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Posted by Tim Worstall

Back a week or so the Congressional Budget Office, at the behest of Bernie Sanders, released a report on who owns what portion of the wealth in the United States. The headline result that had everyone gasping was that the top 10% owned 76% of everything. I rather demurred about this. My essential complaint was that what was being measured was the wrong thing. “Wealth” and “marketable wealth” are not the same thing at all. And it is marketable wealth which the CBO measured entirely accurately. What we really want to know of course is the distribution of wealth which is, as I insist, something rather different.

Another way to approach this is something I shout about so often that it is known, to some at least (and not just to me, I didn’t name it) as Worstall’s Fallacy. Which is to look at some situation or problem and use the raw distribution of whatever it is to decide that more must be done. Instead, I insist, we must look at the distribution after the effects of whatever it is that we already do to change that distribution and then make the decision – should we do more, we’re about right or perhaps we should do less? This can be vitally important – the American Official Poverty Measure (OPM and more colloquially, the poverty line) measures those who would be in poverty if government didn’t help them. This is not the right number to be using when deciding if we should do more to help people out of poverty. What we want to know is how many people are still in poverty after we help them – only then can we decide if there’s a problem we need to do more about.

For example, in the slightly odd way that the US measures poverty, under the OPM, 20-25% of US children are in poverty. That’s appalling, of course. But if we then take account of what is done to raise children out of poverty, Section 8, Medicaid, the EITC, free school lunches, the rest of the welfare state, using that same slightly odd poverty line measurement some 3 or 4% of US children are still in poverty.

Which is the number we should use to decide about whether to do more about poverty? Ignore what we already do and hyperventilate about the 25%? That would be to commit Worstall’s Fallacy – the correct answer is to think about the 3 or 4% and ponder on why the $800 billion a year we already spend on poverty alleviation isn’t alleviating that poverty.

Do note that there’s absolutely no reason why this basic logic means we shouldn’t do more about such things. It’s only that we must be clear about the problem which remains to be solved.

Which brings is to that CBO report. As Tim Taylor points out:

The overall wealth of US families totalled about $67 trillion in 2013. As the figure shows, this total has more-or-less doubled since about 1995. Most of increase is attributable to a rising total for the top 10%, which means that the wealth distribution is clearly becoming more unequal over time.

Well, yes and no. Because this is the unadjusted number. This is before the things that we do to alter that wealth distribution. As I complained last week:

This might actually be one of the few things upon which Jamie Galbraith and I agree – we have discussed it – we must take account of the things that we already do to reduce income and wealth inequality when trying to measure inequality. Your Social Security payments, when they arrive, will definitely be income to you. An asset that provides you with an income is also known as wealth. Social Security does not count in these calculations. And we can go further. Unemployment insurance has a value – all insurance policies have a value. That if I get fired I have an income is a source of wealth to me. But that’s not counted.

The CBO is counting marketable wealth. Which I maintain is not wealth, or at least not the properly inclusive definition of it. I have some who agree with me:

However, Worstall is on more solid footing with the CBOs exclusion of other assets such as Social Security benefits — future assets that have already been earned via contributions. Retirement programs such as 401(k)s are included in the CBO study; defined benefit pensions and Social Security benefits are not.

The CBO refers to inclusion of such benefits as “beyond the scope of this report,” but the report does acknowledge the likely understatement of wealth at the bottom and middle of the distribution and decrease of that at the top. Such benefits are distributed more evenly across all incomes, and clearly are a greater percentage of income for lower income classes.

There’s nothing inherently wrong with this approach — but if the report is being touted as proof of growing inequality, it should at least attempt to estimate data-skewing streams.

Quite so, we must avoid the Fallacy.

Open Britain divides opinion

Aug. 30th, 2016 03:05 pm
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Posted by Joe Otten

Yesterday’s announcement of Stronger In’s rebranding as Open Britain pushing for greatest possible openness, and greatest retention of the benefits of EU membership post-referendum has divided opinion.

Statements like this one

Despite being drawn from different political parties, all of us campaigned proudly and passionately for Britain to remain in the European Union. The result was not the one we wanted, but of course we respect the democratically expressed verdict of the British people.

The UK may have voted to leave the EU, but the certainty ends there. What does Brexit actually mean? Europe will continue to be our biggest trading partner and a pivotal ally in a range of areas, from national security to climate change. The negotiations to leave will be long and complex with unprecedented stakes, not least maintaining the Union. All of us who value our United Kingdom must be vigilant against the result being used as a catalyst to break it up.

have been read as giving up on EU membership, and maybe that is what it means. I have always said respect but don’t accept the result, just as you should respect the result of an election and fight for a better result next time.

And this

However, we must learn lessons. June 23 was a moment of change. The strength of feeling is clear. Free movement of people cannot continue as it has done. It has to be reformed. This was not an expression of prejudice but rather a desire for managed migration and concern that rapid immigration can put pressure on public services and local communities. Britain must be open to talent, but with more ability to act if excessive competition in labour markets hurts our economy.

