Well, well. Here we go again. From the Boston Globe:
WASHINGTON — A white cloth napkin, now displayed in the National Museum of American History, helped change the course of modern economics. On it, the economist Arthur Laffer in 1974 sketched a curve meant to illustrate his theory that cutting taxes would spur enough economic growth to generate new tax revenue.
More than 40 years after those scribblings, President Donald Trump is reviving the so-called Laffer curve as he is set to announce the broad outlines of a tax overhaul on Wednesday. What the first President George Bush once called “voodoo economics” is back, as Trump’s advisers argue that deep cuts in corporate taxes will ultimately pay for themselves with an explosion of new business and job creation.
The Laffer curve postulates that no tax revenue will be raised at the extreme tax rates of 0% and 100% and that there must be at least one rate which maximizes government taxation revenue. The Laffer curve is typically represented as a graph which starts at 0% tax with zero revenue, rises to a maximum rate of revenue at an intermediate rate of taxation, and then falls again to zero revenue at a 100% tax rate. The shape of the curve is uncertain and disputed.1
One implication of the Laffer curve is that increasing tax rates beyond a certain point will be counter-productive for raising further tax revenue…
As the Globe observes:
what the president has called a tax reform plan is looking more like a tax cut plan, showering taxpayers with rate reductions without offsetting the full cost by closing loopholes or raising taxes elsewhere. In the short run, such a plan would add many billions of dollars to the national deficit. Trump contends that it will be worth it in the long run.
“The tax plan will pay for itself with economic growth,” Steven Mnuchin, the Treasury secretary and main architect of the plan, told reporters this week.)
Questions: does any serious economist believe this? And isn’t it interesting that the proposed tax cuts will — coincidentally — benefit the Trump family and its subsidiaries?
The madness that afflicted Paris had also reached Venice. Fortunately, few of Venice’s bridges have suitable railings.
Even the Economist gets it:
For a set of people who finance disruptive firms, venture capitalists are surprisingly averse to disrupting their own tried-and-tested way of doing things. They sit in small groups, meet entrepreneurs and repeat a single formula for investing whenever possible. John Doerr, who backed companies like Google, summed up his philosophy thus: “Invest in white male nerds who’ve dropped out of Harvard or Stanford.”
Defenders of the valley have two retorts. One is that throwing stones at the most successful business cluster on Earth makes no sense. Market forces ensure that the best ideas win funding, irrespective of gender. The data suggest a different story. Only 7% of the founders of tech startups in America that raised $20m or more are women, according to recent research by Bloomberg. Yet nobody would argue that men make the best founders nine times out of ten. On average, firms founded by women obtain less funding ($77m) than those founded by men ($100m). The VC industry has been successful enough to ward off the pressure to change. That does not make it perfect.
A second defence is that VCs rely on tight-knit relationships, in which trust is essential. Call this the “dinner with Mike Pence” gambit, after the American vice-president’s reported refusal to eat alone with a woman other than his wife. On this argument, any outsider, particularly one lacking a Y chromosome, is liable to upset the club’s precious dynamic. Venture capital is indeed a strange mix of capital and contacts, and peculiarly hard to industrialise as a result. But as a justification for sexism, clubbiness is an argument that is as old as it is thin…
Yep. But when will society wake up to the fact that a technology that is changing everyone’s lives — male and female — is designed and financed by a tiny male only elite?
My eye was caught by an extraordinary piece in the FT last weekend which, in a strange way, relates to my Observer column about the Silicon Valley crowd’s obsession with dodging mortality. The FT article is about the new market in apocalypse bunkers.
The location that has become something of an unlikely media sensation is the Survival Condo Project in the usually rather less than super-prime plains north of Wichita, Kansas. Situated on a 1960s Atlas F missile launch site, the 15 condos in the first site are all sold and orders are being taken for places in the second silo. The reason there has been so much interest, from media and buyers, is the spec.
We might think of bunkers as places of desperate last resort, bleak, damp concrete cellars with industrial shelving stacked with cans of beans and musty-smelling gas masks. These, however, are something altogether different. The “Penthouse” units, comprising 3,600 sq ft of living space spread over two storeys, start from $4.5m. LED screens offer a window onto a fantasy outside world of trees and waterfalls (not the actual, frazzled and burnt-out landscape). The communal facilities include a climbing wall, dog park, pool, cinema and shooting range (of course). They also provide hydroponic and aquaponic agriculture and aquaculture, and the machinery to filter air and water indefinitely. These are bunkers for the long haul: five years or more completely off-grid.
The FT piece claims that “the latest real estate trend among internet billionaires and hedge fund tycoons is, apparently, buying bunkers”. If this is indeed true then one wonders what it means. These, after all, are people who made their fortunes from correctly guessing the short- and medium-term future. Does their appetite for these hideous, inhuman residences suggest that they have real fears for the future? Or are they so rich that blowing $4.5m on a holiday house they might never need is a bit like the rest of us buying a ticket in the lottery? The cost is relatively trivial, and you never know… you might get lucky.
