My Thoughts on the Bernie Sanders Tax and Economic Proposal

If you have been a member of the community for a long time, or have gone back and read my archived writings about economic issues in politics, you know that I am a non-partisan, case-by-case voter; a boring-as-watching-paint-dry-let’s-tear-apart-the-details policy wonk.  I look at specific proposals and actions under specific circumstances and conditions then try to vote or influence the electorate in my corner of the world in a way that I believe will result in the best societal-wide outcomes, all relevant known factors considered.

This can be frustrating for some of my friends, family members, and readers because it means my loyalty is to my principles, not to party or people.  I can’t be counted on to be a member of a tribe, which sometimes makes me suspect.  Instead, if someone has 1.) the right values, and 2.) the right policies to enact those values, they get my vote regardless of age, gender, race, religion, sexual orientation, or political affiliation.  This political philosophy has two outcomes:

  1. If a politician has a good idea, even if I disagree with everything else they believe or say, I think it’s important to recognize and support that idea and that, when evaluating that politician, I will attempt to look at the whole picture as impartially as I can without excusing or forgiving the evil they do.
  2. If a politician supports something I think is a good policy and want to see enacted, but he or she does so in a way that I think leads to substantially greater net negatives, I will work against something I otherwise want to see happen.  (An illustration from history would be the well-meaning but economically disastrous rent control policies enacted in the mid-to-late 20th century meant to make housing affordable.  Instead of doing what it was intended to do, it incentivized behavior that, when combined with other variables and factors, ultimately led to cities like New York and San Francisco becoming completely unaffordable for the median resident household at the same time it decreased both the “quantity and quality”, to borrow a phrase, of the existing housing stock for all but the super-rich.  In other words, the bleeding hearts who put it in place did far more harm than good to the point that no serious economist, liberal or conservative, supports them any longer.  They hurt the very class of people they were intended to help.  Those who opposed them were accused of being anti-poor but actually were defending the poor despite appearances.)

Again, none of this is new if you’ve been around me yet it always seems to come as a surprise to some.  It’s simply not a popular way to think.  I had people write me privately who were deeply upset about the piece I wrote on the late Supreme Court Justice Antonin Scalia.  They felt as if, even though intellectually they could see where I was coming from, I was somehow breaking some secret, unspoken rule by acknowledging the good he did rather than solely focusing on the evil and damage he caused a lot of innocent American families.

I’ve grown accustomed to it.  People tend to adapt when they understand this is my framework.  They understand that I’m not, to give another example, praising the Presidency of George W. Bush when I refuse to blame him for the housing crash because he was one of the only people in Washington, D.C. trying to stop it years before anyone else cared.  It resulted from banking deregulations and housing incentives put in place by Democratic leaders who fought him tooth-and-nail when he tried to shrink Fannie Mae and Freddie Mac before the collapse.  If Bush had his way, it never would have happened.  Those are the facts.  It doesn’t change any of the bad things he did.  Both exist.  That is reality.  No matter how I feel about the man, intellectual honesty demands I recognize that. It is unfair to criticize him for something he didn’t cause.

The same goes with my more conservative friends.  Contrary to the popular narrative that he is some sort of left-wing, out-of-touch socialist with disastrous economic policies, President Barack Obama has actually done some extraordinarily wonderful things with the tax code.  He pushed hard for a 50% payroll tax cut, the most regressive tax on the poor, middle class, and self-employed, which he wanted to pay for by returning the top marginal rate to the same 39.6% it was during the Clinton boom years.  He was stopped by the Republicans in Congress who demonstrated they cared more about the super-rich than the vast majority of American families.  He had to settle for a temporary, one-year 2% tax cut.  Later, when compromising with the Republican Congress on the expiration of some earlier tax compromises, he was able to raise the capital gains tax rate to 20% on the highest earning families to help reduce the deficit necessitated by the earlier economic catastrophe but as part of that deal, he eliminated capital gains and dividend taxes on the poor, middle class, and parts of the upper middle class entirely.  Specifically, if you make $37,650 in taxable income as an individual or, if you are married, you and your spouse make $75,300 in taxable income, you no longer have to pay any taxes on your capital gains or dividends.  Almost nobody talks about it but it’s one of the biggest investment giveaways to the typical American in history.  President Obama pushed through an $8,500 tax credit for first-time home buyers to try and bail out individual families during the housing collapse and worked to make loan forgiveness due to underwater mortgage write-offs non-taxable so those who were facing bankruptcy or wipeout didn’t have to worry about being sent to jail for fear of an IRS bill they couldn’t cover.  No matter what others may tell you and what his ardent admirers may have believed in election season, when paper is put to pen and laws are passed, President Obama is a fair, prudent, and moderate steward of the tax code and economy, prioritizing what is best for those who are struggling without resorting to confiscatory tax proposals that penalize hard work.  He’s done a very, very good job on the economic side, often in ways the typical voter doesn’t see.  The irony is, most of the people criticizing him are far better off than they would have been under a McCain or Romney administration.  They have no idea that the things for which they do blame him are a by-product of the on-going transition to a knowledge economy and would have happened regardless of who was elected.

With the upcoming Presidential election in November quickly approaching, there have been a recent slew of economic proposals and platforms released by the Democratic and Republican candidates.  I believe in giving each a fair hearing so I have been spending time going through them line-by-line.  Recently, my attention has been on that of Vermont Senator Bernie Sanders, who is running for the Democratic nomination.  Mathematically, even ignoring superdelegates, it is a near statistical impossibility for him to get the Democratic nomination at this point unless Hillary Clinton is indicted.  This is due to the fact that the Democrats award delegates proportionately and her margins of victory have been truly breathtaking in places.  Saturday, by way of example, Sanders won two of the three states but actually came out of the night further behind Clinton in the delegate count because she so thoroughly trounced him in Louisiana.

Before I Talk About the Bernie Sanders Tax Plan, A Quick Refresher on What I Want In a Country: Equality of Opportunity, an Emphasis on the Individual Citizen and Family, and a Culture of Responsibility

I’ve talked a lot in the past about my belief that certain government expenditures are more accurately thought about as investments.  The outlays lead to bigger dividends than immediately show up in the revenue line.

Historically, you have all kinds of examples.  The G.I. Bill for returning World War II veterans who wanted to access higher education and retrain for the civilian workforce is a good example.  So is the practice of using property taxes to pay for free K-12 education.  We give up money out of our pockets each year and, in exchange, any child, regardless of economic circumstances, has the opportunity to learn to read, write, do math, and self-educate or pursue college or university.  We, as members of the community, get a capable workforce and lower crime.  We don’t have to worry about bands of teenagers roving the streets like barbarians, raping and pillaging for entertainment.  The schools aren’t traditional accounting profit centers – they represent a net outflow each year – but they are to the civilization in that they pay themselves back exponentially, even in monetary terms, once you factor in second and third order effects.  (Think of all of the tax revenue generated by a young man who spends his life as a biologist rather than sitting in a prison.)  True, getting the balance right for school funding can be tricky as Americans tend to have a bizarre pathology of thinking throwing money at a problem fixes it – if you doubt that, look at Kansas City where a judge ordered the biggest financial settlement in American history to the failed school district which, despite practically unlimited funds and new Olympic-style swimming pools, still didn’t improve performance in any meaningful way – but there can be no doubt, upon examination of the evidence, that free public schooling for every child has been one of the most intelligent capital allocations our capitalistic system has ever made.

As a result, you already know that I believe:

  • Merit, not family status, should be the sole deciding factor when it comes to college affordability.  I think that a strict, standards-based national test should be available to any American citizen, regardless of economic or family history, age, gender, or any other characteristics.  Anyone who can score above a certain threshold should be entitled to low-cost or free-at-the-point-of-use higher education.  We all benefit if a brilliant mind is learning how to build better space craft or how to become a dentist rather than supporting themselves in a dead-end job.
  • Health care should be low-cost or free-at-the-point-of-use using a system that rationalizes the economics by substituting, to some degree, wait times for money based on priority (scarce resources must be allocated one way or another and it’s the fairest).  It’s immoral, and ultimately bad for all of us in civilization, when a family who has done everything right goes bankrupt because one of the children are born with a heart defect.
  • The tax code should be progressive, rather than regressive.  The poor and middle class tend to spend money when they get it, putting it right back in the economy, increasing the velocity of money, and, ultimately, government tax receipts.  I’ll take a tax cut in the payroll tax for a factory worker, minimum wage worker, or small business owner any day of the week over a reduction in the estate tax if forced to choose.  Besides, the wealthy benefit as they own the businesses the poor and middle class patronize with their increased purchasing power.
  • Bankruptcy should not be shameful nor should it be denied as real capitalism requires lenders to price their products in a way, and underwrite their loans with sufficient risk protocols, to account for borrower risk.  It is unacceptable for a country as wealthy as ours to let the student loan industry, in particular, turn student debt into some sort of magical class of debt that is almost impossible to discharge in court.  By tying the hands of bankruptcy judges more than necessary, we all suffer.  Educated young adults who should be out getting married, forming stable households, and siring the next generation of citizens brought up in the ideal conditions are, instead, having to take second and third jobs to cover the interest and principal payments.  Medical doctors tend to avoid fields like general practitioner compared to historical rates because the rewards aren’t sufficient to makeup for the enormous debt required to graduate.  We all lose.
  • The family is the major building block of civilization.  The prime political unit.  The first school.  The greatest anti-poverty program.  The ideal apprenticeship.  Therefore, I believe gender equality in parental rights is something that has to happen in coming years; fathers and mothers should be entitled to four to six months of paid parental leave after having a child.  Workers should be given at least four weeks of paid vacation a year to spend time away from the office with their spouse and kids.  We know all of the enormous benefits this generates, again, once you factor in second and third order effects.  Humans are not cogs.  They should not exist solely for wage slavery, no matter how high those wages may be.  Everything from behavioral economics demonstrates the advantages of this sort of thing.  Most people get everything they will complete in a day finished before lunch.  Thereafter, they are coasting; secretly watching YouTube videos, browsing Reddit comments, or dragging their feet on that Excel worksheet.  Frankly, we should go to a four-day work week.  The human brain is better at working in bursts, not in long, sustained effort.  Our entire economy, outside of a handful of industries, is built upon the edifice of the industrial revolution.  We’re almost completely transitioned to the so-called “knowledge economy”, as Peter Drucker would put it so our workplace culture should change to reflect it.
  • I believe in upcoming legislation, The Equality Act, which would crack open the Civil Rights Act of 1964 along with other anti-discrimination regulations, laws, and systems to add protections based on sexual orientation so no worker could be fired, no renter could be kicked out of his or her home, and no service could be denied at a business because of a person’s sexual orientation, relationship, or marital status.

On and on it goes.  You know where I stand on other issues, too.  I basically want a fair society where merit is the determining factor in a lot of cases.  Inequality in and of itself doesn’t bother me – I think it’s right that someone like Steve Jobs or Walt Disney basically lived like a king compared to everybody else and inequality is the nature of the universe as you’re always going to have inequality in beauty, inequality in willpower, inequality in intellect, which means inequality in financial outcomes – but only so long as you don’t have brilliant minds in the South Side of Chicago being shot on their way to school or having to drop out because they can’t cover the bills.  I want a civilization that protects consumers but makes it possible for smaller businesses to thrive so you don’t get this incentive to consolidate with a handful of corporations owning everything.

I also don’t mind a system that permits failure.  I agree with President Obama when he said that Social Security was not a pension system, it was a sort of guaranteed minimum floor below which we, as a people, have decided we don’t want our fellow citizens to fall.  It’s not meant to pay all of your bills or allow you to live comfortably.  It is a quasi-anti-poverty safety net.

Absent the aforementioned medical emergency, if you make it to the end of a 40 or 50 year work career and have not built a large enough net worth to support yourself, in this day and age, and in this country, it is absolutely your fault.  You are responsible for it.

Imagine an 18 year old wanted to end up with $500,000 in today’s purchasing power by the time he or she retired at 67.  It’d be a huge accomplishment considering that, according to the most recent Federal Reserve data, the median 65 to 74 year old has a net worth of $232,100, which includes houses, cars, bank accounts, and the value of other financial assets.  That means our young person is aspiring to accumulate a portfolio of productive assets entirely aside from all of his or her other holdings that, by itself, is over twice what the typical American builds after a lifetime of labor.

Furthermore, imagine inflation runs at a long-term average of 3.5% (between its historical long-term average of 3% and 4%).  Next, assume that nominal pre-tax, pre-inflation equity returns with dividends reinvested collapse to the lowest 49-year rolling returns ever recorded in the United States: 7.5%.  That’s worse than if you bought in at the height of the speculative boom in 1929 prior to the Great Depression.  Finally, for simplicity’s sake, we’ll assume our young man or woman is doing this through a Roth IRA so no taxes will ever be paid.

Given these variables, it would take only $3,700 saved in the first year, increasing at 3.5% for inflation every year thereafter, for our young person to reach his or her goal.  That’s roughly $10.14 per day.  Of course, if anyone believes America’s brightest days are ahead of it, the actual amount required would be materially lower as the 7.5% nominal return would turn out to be far too dim a view of the coming decades.

Let’s explore that line of thought.  What if our investor were willing leave the tax and protective confines of a Roth IRA in order to take advantage of an asset class such as conservatively-leveraged real estate?  Done properly, such an investment should be able to earn nominal returns on equity of between 10% and 15% under most ordinary economic conditions (for smaller projects, especially, these are still available in parts of the Midwest despite considerable overvaluation elsewhere).  He or she would then need only save anywhere from $1,731 per year + a 3.5% annual inflation adjustments ($4.74 per day at the 10% compounded return) to $332 per year + a 3.5% annual inflation adjustment ($0.91 per day at the 15% compounded return) to reach his or her $500,000-portfolio-in-today’s-purchasing-power goal.  That latter return figure should make it clear why so many self-made millionaires prefer working with real estate.  Most will never earn 15% in the stock market.  Leverage, though … leverage can be dangerous under the wrong conditions but done wisely, at the right time, on the right terms, and at the right price, it can be a wonderful path to financial independence for certain types of individuals as it juices the growth in net worth.

The point of all of should be apparent.  Absent some fairly extraordinary circumstances such as the rare medical emergency that is beyond your control, if, upon reaching adulthood, you can’t save between $0.91 and $10.14 per day in the most prosperous economy in human history at the most prosperous time in human civilization, you are either mathematically illiterate, lazy, or have a near total lack of self-control.  There is something wrong with you.  That $500,000 in real purchasing power can provide a combination of principal drawdowns and passive income to augment your other forms of income including, perhaps, Social Security.  If you don’t have it, it is not anyone else’s job or responsibility to bail you out of your lack of planning or stupidity.  In fact, to forcibly take money from a young, hardworking, responsible individual, by threat of sending him or her to jail if he or she doesn’t pay the higher taxes, and then transfer that money to you so you can have had your cake and eaten it, too, after a lifetime of being a profligate, is a disgusting moral failure.  It’s evidence of hedonistic rot.  Freedom means being free to fail; to live with the outcomes that you, yourself, have created.

I know people who have failed at this first hand despite having no excuse.  They went through their entire careers, often making $40,000, $50,000, $60,000, $70,000+ and now have nothing to show for it.  They still rent.  They have no 401(k) or IRA assets.  They have no meaningful savings.  They are loaded down with credit card debt.  They constantly make dumb financial decision after dumb financial decision and now talk about how they can’t survive; how the government needs to provide for them.  I find it both revolting and pathetic.  They want to rob the folks who put off their own consumption, having the best of both worlds.  In fact, I find those who support this kind of behavior almost monstrous in their lack of empathy, focusing solely on tears and not substance.  Fairness matters.  Fairness is important.  No one is entitled to a good life, only the chance at building one for themselves.

On the Balance, You Would Think My Political Alignment This Election Cycle Would Most Match Bernie Sanders

Given all of this, other than the emphasis on personal responsibility, you would think that my political alignment would most closely fall near Senator Bernie Sanders.  On substance, we agree in a very real way on the type of society we want to build – a society where the media isn’t controlled by six corporations, where bribery doesn’t pass as lobbying, where we aren’t constantly going to war on the other side of the world, sending our men and women off to die.  He even shares my deep, personal disgust with the for-profit prison industry, something I can’t bring myself to own because I find it wrong on some sort of fundamental, human or spiritual level that I find hard to put into words.  However, given that applied economics and finance are my backyard, what I do all day, every day for the most part, the “how” of the economic policy is extremely important to me.  Good intentions are not sufficient.  Results are what matter.  Outcomes are what count.  I want the fairest system with the most people possible enjoying the highest standard of living consistent with my aforementioned personal responsibility emphasis.  To go back to an earlier point, no matter how much I may want affordable housing, I won’t vote for rent control since it makes the problem worse even though it may deceive people in the short-term.

Despite wanting to support him, after reading Senator Sanders’ economic and tax plan, I have come to the same conclusion that most mainstream economists have.  Only, I’m going to be more blunt about it.  You know I’m not a fan of cursing and I try to be as even-minded as I can so please absorb what I am about to say to you in all seriousness because that is how it is intended.  This is not a joke.  I do not say this lightly.  I am not kidding.

My verdict: When it comes to economic and tax policy, Bernie Sanders is bat shit crazy.

I wince even saying it so vulgarly but there’s no other way to quite emphasize how insane this man’s proposals are.  I don’t say that to provide a sense of hyperbole.  I’m not trying to generate an emotional response.  I’m telling you that I think the man’s economic and tax policies are deranged.  In a real sense, he is a sort of anti-Obama.  Whereas President Obama’s proposals are ultimately workable and sound policy, even if I feel like they go too far at times on the revenue raising side before he’s forced to compromise with Congress, what Senator Sanders wants to do is not only unworkable, it’s immoral.  It’s disgusting.  It is nothing but the recycled, failed policies of the 1970s; garbage that will ultimately harm the poor and middle class.  It is so unbelievably, catastrophically bad that I cannot imagine anyone but the economic illiterate or someone so deeply vested in political ideology that they’ve lost all semblance of objectivity supporting this.

It is abundantly clear why none of the Democrats would work with him in the time he has been in the Senate to get anything meaningful done.

it is abundantly clear why none of the Republicans would work with him in the time he has been in the Senate to get anything meaningful done.

It is abundantly clear why he has a shockingly and inappropriately small net worth and tens of thousands of dollars in personal credit card debt despite having a very lucrative six-figure income for many, many years now.

He cannot be trusted with money.  He cannot be trusted with the nation’s economy.  He cannot be allowed to get anywhere near the economic and regulatory framework of the greatest wealth-producing system in global history.  No matter how much I agree with him on much of everything else, I will not support this kind of lunacy.

To put it bluntly, Bernie Sanders’ tax plan does not just “soak the rich”.  He all but declares war on the both the middle and upper middle classes as well as the self-employed.  By way of illustration, if you are a reasonably successful dentist living in a suburb who owns your own practice, you are going to get mauled to such a degree that it will result in a materially lower standard of living for you, your spouse, your children, and your grandchildren.  It will result in a gargantuan increase in the size and power of the government – the very government everyone is complaining is already too corrupt!  This is true even accounting for the theoretically lower cost of healthcare.

Specifics matter so let’s get into some of the details.

The Specifics of Bernie Sanders’ Proposed Tax Plan

First, let’s talk about the regressive taxes.  I hate regressive taxes.  I think the successful and rich should pay a higher percentage of their income because we disproportionately benefit from the services of this country.  The military protects more of our assets.  The fire departments are there to protect more of our buildings.  We transport more of our goods and services over public roads.  It also helps prevent aristocracies, which have fallen to the lowest level in global history as the percentage of self-made millionaires and billionaires are now at an all-time high compared to our ancestors for whom wealth came in the form of inherited land, property, and slaves.

Yet, an estimated 45% of the tax revenue Sanders wants to raise comes from these offensive and onerous levies on working families, not the rich alone.  Specifically, in addition to the already-existing 15.3% payroll tax that self-employed people have to pay now (this is paid before a penny in Federal, state, or local income tax, sales tax, property tax, or any other taxes are paid), Bernie Sanders wants to:

  • Remove the cap so the payroll tax applies to all levels of income, transforming Social Security from a safety net to a transfer mechanism where some people pay in way more than they ever receive in benefits;
  • Add an additional 6.2% payroll tax on the employer portion (self-employed people pay this themselves, businesses have to cover it otherwise) on the same tax base as the Medicare hospital insurance tax
  • Add an additional 0.2% payroll tax on the employer portion (self-employed people pay this themselves, businesses have to cover it otherwise) on the same tax base as the Social Security tax
  • Add an additional 0.2% payroll tax on the employee portion (self-employed people pay this themselves, workers have it taken out of their paychecks otherwise) on the same tax base as the Social Security tax

This means that if you are self-employed, before we’ve even gotten to the other tax changes he wants to make, you are now looking at sending more than 1/5th of your income to the Federal government and you still wouldn’t have paid a penny of Federal, state, or local income taxes, sales taxes, or property taxes.

We’re just getting started.

After you’ve paid all of this to the government, now it’s time to get to Federal income taxes.  Sanders wants to:

  • Keep the first four Federal tax brackets – 10%, 15%, 25%, and 28% – but add a special 2.2% premium tax on top of them that applies to all tax payers, rich and poor, affluent and destitute alike.  This means, for all intents and purposes, the first four new Federal tax brackets would be 12.2%, 17.2%, 27.2%, and 30.2%.
  • New tax brackets would be put in thereafter – 37%, 43%, 48%, and 52% – but you have to remember to add that 2.2% premium tax on top of those, too, so the marginal rates actually become 39.2% (assessed on income between $250,000 and $500,000), 45.2% (assessed on income between $500,000 and $2,000,000), 50.2% (assessed on income between $2,000,000 and $10,000,000), and 54.2% (assessed on income above $10,000,000).
  • If you are fortunate enough to amass a net worth that can be measured in the billions, you will pay a special, additional tax of 10% on top of all of this.

Next come your investments.  He wants to tax those, too.