For too long we have ducked an open debate over immigration. That was true in the referendum campaign but it is also true of all the major political parties in the past decade or more. As a result, untruths have been allowed to prosper and a balanced debate never materialised, leading many to feel that legitimate concerns were being dismissed. This must change. Calls for reform must sit with a positive argument about the benefits that immigration brings.

has been interpreted as giving up on free movement and therefore on the single market. I think it has more in common with Vince Cable’s observations earlier today.

These two quotes were taken from the times here, and looking below the line (I know), the first two comments we see are:

Ah yes – the very name “Open Britain” is of course an imputation that Brexit is all about a “Closed Britain”; this slur is then consolidated by your liberal sprinkling of Clegg like lazy remainer messages “pulling up the drawbridge”, “nostalgia is not a strategy”, “a vote for a more insular and less inclusive country”, “turn our face against the world”, “untruths have been allowed to prosper.”
So, despite your faux mea culpa on the issue of immigration – it seems you haven’t moved on but remain stuck with all your insulting straw man arguments.


Free movement doesn’t need reform. It needs to cease.

The British people voted to regain control … and that includes controlling who may come here to work; how many and under what circumstances.

These 3 Remainiacs need to learn that they lost the argument.

This is the division of opinion to which I refer. The first one says “Shut up. The people voted for a more open Britain; you didn’t understand.” The second says “Shut up. The people voted for a more closed Britain; you didn’t understand.”

The official leave campaign message was outward-looking – it said we can stand tall in the world. It was the unofficial message that was all about immigration. The government will never be able to satisfy both sides (or either?) of the leave campaign on this, and it is absolutely right that we should challenge them to take a position – and the better of the two. This is the wedge issue that could destroy leave from the inside and it has to be exploited.

You want another vote on this? So do I, but not now. Not until the government has taken a position on openness, betraying half the leavers, the effects on the economy have become more apparent, and there is a detailed deal on the table (reality v reality, as opposed to the reality v fantasy of June). Vote before that happens, and we will lose again.

We want another vote (but not now). Open Britain are hammering on the wedge that might win us that vote. We are pushing in the same direction. The real division of opinion is on the other side.

* Joe Otten is a councillor in Sheffield and Tuesday editor of Liberal Democrat Voice.

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Posted by John Scalzi

And Entertainment Weekly has the scoop! So go there for details, including a link to pre-order. Note the cost. It’s not a typo.

EW has the scoop, but I will now add a few answers to additional questions I think you might have.

Is there going to be a print edition? Yes, there will be, from Subterranean Press, which includes some amazing artwork. Audible has the novella as an exclusive for a certain amount of time, but SubPress will have it after that window expires. Expect it in 2017. More details when I can give them to you.

Does this mean you’re not working with Wil Wheaton in audio anymore? No, it just means we went with someone else for this particular project. If I have my druthers, Wil and I will be collaborating again, and often. But, you know. I already work with other narrators (including William Dufris, Tavia Gilbert and Amber Benson), and Wil of course works with other authors, including Ernie Cline. We have an open relationship, as it were.

Whoa, Zachary Quinto is cool. That’s not a question, but I agree. And I think he’s going to be just about perfect for The Dispatcher. I can’t wait for you all to hear this one. I’m not going to lie to you. It’s pretty good.

Any additional questions? Drop them into the comments.

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Posted by Gareth Corfield

Second incident saw drone miss cockpit by barely 10m

An airliner circling Heathrow narrowly missed colliding with a drone flying at 7,000 feet – while another aircraft approaching the London airport saw a drone hurtle past just 30 feet from its cockpit.…

On Corruption at CUNY

Aug. 30th, 2016 01:35 pm
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Posted by Corey Robin

The New York Times reports this morning:

The City University of New York is investigating whether a recent $500,000 donation intended to bolster the humanities and arts at its flagship school may have been improperly diverted.

The inquiry was prompted by senior faculty members at the school, the City College of New York, who learned that an account that should have contained roughly $600,000, thanks to the donation, had just $76. Faculty members asked City College officials for an explanation, but were met with “silence, delay and deflection” before appealing directly the university’s chancellor, James B. Milliken. Mr. Milliken then asked Frederick P. Schaffer, the university’s general counsel and senior vice chancellor for legal affairs, to look into the “the expenditure of monies donated,” according to documents obtained by The New York Times.

This is part of a followup to a piece the Times ran last spring, which I blogged about, and which claimed:

Documents obtained by The Times indicated that the college’s 21st Century Foundation paid for some of Ms. Coico’s personal expenses, such as fruit baskets, housekeeping services and rugs, when she took office in 2010. The foundation was then reimbursed for more than $150,000 from CUNY’s Research Foundation. That has raised eyebrows among governance experts, because such funds are typically earmarked for research.

