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October 24, 2017

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I recall Krugman arguing that the main problem with the corruption we could expect from the Trump Administration isn't the direct costs; it's the indirect costs imposed by the attempts to disguise the corruption. In this case, the $300 million to a corporation that probably won't restore electricity to Puerto Rico is just a blip in the federal budget. The bigger issue is that the economic cost of the power outage is probably at least $300 million PER WEEK, and having granted this contract means that the Trump Administration is going to have a hard time devising a plan to fix the electric grid.

in before "The Dems Are Just As Bad"

The bigger issue is that the economic cost of the power outage is probably at least $300 million PER WEEK, and having granted this contract means that the Trump Administration is going to have a hard time devising a plan to fix the electric grid.

I would say that the bigger issue is that this firm doesn't have the resources (nor, probably, the expertise) to fix much of anything. It's not just that there won't be a plan to fix the grid from the administration -- there almost certainly wouldn't have been anyway. It's that nothing will get fixed. At great expense.

Shortly before Maria ravaged Puerto Rico, Whitefish landed its largest [second] federal contract, a $1.3 million deal to replace and upgrade parts of a 4.8-mile transmission line in Arizona.

so, $270,000/mile.

Obviously they are well qualified to rebuild a system which has 2,400 miles of transmission lines across the island, and 30,000 miles of distribution lines with 300 substations.

At the previous rate, that would be a $648 million job, just for the transmission lines, assuming that the work can be done as inexpensively as in AZ.

I forsee an "oops, need more $$$" happening, assuming that the CEO doesn't just decamp to South America with the loot.

Serious economy of scale there, aye?

If you don't count the substations and distribution lines....

If you can do all of it for $300M, that’s a REALLY serious economy of scale.

i've been told there's serious ocean water involved. i hope that doesn't complicate things.

Water, especially when it is salty like sea water, is a great conductor. Maybe the plan is to leverage that to cut costs.

Think of the savings on wiring alone, not to mention frills like transmission towers. That alone could pay for the whole project!

Another mighty mite -- this time without sarcasm -- Canada's Bombardier.

Demonstrating how brilliantly tarriffs can be at improving commerce (from the Economist's daily email newsletter):

Earlier this year, under attack from Donald Trump, he [Dennis Muilenburg, Boeing’s boss] supported the president’s call for more tariffs on imports. America’s Commerce Department then slapped tariffs of more than 300% on rival C-Series airliners made by Bombardier—and annoyed many of Boeing’s biggest customers. Then last week the Canadian planemaker gave Airbus, Boeing’s European arch-rival, half the project for free, sidestepping tariffs by making the C-Series for American customers in its Alabama plant. “This is a win-win-win situation for everyone,” crowed Tom Enders, Airbus’s chief executive. Except Boeing, that is.
Boeing: getting so tired of winning.

But Trump is a savvy businessman and knows exactly what he's doing.

And if you believe that, I have this hugely wonderful bridge between Manhattan and Brooklyn that I can sell you for a fraction of what it is worth!

But Trump is a savvy businessman and knows exactly what he's doing.

Maybe so.

Somebody should check and see if Trump or his kids shorted Boeing.

Rest assured, Mnuchin did.

"that's business"

Somebody should check and see if Trump or his kids shorted Boeing.

Given his stances on trade, tariffs, etc., perhaps somebody should check to see if they shorted S&P 500.

meanwhile, (R)'s in congress want to knock the annual 401k limit down from $18,000 to $2,400.

because they need the revenue.

good for them for figuring out that they actually have to raise taxes to increase revenue.

but seriously, wtf.

russell: in the UK, you aren't allowed to have more than 1 million pounds in tax-exempt pension savings (or defined-benefit scheme values).

As I understand it, if you've exceeded that limit, you pay a 55% tax rate on all withdrawals - while the normal maximum tax rate is 45%.

meanwhile, (R)'s in congress want to knock the annual 401k limit down from $18,000 to $2,400.

the GOP is nothing if not the dumbest bunch of assholes ever.

because they need the revenue.

... in order to get their bullshit 'tax reform' passed through the reconciliation process.

"the GOP is nothing if not the dumbest bunch of assholes ever."

What does it say about hallowed America that the dumbest bunch of assholes in it ever never stop winning?

It says that we have not yet moved from "you can fool all of the people some of the time" to "you can't fool all of the people all of the time." Yet.

At the rate the Congressional GOP is going, their base is going to trash them, personally and individually, in the relatively near future. (And on some level, they recognize that. That's part of why they are so frantic to get tax cuts passed ASAP.)

The question will be, when that happens, what do we as voters do when presented with the stark choice between Democrats (or whatever flavor) and the true nut jobs? Not just the self-aggrandizing scum that control Congress now, but folks like the "Freedom" Caucus and Bannonites.

Interesting times.

What's so funny? The deplorables are primed to believe it:

http://blogs.post-gazette.com/opinion/rob-rogers-cartoons/49315-grassy-knoll

Geo, in the tax reform debate the opposition is starting to have to stretch. 401k limits is one, how many middle class taxpayers can put 18k in a 401k?

So maybe 2400 is too low but limiting that is almost entirely a tax increase on high earners.

And then there is Pelosi against doing away with state and local tax exemptions, again almost entirely a tax increase on the wealthy.

https://www.google.com/amp/s/www.washingtonpost.com/amphtml/news/fact-checker/wp/2017/10/27/nancy-pelosis-claims-on-middle-income-taxpayers-and-statelocal-tax-deductions/

And here we are on obwi talking about how stupid Republicans are, falling for their parties talking points.

