Monday, December 30, 2019

Best Libertarian Jew Blog Posts of 2019

As we close out the year 2019, and indeed this decade, I like to reflect on the previous year and see what to look forward to in the upcoming year. With the impeachment of Donald Trump, the elections of British Prime Minister Boris Johnson and Indian President Narendra Modi, protestors in Hong Kong, increased tensions in the Gulf region, and increased refugees from Central America and Venezuela, it has been anything but a dull year. As always, I am thankful for your readership. As such, here is a recap of the best of the Libertarian Jew blog for 2019, in chronological order.


  1. Top Marginal Tax Rate of 70 Percent. Congresswoman Alexandria Ocasio-Cortez (D-NY) proposed this sheer brilliance. The problem with that idea working is economic history and economics don't work in its favor.  
  2. Elizabeth Warren's Wealth Tax. Presidential candidate Elizabeth Warren wants to implement a wealth tax in the United States. The issue is that it has not panned out so well in Europe. 
  3. A Nuanced View on Masculinity. The razor manufacturer Gillette aired a commercial about "toxic masculinity." Here is my take on the commercial specifically, as well as a healthy way to approach masculinity in a country that is culturally divided. 
  4. Psychedelic Mushrooms. Earlier this year, Denver was the first city to legalize psychedelic mushrooms. Read to find out why it was the right ballot decision. 
  5. "I'm a pro-life libertarian, but...." I still consider my pro-life, but here is a thirty-plus paragraph explanation as to why that comes with caveats, caveats I am guessing more U.S. citizens hold than we realize.
  6. Baby Bonds. Presidential candidate Corey Booker (D-NJ) added onto the pile of bad policy ideas. Baby Bonds might have some merit in dealing with racial inequality, but it comes with its fair amount of issues. 
  7. Good Intentions Do Not Help the Poor. One of the arguments used by the Left in the U.S. for various anti-poverty measures is to argue based on intent, and not results. This blog entry covers why that notion is faulty. 
  8. Is It Fair for Transgender Women to Compete in Female Sporting Events? This was certainly my most controversial of blog entries for the year, and not easy to answer when all things considered. Read on to find out the answer to the question.
  9. Red Flag Laws. I have found most policy revolved around reducing gun violence are of very low caliber. Consider red flag laws to be an exception. 
  10. Amazon Forest Fires. There are actual problems in the world and then there are problems that are either misrepresented or exaggerated to stoke fear. The clamor over the Amazon forest fires is of the latter.    
  11. Mandated Paid Leave in California. The latest evidence from California shows that mandated paid leave does not increase women's employment, wage earnings, or attachment to employers, the very things that proponents say that would happen.  
  12. The Absurdity of "Latinx." The word "Latinx" was meant to give a gender-neutral option for Latin individuals. However, the word "Latinx" is linguistically incongruous and inoperable in the Spanish language, condescending to the Hispanic community, and shows how out of whack priorities can be.  

May you have a Happy New Year!

Thursday, December 26, 2019

Why Add an Extra Candle on the Menorah for Each Night of Chanukah?

Chanukah, which is the Jewish festival of lights, represents both a military victory of religiously conservative Maccabees over the Hellenic assimilationists and the fact that the oil for the menorah in the Temple lasted eight days when it should have only lasted one. To commemorate, Jews are commanded to light the menorah. On the first night of Chanukah, only one candle plus the helper candle (שמש) are lit. The second night, two candles plus the helper candle. This progression leads to the eighth night, during which we light all the candles on the menorah. Why do we add a light each night? Why not simply light all the candles all nights, or just one night for that matter? To answer these questions, I first wanted to see what Jewish texts had to say. The Talmud (Shabbat 21b) provides a couple of answers:
  1. There is a practical reason for this practice: it is a way to keep track and indicate what night of Chanukah it is. 
  2. As Rabbi Hillel brings up, one elevates to a higher level when it comes to religious matters and sanctity. 
While I appreciate those answers and find validity in those answers, I came up with some answers of my own. One idea, which I realized a decade ago, is that the process of lighting the candles over Chanukah is gradual. If the menorah is to be symbolic of our spirituality and the light we bring to the world, it does not happen overnight. Spiritual growth, much like anything else worthwhile, is a process. It is not instantaneous like fast food or the Internet. We have to work on bringing that light to the world gradually. 

This segued into my second thought, which is why we do this gradually. As mentioned in the last paragraph, spiritual growth is a process. It takes years to reach a certain level to develop such traits as equanimity, patience, and humility. They are not handed down, they do not happen at the click of a button, and for many people, they do not come naturally. 

This leads to my third thought, and explains why we do not light all the candles all nights. If we push ourselves at full throttle and beyond our means, we will burn the candle at both ends (pun intended). If we push ourselves beyond our maximum capacity, we will become disengaged from spiritual pursuits, if not downright antipathetic and angry towards the whole idea. It is why we have to live our spiritual lives gradually. It is not an excuse to make mistakes or to slack off, but rather an acknowledgement of our limitations and make sure we maximize our potential.

My final thought is that much like with all things, they have a limit. Even when shining at our brightest, there is only so much that we can shine. This is not to self-deprecate or put ourselves down, but to remind us that we are human and that we can only go so far. The ideals that exist in Judaism de facto ask us to be like G-d, except that is impossible. Only G-d, a being of transcendent Infinite Oneness, can be perfect. This is the paradox of these ideals, and one we hold in constant tension: we do our best to be as close to living these ideals as humanly possible, yet we know deep down that they are not obtainable. As Pirke Avot says, "you are not obligated to complete the work, but neither are you free to desist from it." Yes, our imperfections exist as human beings, but we continue to work on ourselves and become better human beings through the process. 

I think it's important to ask what all of this means for us. Practically speaking, life does not happen in a gradual progression. Life throws us curve balls, things we were not expecting, things that set us back. The road to success is a messy and imperfect one, especially since we are beings with limitations. Instead of viewing the idea of spiritual growth literally as gradual progression, perhaps the menorah is teaching us that we should always be aiming upwards and that we shouldn't lose sight of that on our bad days. Our goal is to grow spiritually. We have to do it at our own pace without burning ourselves out, but as long as we work on growing and we make progress, I think G-d is happy that we are doing the best with what He gave us. 

Thursday, December 19, 2019

California's Gig Economy Bill Will Cost Consumers and the Employees It Was Meant to Help

In September 2019, the State of California signed Assembly Bill (AB) 5, more colloquially known as the Gig Economy Bill, into law. What AB 5 is going to do when it takes effect on January 1, 2020 is that it will severely limit an employer's ability to classify an employee as an independent contractor. While this bill takes particular aim at ridesharing companies (e.g., Uber, Lyft) since they heavily rely on independent contractors, it can apply to any employer unless they can go through the extensive loopholes to get an extension. In order to determine whether an employee is an independent contractor is based on the ABC test:

  • A) the worker is free from control and direction in the performance of services; and
  • B) the worker is performing work outside the usual course of the business of the hiring company; and 
  • C) the worker is customarily engaged in an independently established trade, occupation, or business. 
If the employee meets the criteria of the ABC test, they are considered an independent contractor under California state law. Proponents of the ABC test contend that employees need such protections in the first place because a misclassification means employers do not have to pay such benefits as unemployment insurance, overtime, or minimum wage. Essentially, those who view independent contracting unfavorably see the classification of independent contractor as a loophole to exploit workers (see analysis from Left-leaning Economic Policy Institute here). With AB 5, fewer employees are to be classified as independent contractors, which means greater labor protections. 

