Isaac Laquedem

Endorsements Zero: a general thought on taxation

If one of the three main selling points of a request that you approve a new tax is that you won't have to pay the tax -- it's a tax entirely on other people, or on businesses, or on sales of things that you don't buy -- then the promoters are tacitly admitting that the cause isn't good enough to spend your own money on -- or theirs either, if the promoters are all exempt from the tax themselves.  I'll be elaborating on this thought later in endorsement season.

Harvard Professor Raj Chetty explains COVID-19's impact in a nonpartisan way based on actual data and economics. We should listen.

Here is a link to actual data on the effect of the pandemic on the American economy.  It's a website, "Track The Recovery," maintained by a group of economists led by Harvard professor Raj Chetty.  Bloomberg News has a good description of Professor Chetty's work, and the data on which it's based, here.

Among the most pointed findings is that "the recession has nearly ended for high-wage workers, but job losses persist for low-wage workers."  The money quote from the Bloomberg article:

On video calls with dozens of Democrats and Republicans in Congress, as well as Treasury officials and state and local policymakers, his message has been consistent: Get the virus under control at all costs—a task the U.S. has so far failed at pitifully. No matter how many businesses are allowed to reopen, normal economic life will not resume until their customers feel they’re no longer at risk of contagion. In the meantime, he tells them, target assistance to the people, businesses, and places that need it. There’s no use sending stimulus checks to people making $150,000 a year or cutting their payroll taxes. They have plenty of money; what they lack is places to safely spend it.

 

Why does the Republican Party support the death penalty and oppose abortion? The reason is economics, not ethics

The recent experience with the novel coronavirus and the economic effects of the shutdown gives us all an opportunity to calculate how much the pro-life party values life. Approximately 30 million Americans lost their jobs because of the coronavirus pandemic. The shutdown if continued through the phased reopening without being rushed will save perhaps 1 million American lives. It follows that to the (mostly Republican) politicians who wished to end the shutdown in the early summer, one life to them is worth not more than about 30 jobs. It also explains the Republican fascination with the death penalty. If the average death penalty case costs about $100,000 to try, which we can evaluate as equal to roughly 2 jobs for a year, but if only one out of every 40 people convicted of a death penalty crime is actually executed, then each execution produces roughly 80 jobs, a very decent return on investment from this coldly capitalist point of view.

The same analysis explains also the Republican position on abortion and right to life. If a healthcare team of four people can perform two abortions a day for 250 business days a year, equaling 500 per year altogether, then each abortion produces only 1/125 of a job for a year, far below the job production from capital punishment. What we have taken for years as Republican hypocrisy about human life may merely be economics. Further research is needed to determine the normative Republican value for job-life equivalence. I think it will turn out to be about 20 jobs per life.

Could the Pony Express have delivered mail from Utah to Oregon in 13 days?

This Washington Post story, about the Postal Service intentionally slowing down mail sorting and delivery, may explain why the mortgage statement that my lender sent from Utah on July 15 arrived at my house on July 28.

 

The Laquedem Coronavirus Relief Plan for cruise lines: out of site, out of mind

That's not a typo.  One of the good points of the CARES Act, which provides relief for small businesses across the country, is that to qualify, a business must be "created or organized in the United States or under the laws of the United States," and it must have "significant operations in and a majority of its employees based in the United States."  The CARES Act intentionally omits the major cruise lines from its benefits.  Congress should hold firm against the pleas of the cruise industry for a bailout.  Here's why.

Consider Carnival Cruise Lines, the most American of the major lines.  It consists of two entities, both publicly traded.  The United States entity, Carnival Corporation, has its corporate offices and operational headquarters in Florida.  It is, however, a Panama corporation, though its Seabourn and Holland America brands operate  through American subsidiaries from a Seattle office, and its Princess Cruises brand operates from California.

As for its ships: the Seabourn fleet sails under the flags of Norway and Bahamas.  Holland America's ships fly the flags of Malta, the Netherlands, Great Britain, and Bahamas.  The Princess Cruises ships are registered in Bermuda and Great Britain.  Carnival's own ships are flagged in Panama and Bahamas.

Carnival's management has chosen to register its ships in foreign countries and not site them in the United States for two main reasons: to avoid American income taxes and to avoid American wage and safety regulations.  I would be disappointed if Congress gave in to the industry's pleas for help.  I'd applaud any member of Congress who will tell the cruise line owners to look for relief for their foreign ships from Panama, Malta, and Bahamas, the nations they chose to support.

