has yet to come down.  Delinquent debt on auto loans is increasing, but most other types of delinquent debt are decreasing (e.g. mortgages, home equity, etc).  Although credit card debt is at a high, delinquent credit card debt has fallen.*

(click on figure to enlarge)

I would think this says something about how much the economy can grow from here.

* https://www.wsj.com/articles/u-s-household-debt-reaches-new-record-as-some-delinquency-rates-rise-1510675253

TAX CUTS DO NOT PAY FOR THEMSELVES - II

Not long ago, I wrote about how corporate tax cuts are an inefficient way to stimulate the economy, using the 2004 "Tax Holiday" as an example when 81% of the repatriated money was used to buy back stock.*  Also I have shown why income tax cuts are an inefficient way to stimulate the economy.**

Now there is some confirmation by others from non-scientific polls that confirm that in this economic climate, any profits from business tax will not be used by many companies to increase investment in new facilities or increased employment.**

But at a gathering of chief executives hosted yesterday by the Wall Street Journal, business leaders called into question one of Cohn's top arguments for slashing the corporate tax rate to 20 percent.

When one of the Journal's editors asked the crowd if they planned to up their capital expenditure if the GOP's tax plan went through, only a smattering raised their hands.**

...........................................................................
There's little evidence to support the claim that tax breaks boost employment numbers.

A National Bureau of Economic Research study published in 2014  found "little evidence that corporate tax cuts boost economic activity" unless implemented in a recession.

Far from being short on cash, corporations are sitting on record amounts.***

Gary Cohn was said to be surprised at the response.

* http://stopcontinentaldrift.blogspot.com/2017/11/tax-cuts-do-not-pay-for-themselves.html
** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
*** https://www.cnbc.com/2017/11/15/ceos-raise-doubts-about-gary-cohns-top-argument-for-cutting-the-corporate-tax-rate-right-in-front-of-him.html

ROY MOORE: SINFUL DISTRICT ATTORNEY

Even before the latest revelations on Roy Moore, candidate for the U.S. Senate, I felt all slimy when reading about him.*   Afterward I wanted to take a shower. Now this "Holier Than Thou" sinner turns out to be a pedophile who dated  teenage girls when he was in his early 30s.

I suppose everyone has read about Moore's sexual encounter with a 14 yr old girl and three others age 16-18.  Now comes a very convincing account by a 5th woman who really nails him on an attempt to rape***  Moore says he doesn't know the woman and doesn't even know of the restaurant, but the woman has produced her high school yearbook where he writes a passage and signs it with Love, writing his name (including DA) and even mentions the restaurant.  You can even see a photo copy of the matter in the reference.****

There seem to be men who are not phased by Moore's pedophilia, but how can any woman vote for such a politician?  I don't know but many have before and not too long ago at that.

I think that if Roy Moore  came clean about his sexual fixation of teenage girls when he was in the 30s and asked for forgiveness as a sinner with regrets for his molestations long ago, he may have even gotten some understanding.  He should have taken the advice he wrote in a poem:

If we who are His children,
will humbly turn and pray;
Seek His holy face
and mend our evil way****

Roy Moor has been married for 32 yrs (m. 1985, 6 yrs aftersexual account with a 14 year old.) to wife Kayla, a former beauty queen, who is 14 yrs his younger.  They have two boys and two girls.  Their net worth is said to be about $2.5 million (https://starsinformer.com/kayla-moore/),  Kayla is alleged to find out how much the women have been paid to come out.  There is one phony story on the internet of payment.

* http://stopcontinentaldrift.blogspot.com/2017/09/roy-moore-judge-who-doesnt-believe-in.html
** https://www.washingtonpost.com/investigations/woman-says-roy-moore-initiated-sexual-encounter-when-she-was-14-he-was-32/2017/11/09/1f495878-c293-11e7-afe9-4f60b5a6c4a0_story.html?utm_term=.65197d475c7d
*** https://www.nytimes.com/2017/11/13/us/politics/roy-moore-alabama-senate.html
https://en.wikipedia.org/wiki/Roy_Moore
**** https://www.nytimes.com/2017/11/13/us/politics/roy-moore-alabama-senate.html

THE WALL: DIRTY LITTLE SECRET

Our president is a great stand up comedian and attending his rallys was lots of fun.  One of his best jokes was "What are we going to do?"  and we would shout Build The Wall.  Then he would yell "And who is going to pay for The Wall?"  And we would scream "Mexico!"  It was very exhilarating.

