• The Republican Tax Proposal: A Quick Summary

    Articles chosen with care. Your comments welcomed.
    Linked articles in bold purple

    ◆ Republicans roll out their tax plan. Here are the key provisions

    The Wall Street Journal (subscription) reports:

    Business: 

    • Rates permanently drop from 35% to 20%, with lots of other changes in deductibility
    • One-time tax of 12% to repatriate overseas profits, returning them to US

    Individuals:

    • Reduces seven individual income tax brackets to four at 12%, 25%, 35% and 39.6%.
    • Top tax bracket set for married couples earning $1,000,000 per year and individuals earning $500,000.
    • Bottom tax bracket extends up to $90,000 for couples and $45,000 for individuals.
    • The proposal doesn’t change the top tax rates on capital gains and dividend income.
    • Keeps 401(k) rules intact
    • Nearly doubles individual standard deduction to $24,400 for married couples and $12,200 for singles in 2018.
    • Increases child tax credit from $1,000 in 2017 to $1,600 plus $300 for each taxpayer, spouse and non-child dependents.
    • Places new limit on home mortgage-interest deduction at loans up to $500,000, down from $1,000,000, but existing loans would be grandfathered.
      • Comment: Big impact on expensive homes, especially hitting NYC, San Francisco, Boston, and wealthy suburbs
    • Keeps estate-tax. Sets exemption at $5.6 million per person and $11.2 million per married couple. Repeals the tax in 2024.
    • Repeals the alternative minimum tax
    • Repeals an itemized deduction for medical expenses.
    • Repeals deduction for student-loan interest.
    • State tax deduction eliminated; local tax deduction changed (link here)

    Families would also no longer be able to deduct their state income taxes from their federal taxable income, another change that would have a particular impact on places like New Jersey and New York, where state taxes are higher than in other areas. Taxpayers will be able to deduct their property taxes up to $10,000. –Washington Post

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  • Very good news in the Housing Market

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    New home sales surge 18.9 percent in September, highest level in 10 years (Reuters via CNBC)

    The increase came across all US regions.

    Sales of new U.S. single-family homes unexpectedly rose in September, hitting their highest level in nearly 10 years, offering hope that the housing market was regaining speed after appearing to stall in recent months.

    The Commerce Department said on Wednesday new home sales surged 18.9 percent to a seasonally adjusted annual rate of 667,000 units last month amid an increase in all four regions. That was the highest level since October 2007 and followed August’s upwardly revised sales pace of 561,000 units.  ….

    At September’s robust sales pace it would take 5.0 months to clear the supply of houses on the market, down from 6.0 months in August.

    A six-month supply is viewed as a healthy balance between supply and demand. –CNBC

    A reminder: all single-month data bounces around.

    Comment: The downside is that the Federal Reserve may take this as another indicator that it can raise interest rates. (My hunch: it will raise rates to partially offset the stimulus effect of a major tax cut, if and when that is passed.)

  • ZipDialog Roundup for Wednesday, September 6

    Articles chosen with care. Your comments welcomed.
    Linked articles in bold purple

    ◆ Hurricane Irma, with 185 mph winds, predicted to turn due north.

    Forecasts show it moving up Florida’s heavily-populated East Coast.

    Evacuations expected soon

    The company that commissioned the unverified Trump-Russia dossier is stonewalling Senate investigators (Fox News)

    The company, Fusion GPS, has no attorney-client privilege but it is simply giving the committee thousands of blank pages.

    Comment: Delay, delay, delay and hope the Senate gets tired of the investigation. It won’t. They will threatened contempt, which Sessions’ DOJ, unlike Holder’s, will take to court.

    Trump’s 6-month pause on DACA expiration leaves everything in Congress’ hands (Washington Post)

    The Democrats are united, so far. The Republicans are split, naturally.

    Comment: Don’t know if the D’s will stick together if funding the wall is part of the ultimate deal.

    Don’t know if the Congress can act on this at all.

    If they don’t, it will be a problem for Pres. Trump to simply extend DACA because the original act by Pres. Obama won’t pass constitutional muster (as Obama himself noted for years before he actually did it).

    Trump sides with D’s on debt ceiling, throwing R plans into chaos (Washington Post)

    Wants three-month extension plus Harvey relief, agreeing with Schumer and Pelosi, just as Ryan was panning the idea.

    US now knows the name of North Korea’s top military scientist, heading Kim’s programs (Washington Post)

    Comment: That doesn’t matter unless they have a way to “neutralize” him. Meanwhile, he’ll be living underground.

    How local housing restrictions strangle the US economy. Op-ed in the NYT, of all places

    If you live in a coastal city like New York, Boston or San Francisco, you know that the cost of housing has skyrocketed. This housing crisis did not happen by chance: Increasingly restrictive land-use regulations in the last half-century contributed to it.

