Thursday, September 30, 2010

Still having the wrong debate

The New York Times today picks up on the ongoing debate about whether the top bracket should uniquely be left out of extending the expiring Bush tax cuts for individuals. The article refers, inter alia, to the Todd Henderson-Brad DeLong et al brouhaha on which I briefly weighed in last week.

To give one of my main points from last week a bit more emphasis, one of the big problems here is the fundamental mismatch between the rhetoric being used to support letting the top bracket rate cuts expire and the underlying fiscal situation. Extending ANY of the tax cuts is crazy given the looming U.S. fiscal gap, leaving aside only the points that (a) better-directed stimulus than extending the tax cuts may be politically unavailable, and (b) if base-broadening were on the table politically, one might prefer that to letting the rates go up. But again, given that rational alternative courses are unavailable, it verges on insanity to extend any of the tax cuts (other than in the scenario of a temporary extension that the relevant actors agree will be allowed to expire).

The Obama Administration has decided, from the defensive crouch all Democrats have adopted for at least the last 25 years, to support extending all the tax cuts below the top bracket. In other words, Rove's gambit back in 2001 worked: he was able to shift the political baseline to one of permanent tax cuts without having to count the out-year revenue loss. Plus, he got to exercise agenda control 10 years in advance to the Republicans' predictable advantage. But making an exception just for the top-bracket group has encouraged the Obama Administration to trot out rhetoric about billionaire bankers and the like, which genuinely is a poor fit with $250,000 a year even if that income amount is well into the 99th percentile.

So now we have people like Senator Webb of Virginia saying that the cutoff for raising the top rate above the current 35% should be something much higher than $250,000, leading to yet more revenue loss than under the Administration's position if it happens.

Leaving aside the issue of overall revenue loss, however, Webb has his finger on something that merits attention. The issue of billionaire bankers, or more precisely the fact that the very top of the income distribution has pulled far away from everyone else over the last 20 years, clearly is important even if it doesn't support making the long-term fiscal gap even greater by limiting tax cut expiration to the very top of the top. But no matter what the rates are, and no matter how well or poorly one has addressed the fiscal gap, the question of whether tax rates should be higher at the billionaire level than for those merely at the lower end of the 99th percentile deserves thorough analysis.

I should note, however, that, in the optimal income tax (OIT) literature dating back to the rightly Nobel-awarded work of U.K. economist James Mirrlees, there's a result contrary to raising the rate at the very top. The OIT literature seeks to illuminate the proper consequences for tax rate structure of balancing distributional concerns against efficiency concerns (adaptable to any view one has regarding how best to trade them off against each other). But it tends to suggest that tax rates should be relatively flat and indeed eventually declining at the very top - even if one values progressive redistribution a lot.

This OIT-based view has enormous, indeed compelling, logical force within its assumptions. But these assumptions can potentially be challenged. For example, the approach typically treats utility as depending only on one's own consumption. Thus, if someone gets ten times richer while everyone else stays the same, that person wins and no one loses. There might be a strong case for redistribution away from that person, but this would be based purely on the assumption that, due to the declining marginal utility of wealth, other people would get far more utility from a given dollar than he or she would. Simply burning one of that person's dollars (in the sense of causing him to forego it without getting to transfer even a penny to anyone else) can only be bad, under these assumptions, given that everyone's utility counts positively in the social welfare function.

Suppose there is a case that the top 0.1 percent's astonishing pullaway has had bad social consequences, to which one should object in straight utilitarian terms even if one opposes assigning any independent, non-welfare based, weight to equality for its own sake, to non-welfarist "fairness" concerns, etcetera. Then taking away a dollar at the top could potentially have good social welfare consequences even if no piece of it is successfully transferred to anyone else. This would have to be a claim about externalities. It's very contrary to the way economists (and their fellow-travelers such as myself) generally like to think about these issues - and this reluctance is usually quite justified - but, in this setting, potentially compelling albeit needing specific elaboration.

Other stories might also undermine the standard OIT view about flat and eventually declining tax rates at the top. For example, if being at the 99.99th income percentile correlates with enjoying rents, or with being more concerned about positional jockeying versus one's peers than about the consumption that each extra dollar permits one to afford, there could be further support for rising tax rates at high levels. But this is a set of issues that academics ought to be looking at more, whether just because knowledge is good (as they say at Faber College) or in the hope that findings - and yes, it's not just about self-expression - could eventually influence the political process.

Tuesday, September 28, 2010

New article available on SSRN

I have posted on SSRN my latest article, "The Rising Tax-Electivity of U.S. Corporate Residence," subject of my Tillinghast Lecture at NYU last week.