It’s unclear what the $600,000 went to, and who made the decision. Hence, the investigation, which involves federal prosecutors. But at a minimum, it seems clear that the money was used for purposes it was not earmarked for.

I used to think that corruption was just one of those do-gooder good-government-type concerns, a trope neoliberal IMF officials wielded in order to force capitalism down the throat of developing countries. After years of hearing about stuff like this at CUNY, and in some cases seeing much worse, I’ve come to realize just how corrosive and politically debilitating corruption is. It’s like a fungus or a parasite. It attaches itself to a host, a body that is full of possibility and promise, a body that contains so much of what we hope for, and it feeds off that body till it dies.

One of the reasons why, politically, it’s worse when corruption happens at an institution like CUNY or in a labor union—as opposed to the legalized or even illegal corruption that goes on at the highest reaches of the political economy—is that these are, or are supposed to be, sites of opposition to all that is wrong and wretched in the world. These are institutions that are supposed to remove the muck of ages.

It’s hard enough to believe in that kind of transformative work, and those kinds of transformative institutions, under the best of conditions. But when corruption becomes a part of the picture, it’s impossible.

Corruption is pure poison. It destroys everything. Even—or especially—the promise of that transformation.

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Posted by Tim Worstall

An interesting little report out from Heritage here, talking about the effect a $15 an hour minimum wage will have on jobs across the country. The finding being that if the minimum wage were raised to $15 in each and every state then that would cost some 9 million jobs across the country. And if the Federal minimum wage were raised to $15, then after we’ve deducted the effect of those places stupid enough to have already raised the wage then there would be 7 million jobs lost.

It should be said that this isn’t the most sophisticated of calculations. Heritage isn’t using the more advanced, and more phantastical, ideas of some minimum wage supporters. And quite rightly so as some of those really are spun out of thin air. Like that terribly strange idea that employers will make larger profits as employees spend their new and higher wages in their own places of employment. That just cannot ever work, that’s the equivalent of hauling yourselves up by your bootstraps.

The calculation is done by simply taking the main and general empirical number from the literature and totting up the effects:

However, economists have extensively studied how businesses respond to higher wages overall, not just minimum-wage increases.[7] On average these studies find a 10 percent increase in labor costs causes firms to reduce employment of less-skilled workers by 6.8 percent in the long run.[8] This is not a precise estimate—some studies find greater job losses, others find lower. This figure does indicate, however, the approximate magnitude of job losses that occur when labor costs rise.

Note that it doesn’t in fact matter what your theory is about how jobs are created, or lost, by a rising minimum wage. This is, by definition, the sum of all of those effects. The ones you’ve thought of, the ones everyones’ already thought of and also the ones no one has as yet thought about. This is just from observation of the American economy. Wages change this way, employment changes that, for whatever and all reasons.

There are two points of specific interest here:

Fifteen-dollar-per-hour mandatory starting wages would cover roughly one-third of U.S. wage and salary workers—considerably more than the minimum wage has ever covered.

The first year we’ve got figures for is 1979, when some 13% or so were covered by the minimum wage. Now it’s around 4%. So, for us to move up to where 33% are covered by it is going to be a very large change. The second thing is this:

States with lower living costs would experience relatively greater job losses.

Not just lower living costs. States with generally lower wages currently will suffer greater jobs losses.

The two tables are, firstly, if each state raises to $15 separately:


And if we take out the effect on those states which have already been stupid enough to do this then we get this:


Leaving us with, as Heritage says, 7 million jobs lost if we impose it upon those who haven’t already committed the error through the Federal minimum wage and 9 million jobs losses in total from $15 an hour everywhere.

This really isn’t what the Fight for 15 keeps telling us, is it? It’s also not a good idea so let’s not do it.

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Posted by Amanda

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Posted by Kevin White

Members of the Nuclear Weapons Working Group are presenting their personal views as part of a wider consultation process into the party’s future policy on nuclear weapons. The full consultation paper can be found at www.libdems.org.uk/autumn-conference-16-policypapers and the consultation window runs until 28 October. Party members are invited to attend the consultation session at party conference in Brighton, to be held on Saturday 17 September at 1pm in the Balmoral Room of the Hilton.

1945, August 6, 8.15am. Slicing through the clear blue sky, a previously unknown “absolute evil” is unleashed on Hiroshima instantly searing the entire city, Koreans, Chinese, Southeast Asians, American prisoners of war, children, the elderly and other innocent people are slaughtered. By the end of the year 140,000 are dead.
Witness, a boy of 17: “Charred corpses blocked the road. An eerie stench filled my nose. A sea of fire spread as far as I could see. Hiroshima was a living hell

Witness, a girl of 18: “I was covered in blood. Around me were people with skin flayed from their backs hanging all the way to their feet – crying, screaming, begging for water”.

