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Posted by Tim Worstall

Handsome Devil, by contrast, tries to make a different point: “That LGBT issues are mainstream and they should be funded by the mainstream. We should be seeing $50m LGBT comedies with realistic couples at the middle of it. Because it’s one in 10 of us, you know? We belong in the mainstream.”

It’s not 1 in 10. Nothing like.

Further, that’s not the way that business works. You’re looking for the marginal customer when going big, not trying to address some core.

To be stupid about it compare the scandium business with the hamburger one. Maccy D is trying to sell to anyone and everyone. Thus big productions, lots of shops, big ad budgets and so on. They get some portion of that market of course. When I was selling scandium there were maybe 10 people in the world I needed to reach. All the effort went intoidentifying those 10 people, plus a bit of finding out if there were an eleventh or twelfth.

The strategy for trying to sell to a core audience of perhaps some 3 or 4% (to be generous about LGBT numbers) of the population is rather different than the one required for trying to sell to the marginal member of the general population.

Sigh.

Labour pledges to outlaw freelancing

Apr. 30th, 2017 06:37 am
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Posted by Tim Worstall

Labour has pledged to ban all zero-hours contracts,

Which is a bit of a bugger really.

Obviously, I can see the difference between CapX saying yes they want a piece from me today, or no, they’ve enough from other people so nothing today Tim, and someone getting or not getting a MaccyD shift that day.

But I can’t really see the difference in law.

Anyone? How can we still have freelance work on demand and no zero hours contracts?

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Posted by TSE

O, I die, Horatio;
The potent poison quite o’er-crows my spirit:
I cannot live to hear the news from England;
But I do prophesy the election lights
On Fortinbras: he has my dying voice;
So tell him, with the occurrents, more and less,
Which have solicited. The rest is silence.  – Hamlet Act V, Scene II

William Hill have a market up on whether Jeremy Corbyn will announce his resignation before 11pm on June 9th. Whilst it might sound like the epitome of hubris and arrogance to assume that a Tory majority is nailed on, it isn’t hubristic and arrogant when you remember the Labour leader is Jeremy Corbyn, a man who is setting all sorts of polling records for the wrong reasons.

In recent years the  standard operating procedure is for the party leader of Labour or the Tories that doesn’t win the general election resigns as party Leader, however I feel Corbyn will break this recent precedent. For the following reasons.

  1. One of the things we’ve learned about Corbyn a leader, no matter how bad the polling, no matter how bad the local council election results, no matter the record breaking by election loss in Copeland, he’s quite impervious to the criticism. He genuinely believes in his project to transform for Labour and the country, and won’t let something like a general election defeat get in the way of that.
  2. Corbyn can argue, with some justification, because of Theresa May’s nefariousness in becoming another liar politician and calling an early election in stark contrast to her promises not to do so, he would be justified in being allowed to stay on as leader after a general election defeat. Corbynism is a five year project, you really can’t judge him after fewer than two years of him being leader.

Earlier on this week it was reported that ‘Staff at Labour’s headquarters could go on to strike if Jeremy Corbyn tries to cling on as party leader if he suffers a major defeat on June 8. Sources told The Times workers fear the hapless leftie will refuse to step down even if Theresa May romps to victory next month.’

On that basis I’m taking the 5/6 on him not announcing his resignation before 11pm on June 9th. He’s one stubborn bugger, he kept calm and carried on even after 172 of his 232 MPs declared no confidence in his leadership. Corbyn, I expect, won’t be channelling his inner Hamlet from Act V, Scene II and go quietly after the mother of all electoral shellackings.

Although the way Mrs May is blowing huge Tory leads in this campaign so far, I wouldn’t be surprised if William Hill introduce very shortly a similar market on whether she’ll announce her resignation before 11pm on June 9th as the Tory party will prove once again it is an absolute monarchy moderated by regicide if she fails to win (a majority) against Corbyn.

TSE

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Posted by Paul Walter

There are some fantastic, smiling action photos coming out from Lib Dem campaigners this weekend!