Jane Ace tells off a hospital that asked for a gift

On March 9 the Wall Street Journal published this article by Alexandra Samuel about feedback fatigue, describing how "in their eagerness to deliver a better customer experience" by incessantly asking for reviews and evaluations, "companies have created a new kind of bad customer experience: feedback fatigue."  Ms. Samuel cites two studies that discovered that customers don't like the surveys.  "Repeated surveys," she wrote, "may make customers reluctant to return."  She described a 2014 study as showing that "over-surveying by different organizations leads to exhaustion with all the requests for feedback."  

The article brought to mind one fine example of a business being less than careful with its customer outreach, way back in 1974.  The particular business was a New York City hospital, and it sent this letter to a former patient, Jane Ace.  I've shortened it a bit:

December 6, 1974

Dear Mrs. Ace:

As a recent patient you have seen how our hospital serves its community by providing a full range of medical services, offering a high level of nursing service together with physical amenities, enabling the hospital to treat the patient as a person, rather than a number.  We are appealing to former patients like yourself to contribute to the hospital's Capital Improvement Fund . . .

[Signed by the president of the hospital]

Mrs. Ace and her husband Goodman Ace were well-known radio personalities, and he was a veteran humorist.  He felt that the letter wasn't appropriate, and wrote the following response, which has stuck with me since I first read it in 1975:

December 8, 1974

Dear Sir:

As a former patient I did notice your high-level nursing service together with its other amenities, and I would dearly like to contribute to your hospital fund.  But, you see, on November 11 I died in your hospital.  Maybe we can get together later.

Sincerely, Jane Ace

 

The Laquedem coronavirus relief plan, part 2: the Airline Relief Plan

My previous post tackled student loan relief.  I'm ready to start on the airline industry's pleas for money.

The United States airline industry has been making the rounds on Capitol Hill, attempting to persuade legislators that it is so essential to the American economy that Congress should give it a priority position (early boarding?) when Congress hands out relief to businesses.  Certainly the airline industry is important to our economy, but that doesn't mean that any particular airline is itself important.  The planes, airports, and other infrastructure aren't going anywhere, even if their proprietors go broke.

Several commentators have pointed out that the major airlines would have been better able to weather the COVID-19 depression if they had used the profits of the past five years to pay down debt instead of buying back stock.  The major airlines spent billions of dollars buying back their companies' stock over the past five years, money that's no longer in their tills to get through downturns.  How much stock did they buy back?  Since March 2015 United bought back at least 134 million shares, reducing its outstanding shares by 35%.  American bought back at least 265 million shares, reducing its share count by nearly 40%.  American was so confident about its business prospects that even in 2020 it's bought back 2 million shares so far.

In the meantime ridership has plummeted -- even those Americans who can still travel don't want to -- as airlines have withdrawn from overseas service and cancelled many domestic flights, leaving airlines unable to cover their fixed operating costs.

The airlines profess that they are repenting of their sins.  The leaders of ten major passenger and freight airlines (including UPS and FedEx) have promised Congress that if Congress will grant them $29 billion in aid, they will not lay off any employees until at least August 31, they will not buy back any stock or pay any dividends until they've repaid the aid, and they will limit executive compensation in some unspecified manner.  They want the aid in the form of loans, not equity investment.  Here's a link to their letter.

I have a certain sympathy for the predicament in which the airline companies find themselves.  At the same time, it's time for them to eat some of their own financial cooking.  They've gotten away with serving "airline food" for years.  It's time for them to eat their own cooking.  Hence the Laquedem Airline Relief Plan.

The first element is that the United States will provide the $29 billion in aid, but with a few financial twists:

    1.    The United States will provide the aid, not as a loan, but by buying stock in the airlines, at the lowest price at which the stock has traded in the past three months.  For example, United stock hit a low of $21.28.  If the aid to United is set at $2.128 billion, then the government will buy 100,000,000 shares of United stock at $21.28/share.

    2.    The airline may buy the government's stock back at cost plus 6%/year simple interest, any time in the next 5 years, if the airline has made an operating profit for 4 successive quarters and if the airline is not borrowing money to buy the stock back.  I envision that the airlines that survive the depression will buy the government's stock back, a few shares at a time.

    3.    All existing stock option grants to management and the board of directors will expire 60 days from the date of the aid.  The option owners may exercise them within the next 60 days, or not at all.  The airline may not reprice them to allow the executives to exercise the options at today's price instead of the price at which they were granted.  This effectively makes the stock options worthless, which is the idea - since the senior managers and directors participated in the company's bad decisions, they should not profit from the bailout.

    4.    The airline will not issue any new stock options, repurchase any private shares, or pay any dividend until it has purchased all of the government's shares.