– Taken from the Peace declaration of the City of Hiroshima’s Mayor.

Never again must something like this happen. Yet those who have stuck rigidly to a policy of multilateral disarmament have not been successful in bringing about the nuclear-free world they profess to seek, and they show little sign of doing so.

It is my contention that British possession of nuclear weapons is immoral and that the UK should be leading by example in scrapping Trident and not replacing it with nuclear alternatives.
Nothing I have heard or read during the meetings of the Nuclear Weapons Policy Working Group has convinced me otherwise.

Britain has only 1% of the world’s nuclear weapons, yet our government pretends it is one of the big boys in the nuclear playground and that our nuclear weapons give us some sort of special leverage.
The evidence to back that claim is not convincing.

I recall the former Chief of Defence Staff Lord Carver asking the question “Trident? What the bloody hell is it for?”

Tim Farron and others have referred to it as “a relic of the cold war”. So why on Earth are we even considering the
possibility of spending, maybe, up to £200billion on it in future?

The savings from moving to a part-time fleet, the party’s current policy, are said to be not that significant in the scheme of things.

Former Defence Secretary Michael Portillo said Trident is “completely past its sell by date”, and he is right.
With new technologies becoming available, Trident is increasingly likely to become vulnerable to cyber-attacks and drones, making it even more of a white elephant.

Of the five options suggested in the Nuclear Weapons Policy Consultation Paper, two relate to Trident and one relates to free-fall nuclear bombs (which to my mind conjures up images from the Doctor Strangelove movie). The aircraft and the bombs they would carry are vulnerable to being “taken-out” before reaching their target. The paper notes: “in all likelihood there would not be significant savings because of the cost of developing a new platform”.
Of the remaining two options, one is “Virtual Capability”. There are questions as to whether there would be sufficient warning of need to move to production and operational training. Such a policy could also send wrong signals at a time of international tension in the future.

Which leaves us with just one option “The Zero Option” of cancelling the Successor submarine programme and retiring the existing Vanguard fleet.

It is the option that I recommend. The time has come for Liberal Democrats to lead the way. Let’s do it.

* Kevin White is a Joint Administrator of LibDems Against Trident. He was Chair of Liberal CND & Peace Group during the early 80's and a member of the pre-merger Liberal Party's Defence & Disarmament Panel. He stood for Parliament on four occasions and was a Councillor for eight years on Windsor & Maidenhead BC. Most recently he was Chair of Liverpool Liberal Democrats.

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Posted by TSE

Owen Smith

I surprised a few friends in a previous posting when I declared I was a bit of a fan of Shadow Chancellor John McDonnell. I will surprise a few more when I say I am admirer of my former BBC boss John Birt. My enthusiasm stems in part from the fact that I was a Father of the Chapel for National Union of Journalists in Television News. Under the Birt regime there were lots of extra journalist jobs and progressive policies on equality and diversity

But what got me thinking about the former director general was his warnings about “bias against understanding” in news coverage. The argument is reviewed by one of my ablest former colleagues Richard Sambrook.

Does the Birt theory explain, I wondered, why so many people insist that a Jeremy Corbyn victory is all but inevitable.

The latest is Andrew Rawnsley in the Observer who says the “incumbent will win …Even the more optimistic of his internal opponents now think the best they can hope for is that his majority goes down, diminishing his mandate. And Joff Wild of this parish says Labour members will “almost certainly” re-elect Corbyn.

These confident predictions are made despite the fact that we have yet to have a single poll conducted among the 640,000 plus members and supporters entitled to vote. As I argued here  there is no solid evidence supporting Corbyn’s favouritism. My belief that the contest is “too close to call.”

My hunch is that the “bias against understanding” comes from the fact the central feature of the Corbyn campaign, the mass rallies, are highly visible and easily reportable.

Owen Smith’s path to victory runs through thousands of living rooms where potential switchers are agonising over their decision in private. One who went public gives a fascinating insight into the thought process. Loz or Laura a “self-diagnosed Twitter addict.”

“Yesterday I cast my vote for the Labour leadership election and the box I put my X in…was for a Mr. Owen Smith. There. I have said it.”

She had been building up courage to write the blog . “I genuinely feel frightened, ” says. Rejects the idea that all Corbyn supporters, are a “baying mob”  she has no doubt “that I am in for some abuse, it is unfortunately to be expected in this day and age.” She has made lots of new friend through her support for Corbyn and “I feel I owe them some kind of explanation for my U-Turn”

A key influence on Laura’s decision was her fiancé – “the kind of voter we need to win over.” He has heard all the pro Corbyn arguments from Laura. “So trust me if anyone was going to be influenced to Corbyn it would be him. Yet he told me in no uncertain times that he would NOT vote for Labour if Jeremy Corbyn is leader.”