Victor Chamberlain has been out twice, campaigning for Simon Hughes with colleagues at the Elephant and Castle:


…and at Borough and Bankside:

Tim Farron visited Leeds – and Leeds Young Liberals captured their excitement at the leader’s arrival:


https://twitter.com/GregMulholland1/status/858371510905516032

Bryn Jones was out with a big team in Dunfermline West:

Newbury and West Berkshire Lib Dems were working hard with Judith Bunting in Thatcham:

Will Parry and friend were delivering leaflets for Alain Desmier as part of the Islington action day:

The action day had a huge turn out for Alain and Keith Angus:

Cheltenham Lib Dems are well ahead with their diamonds!:

Vince Cable launched his campaign in fine style:

Bosworth Lib Dems were out in force with Michael Mullaney:

Oxford University Lib Dems hit Abingdon for Neil Fawcett:

Amna Ahmad and team were out in Sutton and Cheam:

The team were out for Dawn Barnes in Muswell Hill:

And the prize for the coolest photo of the weekend goes to Bexley Lib Dems:

And the runner-up is this stylish old Mini in Chiswick:

Here’s a pic of the post-canvass “debrief” at Sawston and Shelford:

Sarah Olney and Susan Kramer were on the doorstep:

Extraordinarily, East Dunbartonshire Lib Dems took to the water to support Jo Swinson:

Tooting Lib Dems were out with a new member:

And the Campaign HQ was opened in Cheadle:

Happy campaigning!

* Paul Walter is a Liberal Democrat activist. He is a councillor and one of the Liberal Democrat Voice team. He blogs at Liberal Burblings.

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Posted by Catherine Bearder MEP

Dear Mrs May,

You called an election last week so that British voters can, you claim, by electing a large Conservative parliamentary majority, give you the “strongest hand” possible in the Brexit negotiations. But I am afraid Mrs May you have already decided on the direction you are taking this country in and I think you already know that.

Today the leaders of the 27 EU countries will meet to finalise their negotiating guidelines, for what Guy Verhofstadt described to Liberal MEPs this week as probably the shortest Council meeting ever. Why? Because they are all are agreed on one thing, the UK cannot get a better deal outside the EU than the one it currently has inside.

It’s not that the EU countries want to punish Britain, (although being called the “mafia” by Mr Farage does get their tails up, but thankfully they know he doesn’t speak for the UK). It’s just that there are rules to being in a club. One of those rules is paying a membership fee of that club. When you say you want all the benefits of membership, whilst not being a member, paying the membership fee or abiding by the rules, it tends to make others in the club feel a bit peeved.

But campaign away in this election, Mrs May. Try to get your “improved mandate”, even though it will make no difference to your strength of argument – negotiators negotiate with governments, not the numbers of MP. Oh, and by the way, it’s probably not best that your opening gambit is to insult leaders, that’s an extraordinarily unhelpful way to get what you want.

I don’t doubt that throughout the negotiations you and your Tory Brexit ministers will claim you are being bullied by nasty Mrs Merkel et al as you rediscover again and again that unfettered access to our largest export market comes hand in hand with the free movement of labour and people. But rules are rules, Mrs May, and the EU will insist on compliance for the United Kingdom just as it does with everyone else.

Don’t get me wrong, there are many in this country who now know you are bluffing when you say this election will strengthen your hand in the EU. My party, the Liberal Democrats, are just 100,000 of them.

But on June 9th, when all the fun and games are over (and the polls predicted were probably accurate), you will have to negotiate the deal you promised and I suspect, Mrs May, you were bluffing all along.

Best wishes,

Catherine Bearder MEP

* Catherine Bearder is the Liberal Democrat MEP for the South East

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Posted by Tim Worstall

Neil Irwin has a nice look at what might be the biggest flaw in Donald Trump’s tax plans, a loophole that would lead to many of us deciding to stop being human beings and become corporations instead. We actually saw this happen in the UK too when Gordon Brown decided to change small company corporation tax laws. There was a rush to incorporate, revenue declined and the rules had to be reversed. Along with a set of regulations that never really have worked properly and yes still cause all sorts of problems.