The Left-leaning news and opinion site Vox opined in September that the Gig Economy Bill is a victory for workers everywhere. It might seem like that for those on the Left....until irony strikes. In anticipation of the enactment of the Gig Economy Bill, Vox Media, which is Vox's parent company, had to let go of 200 freelance journalists in anticipation of AB 5. This example with Vox Media reminds us of an observable reality when it comes to labor law. Whether we are discussing paid family leave, minimum wage, or menstrual leave, there are tradeoffs to greater employee benefits. When we look at predictive analyses on AB 5, that's exactly what we see. 

Earlier this week, the libertarian Competitive Enterprise Institute (CEI) released its report on the impact of AB 5, specifically with regards to ridesharing. CEI's main takeaway was that AB 5 would result in "greater costs for the platforms, reduced pay for many drivers, reduced flexibility for all drivers, and higher fares for customers – as much as 50 percent higher in some cases." You are welcome to read the report for further analysis here on the impact it would have for health insurance, work hours, employee expenses, paid family leave, and state disability insurance. As an independent contractor, an Uber driver costs an estimated $31,776 annually. CEI calculates that costs would go up to $53,008 annually. If minimum wage is an indication of what happens when labor regulations increase labor costs at this magnitude, we will most likely see a combination of fewer hours for drivers, lower salaries for drivers, fewer choices for customers, and increased costs for customers. 

CEI is not the only think tank to have estimated the costs. The R Street Institute, which is a Right-leaning think tank, preliminarily did so in light of the Dynamex ruling of the California State Supreme Court. R Street estimated that if Dynamex's ABC test were to become law, like it has with AB 5, it would cost the California economy anywhere from $1.3B to $6.5B annually. 

A California-based consulting firm, Beacon Economics, looked at the impact from another angle: effects on employment for Lyft drivers. Depending on the scenario, their study found that it could mean anywhere between 219,547 and 300,673 fewer Lyft drivers in California. For context, there were 323,914 Lyft drivers in California in 2018, which could up to a 92.8 percent reduction in Lyft employment in California. Another interesting find was that flexibility was "very important" or "extremely important" for 95 percent of Lyft drivers, especially since the average Lyft driver in California works about 4 hours a week. 

This analysis brings me to another important feature: why people choose independent contracting in the first place. As R Street points out in their aforementioned analysis, independent contractors have the flexibility to dictate their own work schedules and work for multiple firms. Plus, employers like the arrangement because it entails fewer expenses, less risk, and fewer long-term commitments in a labor market in which employees are staying with their employers for less time than in previous generations. 

Not everyone wants the standard "9 to 5" work arrangement that has become standard in U.S. culture. There are those who would rather have the flexibility over the extra benefits. According to a June 2018 survey from the Department of Labor's Bureau of Labor Statistics (BLS), 79 percent of independent contractors prefer their working arrangement over a traditional employment arrangement. Fewer than ten percent of independent contractors would rather be in a traditional work arrangement. The flexibility also provides a financial benefit. The Right-leaning Heritage Foundation found that worker flexibility generated a worker surplus of 38-51 percent of earnings.

Far from feeling exploited, most independent contractors like the work arrangement they have. When you account for the costs and how independent contractors feel about their work arrangement, it really feels like a solution in search of a problem. We live in the 21st century, a time in which technology is advancing at a rapid pace. We cannot be beholden to working arrangements that worked better "back in the day." We need the flexibility and adaptability of independent contracting to enjoy that growth of on-demand services. Otherwise, states such as California undermine their own progress. 

Wednesday, December 11, 2019

Is Strengthening Food Stamp Work Requirements for Able-Bodied Adults Without Dependents a SNAP Decision?

This past week, the Trump Administration's Department of Agriculture (USDA) finalized rules for the Supplemental Nutrition Assistance Program (SNAP), more colloquially known as food stamps. When initially proposed last February, USDA had proposed reforms on three aspects of SNAP. The rule the USDA passed last week only covered one aspect: able-bodied adults without dependents (ABAWD). Those who are ABAWD are those who are of working age (18-49 years), who are physically and mentally able to work, and are without dependents.

As part of the Personal Responsibility and Work Opportunity Reconciliation Act, which is the major welfare reform act from 1996, federal law requires ABAWDs to work, train, or participate in volunteer programs for at least 20 hours a week for those who were receiving more than three months of SNAP benefits within a three-year period. While this has been the law for over twenty years, there has also been allowance for waivers for areas when certain economic conditions were met, most notably when unemployment for a given area had 20 percent higher unemployment than the national average for a two-year period.

When the Great Recession hit, every jurisdiction received a waiver to deal with the difficult times. However, as the American Enterprise Institute brings up, there were those districts used various tactics to maintain their waivers post-recession. Illinois and California are two such states that have done so to its maximum effect. Those two states account for over two-thirds of the waivers in this country, in spite of accounting for 16 percent of the overall U.S. population.

This waivers exist in spite of the fact that the average unemployment rate for these waived jurisdictions was at 4.5 percent as of this past August. As of 2018, nearly fifty percent of ABAWDs lived in districts that allowed for these waivers (USDA). On top of that, about a third of ABAWDs already have income (USDA, Table 3.2). These facts illustrate that the usage of the waivers in their current form undermine the intent of the waivers.

What the new USDA rules intend to do to restrict the waivers by requiring that the unemployment rate for a given area is to be 6 percent. How would that play out?

What Will Be the Effects of the USDA Rule?
According the USDA statistics, 2.99 million out of 20.60 million households on SNAP are ABAWD (Table 3.2). While 14.5 percent of SNAP recipients are ABAWD, this does not mean that 14.5 percent of SNAP recipients are affected because it only affects those who will no longer be exempted from the waiver. The Left-of-center Urban Institute estimated earlier this year that such a rule would affect 588,000 households (3 percent), which about to 716,000 fewer people (1.8 percent reduction of SNAP recipients). These estimates are close to what the USDA calculated, which was 688,000 individuals off the benefits that are to save $5.48 billion over five years.

Other studies have measured the impact of stricter work requirements for SNAP. The Foundation for Government Accountability (FGA) preliminarily found that work requirements in ArkansasFlorida, and Mississippi have been successful. The Upjohn Institute for Employment Research had more modest findings: for every five individuals who stop receiving SNAP benefits due to work requirements, only one individual receives a job (Harris, 2019). Taking the Upjohn findings at face value, it comes off as a 5:1 ratio in terms of individuals being affected. At the same time, losing SNAP benefits does not have the same magnitude as being able to have a job and better support your household.

If you want to read more about SNAP and work requirements, you can read my 2016 analysis on the topic.

Where Do We Go From Here?
One of the underlying bases of economics is that we live in a world of scarcity. It is not realistic to think we can provide everything for everyone, and that goes for SNAP benefits. As such, there is a line that needs to be drawn for eligibility, which means not everyone can qualify or receive SNAP benefits.

SNAP beneficiaries are at 36.4 million [as of 9-2019], which is about the same as the 36.9 million in September 2009 during the height of the Great Recession (USDA). We're not in a recession anymore. If SNAP is supposed to a welfare benefit that meets counter-cycical demand, then the number of beneficiaries should have, at the very least, dropped to pre-recession levels.

I don't want to get into a debate about whether long-term usage of food stamps creates an unwanted dependency because that it is another discussion for another time. I will, however, conclude here. The United States has reached over $22 trillion in federal debt. Looking at the Congressional Budget Office's projections on debt, things are only going to get worse from here. When taken into consideration with everything I have mentioned so far, any reasoned argument would ask about tradeoffs or how to rank priorities. Who is greatest need of SNAP benefits? Are those who are ABAWD really in need of them in comparison to other recipients? And if they are not, should they still be SNAP beneficiaries?