How many Lauras are there? No one can know for sure but the Smith campaign believe there are enough to give him victory and they released a video last week specifically designed to turn doubters into switchers. Four former members of Corbyn’s front bench, Lilian Greenwood, Gloria del Piero, Nia Griffiths and Anna Turley their frustration at dealing with a leader lacking basic leadership skills.

Their collective view is that working with Corbyn was a nightmare. Not so, says his fellow Islington MP and Shadow Foreign Secretary Emily Thornberry. 

“I have not agreed with everything Jeremy has said and done since becoming the Labour leader last year, but where I have had disagreements with him, I have always found him and his team willing to get around a table, listen, reflect and discuss a way forward.”

The striking thing about Thornberry’s 1,000 word letter to her party members is that a no point does she address the question of how Labour can win over voter’s like Laura’s fiancé. And the words “Jeremy will be Prime Minister” never get past her keyboard.

Don Brind

Some good books

Aug. 30th, 2016 01:23 pm
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Posted by Tim Harford


I recently re-read Marc Levinson’s modern classic, “The Box” (US) (UK) – a history of how the shipping container made the modern world. Scholarly yet very readable. Levinson has a new book “An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy”. (US) (UK)

As a not-very-good photographer married to a very good photographer, I’ve been loving “Why It Does Not Have To Be In Focus”. (US) (UK) Witty and accessible guide to modern photography.

A wholehearted recommendation for my colleague John Kay’s “Other People’s Money”. (US) (UK) John is trying to imagine what banking and finance would look like if we had the chance to redesign from scratch. This is a wise and witty book – angry too, as only someone who truly understands what’s going on can be angry. Strongly recommended.

Ed Yong’s brilliant debut “I Contain Multitudes” (US) (UK) will tell you all you need to know about the microbiome and all that jazz.

Then there’s Peter Sims’s “Little Bets” (US) (UK) – a book that was published about the same time as “Adapt” with the same philosophy, but some different and brilliant examples and case studies. I remember distinctly reading through it and thinking “exactly right!” and “I wish I’d put it like that…”

And if that’s not enough for you, you could always pre-order my new book, “Messy“. (US) (UK) More about that to follow soon…

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Posted by Phil Plait

When a star explodes, it’s a catastrophic event on a cosmic scale. The amount of energy released is beyond the grasp of our puny human minds; in a few seconds it blasts out as much energy as the Sun will over its entire lifetime.

Needless to say, you don’t want to be anywhere near a supernova. So what would it be like to be near three of them?

If there are any aliens perusing the skies in the nearby galaxy M33, they got their chance. Astronomers have found the expanding debris from not one, but three previously unknown supernovae. Better yet: The spherical shells of gas hurled outward by these explosions are concentric, centered on the same point in space, which means all three stars were very close to each other when they let go.

This weird triple supernova was found using a technique that specifically looks for rapidly moving gas. It involves a special kind of spectrograph that breaks the incoming light for the sky into very narrow slices of color. The resulting spectrum can reveal a lot of information about an object, including its composition, speed through space, and more.

In this case the spectrograph can create a spectrum for every point in the sky in the telescope’s field of view. For a supernova remnant (the expanding gas from the explosion), some of that gas will be moving toward us (the gas on the near side of the explosion) and some away from us (on the other side of the explosion). The gas heading toward us will have its spectrum shifted toward shorter wavelengths (called blue shift), while the gas moving away will be shifted toward longer ones (red shift).

By mapping these blue and red shifts, the astronomers could see the extent of the expanding gas and how fast the gas is moving. To their surprise, they found the three rings of gas all centered on the same spot, all with different sizes, and moving at different speeds.

They conclude that there must have been a cluster of stars in M33 that had three stars in it of roughly the same age and mass. Judging from how fast the gas is expanding and the size of the rings, the stars blew up 114,000, 40,000, and 21,000 years ago. The bubbles of expanding gas are 140, 52, and 41 light-years across, respectively. Mind you, massive stars live for a few million years, so these three stars blew up pretty close together in time compared to their age. How long a star lives depends on its mass, which is why it seems likely they were born at the same time with the same mass, too.

Each bubble of expanding gas has swept up a lot of material consisting of gas and dust between the stars, adding to its bulk. As I read the paper, I was surprised that the youngest explosion was able to do this. When a star explodes, the gas blasts outward and sweeps up a lot of the material around it like a snowplow. After the first explosion cleaned everything up, I wouldn’t expect there to be enough left for the latest of the three explosions to pick much up.

The astronomers who made the observations expressed the same surprise. They surmise that dense knots of cold gas, which are common in regions of active star formation, were disrupted and boiled off in the first and second explosions, basically evaporating and replenishing the gas swept up. That new material was then plowed up in the subsequent blasts.