Link is here. Abstract is as follows:

In an increasingly integrated global economy, with rising cross-border stock listings and share ownership, U.S. corporate residence for income tax purposes, which relies on one’s place of incorporation, may become increasingly elective for new equity. Existing equity in U.S. companies, however, is effectively trapped here, given the difficulty of expatriating for tax purposes absent a bona fide acquisition by new owners.

Both the prospect of rising tax electivity for new equity and the very different situation facing old U.S. equity have important implications for U.S. international tax policy. This paper therefore explores three main questions: (1) the extent to which U.S. corporate residence actually is becoming elective for new equity, (2) the implications of rising electivity for the age-old (though often mutually misguided) debate between proponents of residence-based worldwide corporate taxation on the one hand and a territorial or exemption system for foreign source income on the other, and (3) the transition issues for old equity if a territorial system is adopted.

Monday, September 27, 2010

Another reader's response to Getting It

A lawyer who read Getting It (via a mutual friend, but without knowing the personal connection back to me) says:

"A tale of avarice, greed, back-biting, debauchery, treason, and dishonesty! In other words, an accurate portrayal of the legal profession."

Hey, I just report the facts - I don't invent them.

Friday, September 24, 2010

Watch my Tillinghast Lecture!

Why settle for just my slides, when you can watch the entire lecture via the NYU homepage here, or directly on youtube here.

UPDATE: If I do say so myself, after sampling it for a few minutes it appears to sound reasonably coherent. Those who know something about the topic may actually be able to follow it in this format. The audience in the room had assistance from my PowerPoint slides, through which I scrolled down during the talk, but if you print them out I suppose they can function as a detailed outline.

Thursday, September 23, 2010

Most hilarious line of the week

From the Republicans' "Pledge to America,", this year's severely marked-down sequel to the infamous 1994 "Contract with America":

"With common-sense exceptions for seniors, veterans, and our troops, we will roll back government spending to pre-stimulus, pre-bailout levels."

In other words, they're going to avoid touching all the main sources of high government spending and growth therein, while cutting taxes by trillions of dollars over the long haul and pretending that they are concerned about debt and deficits.

UPDATE: I mainly try to steer clear these days of overly strongly worded or emotional-sounding responses to Republican shenanigans, but why not let Andrew Sullivan do the honors:

"Given the gravity of the debt crisis, this is the most fiscally irresponsible document ever offered by the GOP. It is to the far right of Reagan, who raised taxes and eventually cut defense, and helped reform social security to ensure its longterm viability. It is an act of vandalism against the fiscal balance of the US, and in this global economic climate, a recipe for a double-dip recession and default. It is the opposite of responsible conservatism."

Wednesday, September 22, 2010

PPT slides for my Tillinghast Lecture, "The Rising Tax-Electivity of U.S. Corporate Rresidence

The slides from my talk are available here.

UPDATE: And here's an accompanying photo.

Tuesday, September 21, 2010

Tillinghast lecture at NYU Law School

Today I gave the 15th annual Tillinghast Lecture on International Taxation, to a group of about 300 people at NYU Law School. The audience mainly consisted of NYU graduate students in the International Tax Program, other NYU students, faculty and staff from the law school, NYU Law School grads, other legal academics, a few economists, and a number of tax practitioners. Mostly from NYC and thereabouts, but a few came from out of town.

I'll post the PowerPoint slides for the talk shortly, and also a link for the underlying paper once it's up on SSRN. (But I am going to do minor revisions first.) While the title is "The Rising Tax Electivity of U.S. Corporate Residence," it ranged more widely than that, discussing many of the basic considerations (as I see them) in the choice of U.S. international income tax regime for corporations. Drab though this may sound to those not in the field, there's actually great complexity and depth to this set of topics, which also may matter economically to a degree.

I knew I had a lot of fairly complicated things to say and very different types of points to make or issues to address, so the problem of how to make it all comprehensible was a challenging one. Especially as I talk quite fast, and am willing to hit a lot of related but distinct topics successively. And I'm also trying to connect simultaneously with multiple audiences (students, sophisticated journalists, practitioners, economists, policymakers, etc.).

Did I worry about any of this in advance? Who, me? Why, yes, as a matter of fact, at least briefly.

This is probably a once-only talk, unlike other recent academic papers that I gave multiple times (typically to 20 or so people at a shot) and thus was able to sharpen up as I went along like an off-Broadway show that starts with previews. But I had put in some time polishing my slides, and also figuring out how best to discuss & explain things, though I absolutely can't stand to do a literal dry run practice talk.