  • Investment income subject to the existing 3.8% Affordable Care Act tax will now be subject to an extra 6.2% surcharge tax, bringing the total to 10.0%.
  • Married couples earning more than $250,000 will pay those new tax rates on cash dividends and capital gains.
  • The stepped up basis loophole would be removed, meaning inherited stock would trigger capital gains taxes even if you didn’t want to sell it.
  • “Like-Kind” exchanges under Section 1031 would trigger taxes, which could have fairly severe consequences for the real estate and art markets.
  • Individuals making more than $50,000, and married couples making more than $75,000, would have to pay a special tax anytime they bought or sold an investment.  This is known as a “Robin Hood Tax” meant to take money from investors and give to the poor through social programs.  You’ll pay 0.5% on your stock every time you buy or sell.  You’ll pay 0.1% on your bonds every time you buy or sell.  You’ll pay 0.005% on your derivatives every time you buy or sell.  That means on a round-trip investment, you’re giving up an extra 1.00% on stocks, 0.20% on bonds, and 0.01% on derivatives.  (This proposal is particularly crazy because it ignores the experience of Sweden between 1984 and 1991.  They introduced something like this and by 1990, more than half of all Swedish stock trades had moved to London as investors reacted to the new incentives.  Markets became less efficient as people were less willing to buy or sell.  The modified human behavior resulted in the government gaining practically no new net tax revenue.  It was a spectacular failure.)

He also doesn’t want you to be able to give money to your children beyond the occasional, small Christmas or birthday gift.  Not kidding.  That’s the general gist of the language his campaign is using in the tax proposal.  Specifically, Sanders wants to:

  • Stop individuals from being able to give $14,000 away tax free per year to a recipient.  Trust funds will most definitely be hurt but it may also mean no more meaningful UTMAs or gifting shares of stock to kids without paying big gift tax bills.  It may mean no paying for a child’s wedding, helping them buy a car, giving them a bit of a head start on a downpayment for a house, taking them clothes shopping for their first adult job, buying them a musical instrument, or any number of other things common in middle and upper middle class families.  To do so, you’ll have to give the government their cut, too, since it’s considered unfair you can provide for your kids and others haven’t or won’t.
  • Eliminate the recognition of liquidity discounts on family limited partnerships, operating businesses, real estate, and other holdings.  He’s literally going to pretend like the inability to sell an asset doesn’t result in a reduction in intrinsic value, denying long-established taxation, financial, and economic precedent.
  • Supercharge the generation skipping tax for trust funds setup to last more than 50 years
  • Curtail the use of grantor retained annuity trusts

He wants to make it much harder for assets to pass to children, grandchildren, nieces, nephews, and others in death.  Specifically, Bernie Sanders wants to:

  • Lower the individual estate tax exemption to $3,500,000 and then purposely not adjust it for inflation so that with each passing year, it is effectively getting smaller and smaller, hitting more and more estates.
  • Apply new, confiscatory rates so that if the estate tax is triggered, the estate tax rate will change so that it is 45% on amounts between $3,500,000 and $10,000,000, 50% on amounts between $10,000,000 and $50,000,000, and 55% on amounts above $50,000,000.

The problem, of course, is this could devastate smaller, successful family-controlled operating businesses, especially in conjunction with the misguided removal of the earlier liquidity discounts.  It would lead to an increase in the power and revenue levels of life insurance companies as you’d have more and more families writing life insurance policies to cover estate tax liquidity needs or, more likely, have family members sell out to larger businesses, increasing the rate of corporate consolidation that has resulted in fewer and fewer mega-businesses controlling more and more market share.

Farmers would suffer the same fate except that Sanders has proposed a special carve out for them.  Farmers would be allowed to pretend that up to $3,000,000 of their farmland didn’t count toward estate tax purposes.  Which, anyone with any economics background is going to tell you will lead to farmland becoming a de facto tax shelter, driving up the cost of farm land and making it harder for honest-to-God farmers to make a living.  On the state level, stupidly designed policies like this result in people like George W. Bush, Michael Dell, the Forbes family, and others buying up prime farmland they likely otherwise wouldn’t own.  It’s an inefficient allocation of resources.

But wait!  That’s not all!  Remember our past discussions about foreign taxation of corporate earnings?  How about that time I explained how corporate inversions work?  Sanders wants to:

  • Start charging U.S. corporate taxes immediately, even on non-repatriated earnings, for foreign subsidiaries of American-owned operating assets.
  • Restrict inversion by increasing the requirements (which will only result in a greater percentage of the firm being sold to foreigners, effectively lowering U.S. influence)
  • Treat foreign companies managed and controlled in the U.S. as U.S. Corporations
  • Eliminate tax deductions in certain businesses (left purposely vague)
  • Institute a substantial carbon tax
  • Limit or deny foreign tax credits on integrated energy companies in particular

Let’s focus on the first two.  These are extreme.  No other major country on Earth would dare to do the first.  It would put our companies at enormous disadvantages to those of nearly every other country.  Our allies in Europe and Asia would be salivating because it would be easy to steal some of our crown jewels.  Specifically, think of a business like Coca-Cola or Colgate-Palmolive.  Huge percentages of assets, sales, and profits come from overseas; foreign factories staffed by foreign workers engaging in commerce in foreign currency with no necessary or meaningful connection back to the parent U.S. operation other than legal incorporation.  By subjecting these assets to tax rates that put those in Switzerland, the United Kingdom, etc. to shame, it would not take long for an exodus to occur.  Inversions would not be necessary.  Let me explain.

Coca-Cola could instantly reorganize itself into two businesses – The Coca-Cola Company (domestic) and Coca-Cola International (foreign).  It’s been done before, specifically with Dr. Pepper, the rights to which now belong to two companies (Dr. Pepper Snapple Group domestically and The Coca-Cola Company internationally).  The foreign business would take a majority of the company’s assets – all of the factories, employees, cash, debt, etc. of the firm’s non-U.S. activities – and wrap it up as a new entity.  It would list its shares on the London stock exchange like Unilever or, perhaps, the Zurich stock exchange like Nestle.  Shareholders of the existing Coke would receive a tax-free spin-off of the new, foreign company with the remaining domestic company being a shell of its former self, doing business solely in the United States.

All of that influence lost.  No additional tax revenue gained.  Some of our best listings now in the U.K. or Switzerland.  This is not difficult to accomplish and any management that didn’t entertain the idea would be breaking its fiduciary duty to its shareholders.  This is not a small thing.  Right now, roughly 1/3rd of all revenue at the S&P 500 components comes from outside of the United States.

The Tax Increases Go On and On and On and On …

By the time all is said and done, even accounting for the supposed free college and health care that Sanders is promising his voters, the discretionary purchasing power of nearly every family in this country, rich and poor alike, would be lowered, in some cases by double-digit percentages.  As I mentioned earlier, the self-employed will be among the hardest hit.  I’d go so far as to say anyone who owns a business and votes for Bernie Sanders is out of his or her mind.  This whole thing is not only regressive as hell, it incentivizes all the wrong values.  It encourages selling out to larger corporations capable of dealing with the added burdens.  It makes it much harder to start a small business and internally fund it from growth due to lower after-tax cash flows, meaning only the affluent will even have that opportunity.  It all but guarantees many of our best corporate assets will end up in the hands of our allies.

It’s astonishing that this ever left committee.  To repeat myself, these are the failed, out-of-touch economic policies of a by-gone era.

And what’s worse, I’m seeing these economically illiterate but well-meaning people defend this asininity because they are so clueless on tax policy, code, and consequences they don’t understand, for example, that the United States marginal rates of 90% in the 1950s were not really 90%.  (Seriously, I’ve seen people argue this!  “Rates used to be a lot higher”).  In the off-chance any of you suffer from that illusion: It’s a myth.  Marginal rates are largely meaningless, it’s effective rates that count.  (One of the reasons Sanders’ policies are so terrifying is they push us beyond an edge which even the most liberal economists are not willing to test.)  To be frank about it, the effective tax rates during the 1950s weren’t terribly oppressive because the loopholes were staggeringly large back then.  Furthermore, the country was willing to pay the elevated-but-still reasonable effective rates because we had gone all-in to defeat Adolf Hitler from conquering the world.  Europe and much of Asia had been bombed into total oblivion so there was no major manufacturing base that could compare with ours.  We were the only game in town.  That isn’t true anymore.

For example, between 1942 and 1954, you could exclude 50% of your capital gains on stock and bond income provided you held the position for only six months. You could pay people with three-martini lunches, corporate cars, and healthcare benefits, not treating it as compensation. You could incorporate your professional practice as a corporation, which had much lower rates. You could deduct personal interest expense on luxury purchases.

When the 1960s rolled around, a Democrat named John F. Kennedy was elected President. He got into the Oval Office, basically looked around and said, “This is the dumbest thing in the world. Just get rid of the exemptions and lower the marginal rates to represent roughly what people are really paying.” (He actually went further and cut real tax rates on the poor and middle class, leading to the government collecting more money than it otherwise would have as people spent the savings, speeding it through the economy and triggering more taxes every time it changed hands.)

So he did. The rates came down, down, down, but the exemptions were closed and guess what? Tax receipts as a percentage of GDP stayed almost exactly the same because those high marginal rates were a mirage and increased velocity of money made up the difference.  I’m over-simplifying a bit here but that’s the gist of it.

You can verify this by Hauser’s Law. In essence, no matter what marginal rates Congress passes, effectively, tax receipts as a percentage of GDP never deviate much from around 19.5% of GDP or else the American people revolt / change their behavior to lower their tax bill by taking advantage of the system. Whether the marginal rates are 10%, 90%, or somewhere in between, it doesn’t really matter much as U.S. citizens, collectively, are willing to give up a little less than 1/5th of their output to the Federal government.  Beyond that and we overthrow our elected representatives.

If someone actually tried to extract effective rates of 70%, 80%, etc. on any meaningful percentage of the population, it would be politically catastrophic.  I’d support an all out insurrection as it is profoundly immoral.  You get into rates like that and freedom is an illusion.  That is slavery.

The Good News: This Likely Won’t Matter as Sanders’ Chances of Enacting Any of These Changes Are Practically Non-Existent

There is little reason to worry, though.  At least, present known factors considered.  Senator Sanders, as it stands now, has a lower than 7-out-of-100 probability of winning the Democratic nomination thanks to Hillary Clinton steamrolling him in the ordinary delegate account as her margins of victory are enormous compared to his (the Democrats use a proportional allocation system).  As I mentioned earlier, even when Bernie won 2 out of 3 states on Saturday, he ended up worse off at the end of the night because Hillary’s victory in Louisiana was so huge, she picked up more net delegates than he did.  Unless she is indicted, she’s going to keep him from the general election.

And, frankly, I’m glad.  I have no desire to see another Clinton or Bush in the White House – the idea I would ever even consider it evokes an almost visceral repulsion – but after reviewing the specifics of his vision for the American economy, I’d take a Hillary Clinton presidency over a Bernie Sanders presidency any day of the week.  I think any – again, I hate to say it but it is so extreme I cannot emphasize it enough – economically literate voter would, too.  No matter who I, or you, end up voting for in the general election (I’m currently not decided), we better all pray, on the Democratic side, it is Hillary’s name on the ticket and not Bernie’s.

Even then, I’m not sure I’d worry too much.  There is only a 3-out-of-100 probability of Sanders winning the Democratic nomination and getting elected to Presidency.

Beyond that, if he did manage to overcome those odds, there is practically no probability Congress, regardless of whether that Congress is controlled by Democrats or Republicans, supports his proposals, meaning we’d go into four years of gridlock.  Total shutdown.  He’d basically spend four years yelling from a bully pulpit.  In fact, he might do some good – he’d likely instruct agencies such as the FTC and the Treasury Department to break apart companies like Comcast, shatter financial institutions like Bank of America.  He’d use executive orders to promote civil rights.  I’d be thrilled with him as long as he doesn’t touch the coffers.  The guy can’t even manage his own household’s finances, how are we supposed to entrust the largest economy in the world to him?

In other words: What good would it do for me to vote for a guy who shares my values if I can be all but assured he’ll burn the house down?  It’d be like allowing a patient with Alzheimer’s access to a stove to cook Thanksgiving dinner.  Sure, their intentions are good but the consequences could be extraordinarily destructive.

I hate saying it because he shares my values, and I like him, personally, more than any other candidate.  I think he’s a good man.  I think he’s a man of unimpeachable integrity.  I have so much respect for him for doing things like this, going to Liberty University to engage in a dialogue with the other side of the political aisle to try and find common ground.  Nevertheless, I cannot go against my own best judgment, especially in a field that is my own backyard.  Economically, Bernie Sanders would be a failure.  His administration would do harm.  I will not support people cutting their own throats by chasing promising of free goodies that are already well within our capacity to provide.  The only person I think is more dangerous in this election is Ted Cruz, which would require an essay of its own.

Frankly, I wish Elizabeth Warren had run.  If she proposed making college free as a societal investment – something that would cost, at most $75 billion out of our existing $3+ trillion in annual revenues – I know the numbers would work.  She’s a nuts-and-bolts, debits-and-credits, bring-me-the-spreadsheet-and-I’ll-make-the-adjustments-myself kind of girl.  Even if I disagree from time to time with her, I don’t doubt her competence and capabilities.  I have no faith in Bernie Sanders after seeing this plan.  None.  He cannot be trusted with the keys to the kingdom.

Finally, if you’re interested in reading another analysis of Bernie’s tax policy, check out the Urban-Brookings Tax Policy Center’s special report [PDF].  They estimate it would raise $15.3 trillion in new taxes, expand the government at least 7% of GDP more than its current levels, and reduce incentives to save, invest, and work for all income brackets.  It doesn’t factor in the supposed cost savings of Bernie’s free medical care system as they are experts in tax policy, not health care projections, which, itself, would require another essay.  While it is true the lack of health insurance premiums would offset some of these costs, the system, as designed, is monstrously stupid.  It suffers from the same economic illiteracy the tax plan does.  For example, Sanders wants to eliminate co-pays.  Anyone who has any exposure to behavioral economics knows this is madness.  Co-pays serve as a sort of dis-incentive to make sure resources are allocated more efficiently as people will hesitate to go into a hospital or take medication if they think it’s only a minor problem.  That’s a good thing.  It means better outcomes for everybody.  It’s a health care plan built upon wishes and hopes, ignoring how humans actually behave in the real world.

This whole thing has made me feel like “everything old is new again”.  I realize the only group that supports Sanders is overwhelmingly the 18 to 24 year olds but, still … this is the same recycled garbage that the free world had to be liberated from a generation ago, which led to the biggest standard of living increases in human history.  They weren’t there to experience it and are buying this hook, line, and sinker.  I mean, God in Heaven … an effective tax rate – not marginal, but effective – of between 50% to 65% all-in on a self-employed, middle-of-the-road dentist?  What is this man thinking?  It would make me ashamed to be American.  Short of special conditions, such as war time military build-ups, nobody is entitled to that much of another’s output.  Nobody.  It’s immoral.  His whole proposal is immoral.

Who’d have thought?  No, really.  Who’d have ever thought that Hillary Clinton would be a firewall between this madness and sanity?  Reading through it, it was so bad I honestly began worrying about the potential for email indictment because I almost cease to care about her personal ethics and morals if it means she stops this.  I don’t have to trust her.  I know the very things that make her so effective at her job are what make her unlikeable to the public – a ruthless, conniving, disingenuous, frigid, politically-savvy kind of sociopathy.  This is a woman who threw a fit about a member of her staff updating the parental forms in the State Department, removing “Mother and Father” and putting “Parent 1 and Parent 2” so couples like Aaron and I could fill out the documents when we traveled with our (future) kids, enraged that it might give Sarah Palin a new line of attack.  Unlike President Obama, who seems to stick pretty closely to his core principles, I have little doubt she’ll throw someone under the bus if it is politically expedient.  That is far preferable to the lunacy in Bernie’s tax document.  That’s how bad it is.  The vision he has for his administration is one of nearly unrestrained greed.  His avarice makes Goldman Sachs look like a bunch of choir boys.  You and I become chickens to be plucked, our efforts and talents extracted at confiscatory rates and transferred to those who have neither earned it nor deserve it.

  • Robert

    I think everyone (mostly myself) is interested on your thoughts with Ted Cruz since you mentioned him in the article.
    I kind of knew intuitively Bernie Sanders economic plan was unfeasible based on his constant rhetoric with taxing “the 1%” and “Wall Street speculation” but I never realized the significant consequences his tax policy would have on the middle class. The alarm in my brain went off as soon as I heard he wanted to heavily tax all investments, capital gains, dividends, and rents.
    I, like many others following your site, value your opinion and expertise and think you would do great service for your readers by spreading knowledge and facts on presidential candidate policies. There’s so much noise and tribal thinking right now that its difficult to make a decision without unbiased information.

    • The Ted Cruz post … oh boy. That would take some work. Where to begin? … economics, politics, the completely lack of personal integrity (I don’t know if I’ve ever witnessed a public official lie as much as this man, he’s almost a caricature of a politician). And what does it say about his character that nobody he’s ever worked with wants to work with him? That everybody hates him? That speaks volumes.

      And then there is the Dominion Theology. If you are unfamiliar with Dominion Theology, it wouldn’t be a surprise because the media isn’t reporting on this, yet, and it’s restricted to my part of the country. Basically, it is the idea that God wants men he raises up to physically take over the levers of power in society – government, media, corporations, art, etc. – and use them to suppress sinful behavior and those who disagree with their interpretation of scripture; to take over the schools and turn them into indoctrination centers so children are “trained up” in their theology, public education becoming a factory of sort for the next generation of heavenly warriors meant to conquer society. This has been a big driving force in Cruz’s success in Caucus states as you have small, insular groups of highly motivated voters who exert social pressure on their peer group.

      Living in the Bible Belt, Cruz’s father – the one talks about so much on the campaign trail and in debates as being his hero – has been one of his biggest campaign tools. He’s been doing a “greatest hits” tour with influential televangelists and pastors, preaching sermons about how God himself has anointed Ted to be commander in Chief to knock down the secular government. He gives sermons about how Ted will never deny anything to the nation of Israel, prioritizing their needs over the needs of the United States so God won’t punish us in his righteous judgment. He talks about how Obergefell wasn’t about marriage equality at all but solely existed because Satan wanted to attack people like him for their religious beliefs and Ted will enshrine the right to deny service to gays into law. It’s … surreal.

      Here’s a recent sermon the Senior Cruz gave plugging his son. Watch the whole thing, beginning to end, if you really want to understand a big block of the people who are voting for him and why they are doing it.

      Then there is the tax setup, which is actually better-than-average but grossly inadequate if you value fiscal conservatism and responsible budgets (the marginal rate is not nearly high enough). And the fact he thinks private companies like Comcast should be allowed to control Internet traffic, which would give them de facto power over information people can see or the ability of start-up businesses to get new customers. It’s just … there is so much. So, so much.

      If it came down to a head-to-head matchup, I’d muster the strength and, in November, vote for Sanders over Cruz. As I picked up the pen and marked the ballot, I’d let out a scream from within the booth, “”Jesus take the Wheel!”, praying that Congress could keep Sanders from passing his insane tax proposals, which I think is highly likely. He is at least a man of integrity and good values and we’d at least get a Comcast breakup out of it, I’d wager.

      I seriously wonder, though, what the liberal side of the spectrum is thinking when they attack Trump on shows like Saturday Night Live. If their goal is to stop him from being on the ticket, they aren’t paying close attention because Cruz is much worse. I found myself in agreement with President Obama recently when he expressed astonishment that everyone was piling onto Donald while the others are getting away with even more extreme positions but saying it with a smile so nobody seems to notice. I mean, for heaven’s sake, Cruz and Rubio have put together advisory panels that are made up of some honest-to-God hate group leaders who are hell bent on dissolving my marriage through forced annulment against my will.

      It’s nuts. The whole thing is like something out of a scripted political drama. This is America. This is what the party system has gotten us.

      If I have time, I’ll try to write a post on Cruz and, perhaps, Trump, too. I’m still not convinced we don’t get some new entrant in a brokered convention so I have no idea who I’m voting for at the moment but, all else equal, if you forced me to choose a front runner from the Republican side, it’d be Trump, and if you forced me to choose a front runner from the Democratic side, it’d be Clinton. Kasich is actually the most sane of all of them, even though he’s a bit too conservative for my taste, but I don’t think he has a chance of actually winning.

      • Matt

        I did not know about Dominion Theology before you mentioned it, but reading Ted Cruz’s positions on his website certainly made me think that he is a) totally using religion as a power play, b) is trying to paint himself as some sort of messiah, and c) has no respect for civil rights or opposing religious views. His positions also seem to evoke language that reads like a sermon (spiritual warfare, we’re under attack by the evil, corrupt, and godless “other”).

        Sounds more like he supports something more along the lines of Iranian theocracy than a constitutional republic, no matter what he might say about the constitution. The constitution is just an excuse.

        • LordSquidworth

          I’ve seen it in various churches when visiting with friends.

          Everyone plays the victim while they resist change, even if it’s for the better.

        • I’m wondering how you think someone who is raised in this sort of environment can break out of it.

          I don’t have to wonder, I know from personal experience. You are looking at a glimpse into my childhood in this video. The televangelist who is making the introduction at the beginning is Kenneth Copeland, who was ubiquitous throughout my life (books, tapes, video cassettes). My family still takes vacations to travel across the country and attend meetings like this one, including serving as volunteers. When I visit, his voice often booms out over speakers and is as much a background noise as espresso machines and steaming milk are at Starbucks. Over my lifetime, the amount of money that various members of my family have give him easily reaches into the six-figures even before factoring in the lost opportunity cost of compounding. One of the other men on the stage laying hands on Cruz’s father is the pastor of the church many of my family members attend. There’s even a decent chance my family is in the audience in that video or, maybe, operating the video camera.

          There were definitely some major benefits that came along with it; benefits that served me well in life and that shaped who I am. That particular journey is another essay for another time. It would require a degree of vulnerability and candor on par with a few of the personal posts I’ve written in the past. Maybe some evening, when I’m sitting on the deck drinking a cup of coffee and listening to the sound of the water in the creek, I’ll pick up my pen and start writing.

          For now, I’ll say it was neither easy nor pleasant.