Lovely Reuters piece by Rob Cox. Sample:
Investors have effectively just done what no self-respecting person ever should: wear sweatpants in public. With Snap’s $3.4 billion initial public offering they have simply given up giving a damn. They handed their money over to an immature company and in the process abrogated their rights to fair treatment, good governance and reasonable valuations.1 If the $24 billion self-styled “camera company” run by a 26-year-old fails to achieve its ambitions, shareholders have only their capitulated selves to blame.
Snap founder Evan Spiegel’s disappearing-message application has many things going for it. One of these attributes – its virtual inaccessibility by anyone over the age of 30 – may have helped its IPO. Few seasoned portfolio managers wagering on the maker of rainbow-vomit photo filters will have properly vetted the product, though they will have perhaps gauged its popularity by monitoring their children’s mobile-data usage.
Still, there is a bull case to be made for Snap, which is why the sale of its securities (calling them shares would be a crime against the Old English etymology of the word) was 10 times oversubscribed and Morgan Stanley priced them above the range at $17 apiece. Snap has 158 million users, who check into the app, like, 18 times a day. It grew revenue almost sevenfold in 2016 to $405 million. Snap’s backers hail it as the third pole to one day challenge Facebook and Alphabet in dominating the internet.
Later, reality dawned on the market and the price slumped.
From the NYT report of the abrupt fall of an alt-right provocateur:
Many on the right are pointing to the Yiannopoulos controversies as a symptom of a trend toward conservatism as performance art, placing less value on ideas like small government and self-reliance than it does on attitude, personality and provocation. While there are respected conservative thinkers on issues like tax reform, immigration and health care, they say, provocateurs like Mr. Yiannopoulos suck up most of the oxygen, becoming the public face of the movement and pushing more serious ideas to the sideline.
“You essentially have a world where there are no adults left, nobody exercising moral authority to say, ‘No, this does or does not meet our standards,’” said Matt Lewis, the conservative author of “Too Dumb to Fail,” which dissected how conservatives have abandoned ideas for outrage. “Everybody is just responding to perverse incentives to get more buzz.”
Mr. Lewis said he would bet that most conservatives had no idea where Mr. Yiannopoulos stood on taxes, abortion or any other issue that has traditionally been important to them. “The only thing we know about him is he’s vulgar, he’s a provocateur and he fights political correctness,” he said. “And I guess that’s what the definition is now for being a conservative.”
From her Philadelphia speech as reported in the Spectator:
President Trump’s victory – achieved in defiance of all the pundits and the polls – and rooted not in the corridors of Washington, but in the hopes and aspirations of working men and women across this land. Your Party’s victory in both the Congress and the Senate where you swept all before you, secured with great effort, and achieved with an important message of national renewal.
And because of this – because of what you have done together, because of that great victory you have won – America can be stronger, greater, and more confident in the years ahead.
And a newly emboldened, confident America is good for the world. An America that is strong and prosperous at home is a nation that can lead abroad. But you cannot – and should not – do so alone. You have said that it is time for others to step up. And I agree.
A spoof, surely? If not, what has she been smoking?
From the wonderful Dave Pell newsletter:
“We informed the White House this morning that I will not attend the work meeting scheduled for next Tuesday.” That was Mexican President Enrique Peña Nieto letting the world know he had canceled his planned trip to the US over Trump’s insistence on building a wall, and further insistence that Mexico will pay for it. The message was delivered via a tweet, and was (of course) met with counter-tweets from the Oval Office. Social media spats and flame wars now have serious diplomatic ramifications. What were once harmless exchanges between a couple of bad hombres can now cause geopolitical shifts. (Sometimes I think the whole Trump presidency is part of a secret plot to save Twitter.)
Discuss (as they say in history exams).
Sobering dose of realism from the Economist as Theresa May prepares to kiss the feet of the new Emperor.
In trade negotiations, size matters. Larger economies can stipulate terms that suit them. Britain, an economy of 60m people, has much less leverage in trade talks than the EU, a market of 500m, or the United States, one of 300m. Mr Trump may promise an agreement “very quickly” and to show other countries that it is safe to leave the EU by giving Britain generous treatment. But more than anything else he is an America First deal-wrangler who knows he has the upper hand. A rushed agreement could see the National Health Service opened up to American firms and environmental and food standards diluted (think hormone-treated beef). Such concessions could upset British voters, who backed Brexit partly because Leavers said it would help the country’s health-care system. They would also frustrate a trade deal with the EU, a much more important export destination.
The curious thing is that Brexit was supposed to be about “taking back control”: immunising the country from foreign whim and interest, while asserting national dignity and independence. Increasingly that looks like a bad joke.