In doing these sorts of public talks (usually, however, shorter talks before smaller audiences), you get to know that you have better days and worse ones, just as one's tennis forehand may be crisp and accurate one day, then into the net or floating long the next. And you always figure that strangers will judge you based on today's performance (just as in tennis, where there's nothing lamer than saying to someone you haven't played before, "Sorry, I'm a bit off today"). But in addition to having thought things through to a fair degree, I discovered early on that I seemed to be in reasonably good form today. So if you were there and found it bewildering, I don't even have the "just an off-day" excuse, inadequate though that would be anyway.

In sum, I felt good about it from a performance as well as a substantive aspect. Also, though I got some good comments, I generally had anticipated them, thus confirming my sense that I am on the right track in thinking about these issues, and have a fair amount to add (only part of it raised in today's paper) even though the topics are by now familiar in the biz.

Monday, September 20, 2010

Pavement concert

Last night in Brooklyn, I got to see a 2-hour set by Pavement from about the 4th row (an approximation, since there was no seating). All it took was getting there not long after the gates opened, and then being willing to stand near the stage for almost 2 hours before they got started, a wait that was mitigated by two warm-up acts, including one with Jenny Lewis (formerly of Rilo Kiley).

My back wasn't especially thrilled by this, but it agreed not to scream too hard or shut down operations, and even recovered swiftly afterwards. Another annoyance was a few drunk twenty-somethings who would shove past people who got there before them and then jump up down screaming the lyrics, physically endangering those near them while also crowding them and blocking their view.

This, however, at least bemused me a bit. The strange angle was that people who would do this sort of thing would actually know Pavement lyrics by heart. They're a bit, well, elliptical for that sort of thing. Take "Summer Babe," seemingly a classic brainless school's-out type of tune about what the title suggests, except that the lyrics begin like this:

"Ice baby / I saw your girlfriend and she was /eating her fingers like they're just another meal / but she waits there / in the levee wash she's / mixin' cocktails with a plastic-tipped cigar." Okay.

Or take "Fin," a stately anthem directed at prison architects, who are urged to send in their blueprints ASAP.

The songs above all made the concert, though the group was high-energy and entertaining as well. Pavement reputedly gave relatively ramshackle or haphazard concerts at times back in the day, but today's standard is more professional (just as rock groups can't take the stage 2 or 3 hours late any more, as the big names used to 30 years ago). So they were revved up and delivered on the songs' musical potential for enjoyable loud performance.

Everyone in the group except for Stephen Malkmus seemed to be a competent but not enormously interesting guy, happy to give a full-tilt concert to the sort of wildly appreciative crowd they probably only got in smaller venues back in the 1990s. There was even football banter between songs. But he, like his songs, is a lot more ambivalent. There's both an evident love for "classic rock," the big anthem, the classic riff, etcetera, along with an accompanying enjoyment of word play and musicianship for their own sakes, and yet at the same time a sardonic and aloof sense of the phoniness and artificiality of rock stardom and public performance conventions.

Late to the fray

Todd Henderson, a University of Chicago law prof who writes about corporations, securities law, and such from what appears to be a classic U of C pro-markets and anti-regulatory perspective, has been having a rough time over the last few days (see, for example, Paul Krugman here) because of a blog post in which he complained about being potentially subject to a tax increase if the expiring Bush tax cuts are not extended for top-bracket taxpayers.

Henderson got into hot water by rightly interpreting a lot of the rhetoric about not extending the top-bracket tax cut as pertaining to how "rich" people should be taxed, as compared to those who are "middle class." The latter group's tax cuts both parties are eager to extend (leaving aside the chance that the Republs will hold their tax cuts hostage to those of the top bracket). Hence, Henderson thought it germane to note how the circumstances of his life prevent him from feeling "rich," even though he is a law prof at a leading school and his wife is a doctor, making for two six-figure professional-level salaries. (My family and I, by contrast, have to get by, if that's the word for it, on just one such salary.)

The word "whining" has been used, and Henderson has been condemned for lack of empathy with people in that portion of the U.S. population (99.5 percent or so) whose households earn less, and in most cases at least 80 percent less, than his, and yet somehow seem to get by. But show me a non-whiner and I'll show you someone who isn't fully human. The important thing is what perspective one ends up taking towards one's own inclination to whine (or should I say, towards the enticing joys of wallowing in it).

Frankly, I can identify emotionally with Henderson's complaint, although I certainly wouldn't have posted such a thing. Emotionally though not intellectually, I very much feel the same way as he does about the "who's rich" question, and I'll bet that the huge majority of people similarly situated in the lower to middle bounds of the 99th percentile have similar feelings.