    But what appears to be several local housing crises is actually a much more alarming national crisis: Land-use restrictions are a significant drag on economic growth in the United States. –Chang-Tai Hsieh and Enrico Moretti, op-ed in the NYT

    Comment: So obvious, even the NYT editorial page noticed, perhaps because New York City is one of the worst cities for housing restrictions.

    Uncertain if they will ever discover which political party controls all those cities with heavy restrictions.

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  • US Job Market Is Tightening Significantly: Why It Matters. What Policies Would Help

    ◆ That tightening sound you hear in the economy is coming from the labor market.

    And you soon may hear a more ominous sound – the US economy choking, unless policy makers begin addressing the regulatory and education constraints on labor.

    The Evidence Is Increasingly Clear

     Commercial real estate contractors told the Wall Street Journal Monday (May 8) that major building projects are soaking up huge gulps of available electricians, carpenters and other subcontractor laborers.

    Those labor-hungry projects include O’Hare modernization in Chicago, office-building projects in New York, condo and rental-housing projects in Boston, Miami and Los Angeles.

    Elsewhere, shortages of auto mechanics due to increasing complexity of cars are driving up labor rates to where a certified master mechanic can command $100,000 pay check. Fiat Chrysler Corp. said its dealers – forget about your local auto mechanic — will need 25,000 new mechanics in the next five years.

    With the US unemployment rate now at 4.4 percent – lowest since the recession began, according to the April jobs report – and with 700,000 workers having moved in the past year to fulltime status from part-time status, the market grows tighter.

    It seems unlikely the Trump administration will encourage immigration to mitigate the shortage.

    Exasperated employers are raising wage rates, but there are fewer workers on the sidelines to lure into jobs. That’s a stiff headwind for any economy, even one growing at the dismal 0.7 percent annual rate for the first quarter.

    What Policies Could Help?

    (1)  US business needs a skills-certification program for key jobs – an education and certification program that’s national in scope so certified workers can move easily and quickly into jobs in many states without having to jump through local-union apprenticeship hoops.

    (2) Long term, the US education system has to confront its depressing record of failing to educate students for 21st Century jobs in the trades.

    Indeed, social and education policies discourage students from investing in a trade-school education.

    Dan Miller is one of Chicago’s most respected and experienced economic journalists.

    He served as Chairman of the Illinois Commerce Commission in the 1990s, then business editor of the Chicago Sun-Times, and, in recent years, as policy adviser to the Heartland Institute, a libertarian think tank.  He also co-founded the Chicago Innovation Awards, which as recognized best-practices in products and services for over 15 years.

  • ZipDialog Roundup for Friday, March 18

    Hand-picked and farm-fresh–
    Linked articles in bold purple

    ◆ Happy St. Patrick’s Day

     House, Senate Republicans don’t care for Trump’s Budget (Washington Post)

    • Defense not raised enough, say hawks
    • Welfare programs cut too deeply, say some rural congressmen

    Nobody thinks the budget is going anywhere. Obama’s didn’t, either.

    The House GOP plan to revise the Affordable Care Act is embattled, as is Trump’s push to build a wall on the U.S.-Mexico border. His tax reform and infrastructure plans have yet to get off the ground.

    As he passes the halfway mark of his first 100 days, Trump is under increasing pressure to show that he can make good on his ambitious promises. –Washington Post

     Two Federal judges block Trump’s latest travel ban (New York Times)

    Comment: I am no lawyer, but I do think about constitutional issues. In the temporary immigration ban and court rulings, I see several thorny constitutional/legal issues:

    • First, the President has very clear, wide-ranging statutory authority to issues these bans, using his national-security authority
    • The President’s authority in this area has not been limited by Supreme Court rulings, as far as I know
    • On the other hand, the US does have various laws, court rulings, and regulations that prevent religious discrimination and prohibit “religious tests.” The courts blocking Trump seem to rely heavily on those laws and rulings.
    • To say that non-citizens, who are not already on US soil, have some constitutional rights related to our immigration laws is very striking–and perhaps novel. The courts know that and have been very reluctant to even make those arguments. They seem to say that the rights apply to US citizens who want their sister to come here from a banned country. Whether that is a stretch or not will have to be determined by higher courts.
    • The courts’ rulings against Trump explicitly say they are not ruling based solely on the text of the Presidential order. Rather, they are “putting this it in context.” The context is that candidate Trump explicitly promised a ban on Muslim immigration. Since the banned countries are Muslim, that must have been his intent. (His counter-argument is that other Muslim countries are not included in the ban and, in any case, the courts have no business ruling on this matter, which is solely within the President’s discretion.)
    • SUMMARY COMMENT: I see four big questions here.
      1. Should court rulings be limited to a law’s explicit text or should they take into account the broader political “context” (and, if so, how should judges determine the appropriate context)?
      2. Previous court decisions (on other issues) have explicitly ruled that a candidate’s statements are not relevant to subsequent laws and regulations, passed after the candidate takes office. Why shouldn’t that restriction apply here?
      3. Do these courts imply that non-US citizens, who are not already on US soil, have some constitutional rights that the courts must protect?
      4. Are these rulings–and the clear distaste for Pres. Trump they evince–the prelude to courts assuming a much larger role in national-security issues than they have previously? That would be an important change. It would also put the courts in an very tenuous position. They lack the information (including classified information) and the expertise to make policy judgments in this area. That is why they have normally deferred to the President unless there were clear constitutional violations. The courts are vulnerable to arguments that they are overreaching to impose their own preferred policies in an area where they should be more restrained. They would rightly receive withering criticism if those rulings lead to bad outcomes.

