Tuesday Stuff

And nonsense.

  1. Heh. A history lesson of sorts.
  2. The sooner people figure out that human value is uncorrelated with salary, the better.
  3. Conservative vs Liberal Supreme Courts (by a paint by numbers metric) measure with respect to freedom of religion.
  4. Seems I grew up in a transition period. I think A grades are exceptional, but that as well, Failing means you were also exceptionally unexceptional.
  5. Church and men.
  6. Snipers and public perception.
  7. Heh.
  8. Security and Progressive. In a word, yikes.
  9. If Picketty is right (capital trumps salary) then gosh, you’d think the President would be proposing policies that encourage investment in markets. Not the reverse, ah, our moron-in-chief.
  10. Great muscular strength helps sometimes.

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11 comments

  1. Boonton says:

    Re #9

    Assume r>g. That is interest is, say, 5% but economic growth is 3%.

    In this simple model also assume that you have choices. You can work, in which case you’ll start at 20,000 a year and that will grow 3% every year (economic growth is just the sum of all people working and earning a bit more each year). You can also invest an anything you save earns you 5%. Also assume your decision begins at age 20 and goes 45 years to 65 at which point you retire.

    In equality of opportunity land I assume everyone starts out at 0 and since they have nothing they all work. But people will save different amounts. So I model a person who saves 10% of his check every year. That person will have $520K in the bank at 65, $185K from contributions and the rest from returns. Another person opts for 20%. He gets $1M in the bank, contributions of $371K. So you get some inequality at the end. However this doesn’t seem extreme.

    What if both die at 65 and their 19 yr old kids inherit the windfall? First let’s say they start out with that fortune in the bank. Say they mimic their fathers and work and save at the same rate. Now the 10% kid ends at $5.196M and the 20% at $10.391M. Not bad, but suppose they didn’t work….say they just slacked for 45 years?

    The 10% kid would have $4.7M and the 20% $9.3M vs $5.2 and $10.4. In terms of absolute dollars as well as relative rank starting out with a fortune creates a situation where one is always behind. Since work will only grow modestly the fortune with a sufficient head start will always be on top. Get a big enough fortune (say over 100M), where even with a very wasteful lifestyle (at some level it becomes almost impossible to keep consuming, if you’re buying mansions and private planes you are buying assets rather than consumption goods…you have a Bewsters million problem where you’re trying to blow your money and it starts getting impossible!) it is still impossible to really exhaust it, and it becomes almost impossible for someone with that fortune to not remain on top.

    Needless to say if you put a simple person into this equation investment becomes meaningless. You’re not going to catch this crew by doubling or tripling your 401K contributions. Of course if you can its probably a good idea to do that for your own gain but in terms of influence and power forget about it.

  2. Boonton says:

    Re #9

    Assume r>g. That is interest is, say, 5% but economic growth is 3%.

    In this simple model also assume that you have choices. You can work, in which case you’ll start at 20,000 a year and that will grow 3% every year (economic growth is just the sum of all people working and earning a bit more each year). You can also invest an anything you save earns you 5%. Also assume your decision begins at age 20 and goes 45 years to 65 at which point you retire.

    In equality of opportunity land I assume everyone starts out at 0 and since they have nothing they all work. But people will save different amounts. So I model a person who saves 10% of his check every year. That person will have $520K in the bank at 65, $185K from contributions and the rest from returns. Another person opts for 20%. He gets $1M in the bank, contributions of $371K. So you get some inequality at the end. However this doesn’t seem extreme.

    What if both die at 65 and their 19 yr old kids inherit the windfall? First let’s say they start out with that fortune in the bank. Say they mimic their fathers and work and save at the same rate. Now the 10% kid ends at $5.196M and the 20% at $10.391M. Not bad, but suppose they didn’t work….say they just slacked for 45 years?

    The 10% kid would have $4.7M and the 20% $9.3M vs $5.2 and $10.4. In terms of absolute dollars as well as relative rank starting out with a fortune creates a situation where one is always behind. Since work will only grow modestly the fortune with a sufficient head start will always be on top. Get a big enough fortune (say over 100M), where even with a very wasteful lifestyle (at some level it becomes almost impossible to keep consuming, if you’re buying mansions and private planes you are buying assets rather than consumption goods…you have a Bewsters million problem where you’re trying to blow your money and it starts getting impossible!) it is still impossible to really exhaust it, and it becomes almost impossible for someone with that fortune to not remain on top.