The reason why is identified by Krugman, as well as by Brad DeLong. The way our society operates these days, people in Henderson's and my tier see those above them who (at least as it seems to us) live way higher on the hog and have no financial worries whatsoever. Suppose I take a long flight on a business trip to Europe or Asia and find myself in the cattle cars, a.k.a. coach. Do you think I close my eyes while staggering with my bag through first and business class? Of course not. We often encounter, and psychologically are inclined to care about, what people above us have (and recall that the income gap between us and the top has skyrocketed over the last 20 years). Plus, we find ourselves strongly encouraged and inclined to want and even expect a whole bunch of things that add up to more than we can easily afford, even if we're in the 99th percentile. But then again, economics is the "dismal science" because it's about choice under scarcity.

Equally or more importantly, there's sufficient economic segregation going on to ensure that many of those in our tier will not get to see a whole lot from the inside regarding the lives of the 99+ percent of households that earn less than we do. (Well, I personally DO get to see some of this, and am emotionally inclined to keep it in mind, but that's just me.)

So the feeling Henderson had is understandably widespread in his (and my) socioeconomic tier. Where he really went wrong, but with substantial encouragement from the rhetoric surrounding the extend-the-tax-cuts debate, is in thinking that the case for allowing top bracket rates to rise rests on the notion that all these people are "rich," a claim that necessarily depends on one's frame of reference. But this is the impression that non-tax and budget experts might have been expected to derive from Obama Administration rhetoric, given that the Administration is urging the extension of all other income tiers' expiring tax cuts.

Brad DeLong's takedown nails this pretty hard, noting the horrific long-term budget problems that we face, which make huge tax increases inevitable. Brad also notes this isn't just because the Democrats like a big public sector - Bush did more than all preceding presidents put together (or at least the net of them) to make the fiscal problem a huge one. But of course this goes to show that the so-called middle class tax cuts shouldn't be extended either - and indeed aren't really being extended other than temporarily, given the payback for everyone that's only a turn or two down the road.

So let me try this quasi-defense (?) of Henderson, who after all could have been my colleague had I stayed at Chicago. The commonly offered public rationale for permitting his annual tax liabiity to go up, via non-extension of the top bracket tax cuts, which is that he is "rich," doesn't jibe with how most (I would surmise) people in his socioeconomic position feel about their lives. This admittedly reflects their myopia, but of a sort strongly encouraged by the circumstances in which they (we) commonly live. But in fact the question of who is "rich" in the proper comparative sense is really beside the point. (It's undisputed, of course, that those in the top bracket are generally richER than those in the lower brackets, even though taxable income is an imperfect measure of comparative material wellbeing.)

As a matter of brute political reality, taxes are going to have to go up, and indeed a lot, for way more than just the "rich" by anyone's definition. Extending the so-called middle class tax cuts is insanity as well (leaving aside the case that the current recession calls for delaying the effective date of rate hikes, at least given other political constraints on fiscal policy). And the Obama Administration (albeit under political duress) has helped perpetuate the misunderstanding that this is all about who's "rich," because no one in politics - and Republicans even less than Democrats - has the incentive or the nerve to speak in full candor about the long-term budget picture, its causes, and likely or feasible solutions.

Sunday, September 19, 2010

Back from the mists of time

When I was 17 years old and had just graduated from high school, I decided I was interested in art films (mostly foreign) and spent much of the summer going to see them in now-vanished Manhattan venues such as the Carnegie Hall Cinema and Bleecker Street Cinema. These places were a bit like the Quad Cinema or Film Forum today, except that, instead of emphasizing first runs, revivals, genre festivals, and the like, they mainly went through repertory one-day, double-bill showings of what were then the enshrined classics (Bergman, Antonioni, Godard, Truffaut, Fellini, Satyajit Ray, etcetera - though I believe Hitchcock and the American likes of Hawks and Wilder may have made it into the canon by this time). Needless to say, you couldn't otherwise see most of those films. Even Sony Betamax hadn't been invented yet, and on TV (pre-cable, at least in my household), if there was any chance at all, it would have had to be late night on channel 13. You could see them on college campuses through the student film societies, but that wouldn't be happening for me until the fall.

Early in the summer I saw what was actually (I think) a new release, Truffaut's Day for Night, starring Jacqueline Bisset and Jean Pierre Leaud, among others, and offering a fictional account of the process of a director (played by Truffaut) making a supposed film. One of the more amusing aspects is that the film-within-the-film appears to be quite hokey. It's called "Je Vous Presente Pamela," and the story line is that a young, newly married British woman, brought for the first time by her French husband to his parents' house, falls in love with the father-in-law, leading to melodrama that ends with a shooting and car crash. In the actual film, we see scenes from the fictional film being shot completely out of order, with actors flubbing lines, a cat refusing to drink milk on queue, romantic and other complications on the set continually getting in the way, etcetera.