        • Brendan

          HI Joshua. Sam Harris interviewed a young woman, Megan Phelps-Roper who left the Westboro Baptist Church last year, and it’s a fascinating interview/podcast if you have time to listen to it. What blew me away was how such a bright, eloquent, young woman was so normal in most aspects of her life, and yet adhered such bizarre religious views for most of her life. What changed her worldview was a simple question from a jewish man about the interpretation of a particular bible passage.

        • Preston Nelson

          I knew families like that, thankfully mine was not as bad.

          I’m still impressed that you manage to deal/have a relationship with those family members. I had a hard enough time being around mine without the extra religiousness.

          Do you think it’s because you are still trapped by the idea that family is sacrosanct? I know I had that problem. (Not totally sure it can be completely escaped though)

          What I think is really funny is that some of your thoughts about cutting people out actually helped me break free from the “need” to keep them in my life. It was very interesting to see the lightbulbs go off when certain ones realized that I was no longer trapped.

        • onlyalittle

          I couldn’t watch the entire video as someone who grew up in a similar environment. I still have some PTSD-like reactions to this type of talk. Maybe the wounds are still too fresh for me.

          Anyway, as someone who has broken out over the past few years, it IS hard. Breaking out had to be a process for me because a lot of my identity was rooted in this, for better or worse. Like Joshua said, there can be a lot of good that comes from this, so even when you discover the deep dysfunction within some of these churches, you are reluctant to throw the baby out with the bathwater.

          What finally got me out was…well, a lot of things. Honestly, I had to be extremely disgusted by some of what I saw before I had the courage to stand up for my personal convictions and leave.

          But leaving is hard. Even now, I can imagine that life in some ways would have been easier if I had stayed. Life would have sucked, for sure–I wouldn’t enjoy close relationships with people who have greatly enriched my life, who challenge me and get me in ways I have never felt before–but it would have been easier thinking I had all the answers. Even if they were wrong.

      • Jay Tank

        Kasich a moderate?! He gives off an avuncular, Mr Rogers-like aura to be sure, but his positions on women’s rights, voting rights, private prisons, foreign policy etc are abhorrent, to say the least. Granted, he may be RELATIVELY moderate when compared to the other candidates, but that’s not saying much.

        • Relatively moderate is the right disclaimer, I agree. I’m not a fan of the guy’s policies – just to mention two, you already know my personal disgust with the immorality of investing in for-profit prisons and his recent comments on how gay people should simply accept that some don’t want to serve them and they should go find another vendor rather than expect to be treated equally like other groups is the same sort of segregation-with-a-smile some moderates served in the 1960’s after the Civil Rights victories, making him no friend of mine – but when faced with the prospect of handing the highest office in the land to a theological Voldemort, it’s easy to suddenly find yourself considering Dastardly and Muttley appealing alternatives. Their mischief can be managed.

      • Let’s hope the old Master Wizard can pull this one off. We’re out of Iowa and Kansas, which is good…

      • Derek

        That is a fascinating video. It really drives home one of the problems I have with Ted Cruz, in that I’m not sure I know how to evaluate him as a candidate. I can evaluate the positions he has advocated for, and I disagree with a great number of them, but I feel ill equipped to evaluate him as a person.

        From my point of view he looks like a lying, conniving, psychopath, willing to do whatever it takes to achieve power. However, I can’t help but wonder if the problem is that I just don’t have an understanding of his world view and the culture in which he was raised. I was not brought up in a religious household and I don’t have that lens to view him through. Maybe he would somehow make sense to me if I had been raised with a strong, evangelical Christian upbringing, but as I see him now he sends cold chills down my spine. Donald Trump concerns me nearly every time he speaks into a microphone, but Ted Cruz baffles and frightens me. I just don’t understand him or his appeal.

        I’d be fascinated to read your views on both Cruz and Trump. I at least understand the appeal of Trump to many, but my attempts to figure out Cruz feel like I am trying to divide by zero.

  • Ang

    Thank you for posting this!

    I have been trying to describe to my friends the second/third order of effects his policies would have (incentivizing tax evasion, reducing the tax base, lowering ABSOLUTE standards of living even if you get more equality so that everyone gets an equal slice of a much smaller pie), but your summary is much more clear.

    Thank you also for the summary background on your base beliefs about what is good for society, I think a lot of individuals only think of immediate effects of policies and structures and don’t take that next step (reminds me of Warren’s response to the new, more efficient loom)

    • Speaking of which, Buffett (as I’m sure you saw) revisited his long-time preferred mechanism for making the tax curve more progressive in this year’s shareholder letter: A huge expansion in the earned income tax credit. As opposed to something like a basic guaranteed income which risked creating all kinds of disincentives and moral hazards, enlarged sufficiently, it could result in a person making up to a certain threshold paying practically no income taxes. It’s an intriguing idea to the point a super, super-majority of economists tend to prefer raising it over a minimum wage increase.

      I’ve been mulling it over all day and it’s definitely a good idea but I’m not happy with the current structure. For example, if you collect more than a few thousand dollars in investment income per year, you’re disqualified. Rather, I think society should reward work to the point that any labor – self-employed or otherwise – a person performs should be tax-free up to a certain threshold to allow those willing to work a chance to enjoy social mobility without anyone reaching into their pockets. The rest of us, who are fortunate enough to be affluent, can pick up the slack (plus, we would benefit from it, too, on the first [$x] of our earnings so it’s not unfair in any way).

      The longer and longer I sit with it, the more I conclude the tax plan that liberal and conservative economists both support is really the best potential outcome. Tax individuals, as they are the economic unit that matters, abolish the corporate income tax, close virtually every loophole that exists (no home mortgage deduction, no deduction for gifts to your church, no deduction for gifts to charity), etc. Personally, I’d like to see some derivation of the proposal from Nobel laureate Milton Friedman, who coupled it with a negative income tax for families up to a certain amount with flat or progressive rates thereafter that have the net effect of a much steeper (read: more progressive) tax scheme than we have now. The rich would pay more but it would substantially aid in self-made upward mobility while making it very, very difficult to cheat the system.

      Special interest groups will never let it happen. Realtors will freak out because property values will have to decline, which means their commissions go (won’t matter, anyway – the real estate commission business is doomed for failure in the coming decades; people will never believe anyone once paid 6% to a human to stage and show a home, the economic forces are aligned against it already and it’s begun), religious groups would scream to the high heavens as they are effectively subsidized by everyone now, etc. It’d be the fairest, most uniform system. It’d serve the poor better. It’d make life easier. It’d put a lot of accountants out of work.

      • Ang

        A massive reduction in complexity certainly would help (not to mention the boost from cessation of double taxation on dividends – I really wonder if and how it would change corporate capital strategies). I think you’ve written about it before, even though a lot of bright people will “lose” their jobs, those minds and neurons can then be redirected to other, more fruitful purposes than just sifting through the enormous labyrinthine US tax code. They could get to work on building businesses or thinking up ideas to help raise the standard of living for people everywhere instead of pushing people around.

        In the end, no matter what the taxation policy or distribution of wealth is in the US, envy will always drive public sentiment and general discussion (I think you’ve been keeping up with reddit lately, not that the mental clouds you’ve encountered surprises you anymore). With broadcasting/communication technology making it incredibly easy to be heard, many individuals without the necessary background knowledge will continue to utilize their voice, speaking first and then thinking later (or maybe never). A lot of discussion devolves into who can be the loudest, as opposed to your reason and data/fact driven approach. Most people don’t really go into a discussion with any intention of being convinced or learning about the other side.

        The nice thing is, because the craziness out there ARE the loudest voices, I do think the general populace isn’t as bad as what you hear on the news or encounter on the web. The logical, rational, and reasonable portions of the populace are still around (and not competing to be the loudest voice), and I take comfort in knowing that their votes still count, just as much as the rapid fire posters on Reddit. This is where I think back to the shareholder letter for this year and agree wholeheartedly with Warren that the best is yet to come, even if there are some bumps in the road and people are impatient for it.

        P.S. One last aside – as I was readying his discussions on agriculture and the massive decrease in people employed in agriculture, it reminded me of your discussion on what great investors a lot of farmers made, because they experienced first hand how planting seeds early on in the year and then being patient led to great results. It really is a shame most individuals don’t get exposure to that anymore, I think it would promote a lot better temperament and patience in the general population.

        • Matt

          Speaking of Warren’s comments on farmers, there’s just one quote that shows that Bernie Sanders just doesn’t get the economy:

          It is unacceptable that there are over 300,000 fewer farmers than there were 20 years ago.

          Sounds more like a success to me! That’s 300,000 more people who can devote their lives to something other than growing food – whether that is studying science, medicine, engineering, architecture etc.

        • rui

          What’s wrong with growing food? Don’t look down on farmers–you need food to survive. They are just as, if not more, important than your engineers and doctors.

        • Matt

          I didn’t say there’s anything wrong with growing food, and I certainly don’t look down on farmers. Farming is an important and noble profession. But this is not incompatible with my previous statements. The assumption you’re making is that I am commenting on the importance of a farming. I’m not. I’m commenting on the fact that productivity increases have allowed us to spend less resources on figuring out how we are going to eat (i.e. survival) and more resources on improving other areas of our life or making it more enjoyable (i.e. luxuries like technology, entertainment, etc.). This makes our society richer. The problem with Sanders’ view is that he incorrectly sees declines in the farmer population as an evil, when it is merely a symptom of progress.

          If we could somehow magically make food appear out of thin air at no cost and with no labor, I’d take that instantly even if it means that all of these farmers are now out of a job. Of course, we’d have to find some way to help the former farmers transition into other productive roles in society. And we’d want to make sure that the food is distributed fairly so that people aren’t starving. But if everyone was still a farmer, we wouldn’t have all of the other modern luxuries we have today (nobody would have had the time, resources, or knowledge to create them). Those luxuries are only possible because we no longer need to devote all our energy just to keeping ourselves well fed.

          Look at China, where rapid urbanization (accompanied by a decline in the farming population) has resulted in massive standard of living increases for a large part of the population. This doesn’t make farming less important or necessary. We should celebrate farmers. But we should also encourage and celebrate productivity increases that allow us to devote our energies to other tasks. It is these forces of “creative destruction” that ultimately enrich our society and raise our standard of living.

      • I wonder if secular changes in the need for labor makes the negative consequences of a basic income less relevant to the point where it should be seriously considered in the national conversation. Frankly, I was surprised that it was not, when outright “socialism” as a concept is.

      • Matt

        The payroll tax currently makes up roughly 1/3 of government revenues, though income taxes paid by the bottom half are probably less than 5% of government revenues. So we are probably looking at a shortfall of 38% of the government’s revenue that needs to be paid for by a combination of higher taxes on the top 50% and GDP growth induced by an increased velocity of money. Of course, this doesn’t include any potential additional spending we might want to add to pay for a) parental leave and b) free/almost free health care.

        What are your thoughts then on specific numbers for a more progressive
        tax plan? (Zero to negative taxes for people making under $50,000 – and
        then what rate brackets thereafter?) What is the highest marginal tax
        rate that will be necessary to pay for this that is also fair and not
        punitive or confiscatory? 40%? 45%? What would your proposed income thresholds be? I agree that taxing individuals is
        superior and that eliminating taxes for the working class would either
        a) give them more purchasing power now or b) allow them to grow their
        wealth faster through saving/investment, but a 35% tax rate at the top
        seems insufficient. The good news is that since the rich take a huge share of the nation’s income, small marginal tax rate changes do have a somewhat hefty influence on revenue.

      • Joel

        What about a land value tax? Quite a few classical economist (Adam smith, Henry George, etc), believed it was the most fair and only tax we needed.

        • Ang

          Those classic economists lived during times when land was the most productive asset one could get his/her hands on (besides maybe a dock located in a prime location, then you’d be talking about the ocean instead of land). Everything of value needed land to produce, whether it be factories or farms. Today, because of technology, a lot of economic activity being generated doesn’t require land, and some economic activity requires far less land per capita than others (just think, for example, thousands of workers in a sky scraper)

          To compare past economic realities against current is not relevant

        • Joel

          Land will always be needed to generate economic activity even with technology (silicon valley). Land value in America is valued at over $23 trillion…..that value is due to infrastructure, businesses, schools, etc.

          My question is…..shouldn’t this value which derives from the community activity (infrastructure, businesses, schools, etc) be used to support the community instead of other taxes like income, capital gains, corporate, payroll and sales taxes which all have a negative economic consequence.

          Would love to hear your take on this Joshua.

      • Zaphod

        Yes, even the EIC is a bad idea, and basically anything that takes what could be simple and makes it complex with several inefficient round trips with the money. Complexity of course exists some by necessity, but mostly to dole out rewards to certain interests.

        I have gone back and forth over a basic income, and while it may have some negative effects, it might be something thats necessary when AI takes over the world. Call it what you want but a negative tax and EIC are basically very similar ideas. I think the simplest way is as you describe, no tax/negative at the lower bounds and progressive thereafter. Making gaming the system harder would be good on many levels, think how much more productive we could be if we didnt spend so much time trying to figure out all the ways to nab a few basis points and we’re just moving forward.

  • Andrew

    Any chance you can post your Ted Cruz comment before the Michigan primaries tomorrow? lol

  • Zaphod

    I wholeheartedly agree. Thought I would love Sanders.

  • Doug

    Joshua, well-reasoned and eloquent as always.

    I know you’re a very busy guy, but I would love to hear your take on Donald Trump in the same fashion as this article and the Scalia article. He’s a very polarizing figure and I would like to hear your take on his stated policies as well as his persona (on and off camera). I’ve been swept up on the Trump Train and I would love to hear from you, as you could definitely help cut to the quick of maybe some unintended consequences of a Trump presidency as well as some of the good he could do in the highest office.

  • Joshua, I’d love to hear your thoughts on a Trump presidency from the guise of the tax code, extracting moral, ethical and social elements from it! Great post.

  • Diracwinsagain

    Was it a typo when you said you’d support a free at the point of use healthcare system? Your later discussion about co-pays seems to disagree with this.

    How would you change the tax code to pay for low cost at the point of service health care?

    • Re: Your first question. It’s purposeful. It’s a reference to the importance of co-insurance and behavioral manipulation to improve efficiency allocations in healthcare. Basically, I want healthcare to be effectively cost free – no major life changes necessary to go see a doctor – but each visit or use of services to require enough out-of-pocket cash to cause hesitation for a typical hourly worker so their first instinct isn’t to jump in the car whenever they feel like they might have the flu. When these aren’t present, humans have a tendency to over-consume low-necessity healthcare at rates far above cost/benefit. This clogs the system, drives up expenditures, wastes the finite number of expert hours doctors have to treat patients, and generally makes everything worse. The downside is, make them too high and compliance with high-priority treatment tends to fall as it also modifies behavior. Somewhere, there exists a sweet spot. My guess (and that is exactly what it is so take the next sentence with a heavy grain of salt): The figure is somewhere between $50 and $100 per visit.

      There’s a really interesting paper called Behavioral Hazard in Health Insurance by Katherine Baicker at Harvard, Sendhil Mullainathan at Harvard, and Joshua Schwartzstein at Dartmouth that breaks down the issue. Here is a PDF copy if you are interested in reading it. It also gets into what they call “nudges” (behavioral intervention) to improve outcome. It’s particularly useful for the references to other studies, using it as a sort of roadmap to go through the literature.

      Re: Your second question. It’d require a much, much longer response but I just left another comment detailing some of the tax code changes I would want. Essentially, I prefer a negative or non-existent tax on the first [$x] in income so poorer and middle class families have almost no barriers to upward social mobility if they want to work their way out of poverty, with much higher marginal rates and practically no deductions beyond a certain point. It’s fair because everyone benefits from the non-existent taxes up to that threshold, but once you get past it, you know you’re paying a lot more (which I think is only fair – the more we own, the more we disproportionately benefit from the military protecting it, the fire department being on-call to stop it from burning down, the roads we use to ship our goods and services at effectively subsidized prices, etc.). I’d also want a concurrent modification in the constitution to essentially replicate the Canadian healthcare model as it offers better outcomes. We cannot fix our current system with tweaks and changes. It will never work. It is structurally deficient. We spend way more than they do and get worse outcomes. This is because they allocate scarce resources with time (prioritizing patient care based upon risk assessment and waiting periods) whereas we do it with dollars (throw money at the problem and allow non-capitalistic regional monopolies to develop). You get talk of “death panels” but death panels already exist: Your insurance company employees and your checkbook register. Sure, a few people would die as a result of that time allocation but people already die due to a lack of financial allocation (e.g., look into deaths from liver failure from over-the-counter acetaminophen overdoses as people put off going to the hospital when they think something is wrong and don’t realize how bad it is – frankly, even as an investor in these firms, I’m surprised the stuff is legal without a prescription as it would most certainly be banned if it weren’t so lucrative for so many people).

      • Helen

        Long time lurker, but first time poster. I love your blog – thank you so much for sharing your insight into so many things!

        As a Canadian physician (resident), I think that at the core we have a decent health care system. I fully believe in a public system that ensure no person should go bankrupt because they suffer from a medical condition. But the Canadian system is slowly eroding because of the costs. I think one of the main problems is exactly this problem of lack of consumer responsibility (no co-pays) that you describe. There are patients who will see 3 doctors for the same problem to get a “second opinion” just because they can (and it’s free). Or patients who demand unnecessary tests (like expensive MRI’s) just because it’s free. As a physician there is no incentive and lots of disincentives to argue against demanding patients – you’re not the one personally paying for the MRI, you could get a patient complaint to the hospital or to the college that could give you trouble, and in the 1 in 10 million chance that the patient’s classic caffeine-withdrawal headache is actually a brain tumor you could be sued.

        I once saw a healthy guy in his 20s in the emerg who had the common cold. When I told him “Good news! Nothing is wrong with you, you have the common cold”, his response was “What do I get for free? Don’t I at least get some free medications?” It’s insane that this healthy, young guy who knew he had a minor problem, spent thousands of public dollars in emergency room visit costs (nursing/physician time, bed space, etc) to see if he could land free Tylenol or something.

        The exceptions to the rule regarding co-pays is for anything that is preventative/public health related and anything that involves patients who can’t make their own decisions. People are very good at coming for care for acute things (like a broken leg), but notoriously bad at accessing preventative care which is good in the long term (eg. vaccinations). Anything involving public health should be free (eg. medications for tuberculosis). You also have to be careful with patients who can’t make their own decisions because these patients are very vulnerable and are at the mercy of caregivers who may not . For example, children, adults with Down’s or severe autism, or elderly patients with dementia.

      • Helen

        Interestingly, regarding your point on “prioritizing patient care based upon risk assessment and waiting periods”. The Canadian health care system is excellent at providing timely acute or urgent care (trauma, cancer, etc), relatively decent at long-term care (eg. diabetes), but not so great at the quality of life stuff (eg. hip replacements). As a healthcare community, we think about mortality and long-term morbidity, but often patients care most about their quality of life.

        Re: acetaminophen. They were FDA-approved in a different era. If they were new drugs going through approval now, they would never be over-the-counter.

      • Abe

        The paper you referenced is a grinder. I had to read and reread several passages because of the intermixing of mathematical notation, unfamiliar terms, and figures.

  • Brendan

    I’m asking this genuinely: what about Trump have you found appealing? I have heard a lot of chatter among my peers about Trump, recently, and it all seems to focus on the low-hanging (negative) fruit. Recalling Joshua’s Trump financial disclosure article, plus a little back and forth with Joshua in the comments section; I’ve taken a much more nuanced view of Mr. Trump as a result.

    • This is why it is good to speak to others on the internet and elsewhere beyond one’s peers in real life. Changed the way I think, for sure.

      • Brendan

        Don’t get me wrong, I don’t like Trump, but I don’t think he’d be quite the disaster that others claim he’ll be if elected. Cruz’s religious views scare the heck out of me, and I’d rather people focused on ensuring he can never be president, instead of falling for the Trump media shtick.

        • Jeb

          Considering most of the U.S. presidents in history have had similar religious views, it doesn’t really matter. The U.S. doesn’t have a national church that holds power over people’s lives. That view is like those levied against Kennedy 50 years ago.

        • Brendan

          I strongly disagree on both points. Jefferson promised a “wall of separation” when responding to the Baptists of Danbury CT who were threatened by the Congregationalists of Danbury CT back in the early 1800’s, thereby leaving a legacy against establishment. The charge against JFK was that he would be more loyal to the Pope than the American people, and while he was Catholic (and not particularly reverent), Kennedy made it clear that he wouldn’t mix church and state, nor look to the Vatican for public policy. See
          However, in stark contrast, Cruz’s brand of fundamentalism seeks explicitly to use politics to advance a fundamentalist religious agenda; seriously, Cruz’s own website makes this clear. At least he’s upfront about it, but that doesn’t mean I’m ok with it.

        • Jeb, what the president does have is the power to veto. The president very well can impose his religious views on the public by ensuring that any attempt at social reform be struck down at their desk. It is a shame that fiscal responsibility is often packaged with deep religious bias. Trump is a very socially liberal guy that understands finance. He honestly may be the best of both worlds in that regard.

          I am not trying to be anti-religion – I think religion, overall, has had a strong net positive effect on society. But there are some “old beliefs” I think we as a nation should be moving past.

    • Brendan, I can share some insight on Trump.

      There are five main players left in the race: Clinton, Sanders, Rubio, Cruz and Trump.

      I cannot vote for Bernie Sanders for the reasons mentioned in this article. He seems like a good guy personally – he’s like that uncle at the dinner table that has a few drinks and among the safety of the family goes off on all the injustices in the world. We shake our heads: “Yea, yea, that’s right.” But ultimately, despite being a career politician he has no accomplishments to show for it, his own personal finances are in disarray and as such, he’s woefully unqualified in my opinion to be President. He is easily the most honest person running (in my opinion), but I think he would be the most devastating to the American Dream.

      I cannot bear another Clinton, (or Bush, see ya’ Jebbie), and she is quite possibly one of the most notorious liars in recent political history. She is a criminal on the verge of being indicted, and for simply moral reasons I cannot cast a vote for Hillary.

      Rubio and Cruz I do not like for personal reasons. Both of them come off as disingenuous. Cruz has odd mannerisms and appears to lack empathy. There have been articles written about his off-putting body language. He very well may be a decent guy, but there is something in my subconscious mind that finds him repulsive. Rubio, on the other hand, is outright repulsive to me with his speech alone. I think he is weak, small-minded and dirty. His own state doesn’t like him, and I think that speaks volumes. He comes off as a grimy, used car salesman knowingly selling me a lemon.