I have been saying for years that we need to reform the SNAP program. It would be nice to have that discussion, but given how polarized this country is, it would be nigh impossible to do so, certainly on the national level. Politicians such as Alexandria Ocasio-Cortez have already played the emotional card by saying how Trump's reform could have affected a younger version of herself. If we cannot even have a debate about a $5.5 billion cut over a five-year period because it is easier to accuse those with whom you disagree politically of being callous towards the poor, then I have little hope for the fiscal future of this country.

Wednesday, December 4, 2019

The Word "Latinx" Is Unnecessary, Linguistically Improper, and Condescending

United States citizens who are of Hispanic or Latino origin have grown to be the second largest ethnic group in the United States. Trying to find a label for this demographic has proven difficult over the years. There is still a debate between whether this demographic group should be referred to as Hispanics or Latinos. In spite of being used interchangeably in everyday conversation, they are not the same thing. Latino refers to the geographical area in North and South America that is to the south of the United States. Hispanic refers to countries where the majority language is Spanish. For example, Spaniards are Hispanic, but not Latino. Brazilians are Latino, but not Hispanic. Argentinians and Mexicans are both Hispanic and Latino.

In case that is not confusing enough, throw in the term "Latinx" to the mix. The term "Latinx" was first used in 2004 in activist circles. It was not until 2014 until it took off and became popular among progressives and in social media, as well as those in higher education (Salinas, 2017). "Latinx" is a gender-neutral neologism that is a substitute for "Latino" or "Latina." The premise is to create an alternative for those of Latin American origin or descent (especially LGBTQ individuals) who would like a gender-neutral or nonbinary way to describe themselves in Spanish. "Latinx" might sound like a well-intended attempt at diversity and linguistic inclusion. However, as a polyglot who loves Spanish enough to have pursued Spanish as one of his three majors in college, I take issue with the term "Latinx."

First, let me lay out the objections I have on grammatical grounds. Unlike English, Spanish is a gendered language. In gendered languages, there are two main types of gendering: natural gender and grammatical gender. A natural gender is when a noun, pronoun, or a noun phrase has a gender attributed to it based on relevant attributes to the referent (e.g., amigo is "male friend," amiga is "female friend"). The second type of gendering, grammatical gender, is a way of classifying nouns that is not dependent on biological sex or sociocultural expressions of sex or gender. Grammatical gender does not indicate whether a given noun is substantively masculine or feminine. As but one example, the word for "masculinity" in Spanish (la masculinidad), in French (la masculinité), in Russian (мужественность), and in German (die Männlichkeit) are all classified as feminine nouns.

Much of the gendering in gendered language is grammatical gender, but there is still natural gender in a language such as Spanish. It comes with such a rule that if you had a large group of women, but one man decides to join the group, "Ellas" suddenly becomes "Ellos." I never understood the rule that a female-majority or gender-neutral plural would be the same word for the masculine plural, but I digress.

There are those who oppose Latino/Latina descriptors because they are gendered, which attributed to the creation of "Latinx". Here is the issue with that. In Spanish, words ending in "-o" are generally masculine and words ending in "-a" are generally feminine. Obviously, there are exceptions to the norm, but binary gender is the norm of how gendered nouns work in Spanish. The suffix "-x" does not exist in the Spanish language. Earlier this year, the Real Academia Española (Royal Spanish Academy), which is the official committee of linguists that preserves the integrity of the Spanish language, ruled on the matter of the suffix "-x". To translate its response (see below), "the use of the letter "x" as a supposed designation for gender inclusion is foreign to Spanish morphology, not to mention unnecessary. The grammatical masculine (the suffix "-o") already serves this function." To apply that ruling here, the word "Latinos" in Spanish can either be masculine or gender-neutral.



When you look at the grievances of those who use "Latinx," the problem is not with just one word, but gendered language, specifically the gender binary that exists in so many languages. The fact that the RAE had to rule on the suffix "-x" tells you it is about more than just one word. Taking this grievance seriously, the suffix "-x" would not only apply to the word "Latino" when speaking Spanish. Even if your argument is that "the suffix would only apply to naturally gendered nouns because inanimate objects don't have feelings," it still remains a problem to use the suffix "-x" in the Spanish language, not only with nouns, but also because adjectives are gendered in Spanish. Here's an example:

Esxs chicxs mexicanxs fueron al cine a ver sus amigxs guatemaltecxs.
(Those Mexican individuals went to the movie theater to see their Guatemalan friends.)

As we see, not only does "Latinx" not grammatically correspond with Spanish, it also does not orally correspond with the Spanish language. The inserted "x"'s make it impossible to pronounce that sentence in Spanish, not to mention it is very confusing for Spanish speakers. And as a side note about aesthetics, it takes a beautiful language and turns such words as "Latino" into an ungainly linguistic bastardization.

This is not simply an academic debate about Spanish phonology. Applying this morphological rule consistently would have major implications for the Spanish language and Spanish speakers. As this well-presented argument against "Latinx" from Swarthmore College points out, the irony of Latinx is that its proponents advocate for its usage in the name of inclusivity, yet manage to exclude millions of Spanish speakers. Even with some fluency in English, pronouncing that "-x" is difficult for Spanish speakers. It excludes older Spanish speakers who would have difficulty adopting such a major change. And finally, how does it empower gender nonbinary individuals? It doesn't provide a gender-neutral alternative for those it was meant to help because "Latinx" is inoperable in the Spanish language.

I can see someone argue "Well, it wasn't meant to be used in Spanish. It was meant to be used in the English language." This is insulting because you are trying to accommodate a minority demographic in the United States that is predominantly Spanish-speaking, as well as provide a form of expression for Spanish-speakers who are gender nonbinary. For argument's sake, let's say it is a valid argument. You still run into an issue, mainly that the English language already has gender-neutral terms for Latino/a and Hispano/a: Latin and Hispanic.

The fact that another term was created when an adequate, gender-neutral term existed speaks to motive, as does the usage of "Latinx." I question motive here because the "Latinx" crowd specifically chose a suffix that does not make sense to use in Spanish. If these activists bothered to learn about Spanish or engage with the demographic that they are supposedly helping, perhaps they would have chosen "Latine" instead of "Latinx" in order to find something that could work within the confines of the Spanish language. At least it would head off some of the issues that come with "Latinx."

Additionally, you can tell the inception of "Latinx" came with little to no forethought. As Merriam-Webster brings up, there is not a consensus on how to pronounce it. All these reasons add up to why "Latinx" comes off as a capricious and politically correct ploy to tell a group of people how they should manage their language and social constructs. Even proponents think "Latinx" is elitist! Such a linguistic shift comes off as culturally and linguistically tone-deaf, which is ironic considering how so many on the Far Left complain about cultural and social ignorance.

Using the suffix "-x" in this fashion imposes an Anglophone norm on the Spanish language in a way that does not grammatically or orally correspond with the Spanish language, which is all the more pronounced when considering that the primary usage of the letter "x" in Spanish is in words borrowed from foreign languages. Such a step is the beginning of linguistic imperialism. What else would you call it when a group of people from the outside looks at a language, deems it too backwards, and attempts to use their linguistic and grammatical structure to force a change on the other group's language? From this mindset, it doesn't matter that millions of Spanish speakers are offended by the fact that foreigners are telling Hispanics how to speak Spanish. It hearkens back to the inherent issues many "Latinx" proponents see with the Spanish language.