     Syria fired missiles into Israel after the Israeli Air Force struck targets in Syria (Associated Press)

    Israeli Channel 10 TV reported that Israel deployed its Arrow defense system for the first time against a real threat and hit an incoming missile intercepting it before it exploded in Israel. –Associated Press

    The Jerusalem Post also has a story, reporting Israeli air defense sirens sounded in the Jordan Valley.

    Comment: Israel has been very careful about being drawn into the Syrian conflict, but it does have two vital interests that could lead to military strikes. Both involve Iran. The Israelis do not want to see Iran’s Revolutionary Guard shipping missiles to Hezbollah (based in southern Lebanon) through Syria. They have bombed those shipments when they learn of them. They are increasingly concerned that the Iranians are moving troops into Syrian territory bordering Israel.

     US economy’s strength apparent in new data on housing, unemployment, and consumer confidence (Reuters)

    Interest rates are slowly returning to normal, too, after years of near-zero rates, designed to buoy a flagging economy.

    U.S. financial markets were little moved by the data as investors digested the Fed’s decision on Wednesday to raise its overnight benchmark interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent. The U.S. central bank also forecast two more rate hikes this year. —Reuters

     Venezuela: When a socialist economy has no bread, they know exactly how to solve the problem. They nationalize the bakeries(Miami Herald)

    Comment: Sean Penn had no comment.

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    zd-hat-tip-facing-inward-100px-w-margin♥ Hat Tip for helpful suggestions:
    ◆ Barry Shaw
     for the Israel missile story

     

  • ZipDialog Roundup for Monday, February 27

    Hand-picked and farm-fresh–
    Linked articles in bold purple

     The Democratic Party missed a bullet by saying “no” to Keith Ellison. That Tom Perez is considered a centrist, establishment figure tells you how far left the party has shifted under Obama.

    The Washington Post has a piece on why Ellison lost, but, unfortunately, it is biased and incomplete. The piece, written by David Weigel, cites these elements:

    • Former Pres. Obama’s support for Perez and the party’s unwillingness to depart from Obama’s legacy
    • Perez’ success in minimizing the ideological space between him and Ellison
    • Common opposition to Trump lessened Democrats’ internal differences
    • A “persistent smear campaign cost Ellison votes”

    In the final days of the campaign, Ellison’s harshest critics — including Alan Dershowitz, who donates to Democrats but is not particularly involved in the party — reemerged to smear the congressman’s record on Jewish issues. The National Jewish Congress put out fresh criticisms of Ellison, which Senate Minority Leader Charles E. Schumer (N.Y.), an Ellison supporter, publicly disputed. –David Weigel in the Washington Post

    Comment: Weigel’s characterization of attacks on Ellison as a “smear campaign” is a good example of why the Post is accused of serious political bias. It richly deserves the characterization.

    Even if you accept Ellison’s word that he has broken completely with Louis Farrakhan and the Nation of Islam, Ellison’s public record of anti-Semitic statements was bound to create problems. So was his record of harshly anti-Israeli rhetoric. Those may not matter in his Congressional district, but they would matter nationally.

    Second, if the job of the DNC chair is to recruit strong local candidates and raise money for them–and that is exactly what the job is–then a candidate with Ellison’s background and record, plus his association with Bernie Sanders would be a death knell in many swing states. That’s why every Republican wanted him to win. Everyone. That’s why Republicans will point out that Ellison is now “Vice Chair” of the party. It is an honorific post, to be sure, but the Democrats have given it to someone who deserves no honor.

    Perez does have one advantage as incoming chair. No matter how bad he is, he can’t be worse than Debbie Wasserman Schultz or Donna “Here are the secret questions, Hillary” Brazile. They are the face of entrenched Washington insider backscratching.