Back when I was doing my Ph.D. work, and later on Hubble (as well as when I was writing outreach materials for other NASA missions) I often wondered what it would look like if several supernovae went off near each other around the same time. I wasn’t sure it would ever happen, but these observations look to show exactly this. M33 is less than 3 million light-years away, which is in our back yard as galaxies go; in fact it’s a small spiral that’s part of what we call the Local Group, a loose collection of a few dozen galaxies including ours, the Andromeda Galaxy, and a bunch of dwarf galaxies. That means that this strange matryoshka doll of supernova remnants can be studied in more detail, which is good news.

It also means something else: If we find one in a nearby galaxy, then it’s likely to be a common phenomenon. I hope the search continues and is successful in finding more of these. The Universe is a weird and wonderful place, and a new category of objects is a delight to astronomers … even when they’re the result of some of the most violent events that Universe is capable of.

Tip o’ the neutron star to Michael Krol.

Vince Cable writes: What Brexit means

Aug. 30th, 2016 11:36 am
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Posted by Vince Cable


I appreciated the large response to my post-referendum blog on the 48 Movement.  The Bank Holiday Sunday press reminds us that this issue will very soon return with a vengeance as the politicians come back from their holidays.  The Brexit hardliners in the Tory party are already preparing their narrative of betrayal by Remainer ministers and sabotage by civil servants.

When I wrote my note there was agreement on many points, not least the negative impacts which still await us, but two things I said triggered a negative reaction.  One was my argument that the result was final and could not be wished away by legal subterfuge or attempts to reverse the vote.  I see that  Owen Smith in the Labour leadership contest is arguing for a re-run through a second referendum and that position appeals to many in our own party.  There will be debate on this issue at Conference. Since, unlike Labour, we have nothing to prove on the EU issue I hope we can be more realistic.  The most recent polls show that almost all Brexit voters and half of Remainers accept the result however much we deplore it.  Shock, anger and remorse are very understandable but not if these harden into the conviction that the majority of voters are gullible fools.

The second point of controversy was my view that the free movement of EU labour should not be regarded as an inviolable principle, but is now politically unsustainable and of questionable merit when at the expense of non-EU migration.  There are better ways of being liberal on immigration: opposing the self-harming stupidity of the current ‘crack-down’ on overseas, non-EU, students to help Theresa May meet her absurd target; defending the position of EU nationals who are already resident here; promoting a less pusillanimous approach to refugees, as Tim Farron has been doing.

Almost three months on from the Brexit vote, not much has actually happened.  And the more extreme forecasts of a post-referendum economic shock, by Osborne in particular, have not materialised thanks in large part to an emergency monetary stimulus by the Bank of England.   The one big change has been sterling devaluation, which will squeeze incomes in real terms but is necessary in any event to restore external balance.

I believe more strongly than ever that we have to engage with the issue of what Brexit means, and the wide range of possible options, rather than bury ourselves in the backward-looking question of how to negate the referendum result.  This debate is already taking shape within government; but it affects all of us.  It can be loosely characterised as ‘soft Brexit’ versus ‘hard Brexit’.  The former seeks to maintain as much as possible of the present arrangements: the Single Market, for manufacturers in particular; the customs union (just as important as the Single Market and potentially a nightmare, if lost, for UK exporters to the EU who would be caught up in fiendishly complicated red tape around rules-of-origin); much of the regulatory framework designed to ensure common standards; and participation in common EU programmes through a shared budget.  The negotiating strategy of the ‘soft Brexit’ tendency will be to keep as much of this as possible while securing the one objective which eluded David Cameron: some restriction on free movement of labour whether in the form of a ‘brake’ and/or restrictions on those who do not have jobs to go to (while providing complete protection to those already resident).

I have no doubt that something along these lines is what Sir Humphrey is urging and favoured by some ministers like the Chancellor:  perhaps, even, a chastened Boris Johnson.  This will also be the advice of the CBI, the EEF, the universities and others who have good reason to fear serious disruption.  Key figures in the German government are signalling that they want some kind of associate status for the UK which has many of these elements.

The counter-view is that ‘soft Brexit’ is simply unrealistic.  We hear that various EU  governments will not tolerate a ‘pick and mix’ approach to EU membership though that is precisely what the UK has been doing so far with the various opt-outs.  We also hear that the principle of free movement is inviolate, though in practice the labour-exporting countries might well see merit in having the UK applying some limited but agreed controls on EU migrants rather than blanket restrictions.  And the Single Market is potentially divisible: keeping the arrangements for industrial goods but accepting that Mr Barnier will be less accommodating to the bankers.

We should stop seeing the issues as absolutes and binary alternatives.  We are, after all, embarking on a negotiating process. It is not too difficult to see how Britain, instead of being 55% European as at present becomes 45% European.  Messy and unsatisfactory, no doubt, but not a total disaster.