I just loved the movie (and also, as I recall, Jacqueline Bisset), but for more than 3 decades I had never seen it again. (I once rented a VHS version, back when that was the dominant format, but gave up after 5 minutes because it was excruciatingly badly dubbed.) But I had always wondered if I'd like the movie seeing it again later in life, and also why I had liked it so much. I'm not generally a huge Truffaut fan (though he's often OK) with the exception of The 400 Blows, which I certainly still swear by. One operating theory was that Jacqueline Bisset had a lot to do with it. But when I'd seen her in other movies while a bit older, I hadn't been similarly starstruck (though obviously she was quite beautiful).

I finally decided to get Day for Night from Netflix, have now watched about 2/3, and will finish it in a day or two when I have the time. The verdict: good but not great, and the reason I liked it so much back in the early to mid 1970s was not just Jacqueline Bisset but rather the broader milieu of the film, which gave me an excited nose-to-the-glass sense of finally, at a transition stage in my life, getting an actual full inside glimpse at a sophisticated adult professional and social world.

Saturday, September 18, 2010

Getting ready for the Pavement concert tomorrow

To get in the right frame of mind for the Pavement concert at Williamsburg Waterfront tomorrow night (2 tix still available, BTW, for Tuesday night in Central Park), I decided to make my own version of Quarantine the Past, their recently issued greatest hits (if that's the word for it) compilation CD. Just under 80 minutes to fit on a CD for the car, but then I decided to expand it for an iPod playlist with a target ceiling of about 90 minutes (this having something loosely to do with health club exercise times).

Still missing a few vital songs, especially from Crooked Rain, Crooked Rain and Brighten the Corners, and also containing a few quirky picks that might not really belong on a best-of, but at any rate here are my current choices for Best of Pavement, clocking in at 1:29:56:

Box Elder
Summer Babe
Trigger Cut
In The Mouth A Desert
Silence Kid
Elevate Me Later
Stop Breathin’
Range Life
We Dance
Rattled By The Rush
Father To A Sister Of Thought
Easily Fooled
Brink Of The Clouds/Candylad
Shady Lane
Date With IKEA
Harness Your Hopes
No Tan Lines
Spit On A Stranger
Major Leagues
The Hexx
...And Carrot Rope

UPDATE: If I'm counting right, they ended up playing 16 of these songs.

Tuesday, September 14, 2010

More good news for people who like bad news

Desmond Lachman at AEI is predicting that "the Euro will unravel, and soon," which he notes would have disruptive effects extending well beyond Europe itself:

"From a U.S. perspective, a deepening in the eurozone sovereign-debt crisis could threaten the rather feeble U.S. economic recovery now underway. In part, it would do so by weakening the euro against the dollar and by clouding European growth, both of which would diminish U.S. export prospects. The more threatening channel through which it could impact the U.S. economy would be by increasing overall global financial-market risk aversion and by precipitating another global credit-market crunch akin to what occurred in the aftermath of the Lehman bankruptcy in September 2008. This risk is underlined by the fact that global financial institutions are now closely integrated and that U.S. banks presently have around US$1.5 trillion in loans outstanding to Europe."

I don't know Lachman personally or by reputation, but gather that he is well-regarded and a serious person, rather than being one of AEI's more politically minded resident scholars or fellows.

Friday, September 10, 2010

Getting It versus the Coen brothers

The Coen brothers’ Burn After Reading came out two years ago, but I only got around to seeing it on DVD last night. I liked it, and as a family activity in a household with 2 teenagers it was a big success, as the film’s snark level proved highly age-appropriate (though it worked for the adults as well).

For those who haven’t seen Burn After Reading, it's a dark and absurdist farce, mixing a sex comedy with a spy caper, in which a bunch of scoundrels and fools largely fail at everything they try to do (and if it's one against another, they both fail). Like much of the Coen brothers' work, it's in a sense aesthetically radical for a mainstream release with a decent budget, distribution, and well-known stars (such as George Clooney and Brad Pitt). Nearly all of the characters are either unpleasant or stupid, and most are both. Hence, there is no one conventionally to root for in the Hollywood tradition, and if you insist on that you won't like the movie. Moreover, the great thing about the spy plot (if one can call it that, and I'm laughing with not at the Coen brothers in saying so) is that, between a few coincidences and the characters' stupidity, what ends up (or rather keeps on) happening makes absolutely no sense to trained professionals whose job it is to look for purpose and meaning.