The specific point is that Trump is suggesting that the lower corporate income tax rate should also apply to pass through corporations, that is to methods of organisation that don’t even pay the corporate income tax. This isn’t a good idea. And it’s not a good idea for a reason that Irwin gets close to but doesn’t quite spot:

The opportunity to game the system arises from the huge gap between the tax rate paid on individual income — up to 39.6 percent now, or 35 percent under the Trump plan — and the low rate on business income the president proposes, of 15 percent. He seeks to apply that rate to all businesses, including “pass-through” organizations such as limited liability companies and S corporations, and that is where the opportunity for games arises.

In more detail, C corporations pay the corporate income tax, S corporations do not, the owners are taxed upon their income from the business at the normal personal income tax rate instead. We can see what Trump is thinking here, one form of business organisation should be taxed much like any other form of business organisation. We don’t want to have distortions in the tax code that favour one legal form over another, after all. So, if the corporate income tax rate goes down then the pass through rate which applies to S corporations should also go down, right?

No.

As Irwin mentions but doesn’t quite get:

Pass-through entities include a variety of corporate structures with one thing in common. They do not pay federal income tax directly, but rather pass their earnings along to their owners, who in turn pay individual income tax on the money. That avoids the problem of double taxation faced by C corporations (the structure most commonly used by the biggest companies), which pay the corporate income tax directly and whose investors must pay taxes on dividends they receive.

But if the tax code is changed to lower the corporate income tax rate to 15 percent, from its current 35 percent, that creates a different fairness problem. Suddenly C corporations would have much lower tax rates than competitors that happen to be organized using pass-through structures, such as S corporations and limited liability companies.

No, they wouldn’t. Because of the double taxation of the income from a C corporation. We can’t quite just add together the tax rates, sadly, it doesn’t work that way, but let’s just do that for ease of calculation. The C corporation makes $100 in profit, pays $15 tax, the investor receives the $85 in dividends and pays 15% tax (currently, or is it 20% now?). Just for ease of calculation we’ll call that a 30% tax rate overall. The S corporation doesn’t pay the corporate tax, the recipients of the profits pay normal income tax which might well be about 30%. The income from the business is being equally taxed in this set up.

Under the current system the S corporation tax is the same as now, say 30%, the C pays the 35% (and yes, you do have to pay the full rate to pay out dividends) and the investor also the 15%. To give a blended rate of 50% (again, not accurate, just for ease of calculation). Or Trump’s proposal that the S and C profits are both taxed at 15%–but then the dividends will still pay the other 15% (or 20%) dividend tax while the S only the 15%.

And yes, we really do want equal taxation for what is roughly the same thing, running a business, whatever the legal form used to run it. Which means that to equalise the tax rates we should abolish the dividend tax, or lower the corporate income tax rate, but we don’t need or want to change the pass through rate at all.

[syndicated profile] tim_worstall_forbes_feed

Posted by Tim Worstall

The one single thing that worries economists about the Trump Administration is the attitude to trade. Sure, there are other things that people shout about but it is trade which really gets people wondering. Because the various people within the administration don’t seem to understand the basics of the subject. For example, Wilbur Ross is asking us to concentrate upon the trade deficit in goods. This is a complete irrelevance, it doesn’t matter in the slightest, it’s just not a matter of concern:

“I think everyone here is generally aware that we do have a big trade deficit,” said Ross. “It’s some $700 billion — not counting our trade surplus in services, just counting the trade deficit in goods.”

Trade deficits themselves don’t matter but the goods deficit definitely, definitely, does not matter. Hollywood ships movies off to China which is a services export. Hollywood provides some pretty well paid jobs for Americans. China ships back electronic tchotchke, something that even when it was still made in the US provided very substandard wages (electronics assembly pays, or paid last time I looked, around $13 an hour, half the median wage). If we were to make the mistake of thinking that trade deficits are important then we still should not make the mistake of thinking that the goods part was more important than the services.