    Needless to say if you put a simple person into this equation investment becomes meaningless. You’re not going to catch this crew by doubling or tripling your 401K contributions. Of course if you can its probably a good idea to do that for your own gain but in terms of influence and power forget about it.

  3. Boonton says:

    That being said, let me dispense with your criticism quickly:

    * The President did propose a $3K tax credit for auto-enrolling in an IRA. That seems to be exactly what you are claiming he should be doing….increasing investment at the bottom 99% of hte income scale.

    * Your blogger totally botches the trust fund loophole.

    Say you buy a stock for $1M today and ten years from now you sell it for $100M. What is the income from that on your taxes? Easy, $99M ($100M less the $1M it cost you to buy it).

    Say the day before you were going to sell it you are hit and killed by a cyclist on the street. Your ungrateful kid inherits the stock and sells it. What’s his income? $0. The price of the stock the day he got it was $100M so when he sells it for $100M he claims no income at all.

    This is clearly a loophole that increases inequality and violates the principle that like transactions should be treated in like manner by the tax code.

  4. Boonton says:

    Re #3, the first case he cites doesn’t sound like a religious freedom case. In it you had a church that was marked a historic building, which limited the alterations the Catholic Church could make to it. That sounds like a landuse/zoning type of case that just happened to involve a Church but could have involved any property owner.

  5. Boonton says:

    Re #8: I thought that port was Read only, you’re telling me that little Progressive Snapshot thing can actually take control of the vehicle itself!

  6. Mark says:

    Boonton,
    The OBDII port is not just read only. The progressive snapshot isn’t made to write, but if hacked, probably could do a lot.

  7. Mark says:

    Boonton,
    Actually a bigger headache is if you bought, say Bell Telco stock in 1965 and used dividend reinvestment plan. Now through the baby bell split an mergers, .. try calculating what you owe today if you sell shares of one of the baby bell’s today.

  8. Mark says:

    Boonton,
    Assume r>g. Compare two groups, one puts a percentage of their funds (let’s say this is SS, use 15% if you want numbers) in the market, the other group takes the money and pays the retirement of those in their bunch which have retired. Call them the R & G groups (for obvious reasons). In a generation or two, the R group has a lot more money available to pay the retirees than the G group. End of story.

    Look. Here’s the thing. Every parent (grandparent) should give there kids a passel of cash in their first 1-5 years. That way, it will grow to the point that when they are 20-25 and starting out, they’ll have a nest egg, to draw on for mortgage downpayments, so pay for emergencies, to let it grow so they can do the same for their kids. I’m quite unclear on why you prefer salary based taxation to encouraging investment (hint, you can’t invest money which is taken from you as tax).

  9. Mark says:

    Boonton,

    Equal opportunity land is what liberals want. I find that desire and the codes/laws it spawns to be reprehensible. I find the notion that you should be prevented from helping your children inhuman and immoral.

  10. Mark says:

    Boonton,
    I’m not sure quibbling over particular cases is important. As long as the same criteria is used throughout then the conservative/liberal +/- numbers can be tallied. Case numbers are probably in the hundreds so quibbling about a single case here or there shouldn’t change the overall.

  11. Boonton says:

    Actually a bigger headache is if you bought, say Bell Telco stock in 1965 and used dividend reinvestment plan. Now through the baby bell split an mergers, .. try calculating what you owe today if you sell shares of one of the baby bell’s today.

    Accounting is made up of very simple principles but they add up quickly to lots of complication. I had taken classes in stats., calculus, and econometrics and I thought accounting should be easy. After all it seemed to consist of nothing but applied addition and subtraction (once in a blue moon you have to actually multiply or divide a number). Yet the complication adds up.