Did the Latinx proponents bother to ask the Hispanic/Latin community, the very people that would use "Latinx" as a descriptor, about Latinx? A progressive Latino polling organization and market research firm, ThinkNow Research, did ask the Hispanic/Latin community earlier this year about how they self-identify with their ethnicity (see below). Through its polling, ThinkNow Research found that only 2 percent of Latinos prefer the term Latinx. Hispanic and Latin millennials polled at a slightly higher 3 percent. Another way to frame this finding is "the vast majority of Latins and Hispanics prefer another term to describe their ethnicity." The main pollster, Mario Carrasco, was surprised at the results upon realizing that Latinx has limited appeal. Maybe politicians and marketers should think twice before imposing the term "Latinx" on a community that deems the "Latinx" designator as unpopular.



It makes sense that not many Latinos are not using the term "Latinx", and it's not simply from a grammatical standpoint. Latinos have to worry about discrimination, immigration and labor exploitation, lower literacy rates, access to health care, and a myriad of other issues. With all of these issues facing Latin Americans in the United States, why would they care about using "Latinx?"

To summarize the issues with "Latinx":
  1. "Latinx" does not grammatically or orally correspond with the Spanish language. 
  2. Because of this inoperability, it does not practically do any favors for the demographic it was meant to help: non-binary and gender-neutral Latin and Hispanic individuals.
  3. Consistently applying the "-x" suffix to Spanish would ironically exclude more people than it includes, which is contrary to the intent of the creation of "Latinx." 
  4. Spanish already has a gender-neutral term: Latino. So does the English Language: Latin. "Latinx" is, at best, superfluous. Honestly, calling it superfluous is giving it too much credit. 
  5. After existing for 15 years, the term "Latinx" is still not popular amongst Latins and Hispanics in the United States.
  6. "Latinx" was conceived in such a disorganized fashion and such a disregard for the Spanish language that it feels like it comes from an outside force, rather than the organic process in which language almost always evolves. 
  7. "Latinx" is a distraction from the real issues that Hispanic and Latin individuals in the United States face. 
  8. The "Latinx" debate is not ultimately about inclusivity or how language evolves. It comes down to whether gendered language, particularly in gender binary form, should exist.
If Spanish ever becomes gender-neutral or at least allows for a gender-neutral option, it will most probably evolve that way organically and naturally. People have the freedom of speech to use what words they want, especially when describing themselves. If someone wants to describe themselves as "Latinx," more power to them! But let's not kid ourselves about the paternalism behind the predominant usage of the term "Latinx." All the argument for "Latinx" perpetuates is the stereotype that elitists on the Far Left think they know what is best for everyone else, including how Spanish should be written and spoken.

Wednesday, November 20, 2019

Welfare Magnet Theory: Do Large Welfare States Attract Low-Skilled Immigrants?

To leave one's home to live in another country is a huge undertaking. It involves leaving behind that which you once knew, and once you arrive, you have to get used to a new culture, a new way of doing things, and in some instances, a new language. This acclimation and shock are all the more pronounced if you come from a lower socioeconomic status. Why do these individuals decide to leave their comfort zones and migrate to another country? There are a number of reasons one makes the choice to live in another country. One possible answer is that of the welfare magnet theory.

The welfare magnet theory hypothesizes about the effect that the existence of a welfare state has on migration flows. The larger the welfare benefits, the more incentivized migrants, particularly low-skilled migrants, are to move to a given country. It seems intuitive enough of an idea. The question is whether it plays out in reality.

Harvard economist George Borjas was one of the first ones to argue on theoretical grounds that the phenomenon exists (Borjas, 1998). There has been some empirical work since then to rebut the theory. Here are four particular studies:

  • The Personal Responsibility and Work Opportunity Act of 1996 included a provision to allow states to provide cash welfare to immigrants. Since some states opted not to, it would follow that immigrant families would have migrated to states that had the benefits. However, the law did not have that magnitude of migration (Kaushal, 2005). Perhaps the cash incentive was not large enough to induce migration. 
  • One study showed that poor, single mothers were not particularly inclined to move across state lines for the welfare benefits (Levine and Zimmerman, 1999). 
  • Another study showed that the empirical evidence for the welfare magnet theory "does not uniformly support this theory" (Bitler and Hoynes, 2011).
  • One study from the Journal of the American Medical Association: Pediatrics came out earlier this week showing that the expansion of public health insurance for non-U.S.-born children does not create a "welfare magnet effect" (Yasenov et al., 2019).

To be fair, the aforementioned studies are measuring interstate migration patterns. Migrating across international borders involves a whole different set of incentives and challenges. On the other hand, if one is not willing to migrate interstate, one would a fortiori would not be incentivized to migrate internationally. What does international research have to say? One paper uses an econometric model for the European Union to suggest that it does exist (Razin and Wahba, 2011). One study countered by postulating that not only does the magnet not exist, but in some countries, immigrants experience less welfare dependence than their native counterparts (Giulietti, 2014).

If it didn't feel coincidental to have one study on the topic released this week, how about two studies? We already covered the first one (see above), but there was one released in the National Bureau of Economic Research (NBER). A Princeton economist, Henrik Kleven, worked with two of his subordinates to look at a Danish case study. According to this research, it turns out that the welfare magnet theory is much more than a theory (Kleven et al., 2019). The authors go as far as stating that this is the first real piece of causal evidence on the welfare magnet theory.

After sifting through this evidence, I still maintain some skepticism because there are multiple factors that induce migration. Let's use the United States as an example. The Congressional Research Service, a nonpartisan public policy research institute of Congress, found that major factors of Central American migration include poverty, natural disasters, political persecution, and gang violence. At best, I would say the recent NBER study would hold for Denmark only, and that it is a single case study.

I personally don't hold any stake into the veracity of the theory. I recognize that it has political implications for immigration policy throughout the Western world regardless. It could be used by anti-immigration movements to restrict migration flows. As I have brought up in the past, immigration is a net benefit for the host country, even when it comes to low-skilled immigrants. If the welfare magnet theory ends up being true, I would find it more of an indictment of the welfare state and provide an argument that we should scale back the welfare sate. After all, the famous economist Milton Friedman found the welfare state to be incompatible with open borders because of limited resources. At the same time, Friedman was against having a welfare state in the first place.

Plus, it is worth noting that the welfare magnet theory is not the same as the fiscal burden hypothesis, which states that migrants pose a net fiscal burden on the native population. Evidence shows that immigrants, especially low-skilled immigrants, do not cause a fiscal burden (see here, here, and here). If you're worried about welfare usage, look no further than Cato Institute research from 2018, which found that natives are more likely to use welfare benefits than immigrants.

Getting back on topic, the welfare magnet theory should not be weaponized against immigrants. Even if the theory does turn out to be true, it is also true that low-skilled immigrants are a net benefit to this country. If people are worried about draining the welfare system, perhaps they should ask how it got so big in the first place and what could be done to shrink it so insolvency doesn't swallow us whole.

Wednesday, November 13, 2019

A Soft Drink Tax Is Hardly A Sweet Policy Idea

Sugary drinks, and sodas in particular, are tasty. popular among people in the United States. About half of Americans drink a soda every day. The catch is that they are some of the unhealthiest drinks out there. In response to the unhealthy nature of sodas, municipalities have enacted soda taxes. The purpose of such a "sin tax" is to levy an excise tax in order to produce healthier outcomes for Americans.

Mathematica Policy Research, a nonprofit research firm, released a study a few weeks ago about the effects of such taxes in four cities: Oakland, Philadelphia, San Francisco, and Seattle (Cawley et al., 2019). The study's main finding is that a beverage tax rate of 1¢ per ounce, it translates into a reduction of 53 ounces consumed per month (or a 12.2 percent decrease).