But then this is the man, Ross, that Trump is asking to examine the various trade treaties the US is party to:

President Donald Trump will sign an executive order on Saturday seeking to identify any problems caused by the nation’s existing trade agreements, including an examination of U.S. involvement in the World Trade Organization, a top trade official said.

Commerce Secretary Wilbur Ross said his department would work to issue a report in 180 days outlining challenges with these trade deals and possible solutions.

Someone who doesn’t grasp the basic points we might even think about wanting to worry about is to lead the investigation? That’s not going to work out well, is it?

“Whenever we’ve ventured into any of these agreements, the forecast has always been that it would be a job-creator. Well, to the degree that those forecasts are wrong, it would be very useful to figure out why were they wrong and what can be done to fix it,” Secretary of Commerce Wilbur Ross told reporters Friday.

But the point of trade isn’t to create jobs. In fact, trade has no effect whatsoever on the number of jobs in the American economy. No, really, none, zip, nada. Trade changes which jobs are done in the US economy, that’s true, but not the number of them. That is determined by fiscal policy, something cooked up between the President and Congress, and monetary policy, from the Federal Reserve. Trade just doesn’t get a look in here. And if you don’t believe me how about Paul Krugman, a Nobel Laureate?

During the NAFTA debates I shared a podium with an experienced, highly regarded U.S. trade negotiator, a strong NAFTA suppporter. At one point a member of the audience asked me what I thought the effect of NAFTA would be on the number of jobs in the United States; when I replied “none”, based on the standard arguments, the trade official exploded in anger: “It’s remarks like that which explain why people hate economists!”

Trade deficits don’t matter, the goods trade deficit really doesn’t matter, trade never is about jobs at all and yet Wilbur Ross, for Donald Trump, is going to examine trade deals for the effect upon jobs and worries over the goods trade deficit. Are you surprised that economists are worried?

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Posted by Tim Worstall

As I’ve been known to remark before, a rise in the minimum wage would be expected to reduce the number of low end jobs in an area. We just really are sure that people buy less of something as it becomes more expensive and we’ve just no reason to think that labour doesn’t work this way, just as hamburgers do. We are also really very sure that whatever the effects are we’ll see them most clearly in the restaurant industry. San Diego appears to be losing restaurant jobs–San Diego recently raised its minimum wage. The theory would predict that the two are connected.

As Mark Perry over at the AEI blog points out:

The …. six-month percent changes in: a) San Diego’s restaurant jobs and b) non-restaurant payrolls in San Diego from 2006 to March 2017. While non-food jobs in the San Diego MSA are increasing at a steady rate of about 1% (semi-annually) and 2% annually, restaurant job growth has tanked and fell by 3.5% over the most recent six-month period through March 2017. In terms of jobs, restaurant employment in the San Diego area has fallen by a stunning 4,700 jobs since last September, at a rate of almost 200 job losses per week. During the same period, employment outside the food industry increased by more than 12,000 jobs in San Diego.

If you prefer this in a graphical format:

San Diego jobs market

San Diego jobs market

Or as was said by a local newspaper before the figures for the latest month were available:

Amid an abrupt slowdown in growth, nearly 4,000 food-service jobs may have been cut or not created throughout San Diego County from the beginning of 2016 through February of this year, according to an analysis of federal payroll data by Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University.

“This was at a time when both overall economies performed similarly well,” Reaser said. “If job growth in the restaurant sector had just kept pace with the state’s performance … the industry could have created 5,200 jobs instead of the 1,300 that took place.” Last month growth turned negative, as the sector actually lost jobs.

Now it’s entirely true that this evidence is not conclusive. We have the data only at the level of the Metropolitan Statistical Area, which includes areas around San Diego proper which have not had the minimum wage rise. It’s also entirely true that the restaurant industry is not the be all and end all of the employment market. However, this is indeed where we go hunting for our evidence, for some 50% of the people who get the minimum wage are in this industry and some 50% of the people in the industry get the minimum wage. Thus, whatever it is that is going to happen will likely be found by looking here.

