Tuesday, January 10, 2017

Bruni on Rule of Law in Regulation

I found Frank Bruni's opinion piece in the Sunday New York Times noteworthy on the whole question of rule of law in regulation:
Hillary Clinton as New York City mayor?

Imagine the fun:  City building inspectors start to show up daily at Trump Tower, where they find a wobbly beam here, a missing smoke detector there, outdated wiring all over the place. City health inspectors fan out through Trump’s hotels, writing citations for clogged drains in the kitchens and expired milk in the minibars. 
The potholes near his properties go unfilled. Those neighborhoods are the last to be plowed. There’s a problem with the flow of water to his Bronx golf course, whose greens are suddenly brown. And the Russian Consulate keeps experiencing power failures. It’s the darnedest thing. Clinton vows to look into it, just as soon as she returns from the Hamptons.

..His [Trump's] hometown is her fief. She’s the boss of him whenever he’s in the Big Apple, and he’s in the Big Apple a whole lot.

...I’m fantasizing, yes, but with a glimmer of encouragement....there are so many scores she could settle, so many ways she could meddle. ...above all there’d be the torturing of Trump...The city’s Mexican Day Parade would be rerouted, from Madison Avenue over to Fifth, right past Trump Tower. A new city zoning experiment would locate detention centers in the strangest places. And in the city’s libraries, “The Art of the Deal” would be impossible to find, while upfront, on vivid display, there’d be copies galore of “It Takes a Village” and “Hard Choices.”
There is no indication that Bruni is kidding, that any of this would be both monstrously illegal, unethical, and a disaster for New York, and no disclaimer from his editors.

As far as I can tell, Bruni is a middle of the road Democrat, and a fan of large-government regulation.  (Like the rest of the Times, Bruni seems currently in full-tilt Trump Derangement Syndrome, with 11 out of his 14 columns since the election criticizing Trump, rather than policy, so if he's really a free-market deregulator, let me know.)

So how fascinating that Bruni -- and his Times editors -- seem to think it so natural that regulation and public services they admire -- building inspectors, muncipal water and power, zoning, even the public library -- should naturally be bent, far beyond legal limits, to partisan political service. Building inspections are used to punish political enemies, but we're supposed to trust that the IRS, Obamacare, EPA, FDA, NLRB, and Dodd-Frank are not?  Or is it just that illegal abuse of power is just fine and normal in the hands of their friends?

And how deeply naive. Really?
Imagine Mrs. Clinton becomes mayor of New York, and fulfills' Brnui's fantasy. President Trump just sits back and takes it? If the regulatory state is a political free for all, is it not possible that Mr. Trump -- who, after all, during the campaign said he would send the department of justice after Mrs. Clinton, whose slogan was "lock her up," and who threatened to send the IRS after political enemies -- might play back in kind? And is it not possible that with the awesome power of the federal regulatory state behind him, he might not crush Mrs. Clinton -- and the city of New York -- in the process?

The Fox News fantasy is as easy to construct. Mrs. Clinton becomes mayor and tries any of the above. Suddenly, the IRS is all over the Clinton Foundation, the DoJ reopens its investigation -- 30,000 missing emails looks a lot like obstruction of Justice -- the Russians release the 30,000 missing emails to wiki leaks -- you surely don't think they let us know everything they were holding against her in case she won? -- DoJ and NLRB open wide ranging investigations of NYC hiring practices -- using statistical discrimination programs, just for fun -- the EPA wants careful review of everything under the sun -- say, how garbage is collected - Gov. Bridgegate Christie is put in charge of a department of transportation "study" of traffic in and out of New York, Federal funding for NY mass transit suddenly needs a comprehensive review, FBI starts a huge corruption probe of New York city officials -- remember, you don't have to find anything, there mere act of investigation consumes everyone's time. Oh, and I haven't started on the remaining rule of law constraints on just the sort of actions Mr. Bruni dreams of -- Congressional and FBI investigation at a minimum.

Should that happen, I wonder if Mr. Bruni and the Times will be running similarly lighthearted articles, well ha ha, that's all just how politics works isn't it?

