The Perpetual Notion Machine

Back in the days before a Geek was a guy who sat in front of a computer sacrificing his eyesight to get rich organizing dots on a screen, a geek was a guy with big glasses and hair that looked like a neglected weed patch gone wild ( a look young males now spend hours trying to achieve).  Geeks in those days spent their days trying to invent a perpetual motion machine - trying to find out a way to attach springs, levers, weights and their momma's kitchen faucet into a machine that would be so frictionless that once it was set in motion it would run forever.

I believe a lot of those old Geeks must have gone into Government, because Government has become the closest contraption mankind has ever gotten to perpetual motion.   Nothing ever ends.

Take Corporate Income Taxation for example.  Lately Congress has been holding lots of hearings and giving lots of interviews and releasing press releases after just "discovering" that US tax laws allow Corporations to use accounting tricks to book income in other countries so they don't have to pay income taxes. 

If we hop in our time machine and go hopping back through the decades we would discover that Congress regularly fairly regularly "discovers" that US tax laws allow Corporations to avoid paying income taxes.   I don't know how far back one would have to go to find the first point in time that Government "discovered" the tax law allowed Corporations to avoid income tax, but I would imagine it would be a couple years after the first income tax was enacted.

Some might think it odd that the organization that creates the income tax law seems to be schizophrenically oblivious then outraged by how the law works in practice.

There is a real problem behind this of course.  Every government in the world wants to tax corporations and is looking for an excuse to do so, because Corporations are both really wealthy and they are...well....not people (at least to everyone but the US Supreme Court).  Cold, impersonal legal machines constructed to generate money.  As the global market expanded every country wanted to tax a corporations income as soon as the corporation set foot on their shores.

So iinternational agreements long ago provided that corporations are only taxed on the income they make in the particular country.  This is sort of intuitively fair since, if a corporation is being taxed by another country for the income generated in that other country, it would not be fair for any other country to tax the same income.  Of course the international agreements were not put in place because of fairness, the formulas were arrived at after decades of haggling to avoid marketplace anarchy that would undermine the global economy.

But since then Corporations have learned to shift income away from high tax countries to countries that have little or no tax who use the low taxes to attract a corporate presence.  The long ago international agreement has been turned from something that was intended to not make corporations have to pay twice into a tool to allow them to avoid paying taxes even once on big chunks of their income.

Congress is looking into the problem due to the fiscal difficulties we are experiencing.  They will hold hearings for months - maybe years - and probably not much will happen in the end.

It seems to me there is a really simple and elegant solution to the problem through a simple change in the fundamental explanation for what is being taxed.  Tax the right to access to your countries market, and measure it by the income from sales of your product within the country.  Sort of a product specific sales tax.  Not that the lawyers wouldn't find their way around any tax scheme, but at least we could pretend the problem was solved for a few more years.

The Ice Age Economy

Water is the currency of life.  10,000 years ago, during the last ice age, much of the Northern Hemisphere was blanketed under huge sheets of ice that locked up much of the freshwater on the planet.  On much of the earth life barely existed.

This strikes me as an apt model for the current US economy.  Money is the currency of productivity, and much of the money in the United States is locked up in the control of wealthy people who have no real needs.  So they pay ever increasing amounts trading existing assets back and forth. This gives the illusion of productivity as the "value" of the assets they trade keep rising, but it actually produces no new usable value.  The standard of living of a larger and larger percentage of the population sinks as it gets harder and harder to afford the homes, or the education or the other tools they need to build wealth.

A tax policy that rewards people for trading in existing assets, or allows people to sit on accumulated wealth, or devalues education in favor of accumulated wealth, is inviting an economic ice age.

Compensation and accumulation research

Couple of recent research studies have results that fly in the face of conventional business practices.

1.  The Big Box store theory that the can save money by spending as little as possible on employee wages isn't really saving Money.
This study looked at the big box store practice of paying employee's very little and having the minimum number of employee's.   (I read about this study a few days ago and don't recall where, so don't recall the exact methodology) but the finding was by having more employee's and being more willing to compensate them, sales went up 25%.

As one has has walked out of big box stores many times without buying anything because I couldn't find anyone to help or answer a question, or having harried employee's give me half an answer or the wrong answer, this makes perfect sense to me.

2.  Article in the Journal of Psychological Science in June of 2013 (reported in NY Times Business Section 1/5/14) claimed to demonstrate a deeply rooted instinct to earn more than we can possibly consume, even when doing so makes us unhappy.  The study was built around people sitting at computers with the choice of listening to pleasant music or obnoxious noise, but they would earn Chocolate pieces for listening to the obnoxious noise.  Some "high earners" qualified for a piece of chocolate pretty quickly, "low earners" had too tolerate more to obtain a piece of chocolate.

Both the High and Low earners were asked to estimate how many chocolate pieces they would actually eat, and were told they would forfeit chocolate they wouldn't eat.  Both high and low earners listened to about the same amount of obnoxious sounds but High earners accumulated more than twice as much chocolate as they estimated they would eat and actually ate more than they estimated but far less than they accumulated.  The low earners accumulated less than they thought they could eat.

The researchers concluded the subjects didn't measure how much unpleasantness they were willing to tolerate by what they needed, but by how much they could tolerate.  As long as they could tolerate the unpleasantness, they would continue to accumulate regardless of need.

Are Political Contributions by Unions and Corporations Comparable?

Unions point the finger at Corporations as the bad guys whose cash undermines democracy.  Corporations point at Unions as the bad guys whose cash undermines democracy.

Is this a wash, are they both equally culpable?  Lets compare them.

Are the organizations themselves democratic?

Unions, theoretically and generally yes.  The dues paying members elect management who make decisions for the union, including decisions on who to support politically.  While individual union members may not like the Union supporting a particular candidate, that seems not much different than individual citizens of the United States paying taxes they didn't vote for because the chose to be citizens of the United States.  Sometimes in reality Unions are less Democratic, when the Union has the political muscle to enforce a closed shop, so if you don't join the Union you don't have a job.

Corporations are somewhat democratic theoretically and not democratic in reality.  In theory the stockholders chose a board of directors who run the corporation, but in reality in modern markets stockholders have little control over large corporations.  Management has the knowledge and leverage to fill the Board of Directors with like minded people, so management runs the Corporation.  It is not a problem for stockholders, if they don't like the way the company is being managed they just sell the stock.

The big difference between Unions and Corporations is the people that own and run corporations are relatively insulated from the consequences of their bad decisions due to the limited liabilty that Corporations enjoy.  So they have much greater capability to ignore the law.