There are some who insist that a higher minimum wage will lead to more employment. Low paid workers tend to spend all of their income, thus raising their pay increases demand, leading to more hiring. That has a number of conceptual problems but it is at least possible that there will be some effect like that. Except we don’t seem to be seeing it so perhaps we should relegate that idea to the list of those which could have been true but appear, in this reality, not to be.

As I said about that earlier report:

Again consider what the prediction is. If low end wages rise then we expect there to be less low end labour being employed. That’s the standard and orthodox economic prediction at least, it is the heterodox who are saying something different. And with their greater claim comes their need for greater evidence. And that evidence we have so far from Seattle and now San Diego doesn’t seem to be supporting their case. We expect a rise in the minimum wage to cut restaurant employment compared to the no wage rise scenario. That seems to be happening–score two so far for conventional labour economics then.

The various minimum wage rises around the country seem to be working out as conventional economics said they would. At some point those who argued the contrary are going to have to start confronting the evidence, aren’t they? Better sooner before more jobs are lost, no?

[syndicated profile] political_betting_feed

Posted by Mike Smithson

But he still leads by wide margin

The French election comes to its final round next weekend and the polls are showing a slight edge towards Le Pen though it is still very hard to see a pathway to victory for her.

What is intriguing is this Wikipedia analysis of how second round votes are splitting by what people did on the first round.

Clearly there are lot of voters yet to make up their minds and this is giving a touch of hope to Le Pen backers. Things are not as good as they were from Macron amongst supporters of the ultra left Melenchon as can be seen from the declining shares he’s picking up from this source.

Macron remains 87% favourite on Betfair which I think is good value.

Mike Smithson


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Posted by Mark Pack

The Australian advert I previously blogged about, It’s Time, looked as much like a music video as a political advert. Music too played a major role in one of the UK Labour Party’s 1997 general election broadcasts, which is the most powerful of all the ones I’ve seen ‘live’ at the time of broadcast.

As in the Australian Labor Party’s case, Labour too had been out of power for a long time – 18 years this time – and also faced an incumbent government that many felt had passed its sell-by date. The genius of the Labour ’97 effort was to put together ingredients which usually featured in Conservative broadcasts – patriotic music, Union Jacks, Conservative ministers, celebrating Conservative members – and turn them into a devastating attack, raising fears of what another term of Conservative government might do.

As I noted in my previous blog post about this broadcast, watch out for the very different way in which Ken Clarke was viewed then compared with now:

You can see all the posts in this series on my Political Ads page – including the amazingly bizarre Luis Fishman classic. The stretch from 7 seconds in until 22 seconds in is fairly normal. But as for the rest…

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Posted by Mark Pack

Very good, David Schneider:

On a similar theme:

Of course, one reason for this may be found in these facial expressions:

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Posted by Mark Pack

As previously tipped, Christine Jardine has been selected to fight the former Lib Dem seat of Edinburgh West:

Former MP Mike Crockart had previously said he didn’t want to stand again, whilst the nearly identical Scottish Parliament seat of Edinburgh Western was won by Alex Cole-Hamilton last year.

It’s great to see the party select another woman to contest a seat formerly held by a man as that’s a key part of moving away from a nearly all-male Parliamentary party. That’s not the only respect, of course, in which diversity matters so it’s worth also noting Christine Jardine’s background:

It was my working class background, and the opportunities I was given, which I believe, instilled in me a social awareness which underpins everything I strive to do both as a mother and a political campaigner.

Keep up with news about Lib Dem selections

If you’d like to be notified by email when further posts about Liberal Democrat selections appear on this blog, just sign up here. (Note: if you’re already signed up for a daily email alert with all my new blog posts, then there’s no need to sign up for these alerts too as the stories will also be in the full daily digest.)

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The Point of a Manifesto

Apr. 29th, 2017 10:07 am
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Posted by Weaver

Today's eddy from the election campaign follows a thread of thinking. Starts as a musing on Corbyn's failure, and ends with a philosophical lens to explain manifestoes.

This blog treats a manifesto in two ways. For all parties, it's a direction of travel, a statement of aims. Something to help us decide if we can possibly support them, and a document to help work out the principles of opposition.