The revealing fact is that this does not cross Mr. Bruni's mind. It's part and parcel of the bubble attitude that we are so right, and our enemies so evil, that of course they will wilt at the shining light of our rightness--A presumption proved wrong over and over again in both domestic and foreign policy.

There is a serious issue. After 8 years and more of egregiously politicized legal administration and regulation, will Republicans, now in charge, wring their hands and say "Thanks for the new tools and precedents. Now we do unto you like you did unto us? Pass that phone and pen." Or do they say "No, we put the genie back in the bottle, we reconstruct rule of law and limited government, for us as well as you?" We are all breathlessly waiting for the outcome.  Even commenters such as Larry Summers and Paul Krugman are coming around, shocked, inspector-Renault style, to find that regulation and law might be misused for political advantage and worried about rule of law. Well, late is better than never.


  1. Maybe Obama has pardon's for Hillary and Bill sitting on his desk ready to be signed Thursday a week. Politics is a massive multiplayer game. Sadly the game seems to be deteriorating into Calvinball.

    1. Well, we should be used to the pardons game already.
      Contragate springs to mind immediately. Perpetrator pardon in order to avert cross-examination that would have risked revealing culpability among higher authorities.

  2. This seems rather rich given the GOP's disdain for the rule of law. Really, more than rich. One side does it in reality - no comment necessary. The other fantasizes about it and they should be excoriated. Takes false equivalence to an entirely new level.

    1. So you just throw that out there with absolutely no examples of what you are taking about?

    2. Yes, I agree. I would love to see examples cited.
      Tit-for-tat whines are just so much waste of time etc..

    3. "I would love to see examples cited."

      I would think that the Republican threat to default on the commercial and statutory obligations of the United States of America during the debt ceiling crisis demonstrated a distain for the usual understandings of rule of law and fair play.

    4. I don't find that to be distain for the rule of law or "fair play" at all.

    5. 'I don't find that to be distain for the rule of law or "fair play" at all.'

      If the government owed you money and you had Republicans running around saying that the government should simply refuse to pay you, you might have a very different view.

    6. I think you have the facts wrong. Instead of me listing cases where the Obama administration hastaken liberties with the law, I will let Ted Cruz do so more effectively. https://www.youtube.com/watch?v=_-qtVTsL-FQ

    7. Constantine,
      I think you should be able to do a much better job than TC.
      I am distinctly uninformed by TC's series of whines.
      Please tell us your list of complaints. Hopefully you can include some cases of rule by fiat -- something that has been alleged, without detail, in these comment pages.
      There is a good chance you have some complaints that I agree with.
      Like, the other day, I heard Mr T agree with me.... that CNN is a fake news organisation.

    8. Anonymous,

      in 480 BC the Athenian general Themistocles asked an admiral who was trying to strike him with his cane, "hit me, but then listen to me." Themistocles then laid out his plan that helped Greeks defeat the Persians in the battle of Salamis. My point is, say what you like about Cruz, but also watch the video. I don't have the time or space to write a long list. But I will address your last comment about CNN.

      Do you remember the Obama administration boycotting Fox News? Are you aware that the Obama administration has prosecuted more whistle-blowers under the 1917 Espionage Act than all other presidents combined, or that reporter's phone logs and emails have been secretly subpoenaed and seized? Isn't it sad that the same liberals who were up in arms about the Patriot Act don't sweat the fact that Obama has assassinated, through drone attacks, more people, including American citizens, than any other President in history, thereby depriving them of due process rights? How is it that GW was branded a "war criminal" for removing a brutal dictator in Iraq thereby creating fertile ground for a civil war and extremism, but Obama gets a pass for doing the same in Syria and other places? I can keep going.

      I am fed up by people who judge the conduct of policy makers not on principles but on the party affiliation or likability of the policy maker. What has kept the US great through good and bad presidencies is its institutions. Take that away, and you will end up with another Argentina. I wish more people would fight for those than for an elephant or a donkey. It is one reason why I like John Cochrane and this post.

    9. I did watch the video - I was struck by the fact that Cruz repeatedly put words in Sessions mouth and Cruz was making long self serving speeches.