Mexico, however, was afraid that a lot of Americans and the President might be serious so they kept saying, "We will never pay for the wall."  Eventually the cry became Mexico will eventually pay for the wall.  Finally the President admitted that Mexico wouldn't pay for the wall.  Heck!

But there is a dirty little secret we are not being told.  The biggest joke of all is, if The Wall is to be built, we will undoubtedly use concrete and. actually pay Mexico to build the wall to a great extent.  There are two reasons for this (at least).

One is that the largest company making Portland cement (used in concrete) in North America by nearly a factor of two is Cemex,* a Mexican company.  Furthermore they have operations in the right place, whereas the other large producers are mainly in the East and Midwest.

The second reason is that construction is booming right now so prices of concrete are high and available labor is short.  A home builder owned by Warren Buffet even has a school to train home construction workers.   So we will probably have to "import" Mexican construction workers to build most of the wall.  Times are good in Mexico, so even Mexican workers may not be readily available, but, for a price, maybe they will come.

So yes, if we build The Wall, we will actually pay Mexico to do it to a large extent.  The joke will be on us.

* https://en.wikipedia.org/wiki/Cement_industry_in_the_United_States

JOHN MCSANE HAS A POINT

John McSane (my alias for John Mc Cain) has a point that congress should return to regular order.  But something has taken home in the decline* of our political system.  Everything has sped up and is no longer developed with care.  Congress had a succession of "health care" bills, each rapidly thrown together and voted on, fortunately down.  Now Congress is doing the same thing with "tax reform," rapidly cobbling something together to be voted on without many hearings or discussion. We are told this is necessary because the donators demand it so you better believe those favored in the so-called reform isn't us.

* http://stopcontinentaldrift.blogspot.com/2017/06/decline-of-american-politics.html

TAX CUTS DO NOT PAY FOR THEMSELVES

Though income tax cuts do not pay for themselves* and are proven to be an inefficient way of stimulating the economy,** business tax cuts are a different matter.  To some extent business tax cuts may pay for themselves to a certain point, but there is no proof they will increase investment in corporate plant and equipment, result in more hires, or increase wages.

Currently would be a good test corporate tax cuts because companies are rolling in money. and are buying back stock which shows they don't know what to do with the money they have.  Back in 2004, companies were given a tax holiday to repatriate foreign profits to the U/S. and employment actually dropped!***  Most of the money was wasted on buying back stock..  My guess is that the same thing will happen in today's economic climate.

What about small business?  The definition of a small business is complicated.****  Many pay at the income tax rate.  A tax cut for small businesses might well increase their investment in their companies and is worth a try.  Of course only the largest small business would benefit from a maximum rate of 25%.
The GOP plan revealed on Thursday set the pass-through rate  [i.e. small buiness and partnerships] at a maximum of 25 percent, but to deal with concerns it could be abused by individuals rather than truly benefit small businesses, the GOP bill includes prohibitions on what kinds of businesses qualify for this tax reduction. The tax reform bill also allows businesses to immediately write off the cost of new equipment, as well as business loan interest.****

* https://www.cnbc.com/2017/11/07/gop-tax-cuts-will-not-pay-for-themselves-add-to-us-debt-fitch-report.html
** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
http://stopcontinentaldrift.blogspot.com/2016/09/tax-cuts-and-economic-stimulation.html
*** http://stopcontinentaldrift.blogspot.com/2017/11/corporate-taxes-cuts-unintended.html
**** https://www.webopedia.com/TERM/S/small_business.html
https://www.cnbc.com/2017/10/23/main-street-to-trump-tax-reforms-needed-to-keep-american-dream-alive.html

ALL TOGETHER NOW, ...

Gen,.Michael  Flynn and his son allegedly were hired by the Turkish government to kidnap and spirit a Muslim cleric - Fethullah Gulen - in the U.S. off to a Turkish prison for a sum like $15 million.*

All together now:  lock 'em up, lock 'em up, lock 'em up.

* http://www.dailymail.co.uk/wires/reuters/article-5070133/Mueller-probing-alleged-Flynn-plan-deliver-cleric-Turkey-WSJ.html

CORPORATE TAX CUTS: UNINTENDED CONSEQUENCES

There are some dirty little secrets about corporate tax cuts in unintended consequences.  I'm actually for a corporate tax cut from 36% to 26% and see what happens though many conclude it shouldn't be done.*  Will it pay for itself?  Will employment increase?  Will wages increase?  If all the socialism support of companies remains in place, the average company tax would drop from 27% now to  around 17%.