I want to take the Mathematica finding at face value and find the impact of the soft drink tax. Let's walk through a back-of-the-envelope calculation of mine. The average American consumes 38.87 gallons annually, which is about the equivalent of eight 12-ounce cans in a week. With the average can of soda having 150 calories, that amounts to 1,200 calories a week (or 171 calories a day). The average American consumes 3,600 calories, which means that means sugary drinks account for 4.8 percent of daily caloric consumption. The soft drink tax reduces consumption by 21 calories per diem, which is 0.6 percent of caloric consumption.

Asking what optimal caloric consumption is tricky to determine since it depends on sex, height, current weight, level of activity, and metabolic rate. Plus, the quantity is different if you are trying to maintain current weight versus if you are losing weight. Even with the assumption that the average woman needs 2,000 calories to maintain and the average man needs 2,500 calories to maintain (and that's for maintaining weight, not losing weight), it illustrates how little the soft drink tax has done to cut caloric intake adequately to reduce obesity.

None of this factors in what economists refer to as the substitution effect. The substitution effect is when a change of prices of one good results in the increased consumption of another good, typically because the alternative good is cheaper. Much like I asked with trans fats, my question here is "When the tax is implemented, what gets replaced with soda?" As the Left-leaning Urban Institute points out:

While sugar is consistently identified as contributing to obesity, it is not the only factor. And the health effects and medical costs of obesity are not uniform. Some consumers with no risk of harm or medical cost will pay the tax. Meanwhile, others may substitute equally or more unhealthy options (such as  alcohol) to avoid the tax.

I bring up these questions and points because the truth of the matter is that the primary goal of the soft drink tax is not to reduce soft drink consumption per se, but rather to reduce obesity. This line of thought corresponds with the past research that has shown that taxing sugary products does not a) cause significant weight loss (Fletcher et al., 2014Fletcher et al., 2010Sturm et al., 2010), b) greatly shift overall caloric consumption (Epstein et al., 2015; Fletcher, 2011), or c) does not automatically cause consumers to purchase healthier options because they might be driven to purchase unhealthier options (Seiler et al., 2018; Wansink et al., 2012). Another fun finding with the Philadelphia soft drink tax is that enough people went to neighboring areas to purchase soft drinks, which offset the decrease of sugary drinks attributed to Philadelphia's soft drink tax by 56 percent (Roberto et al., 2019). And if that weren't enough, here is a literature review conducted for New Zealand's Ministry of Health. After examining 47 studies on sugar taxes, the conclusion of the authors was that "we have yet to see any clear evidence that imposing a sugar tax would meet a comprehensive cost-benefit test."

I am not here to cast doubt on Mathematica's methodology or its findings because Mathematica is a reputable research organization. What I would like to remind us is that we need to have a fuller understanding of the effects on a policy such as a soft drink tax, not simply one aspect that sounds nice but in reality has little to no bearing on the primary goal of obesity reduction.


2-24-2022 Addendum: In 2018, Seattle adopted a soda tax. A study found that people were substituting soda for beer (Powell and Leider, 2022). The people of Seattle were swapping out one calorie-heavy drink for another. In other words, we have another study that shows that the soda tax does next to nothing to help with obesity. 

Tuesday, November 5, 2019

Warren's "Medicare for All" Math: A Lot of Wishful Thinking Plus Avoiding Her Tax on the Middle Class

There has been a major push for single-payer healthcare vis-à-vis Medicare for All (M4A), one that was most prominently started by Senator Bernie Sanders (I-VT). Other Democrats have followed suit, especially Senator Elizabeth Warren (D-MA). Much like so many proponents of single-payer healthcare in the United States, Warren has not able to answer the ever-elusive question of "How to pay for it?" Warren has been so evasive of the question that Saturday Night Live made fun of it this past weekend.



This past week, Warren finally released a response as to how she would pay for M4A. As the memorandum points out, Warren anticipates six forms of funding for M4A:

  1. Employer Medicare Contribution. Instead of making employer-sponsored healthcare contributions, Warren would have employers make the contributions to the government for M4A. Total amount: $8.9 trillion
  2. Additional Take-Home Pay. Employees would no longer pay their part of salary to their health care premiums or health savings accounts (HSAs), hence the additional take-home pay. Total amount: $1.4 trillion
  3. Taxing the 1%. Combine taxes on financial firms, on corporations, and 1% of individuals. Total amount: $6.8 trillion
  4. Improved Tax Enforcement. Attempts to fight tax evasion and improve tax compliance. Total amount: $2.3 trillion
  5. Immigration reform. Under a Warren presidency, she would allow for greater immigration, which would mean more taxpayers. Total amount: $400 billion
  6. Eliminate the Overseas Contingency Operation Fund. Total amount: $800 billion
In total, Warren expects these six policy prescriptions to generate $20.5 trillion over the next decade to fund M4A. Much like I have criticized Sanders' math when he made his proposal in 2016, I am now going to do the same for Warren.

  • Warren underestimates the costs of M4A. Warren estimates that M4A is going to cost an additional $20.5 trillion over the next decade. According to the bipartisan Committee for a Responsible Fiscal Budget (CRFB), ten-year estimates of M4A range from $13.5 trillion to $36 trillion. The tricky part of the range is that the rosy $13.5 trillion estimate was conducted for the Sanders campaign. Independent estimates put the amount ranging from $25 trillion to $36 trillion, with the most recent estimate (coming from the Left-leaning Urban Institute) at $34 trillion. What this means is that even if her calculations are correct (which they are not...see below), Warren's estimation is still about $10 trillion short of being able to pay for M4A.
  • Warren's plan includes a middle-class tax. What Warren calls an "employer Medicare contribution" is in fact a tax. What else would you call a payment to the government to finance government programs? That's what a tax definitionally is. More to the point, this "contribution" would be a payroll tax. Much to Warren's dismay, general economic consensus is that incidence of the current payroll tax for Medicare is largely borne by the employee, which means that the "employer Medicare contribution" is de facto a multi-trillion-dollar tax on the middle class. The Biden campaign is taking a shot at Warren for this exact reason.
  • Warren has rosy projections for improved tax enforcement. Through increased tax enforcement, Warren calculates she could acquire an additional $2.3 trillion over the next decade. This is in considerable distinction to previous estimates. The Congressional Budget Office (CBO) calculated what would happen if the IRS increased appropriations for enforcement initiatives by 35 percent. The CBO calculated that this policy alternative would generate $55 billion over the next decade. Warren's calculations are whimsical enough where she thinks she could get 40 times CBO estimates.  
  • Savings from "comprehensive payment reform." Warren credits itself for $2.9 trillion in savings from comprehensive payment reform relative to the Urban Institute study. As former public trustee for Social Security and Medicare Charles Blahous points out in his analysis on Warren's Medicare for All calculations, has already taken credit for these credits, which makes it tantamount to double-counting the savings. 
  • Warren's wealth tax is impractical. Warren would like to impose a 6 percent wealth tax on billionaires, and estimates that it would generate $3 trillion in revenue over 10 years. Forgetting the constitutional barriers, a wealth tax would be impractical (see my past analysis on the wealth tax here). No country has ever imposed a wealth tax that high. Countries that had lower wealth taxes repealed them because, as the OECD states, "[the repeals were] justified by efficiency and administrative concerns and by the observation that next wealth taxes have frequently failed to meet their redistributive goals (OECD, 2018, Executive Summary)."
    • Warren has already stated that she plans on using wealth tax revenue for other initiatives.
    • Warren's previous wealth tax estimate had overstated what it would acquire in revenue. Per OECD data, the average European wealth tax raised 0.27 percent of GDP, with Switzerland raising 0.98 percent. Warren thinks she can pull off 1.4 percent of GDP. How is Warren going to succeed where so many other countries have failed? 
  • Skepticism on Warren's payment cuts to providers. One of the ways that Warren attempts to keep costs low is to pay physicians at Medicare rates and hospitals at 110 percent of Medicare rates. Per Warren's calculations, it would save $4.2 trillion over ten years. The closest system that the U.S. has is Maryland's all-payer system, which means that every price is the same, whether private or public. While private systems are 13 percent lower, the public-sector hospitals are 40 percent higher for inpatient services and 60 percent higher for outpatient services. The rates under this system are much higher than average Medicare costs (Pope, 2019). Additionally, the state of Washington could not handle smaller provider payment cuts with its public option. The federal government also could not overrode Medicare physician payment cuts, and eventually did away with the Sustainable Growth Formula (SGF) [see Congressional Research Service report here]. Combined with other countries' inability to keep costs down once single-payer was implemented, it provides enough reason to pause and wonder if Warren could actually implement such payment cuts.
  • Warren is going to need to impose additional taxes, including taxes on the middle class. Shortly before Warren released her calculations, CRFB released their findings on whether funding M4A would require a tax on the middle class. Even with high taxes on the 1 percent, financial institutions, corporations, and other policies not included in Warren's calculations (e.g., closing corporate tax loopholes), CRFB calculated that the government could raise $11 trillion over a decade. The CRFB makes caveats with this $11 trillion estimate, the foremost being these are aggressive policy prescriptions that might not be technically or politically feasible. A wealth tax would have constitutional challenges. Additionally, these aggressive policies would likely reduce incentive to work and save, thereby stifling economic growth, which would also have indirect effects on tax revenue. CRFB's conclusion was that we would need to increase taxes on the middle class. 
Postscript: Not only is Warren making unreasonable assumptions about her cost savings, but she is also imposing a tax on the middle class without being honest about the nature of her "employer Medicare contribution." Additionally, she is using an unrealistically low cost estimate to avoid the criticism that single-payer critics are all too right about: single-payer health care is an insolvent payment mechanism and something the people of the United States can ill afford.