      Some of Cruz's assertions are not fair. To visit "Fast and Furious" on Obama when it was started in 2006 seems unfair.

      While I agree that it would be wrong (and contrary to the rule of law) to single out conservative political groups for special review for tax exempt status, there was an FBI investigation and there were no charges. On the other hand it would also be wrong to say that they should be granted tax exempt status for political reasons if they do not fall within the general rules.

      I am ambivalent about "Chokepoint" - the DoJ leaned on banks to not do business with certain "high risk" types of businesses (including pornography, escort services, payday lenders and others). I can see both sides of the argument and where I came down would depend on the wording of the statutes that regulate the financial institutions.

      The "illegal" recess appointments I do not see as a rule of law issue. There are two ways to interpret the legislation. Obama chose to interpret it one way and the court disagreed with him.

      Cruz complains that DoJ should have blocked Federal funding of "sanctuary" cities. I expect that on a close reading of the various statutes it is Cruz who is advocating a breach of the "rule of law".

      In the context of running an organization as large and complex as the United States government, Cruz's complaints seem pretty minor.

    10. I will add that I think that the indefinite incarceration of prisoners at Guantanamo Bay is the most egregious breach of rule of law concepts that has happened in the United States in recent memory but the Republicans, the Democrats, the military and the courts are all culpable. From the clip, Cruz certainly seems to be a defender of Guantanamo Bay and as a lawyer he should know better.

    11. Absalon,

      I have feeling that if it were liberal groups being targeted you would be singing a different tune, charges or not.

      Fast and furious began in 2009, not 2006.

      There is a law about federal funding of sanctuary cities, passed by Bill Clinton (oh the irony). Cruz is asking for nothing more than its implementation.

      As far as the rest, violating the rule of law means not enforcing it, enforcing it selectively, or applying it according to the letter but not the spirit. It does not necessarily mean acting illegally. Cruz's examples sayisfy at least one criterion, and thank goodness for the Supreme Court. Yes, his remarks are self serving but if you have followed these or any other hearings that is the norm. It is common for senators to speak more than the people testifying.

    12. Constantine, et al .... a few observations.....

      Fast and furious, being a sub-plot of the "war on drugs", in reality has its origin in 1971. Or even earlier, perhaps 1914, with the criminalization of drugs on various occasions, of various kinds, including alcohol. It is very complicated. In part the war on drugs is a cover for regional domination. In part it is feel-good efforts by strict moralists flying in the face of the reality that their moralizing interference in regulation causes more harm that the immorality they oppose. In part it is government regulation introduced at the behest of corporate bosses who see personal benefit from said regulation (like in 1937 hemp vs timber for papermaking). In part it enabled drug-running by the US government ("The Company"; "Southern Air Transport") to obtain streams of money to fund clandestine operations. So "Fast and Furious" is a tiddly part of an ongoing saga. Obama is just the latest stooge to be dragged into it.

      Fox is a poor excuse for a news outlet. Murdoch media is in the (multi-national) business of forming compliant electorates to be delivered to political parties in exchange for corporate regulatory favors from government.

      You won't catch me favoring one party or the other. My observation is that R's are supposed stand for enriching billionaires. D's are supposed to stand up for ordinary folks. But they are unable to do so since their re-election depends on money from billionaires. Thus they fall for all that R's stand for. Now that we have a preponderance of R's there is a real opportunity to boot the insurance corporations out of the business of providing basic healthcare for ordinary folks. Something Obama felt obliged to drop off the table from the very beginning.

      GW claimed to be "the decider" even though everything on his watch came from noecons whose express intent, publicized in the "project for the new american century", was to establish permanent bases in Iraq. That war resulted in the untimely deaths of over 100K ordinary folks. Poor GW outdone by nature in 2004 .... over 200K killed by tsunami.

      Still nobody has offered a list of even a few instances of Obama ruling by fiat. I am disappointed. People claiming to be conservatives have alleged many. Come on people. Enlighten those of us that you choose to claim as your opponents.