    5.    Executive compensation is capped at $750,000/year, or in the alternative at 30 times the salary of the lowest-paid full-time employee as of March 1, 2020.

I accept the industry's argument that it is something in the nature of a public utility, an essential service for American business and consumers.  In recognition of the claims of its managers that it provides a public service, the Laquedem Airline Relief Plan also has two operational requirements.  One is to provide better service to communities and the other is to improve the passenger experience in the air:

    6.    The federal government will require each recipient airline to provide daily passenger jet service to at least one community that had daily passenger jet service at any time since 1986 and that has since lost its jet service.  I picked 1986 because that's when the federal government deregulated the industry and stopped ensuring that communities that needed air passenger service would receive it.  The principle is the same as the one that gives electric power companies exclusive territory in exchange for their promise to serve everyone within the territory.

    7.    Within one year after receiving federal aid, each recipient airline will refit its coach sections to have at least 34 inches of seat pitch.  (Seat pitch is not the same as legroom.  It is the distance between a point in one row of seats and the same point in the next row of seats.)  The sale of any seat with less than 34 inches of seat pitch will be prohibited after a certain date.  If we taxpayers are going to save the airline industry we should require the lucky beneficiaries to improve the quality of the product.  There's no reason for coach travel to be comfortable only for people of the stature of Martin van Buren.

Let's use the airlines' need not just to make them improve their financial management but also to make them offer a better product.

The Trump Administration kicks a bad banker out on his assets, and high time, too

Eleven years ago this week - in fact, during the first days of the Obama administration -  I offered a Laquedem Plan for how the federal government should deal with the bankers whose carelessness, fecklessness, and recklessness threatened to bring down the banking system and, with it, the nation's economy.  I proposed that the government should buy up the bad assets of the major banks and then make the bad bankers leave their sinecures and work for the banks with the bad loans that they had created - the "Kick the bad bankers out on their assets" plan.

A year and a half later I went farther, and proposed that the Federal Deposit Insurance Corporation should treat the bad bankers the same way that life insurance companies treat those with serious and chronic health problems: declare them to be uninsurable, or, more exactly, declare that any bank that engaged any of the bad bankers to be an officer or director would not be eligible for FDIC insurance.  The FDIC, I thought, should start a "no-fly" list of its own to protect our nation's financial institutions.  As far as I know it didn't happen under the Obama administration.

You may recall the interchange between Senator Elizabeth Warren and John Stumpf, then the chief executive officer of Wells Fargo, when he was testifying before (read:  haled before) a Senate committee about his bank's having created millions of fake bank accounts and issued millions of bogus credit cards so that account representatives and mid-level officers could meet their sales targets.  Mr. Stumpf lost the debate and shortly afterward, retired -- very gently and lucratively -- from Wells Fargo.  That was about all that happened to him . . . until this week.  Much as I disagree with President Trump, I was delighted to read today that the Office of the Comptroller of the Currency has obtained Mr. Stumpf's agreement to pay $17.5 million to the Treasury and to never, ever work in any financial institution again - think of him as the Pete Rose of the banking world.

My delight in the OCC's expelling Mr. Stumpf from civilized financial society is tempered, however, by the fact that he got in trouble not for running his bank into the ground but for using unsavory methods to make $billions for the shareholders.  I suppose that makes him a good bad banker.  For its next expulsions the OCC should select the bankers who lost billions - the bad bad bankers.

Jakob Kryszek (1918-2019) and the American dream: He who dies with the most joys wins

The most religious of rabbis might have forgiven Jakob Kryszek if he had become an agnostic.  Born in the small Polish town of Poddębice in 1918, the fourth of six children in a devout Jewish family, he moved to Lodz in 1937 after his father died.  There he went to work for an uncle who knitted socks - until Nazi Germany invaded Poland and sent the Jews of Poland first to ghettos and then to the concentration camps that became death camps.  He never again saw his mother and his siblings.

That Jakob Kryszek was not among the six million Jews killed in the death camps or elsewhere in the war was a matter of improbable chance.  He was working in a Lodz factory when Germany began to bomb Lodz.  Later in the Lodz ghetto he volunteered to work on the crews building the Autobahn because he was told that his siblings who remained in the ghetto would get extra food rations.  When the ghetto residents were sent to the death camps he was at first sent to a work camp because of his experience on the highway crews.  As he later passed through death camps -- Birkenau, Buchenwald, and Auschwitz among them - one  happenstance after another kept him alive.  Once when bombers attacked the camp he ran to the fields instead of going to the bomb shelters, which the planes destroyed.  Later when he and other prisoners were in rail cars, Allied airplanes strafed the cars and a bullet passed through his leg and broke his femur.  A friendly Polish doctor was able to pin the broken pieces together, creatively but without anesthesia.