    There the principle is still pretty simple. Your cost basis would simply be your initial purchase in 1965. The dollar value of each dividend would be added to that and all that sums up to the cost of the stock. If you sell it today you simply subtract the cost from the revenue and you have your net profit. If you didn’t bother to keep track of your dividends, you’d have to go back and look all that crap up, but even then you’re talking a single dividend issued each year. I think this is a good example where ‘complicated regulation’ ceases to matter economically. In 1980 this might have required paying an accountant a few hundred dollars, today you can probably find an app that will do all this work for you.

    Anyway in terms of the ‘trust fund loophole’ this isn’t a good argument against Obama’s proposal. The tax code still currently treats this transaction differently. If you sell the stock you have to go back to 1965 and figure out your costs to compute your profit. If you die all your kid has to do is look up the stock’s value the day he inherits the fortune and go from there. Not only is the same transaction treated radically differently, the tax burden falls upon the person who actually undertook the most sacrifice and work rather than the person who did nothing.

    I find the notion that you should be prevented from helping your children inhuman and immoral.

    Whose prevented from helping? Clearly buying stock for $1M and then selling it years later for $100M is a huge win, even if you have to pay tax on the $99M profit. Why would you not be able to provide significant help for your kid? If this ‘loophole’ was closed the kid would be able to easily clear $70M or so.

    The OBDII port is not just read only. The progressive snapshot isn’t made to write, but if hacked, probably could do a lot.

    Why exactly is this a good idea to have built into cars? If it was mechanically limited to just reading you’d have no security problem at all (except maybe privacy violation). Why not dedicate a few pins on the port for writing. Mechanics could have devices that write but Snapshot type devices could be mechanically limited to just reading thereby preventing a problem.

    Assume r>g. Compare two groups, one puts a percentage of their funds (let’s say this is SS, use 15% if you want numbers) in the market, the other group takes the money and pays the retirement of those in their bunch which have retired. Call them the R & G groups (for obvious reasons). In a generation or two, the R group has a lot more money available to pay the retirees than the G group. End of story.

    g = economic growth = GDP growth. GDP = spending = income (every dollar spent is someone else’s income).

    r>g means interest/investment income is growing faster than the economy as a whole. This creates a long term conceptual problem. r is a part of g so if r grows faster than the whole then r’s portion of the whole has to get larger and larger. At some point the whole becomes dominated by r leaving nothing for g. If there’s no growth in wages then where are these ‘retirement funds’ coming from? It’s great if you can make a killer return on your 401K but if you have no salary there’s nothing to put in the 401K to start with!

    Think of it this way, say 1/4 of your calories come from fat but every year you increase your fat calories by 10% and your non-fat by 1%. What is going to happen is after enough time passes your diet is going to be 99.9999% fat and your overall calories will grow by just a tad shy of 10% per year.

    This is the same objection I raised about “medicare/health care costs are bankrupting us”. They were premised on observing the economy growing say 3% per year while health grows 10%. Since health is a portion of the economy it cannot grow faster than the economy forever, either the trend mathematically has to reverse or overall growth will start to look like the growth of health care, thereby going up.

    Regardless if r>g for an extended period of time you have inequality built into starting positions. Regardless of how much you try to increase your savings from salaries, the problem is that you can never catchup to someone with a sufficient headstart in capital. The compounded returns to capital are simply too great even though you do get to have the same rate of return on your savings. In that sense there’s no difference between a 401K system, a social security tax based system, or a private pension plan based system. All systems depend upon salaries.

    Religious Freedom cases
    Case numbers are probably in the hundreds so quibbling about a single case here or there shouldn’t change the overall.

    Probably not even that, the SC doesn’t hear many decisions and many lower court decisions are about working out the application of legal doctrine, not cutting edge cases. The definition seems to be too slipshot IMO.

    It seems to be a ‘religious freedom’ case is just defined as any case involving a church or someone asserting a religious belief and ‘pro freedom” here is simply defined as siding with the church regardless of merits.

    Simple example. You put a new roof on a Church for $15,000. The check bounces, you sue and you win. This is a run of the mill, mundane contract law based suit. Your victory has nothing to do with religious freedom.

    More than a few of the cases described as ‘religious freedom’ recently have IMO been more about ‘religious ease’. For example, a school classifying teachers hired to teach secular subjects are classified as ‘ministers’ in order to shut down a lawsuit for disability discrimination.