All of this is complete anathema to the hard-line Brexiteers.  They want out, period.  They fear, with good reason , that the forces of common sense and compromise will mobilise against dogma and ideological purity.  I found myself on the radio, recently, debating with Nigel Farage who seems to have concluded already that his legacy will be betrayed by the Establishment.  Dr Fox will realise that if a customs union remains he will be redundant since there will be no need for him to fly round the world seeking separately negotiated trade agreements with Tanzania and Tonga.  He and the rest of the Tory Right will be up in arms.  And I, for one, can’t wait to see the Tories at each others’ throats again.

The issue for our party is whether to stick to the position that only the status quo ante is acceptable or whether to define a series of negotiating objectives and ‘red lines’ which will determine whether we support or oppose the government’s negotiating strategy, once decided, and the outcome of negotiations, once agreed.  In the short term it is just about plausible to defend the status quo in the event of an early election and before Article 50 is triggered.  But an early election is unlikely, albeit possible and, once negotiations commence, it makes progressively less sense to insist that the referendum can be revisited and reversed.

Such a position is, moreover, politically dangerous.  It suggests arrogance and being out-of-touch perpetuating the errors of the Remain campaign.   It also risks our becoming tactically aligned with the fundamentalists of UKIP and the Tory right, rejecting whatever outcome is put to parliament or another referendum.  And it could contribute to ‘hard Brexit’, the worst option.

* Vince Cable was MP for Twickenham from 1997-2015 and Secretary of State for Business, Innovation and Skills from 2010-2015

[syndicated profile] tim_worstall_forbes_feed

Posted by Tim Worstall

I have been saying for some time now that the European Union’s investigation into the tax affairs of Apple in Ireland were going to amount to not very much. I was pegging the amount of tax to be recouped at perhaps $200 million to cover a decade, $20 million a year perhaps. Real money but not something to trouble a company of Apple’s size.

You can see examples of this here and here.

We now have the actual result and boy, boy oh boy, was I wrong. The EU has decided that Ireland must recoup €13 billion in back taxes from Apple. The decision is here:

The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.

So, there we have it, mea culpa, mea maxima culpa.

I have to admit that I’m not entirely certain that the ruling will stand once it is appealed:

Following an in-depth state aid investigation launched in June 2014, the European Commission has concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991. The rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality: almost all sales profits recorded by the two companies were internally attributed to a “head office”. The Commission’s assessment showed that these “head offices” existed only on paper and could not have generated such profits. These profits allocated to the “head offices” were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force. As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International.

Those profits are of course taxable in the United States upon repatriation to the United States. So they are righteously taxable somewhere, contrary to what is being said here. It’s worth again pointing out that Apple’s total tax bill, legally due at some point in some future, hasn’t changed in the slightest as a result of this ruling. For that repatriation reason.

But yes, obviously, I got this wrong.

However, there’s something else very interesting indeed about this ruling. This does not apply to Microsoft, Facebook, Google and others who use Ireland as a similar near tax free conduit for their business outside the United States. Because they all do this in a slightly different manner, one which does not fall foul of the Commission’s finding in this Apple case.

Those companies do not allocate to some ethereal “head office”. Instead they pay royalties to an offshore company. Royalties for the use of the technology which is originally generated in the US and the money then sits in the offshore company before it is, at some potential future date, repatriated. Similarly, the sales being made from Ireland to other EU countries are not at fault. As the Commission says:

In fact, the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market. This is due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold. This structure is however outside the remit of EU state aid control.

You can indeed sell across Europe from Ireland.

Apple Sales International and Apple Operations Europe are two Irish incorporated companies that are fully-owned by the Apple group, ultimately controlled by the US parent, Apple Inc. They hold the rights to use Apple’s intellectual property to sell and manufacture Apple products outside North and South America under a so-called ‘cost-sharing agreement’ with Apple Inc. Under this agreement, Apple Sales International and Apple Operations Europe make yearly payments to Apple in the US to fund research and development efforts conducted on behalf of the Irish companies in the US. These payments amounted to about US$ 2 billion in 2011 and significantly increased in 2014. These expenses, mainly borne by Apple Sales International, contributed to fund more than half of all research efforts by the Apple group in the US to develop its intellectual property worldwide. These expenses are deducted from the profits recorded by Apple Sales International and Apple Operations Europe in Ireland each year, in line with applicable rules.

You can indeed pay royalties for the use of technology and brands. Given that this is largely what those other companies – in fact pretty much all other companies as Apple was, as far as we know, the only one with this odd Irish structure – Facebook, Microsoft, Google and so on, are doing, they would seem to be unaffected.

Finally, it would appear that the US Treasury was correct:

There is the possibility that any repayments ordered by the Commission will be
considered foreign income taxes that are creditable against U.S. taxes owed by the
companies in the United States. If so, the companies’ U.S. tax liability would be reduced
dollar for dollar by these recoveries when their offshore earnings are repatriated or
treated as repatriated as part of possible U.S. tax reform. To the extent that such foreign
taxes are imposed on income that should not have been attributable to the relevant
Member State, that outcome is deeply troubling, as it would effectively constitute a
transfer of revenue to the EU from the U.S. government and its taxpayers.