      There are 1,000,000 reasons why I can tell you NOT to vote for Trump, but given the other four options, I feel he is the most likable in the race. He repulses me the least. I am confident that what we are seeing is really Donald Trump – this isn’t a facade, this is the Donald Trump we all know. He isn’t phony like Cruz, Rubio or Clinton. Trump and Sanders are both unique and come off as real people, they’re not phony actors, and given Sanders’ insanity on the economy, that almost defaults me to Trump. At least I know Trump can manage finances.

      But I’m not happy about any of this, and I’m sick with America that these 5 clowns are the best we could come up with. 350 million people, and these 5…really? It seems like I say that every time, though.

  • Abe

    May I share this on my Facebook page?

    • Sure. Feel free.

      • Abe

        Also, this is a gem:

        ” It’d be like allowing a patient with Alzheimer’s access to a stove to cook Thanksgiving dinner. Sure, their intentions are good but the consequences could be extraordinarily destructive.”

  • Matt

    Right on Josh! I had a bit of a moment of concern with his tax plan as well. I took my kid to Disneyland and went straight to Mr Toad’s!! Got me back on track. I really like these fundamental analysis articles you write. Loaded with historical perspective and current data. Are the millennial’s in this country going to become like the welfare children of Europe? Do they think it’s romantic or something? I mean, it has to have a cool factor for them.

  • Matt

    I should say some millennial’s, since many are doing really well on many levels. Just when you mentioned Sanders’ voter base, that’s what comes to mind.

  • I can feel a big Trump post coming down the pipeline sometime, perhaps after the somewhat-predicted “pivot” in the general election to show “more true” Trump (if such a thing exists).

    • undercover

      I hope so Innerscorecard. That be enjoyable reading material.

      The election so far has been captivating to watch. You have all the Trump assassination attempts from the GOPe.

      Not to mention the Spanish Inquisition (our media) is finding out he is impossible to kill like he’s a vampire.

      I have a feeling during the general election they also found out he’s immune to sunlight. (plot twist)

      Given we only have two options here. My choice comes down to competence. He has that in spades. However, that spontaneous mouth of his is trouble. Lucky many Americans love that about him and hate our current teleprompter president. (Hillary would be teleprompter 2.0)

      The next 4-8 years if he gets elected:

    • SonicTraveller

      I’ll add my voice to those who’d love to get Joshua’s thoughts on Donald Trump. I’ve spent some time trying to clarify my own thinking in terms of if I’d vote for him under any circumstances.

      Trump does have positive qualities. Clearly an expert negotiator and dealmaker over the course of his career (a valuable skill for a President). He has, by all appearances, nurtured and raised a great family. His stance on money in politics and the ability of special interests to buy influence seems valid and particularly potent in this election cycle, and his willingness to step beyond the politically correct bubble to straight up call other politicians out is refreshing.

      Maybe the thing I appreciate most is his habit of reflecting any circumstance or situation in a positive way. It reminds me of Napoleon Hill’s advice in Think and Grow Rich, that basically convincing yourself of things being positive and finding the positive in any negative circumstance, can begin to fundamentally alter your worldview and cause you to have much more confidence in yourself and drive to go for what you want. Someone could write a 10 page negative article about him but he’d find the one positive sentence in the article and focus on that. If 10 polls come out and 9 show him losing you know he’s focused on the 1 that has him winning.

      With all that said, there’s too much about him that is downright frightening.

      He seems to have an obsessively protectionist worldview- his primary policy for the economy seems to be ‘Bring our Jobs Back!’. Introducing tariffs and protectionist measures would have a crippling effect on the world economy (America included) and would most heavily impact those with the lowest income who’d see their bills increase for clothes, cars, consumer goods, TVs and much else. A great example is his idea that Apple should be making the iPhone in America. Never mind that virtually all of the very high value-added design work, engineering, software and executive functions are already in America. Forcing Apple to bring back the physical manufacturing would put them at a disadvantage to foreign competitors, and it would increase the cost of the phone- passing that additional cost onto every American who buys the phone, effectively a hidden tax to support some non-competitive manufacturing jobs. I think selling people on the idea that the economy will grow dramatically if only America would ‘bring back jobs’, is dishonest and/or delusional. The world has changed, those types of jobs aren’t the ones which will drive the economy forward- it is the knowledge jobs which are highly mobile and globally competitive. The thing that frightens me is that Donald seems to genuinely believe in those simple solutions- and would be willing to take authoritarian actions to force companies to comply with his economic ideas (like calling up CEOs and telling them what to do).

      Trump seems to take the usual politician playbook of making unrealistic/unsupported promises to an extreme level. Apparently he can balance budgets and bring down the deficit, despite no cuts to entitlements, and having a much stronger military. The math doesn’t add up- but he seems to be able to claim all of this with a straight face, and won’t budge even when called out on it.

      Then there’s his authoritarian personality. His proposal to ban all muslims from entering the USA, despite likely being just a publicity stunt without intending to enact it, should be a disqualifying comment by itself. I also find his other statements related to bringing back waterboarding “and much worse” and views on changing libel laws for the press deeply troubling.

      Listening to Trump, I usually get the distinct impression that under the surface of his simple proposals is a near total lack of knowledge or ideas on basic policy details- in one of the debates, his inability to speak for more than 20 seconds on his proposed Obamacare replacement, other than to continually repeat his proposal to remove inter-state restrictions on health insurance was one example. He seems to have almost a contempt for confronting anything more than the highest level most simplified details of policy issues.

      Trump strikes me as the worst type of executive- the type who rides in, provides his managers with simply impossible and ill-thought-out demands, is unwilling to listen to or even consider alternatives, and then takes off. His degree of success in real estate development and licensing deals isn’t anything to scoff at, but in my mind is much different from the executive talent required to successfully run a large and complex organization, such as a Michael Bloomberg. Maybe the Presidency is suited for Trump’s management style, with him issuing orders to heads of departments and making deals, but it’s not a gamble I’d want to take.

      Calling out John McCain’s military service (“He’s not a war hero. He’s a war hero because he got captured. I like people that weren’t captured.”) is particularly galling coming from a man aiming to be the commander in chief (and who avoided that same war with multiple deferments). Despite having a fortune, he decided that backing a real-estate training school which pressured folks into paying thousands of dollars in order to get very questionable training was a good idea, instead of trying to build something that was genuinely value added. Open mockery of a disabled reporter. All this points, in my mind, to a lack of character.

      My conclusion on Donald is that through extreme self-confidence, charisma and expert handling of the media, he’s able to captivate a large number of people into wanting to follow him and believe what he says, enough for them to turn off any doubts they may have in the back of their mind when they drill any deeper and ask “how?”. Probably not much different from the sales pitch at a Trump University seminar. We’ll make you rich, but don’t ask us for details, and hand over your credit card.


      • undercover

        “His proposal to ban all muslims from entering the USA, ….., should be a disqualifying comment by itself.”

        Just because you think that way does not obscure the fact that they are the cease of murder and mayhem around the world.

        Muslims do not belong to a peaceful ideology, in fact, it’s the exact opposite. (There founder was a belligerent warlord.)

        The extreme ones are so incompatible with the rest of us.

        • Ang


          Do you have actual data on this comparing Muslim murder/mayhem around the world vs other ideologies’ murder/mayhem rates? I don’t really have the stats, but am willing to bet the US has taken more lives than the sum of all terrorists in the same span. Just because some piece of information is more available and visible (i.e. US media reporting) doesn’t mean it’s the whole truth

          Re: belligerent warlord statement. You could frame it the same way about the founding fathers: belligerent and treacherous upstarts who did not appreciate the fact that they were the only portion of the populace under Britain that wasn’t getting taxed their fair share

        • onlyalittle

          Nope. That’s the availability heuristic at work, all the way.


        • Matt

          they are the cause* of murder and mayhem around the world.

          Bold for emphasis. I find this type of statement fascinating, as it seems to be pretty common out in the world these days. Your statement implicitly places collective blame on all Muslims for radical Islam (as shown by your use the word “they”). Even if a tiny minority of radicalized Muslims cause mayhem or murder around the world, that doesn’t justify making a blanket statement connecting Muslims (“they/them”) to violence. There really is no “they”. There are simply individual people who choose to take or refrain from certain actions. And this is the problem with The Far Right’s current stance on immigration at the moment – it doesn’t treat people as individuals and instead plays on people’s fear of “The Other”.

          In a liberal society, we treat individuals as innocent until proven guilty. I don’t think that there are many people who believe that people should be treated as guilty until proven innocent. But by trying to ban Muslims from entering the US that’s exactly what we’re doing. We are essentially using some characteristic (country of origin, religious affiliation) to flag them as guilty until proven innocent. I don’t think that is a particularly wise or moral way to behave, and I don’t even think the average voter realizes that this is essentially what is happening.

        • undercover

          I think you are being genuine with me Matt, unlike that other dude. So I will give you my honest to god response from one intellectual to another.

          First off lets force on the true issue here. Trump’s position.

          On what exactly?

          Mass Muslim Immigration. Is it a good idea or bad idea to ban it.

          I clearly am on Trump’s side. You clearly aren’t.

          You say a ban is not a particularly wise or moral policy, yet with the things, I understand about Muslims. I think Trump is being very wise on the whole Muslim immigration issue.

          I think Trumps right on money with statements like this one:

          “I think Islam hates us. There’s something there that — there’s a tremendous hatred there. There’s a tremendous hatred. We have to get to the bottom of it. There’s an unbelievable hatred of us.” -Trump

          I am also presuming where both fans of Joshua Kennon here. So I like to bring up something he talked about when on the subject of drawing conclusions.

          “….had you worked the question backward, it would have been much easier to solve – as Charlie Munger says always quoting the mathematician Jacobi – “invert, always invert!”.

          So my question to you is this:

          If mass immigration of Muslims is no problem, then what current Islamic nation would you be happy for your family to go live in?

          I want you to think about that for a while and get back to me.

          However, if you come back to me and have not taken my side of the argument by now. Keep reading. Cease now the intellectual boxing gloves are coming off and am putting on my straightforward (telling it like it is) Trump brass knuckles.

          Since you like to laser into the word “they” I tell you what I mean by “they”.

          “they” = a Muslim, a person who follows the religion of Islam.

          Islam has a violence problem. That is a fact you cannot disprove if you are intellectually honest. I have looked into Islam myself and there is no way I can disprove the worst things said about it. I tried.

          Without Muslims, Islam itself would not exist.

          So Muslims have a violence problem. They are the cause of so much murder and mayhem around the world today.

          While you and everyone else has the right to believe they are NOT the cause of murder and mayhem around the world.

          I have the right to tell you the facts are already in. They indeed cause so much murder and mayhem around the world.

          Islam is a violent ideology, not a race.

          Islam is a set of ridiculous ideas.

          It is an objective fact that Islam calls for violence against disbelievers.

          Islam is more like a political ideology disguised as a religion that endorses the most heinous of actions.

          Islam is what happens when you let a violent, 7-century warlord create a “religion”.

          Islam is objectively the worst “religion” as of right now. The main reason a lot of trump supporters dislike Muslims is because they behave horribly, not because of blind bigotry.

          Islam is a barbaric political ideology of subjugation, rape, and murder of women, gays, and all non-Muslims.


          “Men are superior to women”

          “Beat your disobedient wives”

          Did that enrage you? It should. Their warlord founder Mohammed said it. So many Muslims treat women that way today.

          If people are serious about fighting worldwide misogyny and homophobia they would focus an LOT of their attention on Islam.

          Hell, did you even know they rape any virgins before their executions to prevent them from going to heaven.

          They are beyond sick with their beliefs.

          Many wise people have fought & died for well over a 1000 plus years to keep Islam at bay, now the PC types & unthinking sheep are leaving the door wide open to followers of Islam to come here in mass.

          Our leaders have sold us out to the totalitarian ideology of Islam. Example: Obama has been flying many of them here and settling them among us. Meanwhile, Europe is paying the price already and filling up with these scum of the earth in mass.

          It takes a special kind of stupidity to suggest we cannot connect the followers of Islam with the violence they bring with them.

          Islam at its core is horrible. It’s like a disease to freedom and liberty everywhere it’s allowed to spread.

          Much like how cancer cells are a major threat.

          Trump is just saying he wants to turn on the immune system.

        • Matt

          I understand that you dislike Islam. I also think that Islam is regressive, misogynistic, and incompatible with basic human rights and liberal values. (Arguably, so is Christianity – as you probably do know from reading this blog that there is a LOT of
          violence and misogyny sanctioned by the Bible, so this isn’t even
          exclusive to Islam – witness all the superstitious, bloody, violent murder and torture committed throughout history by Christians and Christian governments). And as to your question, I certainly don’t want to live in an Islamist country. However, this misses the point I was bringing up in my earlier post, though perhaps I didn’t make it clear enough.

          Your point of view seems to conflate 3 things: Muslims, Islam, and Islamism. Muslims are people, Islam is a religion, and Islamism is a far-right political movement which attempts to impose Islamic values on all areas of life (this seems to be much like Dominion Theology, which Joshua has commented on further down in the comments here). Your criticism of Islam is completely valid. A criticism of Political Islam is also fair – these two are both ideas. However, criticism of Islam does not excuse what amounts to bigotry against Muslims.

          Your statements imply that Muslims are a homogeneous group, which they clearly are not. There are liberal, conservative, and radical forces in Islam, just like there are liberal, conservative, and radical forces in Christianity. Muslims are not homogeneous just like Christians are not homogeneous. In Christianity, you have groups that oppose gay rights, think the Bible is divinely inspired and should be interpreted literally word for word. But you also have groups that support gay rights and don’t believe the Bible is the truth word for word. And you have extremist groups like Westboro Baptist Church and politically inclined groups that adhere to the Dominion Theology mentioned above. In short, while it is certainly valid to criticize religion and its views, is is not fair to stereotype or lump Muslims into a group, just like it is unfair to stereotype and lump Christians into a group. There are definitely SOME Christians who are radical, hateful, and bigoted. But I don’t see anyone advocating that we should expel Christians from the country because they adhere to a violent, misogynistic, and homophobic religion. The reason why people are inclined to do this for Muslims is simply because Muslims are more unfamiliar to the historically Christian-dominated US. They are in essence “the other”, and so it is much easier to stereotype them and see them as an undesirable group as opposed to individual people.

          There are many peaceful, liberal, and tolerant Muslims who do not believe that it is ok to go out stoning women for adultery, hanging gays, declaring war on non-believers, and committing violence against women for refusing to veil themselves. Many of these Muslims are victims of far-right Islamist governments, not supporters or perpetrators of it. In Iran, there are many liberal, secular, and reformist Muslims who are repressed by the theocratic government. Out of all the countries currently ruled by Islamists, Iran is probably the one that comes to mind most frequently when we think of a vibrant, liberal population. Iran has a hostile government, but it has many friendly people who support liberal values. I know because I know a lot of Iranians who had to emigrate from Iran to escape the repressive regime. We should not punish all Muslims by refusing to let them immigrate simply because of some radical Muslims and oppressive Islamist states. And besides, being a Muslim is simply one aspect of identity, and many people have multiple identities. You may be a woman, a student, a doctor, a civil rights activist, a Muslim, and a Republican all at the same time. Just like I’m guessing you wouldn’t want to be defined by only ONE of your identities, we shouldn’t put Muslims in a box and judge them just based on that one attribute.

          And lest you believe that the Middle East was always a hellhole and a struggle against violent Islamists, this is simply not true. For many people who have been born after the 70s, all we see about the Middle East is that it is full of theocratic, superstitious, repressive, and dictatorial states. However, this is a relatively modern phenomenon. The Middle east prior to the 80s was much more liberal than it is today. Check out these pictures from Iran, Afghanistan, and Pakistan from the 1960s and 1970s. In these pictures, you will see a much more liberal society than you see today. You’ll see a few pictures where women are not veiled, have uncovered legs, and dress like Westerners! Of course, all that went away when the Islamists took over and decided to tell people that the West was evil, and that women need to cover their bodies because they shouldn’t “corrupt society” by arousing men and getting raped (because if they do, it is all their fault for being immodest?!). Keep in mind that the Iranian Revolution of 1979 was originally a rather liberal movement composed of consitutionalist liberals, Marxists, and Islamists. Only after the revolution succeeded did the Islamists take over and expel the liberals and Marxists, much to their dismay of course.

          So in sum, while it is ok to criticize Islam, it is incorrect and harmful to conflate Muslims (people) with Islam (a religion) and Islamism (a far-right political movement). We should see Muslims as individuals who have multiple identities and multiple things to offer instead of seeing them as a homogenous group. There are many Muslims who are brilliant scientists, civil rights activists, teachers, etc. who share our liberal values and would benefit our society if we let them in. If we were in their position, we wouldn’t want to be stereotyped and put in a box solely because of our religious background. For these reasons, Trump’s proposed policy is bigoted and immoral.

        • undercover

          Lets go to the dictionary!

          Here three different dictionaries entries for you.


          noun, plural Muslims, Muslim.

          an adherent of Islam.



          a follower of the religion of Islam.


          Mus·lim (muz’l?m, mo?oz’-, mus’-, mo?os’-)

          A believer in or adherent of Islam.


          Clearly the Muslims (the followers of Islam) are not a race of people.

          When Trump says no more Muslims. He is not banning the Persians or the Arabs. They are the races of people you have mistaken for Muslims.

          Also, as you go on and on about all the peaceful Muslims that there are in the world. I don’t care! That is an absurd argument. Only a complete and total moron would fall for that kind of argument.

          I bet you’re totally clueless to the obvious.

          So I’m just gonna say it.

          Because peaceful Muslims are irrelevant!

          There are murders outside the gates. I wonder if you were a military commander, would you fall for a trojan horse?

          Trump just wants to protect Americans from danger. A lot of people are clueless to the real danger. They just don’t understand it.

          So here is Brigitte Gabriel response to a halfwit going on about peaceful Muslims. This what you need to hear now and not anymore from me.

  • Stephen H

    I guess I’ll stop complaining about our choices up here in Canada. I thought lowering the TFSA limit from $10,000 a year back to $5500 sucked.

    • Jeb

      That does suck! That isn’t high enough to hide vast sums of money but it is a great level for someone who wants to take control of their own future/retirement. This is the sixth year that IRA limits have been stuck at $5500 in the U.S.

  • Alex

    Please accept my apologies for commenting out of topic. I could not find the correct one. I first wanted to thank you for your blog. I
    find it very challenging and enjoy it very much. I give you full credit for motivating me to lose
    weight. Your challenge about “fat people being bad at math” made me lose 56
    pounds. Think you. I did have a comment about a post you made a while back
    about some mutual funds sitting on large unrealized capital gains creating a
    potential and uncontrollable tax event for its holders. I wanted to bring to your attention that the
    same may be true when you directly own (as a minority owner) shares of a company
    as well. If the company’s leadership
    decides to go through a process of corporate inversion to free up their cash overseas,
    the unrealized capital gains that you had built in the company shares may
    become taxable. A good example is Medtronic
    inverting with Covidien last year. The
    only difference is that shareholders got to vote on the decision where in the
    mutual fund they do not get the vote.
    However, as one of the minority shareholders you are stuck with majority’s
    decision. You could sell but that means you are in the same boat as far as
    taxes go. Please let me know if I am not
    seeing something in the process.

  • LordSquidworth

    Competence or an army of lawyers?

    The two can look the same, but they’re very different.

    • Eugene

      Yeah, with multiple failed businesses, Trump doesn’t exactly have confidence “in spades.”

      • Just some rambling thoughts, take them for what you will …

        That actually doesn’t bother me at all because a big part of it is an accounting quirk. Consider Warren Buffett. Hugely successful. He managed everything through a single, consolidating holding company that doesn’t have his name on it. Over the decades, he’s made some terrible decisions – just really awful economic disasters that were totally on him – but, overall, he knocked it out of the park as the losses were small relative to net worth and he is a genius at structuring deals so they can be self-contained if they need to be shut down.

        For example, he diluted Berkshire Hathaway shareholders to buy a then-profitable business named Dexter Shoe that went into a catastrophic meltdown almost while the ink was still wet on the paper. Had he bought it as a stand-alone entity and renamed it “Buffett Shoes”, the near total-wipeout would have been headlines. But it wasn’t. It was hidden within a larger conglomerate, two names removed from his identity. Instead of declaring bankruptcy, Buffett can simply pay off the liabilities to save his reputation, quietly close the doors, and move on without many people noticing. It was one of the dumbest moves of his careers. It was entirely mismanagement on his part. It doesn’t change the fact he’s a great capital allocator.

        Trump tends to setup things or acquire them as stand-alone entities not meaningfully connected to his other operations while controlling his personal equity through a consolidated holding company. He then slaps his names on these stand-alone entities and when/if they fail, are associated with him as a result. Four of his many, many companies over the years have declared bankruptcy. Three of these were casinos, which have had a terrible time during the past couple of recessions. All were reorganizations, not liquidations, designed to save the business in exchange for him reducing or giving up his equity stake. In other words, they were strategic uses of bankruptcy and highly intelligent at that. He minimized the damage by recognizing economic reality sooner rather than later. Even experiencing them, he got richer and richer over time, expanding his net worth while he created some really beautiful properties.

        Compare it to something like Bain Capital. Romney’s investment group made nearly everyone involved very rich but its failure rate was exponentially higher than Trump’s (which is one of the reasons Trump is a hell of a lot richer); something like a whopping 1 out of 4 businesses it restructured went bankrupt the last time I checked. Nobody thinks about that because he wasn’t out there renaming each subsidiary “Romney [Insert Business Name Here]”. It’s a psychological thing.

        In business, what counts are net results. You are absolutely going to have failures along the way. Microsoft shut down one of its video game studios a few days ago, announcing that the Fable series is now dead. That’s a failure. Microsoft is still a huge success. Nobody criticizes Bill Gates because it wasn’t “Bill Gates Studios”.

        I don’t think it’s appropriate for people to view the intelligent use of the bankruptcy code to be indicative of a lack of financial judgment. There could be certain circumstances where the best chance a person has at rebuilding very, very quickly is declaring bankruptcy. In fact, I think people try to avoid it too often, putting it off until it is too late.