What are the unintended consequences and there are many.  For examples:
(1) What will other countries do?  It is quite possible that other countries will adjust their corporate tax rates too to maintain the U.S. has the highest rate.  My guess is that the bigger we cut the corporate tax rate, the more likely it is that other countries will do the same.  It could be a tax cut war.

(2) Will employment increase?  Actually this is pretty iffy.  In the 2004 tax holiday for companies to repatriate their foreign earnings at a tax rate of 5.25% , employment in the seven largest repatriates actually fell!*

From 2005 to 2006, Pfizer, which repatriated $37 billion, slashed 10,000 jobs. Merck, which brought back $15.9 billion, cut 7,000 jobs, and HP pared its employment rolls by 14,500 after repatriating $14.5 billion.*

Most of the money went to repairing balance sheets and rewarding shareholders, according to the CRS. According to one study cited, as much as 91 cents on the dollar went to share repurchases, even though that, along with compensation increases, was expressly prohibited by Congress.  (Empasis added).*

Prohibited uses for the cash weren't easy to track because the money ended up being commingled with other corporate funds.*

(3) Will the increase in profits from a corporate tax cut be used productively to build new plant or acquire new equipment and hire workers at increased wages?  This was not the case in the 2004 repatriation tax cut. Most of the money went to repairing balance sheets and rewarding shareholders, according to the CRS. According to one study cited, as much as 91 cents on the dollar went to share repurchases, even though that, along with compensation increases, was expressly prohibited by Congress.*  (Empasis added)..

So don't be surprised if any increase in profits doesn't go to hiring new workers, increasing wages, or to building new plant and acquire new equipment.  As I said just a couple of months ago: "Though I am for a "Tax Holiday" to repatriate foreign corporate profits with a tax, of say, 5%,  I would demand that the companies doing so be legally bound not to buy back stock for 5 yrs.  What would be the penalty if they do buy back stock?  Perhaps a tax of 50% of the dollar amount of the buyback.  Stock buybacks are wasted money and are done because companies don't know what to do with the money.  Companies are awash in money and really don't need the repatriation.  I doubt much of the money will go towards new plant and equipment or a bonus to the employees.  They could buy back debt and/or issue a special dividend, some of which may find it way into productive enterprises.  If something like this isn't done, then we would no doubt see something liked happened to the "Tax Holiday: of 2004.""**

Don't be fooled by all the hoopla.

* https://www.cnbc.com/2017/08/31/trumps-tax-repatriation-plan-flopped-the-last-time-it-was-tried.html
** http://stopcontinentaldrift.blogspot.com/2017/09/tax-holiday-for-repatriation-of.html

TRADE GROWTH VS MANUFACTURING EMPLOYMENT

One of the big myths believed by many workers is that their jobs are being lost overseas.  Well, some of it is, but most is lost through technological improvements.  This is hardly a mystery as a CNBC article points out.*

Although free trade can lead to some job displacement, associating it with all manufacturing job loss is too simplistic. Since the mid-20th century, as Figure 1a shows, U.S. manufacturing productivity has experienced impressive growth because of technological advances.⁴ As with trade, technology has also contributed to manufacturing job losses. In fact, 87 percent of the job loss in the first decade of the 21st century stemmed from technology (Figure 1b).⁵ The mass U.S. adoption of technology has especially transformed the manufacturing industry by increasing each worker's productivity by more than five times since the 1950s. Today, the average autoworker can make 18 cars a day, compared with 13 in 1990*.

(Click on figure to enlarge

The U.S. Bureau of Labor Statistics presents a figure on total employment going back to 2007.  As can be seen from their figure below, manufacturing employment has been in a general upswing since it bottomed in 2010.**  Manufacturing employment reached a peak of 19,553 million in June of 1979 and began a gentle decline.

In August of 2000 when manufacturing employment had declined to 17.287 million workers, the decline steepened (see fig. below)  The decline flattened at the beginning of 2004 when manufacturing employment was at 14,332 million, but then steepened again when manufacturing employment was at 14,213 million in June of 2006.