For the winning party, and the winning MP, the manifesto is a skeleton contract with the people. We treat it as a constraint. Unless there are clear external reasons, the winners must not do something they've said they won't. And they must not do something that will directly frustrate other policies.

Losing parties are less bound by their manifesto, but if they wish to reverse specific commitments, they need to say, and to explain why. Their members remain bound by the principles that got them in office, and any specific commitments they made.

For instance, both Labour and Conservative in 2015 said that they would remain in the single market. There is no compelling reason to change this opinion. It's not acceptable now for MPs to vote to leave the single market.

Read this post in full at The Snow in the Summer or So-So.

Lib Dem tip #31: what is Connect?

Apr. 29th, 2017 09:09 am
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Posted by Mark Pack

Welcome to the latest in my series of tips and advice for Liberal Democrat members, which appear first in the email bulletin run by London Region for party members.

Connect is the electoral database program used by the Liberal Democrats. This is where we store the names and addresses of voters, along with data which we gather – such as what voters tell us on the doorstep when we are out campaigning.

Connect is based on the NGPVAN technology which also powered Barack Obama’s winning 2008 and 2012 Presidential elections and is used by our sister party, the Canadian Liberals, winners of the last Canadian general election. In other words, it is very powerful and effective, although it can come with a little bit of a learning curve if you are helping with its administration.

Super-easy to use, however, are two of its key features Connect comes with a smartphone app, MiniVAN, which makes doorstep canvassing much easier to do, and for telephone canvassing there is the Virtual Phone Bank (VPB) feature which people can access via a secure website login. If you do run into any questions, there is an excellent support group for Connect users on Facebook.

You can read the full set of tips for Lib Dem party members here.

[syndicated profile] tim_worstall_forbes_feed

Posted by Tim Worstall

British Members of Parliament have released a report insisting that because the 8 largest housebuilders construct some half of all new housing in the UK therefore intervention is necessary to fix the broken market. The problem with this is that they’re looking at entirely the wrong cause for that broken market. 8 housebuilders with only half the market is entirely enough to make sure that collusion doesn’t occur, that there is no cartel, no oligopoly going on.

MPs have called for an end to the dominance of big home-building firms to fix the “broken” housing market.
The communities and local government committee said the eight biggest firms built more than half of all new homes.

Yes, we all know that the perfectly free markets of the textbooks don’t exist. But it doesn’t take all that many players in a market for the real world to asymptotically approach that textbook model. And 8 players with only half the market between them is quite enough to have got us over that barrier to where the simplistic models are a useful–even if not 100% accurate–description of this universe.

The committee’s chair Clive Betts MP said: “Smaller builders are in decline and the sector is over-reliant on an alarmingly small number of high-volume developers, driven by commercial self-interest and with little incentive to build any quicker.

“If we are to build the homes that the country so desperately needs, for sale and for rent, then this dominance must end.”

The only way that such dominance could be exploited is if the builders deliberately build slowly, in order not to push prices down. But there are too many people in the market for that to be a viable option for them. Even if all 8 really did directly collude they’re not enough of the market among them to be able to maintain the policy:

Contrary to the rhetoric of Government ministers such as Sajid Javid, who said last year that developers had to “stop sitting on landbanks,” the committee found no evidence of landbanking, when developers sit on land so that its value increases.

It said: “While we have not seen evidence of [landbanking], we have found that there is little incentive for volume housebuilders to build any quicker. It is in their commercial self-interest to maintain profits and they cannot be blamed for this.”

But landbanking is building slower in order to maintain profits. And if they’re not landbanking therefore they’re not building slower in order to reduce profits. QED.

There is a problem with British housing of course. It’s horribly, horribly expensive. And the reason is that the government deliberately, and with malice aforethought, limits the number of permissions it issues to build houses. Furthermore, it is near impossible to get such permissions where people actually want to live, around the already extant great cities. The answer is therefore to reverse this policy.

Or, as I’ve been known to say, the solution to Britain’s housing woes is to blow up the Town and Country Planning Act 1947 and successors.