        The bigger concern with Trump’s business skills – which may or may not be applicable to the Presidency as you can argue he will have the infrastructure and resources to get any managers he wants in the world – is that he seems to be a genius at negotiating deals but not so much interested in the day-to-day operating optimality. Again, that may not matter. Why does he need to worry about the mechanics of the executive branch since that is what the agency heads do? But it is a concern. Buffett’s genius, of course, was recognizing that about himself. After nearly bankrupting a service station early in his career when it represented a good chunk of his net worth and, later, almost running several insurance subsidiaries into the ground, he gave up on the managerial side and stuck to capital allocation. He knew his short-comings and acknowledged he was not as capable as others when it came to actually running companies.

        Personally, given the details surrounding the four bankruptcies, and the much larger record he has on a net basis when factoring in his other projects, I don’t take nearly as critical a view of them as some members of the media seem to think voters should.

        I mean, I don’t think of Milton Hershey as being any less capable since The Hershey Company wasn’t his first business and he had experienced failure in the past. I don’t think of Walt Disney as any less capable because his company was started after his first animation studio went bankrupt. He learned, adapted, and built upon his success.

        (Note: This is not about Trump per se as I have no idea who I am voting for in November. This is a general thought on this idea that somehow the intelligent use of bankruptcy code to one’s advantage is indicative of a lack of executive talent, which I find inaccurate. There are plenty of other things one can criticize him about that seem more appropriate.)

        • undercover

          I like your rambling thoughts. Here’s mine on yours.

          “He seems to be a genius at negotiating deals.”

          This man is going to get the deals done for us. Trump will be the closest thing we have to a busy, industrious beaver as one president gets.

          “But not so much interested in the day-to-day operating optimality.”

          He is free to do what he does best.

          There a cheat sheet to understanding trump. His personality.

          If Joshua Kennon is an extreme ENTJ:

          Trump has to be an extreme ESTP. His competence in all the talents ESTP often put to heavy use is remarkable.

          I leave you with an image, tell me does this not scream trump.

        • Joshua, you’re a gem. I’d love to see a full breakdown of the Trump phenomenon.

        • Chris G.

          Check Scott Adams’s blog. (The Dilbert guy.) “Master Persuader Series” is what you want to Google.

        • DonnieNYCA

          yes. agreed!

        • Eugene

          Those are great points. I guess I am not being fully intellectually honest as his rhetoric makes me dislike him. I can’t quite pinpoint what it is. I would love to see a full post on Trump!

        • mercury

          How about just estimating his compound growth rate from his starting point? All estimates of that put him nowhere near Buffet, the S&P, or real estate returns. That’s the biggest issue about his underperformance, not the corporate bankruptcies, which are unremarkable in the course of business. I will readily admit that I am not interested in personally doing a deep analysis of his returns, but multiple views end up with the same result – he is a poor investor.

        • This, if you’ll forgive me for being so direct, is not an intelligent analysis objection from an accounting for financial standpoint because it ignores two extraordinarily important things:

          1. Attempting to calculate a compound annual growth rate from the starting point and the current ending point, which demonstrates a still very satisfactory return, ignores the fact that he’s been taking MASSIVE cash flow withdrawals and dividends over the years to fund a lifestyle that goes beyond what most royalty in the world does; withdrawals that have allowed not only him, but his five children, seven grandchildren, current wife, multiple ex-wives, siblings, and their respective families to have practically anything money can buy. They travel around the world in what some have described as the nicest customized 757 jet on the planet. He has a three-story penthouse apartment valued at well over $100 million overlooking Central Park in New York. He owns a $19.5 million historical estate, originally built by the late Katharine Graham’s family at The Washington Post. He has an eight-figure estate in Florida. He has an army of staff to do whatever he wants. Massive tuition bills. The best furniture in the world. Unbelievable amounts of jewelry. Cars. Huge charitable donations. If you add all of that back in and look at total return, even under the most modest assumptions, it becomes fairly clear that he almost assuredly had to beat the S&P 500 by a substantial amount.

          In other words, to ignore this would be like trying to calculate the CAGR of Royal Dutch Shell over the past 50+ years while ignoring the dividend component, which is enormous. The base compounding rate is not relevant but only one part of the total return calculation.

          2. Unlike a totally passive index fund, such as the S&P 500, which exists as a sort of quasi-parasitical extraction on the activity of others, nearly everything he did generated actual, physical improvements to the civilization, jobs for real people (plumbers, electricians, architects, interior designers, millwork manufacturers, brick layers, HVAC installers), and a hell of a lot of taxes once you factor in the second and third order effects, especially. Most of the time, the whole “job creators” rhetoric is complete nonsense. Not in this case. When he generates a dollar of return, it’s because he’s doing something; building something. There is tremendous value to both society and the individual tax payer. Benefits that show up in incalculable ways, ranging from insignificant to enormous; memories formed at skating rinks in the park or Rockefeller Center in New York; deals made on golf courses or weddings hosted at his resorts.

          Again, I have no idea who I’m voting for this November at the present time as I think it’s still too early to tell but there are many criticisms you could levy against Donald Trump. His business acumen is not one of them. His compound annual return is not one of them. To say otherwise is a flawed analysis which, I suspect you know as you admit you’re not interested in actually discovering the truth of the matter. Which is fine. I’m of the school that criticisms should be justified, though. I think it’s basic fair play and how I’d want to be treated if the tables were turned. Plus, it’s dangerous to allow yourself to slip into the temptation to believe things that fit the narrative you want to believe rather than most accurately reflect reality. Do it once, you’ll probably do it, again. I’d rather think clearly about it even if I don’t like what I find.

        • Pablo

          Woah, the light bulb went off for me: I never thought about adding back personal withdrawals into his personal returns. The analogy about calculating the S&P index without including the dividends was genius! Plus, not only do his businesses employ people, but his personal consumption also creates jobs in the luxury market!

          I admire the fact that he is a master negotiator and salesman. He seems to know how the “average” voter thinks and is able to shape his message that speaks to the voter’s sensibilities. He is certainly a lot more nuanced than the anti-Trumps realize. I’m curious to see how this election turns out.

      • Eugene, I fail to see what having failed businesses have to do with anything. Most businesses fail. What’s that adage about Milton Hershey and his mountain of failures? Don’t we all wish we could fail as hard as Milton Hershey failed?

        Trump has started probably hundreds, if not thousands of businesses. Some are bound to fail. I fail to see how that’s a slight against him. All the while, he has produced income for countless people. There are a myriad of ways you can attack Trump, but that isn’t one of them.

      • Tom Fulfaro

        Not too mention the fact that his daddy was one of the largest homebuilders in Brooklyn in the post WWII era – who incidentally WAS 100% self made! To steal a quote from former TX governor Ann Richards (regarding GW Bush)…”He started out on third and thinks he hit a home run!” It’s easy to become a billionaire when your dad’s net worth tops $200 million! The “Donald” has declared BK multiple times due to using massive leverage and other peoples money, hurting not just his creditors but hundreds of middle/working class contractors left in the wake of unpaid bills. Not to mention Trump Mortgage (started in 2006), Trump Airlines, Trump Vodka, Trump Steaks, Trump University etc. Also of note, most of the buildings you see with his name on it are simple leasing his name, but to the casual bystander you’re left with the impression he owns 100% of it. I am sorry he is simply an egotistical attention wh*r@ who’ll attach his name to anything if he thinks it will extend his 15 minutes of fame!! As a native NYer who grew up near the epicenter of his rise to fame, I can assure you all, this man is the epitomy of sleaze! While the media will have a field day if he is elected president, God help the USA.

        • FratMan

          Tom, re: “hurting not just his creditors”

          Don’t creditors receive an ex ante opportunity to assess Donald Trump’s bankruptcy risk before loaning him money? If his past bankruptcies, proposed business model, or capitalization proved an issue for creditors, couldn’t they attach higher interest rates to their lending or lend on specific terms that would justify this risk? And if not, couldn’t they avoid lending to him altogether by declining to give him money?

          And if Donald Trump’s past bankruptcies did reveal a higher risk to future creditors, then shouldn’t the higher interest payments that Trump made along the way for his other operations act as an offset to the creditors that got jilted, making his participation in the credit markets a net gain for society? And if they didn’t result in higher interest payments or adverse specific terms, then doesn’t that mean Trump’s creditors were either incompetent or Trump’s borrowing didn’t reflect a heightened borrowing risk–thus making the stories of his bankruptcies a red herring from the perspective of injustice to creditors?

        • Tom Fulfaro


          My rant wasn’t necessarily over concern for his creditors. Because, yes any creditor worth their salts should seek and expect extra return based on his pat creditor risk. It was more about the union plumber or contractor who took a job to feed his family, only to be stiffed in court as a junior creditor. It was more about the MYTH of Trump being a successful self made businessman. He is neither self made – his Dad Fred Trump built something like 27,000 houses in Brooklyn in the 1950’s and 60’s and amassed a fortune of approximately $200 Million, nor is he successful at everything he touches, as he would have you believe (see examples from my post). Is he wealthy, yes of course, is he shrewd absolutely (as evidenced previously by Josh pouring over his financial statements with what something like 50 different entities). Reality it is easy to claim you’re a multi-billionaire when you have you yourself (i.e. you “Brand”) as $3Billion with to my knowledge no general independent accounting of such value. “The Doanld” cares about nothing more than himself, and listening to himself speak, and keeping his name in the papers, period end of story.

  • David Hughes

    Thanks for a very insightful piece. I honestly don’t know if I can vote for any of these folks. The negatives are so unbelievably high for all of them it’s really hard to see what the ‘lesser evil’ would be.

    I…almost think the lesser evil would be Sanders just because gridlock would reign supreme domestically and he’s the only one who might not start another war, and end our involvement in the ones we’re already in.

    Somewhat self-servingly, I would love to read a breakdown of Cruz more than what you’ve posted in the comments so far. Most of my extended family seems to be backing him but one quote (“I don’t know what temperature sand burns at, but we’re going to find out”) just terrifies me.

  • Matt

    Very interesting podcast. I also found a couple articles here and here that give an interesting insight to my original question.

    Definitely seems similar to the challenges and psychological issues that accompany coming out as gay in a hostile world, except perhaps worse because of the self-sabotaging thoughts that have been so ingrained into your worldview. Cognitive dissonance and indoctrination about the consequences are definitely powerful forces here. But it seems that without constant exposure to the outside world, you won’t be able to see enough inconsistency to break out (partly luck based/out of your control). The deck does seem to be stacked against you. Smart’s don’t seem to be enough here – Megan clearly seems intelligent but it still took her until age 27 to break out.

  • Zaphod

    Trump only cares about trump. What deals does the US need to get done that we cannot? We are negotiating (and have been) from a dominant position for decades. We dont need to abuse that, we need nuanced, smart policies that do well for the most people with the least unintended consequences.

  • DonnieNYCA

    B R A V O ! ! !

  • DonnieNYCA


  • freereel

    Great analysis.
    So, what’s your preference among:
    Trump, Cruz, Clinton?

    • Gary Small

      that is exactly the problem!

  • freereel

    Or other

  • nlf

    Out of curiosity, I calculated using 2015 figures how much more I’d have to pay in taxes under the new proposal. After readjusting the income range to accommodate the four new brackets, as a single person with a taxable income of $43.7k, my estimated tax burden under the new proposal is roughly $950 more than it would be under the current system.

    This post definitely opened my eyes to actual implications of this proposed tax plan. I would expect the tax burden gap between the two proposals to widen as my taxable income increases.

  • dave (nestle)

    OMG, what a field.
    Luckily, based on where I live, my vote has no weight either way.

    IMO and HOPEFULLY, based on the primary voters that Trump is trying to win over, he is putting on another reality show for now but will move center-ish if he gets the nomination.

    I think I despise Hillary as a person even more than Ted Cruz. I even get the feeling that Bill is going to hold his nose as he pulls the lever if that is the matchup. (if it’s Trump-Clinton then he will vote for Trump)

    (in combining responses from your last post)
    I would like to know what it is that is motivating you to start your latest business? I mean, it seems like you are set financially, educationally, socially, etc. You have mentioned many times how spouse, family, friends, free time, food, video games, and possibly your own children are what really matter to you. Why would you choose to spend so much time and add so much responsibility to your life at this point, while possibly delaying enjoying some of these fruits of your success this early in life?

    Maybe just list top three in one word answers if you don’t want to go into detail.
    (I admit this question is somewhat self-serving and I also get-it if you don’t want to answer)

    • Nicholas Archer

      Why do greyhounds run fast?

      • dave (nestle)

        Dude I get-it.
        However, the minds on this blog intrigue me at times and knowing more details has benefited my own decision making process countless times. For instance recently, besides having a project that I have been working on for a long time that I may or may not pull the trigger on, an opportunity has presented itself which could completely change my family’s financial future. This would have been a no-brainer-jump-on-the-train-let-me-have-it type thing 20 or 10 or even 5 years ago. The thing that holds me back now is the amount of time it would steal from my otherwise very comfortable(and getting more so every day) family life. (and I assure you this is not about being lazy)

        • Nicholas Archer

          My response was meant to be a little more of the tongue in cheek variety. That being said, I’m sure JK has certainly put a lot of thought into this. I see him as a sort of Benjamin Franklin or Warren Buffett. It makes him extremely happy to do this and it is sort of the next logical step after building this huge foundation: companies, university,
          It is natural to him. It makes him happy. It is easy to him.
          Why do greyhounds run fast?
          Because they are designed to and it makes them happy and it’s easier for them than it would be for a bulldog.

          And to your specific dilemma. I can only point you to: opportunity cost and the fact that usually you can change your mind if you make a mistake, and this isn’t a mental model that I know of but “trust your gut.”

          *** I had to cut this short I was on my way to work ****


          Let me explain a little more, I was preoccupied before on my way to work. I know everyone wants Joshua to elaborate on a lot of things, but he is so busy I thought perhaps I could offer a little help to solving your problem until he gets around to responding. Or, someone else from the community can chime in. I’m definitely not the smartest person on this website – that is for sure.

          I can definitely empathize with your dilemma. Just this last December I started a new job that was a huge improvement in so many key areas. I loved the leadership, the staff, the commute was less than 2 miles. But, the role I was in was so horribly not a good fit for me. I had to immediately resign. It was awful. Before I accepted the job, I had a really bad feeling that it was going to be a bad move although logically, it seemed like a good decision.

          With your situation, you have even more to consider: your family, your station in life is probably much higher than mine, so when you make decisions it’s probably harder for you to change gears.

          On the other hand, I’ve often experienced a phenomenon where initially I estimate a task will be impossible or near impossible and then soon after I begin said task, I find that it was much less difficult to solve than anticipated. So, sometimes things seem like they are going to throw a wrench in your plans, and it turns out to be a piece of cake.

          At the end of the day, you think on it, deliberate, try to objectively assess all possible outcomes. I always speak to my advisor committee aka trusted, more-intelligent-than-me friends. And, after I have taken the measure of everything as best I can. You make a decision. Even if you decide against it, that’s still making a decision. And the good news is, if it turns out to be a colossal failure, most times, people that love you will forgive you, and you can change course. To quote Penelope Cruz from Vanilla Sky, “each passing moment is another chance to turn it all around.”

          As far as Joshua’s patented formula for making hard-ass decisions, I’m all ears too. I just thought I’d try and do my best to help, during the interim.

          And, it always comes down to how good you are at managing something. For instance, the greyhound can run 30 mph several times a day and it will be very easy for it to also go about his other business. But, a German shepherd would have to expend much more effort to accomplish this task and go about his daily business at the same energy level. And lastly, our friend the French Bulldog, it is unlikely he would ever be able to achieve 30mph, and if he did, he would likely risk his health and well-being, especially if repeatedly doing so.

          In December of last year, I found myself feeling like the French Bulldog and it was horrible. So, basically what I’m saying is: Joshua can do things so efficiently, so fluently, so concisely that what would be completely impossible for someone like me, is possible and most likely a lot of fun and actually invigorating and healthy for him.

          Anyways, i guess it was hard to extrapolate all of that from my initial, overly simplified response. But, that’s what I was thinking.

          Hope you find some help. If you don’t own poor Charlie’s almanack I’m sure that would help you. There’s so much to learn, it’s a wonderful community. I hope this makes more sense now.

      • Abe

        This response was unnecessary.

        Dave, like many of us on this blog, have an interest in the decision making process of others. As Dave already noted, Joshua doesn’t appear to be lacking in any financial comfort and he frequently reminds his own readers that money is just a means to an end. From an outsider’s perspective, Joshua’s recent endeavour would sacrifice his time with loved ones for a superfluous financial gain.

        So, like Dave, many of us would presume that Joshua’s reason goes beyond just money.

        – Maybe he has a desire to leave a legacy in the form of an Investment Management Firm for his future children?
        – Maybe his current time spent pouring over 10-Ks would only increase marginally but the financial gain would be extraordinary?
        – Maybe he’s got his eye on a Golden Oak Luxury Home?

        The truth is we don’t know, but we’re confident that Joshua’s own thought process would lead him to make a choice that’s consistent with his values and intellect. And, undoubtedly, we would learn from that same thought process.

        • Nicholas Archer

          I’m sorry you found my thoughts unnecessary. I thought they were actually quite insightful. I would concur his primary motivation is not money. Money is simply a byproduct of him doing something that he is extremely good at that benefits society, aka “us,” in a big way. It is his virtue that drives him.
          Last time I checked Paul McCartney didn’t need to make any more money, but he continues to participate in music because I imagine, he loves it, other people love it too, and they vote with their dollars further reinforcing his doing something that he loves to do.
          Unlike Sir McCartney, I hardly think JK has reached his prime in life and it would be in my opinion a great disservice to all, and especially himself if he were to rest on his laurels and coast the next 70 years although he could certainly do that.
          In regards to his particular algorithm to making important life decisions, I believe that may be irrelevant because everyone’s situation is quite different but I would guess he uses a latticework of mental models, intuition, self reflection and objective assessment to make those decisions. But, essentially, he probably does what makes him most happy: his friends and family’s happiness also included in that balance due to his not being a sociopath. And, with all these models and factors carefully balanced he does what generates the most net utility, happiness, and what is natural to him, in a way like Sir Greyhound McCartney.
          If he did have a really awesome patented JK life decision algorithm he would share with us that would be awesome though. Almost like the logical equivalent of Harry Potter’s invisibility cloak. ;0)
          Cheers. Also, please give me the benefit of a doubt, I’m better in person than on Internet forums.

      • dave (nestle)

        Thank you Nicholas, Abe, Kapitalust, and Ang! (in order of response)
        As always, the posters’ thoughts on this blog are priceless!

        One thing that I can’t get past is the value of the mid-life healthy time for a human’s life span. If such a person can become independent(or at least on a comfortable trajectory) with their time in their 30’s or 40’s I believe they can extract the most value out of their free time during those years(for a number of reasons; health, life experience, edcucation, etc.). Put another way, I can more understand why say, Donald Trump or Mitt Romney would run for president at their stage in the game, while I would not understand if say someone with similar success would run at 40 years old.
        Just using my BIG mouth again.

    • I recall reading in a long, long ago post that Joshua has a secret “number” financially that he wants to hit personally and I got the impression from the way it was written that it was quite a large number… like owning your own skyscraper type of large number?

    • Ang

      Kapital touched on this in his post above, here’s the link where Joshua describes why he isn’t “having kids tomorrow, spending 90% of what (he) make(s), and playing golf all day. The thing is, that isn’t (him). (He)’d be miserable because (He) want(s) to build something huge by the time (He’s) old”

      It’s also not accurate to say he’s not enjoying the fruits of his success. Like Warren and Charlie always says, they got rich so they could have complete control of their time. The fact that Joshua is building his own businesses and not working for anyone else means he has already achieved one of his top priorities

    • I’ll try and remember to write about this at some point when I share more about the upcoming launch. Sorry for the delay in getting back to you on this. I have practically no free time at the moment. It’s 2:38 a.m. and I’ve been at my desk since 9:30 a.m. or so. The blog has become a tertiary thing, as much as I hate it, because I need to focus on where we are in the regulatory process.

  • Joel

    Hi Joshua. Fantastically informative – thank you for your insight.
    Would you be willing to explain, and I am genuinely interested in your rationale, the following comment:

    “In fact, he might do some good – he’d likely instruct agencies such as the FTC and the Treasury Department to break apart companies like Comcast, shatter financial institutions like Bank of America.”

  • Ang

    That’s some really good stuff. Perfect illustrations of the effects of incentives and disincentives from someone in the field. Thanks for posting this

  • Jeff

    You’ll be glad to hear that preventative care and regular scheduled testing in the US no longer has a co-pay.

  • Abe

    I misinterpreted your initial response as dismissive in response to Dave’s inquiry. I apologize. Much like yourself, I believe Joshua can and will continue to benefit those around him by taking part in what he loves to do.

    With regards to the specific algorithm he uses to make life decisions, it is as you say – he likely uses a variety of mental models, intuition, and self reflection to come to those decisions, and that’s precisely why Dave posed the question that he did. He wants Joshua to elaborate, expound, and ultimately share how he came by his decision. So, while I can agree that your summation may be correct, it doesn’t change the fact that I, Dave, and JK’s other readers would still like to to hear the details of it all.

    Happy Trails! I’ll think better of your responses from here on out 🙂

  • IlovePi314159265359

    I’m interested in the numbers for this: “The fact that you can’t afford a new car or cable television isn’t anyone else’s problem. In today’s purchasing power equivalent, you could basically save $20 a week throughout your career, increasing it with inflation, earn sub-par rates of return on it, and still end up with at least $577,000+ in productive net worth, producing $17,000+ per year in passive income to augment your Social Security. ”

    Would you be willing to give some quick figures for how you came to this number? I ran some different scenarios with interest rates and didn’t get close, so I’m clearly doing something wrong. Thanks!

  • robweeve

    clearly, the current system does not work. what would your tax plan be?

  • Marko

    I have to take issue with your assesment on Obama’s fairness with the tax code.