Forecasting the Great Recession by a bit, manufacturing employment began a waterfall-like decline with employment at 13,746 in March of 2006  and bottomed at 11,453 million manufacturing employees in February of 2010.  Since then during the Obama administration, manufacturing employment began a slow rise that has continued into 2017, the beginning of the Trump Administration, with 12,481 million manufacturing employment jobs as of October 2017 for an increase of about a million manufacturing jobs since February of 2010.

* https://www.cnbc.com/advertorial/2017/10/20/what-your-clients-need-to-know-about-trade-deficits.html
** https://fred.stlouisfed.org/series/MANEMP

WHY DOES HE DO IT?

I am trying very hard not to comment on President Trump.  I have said what I have to say, except something new occurred to me.  Why did Donald Trump say that Japan should produce cars in the U.S. when he almost certainly knows they did.  Trump watches a lot of news, after all, so he had to know.  Certainly I did, though I wasn't sure if they produced the Prius in America (As nearly as I can tell, they are still all made in Japan in spite of announced plans to make some in the U.S..*):

Toyota Motor TM will start producing the hybrid Prius in the U.S. for the first time as the Japanese automaker adjusts its U.S. manufacturing operations to meet customer demands for smaller, more fuel-efficient vehicles.*
.....................................................................
Toyota has 13 North American plants and two under construction in Mississippi and Ontario. The automaker has more than 43,000 workers in North America.*

Well either he lied to appease his base that feels countries like Japan are taking lots of American jobs, OR he is having trouble with his memory.  He says he has one of the greatest memories ever.  Maybe he did but no longer.  This would mean that he honestly doesn't remember, showing first signs of senility.  At age 71, it could well be the latter.


* http://abcnews.go.com/Business/story?id=5353375

SERGEANTS KILLED IN NIGER

Recently it came to me that all the Americans killed in Niger were sergeants.  I find it strange that so many sergeants are being killed in the recent wars.  I wrote a poem about it back in 2011 The Sergeants:
http://stopcontinentaldrift.blogspot.com/2011/12/sergeants-poem.html

I've also been surprised that congressmen are so surprised at what is going on in Africa.  Certainly even I knew in general though not exactly the number of troops.  I wrote a piece on Africa and referred to it that we are in a low-level world war: http://stopcontinentaldrift.blogspot.com/2015/04/the-war-in-Africa-update.html

CONSUMER SENTIMENT, MANUFACTURING INDEX, CONSTRUCTION INDEX

A variety of recent reports on the economy show it is still strong with GDP growth in the quarter up nicely at 3.0%*  I urge you to read these three articles discussed below in their entirety.  As a result, stock market indices continue to hit new highs.  Some consider the value of stock market indices to be dangerously high, but I find it hard to tell what with all the good economic news.

The consumer sentiment index, a survey of consumers by The University of Michigan, hit 100.7 in October, slightly below estimates of 100.9, according to economists polled by Reuters.

Earlier this month, the key economic indicator leaped 6.3 percent to 101.1, demolishing the record previously set in August*.

..............................................................
"Lingering doubts about the near term strength of the national economy were dispelled," said Richard Curtin, Survey of Consumers chief economist. "More than half of all respondents expected good times during the year ahead and anticipated the expansion to continue uninterrupted over the next five years."*

The Consumer Sentiment Index graph for the last year is given below.**

(Click on figure to enlarge)

The ISM Manufacturing Index for October (58.7) was down from September (59.8) but still higher than any  recent previous month.***
The Institute for Supply Management's index registered 58.7 in October, slightly better than the 58.6 expected from economists polled by Reuters. That represents a decline from September's 59.8, which was the highest reading for the service sector index since August 2005, according to ISM.

(click on figure to enlarge)

There was an increase in construction spending in September by 0.3% was considered a surprise.***
U.S. construction spending unexpectedly rose in September as a surge in public construction outlays offset the third straight monthly decline in investment in private projects.***

(click on figure to enlarge)


* https://www.cnbc.com/2017/10/27/first-reading-on-third-quarter-gdp-up-3-point-0-percent-vs-2-point-5-percent-rise-expected.html
** https://www.cnbc.com/2017/10/27/october-2017-us-consumer-sentiment-index.html
https://www.cnbc.com/2017/10/24/three-charts-prove-bull-market-has-more-room-to-run-bofa-technician.html
https://www.cnbc.com/2017/10/31/consumer-confidence-october.html
*** https://www.cnbc.com/2017/11/01/october-ism-nonmanufacturing-index-september-construction-spending.html