Including: why Obama is actually a Republican, how outsourcing has become a nuisance for Wal-mart and Gap, and why they won’t care, and is it just me but Apple seems to be maturing…
- Obama tweets.
Link: America misinterprets.
I feel a bit sorry for BO at the mo. Mostly because he looks like he’s trying and failing to get through to anyone. For example, Yahoo Canada (?) put out an article yesterday about Obama’s most recent round of tweeting to try and gather support for his fiscal remedy solution. Part of which was him saying “if I can’t persuade the Republicans to give in on the higher taxes on the rich, we’re going to have to get rid of the home-mortgage tax deduction”.
Or, more specifically, someone asked him “As a home-owner, I worry deductions for homeowners are at risk. Is that the case?” And Obams replied with:
“Breaks for middle class impt for families & econ. if top rates don’t go up, danger that middle class deductions get hit – bo”
This spurred a scandal of tweets with Americans going crazy about how evil Obama is. Meanwhile, the rest of the world is all: you get a home mortgage deduction?!
In a more formal Bloomberg article, Obama has been reiterating that he won’t budge on a tax rate increase for the top 2%.
I would just like to point out that whether you take Obama’s top tax rate or Boehner’s top tax rate, America is still getting a right-wing, Republican tax rate.
Let’s not kid ourselves: the historical tax rates speak for themselves.
- The trouble with outsourcing.
Link: Wal-mart and the Gap in Bangladesh.
Wal-mart and the Gap have outsourced most of their clothing production to Bangladesh. And hey – I think that’s great. I love Gap clothing – and if it means that I can afford it, loose labour laws all the way.
But that’s not really the news. The point is that Wal-mart and co are coming under criticism for the safety failures in the factories to which they outsource, with the argument being that they should fund the safety improvements, etc. The general response from the Wal-mart/Gap crowd is:
“Specifically to the issue of any corrections on electrical and fire safety, we are talking about 4,500 factories, and in most cases very extensive and costly modifications would need to be undertaken at some factories. It is not financially feasible for the brands to make such investments.”
I am not sure why there is such a big deal being made about this. And I can only think that we are talking about thoughtless outrage. Should the factory conditions improve? Yes. Should Wal-mart and Gap do it? Only if it’s financially feasible for them to do so.
The outrage stops at the “yes” and doesn’t continue into the implications. “Financial feasibility” is a euphemism for “Wal-mart and Gap will just take their business to another developing country if Bangladesh gets too expensive”. And then who really loses? In the grander scheme of economic well-being, a Bangladesh with lower safety standards but sustained internal production and higher exports is better off than a Bangladesh with no production.
And sad as it may be, those are the alternatives.
So it’s up to the Bangladesh government to do something about the safety standards.
It’s been a while since I had a look at the Apple share price. Mainly because I have been well-irritated by the Maps application.
The share price:
Well at least it’s starting to recover. But it does look like someone said “Sell” and people did. And an analyst made this point which I liked:
“The new product aspect has faded recently as the newer versions of their products provide less of a reason to upgrade. While Tim Cook is a capable executive apparently, his background is in procurement and engineering, not innovation. So who is driving this?”
Tim needs to pull something out the bag. Or else Apple will move from being a growth-company to being just another quality-brand. And maybe it’s just that time.
- Mysterious algorithms.
Link: ready, set, arbitrage.
Wrote about it here.
That’s all for now.
Have a good day.
Caustic Pop December 5, 2012 at 10:15
It never ceases to amaze me how people could actually think that someone back in the day would fork over 70%, 80%, or 90%+ of their income to the Federal government! Looking at historical nominal rates is totally misleading because the tax codes were completely different. The effective rates on income tax are the ones to look at, and they never exceeded 35%, at least since 1966: http://www.baldingsworld.com/2012/11/30/the-obsession-with-nominal-tax-rates-or-the-twinkie-romanticism/
Of course, the effective rates are lower today, but this has had the Laffer Curve effect of actually -increasing- revenue.Reply
Jayson Coomer December 7, 2012 at 10:45
I hear what you’re saying. And if you go to my post on Thursday, you’ll see an estimate of the effective tax rate on income of $200,000. I do not believe that nominal tax rates are the best reflection of taxes paid – but they are an indicator of trend. And from what I can see, there has been a distinct lowering of effective tax rates since Reagan came to power. And as you point out, the effective tax rates today are lower on the top 1%.
Which brings us back to the Laffer Curve. By my understanding, the Laffer Curve argument only makes sense if you are sitting on the righthand side of the bell-curve. I understand the argument – if you make tax rates 100%, no one would work and you collect no tax. As you reduce the tax rate, people are more willing to work, and therefore you have a larger tax base from which to extract tax. But that situation cannot always hold, because if you charge 0%, then you raise no tax. If you charge 1%, then you raise some taxes. And somewhere in the middle, there is an optimal point. Does America sit to the right or to the left of that optimal point?
I think it sits on the left… Your statement suggests that it sits to the right.
Immediately before the Bush tax cuts, America’s tax revenues were around 20% of GDP. After the tax cuts, that revenue declined to between 16% and 18% of GDP (in the years while the US was still growing). It currently sits at around 15% (http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205). Surely that implies that on some level, the lower tax rates resulted in fewer taxes being collected?
In my mind, the real question for the Laffer Curve is: at what tax rate do I stop working in the country in which I live? If you increase my effective charge from 35% to 40% – I would complain, but I would not leave. I have a vested interest in staying where my wife is happy and where my children go to school. So I would still invest because I would still need income to live. When it comes down to practicalities – the optimal tax rate must be the point at which we would actively make the choice to leave rather than just put up with the tax rate and pay. At least – that’s my understanding of Warren Buffett’s point…Reply