I very much identify aesthetically with this type of thing, and thus perhaps it's unsurprising that Getting It has a similar aesthetic. Except, in my novel the comedy comes from grotesque disproportion between the value of the characters' aims (to themselves or anyone else) and the efforts they invest in trying to achieve them, as well as from the characters' self-importance and grandiosity, rather than from stupidity and meaninglessness as such.

But one difference betweeen the two relates to what I think is the main problem that some people who are quite willing to embrace the aesthetically radical or non-mainstream often have with the Coen brothers' movies. At times the Coens so dislike and appear to feel superior to their characters, to whom they can be quite cruel, that it can come off as a bit smarmy on their part and also adolescent. Which is too bad, because there truly is an aesthetically radical element there as well. E.g., consider the delightful cynicism of the endings of, say, Burn After Reading, Barton Fink (which I nonetheless don't entirely like, though parts of it are great, such as the Coens' vicious critique of the otherwise forgotten Clifford Odets), and The Big Lebowski. There really is something in these films that's pretty bracing for a major commercial release, though hard to separate entirely from the aspects one might find too self-satisfied.

In Getting It, I tried to have a bit of compassion even for my most odious characters, without softening them up or giving them redeeming features, and while I could be hard on them I tried not to be gratuitously cruel. I saw them as victims of delusion and false consciousness, and thus in the end to be pitied for that, rather than hated for their bad behavior. "There but for the grace of whatever go I," I was inclined to think while writing it. Hence, I hope it can appeal to people who like the Coen brothers' aesthetic other than when the Coens seem too persuaded that they are much better than their characters.

Thursday, September 09, 2010

Swinging for the fences

My book in progress concerning U.S. international taxation, tentatively called "Fixing the U.S. International Tax Rules," is starting to come out pretty assertive regarding how I feel I am changing and advancing the prevailing analysis. This can be risky, because people don't want to hear such claims and may be inclined to resist them, but I feel it's justified.

In Decoding the U.S. Corporate Tax, by contrast, I made no such claim, nor could I have. "Decoding" tried to explain and critically evaluate a rich preexisting literature, but without adding as much that was intellectually new, beyond a sense of the broader context and several dollops of intellectual arbitrage.

Two differences: the underlying academic literature in corporate taxation is much richer than that in international taxation, and I hadn't thought as deeply about the corporate tax issues. That book's motivation was largely pedagogic, indeed born of my frustration when teaching corporate issues in tax policy classes and finding that there was no suitable reading accessibly addressing the issues that I considered most interesting and important. This time, by contrast, more is accessible but the field (in my view) remains intellectually in a far more primitive state.

Wednesday, September 08, 2010

With apologies for the commercial solicitation

Would anyone from the NYC area like to inquire about 2 Pavement tickets, featuring uberslacker Steven Malkmus from when he was still razor-sharp and at the top of his sardonic game? Central Park, Tuesday Sept 21.

I can't go because I'm giving the annual Tillinghast Lecture on international taxation at NYU on that day, though I did manage to buy tickets to the preceding Sunday show.

Oh, to have been a fly on the wall ...

Doug Holtz-Eakin, in a widely-linked MSNBC interview the other day:

"Let's get away from the politics of personalities. Let's not talk about a Sarah Palin all the time, and let's have, again, a debate about ideas...."

There may be a wound lurking beneath this comment that all those delightedly linking to it (mainly because the interviewer compared Palin fandom to taking cocaine) have missed. I believe Holtz-Eakin, during his days with the McCain presidential campaign, was among the main people tasked with teaching Palin some basic ABCs of public policy and history (e.g., what was the Korean War, who was Margaret Thatcher). That must have been quite an experience for Doug (or anyone in his position) - it's a miracle his hair hasn't all turned gray.

Tuesday, September 07, 2010

Voting paradox and the 2010 elections

The "voting paradox" is based on the observation that it's irrational to vote in a large-scale election, such as those in the U.S. for President or the members in either house of Congress, if you place any value on your time and define the benefit from voting as the gain to you from increasing the likelihood that the election result will have a favorable effect on policy outcomes, from your perspective. After all, if you value your time at as little as $10 an hour and there are, say, 100,000 voters in the relevant constituency, the amount of time it's likely to be worth spending (even if Siddhartha Gautama is running against Adolf Hitler) is bound to be well under a second.