    1) The payroll tax cut is in other words a cut on the necessary contributions to social security. We think of it as a tax because the money goes in the general fund but there is an agreement in place that the money you put in will be paid out to you through social security in your later years. Cutting your required contributions without at the same time cutting benefits is just robbing Peter to pay Paul. Should richer Americans have to divert some of their 401k contributions to pay for those who cannot contribute?

    2) The capital gains rate for people in the 0-15% range (those earning up to $37.5k) was 0% before Obama even took office and he did not lower them as you claim. He only increased them to 20% for richer Americans. You also failed to mention the 3.8% additional tax for cap gains and dividends that those making 200k have to pay. (ACA tax)

    3) The tax code has gotten even more complicated for normal people. (Obamacare subsidies, reporting, etc) This only enriches the HR Block and other tax preparers.

    4) Now my personal gripe is the treatment of US citizens overseas. Obama and the Democrats passed FATCA. In an attempt to cast a wide net to catch the tax cheats in America that park their money overseas, Obama has made life difficult for the millions of Americans who live abroad. We are being denied bank accounts or investment accounts by foreign banks (though local to us) because we are toxic assets. We have no one to turn to. Even though I owed no taxes to the US last year, i still had send in a 40 page tax return, report all my assets (bank account, car, home) to FINCEN,

    • 1. This strikes me as a horrible failure of logic in that it ignores the nature of taxation and the tradition of American politics as it pertains to taxation. If your line of thinking prevailed, where would it stop? Should I, who am currently (but not in the future) childless have to spend thousands of dollars paying for a local school system that doesn’t contain any of my offspring? We, as a democratic republic, permit it through the electoral process because I’m going to benefit from the increase in human capital in a material way. I’m surrounded by better-educated people which means more economic output and lower crime. I have a better selection of potential employees when hiring. I get to benefit from their future careers – they are the future fire fighters, ambulance drivers, plumbers, chefs, construction workers, and computer programmers that make my life infinitely more enjoyable.

      Payroll tax cuts are among the best tax cuts society can offer because the poor and middle class blow their money, speeding that capital through society, often triggering additional taxes and increases in GDP. Tax cuts for things like, say, the estate tax or even the top marginal rates at a certain point, don’t. Just like a public school, EVERYONE benefits enormously from a progressive tax system with the lowest income members of society paying little to nothing provided they work (transfer payments have moral hazard and can create perverse incentives but things like the earned income tax credit, in contrast, don’t to the same degree). All of those televisions, shoes, couches, computers, kitchen appliances … everything those folks buy with that additional money not only makes their life better, it makes upward mobility more possible and increases the profits people like me enjoy from the businesses we own. Saying that it’s a case of stealing from Peter to pay Paul is horribly short-sighted and doesn’t take second and third order economic effects into consideration.

      2. You’re right. I should word this better and will try to do so if I have a chance sometime in the future. Thank you for this.

      3. This was not President Obama’s fault. Intuit, the makers of Turbo Tax and H&R Block, spent large amounts of money specifically lobbying individual members of Congress to kill a bill that President Obama would have signed that would have allowed an enormous portion of citizens in this country to file their taxes in under sixty seconds, akin to the way it is done in some places in Europe. He cannot and should not be blamed for the corrupt political dealings of a corporation that fought a law he would have supported.

      4. You’ll get no argument from me on this. I agree with you 100%. The current international tax rules for American-based multi-nationals is equally as absurd. It’s non-competitive, burdensome, and does real damage.

    • kdk22

      It’d be wonderfully fantastic to just cut social security and medicare and eliminate the payroll tax completely… but I’m just a dreamer.

      Instead of being taxed, if 15.3% of your pay was saved in your own account and allowed to be contributed pre-tax AND taken from tax-free, at even a modest income $18,000 (for life, no raises) or $2,754 for 47 years (age 18-65) assuming an 8% CAGR an person would have $1,200,000 at age 65. Via the ‘”4% rule” this would allow $4,000/mo tax-free income (thereafter increasing with inflation each year) and roughly a $2,600,000 inheritance (assuming death at age 85).

      THAT is “social” security.

  • IlovePi314159265359

    I disagree with the following statement: “Absent the aforementioned medical emergency, if you make it to the end of a 40 or 50 year work career and have not built a large enough net worth to support yourself, in this day and age, and in this country, it is absolutely your fault. You are responsible for it.”

    First, I think it implies equality of opportunity. Second, if this statement were true, we would see an even distribution of people who save for retirement, and wealth outcomes throughout the population. We don’t though, what we see are that people tend to stay in the tax bracket they are born into, and poor people tend to stay poor. This is largely do to the birth lottery. Biological, sociological, psychological, and environmental factors all play into this. Poor people tend to raise their children as they were raised, whether they are from inner city or extremely rural areas. Those damaged components of the biopyschosocial and environmental milieu ultimately effect outcomes.

    I don’t know if there are any answers, as we have spent trillions chasing this problem. I do think that raising the EIC a good amount would be beneficial. While raising it designate a certain percentage of the EIC to automatically be deposited into some sort of index fund unable to be withdrawn until retirement. The only way some people are able to save is through that paternalistic method, going by the past fifty years history.

    • I see your point, and recognize that the reason many of the poor stay poor or the middle class stay middle class is at least in part due to inter-generational transfer of bad or mediocre financial habits. I know this has been the case in my family and in many families I know personally. I think it would be naive to say that environmental considerations are not a factor in ultimate financial success, but it is undeniable that personal choice at some point plays a role. How long is one able to point to their parents’ habits as the main cause for their financial situation and station in life? Is it at age 25? 35? 55?

      • joe pierson

        What do you exactly mean by “personal choice”. You make it sound like a button someone pushes and they become wealthy. Some habits are difficult, if not impossible to break. That is just the way we are designed. There is large amounts of societal, psychological, and economic factors which limit the options people have available to them, and in some cases remove the element of choice entirely.

        • Indeed, you’re right that many habits are difficult to break. That is why it is so hard for people to change, regardless of the environment or situation they have been exposed to. I am simply making the point that there is the possibility of overcoming those barriers (societal, psychological, etc.), and that a grown person working to change their habits can indeed do so. Obviously this is not “pushing a button” for an automatic result, but a gradual process of change that eventually produces results. Charlie Munger himself had to start over at 35, but the reason he became rich is he continued to try to find “intelligent things to do” until he reached his desired result. I’m sure he felt those chains himself, but made the decision that he would eventually break them.

        • MW

          OldManMAse, it seems that you aren’t clear on what you’re arguing about.

          Joe stated his belief that a large part of why people stay poor are unconscious habits common to the social and economic class into which someone is born.

          You responded agreeing with many of the points Joe made, then largely dismissed your concurrence by saying, basically, that free will exists.

          He went on to provide supporting arguments for his initial point, arguing that because of many difficult-to-avoid factors, people have far less choice in these matters than even they themselves tend to believe, and this necessitates a public-policy solution.

          You disagreed by providing an counterexample using someone who is such a major statistical outlier in a variety of ways that it seems rather disingenuous to bring up at all, and again failed to actually engage with the argument to which you were replying.

          The issue that Joe actually brought up is that while some people do learn to reject the negative behavioral patterns (financial, in this case) they pick up early in life, most people do not because of a complex set of social, economic and psychological factors that make these habits extremely hard to break. And while what you said about people having the ability to make other choices is not untrue, the people who actually do so in our current society represent a very limited number of cases. Because of this, Joe is arguing that there need to be public policies which address
          low social mobility by working to counteract the typical behaviors of low and lower-middle class people which have been shown to be detrimental to their financial well-being. The fact that some few exceptions exist does not in any way negate his point.

          There are a number of good, or at least plausible, arguments you could make in opposition to such policies, but so far you have not done so. The logical extension of what you have said so far, by the way, is that because occasionally exceptional people such as Charlie
          Munger exist, and exercise unusually good judgement, that there is no need for real-world policies to cater to vast majority of people in poverty and near-poverty because he had to completely rebuild his life financially in his mid-30s and subsequently became a billionaire.

          That doesn’t appear to be you real argument, and even if it is, none of the things you have said would support that position. I would agree that, were there more policies in place to create enforced safety nets and more useful, widespread financial education available to low and middle income people, then you would be arguing a much stronger case and, absent other mitigating factors, I would probably be inclined to agree with you.

          As I said from the start, if you’re going to have a discussion, actually address what the other person is saying. Not only were you using poor examples, but they weren’t even examples which worked to prove the opposite of what Joe was saying; the truth of your statements was not conditional on his being wrong. You might well have a convincing case here, but as you’ve yet to start arguing it in any sort of persuasive way, no one besides you could know that.

        • MW

          Sorry, I made an error in referring to posters. The second paragraph should have mentioned IlovePi314159265359 and not Joe Pierson. Hopefully that didn’t confuse any issues, but all the same, it should be clear after this.

        • MW, thank you for your constructive criticism. I did not communicate nearly as well as I had
          hoped to. Your point about bringing up
          Charlie Munger is entirely true – he is a statistical outlier; it was probably
          a bad idea to even mention him as a counter-example.

          The larger philosophical question I am wrestling with is
          this: how much should public policy be held responsible in order to incentivize
          good habits? (financial and otherwise) For
          me, it is undeniable to see that free will exists, yet it is also undeniable that
          there are unconscious habits that get formed due to larger forces at work, as
          joe mentioned.

        • joe pierson

          Free will is mostly a theological concept and not a scientific one. To me it’s an immoral concept because the natural conclusion of this concept is people deserve to suffer because of their poor choices. I have a hard time dealing with that when reading about the millions of poor starving people. But I understand it’s an appealing concept to many because it absolves them of any empathy for the misfortune of others, and removes any obligation of the state to address societal issues.

          So to answer your question, in my opinion assume their isn’t free will, then develop public policy under that assumption.

        • 1. Isn’t that greedy reductionism? An attempt to convert a spectrum issue into an artificial binary so it becomes easier to deal with emotionally and mentally? In other words, why can’t free will and institutional ladders/impediments also exist simultaneously the same way two forces such as gravity and wind can exert influence at the same time on a ball thrown up into the air?

          2. Leaving aside the scientific question of whether we are all Newtonian action/reaction response machines or if there is something more that goes on with the emergences of consciousness that we don’t fully understand, yet, isn’t there an enormous societal danger in perverting the culture if it becomes dogma that free will, and the resulting individual choices, don’t matter? A litany of mental models from psychology show a direct correlation between the perceptions a person has of individual accountability and responsibility (including consequences of decisions) and their behavior. From the by-stander effect of allowing a rape victim to be killed with hundreds of people listening because nobody feels like they are responsible to learned helplessness, where otherwise capable people internalize this idea that they don’t control their destiny so it’s pointless even to try, aren’t the potential outcomes of such a position inevitably going to lead to hedonistic rot? In other words, to borrow an idea (“if God didn’t exist, it’d be necessary to invent Him”), can’t it be said that if free will didn’t exist, it would be necessary to invent it otherwise people devolve into these self-reinforcing mental model patterns that cause sub-optimal outcomes both for themselves and society as a whole?

        • Abe

          Joshua already hit on this point but I feel the need to elaborate a little further. I’m not quite sure how you come to the conclusion that Free Will necessitates the belief that people deserve to suffer due to their poor choices. Free Will exists within different environments, and undoubtedly those different environments will color both one’s life choices and how one comes to those choices. An individual born to a wealthy, well-educated, and emotionally stable family in the United States is going to have a series of advantages that an individual born into a poverty stricken, single parent home in the middle of rural Mexico will not. Comparing the financial or educational success of the two without taking into account their background is the equivalent of faulting a bilateral lower extremity amputee for not beating Usain bolt in the 100m dash. Anyone that comes to that conclusion is either mentally handicapped or being intellectually dishonest.

        • Tom Fulfaro

          Sadly I think we will never see the day when public policy incentivizes good behavior! When you have governments on all level that consistently set a poor example (i.e. spend more than they take, promoting real estate bubbles, student loan bubbles etc.) I don’t think we’ll ever see the day when good/smart/frugal behavior will be rewarded.

          I mean this election is the perfect (and scary example)! On both the far left & far right you have demegogic figures exposing the doctrine of “it’s someone else’s fault”. In the case of Mr. Sanders you have someone Wall Street and the 1%. It’s not my fault I spent $200K on college to be a journalism major or make $40K a year and thought buying a 400K house was a good idea, no it was a bankers fault.

          Ditto for Mr. Trump on the right, where the problems are the fault of immigrants, muslims, and China. It is easier to blame “the Mexicans” for my problems, rather than asking the question “What life choices have I made that have left me in such an uncompetitive position in the global economy that a immigrant working for minimum wage is ‘stealing’ my job? And how can I change those decisions”. I mean there are countless blue collar positions in the trades (welding, electric, truck driving, freight railroads) that go unfilled because pursuing them takes effort and training.

    • 1. It doesn’t imply equality of opportunity at all. Like being in shape or learning to play the piano, a positive net worth is simply a by-product of behavior. After 50 years of a productive career, absent a medical emergency, in this country with the safety nets and affluence we have in place, if you are not sitting on a positive net worth sufficient to support you, it was a choice. You mismanaged your affairs. Most things in life, over a long enough time period, are a choice. You can be a complete and total moron, a felon with barely any job opportunities, and you still should be able to amass a decent chunk of change by the time the final curtain falls.

      There seems to be this bizarre pathology in life these days about fairness; the idea that if we all don’t start under ideal conditions, we somehow are absolved from personal responsibility or robbed of power over our destiny. Yes, certain doors will be shut to you. Yes, the journey may be harder. Yes, you may not get as far as you otherwise would have. But a few hundred thousand dollars in today’s purchasing power? It requires almost no effort.

      2. The belief that you’d see equal outcome distributions is untrue because it contains several incorrect assumptions in the model. First, not everyone has the same utility as it pertains to spending money and saving. My mom, for example, gets more enjoyment out of nice hotels. My dad, when traveling, would stay at a Super 8. Even under otherwise identical situations, my dad would probably end up with a higher net worth than my mom because he’d have more capital compounding in some alternate universe where they had never met. My mom, on the other hand, was still going to end up with money but she’d have had a lot more enjoyable (for her) experience along the way. Money is a tool. It exists to maximize personal utility. Personal utility is not maximized with equalized outcomes.

      I agree with everything else you wrote – that all of those factors result in sub-optimal or supra-optimal performance compared to what a person might have achieved. Nevertheless, outcomes are never going to be equal. I mean, look at someone like me. I enjoy compounding money the same way other people enjoy buying expensive cars. I get utility out of it. It’s not a sacrifice the way it is for other people. You could equalize everything and in ten years, I’d still end up in the top compared to a lot of my fellow citizens. So would many people on this blog because of how unique the community is. We’re optimizers. Analysts. Over-achievers. Thinkers. Sometimes, it really is as much about the game as the thing itself.

      Of course, then you have the interesting faith mental model. If people are told they are in control, and indoctrinated to believe in free will, it seems like you see all of these better outcomes. Oprah Winfrey once talked at length about this as it pertained to the way people treated black (males, in particular, I believe it was) in school. She called it “the soft bigotry of low expectations”. This idea that, because you started further back, you weren’t as capable or shouldn’t be expected to achieve as much does profound damage and perpetuates institutional discrimination and poverty.

      I hope some of that made sense. I need to go to bed. It’s almost 3 a.m. here.

      • kdk22

        “Money is a tool. It exists to maximize personal utility. Personal utility is not maximized with equalized outcomes.”

        Hear, hear!

  • MW

    I was going to respond to this by addressing your points, but instead it’s probably more worthwhile to just ask a few questions:

    1. Are you Christian (and if so which denomination)?
    2. What is your education level?
    3. What is your view, if any, on the value and level of factual reliability of explicitly biased, openly partisan news organizations?
    4. How important is it to, to you, to have trust in authority figures, versus keeping a skeptical attitude towards people in positions of power?
    5. How many people do you see or interact with on a regular basis who are different than yourself, in terms of ethnicity, national origin, religious beliefs, sexual orientation, etc?

    6. Do you feel you have personally lost ground economically to people in other countries?

    7. What is your position on domestic Christian terrorism in the US?

    (Also, you, use, commas, too, frequently, and, it, is, distracting).

    • MW

      oh, forgot one important question: Where do you get your information about Muslims and Islam?

  • Austin from TX

    Thanks for breaking that down concisely. I will bookmark and quote this until I don’t hear his name anymore at the office. Perhaps I’ll work up a spreadsheet using your figures and show how each of my employees will be worse off. They weren’t happy when I suggested they all get paid the same, regardless of hours worked or skills/tenure (opportunity costs).

    • Momofuku O’Murphy

      great, please let us know how it’s going! I wanna know whether it works before I attempt to do so…

  • Ang

    Found this interesting: Bernie’s interview and his non-answers on how he would go about implementing policy –

    I get that presidents will have advisors to help him understand how to put his/her ideas into place, but I think candidates should have at least a little bit of an idea on how such ideas/policies would affect the big picture (first, second, third order effects, etc.)

    • Domhnall Trump

      That’s particularly true when it’s their absolute number 1 issue and talking point.

  • Blake

    As a huge fan of your blog (been reading on and off since 2010), I am extremely disappointed in your flamboyant claim that “When it comes to economic and tax policy, Bernie Sanders is bat shit crazy.”. Like you, I disagree with specific aspects of his tax policy, as I do with some of his other stances(examples such as his rejection of nuclear energy), but to call him “bat shit crazy” is at best misguided and at worst insulting. His comprehensive platform on wall street reform has been reviewed and endorsed by 170 economists such as Robert Reich. The leak of the Panama Papers have demonstrated the widespread practice of tax evasion globally, and no other candidate has articulated anything close to his platform of reigning in such subversive economic behavior that shifts the tax burden from shareholders to the middle class. With his healthcare policy, though I agree that the lack of co-pays is an issue, most calculations have shown that a single payer system, while raising the tax burdern slightly, will save the average family thousands of dollars annually in healthcare spending, and he is the only candidate highlighting how the price inelastic demand for healthcare and the monopolitstic market practices by healthcare companies have led to absurd drug costs in the US. Most of all, while I agree with you that the family should be the basic societal unit, it should not be a vehicle to perpetuate intergeneration immobility, and estate taxes are still the best solution in preventing the growth of an entrenched aristocratic class.

    But most importantly, while I may have issues with his policies, I trust his morals and judgement. I trust that he will avoid unjustified expensive foreign policy entanglements that add on to our national debt without increasing productivity in the US. His stances on military intervention and domestic surveillance do anything but to “increase the size of our government”. He has been the most transparent and approachable candidate this whole electoral season, and if elected President(which he does have a mathematical chance in), his policies will be scrutinized by advisors, the opposition and the public and hopefully improved, and the final solutions while perhaps not optimal will lead to a demonstrated increase in the quality of life for most in this country.

    If you agree with him because he shares your values, then help him make a better plan. A one-sided critique that does not take into account healthcare savings, the promotion of intergenerational mobility or any other wider benefits does not help at all.

    • scabies


    • While I respect the spirit of your position, and understand what you are saying, I’m going to say something that, within the limitations of the medium in which we are communicating, might unintentionally come across as dismissive. If that turns out to be the case, I apologize in advance as that’s not in any way the spirit of my response. Nevertheless, I’m going to be upfront and honest with you, saying it anyway and hoping that you can see past the form in which we are talking to the substance: This is one of those things that, if you look into it long after this election cycle is over, and think about it, ten years from now, you’ll come around to agreeing with me.

      Why? To borrow a phrase, “You’re smart, but I’m right”.

      The evidence can lead you to no other conclusion. Keep digging and you’ll get there in time because this isn’t one of those areas where a modest difference in taste could lead to two people coming to different opinions like whether beef or chicken is superior at the buffet, as it pertains to some of the nitty-gritty specifics of his plan. (That is a real cognitive bias that sometimes can be tempting when, in reality, reasonable people can disagree on the minimum wage. Reasonable people can disagree on the specifics of appropriate countermeasures to unfair trade practices by our economic allies. Reasonable people can have different visions of the scope of the Federal government and the role it plays in the lives of individual citizens.)

      What reasonable people cannot do while running for the highest office in the land is completely ignore evidence, treat mathematics like it is some sort of suggestion, and remain ignorant of the specifics of the global economy while proposing major changes to the way in which we interact with it. Reasonable people cannot pretend that 2+2 equals 17 or that the sky is made of marshmallow fluff. Not all opinions are valid. Not all politicians are equally competent or informed. Not all positions are worthy of respect. This is one of those situations in which real life experience, and applied knowledge about a topic, trump the need to pretend like everybody’s opinion is valid.

      You are responding to Bernie Sanders on an emotional, not rational, level; listening to platitudes rather than specifics. Consider that nothing you wrote disputes any of this. Nothing. The 170 economists supporting his plans to reinstitute Glass-Steagall and break up many of the Wall Street banks is fine. I support it. I’ve talked about it for years, long before he was ever on the national stage. I don’t think, for example, JPMorgan Chase should be allowed to exist in its present form. Mentioning those 170 economists in any other context is an attempt to trigger a “halo effect” that somehow lends credibility to his other, thoroughly mocked and derided economic and tax ideas to the point that even the most respected liberal economists are having a hard time holding their tongue about the fiscal fairy tale in which he seemingly resides.

      Beyond that, everything you mention deals with intention. You say you’re disappointed with the strength of how I state my conclusion as it pertains to his economic and tax policy – despite praising many of his other positions – but then … don’t talk about those things. You go back to these emotional triggers and the topics on which we agree. We’re talking specifics about how to change the incentive system of the largest economy in global history. We’ve already established we are in agreement as to intention – the kind of society we’d like to build – are we not? Thus, what we are facing is a situation of competence as it pertains to Sanders.