11-7-2019 Addendum: If you want another good read on Warren's budgetary manipulation, read this piece from the Federalist. 

Friday, November 1, 2019

California Provides an Argument Against Mandated Paid Family Leave

At least in a U.S.-based context, California is known as a state that is at the forefront of trying policies that are heralded by the Left. One such policy is that of mandated paid family leave. Under the California Paid Family Leave (PFLA), employees are provided partial pay to take off of work for up to six weeks to either tend to the serious illness of a close family member or to bond with a new child. Essentially, the premise behind paid family leave is work-life-balance vis-à-vis providing employees to take on a variety of family caregiving obligations without work getting in the way or needing to quit one's job to meet said obligations. If you want more information on paid family leave, please see my analysis on paid maternal leave from five years ago (see here), my analysis on Family and Medical Leave Act (FMLA), this policy report from the Cato Institute, or you can read this primer from the Congressional Research Service.

Having recently come back from a trip to France and see how they better manage work-life-balance than in the United States in the sense that they work to live (instead of the increasingly common practice in the United States to live to work), it got me thinking about whether it's an important value. Nevertheless, the tricky thing about public policy, especially when it has good intentions, is that it all too often comes with unintended consequences. Looking at the latest study on the PFLA, it seems that paid family leave is no exception. Last week, researchers from the University of Michigan, University of Utah, Middlebury College, and the U.S. Department of Treasury released a study showing that there is little evidence towards the benefits of paid family leave (Bailey et al., 2019). To quote the report:

We find little evidence that PFLA increased women's employment, wage earnings, or attachment to employers. For new mothers, taking PFLA reduced employment by 7 percent and lowered annual wages by 8 percent six to ten years after giving birth. Overall, PFLA tended to reduce the number of children born, and by decreasing mothers' time at work, increase time spent with children.

This finding is significant because one of the arguments used for legally mandated paid family leave is that at least for new mothers, it helps with labor force attachment. Based on these findings, reducing annual wages by 8 percent sure doesn't help with the gender wage gap that liberals are vehemently against (see my analysis on the gender wage gap here, here, and here). And I imagine that reduced employment doesn't do any favors when it comes to trying to get greater female representation in the workforce, nor does it help with make new mothers more likely to stay attached to employers, as proponents predict. While increased time with children is important, there is also the tradeoff of a lower fertility rate, which is problematic for a country that already struggles with a fertility rate below replacement rate.

Yes, this study draws upon robust tax data, has a large sample size, and does so over a relatively long period of time, all of which helps make it methodologically superior to previous paid family leave studies. While case studies have a role in discovering the efficacy of new ideas with little previous empirical data, there are limits to trying to draw general conclusions from this study. For one, PFLA lasts for six weeks. One could argue that six weeks is not long enough (or that it could be too long). Another issue is that PFLA provides 60-70 percent of a worker's wages. Perhaps providing a different amount would create different incentives. Perhaps an automatic enrollment would change the interactions. There could also be other elements within either the culture or economy of California that could make paid family leave less effective than it could be otherwise.

By itself, using this study to rally against mandated paid family leave is inadequate. Nevertheless, it does add to the empirical research showing the unintended consequences of mandated paid family leave. With that being said, here are a few points to consider when thinking of the tradeoffs of mandated paid family leave:

  • Paid family leave lowers women's wages. The latest study is not the only one to confirm this point. One study analyzing 21 countries showed that paid parental leave is more effective when the time period is moderate, as opposed to being long (Misra et al., 2011). On the other hand, the same study showed that the same policies contribute to lower wage levels for women relative to men (ibid.). There are also older studies showing the same effect, including those from economists well-known on the Left (e.g., Ruhm, 1996Gruber, 1994Summers, 1988).
  • Paid family leave affects women labor participation rate. A study from the National Bureau of Economic Research came to the conclusion that paid parental leave was responsible for about 28 percent of the drop of women labor participation between 1990 and 2010 (Blau and Kahn, 2013).
  • Paid family leave makes it more difficult for women to receive promotions. A study of paid leave expansions in the United Kingdom not only resulted in fewer female managers, but also exacerbated gender inequality (Stearns, 2017).
  • Support for paid family leave is in the details. Much like with so many policies, they sound nice in concept or in theory. That is why support for many Left-leaning proposals has higher support in the abstract. When you ask survey respondents about the details of the Left's latest and greatest policy ideas, support declines (see my analysis on that survey data here). Mandated paid family leave is no different. People assume that paid family leave is a wonderful thing, assuming they don't have to pay for it. When confronted with costs they would have to shoulder (e.g., lower salary, fewer benefits, less promotional potential for women), the support for federal paid family leave diminishes to the point where a majority are opposed (2018 Cato Institute survey).

I will leave you with this thought: whether we are discussing minimum wage, menstrual leave, or other rigid employee protections, they unquestionably come with a tradeoff. That is the economic nature of labor laws, and more specifically, employee benefits. If mothers want to prioritize more time bonding with their newborn children, that's fine. That is a decision they have to make for themselves. But let's not ignore the fact that that choice all too often comes with the tradeoff of less career development potential, a shift in career choices, and lower wages for women. While paid parental leave is becoming more popular, it comes with a price, a price that employers are too happy to ultimately pass either to the customer or their employees. The question is whether the price of a policy such as mandated paid family leave is worth the cost.