    13. "There is a law about federal funding of sanctuary cities, passed by Bill Clinton (oh the irony). Cruz is asking for nothing more than its implementation."

      I would have to see the wording before saying whether it is a violation of "rule of law". If it is merely permissive - that is it says the administration COULD refuse to transfer certain funds to sanctuary cities - then not exercising the discretion is not a breach of the rule of law.

    14. "passed by Bill Clinton (oh the irony)" ..... Bill Clinton was hardly any friend of ordinary folks during that time he was busy kow-towing to Newt Gingrich.

  3. I'm surprised it hasn't happened already. The wait and see posture some are taking, this could be the real issue when Trump takes office irrespective of who inhabits Gracie Mansion.

  4. It's not that I don't agree with the sentiment of the comments. But...
    Suppose that Republicans play nice, and do everything by the book.
    But then, after a few years, Democrats win again.
    What stops them from playing ugly again? What stops them from locking out Republicans, from tossing the filibuster rule out (again), from ruling by executive order like a Third World despot? They did it once, and perhaps, they could think, if it worked once, it can work again.
    So, with that prospect, why should Republicans play nice today?
    Maybe the opposite should be true - Republicans should be really, really ugly to Democrats, horrendously ugly, so that Democrats will not be as ugly.
    Or, the whole thing just descended into a tit-for-tat game.
    By the way, Krugman coming around? Really? I think pigs will fly first.

    1. It's curious that you think Republicans have been pious do-gooders these past eight years. Do you really think that Republicans were playing nice? The Democrats got rid of the filibuster for appointments (other than the Supreme Court) because Republicans just straight up refused to have hearings or votes on appointments, even for people they had no qualms about. They refused a Supreme Court justice to a sitting President. That's dysfunctional and purely political.

    2. BBQ - as far as the Supreme Court justice is concerned, Republicans were following the Democrats' advice of not confirming a Justice in the last 18 months or so of the Presidency. Chuck Schumer and Joe Biden are on record of saying so with respect to Republican presidents. Republicans in Congress just followed through with that advice, and of course, now Democrats whine because it really hurt. Ergo - Schumer and Biden (and others) should be very careful with the threats they utter, because somebody may actually follow through *against* them. But perhaps, game theoretic thinking is not their thing. (And BTW - remember Miguel Estrada?)
      As far as Republicans not playing nice, of course not. But Democrats had the majority in the beginning, and they locked Republicans out of any and all major decisions; and that caused a backlash, in 2010 (House) and 2014 (Senate) and 2016 (Presidency). In any game, the opponent also plays, be it in soccer, American football, tennis, and politics. But Democrats behaved as if they were the only ones, especially Barack-"I-won-have-pen-and-phone" Obama.

    3. Manfred said: "Democrats had the majority in the beginning, and they locked Republicans out of any and all major decisions; and that caused a backlash,"

      You seem to have forgotten (or you want us to forget) that in 2009 McConnell told the Republicans that the strategy would be to oppose and obstruct ANYTHING Obama tried to do. Obama's big mistake was trying to engage with the Republicans for almost two years rather than just putting up McConnell's statements on a billboard and then running roughshod over the Republicans.

    4. Absalon - not sure if you and I were living in the same country in 2009. I do not recall McConnell saying such thing.
      However, I do recall McConnell saying that he (McConnell) wanted to make Obama a one-term president.
      [Here is a source:

      I have no problems with McConnell in saying that. Every opposition party's goal is to unseat the governing party. That's called democracy.
      This is different from saying "I won" and "I have a pen and a phone" and blocking Republicans out from a major overhaul of 17% of the nation's GDP.
      BTW, Absalon, Obama did not engage the Republicans in anything. That's not how it went. The Democrats lost their congressional majorities exactly *because* they governed despotically.
      But now the shoe is on the other foot, and Democrats do not like it one bit, because suddenly they realized that whatever they did to Republicans, it can come back to them. Like Bad Karma.

    5. Manfred


      The quote is not as good as I would have like but: “The way it was characterized to me was: `For the next two years, we can’t let you succeed in anything. That’s our ticket to coming back,’ ”

      is certainly consistent with what followed.