What makes it an ostensible paradox, of course, is the fact that lots of people actually do vote. And what makes it not really a paradox is the fact that people don't actually vote for the stipulated reason. Rather, voting is a consumer act, generally of an expressive character, hence no more irrational than waiting on line to see a good movie (though, to be sure, the nature of the consumer good is different - pulling the lever isn't in itself that much fun, other than perhaps in November 2008).

I've thought for many years, however, that voting's being an expressive consumer act, not a calculating one given the collective action problem (a prisoner's dilemma) that makes the supposedly "rational" approach so irrational, is vital to many of the defects in our political process. In its own way, declining to be individually "rational" about voting when everyone else out there is going to determine who wins leads to outcomes potentially as destructive socially as the fact that each of us may benefit from driving long distances and running the car's AC without regard to the local or global environmental impact.

If you're buying a car, you both get to decide what car you end up with and bear most of the consequences of whether it's a good or bad car. (Leaving aside problems such as SUV externalities on other drivers.) Hence, there's some reason to try to make a good choice in terms of the effect it will have on outcomes, which is not to say everyone always does so. But when your individual vote has effectively zero effect on your wellbeing and indeed that of the entire world (even if Gautama is running against Hitler), you may have no reason not to approach the decision in a fundamentally unserious way, so far as true effects on outcomes are concerned.

Otherwise, would it have been a pertinent factor in the 2000 election that Bush seemed like a better drinking buddy type than Gore? Would Palin backers be so blithely indifferent to evidence bearing on her true character if, say, their lives individually depended on it, conditioned on their backing her? For that matter, though I was glad about the 2008 presidential election outcome, would all those first-time Obama voters have materialized if it hadn't been a bit like showing you're into the new soft drink or Lady Gaga video?

In 2010, the voting non-paradox helps explain the possibly upcoming Republican landslide. Voting is fun if you're a Republican and eager for that solidaristic expression of anger that many Dems had fun with in 2008. Not so much fun to vote expressively on the other side these days. Plus voters in the middle, insofar as there are any, don't ask themselves questions such as which party's or candidate's views are closer to mine, or what will happen on the ground if Congress changes hands. They just want to vent.

But real outcomes are affected by the sum of votes, no one of which individually matters more than infinitesimally. And electoral outcomes often are taken as if they reflect the next two years' outcome preferences rather than the moment's expressive preferences.

Negotiating with Republicans

I was glad to hear that Peter Orszag will now be a NY Times columnist, as he addresses tax and budget issues from a sophisticated perspective that has considerable overlap with mine. And we'll see how his take on the economy compares to Krugman's, now that he is in private life and free to speak.

In today's inaugural column, Orszag proposes extending the expiring tax cuts through 2012, but with the understanding that they will definitely expire in 2013. The reason (no surprise here, but worth saying in a big-megaphone forum like the NYT): they're unaffordable over the long run, but the recession makes this a bad time to let them expire. The high-income tax cuts he'd rather let expire now, given their limited stimulative impact, but if extending them needs to be part of the legislative deal, he reasonably says, so be it.

I'm fine with this, but the problem is how do we know that they'll be allowed to expire in 2013? Republicans won't agree to this, and even if they did they wouldn't stick to it in 2013. He suggests a firm promise to veto any further extension, but this of course presupposes who will be in the Oval Office in 2013. Not to mention what broader pressures Obama, if still there, might be facing at the time (especially if he's in the Congressional minority, in which case there's a chance of government shutdowns, impeachment proceedings on grounds TBD, etc.).

This is not a criticism of Orszag and his column, but rather of the political and budgetary situation we find ourselves in. Columnists try to propose feasible good ideas, but they are limited by the actually existing set of such things.

Relatedly, Thomas Friedman, in a recent (and characteristically a bit windy) column called the U.S. the "superbroke, superfrugal superpower" that can no longer afford even to do something like the Grenada invasion. But even if that's true, even if we can't afford it (in the sense that doing it would be irrational), as a realistic political matter it doesn't offer the slightest indication that we won't nonetheless be starting multiple unaffordable foreign wars, especially if the White House changes hands in 2012. If William Kristol has the president's ear in 2013, and wants him or her to attack Iran and start a horrific global bonfire that will be devastating for millions of people, why would accelerating the U.S. budgetary crisis put him off?

Final gripe for now pertains to Obama's apparent decision to propose full expensing for equipment through 2011. For once we have a tax cut proposal that actually would be fairly stimulative (especially if the expiration is credible), and that costs less in the long term than the short run (as some investment is merely moved up, but here for countercyclical reasons that's actually the idea rather than a defect). But who's to say this will be allowed to expire either. And needless to say, by doing a Republican-style initiative, he won't win the least bit of reciprocity on any other policy front (such as infrastructure spending), and once again is simply reinforcing their narrative (tax cuts all the time for any and all reasons).