Thursday, October 24, 2019

Democratic Party Policy Ideas Not Popular Enough to Win 2020 Presidential Election

I have to love the optimism of my self-identifying progressive friends when it comes to them thinking that "progressivism" will win the hearts of Americans and win the 2020 presidential election. While I find that sentiment to be cute, I really do have to wonder if my country is that liberal. On such issues as same-sex marriage and marijuana, I would agree that Americans have become more open and accepting on these topics. When it comes to immigration, Trump has become belligerent and ridiculous enough where Americans have become overall more supportive of immigration (Gallup). In spite of some issues being in the Democrats' favor, what I am going to argue that when it comes to the major issues, the United States is by and large not ready for a Left-leaning agenda.
  1. Medicare for All. When asked about whether they support Americans, 51 percent support it, according to a Kaiser Family Foundation (KFF) poll. Support drops when asked about particulars. If Medicare for All is to result in delayed treatment (which other single-payer systems have experienced), then support for Medicare for All drops to 26 percent (KFF, 7/2019). Support hovers around 37 percent if Medicare for All raises taxes and eliminates private health insurance (ibid.).  
  2. $15 Minimum Wage. Generally speaking, 63 percent of Americans support a $15 minimum wage. What changed was when they were told about the economic impact as found in the recent Congressional Budget Report (see my analysis here). When they were told that 27 million people would get a pay bump while 1.3 million would lose their jobs, support dropped from 63 percent to 37 percent (Business Insider).
  3. Abortion. On the one hand, 60 percent think that Roe v. Wade should not be overturned. On the other hand, support for abortion drops to 28 percent for abortions performed in the second trimester, and down to 13 percent for abortions performed in the third trimester (Gallup).
  4. Reparations. Especially during the Democratic primary debates, there has been a shift on discussing reparations for the descendants of enslaved men and women. While the idea is gaining traction amongst Democrats, two-thirds of Americans are opposed to giving cash reparations to descendants of slaves (Gallup, 7/2019). Rasmussen had a similar finding in April
  5. Universal Basic Income. Andrew Yang has been a particular proponent of a universal basic income, although other candidates are starting to catch on. It might not sit so well with voters: 52 percent are opposed to the idea (Gallup, 2/2018).
  6. Political Correctness.  While this could have some economic effects, the concerns here are primarily cultural in nature. 52 percent of Americans, along with a majority of independents upon whom the Democrats would have to depend on to win in 2020, are against political correctness (NPR, 12/2018). 
  7. Climate Change. Climate change has become an increasingly large concern amongst Americans. A Washington Post poll found that 64 percent think fighting climate change is very or extremely important. In terms of solutions, 25 percent support a 25¢ increase in a gas tax and 27 percent support a $10 increase in electric bills (Washington Post). Another poll confirms this notion: 68 percent of Americans would not want to pay an extra $10 a month in utility bill payments to fight climate change (AP/NORC, 1/2018). In short, people feel that climate change is important, but they don't want to have to foot the bill in any significant way. 
  8. Providing Health Care to Illegal Immigrants/Undocumented Workers. All 10 candidates at the second night of the first round debates back in June said they would provide health care to illegal immigrants. The issue is that 58 percent of Americans do not think that should happen (CNN, 6/2019).
  9. Student Loan Forgiveness and Free College Tuition. Elizabeth Warren has a plan for student loan forgiveness and free college tuition. Only 38 percent are in favor of student loan forgiveness (Rasmussen 7/2019), whereas 52 percent oppose making college free (Quinnipiac, 4/2019). 
  10. Taxation Levels. Democratic presidential candidates have proposed multiple initiatives, whether it is the Green New Deal, Medicare for All, or free college tuition. One of the major blind spots of proposing these initiatives, however, is how they are going to pay for it all. Candidates such as Sanders love to cite Scandinavia as an example, but he ignores how they pay for their large government programs. Over there, it is not only the one percent that pay forty-plus percent in taxes. It is everyone, including the poor. 45 percent of Americans think that they pay too much in taxes, whereas an additional 48 percent think they pay the right amount (Gallup). Getting Americans to pay more in taxes will be a hard sell, and it wouldn't be at all surprising if the Republicans played that fear to their advantage in 2020.  
  11. General Trust in Federal Government. Trust in the federal government is key because so many of the Democrats' ideas involve the federal government as the solution. What is interesting is that trust of the federal government is at a twenty-year low. 41 percent of Americans think that the federal government can solve problems, whereas 35 percent believe that the government can solve domestic issues (Gallup, 1/2019). 23 percent think that the government is the most pressing issue to resolve (Gallup, 7/2019).
  12. Democratic Party Preferences. Another factor is the direction in which Democrats would like to see their party shift. From the looks of the presidential primary debates, you would think that Democrats unambiguously want their party to become more Left-leaning. However, polling suggests that only 41 percent of Democrats want the party to lean further Left. 54 percent would rather have a more moderate party (Gallup, 12/2018). This puts the Democratic party at odds with its own base. If a majority of Democrats don't want their party leaning further to the Left, if would stand to reason that the majority of the country doesn't want policy to lean more to the Left.  
When asking general questions about certain policy issues, one might think that the citizens of the United States lean more to the Left. It's when surveys ask about the details about the implementation about policy when we start to realize that the United States does not lean anywhere far to the Left, certainly not enough for Democrats to win the 2020 presidential elections based on issues. Can sentiments change? Yes, although historically, they do not typically shift that quickly. Do people vote solely on issues? No. For one, this country has become more polarized and is more likely to vote based on party lines than they did (e.g., Pew Research). To that point, there are a myriad issues not having to do with policy ideas that influence election outcomes, including the state of the economy, media, approval of the current president, and potential scandal. I'm not here to say who will win the 2020 election, but I can say that for the most part, having a "progressive"/Leftist agenda is not a sound campaign strategy. 

Friday, October 18, 2019

Is the One Percent Finally Paying A Smaller Percentage In Taxes Than the Poor in the U.S.? Probably Not.

Income inequality continues to be a rallying cry for the Democratic presidential candidates. Whether it is the idea of raising the estate tax or creating a wealth tax, the Democratic candidates want to soak the rich with taxes. A study by two economists give additional fodder for the "soak the rich" platform. According to economists Emmanuel Saez and Gabriel Zucman in their latest book "The Triumph of Injustice," we have reached the point where the billionaires are paying a smaller percentage in taxes than the poorest 20 percent when factoring in federal, state, and local taxes. The New York Times had a field day with this finding (see figure below).



If Saez and Zucman's (herby referred to as SZ) findings are true, it would strengthen, at least in a political sense, the Democrats' arguments for higher taxes on the rich. Rather than give into knee-jerk reactions about the Tax Cuts and Jobs Act (TCJA) that the Republicans passed, let's actually take a closer look at what went behind SZ's findings:

  • Where are the 2018 federal income tax figures coming from? Normally, such figures would come from the IRS. However, the IRS has not released the 2018 figures. If that's the case, how could SZ possibly assert that the rich paid a lower percent than the poor? They took 2017 figures and extrapolated. As the Left-leaning Tax Policy Center points out, that is no easy feat because the TCJA made such changes to the tax code. Any findings on the TCJA have been preliminary, and as such, SZ's findings are premature at best. While I cannot be certain until we receive those figures, I would bet (if I were a betting man, that is) that the richest are not paying a lower tax rate than the poor, so let's get into why I would make that assertion, shall we?  
  • The U.S. tax code has been progressive, and most probably remains so. Historically, the U.S. tax code has been more progressive than its European counterparts (see 2016 CBO figures as an example). What is even better is that the TCJA made the tax code more progressive, not less. That is not just based on the estimates from Joint Committee on Taxation, but also the Tax Policy Center. In response to SZ's book, JCT economist David Splinter wrote a response with an alternative estimate to SZ showing how the tax code remains progressive (Splinter, 2019; see Figure below). Obama's former Chair of the Council of Economic Advisers, Jason Furman, also takes issue with SZ's claim about tax progressively. With these estimates from Left-leaning sources and the JTC, it becomes more difficult to accept SZ's thesis. The federal tax code seems to remain progressive, even with the TCJA. Perhaps state taxes are the thing causing the increase in the tax rate for the poorest.