      No matter how much I may want a thing, I will not ignore reality to make myself feel better. I will not allow my intellect to be overridden by emotion. The reason: I want to do my part to improve life for the most people around me in the fairest way possible as a fully participating member of the republic. That means facing facts, as they are, and making the most intelligent decision possible under the circumstances in which I am forced to make that decision. As it relates to economic literacy, I am convinced that Bernie Sanders is the least economically literate candidate running for the Presidency at the moment. That is both my personal, and professional, opinion. This is what I do all day. This is what I spend practically all of my time, and most of my life, thinking about. To give you an idea of how much conviction I have after spending a very long time researching candidates early in the election cycle (to the point of going back and pulling archives of 1990’s newspapers to see how they’ve evolved over time and how their actions match up with their public persona), I think Ted Cruz – an utterly monstrous, evil man who would declare war on my family and seek to implement what amounts to a certain form of theocratic rule – has a better, more intelligent grasp of the American and global economic system than Bernie Sanders does. I would not vote for Ted Cruz under almost any conceivable situation but that doesn’t change my obligation, for the sake of intellectual honesty, to acknowledge all of the evidence points to such a conclusion. To try and convince myself otherwise simply because of how much I dislike him is cheating myself. I won’t sacrifice clear thinking for the sake of feeling better. In a case like that, it’d be a matter of picking your poison. (In my case, I’d go with Sanders over Cruz because I think Congress is an insurmountable obstacle to his policy objectives while he would use executive powers to expand civil rights. I’d do it with trepidation, though.)

      Think about what you wrote through that lens. It’s all irrelevant to the objection.

      Bernie Sanders wanting to make prescription drugs more affordable does not change the fact he is economically illiterate and likely to do enormous damage to standards of living based on the specifics of his policy proposals.

      Bernie Sanders wanting to cease meddling in foreign conflicts does not change the fact that he is economically illiterate and likely to do enormous damage to standards of living based on the specifics of his policy proposals.

      Bernie Sanders wanting to stop non-constitutional surveillance does not change the fact that he is economically illiterate and likely to do enormous damage to standards of living based on the specifics of his policy proposals.

      You say that, because his intentions are good, and he shares my (and your) values, I should not criticize Bernie’s economic illiteracy but, instead, propose a better plan. The problem? I do not believe he is capable of it.

      I don’t say that lightly. That’s my personal, informed conclusion. He does not have the mind for the job. Love him or hate him, President Obama does. Love him or hate him, President Reagan did. The issue of competence and grasping how a system works is entirely different than the issue of agreement on policy. Liking someone, and agreeing with someone, are not enough. Not for this job. (It reminds me of Charlie Munger’s comments about Carly Fiorina during her tenure at HP, which were absolutely brutal. Long before her fall, he talked about how anyone who objectively looked at the data on paper could conclude she had no idea what she was doing and was completely incompetent for the task at hand, yet she was able to create these favorable impressions based on what people wanted to hear so they fell for it as she destroyed, through well-meaning ineptitude, their valuable economic assets.)

      Bernie Sanders is the same way to me. Aside from a handful of good ideas in what is otherwise a maelstrom of refuse, after looking into his life, he has a long-established record of obstinate, out-of-touch, ineffective thinking; a singular ability to cruelly and hatefully abuse the people around him whenever they tell him something he doesn’t want to hear. He is an ideologue, not a thinker. He has a form of secular religion every bit as real as Ted Cruz’s theological religion and facts, logic … none of that matter to him. His greed knows no bounds, his avarice nearly unchecked. The very same government of which we are all now complaining would be handed the single largest increase in economic and political power in the history of the United States; as if, somehow, more money would make those with the levers of power suddenly transform into better angels. He talks about outcomes but lacks both the knowledge and wisdom to know how to get there without destroying everything in his wake.

      Even if all of the evidence about how he treats people is wrong and Sanders was perfect, and wonderful; even if he did use this massive expansion of government money and power to make life better – which the numbers do not support – and did it through a sickening increase in the payroll tax (the precise opposite of what many liberal and conservative economists have been arguing for these past few generations, saying a negative income tax should be applied to the poor and middle class to spur economic growth while, at the same time, steepening the marginal tax rates), a good leader builds a system that outlasts him or her.

      That cannot happen with Sanders. Sanders is at the end of his life expectancy. He’d be the oldest person ever elected, should he win through some sort of remote-probability event, and there’d be an extremely high chance that he’d die in office during his first term. Those are, again, simply the numbers. Maybe it wouldn’t happen. Maybe he wins the longevity Powerball. Still, taking those probabilities into consideration are definitely appropriate given their relevance. Are the people who so happily advocate him at the helm going to be able to live under a system when a Ted Cruz is running the show? When another George W. Bush shows up? They will. It’s the nature of life. Someone you don’t like, and someone with whom you have significant disagreements, will someday be sitting in the chair in the Oval Office. Make sure the system you vote to put in place doesn’t give them too much power or that very power can be used against you.

      But beyond all of that, you talk about advisors. Bernie Sanders has not demonstrated himself wise in selecting advisors. When you have some of the most famous liberal economists in the world talking about how Sanders risks ruining the reputation of the Democrats as the party of facts and thinking, that should tell you the level of derangement. You say you’ve been reading my work for many, many years, which means you’ve variously heard me defend everyone from President Obama to President George W. Bush when I felt they were wrongly criticized on certain economic matters, no matter how unpopular it was to say it. That should give you an idea, a calibration point, for precisely how nuts, in my experience and (let’s drop with the pretense a bit and face it – highly informed) opinion his vision for not only the tax code, but the corporate setup is. If he got away with implementing it, we would deserve to fail. No matter how much I love the United States, the meritocracy side of me would probably cheer for Switzerland, Canada, The Netherlands, the United Kingdom, Germany, Japan, and other allies who took some of our best assets, as would inevitably happen. Even I would do something unthinkable and support a stockholder vote to shatter firms like The Coca-Cola Company into two, making inversions totally unnecessary. (I really don’t think Sanders even understands how this was possible. Look at his recent comments on General Electric. He talks about it like it’s an American company. It’s not. A majority of its revenues are from international sales. It operates in something like 180 countries. It’s like he’s living in the 1960s. I mean, even his recent comments about using Subway tokens to ride the Metro… I mean, seriously, how many decades in the past is this guy living? The things he says do not reflect the world as it is.)

      Finally, when it comes to politics, I am a cold, ruthless pragmatist. I agree with the Democratic Senator from Missouri and the Democratic Governor of the same when they recently had a melt down over the chances of Bernie Sanders on the General ticket. He would nuke the entire down-ticket Democratic base. The damage that would be done to everything from civil rights to education in places like Missouri would be felt for decades. All for … what? So he can sit in the chair for a few months or years, accomplishing nothing? Even I’d be dumping money into elections to stop his agenda from getting through Congress. He possesses none of the reasoned trade-off calculations of Obama.

      All of this is to say, it was not merely a “flambouyant [sic] claim” (that word doesn’t make sense in this context but I’m assuming you meant … honestly, I don’t know what you meant as I’ve never seen that term used that way in formal or casual speech despite it being technically correct from a literal standpoint … I’m starting to fall asleep and risk getting derailed here so, sorry … back to the point). I’ve been doing this a long time. I trust my judgment on it more than the judgment of anyone else. I’ve seen not only a lot of people come and go in my lifetime, but with politics and history a bit of a passion of mine, this is nothing new. Sanders economic and tax platform is recycled garbage. Disproven, out-of-date economically illiterate trash meant to appeal to emotions and not intellect; to win votes and not actually improve lives. It will do damage. Whether it makes me unpopular or not, I feel as if I have an obligation to be honest about my conclusion.

      I’m serious though. Throw yourself into the specifics of finance and economics and get in touch with me ten years from now. You’ll understand why I react to him with such horror; why so many economists, liberal and conservative, are dismissive of him; why the best minds in the business community think he is senile as it pertains to his economic rantings. Sanders doesn’t deserve serious consideration. His positions are dangerous. He talks a good game. He sells a good ticket. He was, is, and will likely always remain, as it pertains to this particular area we are discussing, bat shit crazy. I refuse to pretend otherwise. I respect both myself, and you, too much to gloss over it for the sake of feelings. Trying to salvage his policy positions when they contain so much folly would be like trying to elect a flat Earth advocate to the local school board because you think they are a nice person. It is not going to end well because, contrary to what we were taught in nursery school, intentions are only half the story.

    • Ang

      Some things to think about:

      “His comprehensive platform on wall street reform has been reviewed and endorsed by 170 economists such as Robert Reich”

      You are referring to a very narrowly scoped letter that do not go into detail on anything EXCEPT for wall street reform, seeing the number of people and the epithet “economist” attached to it, and assuming that the rest of Sanders’ financial reforms are, by association, not “bat shit crazy”.

      I think most of the posters here (though I can’t speak for them) would agree that wall street reforms must take place. Commercial banking should absolutely be separated from investment banking so that investment banking activities can be allowed to fail. If you take too much or unintelligent risk, you should go down in flames when things turn against you. However, nowhere in Joshua’s article did he criticize that platform. In fact, he specifically wrote: “In fact, he might do some good – he’d likely instruct agencies such as the FTC and the Treasury Department to break apart companies like Comcast, shatter financial institutions like Bank of America” Thus, I think you will find that you will get no argument from him on Sanders’ proposed wall street reforms. However, if Sanders doesn’t even know how he can go about accomplishing his biggest platform (see the NY Daily News interview), the issue that he theoretically knows most about, how can you have any confidence about the rest of his platforms?

      “his policies will be scrutinized by advisors, the opposition and the public and hopefully improved, and the final solutions while perhaps not optimal will lead to a demonstrated increase in the quality of life for most in this country.”

      So you’re basically crossing your fingers and hoping that other, yet to be identified “advisors”, will swoop in and create policies in Bernie’s image? His lackadaisical focus on actionable details/policies and instead misguided fixation on pie in the sky “do gooder” ideas bleeds into the rest of his platform. He wants to tax everyone, from the rich on down, to hell, ignoring the laffer curve, putting that (ever decreasing over time) tax revenue in the hands of the government, never known for its efficiency and outsized results, so that it can provide services to everyone. This has been tried before, MANY times in history, and has either failed completely or been scrapped/modified into a different system. He completely ignores incentives, human psychology, and reality. How can you have any confidence in putting someone like that in charge, even if his ideas align with your own?

      Lastly, “The leak of the Panama Papers have demonstrated the widespread practice of tax evasion globally, and no other candidate has articulated anything close to his platform of reigning in such subversive economic behavior that shifts the tax burden from shareholders to the middle class.”

      First off, Bernie’s tax policies will DRAMATICALLY increase tax burdens on the middle class, even if it’s marketed to affect only the rich. Secondly, in regards to tax evasion, Bernie’s tax policies will INCREASE tax evasion, not rein it in. David Tepper just decided to move his operations from New Jersey to Florida, which will result in a decrease of tax revenue to New Jersey by 1% (From one person!). Why do you think the rich will continue to do business in the US, with technology making life and economic activity as mobile as it is in today’s world? It’s as if we learn nothing from failed tax policy in France, Greece, (closer to home) Maryland, or New Jersey. Frankly, it’s not a decision between taxing 39% of X or 77% of X, it’s deciding between taxing 39% of X of 77% of nothing. If Bernie doesn’t understand that, then he’s not fit to be the chief officer of the United States.

  • John Dough

    I just found this blog and I have to say, I really like your style of thinking and writing. This part was my favorite:

    “If a politician has a good idea, even if I disagree with everything else they believe or say, I think it’s important to recognize and support that idea and that, when evaluating that politician, I will attempt to look at the whole picture as impartially as I can without excusing or forgiving the evil they do.”

    A great deal of people out there can’t, or won’t do this and it makes it difficult to really learn the truth. It’s refreshing to see someone who can put aside their personal opinions and just talk facts. Any chance of an article like this for Trump? I’m sure there are a lot of us that would love to hear a non-biased opinion on him.

    Also, I just finished the “How to Be Rich by 30” article (I’m 22), and it was very insightful, you’ve definitely hooked a new reader. Thank you for sharing your knowledge and experience, it’s extremely valuable for those of us who are new to investing and looking to build a future.

    • hybrid

      Bit of a long time lurker here as I first found this site several years ago when I was looking up information on setting up a holding company, I too have to say was impressed with the logic behind the post with regards to Bernie. Mind you I don’t really have a favorable opinion of many of his policies either, let alone his economic literacy, but I can respect the guy for being at least honest on where he’s coming from what he aims to do. Even if I nearly viscerally object to many of his plans.

      That said I thought I’d pass a comment on in regards to Trump and put him in regards to Cruz (these two are by now probably the only republican candidates worth discussing that are left) as requested above by John. I can only comment on this from the point of view myself. Emotionally, Trump’s statements and plans that he has mentioned to date is like taking a ride on a roller coaster, you never know what the guy will say next nor whether it will make you feel ecstatic about his ideas or terrified. HOWEVER when it comes to his proposed tax plan I believe he is significantly more palatable than Cruz and even Hilary would be more palatable in that respect.

      Let me provide a little background, I’m both a small business owner (s-corp apartment rentals) and an regular employee working for another business. I can figure out roughly how much I will owe extra with Hilary or less with Trump right now, however with Cruz’s proposed plan I really would be at a loss for how much I truly owe. As a regular employee for the other business under his plan I would just pay 10% of my gross earnings, okay that’s pretty straight forward. However now on the other hand I have my s-corp. As a pass through business I pay myself a salary, so does this mean I pay 10% on that? If so does that mean my company has to pay a further 16-19% of its profit after expenses are taken out? Wait now I run into another problem, the corp rate he (Cruz) proposed is based on an assumption of a business having Cost of Goods sold and CapEx being deducted immediately, but I have a rental property I don’t manufacture any goods and I will not add much in the way of CapEx on a yearly basis. Since I can additionally no longer deduct wage expense nor depreciation this in turn potentially means I have a higher basis that I would have to pay taxes on. In light of a tax plan like this I have to say Trump’s plan at least as proposed is eminently more acceptable, say what you will of the man and his opinions/statements but at least on taxes I can wrap my head around the numbers.

    • Welcome to the site!

  • Welcome to the site! (And thank you for the kind words!) It always makes me happy when a long-time lurker comes out of the shadows.

  • Metis

    Fascinating. I know nothing about economics but this article is very helpful and eye-opening.

  • James Donahue

    I just stumbled on to this website. I read some other stuff and can say without hesitation that Joshua Kennon seems fairly brilliant, but keep in mind there are many people in similar positions with comparable economic intelligence who support Senator Sanders’ plans. The case for disagreement is presented well in this blog, but there is always more than one side.

    I was impressed with how you (Mr. Kennon) made sure to touch on the morale aspects. Do you not think that, alone, outweighs economic concerns that will surely be addressed? And what about the planet? I’m sure that you’re aware that 5 of the Soloman Islands have now disappeared due to rising sea level in the last 70 years. I am not a scientist and do not wish to make an unwarranted jump to conclusions, but is this not concerning? I suspect that we need to have faith that people such as Ms. Warren will be able to strike a fair balance between his taxation plan and what will work. Let us not forget that he has prognosticated many economic disasters, and I’ve even seen a tape where Greenspan himself was forced to admit that his policies were a mistake and Sanders was right. So while Sanders may not be an economic genius, we can agree that his heart is in the right place and he is no dummy.

  • James Donahue

    I just stumbled on to this website. I read some other stuff and can say without hesitation that Joshua Kennon seems fairly brilliant, but keep in mind there are many people in similar positions with comparable economic intelligence who support Senator Sanders’ plans. I like the writing a lot. The case for disagreement is presented well in this blog, but there is always more than one side. I do not wish to seem confrontational, and I ask your forgiveness if the following observations seem insulting or dismissive. It is just that your blog seems to be espousing the veiled interests of the filthy rich, which while understandable since they are probably your clients, is disingenuous when supposing to speak for the interests of the masses. It is a fine line, and I have to wonder who is looking out for us? You talk a great game, Mr. Kennon.

    I was impressed with how you (Mr. Kennon) made sure to touch on the morale aspects. Do you not think that morality, alone, outweighs your economic concerns that will surely be addressed? How can you dismiss these programs that he is pushing for? I was also dismayed that you brought up the moral concerns. It seems to me that you are looking at this presidential race with blinders and are thinking only about the ramifications to you and yours, economically. Is it not your opinion that a $15 minimum wage would greatly increase the velocity of money? You have also pointed out that taxes do the same thing to the velocity. How is the stashing of money in tax-free havens doing anything for anyone except, perhaps, the rich folks’ great-grandbabies? And what about the planet? I’m sure that you’re aware that 5 of the Soloman Islands have now disappeared due to rising sea levels in the last 70 years. I am not a scientist and do not wish to make an unwarranted jump to conclusions, but is this not concerning? Why would you say anything, from your perspective, to lend credence to the disappearing planet argument, anyway? What is your best interest?

    I have to give you the economic argument as I know so little about the subject on the macro level and have not poured over any of the plans. However, I suspect that we need to have faith that people such as Ms. Warren will be able to strike a fair balance between his taxation plan and what will work — Checks and balances. Let us not forget that he has prognosticated many economic and neocolonial disasters, and I’ve even seen a tape where Greenspan himself was forced to admit that his policies were a wrong (and Sanders was right.) So while Sanders may not be an economic genius we can agree that his heart is in the right place and he is no dummy.

  • James Donahue

    I just stumbled on to this website. I like the writing a lot. I read some other stuff and can say without hesitation that Joshua Kennon seems fairly brilliant, but keep in mind there are many people in similar positions with comparable economic intelligence who support Senator Sanders’ plans. The case for disagreement is presented well in this blog, but there is always more than one side. I do not wish to seem confrontational, and I ask your forgiveness if the following observations seem insulting or dismissive. It is just that your blog seems to be espousing the veiled interests of the filthy rich, which while understandable since they are probably your clients, is disingenuous when supposing to speak for the interests of the masses. It is a fine line, and I have to wonder who is looking out for us? You talk a great game, Mr. Kennon.

    I was impressed with how you (Mr. Kennon) made sure to touch on the moral aspects. Do you not think that morality, alone, outweighs your economic concerns that will surely be addressed? How can you dismiss these programs that he is pushing for? I was also dismayed that you brought up the moral concerns. It seems to me that you are looking at this presidential race with blinders and are thinking only about the ramifications to you and yours, economically. Is it not your opinion that a $15 minimum wage would greatly increase the velocity of money? You have also pointed out that taxes do the same thing to the velocity. How is the stashing of money in tax-free havens doing anything for anyone except, perhaps, the rich folks’ great-grandbabies? And what about the planet? I’m sure that you’re aware that 5 of the Soloman Islands have now disappeared due to rising sea levels in the last 70 years. I am not a scientist and do not wish to make an unwarranted jump to conclusions, but is this not concerning? Why would you say anything, from your perspective, to lend credence to the disappearing planet argument, anyway? What is your best interest?

    I have to give you the economic argument as I know so little about the subject on the macro level and have not poured over any of the plans. However, I suspect that we need to have faith that people such as Ms. Warren will be able to strike a fair balance between his taxation plan and what will work — Checks and balances. Let us not forget that he has prognosticated many economic and neocolonial disasters, and I’ve even seen a tape where Greenspan himself was forced to admit that his policies were a wrong (and Sanders was right.) So while Sanders may not be an economic genius we can agree that his heart is in the right place and he is no dummy.

  • James Donahue

    One more thing: I believe that you’d be an excellent ally to this cause. If your intellectual honesty allows it, please consider changing your views for the cause. We both know that emotional arguments are strong, and it might be this very quality that also make these arguments more sustainable. The long-term economic gains from Sanders’ approach would have to be a boon for the economy, if only from the side of increased morale. Also think of the freed up time that everybody would have to discover innovative ways to make money and further develop the economy. Somebody has to think of something as the planet’s resources are dwindling and population is increasing. In all intellectual honesty, and from an economist’s perspective of scarcity of resources, how could you think any differently?

  • Paul

    You say you disagree with Bernie’s plan to shift Social Security away from a safety net to a wealth transfer mechanism. My financial understanding is dwarfed by yours, so I would gladly change my opinions given different facts, but I’ve always seen SS as sort of a welfare system. I mean, that’s what it is, isn’t it? You take it from people’s paychecks and pay it out to the destitute older/disabled crowd, right? I completely agree with you that everyone should be able to save up for themselves. But as we all know, that’s not the case for millions of Americans. I’ve never understood why people stop getting SS taken out of their paycheck at a certain amount, and more importantly, why people who very obviously don’t need it, get to collect it (Mitt Romney, for example). It’s a safety net, not a pension, right? So no one should be paying into it with the expectation that they’re going to get anything back. That’s how welfare works.

  • Paul

    You say you disagree with Bernie’s plan to shift Social Security away from a safety net to a wealth transfer mechanism. I’ve always seen SS as sort of a welfare system. I mean, that’s what it is, isn’t it? You take it from people’s paychecks and pay it out to the destitute older/disabled crowd, right? I completely agree with you that everyone should be able to save up for themselves. But as we all know, that’s not the case for millions of Americans. I’ve never understood why there’s an income cap for social security, but more importantly, why people who very obviously don’t need it, get to collect it (Mitt Romney, for example). People who earn higher salaries during their working career get more benefits upon retirement. The very same people who had a greater chance of accumulating a big nest egg. That just doesn’t make sense to me. It’s a safety net, not a pension, right? So no one should be paying into it with the expectation that they’re going to get anything back. That’s how welfare works.

  • Christopher Brown

    We really need to get away from gold standard era thinking. Let me just say it….Taxes do not fund spending in any meaningful way! If the government creates the currency why would it have to collect taxes in order to spend? The issuing or government bonds is best understood as an operation to offset government spending, rather than finance it.

    To the Author’s point, his approach is the same as mine. I follow ideas, not ideologies or groups and I’ll just add that taxes, by themselves, remove money from the hands of people that spend it without a recipricating benifit (again at the federal level). I paid enough in federal taxes to buy a new car. Think of the potential demand lost when the federal government (not the state) takes money from us it does not need. Taxes are tool to drive policy and lower inflation (by offsetting spending), not to fund spending! Taxes should be for those at the highest levels. Very large pools of idol income are, imo a threat to democracy. When just 158 families donate nearly 1/2 of all the money to put a person in the Whitehouse (on the Republican side), clearly that is destructive as there is an imbalance between money and the number of people directly represented.

    Bernies proposal suprises me given the fact that at least a few people that advise Sanders, Stephanie Kelton, Randle L Wray and (I think) Billy Mitchell all completely agree with me with respect to taxes and their use. The only justification for higher taxes is to offset much higher spending. In the end, I think we have to wait to see what spending looks like, but I will say I’m sceptical as I cannot understand the justification for raising taxes on the bottom 3/5ths of taxpayers regardless of spending levels.