Apple’s theoretical future tax bill to Uncle Sam has been reduced by exactly that €13 billion that Ireland is now supposed to recoup.

So, yes, I did get it wrong. And now for another prediction – it’ll be up to a decade before we see how this finally plays out. Ireland has already said it will appeal this ruling and the ECJ, the European Court of Justice, is not known as a speedy organisation, to say the least. Nor do they always rule the way the Commission might wish….

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Interesting Links for 30-08-2016

Aug. 30th, 2016 12:00 pm
[personal profile] andrewducker

How to treat a new Labour party

Aug. 30th, 2016 09:54 am
[syndicated profile] lib_dem_voice_feed

Posted by Eduardo Reyes

We need to talk about Labour. Specifically, we need to start talking about us and Labour.

Not the bit of the party that Jeremy Corbyn gets to keep after its leadership election – the trademark and some very shouty people – but about our attitude to, and relations with, the c.170 MPs who will likely decide that that they need another vehicle to jump into when Owen Smith loses, and who would then enter the next election as some mutated strain of Labour.

They will be attempting something quite difficult, and it will be messy.

With grand scale election defeat still a bitter, recent memory for Lib Dems, the temptation to make some popcorn, stick beer in the fridge and ask friends round to watch Newsnight is understandably strong.

Instead we should be asking some serious questions. How do we want to behave towards those Labour ‘moderates’? Could we make common cause on some key issues? And come the next general election, do we want to run against all of them as hard as we run against Conservative candidates?

The shock of the EU referendum result is an awful and stark illustration that the political culture of the UK is in a dangerous place. As a party we weren’t able to stop that, however up for the fight we were, or however much integrity he had.

As things stand, with a Commons presence that could fit into people carrier, that’s not an electoral opportunity for us as Lib Dems – it’s sinkhole that threatens to pull in an awful lot that we care about.

How we answer these questions will also affect our ability to pull back into politics parts of the party we have lost. Lib Dems who argued that the groundwork should be laid for a possible Lib/Lab pact in event of a hung parliament (I was one) did not act in unison faced with Clegg’s leadership and the coalition. Some joined Labour (to be fair, who saw Corbyn coming?), some served as coalition ministers (Tom McNally).

Yet more are still members, but like me are currently on the disengaged side – there’s plenty of private life to get on with if the reasons for a Focus delivery round are not made compelling enough.

Maybe, reading this, you don’t want those of us who drifted away back in the thick of the fight. If that’s the case, well – good luck, but I think that’s a shame.

Going into the next general election – and beyond – a decent narrative for the centre-left, using an adequate parliamentary bridgehead to make it heard, is urgent.

Do I ‘like’ Labour if you take the Corbyn and Momentum folk out? No, and that’s why I’ve never cast a first preference vote for them.

I know that even among the ‘moderates’, there are many people we’ve had bruising ideological and campaigning encounters with. But look, I’m not suggesting you go on holiday with these people.

For me it comes down to this. Was I pleased Sadiq Khan beat Zac Goldsmith? You bet I was. It was a centrist success that moved the position and tone of an important bit of our political landscape. And if Clinton beats Trump, the tone of the Anglophone political world will alter in key regards.

We need the formation of a new sort of Labour party to work, and we need to think about a range of ways to work with it. The alternative – that the sinkhole gets even bigger – is for me simply too awful an alternative to contemplate.

* Eduardo Reyes is a former Liberal Democrat agent, council candidate and parliamentary researcher.

Quite stunning

Aug. 30th, 2016 10:35 am
[syndicated profile] tim_worstall_feed

Posted by Tim Worstall

This is a great day for the sovereignty of the EU’s nations when it comes to tax. They will now be able to choose their own tax policies


Well, that’s me wrong then

Aug. 30th, 2016 10:31 am
[syndicated profile] tim_worstall_feed

Posted by Tim Worstall

€13 billion?

How in buggery have they managed to calculate that?

Yes, that’s me completely wrong.

Think I’ll keep quiet on this one until we see how it goes.

matgb: Artwork of 19th century upper class anarchist, text: MatGB (Default)

British Liberal, house husband, school play leader and stepdad. Campaigner, atheistic feminist, amateur baker. Male.

Known to post items of interest on occasions. More likely to link to interesting stuff. Sometimes talks about stuff he's done. Occasionally posts recipes for good food. Planning to get married, at some point. Enjoying life in Yorkshire.

Likes comments. Especially likes links. Loves to know where people came from and what they were looking for. Mostly posts everything publicly. Sometimes doesn't. Hi.

Mat Bowles

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October 2015


Stuff and nonsense

I'm the Chair of the Brighouse branch of the Liberal Democrats & the membership secretary for Calderdale Lib Dems and run the web campaign for the local candidates. I have a job, a stepdaughter and a life.

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