      If we look at one particular issue - the Affordable Care Act - where Obama was accused of not consulting with the Republicans:
      1) what exactly was further consultation to accomplish;
      2) for the last six years it has been completely open to the Republicans to say : "the ACA would be better with the following specific changes"
      3) for six years, the Republicans have been saying they would replace the ACA with something "better".
      4) it is manifest that the Republicans do not in fact have a plan for something "better" even though they have had six years to come up with it.

      The inference I draw from the fact that the Republicans do not have a plan to replace the ACA is that they have never in the last eight years dealt with Obama on healthcare in good faith. All the Republicans need to do to prove good faith is to come out with a specific plan - they have had more than enough time.

    6. This is verging in to he said she said and totally off topic.

      Manfred, we look forward to Nancy Pelosi and company working with the President on a bipartisan way, as you, she, and many others complained of Republicans not doing for the last 8 years, and not solidifying into "the resistance" on any and all issues. As, we look forward to Republicans reestabishing rule of law they've been complaining about for 8 years rather than using the same tools to ram contrary legislation down Democrat's throats, starting with the Obamacare replacement.

    7. Sure.
      Subscribe to it 100%.
      I look forward to Nancy Pelosi and Charles Schumer working in a wholeheartedly bipartisan and good faith way, to accomplish great things with President Donald Trump and the Republican Congress, for the good of the American people - in regards to repealing and replacing Obamacare, repealing and replacing Dodd-Frank, simplifying the tax code and reducing taxes overall, reducing punishing regulation, etc etc.

    8. If I were Nancy Pelosi or Charles Schumer and the Republicans in Congress told me they wanted to work with me in a bi-partisan way my response would be:
      1) the first thing you have to do is publicly repudiate the "Hastert Rule";
      2) publicly disclose your detailed proposal for amending or replacing the Affordable Care Act and we will give it a fair and open minded consideration.

      The recent history is that the Republicans cannot agree among themselves on a budget proposal and cannot agree among themselves on health care reform. While I hope for the best, I expect that the next two years will be a three ring (Democrats, Republicans and Trump)circus.

    9. Absalon / Manfred,

      "While I hope for the best, I expect that the next two years will be a three ring (Democrats, Republicans and Trump) circus."

      Call me cynical, but that three ring circus may end up being the best of all possible outcomes.

      As a conservative, doing nothing is always an option. I have high hopes that Trump can continue to run his mouth roughshod and not accomplish anything other than being a thorn in the side of both Republicans and Democrats.

  5. "Bruni seems currently in full-tilt Trump Derangement Syndrome, with 11 out of his 14 columns since the election criticizing Trump, rather than policy,"

    I expect that when Trump finally declares where he stands on policy that Bruni and the other Democrats will be perfectly happy to attack Trump on policy. Right now Trump's "policies" seem to be just an incoherent mess that changes from one tweet to the next.

    In the meantime, I don't feel that Trump's use of Twitter to try to bully individual companies bodes well for the rule of law under his administration.

    1. They didn't go after Hillary's incoherent policies. Kind of unfortunate how partisan things are. Or were. Or may have always been(though Gentzkow et all suggest its a more recent phenomenon).

    2. Trump and the Republicans chose to not engage on policy during the campaign. But the campaign is over. What Hillary wanted to do is now irrelevant. What Trump intends to do is the proper topic going forward.

  6. Jiminy cricket. This article is a joke. It is not serious. You guys need to get a humor transfusion or something.

    1. Yes, exactly, it was a joke piece. Fascinating that it set Cochrane's antennae quivering. And not the first time he has longed for increased editorial regulation of those rogue columnists at the NYTimes. Ironic!

    2. Robin - evidently, you do not get the gist of Cochrane's comments. It was not a joke when Obama haughtily said "I won", and asserted "I have a pen and a phone". It was not a joke when he ruled by executive order as if he were a European monarch from the 17th century.
      But suddenly, Obama's party discovered that there is merit to the rule of law.

    3. If Congress refuses to do its job (you know..legislate, advise, consent), what should any President do? The GOP couldn't even pass it's own bills.