[syndicated profile] tim_worstall_forbes_feed

Posted by Tim Worstall

President Donald Trump has been at the Twitter keyboard again, insisting that slow GDP growth in 2016–it was only 1.6%–was caused at least in part by the trade deficit. This is simply wrong, it’s a misunderstanding of the basic economics at play here. But then several advisers, Dan DiMicco for example, share this mistaken belief. The mistake is in not grasping the GDP equation.

Which is a pity, as it’s usually explained on the next page of the textbook, right after it’s first laid out. But here’s Donald:

Dan DiMicco also believes this:

Dan DiMicco, the former Nucor Steel chief executive who led Mr Trump’s trade transition team, told the Financial Times the new economic numbers bolstered the president’s economic case for a harder line in international trade policy.

“It’s another example in a long line of 20 years of examples of where the trade deficit reduces growth,” he said. “If you look at just what the deficit did this quarter, imagine what it has done all those years.”

Peter Navarro, sadly, shares this mistake:

This is the basis on which Navarro argues that having a trade deficit — buying more goods than you’re selling to your trading partners — hurts growth and that the best way to grow faster is by closing this deficit. That is to say, selling more goods than you buy.

It’s just an incorrect belief.

Economists have noted the correlation between growth and trade deficits, but many have said faster economic growth can lead to even higher trade deficits, as a roaring U.S. economy tends to demand more inputs from abroad.

Well, we had a huge trade surplus during the Great Depression. And as Politifact points out:

If anything, pairing the two charts shows that two of the years with a relatively small trade deficit — 2001 and 2009 — were two of the three weakest years for GDP growth during that time span.

What Trump, DiMicco and Navarro are getting wrong is this, the GDP equation.

Y = C+I+G+(X-M)

GDP is consumption plus investment plus government spending plus the trade balance – and minus it if there’s a trade deficit. So people look at this and think yep, if there’s a trade deficit than that makes Y, GDP, smaller!

But this is a mistake, an error. For, as the textbook immediately goes on to explain, what is it that we do with imports? Well, we either consume them, use them in investments or government buys them. So all imports are already in C and I and G. Meaning that if we don’t deduct them we’ll be double counting them. So, to avoid double counting we subtract them.

Trump and his advisers are simply wrong on this. The trade deficit doesn’t reduce the size of the economy. They’re getting it wrong simply because they’re not reading the second page of the explanation of the GDP equation.

[syndicated profile] tim_worstall_forbes_feed

Posted by Tim Worstall

One of the casual insults thrown at those who would leave the European Union–you know, people like me–is that we’re Little Englanders. People afraid, so the joke goes, about all that foreign food which might have garlic in it instead of being plain like Good British Food. This is, of course, a vile calumny (although that garlic is called knob in German has provoked many a schoolboy titter) but why not play up to stereotypes? Germany has insisted that the will be no free lunch post-Brexit. Well, that’s fine, it would be foreign food, wouldn’t it? Might contain garlic:

The UK will not have advantages over the remaining 27 EU countries after Brexit negotiations conclude, says Germany’s finance minister.

Wolfgang Schaeuble said: “There is no free lunch. Britons must know that.”

Weirdly, in economics there really is a free lunch, it’s called trade. Trading with other people makes everyone richer. And that’s really the only argument there is concerning Brexit, on what terms will we allow the rEU to trade with us? The obvious answer being–at least should be–that we’ll have no restrictions upon something as beneficial as voluntary exchange which is a relief really, as that makes the negotiations rather easy, doesn’t it?

The EU 27 are expected to remain firmly committed to a “phased” approach to negotiations.

Mr Tusk has said that before discussions on any future trading partnerships can take place, progress must be made on the UK disentangling from its ties to the EU.

Key issues in the first phase are the size of the “divorce bill” the UK will need to pay on departure which is estimated by EU officials to be approximately £50 billion.

Some people are in for something of a shock there. Because there is just absolutely no way at all that anyone on the free side of The Channel is going to agree to anything like £50 billion. And rightly so, it’s simply not money which is owed. For example, it includes contingent liabilities. But they’re not owed until the contingency takes place, are they?