     Millennials having troubling getting into the housing market. When they are “ready to buy a home, the pickings are slim(Washington Post/Chicago Tribune)

    Overall millennials are falling behind other generations in homeownership, with first-time home buyers, who usually consist of 40 percent of the market, stuck at 34 percent.

    That could become damaging to this generation’s future prosperity. Housing experts say homeownership remains one of the primary ways for the middle class to build wealth, despite the ups and downs of the past decade. And with mortgage rates beginning to creep up, millennials who have to wait to buy could miss out on historically low rates. –Chicago Tribune

    Comment: There are building cranes all over downtown Chicago, erecting housing. Almost all of it is rental, I’m told.

     Good news on millennials’ economic fortunes  The same article reports that many more are now in the workforce and that their wages are up sharply. Very good news, indeed.

    As the economy has improved, so have millennials’ fortunes.

    The most recent employment data shows that the percentage of 25-to-34-year-olds in the labor force is the largest in eight years. This group has also recently begun to enjoy stark wage gains. Recent census data showed that in 2015, millennials’ incomes jumped 7 percent, far more than most other groups’.

    In a stronger financial position, more millennials are starting families. The census projects that household formation will average about 1.5 million per year through 2020, up from the 900,000 annual average in the past five years.

     The high cost of higher minimum wages: Wendy’s plans self-ordering kiosks at 1,000 locations by year-end  (WHIO)

    Comment: This is not rocket-science: labor-saving devices are more attractive when wages are high.

    The substitution of computers, artificial intelligence, and robotics will happen inexorably for low-skill jobs (and increasingly for cognitively-difficult jobs). Raising wages artificially only speeds the process. The biggest losers are those who need low-wage jobs the most. Those are people just starting out who lack other marketable skills and need to prove their competence and reliability so they can move up the wage scale.

     Ted Lowi has died. He was one of the most important scholars of American politics in the mid-20th century.  (New York Times) Originally from Gadsden, Alabama, he was a professor at Cornell for many years.

    Comment: Ted was part of the Marks family, which founded my hometown in Mississippi. 

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  • ZipDialog’s Roundup of News Beyond the Front Page . . Thursday, January 12

    Hand-picked and farm-fresh–
    Linked articles in bold purple

     Rex Tillerson takes a tough stand on the South China Sea.  Tells Senate confirmation hearing that China “must be denied access to artificial islands built in the disputed waters.” (Bloomberg)

    We’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed,” [Tillerson] said when asked whether he would support a more aggressive posture in the South China Sea. –Bloomberg

     Spreading gossip and calling it news

    Only sleazy sites do what BuzzFeed did, publish unsubstantiated rumors saying Donald Trump is effectively the Russians’ Manchurian Candidate. The charge is that the Kremlin has blackmailed him over sex acts during his business visits to Russia.

    Trump furiously denies the story, which gained wider currency after CNN spread it, while withholding the salacious details and saying the story is unsubstantiated.

    Senior officials in the US intelligence community have reportedly called Trump to say their agencies were not involved in developing the “information” or spreading rumors about it.

    The Wall Street Journal has confirmed that the dossier was compiled privately by a former British spy, who runs a small, private intelligence firm.

    Aside from CNN and The Guardian (UK), mainstream news outlets have been wary of running the story as “news.” Instead, they have said there is currently no proof for the allegations.

    Here is a brief clip from Trump’s news conference denouncing CNN for spreading the rumor, following by Fox’s media analyst, Howie Kurtz, calling the story a “bubbling stew of unverified rumors and allegations.”

     North Korea now has enough plutonium for 10 bombs, according to a Time magazine report (story here). The regime will be one of the toughest challenges for the Trump administration, one his predecessors made no headway resolving.


     Three black lawmakers testify against Jeff Sessions for Attorney General
      The appearance of Sen. Cory Booker (D-NJ) was unprecedented because he was testifying against a fellow Senator. That of John Lewis, a Civil Rights hero, lent more weight. That of another lawmaker, Rep. Cedric Richmond (D-LA), was the harshest, including a charge that the committee’s decision to have them testify last was, in Richmond’s words, ” the equivalent of being made to go to the back of the bus.” (CNN story here.)

    Comment: Harsh and tense as the hearings were, they elicited no new and damaging information that could harm Session’s confirmation chances.

     China’s inexpensive electric cars, made for their local market  They don’t go as far as Tesla and other US models, but they are much cheaper–around 1/4 of the cost of the Chevy Volt. They are popular with Chinese buyers, too. In fact, the country has more electric cars on the road than the rest of the world, combined. That’s a welcome development in a country suffering from terrible smog pollution. The Reuters story is here.

     Good Economic News  US property foreclosures at a 10-year low. (Reuters via Business Insider)

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