    4. As I said above, Chuck Schumer and Joe Biden are on record saying that Congress does not need to give advice and consent in certain things, like, you know, Supreme Court Justice nominations.
      And as far as "legislate" is concerned, I am fine if Congress does not legislate. We have too many laws on the books anyway.

    5. HotBBQ: The Constitution's answer is that the President should take care that the laws[already on the books] are faithfully executed.

    6. Increased editorial regulation? I hardly believe Cochrane wants ANY editorial regulation. I suspect neither party is immune to this behavior, human nature being what it is.

    7. Indeed, I am a strong believer in freedom of speech and zero government regulation. Bruni may write what he wishes, and the Times may publish what it wishes.

      I am also a strong believer that good editors are essential to good newspapers. Editors should indeed make sure what their columnists write makes sense. If not, people notice the paper is garbage and stop reading it. Bruni has no constitutional right to write in the Times, any more than I do. (They always reject my pieces, as is their right.) You should see how many drafts my WSJ op eds go through, with every word examined.

      JZ's comment is a classic of obfuscatory lack of subjects -- "increased editorial regulation" by whom?

    8. By whom? By the editors of the NYTimes, in fulfillment of their regulatory function there. I was trying to get at an irony: the calling for more regulatory control in one sphere, but its dismantlement in another.

    9. JZ, you need to go back to a basic civics class. "Regulation" of speech by the government is an entirely different topic than "regulation" of speech by an editor of what is printed in that editor's privately owned newspaper, in the presence of competition from many other privately owned newspapers.

    10. I understand that the government doesn't regulate my speech, and the NYTimes can't put me in jail. So, yes, apples to oranges.

      It seems that government vs. governance are the two independent factors involved here.

      You seem to be saying that good governance doesn't arise in the context of government. I don't believe that.

    11. When a private supplier fails to practice good governance, consumers can switch to a different supplier (e.g. a reader can switch from the NYT to any other newspaper). When the government fails to practice good governance, those affected have no alternatives. Hence, there is less of an incentive for the government to improve, and there is no way for those affected to escape the consequences of the government's poor performance. This is a very big difference!

    12. Fascinating to me how often right-wingers target "government", as opposed to poor governance, for their ire.

      Volkswagen has been in the news again recently, for its violation of the Clean Air Act--that's a law, by the way, not a regulation. Explain to me how this governance disaster arose despite the guidance of the wondrous invisible hand?

      Any argument that reduces to "government is always the problem" is childish. Government is sometimes the problem, and sometimes the solution.

    13. I understand that a strawman is easier to debate, but can you point out where anyone wrote that government is always the problem? I don't think anyone here is an anarchist. The problem is that left wiingers think the government is the solution to everything. It is important to recognize that sometimes the medicine is worse than the condition it's trying to treat.

    14. "left wingers think the government is the solution to everything"
      Now who's putting up a strawman?

    15. Since we will have a government, could we have a mature discussion about its character and scope, without the extremism?

      Honestly, when someone of John Cochrane's professional stature and accomplishment writes here, "I am a strong believer in ... zero government regulation" it stops productive discussion cold.

      He didn't write "limited" or "moderate" or "appropriate". No, he went for the extreme end-point of the spectrum.

      Let's be clear, when it comes to government there *is* a spectrum of possibilities and outcomes, and these *must* be considered thoughtfully.

    16. JZ, sure, I agree with you.
      But also....
      1. the professor, I believe, sometimes gives in to the urge to make a joke.
      2. the professor's business is within what I call, slightly mockingly, "right-wing think tanks".
      3. there is the polemical method akin to zero-based budgeting..... start out with an extreme even if your expectation is to end up somewhere else.
      4. in the broader world "law" and "regulation" have very similar meaning. Often the regulation mechanism of a machine contains something called a control law.
      I am a strong believer in ... government regulation/law that keeps abusers from polluting the free market. i.e. controls that prevent shady operators undercutting responsible businesses.

    17. Yes, perhaps the extremum in "zero government regulation" was just polemical shorthand, or a lapse into think-tank speak. This was no joke or slip, however.