As I've been saying for years, there's no way out of the budgetary crisis without 2 reasonable parties willing to cooperate in the pursuit of sanity (as they were in the 1980s). One of the tragedies of the likely Republican landslide this year, apart from one's concern about how they will use their majority status, is that it will further postpone their much-needed return to sanity (which I at this point no longer expect).

Monday, September 06, 2010

Fun math problem for 8th graders who are baseball fans

My kids are both in high school now, hence too advanced in math for this, but here goes for anyone else whose kids are at the right level (and possibly starting the new school year this week). The other day Nyjer Morgan of the Washington Nationals charged the mound after the pitcher threw behind his head. He got there just before the first baseman, who decked him with a devastating clothesline. The question is: Who was closer to the mound and by how much, if we assume for simplicity that they started on, rather than merely near, the bases closest to them (home plate for Morgan, first base for the clothes-liner).

Doing it in my head, I come up with Morgan about 2.5 feet closer, reflecting that the mound is not perfectly centered inside the diamond. [Infield is square, 90 feet per side, hence 2 isosceles right triangles, but mound is only 60'6" from home plate.)

UPDATE: Jim Wetzler corrects me as follows:

“Not sure your geometry is precisely correct. If the diamond is a square with each side 90 feet long, the lines from home to second base and first to third base are 127.27 feet long (by the Pythagorean theorem). So these lines cross at a point 63.64 feet from all the bases. The batter runs 60.5 feet to the mound. The first baseman runs along the hypotenuse of a right triangle whose two legs are (1) the distance from first base to the center of the square (63.64 feet) and (2) the distance from the midpoint of the square to the mound (3.14 feet). By the Pythagorean theorem, the hypotenuse is 63.72 feet. So the first baseman runs 3.2 feet more than the batter.”

My response: Well done. My own mental process (while watching a Mets game) was less rigorous, as I simply rounded off √2 as 1.4 and ignored (though I was aware of) the fact that the first baseman’s trip is made slightly longer by the fact that the mound is off-center. At least the latter simplification was OK, as it only added .08 to the final total.

I guess I must have written some books other than Getting It

Bill Barnhart, an author (with a recent book about John Paul Stevens) and journalist who will be interviewing me on corporate taxation later this month, recently was kind enough to mention some other book I've written in the last couple of years:

"As New York University law professor Daniel Shaviro remarks in his terrific book, Decoding the U.S. Corporate Tax (The Urban Institute Press):

“'Sometimes we hear of a solution in search of a problem, which someone offers to a baffled world despite the lack of any discernible need for it. Examples include the George W. Bush administration’s endless advocacy of tax cuts, interminable concert tours by the Rolling Stones when they are past age 60, and the live-action theatrical movie version of Scooby-Doo.'”

Reference in the book was to corporate integration, which I said had more point to it than any of the above (i.e., too many rationales rather than none), only what the point is often varies with the proponent.

Thursday, September 02, 2010

Another favorable Amazon customer review for Getting It

"Hooked on books" says the following about Getting It:

"I believe that if any book actually makes me laugh out loud at any point, it's worth bringing to others' attention, which is why I'm recommending Dan Shaviro's "Getting It", a satiric look at life among cut-throat young associates (and oblivious pompous partners) at a Washington D.C. law firm. Set a few decades back, and with a pleasantly dated retro feel,it's impressively well written and in parts genuinely funny, even reminiscent at times of some of the funniest passages from some of Richard Russo's earlier novels - which is a major compliment. I think anyone who has had any experience working in the law or dealing with lawyers would enjoy this very quick read, which the author obviously had a lot of fun writing."

Upcoming talks this semester

I'll be traveling less far afield than usual in the fall semester, scheduled so far to give talks at St. John's, Rutgers-Camden, Harvard (tax group not general faculty), an ABA meeting in Chicago, and NYU's Tillinghast Lecture on September 21. At least one more talk is potentially in the works, however.

The best part is that I don't have to fly for any of these talks except for the one in Chicago. Not that I especially mind flying as such, but the long trips to and from the airports, need for early arrival & security check, risk of weather events, etc., take their toll.

At Rutgers-Camden, in addition to discussing a paper at a faculty session, I may try to help scare up student interest in a mid-PM talk about Getting It. Unfortunately, I'm more confident that if they tried it they'd like it, than I am that if I give the talk they will come.

New semester at NYU Law School

I'm on sabbatical (though agreeing to supervise a couple of student papers), but it appears we have a pretty strong incoming LLM class this year. Presumably courtesy of the terrible job market.