  • Skepticism on state and local tax calculations. I'm not only skeptical of SZ's estimates on the federal figures, but the state figures as well. For one, I have to question why SZ include state- and local-level consumption and property taxes. Everyone pays the same tax percentage. There is no "tax injustice" going on here, only a recognition that lower-income households pay a higher percentage of their income on these taxes because they spend a higher percentage of their income on the goods and services upon which the taxes are assessed. If you remove these taxes from the equation, it's unsurprising how the richest manage to have a higher tax rate than poorest, thereby diminishing SZ's argument. 
  • Skepticism on state and local tax calculations, Part II. But for argument's sake, let's give SZ this assumption and include state- and local-level consumption and property taxes. It's still problematic. Why? The Left-leaning Institute on Taxation and Economic Policy releases its studyWho Pays?, on state tax levels. ITEP found that the difference in state taxes between the Top 1 Percent and the Bottom 20 Percent is 4 percent (ITEP, p. 4), which is nowhere what it would need to be for the poor to pay a higher tax rate than the rich. What is even better is that ITEP estimated what taxes paid and total income would be. It turns out that in terms of tax rates and shares of total federal, states, and local taxes, the rich still pay more. Figures from Left-leaning sources show that the higher the income, the higher the tax burden, which serves to imply that SZ's estimates are simply over the top. How is that the case?


  • Omission of Earned Income Tax Credit (EITC) and other means-tested welfare. What SZ are measuring (or in this case, not measuring) is affecting their numbers. SZ consider the EITC as a transfer of income rather than a negative income tax. As the Tax Policy Center argues, while the EITC and the Child Tax Credit (CTC) feel like spending, they are features of the federal tax code to offset the burden of the regressivity of the payroll taxes. Since the EITC and CTC are administered through annual tax filings and contribute to net tax rate, the Congressional Budget Office has included them in their calculations. By treating the EITC and CTC the way they did, SZ raised the effective tax to a rate much higher than otherwise would exist. When those tax credits are accounted for, the Tax Policy Center has the effective federal tax rate for the poorest 20 percent at 2.9 percent, and not the 20-plus percent that SZ have calculated.
  • Addition of health care premiums. Not only do SZ omit aspects of the tax code explicitly created to ease the burden of the poor, but SZ highlight something else peculiar on their website: they consider private health care premiums as a "health insurance poll tax." If that ends up playing out in the data they used for their book, it is a peculiar choice indeed. While there are aspects of health care premiums intertwined with the tax code, it is equally true that private health care premiums are not taxes. Treating private health care premiums as part of taxation while excluding the EITC and CTC as part of taxation (when they are de facto negative income taxes) only serves to exaggerate the tax rate of the poor. 
  • Treatment of Corporate Taxes. When analyzing the incidence of corporate taxes, some of the incidence falls on shareholders and part of it is passed through other forms of capital (e.g., disbursement through the non-corporate sector). SZ toss aside that assumption and transfer the entire incidence to shareholders, which is contrary to reality and standard economic practice (e.g., Smith et al., 2019Splinter, 2019). This heterodox approach is significant because using this assumption attributes an excessively high amount of wealth to the rich, thereby giving the appearance of a lower tax rate than they actually have. 

Postscript: When looking at the tax data with reasonable assumptions, the U.S. tax code has not become overly regressive, certainly to the point where the rich pay a lower rate or amount than the poor. The best-case scenario is that SZ are using unconventional means and assumptions to arrive at their numbers. Combining the spurious assumptions with how they frame the issue in a "politically slanted narrative" (e.g., their website promoting the book has an interactive data simulator with tax proposals from the Democratic presidential candidates, boasting on their university website how it will affect the Democratic primaries), it becomes more difficult to accept the best-case scenario, thereby casting doubts on their intentions since they blur the line between scholarship and politics. These severe methodological flaws do not take away the need for debates about what tax policy should like (e.g., simplify the tax code to remove tax avoidance mechanisms, adapt to the increasingly global nature of firms) or what to do about income inequality. At the same time, Elizabeth Warren, Bernie Sanders, and others who are of similar ideological mind should base their policy ideas on reality, not on what they would like for reality to be.

Thursday, October 10, 2019

Why Vegans and Environmentalists Should Cut Back on the War on Meat

In efforts to fight climate change, there have been multiple proposals to cut back on carbon emissions, including carbon taxesgeo-engineering, or the infamous Green New Deal. A crusade to make for a healthier citizenry has seen similarly ambitious recommendations with soda bans, Medicare for All, or e-cigarette regulations. There is an issue that caught my eye that combines the environmental and health policy angles: a ban on meat. During one of the Democratic presidential debates, Kamala Harris called for reducing meat consumption. And with the recent FDA approval of selling Impossible Burgers in supermarkets, it seems like meatless meat is trending upward. With the increased demand of plant-based substitutes for meat and louder calls to do something about climate change now, meat has become a target, both on health and environmental levels. I want to take the time here to bring some skepticism to the war on meat.

Health Concerns with Meat-Eating
Most of the empirical evidence on meat-eating told us that eating red meat is bad, that it will shorten average lifespan. It was one of the reasons I decided to go vegetarian a decade ago (I have since reverted back to eating meat). It made sense at the time, although I did learn from my own eating habits while I was vegetarian that vegetarian did not automatically translate into healthy eating. That notion was upended last week with the release of five systematic reviews published in the journal Annals of Internal Medicine (Zeraatkar et al., 2019) found that the effects of meat-eating on one's health are negligible. As the Left-leaning Vox explains in its coverage on the meat study, this recent study was able to overturn previous research through better science and sounder methodology. This is not confined to nutrition science. It happens in psychology frequently, and it is something that has been going on in the minimum wage debate. This is a good thing: as we gain better information and better methods, we get closer to the truth. That might be fine and dandy for an individual's health, but what about the health of the planet?

Environmental Concerns with Meat-Eating
"What about the planet?," indeed. What would happen if every human being stopped eating meat and did not use the resources (e.g., water, corn) that are used for meat production? How would that affect carbon emissions? Would that greatly stop the rise in global temperatures? After all, the Intergovernmental Panel on Climate Change (IPCC) released a report in August explaining how we should greatly decrease meat consumption to avert climate change disaster. The World Resources Institute shows how animal-based diets create more greenhouse gases (GHG) than plant-based diets (Ranganathan et al., 2016).

First is realizing that there are bigger causes of GHG emissions than meat production, such as fossil fuels and deforestation (Skeptical Science). Animal agriculture accounts for 13 percent of GHG emissions, although it is lower in developed nations. As an example, animal agriculture only accounts for 2.6 percent (White and Hall, 2017) to 2.8 percent (Pitesky et al., 2009) in the United States. Reason Magazine did a back-of-the-envelope calculation, and found that even if every citizen of the United States went vegan and stopped all livestock production, it would only reduce U.S. emissions by 3.6 percent. Based on Union of Concerned Scientists data, the United States is responsible for 16 percent of global emissions, which means that ceasing U.S. meat consumption would only reduce global carbon emissions by 0.58 percent. One could counter by saying that every bit helps, but even if the world went vegetarian, it would only reduce GHGs by 4 percent (Grabs, 2015). Reducing meat consumption might do something to mitigate anthropogenic global warming, but we should stop pretending that veganism or vegetarianism can be the silver bullet to save the planet.