  7. Cochrane mentions the possibility the column could be a joke; but he also wonders if it's funny with the tables turned. He also wonders if publishing fantasies like Bruni's column might weaken people's trust in the government.

    I have noticed over the years that many people who support prison reform, or who believe that for-profit companies should never run prisons are willing to joke about prison rape when somebody they don't like serves time. I've always thought that such humor significantly weakens their message.

    1. The article has good political advice to the retired Secretary. If she wants a "future," being mayor is not bad. It is just a figureheard/powerbroker job anyway. Appointees run the Machine for The Boss.

      Cochrane is invoking the lessons of Hayek and Buchanan. Having lived in Chicago and worked in the partisan government, Cochrane has it right. I have since experienced the local zoning bullies when I built my retirement home.

  8. The precedent you're looking for is "Will no one rid me of this troublesome priest?".

    J. Mark

  9. Brilliant piece ... will sadly go over most readers and be misinterpreted as partisan.

  10. John,

    Any thoughts on this:

    "Republicans in the House are proposing sweeping corporate tax reform. Their proposals would effectively repeal the corporate income tax, currently levied at a 35 percent rate, and replace it with a new destination-based cash-flow tax (DBCFT) at a 20 percent rate for corporations and 25 percent for unincorporated businesses. The new tax would be border-adjustable – taxing imports and exempting exports."

    This looks like it has some merit, and I tend to agree with the writer's objections (William Gale).

    "However, precisely because the DBCFT does not have the negative incentive effects of the corporate income tax, there is no good reason to reduce the tax rate to 25/20 percent. Indeed, the tax rate should be equal to the top rate on individual income, so as to reduce incentives to reclassify wage income as business income."

    1. Looks like a VAT by a different name.

    2. Absalon,

      Two important parts:

      1. "The DBCFT is essentially a value-added tax (VAT), but with a deduction for wages. Every advanced country except the U.S. has a VAT alongside a corporate income tax. The U.S. would in effect be replacing the corporate income tax with a modified VAT."

      2. "The deduction for wages makes the DBCFT progressive, relative to a VAT. It only taxes consumption financed out of holdings of capital, whereas a VAT burdens all consumption."


      "By the method of collection, VAT can be accounts-based or

      "Under the invoice method of collection, each seller charges VAT rate on his output and passes the buyer a special invoice that indicates the amount of tax charged. Buyers who are subject to VAT on their own sales (output tax), consider the tax on the purchase invoices as input tax and can deduct the sum from their own VAT liability. The difference between output tax and input tax is paid to the government (or a refund is claimed, in the case of negative liability)."

      Under the invoicing method and with the wage exception in the DBCFT, a corporation calculates it's taxable output by the following equation:

      Taxes Paid = (Total Output - Wages) * Tax Rate #1 - Purchase Invoices * Tax Rate #2

      Presumably Tax Rate #1 and Tax Rate #2 will be identical (flat tax), but I list them differently to illustrate the difference between invoice and accounts based methods of collection.

      "Under the accounts based method, no such specific invoices are used. Instead, the tax is calculated on the value added, measured as a difference between revenues and allowable purchases. Most countries today use the invoice method, the only exception being Japan, which uses the accounts method."

      Under the accounts based method and with the wage exception in the DBCFT, a corporation calculates it's taxable output by the following equation:

      Taxes Paid = (Revenues - Allowable Purchases - Wages) * Tax Rate

      Finally, I am not sure what this means:

      "It only taxes consumption financed out of holdings of capital, whereas a VAT burdens all consumption."

      I don't understand what is meant by "financed out of holdings of capital" and why wages are considered to not be financed this way. Money is fungible, there is no way to determine the source dollars used to pay wages and dollars used for other consumption.

    3. "Taxes Paid = (Total Output - Wages) * Tax Rate #1 - Purchase Invoices * Tax Rate #2

      Presumably Tax Rate #1 and Tax Rate #2 will be identical (flat tax),"

      Frank - I think the two rates would have to be different since the purchase invoices include an element of wages. Be easier just to do what Canada does with the HST / GST and have the invoices separate out the tax and allow a claim for input tax credits based on that.