Years later, as Mr. Kryszek recalled his years in the camps, he said that in the camps, "to remain alive was really absolutely circumstantial. We could not figure out [how to remain alive]; it was not a matter of figuring out how to do it to stay alive. It was fate."

Fate brought him through the war and gave him another three quarters of a century.  Mr. Kryszek died not in Poland in 1939 from German bombs nor in 1945 from Allied bullets and battlefield surgery but in Portland this Wednesday from the ills of age, having lived to celebrate his one hundredth birthday last year and then to greet his first great-grandchild two months ago.  Along the way he came to America and moved to Portland, where he went to work for an old-line knitting mill, Columbia Knit.  (It is unrelated to the younger and larger Columbia Sportswear.)  He later bought and expanded Columbia Knit, using knowledge that he had acquired from his uncle in that vanished European world of long ago, and achieved the American dream.  In civic life he became active in ensuring that the Holocaust is remembered, first by contributing to the Oregon Holocaust Memorial and later by speaking about his family and his own experience.

His time in the death camps made him fearless in the commercial world.  Once he had a disagreement with a business connection, who told him, "If you don't settle this dispute on my terms, I will sic my lawyers on you and they will tie you up in court for years. It will be the worst experience of your life!"  Mr. Kryszek smiled benignly as he replied, "I was in Auschwitz for a year. What can your lawyers do that's worse than that?"

His war experience also made him quirky with his time.  He would occasionally bring a small project to a lawyer and then sit placidly in the lawyer's office watching the lawyer type the document he wanted instead of going about his business.  Did he want to ensure that he wouldn't be overcharged?  He was thrifty in small things; one who didn't know Mr. Kryszek's life story might have taken his thrift as a sign of parsimony.  He was actually quite generous: the same fate that had taken his brothers and sisters from the world of his youth gave him nearly 75 years to preserve their memory, and he freely shared the richness of time with the world around him.  And every year, every month, every day, every minute that he enjoyed of his long and vibrant life after the war was both a joy in itself and his own private victory over the nation that, 75 years ago, had done its best to try to kill him.

יעקב בן אברהם

תהא נפשו צרורה בצרור החיים

The Janus case on compelled union dues: it's time to extend the same protections to shareholders

This week the Supreme Court held, in a case called Janus v. AFSCME, that public employees could not be compelled to pay "fair share" fees to the unions that negotiate their contracts with the government, overturning 40 years of precedent.  The majority said that to compel public employees to pay anything to the union is a form of compelled speech that violates the First Amendment, because it requires people to subsidize a message with which they may disagree.  The decision is likely to weaken the economic power of the unions that represent state and local government employees, which mostly support Democratic candidates.

I oppose forced speech of all kinds, and the decision doesn't bother me -- if we can extend it to other forms of forced economic speech.  Consider retirement funds.  Private individuals can invest in all sorts of things, but as a practical matter a large pension fund (think of Oregon's Public Employment Retirement System or California's even larger CALPERS fund) must invest most of its capital in the stock market, which more than any other investment provides a reasonable amount of income, appreciation, and liquidity.  The stock market is simply a collection of corporations, most of which engage in political speech through lobbyists, public relations, and affiliated political action committees.  If we are going to give people the right to opt out of subsidizing political speech with which they disagree, then let's expand the principle, and allow pension funds to compel the corporations in which they hold stock to lay the cost of their political efforts on only those shareholders who agree with them.  There's no reason for a government pension fund that holds shares in Wal-Mart to subsidize any of Wal-Mart's political efforts with which the fund's governing board disagrees, for example, efforts to oppose increasing the minimum wage.  If compelled political speech is bad when unions do it, it must be equally bad when management does it. 

Imagine the fun if PERS could tell Wal-Mart that its board disapproves of Wal-Mart's lobbying efforts and that it insists on being excused from paying for them.  If Wal-Mart's political speech costs the shareholders 3 cents/share/year, then PERS could insist on Wal-Mart paying it a special dividend of 3 cents/share/year to compensate for the expense.  Shareholders who support Wal-Mart's politics could still pay for the work; shareholders who oppose Wal-Mart's politics wouldn't have to bear the expense. 

Fair, as the wags occasionally note, is fair.  Why should the law deny government retirement funds a right that the court has granted to government employees?  I wouldn't want to suggest that the court's majority might be two-faced about the issue, but the case, fittingly, is named after a plaintiff named Janus.