EU leaders will toughen their stance on Britain paying its Brexit bills when they agree negotiating guidelines at a special summit on Saturday.

EU diplomats have agreed unanimously that Britain must settle its bills before embarking on trade talks.

That is, they have agreed that that is what they will ask for. Whether they’re going to get it is rather another matter, isn’t it?

The important thing here is that Britain has the whip hand. We’re going, in under two years, and we’ve already said that no deal is better than a bad one, WTO terms will suit us just fine. There is no leverage over us.

[syndicated profile] tim_worstall_forbes_feed

Posted by Tim Worstall

The great holy grail of economic policy is to find something which increases the efficiency of the economy as a whole. There aren’t that many such things around but the introduction of the Goods and Services Tax in India this summer is one of them. It’s true that consumption taxation itself is more efficient than most other kinds–and it’s also more regressive–but that’s not the major point here. Rather, it’s to turn India into one market rather than a series of state ones. And it’s that which has the International Monetary Fund stating that the GST will push India’s GDP growth rate up over 8%:

The ambitious Goods and Services Tax (GST) to be implemented from July 1 would help raise India’s medium-term growth to above eight per cent, the IMF has said, but expressed concern over the health of the country’s banking system.

Sadly there’s always concern over the health of the banking system.

“The government has made significant progress on important economic reforms that will support strong and sustainable growth going forward,” Tao Zhang, Deputy Managing Director of the International Monetary Fund, told PTI in an exclusive interview.

“We expect that the goods and services tax (GST), which is targeted to be applied starting in July, will help raise India’s medium-term growth to above 8 per cent, as it will enhance production and the movement of goods and services across Indian states,” the IMF official said.

That’s the important point:

“We are extremely impressed by the work that is being done and that we expect it will pay off in terms of higher growth in the future,” he said in response to a question on the reforms being undertaken by the Indian Government.

The basic insight is derived from Adam Smith–Yes! We get to discuss the pin factory again! The point being that the division and specialisation of labour increases production. There’s just more stuff from the same amount of labour. We then need to trade that production around for if I’m making only pins and you’re making only beer then I’ll be thirsty and you’ll be pinless.

Once we accept this basic logic, which is at almost entirely the other end of the spectrum from the economic ideas of Gandhi, then the only limit to the process is how many people we can trade with, how many we can divide and specialise with. As the Indian economy is currently set up the different states can and do tax goods differently. Up to and including internal customs posts, duties which vary according to place of production and so on. This doesn’t entirely kill inter-state trade but it does reduce it and thus reduces how much richer we’re all getting. The important thing about GST is that it is a national system. Thus we’ve converted the semi-connected state markets into just the one national one. India will be richer.

The IMF is just stating the obvious here, the GST will make India richer by making the Indian economy more efficient.

WATCH: Jo Swinson on Question Time

Apr. 29th, 2017 07:26 am
[syndicated profile] lib_dem_voice_feed

Posted by Caron Lindsay

Jo Swinson was on Question Time on Thursday and she was fabulous. She really took on Tory minister Damian Green with pithy and sharp interventions.

Here she is taking about the awful Rape Clause:

And on hard Brexit:

You can watch the whole thing on iPlayer here.

Impressed? Want to see her back in Parliament? Then help her to get there.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

[syndicated profile] tim_worstall_feed

Posted by Tim Worstall

Yes, I knew about the teacher bit, but not that it was while still at school:

One of Emmanuel’s friends – at whose grandmother’s home near Chantilly, he was supposedly studying for his baccalaureate exams – rang to organise the coming weekend. His mother, Francoise Noguès-Macron, realised then that “Manu”, who called her every day to tell her about his day, was not actually in Chantilly. At the end of the week, his father went to the station to collect his son on his supposed return from a week’s revision with friends. There were raised voices when they returned home.

“What mattered to me was not the fact he was having a relationship with Brigitte but that he was alive and that there weren’t any problems,” says Francoise.

Nope, that’s being in authority etc, hands off territory.

Amazingly, I’ve not seen anyone noting this….

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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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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