      I read these types of proposals and think - this is going to hit any heavily leverage business really really hard. Maybe I should sell my utility stocks.

    4. Absalon,

      I only mention that "Presumably Tax Rate #1 and Tax Rate #2 will be identical (flat tax)." because John, in his support for a VAT has repeatedly said that he would prefer a single flat tax rate.

      Also, if you read further down, the article mentions border adjustment:

      "(5) Border adjustment of a VAT is not some wild, radical idea. It is a natural and logical part of the tax. All advanced countries with VATs employ border adjustments. In order to focus the tax on domestic consumption, the VAT should exempt exports – which are consumed abroad – and tax imports – which are consumed here. Again, exactly like a retail sales tax."

      And Larry Kudlow (presumed nominee for CEA) chair weighs in here:


      In a CNBC discussion with Rep. Devin Nunes, a Republican from California, Kudlow criticized any kind of plan that would include value-added taxes or a system of tariffs and subsidies on cross-border goods.

      “This is the kind of thing that could doom business tax reform, which in my opinion is the most important pro-growth element and really the heart of President-elect Donald Trump’s plan for economic growth and jobs.", said Kudlow.

      Like I said above:

      Call me cynical, but that three ring circus may end up being the best of all possible outcomes. As a conservative, doing nothing is always an option.

    5. "As a conservative, doing nothing is always an option."

      Which is why conservatives are so fond of policies or arguments that would paralyze government. For conservatives, broadyly, any government failure is a win.

      We will have to wait to see what Trump's tax plan is. The Republican plan seems to be to move taxes from capital to consumption. That will have economic and political consequences. However, it is not likely to boost investment much since the effective rates on corporate investment are already so low.

    6. Absalon,


      "It was probably too good an idea to survive the Washington policy meat grinder, but President-elect Donald Trump may have killed the House Republicans’ favored corporate tax reform before it even had a chance. I don’t love it, Trump told The Wall Street Journal in an interviewed published this morning—an early anti-Valentine widely seen as the kiss of death."

      I don't see much likelihood in Paul Ryan getting a 2/3rd's majority with Democratic support in overriding a Presidential veto and so, let the three ring circus begin.

  11. I suspect that the article was tongue-in-cheek;


    Trump is a (formerly liberal) New Yorker through and through and he knows how to play hardball with the other side;


    If it came to pass, it should be thoroughly entertaining and, at the same time, thoroughly irrelevant to those of us in flyover country.

    1. I would call Trump a former member of the Democratic Party but nothing in his policy positions in so far as the size and scope of government gives me any inclination he has ditched his liberal underpinnings. But, I hope I am wrong, that 95-100% of what he said, he said to get elected.

    2. "But, I hope I am wrong, that 95-100% of what he said, he said to get elected."

      Frank - so if you voted for Trump your reasoning was that his campaign was almost certainly a con job but you voted for him because you thought you were "in on" the con?

  12. Trump derangement syndrome indeed. Will we ever return to a sane, civic dialogue again. Meanwhile Ken Griffin spoke at Afa meeting. He's advising Trump's transition team. Look for easing up on banking and health care regulation. Transition team recognizes growth is the only goal and putting capital and huge compliance staffs to work producing goods and services again is the way to go. Cutting taxes and infrastructure spending not feasible. Says Griffin.

  13. If I understand correctly, and I think I do, what happened on the weekend was President Trump issued an executive order effecting a wide range of people traveling to the United States. Two White House political operatives (Bannon and Miller) over rode legal advice and directed government employees that the suspension applied to people with Green Cards and residency permits.

    The result was that people arriving at the US border with all of their paper work in order and a legal right to enter the United States were detained and told they could leave voluntarily or be deported and banned from the United States for five years. No warning, no hearing, no due process - your Green Card and residency permit are simply "suspended" and you need to reapply to be reviewed under some, as yet, not established process.

    I think that all those Republicans who complained about Obama not respecting Rule of Law need to be doing some serious contemplation this morning.


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