  • James Donahue

    Don’t let this article fool you. Mr. Kennon understandably has a vested interest in protecting the incomes at the top. In reality Sanders’ plan is targeted at those same top incomes as he wants to institute a top tax rate of 52%. When that is combined with state and payroll and new Social Security taxes that brings the rate up to 73%. What I found interesting, in the New York Times article written by Josh Barro, is that 73% is the precise number thought to be the limit and any further increase would cause revenue to fall. This was concluded by top economists at U.C. Berkeley and M.I.T., and this number is reached, primarily, I think, because incomes would drop off so people could avoid that. This number is also targeted at those with incomes above $10 million.
    For incomes from $500,000 – $2 million it would be 65%. There is a host of other ideas such as taxing the dead money and taxing Wall Street speculation. I imagine the former is marginally unpopular on this page, but in all intellectual honesty how can you say that ending tax breaks and subsidies for oil, gas, and coal, and the subsequent generation of $113 billion over 10 years is a bad thing? And what about the currency manipulation fee? I think that’s a pretty big deal as it would, hopefully, generate about $500 billion in 10 years. I can understand why he doesn’t support many of these from a short-sighted fiscally motivated standpoint, but why aren’t some of those issues even addressed in this well-written article?

    • Don’t let this article fool you. Mr. Kennon understandably has a vested interest in protecting the incomes at the top.

      If you were in any way familiar with my values, my life story, or the millions upon millions of words I’ve written across both of my sites, you’d realize how inaccurate this sentence is. My primary concern is building a society that produces the highest aggregate standard of living for the most number of people consistent with a fair shot at upward mobility regardless of the socioeconomic status a person has at birth. My criticism of the tax code is that it isn’t progress enough. The poor and middle class pay too much while the rich don’t pay enough. There’s something profoundly wrong when a reasonably successful heart surgeon, who is contributing enormous amounts to the well-being of society, has a materially higher effective tax rate than someone who earns 100x what he does.

      I want what both liberal and conservative economists have been pushing for as there isn’t a lot of disagreement on it – abolish all tax shelters (no write-offs of any kind), begin treating individuals as the taxable economic entity so the wealthy can’t hide income through entity arbitrage (e.g., that means there’d be no corporate tax as it is beyond question it simply gets passed on to consumers. Instead, owners of, say, Exxon Mobil would get a K-1 statement with their share of the profits and losses, which they’d have to pay on their personal tax bill, meaning a poorer investor would pay almost nothing, allowing for upward mobility, while someone like Mitt Romney would pay a lot more on his cut of the profits. We already have some sort of pass-through treatment or greatly modified tax regime for LLCs, LPs, LLLPs, REITs, Royalty Unit Trusts, MLPs, Sub-Chapter S-Corporations, general partnerships, etc.) Then, there’d be a negative income tax on the first $50,000 or so in income (which, effectively, translates into a do-it-yourself cousin of a basic universal income as money at the bottom gets spent and put back into the economy much more rapidly) with significantly steepened marginal rates.

      Other issues – the Laffer Curve, which you discuss in reference to Barro’s piece – have been talked about as well, in the past. There’s no reason to get back into them here; to spoon feed 15+ years of writing in a single essay that is already bordering on far too long. I’m writing to and communicating with an established community that is already familiar with who I am, what I believe, and why I believe it based upon the evidence. The disclosures I already give in case new people stumble across it are lengthy enough as it is, if I tried to constantly cover every possible thing that’s already been covered, you’d have tens of thousands of words of pedantic exposition. Who wants to read that? In other words, it’d be like walking over to a table of book club members where a conversation has been going on for years then, rather than asking about a topic, demanding to know why people believe things they don’t believe because you weren’t around when it was already covered.

      And this …

      There is a host of other ideas such as taxing the dead money and taxing Wall Street speculation. I imagine the former is marginally unpopular on this page, but in all intellectual honesty how can you say that ending tax breaks and subsidies for oil, gas, and coal, and the subsequent generation of $113 billion over 10 years is a bad thing? And what about the currency manipulation fee? I think that’s a pretty big deal as it would, hopefully, generate about $500 billion in 10 years. I can understand why he doesn’t support many of these from a short-sighted fiscally motivated standpoint, but why aren’t some of those issues even addressed in this well-written article?

      You’ve quite literally, in the worst possible, most dishonest and misguided way, constructed a strawman of beliefs I do not hold, erected them, then burned them as if you are somehow refuting something I’ve said or written. It’s all in your head. It’s such bad form, James. This is basic logic and debate. Those opinions are your own, not mine. You showed up, read a page, and filled with the false confidence of first-conclusion bias came up with all sorts of unwarranted and false assumptions because you want to believe what you want to believe. There is simply no way, any sane person, in any capacity, who was even remotely familiar with my political beliefs could have written something so bizarre, including things about the financial tax, which have also been discussed, particularly as it was tested in Europe a generation ago resulting in one of the most spectacular failures in modern history, that I find myself wondering why I should even bother to respond except it sounds like you actually mean this in good faith so I’m hoping for the best.

      Overwhelmingly, my problem with the existing unfairness in the tax system is coupled with an exasperation that people seem to think there is a shortage of revenue. Right now, at this very moment, the Federal government is pulling in more inflation-adjusted purchasing power per citizen than it ever has at any point in the history of our civilization. There has never been more money (again, defined as purchasing power) than there is right now. None. What is flooding into the Treasury at this moment makes the dot-com boom years of Bill Clinton look like poverty in comparison. With more than $3 trillion gushing into the coffers, we have the money to do almost anything we want (with certain targeted tax increases on the high end being necessary) if other systems are ripped apart and reformed, too. All this talk about free college for everyone? That’d cost – what? – $75 billion per annum to pay off? It’s a rounding error. Congress doesn’t need more revenue. It could do it today if it wanted. The reality is, the entire system is setup to support outdated institutions and transfer mechanisms so no one wants to give up their piece of the pie. You, and I, don’t like our how representatives are allocating the capital under their control. We spend obscenely more per patient on things like healthcare yet get worse, less productive outcomes than nations like Canada. Giving more money, more power, and more control to a small number of politicians isn’t my idea of intelligent action. I spent my entire life being told by politicians in control of the government how and I could live and who I can marry. I’m not willingly going to set back and give them more control over every aspect of life. I don’t trust them. I don’t trust concentrated power in general, government aside. Given the ability, I’d smash a significant percentage of the S&P 500 into smaller businesses on scale with Teddy Roosevelt’s handling of Standard Oil. I don’t think a bank like JPMorgan Chase should be allowed to exist.

      But that last sentence … ” I can understand why he doesn’t support many of these from a short-sighted fiscally motivated standpoint, but why aren’t some of those issues even addressed in this well-written article?” …truly tells me you don’t have a clue what this site, or I, am about or believe. A major philosophy in almost everything I write is choosing the better long-term outcome over short-term pain.

      With Sanders, you’re looking at a big, beautiful cupcake, James. You see what you want to see. Only, he didn’t have any salt so he replaced it with rat poison. The mechanisms through which he wants to implement certain reforms I consider necessary are as bad for a country’s economy as cancer is for the human body. Well-meaning but economically illiterate people come up with policies that end up devastating the very groups they purport to be helping. What’s even more astonishing is that it’s become clear in the past few weeks that the man is not nearly as well-meaning as I had hoped. He’s getting young people to finance his last hurrah around the world as he travels on private jets and eats haute cuisine.

      To some extent, this is a conversation without a lot of utility. Sanders has no chance at the White House and even if, by some probabilistic miracle he did get it, he has neither the life expectancy to make it through a single term nor the political capital to get a single bill through Congress. The only question at this point is if he is going to Nader the election; an election of which I’m already tired and have little desire to discuss until the final tickets are settled.

      What I don’t understand is why you have posted to this page three times, as if you forget you’ve read it or it is some sort of shared account by a marketing agency hired by one of the campaigns. Given the length of time you’re Disqus account has been established, it seems entirely possible.

      • James Donahue

        Very nice. Thank you for such a response. I’ll agree that I am economically illiterate by your standards. I apologize for not making sure that I am more informed and if I did any damage, I am sorry. You sure put me in my place. 🙂 I will not agree on the lack of salt. Your rat poison analogy was troubling, at best, and Sanders seems about as salty as they come these days.

        I may not be an economic genius, but I’d bet that if you could steer the right people to your blogs and get an audience with the guy, you’d have a chance to enact some real change. You know as well as I that his proposals are only half-cooked right now. If they were touted as complete then I’d know they are crap. If what you said is true about us being able to fund college and that only being a drop in the bucket, then what are you waiting for? At the very least, if we get that, you’ll have to deal with fewer economically illiterate people, as I was only allowed to take an intro course in ECON since my major was psychology, and I couldn’t afford a more well-rounded education. You’ll get to expand civil rights, not have to worry about your country bombing babies, and overall, treat humanity with respect. And if you really think it’s best to tax the hell out of the rich, i.e. close the loopholes, then I guarantee that you’d have a willing partner in Sanders.

        I like to think that I can recognize your social positions, and from that standpoint I can see little other choice but to do what you can to work with the guy. You have clout. Of course I deal with the mentally ill and terribly unfortunate people on a daily basis, so I’m biased as to the social rights aspect. Maybe you can tell me how one can logically separate social well-being from economics.

        I do understand that this conversation lacking a certain utility, but as they say, “It’s not over until the heterosexual falls asleep at the opera.” Speaking of which, I’ve seen an opera and I was able to stay awake. In fact it was pretty awesome, so I guess that stereotype is gone now. Speaking of stereotypes, did you know that Sanders backed a gay pride march 32 years before the Supreme court ruled in favor of gay people? I’ll leave you with a clip about that, but before I get out of your hair I want to thank you for indulging me. You are generous. I also want to ask you once more to try and find some common ground and work with the guy. Most people think he’s a good man.

      • James Donahue

        I reread your last few paragraphs, and I am forced to concede agreement to many of your basic premises. This disagreement is in your priorities. That and a section has been added to your introductory article has been added to in order to encapsulate much of what I was saying on the response that I wrote that disappeared. Except your logic is still strained on That kind of reminds me of the Clinton tactic that she is using with some of Sanders’ plans. Although I don’t expect this to stay up on your website for long, I would like to point out that your analysis is disingenuous and arguably preying on fear when you say that a dentist would pay 65%. Sanders’ tax plan, according to, whenthe plan would have a top rate of 54.2%, and that’s for folks making over $10 million. I can understand how you might feel that is an unwarranted redistribution of wealth, but 65% is ridiculous. Besides Robert Reich has endorsed Bernie. I’d say he knows a little about economics.

        You know as well as I that these proposals were put up because people were crying, ” But where are you going to get all that money?” If the U.S. is really doing as well financially as you say then there will be no need for such dramatic increases. Sanders does need some money to get that stuff done.and move our country toward the future. I’ll paraphrase a Reich article I read: Clinton is the best choice to run what we have now, but it’s nearly broken. Sanders is the best choice to lead us where we need to go. If you care to see the other side, some other very respected economists are liking his plans. I was going to post the link to the “Robert Reich on Bernie Sanders Endorsement” interview on youtube. The main point is single-payer healthcare for all. I do agree that copays are probably necessary, but that seems like such a small thing. How can you argue against single-payer?

      • James Donahue

        You say trash the whole tax code. I’m likely to concur with that, but how realistic is that plan?

  • James Donahue

    I took the offending article down. I can understand how it would be offensive. What I cannot understand is why Mr. Sanders is popular with a few Wall Street guys. Can you help me?

  • 1. Neither I, nor any of the other moderates, are deleting any of your comments. For whatever reason, the comment platform of the site, Disqus, has decided you are either a spam or paid account run by multiple people based on your posting history so everything you write ends up getting kicked to moderation. I’ve probably re-approved your comments at least 6 or 7 times in the past few days.

    2. What are you talking about?

    . That and a section has been added to your introductory article has been added to in order to encapsulate much of what I was saying on the response that I wrote that disappeared.

    Nothing has changed in the article. It hasn’t been edited since March 6, 2016 at 23:07 CST when the ad code was switched over to the new Kennon-Green banner. It certainly wasn’t changed in response to anything we’ve discussed.

    3. This is one of the reasons politicians and the wealthy are so easily able to manipulate the public. You write …

    I would like to point out that your analysis is disingenuous and arguably preying on fear when you say that a dentist would pay 65%. Sanders’ tax plan, according to…, whenthe plan would have a top rate of 54.2%, and that’s for folks making over $10 million. I can understand how you might feel that is an unwarranted redistribution of wealth, but 65% is ridiculous. Besides Robert Reich has endorsed Bernie. I’d say he knows a little about economics.

    … which demonstrates a complete lack of understanding as to how the Federal taxation system works. That document does not say what you think it says, it supports precisely what I’ve been telling you. (I don’t mean that as a personal attack, I mean it as an objective discussion of facts. Since you seem to be in good faith, I have to cut to the heart of the matter since your misunderstanding of the way the rules are structured is causing you to incorrectly assess the taxation consequences of the proposed policies). The “top marginal rate” is not the maximum effective rate a person could pay at the Federal level. The massive increase in payroll taxes, new proposed surcharge taxes, transaction taxes, et cetera are all in addition to the basic Federal marginal rates, which are themselves aggregated with both State and, in many cases, local taxes, not even including property taxes, sales taxes, and use taxes. (Note, this misunderstanding as to marginal tax rates can also go the opposite way, and the rich play the same game Sanders is only in the other direction by sometimes getting their effective rates significantly below marginal rates through the use of special carve-outs and strategies they push through with lobbyists.)

    This is one of the reasons vested interests won’t listen to the economists and get rid of the tax code. The marginal rate game is too easy to play. The more byzantine you make the rules, the more effortlessly you can hide among the hedge maze you’ve created.

    In other words, it isn’t fear that is causing me to tell you what a self-employed dentist could be paying, it’s experience. He or she would be forced to engage in all sorts of non-productive behaviors to reduce the effective tax burden so the focus of time and effort became more on mitigating taxation consequences than doing productive work for society. The Federal marginal rates are not his only tax burden. Not by a long shot.

    Incentives matter, James. Look at what is happening in Illinois right now. On the surface, it appears that they are going to raise the tax rate on wealthy millionaires significantly but if you look at how it is specifically structured, it’s going to almost entirely fall on smaller, successful family-owned businesses and high performers, such as professional athletes, while letting the obscenely wealthy pay what amounts to almost half the rate! That is, make $2 million a year, pay [x], make $100 million a year through a different structure, pay 1/2 of [x]. It’d be better to consolidate, accumulate, and sell out, concentrating power even further. The old saying, “the devil is in the details” arose for a reason. You’re being lied to and manipulated. Look into it, if you’re interested. Study the tax code. Get back to me in a few years and you’ll realize I was right.

    These policies create incentives that look good on the surface but are really going to concentrate power at the top and in the hands of politicians and corporations. It’s a difficult thing to unravel, though. Look at what the Democrats and George W. Bush did, together, a few years ago. They got this huge expansion in medical care for the poor passed through but it was written in a way that basically made the whole thing a disguised transfer of wealth – billions and billions of dollars – from the taxpayer to the shareholders of large pharmaceutical companies. It’s so well written that any attempt to dismantle it will be seen as an attack on the lower classes so reform will never be possible short of a miracle.

    Results matter more than intentions. Outcomes matter more than objectives.

    As for Robert Reich, I think he’s banking on the notion that if Bernie Sanders were to take the levers of power, people like him would be in a position to transform the ideals into workable policies; a gamble I’m not precisely willing nor eager to take. Reich is exponentially more intelligent, and far more informed, than Sanders (for example, he’s significantly more intellectually honest, making distinctions between effective and marginal rates in discussions of historical tax regimes). I’m not sure he fully appreciates the level of ideology, rather than pragmatism, inherent in Sanders; to borrow a literary reference, I think he overestimates the value of rationality in a discourse like this somewhat akin to Piggy in Lord of the Flies. That can be dangerous. I’m more wary; less trusting and optimistic.

    I don’t agree with Reich on everything – one particularly large disagreement is his desire to remove the so-called stepped-up basis loophole for capital gains, which has been around for generations (I’d get rid of it if we were talking about ripping apart the tax code as mentioned in our previous conversation, but not on a piecemeal basis. It all has to go, fundamental reform from the ground up, or it doesn’t get touched. This absolutely is an area where incentive causes me to have a bias because it strikes me as one of the few things available for a self-made person to leave his or her family materially better off as a result of his or her efforts) For a married couple, the sort of maximum theoretical advantage it could convey to their children and grandchildren is $10.9 million so we’re not talking about all-powerful billionaires or anything. In fact, I think the entire estate tax as presently structured is immoral. Instead of taxing the estate in an effort to prevent aristocracy – a worthy, and desirable goal – taxes should only be levied on inherited sums by heirs. That is, if a guy has $100 million and leaves 1,000 people $100,000 each, I’m not sure any tax should be owed at all as there is no concentration problem. At the very least, I think the tax should be equal to the tax on labor to provide parity.

    Perhaps the best way to understand my perspective is that, like a watchmaker, I’m concerned about the movements; the gears and how they fit together, what they will do to the overall health of the watch. An outcome that aligns with mine isn’t always the best outcome if it causes too much damage elsewhere or is somehow inherently immoral. Aside from the intellectual shortcomings, there’s a lot of immorality in Sander’s worldview. If he really had his way, and the power to get what he wants done, I don’t think people appreciate how likely it is we’d end up looking like Venezuela. This whole thing is tribalism; signaling theory. There is a staggering gulf between Bernie Sanders and people like Robert Reich or Elizabeth Warren. The latter two, even when I disagree with them, even strongly, are so much smarter, and so much more familiar with the actual workings of the economy that I wouldn’t worry about them nearly as much. (My criticism of Warren is that she’s not as intellectually honest as Reich. She scores political points all the time with her purposefully misleading conversations about the corporate tax code, which I think is beneath her. I still think when push comes to shove, though, her exceptional understanding of moral hazard and bankruptcy law would be an enormous asset to reforms I consider necessary for a more just society, particularly where student loan debt is concerned.)

    • James Donahue

      Thank you for explaining your position. I am humbled by this generous example, and I apologize for the perceived accusation that I previously, unconsciously, made. Now please do not patronize me with the idea that I am easily convinced of anything. Too bad my humility is so short-lived. I’ll agree that the details must be the devil’s favorite work.

      First, the tax rate: you are right to argue the numbers I displayed from that article. I was well aware that I was cherry-picking just as you were. I am not even close to as versed as you, but I am aware of a few things. For instance, you have considered that the payroll tax is compensated with free healthcare. There are a plethora of other variables in the fictional dentist’s taxes that could push the level up or down. If I had to guess the number would be around 30% +/-.

      I don’t understand how you can call Reich intellectually honest, and yet make the assumption that he is basing his support of Sanders on an assumption of being able to work with him. In order for Reich to really be intellectually honest, for which you give him much credit, he could not, logically, base his support away from his friends, on mere conjecture. You understand what I’m asking, right? Wouldn’t his honestly require of him more than a just leap of faith to do what he has publicly done and forsake his buddies? And even if it is a gamble, that in itself, should tell you something. He knows something the we can not. And Reich lives in a drought-stricken state. Perhaps he’s had enough with the capitalists turning a profit (collecting insurance) on the building that is burning while they are still inside.

      Closing the capital gains loophole sounds good. You have, as a rich man, formally convinced me that is something that will not hurt your bottom line as much as it might help your reputation. I’m sorry if that sounds cynical and mean-spirited. I’m sure that you think you’re doing the right thing for the most people, but I’d be a fool to think that you also won’t look after yourself just in case this world doesn’t really become uninhabitable in the near future. The Venezuela analogy illustrates to me how the rich and powerful people can use fear tactics to influence public opinion. It is simply preposterous to even entertain the idea that the United States could ever be like Venezuela. You must be running low on ammunition. I would ask that you discontinue that line of reasoning or you risk losing respect. That is not meant as an insult or a threat, but to help you understand how I see things. I can debate your logical fallacies and questionably conservative moral stance until the cows come home, and you can come back at me for what appears to be insults and stupidity that I’ve directed at you, but there is little chance that I will step further into your domain of expertise. Not only do you have hundreds of hours of practice influencing intelligent people to see things your way, as it is basically your job, but you have presumably made a pretty good living by staring at charts and curves in your spare time. I do understand that as you have come out against Sanders’ tax plan and probably with good reason, that you feel a pressing need to steer people away from the madness. I wish I knew the “good reason,” but I guess that’s just part of the game (not knowing). But what do you call it? A red herring? For crying in the nighttime — Venezuela? I have seen you, in other articles, carefully show support for Clinton. This, however, is fairly blatant. I’m losing faith.

      Take the gamble. I honestly believe that it may be one of our last chances, as a society. I have to go to bed now, as I had to work all night and am exhausted. So at 4:38 pm I say to you, “Good night, Irene.”

    • undercover

      Joshua, I don’t think we have to worry about the immoral estate/gift tax code much longer.

      It’s about to be taken out back and shot like old Yeller. One of Trump’s main objectives, once he’s in office, is to gut the whole damn thing himself.

      I love his motive too:

    • James Donahue

      Excellent explanation of your point of view. Thank you. I did write a lengthy response yesterday, and I apologize if it seemed trite. It isn’t there as a reply which I hope wan’t a mistake, but it is placed as its own thread. I hesitate to edit it as that may have been the problem last time. I agree that Hillary Clinton would be a decent compromise. While she is far from preferable, at least we wouldn’t have to sorry about Trump, with his grubby little fingers, raiding the cookie jar.

    • James Donahue

      You said, “Results matter more than intentions. Outcomes matter more than objectives.”

      Let me explain how I see this as fallacious. One cannot compare outcomes and objectives as they are on opposite sides of the equation. It’s like saying that the cake matters more than the flour, or that 7 matters more than the 3 in 3 + 4.

  • jp

    honestly i voted for bernie. Clinton was too unpredictable and Trump quite honestly is a genius but i feel he is trying to hurt us. bernie’s tax plan is lunacy but as you said the stuff he can get done is actually pretty good and the rest wouldnt get through congress if dems had 100% of both houses. taking into account the firewall they provide i felt he was the best candidate


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