Except the taxes avoided by the people on the lower end of the income scale who are taking the SALT deduction are more critical to the those people. There's no need to eliminate the deduction. Just phase it out gradually or increase the rate at which itemized deductions, in general, are phased out as you go higher on the income scale.

The fact remains that this change will hurt people in specific states far more than everyone else. It's great that they're proposing to increase the standard deduction, which would make this neutral or even a plus for most middle-class people, except for the elimination of personal exemptions, particularly for dependents. That's going to screw people with more than a couple kids, unless there's some other compensating change I haven't seen.

Well, hsh, raising the standard deduction is making many fewer people itemize. In particular at the low end. which "increases the rate at which itemized deductions are , in general, phased out".

So, of course it is a balancing act between raising this and lowering that. But "that's gonna screw people" is likely to be true of any plan, in this case, with the stuff floated so far, the worst case for some small number of middle class people is that it doesn't lower their taxes much, but makes it simpler to file. Lots of middle class people get a break and not much in it for the rich, unless they are business owners which is kind of a goal.

So maybe 2400 is too low

it's ridiculously low. especially when you factor-in employer matching.

let's take this article from 2015:


• 42 percent of companies now match dollar-for-dollar, up from 31 percent in 2013. Before 2013, a 50-cent per $1.00 match was the most common formula.

• The majority of plans (56 percent) require workers to save 6 percent or more in order to receive the full employer-matching contribution.

if i make $20K and manage to save 6%, i'll have saved $1200. if my employer matches that 1:1, i'll hit the $2400 limit. that's a big savings for a $20K salary, no doubt.

if i make $50K, my 6% is $3K. but i'll blow past the limit before i get the match. and then i'll pay taxes on the excess paid. and taxes when i take the money out. hooray. good job, GOP. way to help the middle class.

And then there is Pelosi against doing away with state and local tax exemptions, again almost entirely a tax increase on the wealthy

holy crap is Kessler a hack.

oops. scratch all that except the last line.

forgot employer contributions don't count towards the 401k limit . :(

So maybe 2400 is too low

Ya think?

And then there is Pelosi against doing away with state and local tax exemptions, again almost entirely a tax increase on the wealthy.

Unclear to me whether you're saying doing away with it is a tax increase on the wealthy, or retaining it is a tax increase on the wealthy.

In any case, folks who live in the 43 states that have a state income tax, will no longer be able to deduct that.

its clear if you read the link. getting rid of the deduction is primarily a tax increase on the wealthy.

Double taxation!!!

Well, hsh, raising the standard deduction is making many fewer people itemize. In particular at the low end. which "increases the rate at which itemized deductions are , in general, phased out".

Not according to the meaning I intended, which may simply mean I wasn't clear. Various deductions are phased out as you go UP in income. You reach a certain level, and you only get some percentage of the deduction, and as you go higher in income that percentage gets lower and lower, until you get to the point where you are simply ineligible to deduct it.

I have no great desire, myself, to itemize deductions and would be happy to simply take a standard deduction that was within some reasonable range of what I would otherwise itemize. I don't care if my taxes go up a little bit. I don't consider it to be theft.

its clear if you read the link. getting rid of the deduction is primarily a tax increase on the wealthy.

But the article seems not to appreciate that measuring the effects by raw dollar amounts or percentages of the national total saved in federal taxes by various income groups misses the mark in terms of what those dollar mean to the people who will no longer have them. To someone making less than $75k, with a decent-sized family, $825 may mean trouble paying the bills. To someone making over $200K (up to $500K - big range there), it might mean a less lavish vacation and a lower-tier model BMW.

And it's bad for particular states, regardless of how it falls on different income groups. That's a problem for the "general welfare" even by the standards of constitutional originalists.

It's also more fair to the "other" states, who are currently disadvantaged. Which would be a bigger problem for originalists. So, I think the "state's" argument favors doing away with it.

"Ya think?"

I am not sure. It "feels" low to me bit I don't know the range of actual 401k deductions that are typical in the middle class.

But whatever you lower it to [insert some huge percentage] of the cost will go to the wealthy.

Because that's the way taxes work.

Here's a for-instance: My household includes 6 family members. My taxable income would increase, by losing the personal exemption, by 6 * $4050, or $24,300.

I pay about $10,500 in property taxes and somewhere around $2000 in state income tax. Add mortgage interest and charitable donations to that, and the increased standard deduction of $24,000 might be about $5K more than my itemized deductions.

So my taxable income would go up by about $20K, and I would guess almost all of it would be at the 25% rate, so my federal income taxes would go up $5K per year.

That would hurt. I'd have to move.

But whatever you lower it to [insert some huge percentage] of the cost will go to the wealthy.

Because that's the way taxes work.

That's how taxes work if you have great income disparity. Besides that, so effin' what? You can still be screwing people at the lower end, even if the bulk of the cost goes to the wealthy.

It's also more fair to the "other" states, who are currently disadvantaged.

You mean the ones who get net federal dollars coming in at the expense of the states that have net federal dollar flowing out and whose tax base would be eroded by this plan?

Spot on, it's a Republican plan to increase federal wealth transfers from Democrat-voting states to Republican-voting states.

"Besides that, so effin' what?"

So the fact that a tax cut primarily accrues to the rich garners this reaction from me. It doesn't recognize that the dollars are more meaningful to everyone else because $800 means more to them.

As for your example, I think the goal should be to simplify the code, lower rates, and raise the standard deduction so you at least break even.

I am not tied to any of the changes individually, but cumulatively they should achieve simplistity and ageneral reduction. Maybe leave a deduction go kids, those can be counted pretty simply.

The other thing that isn't being mentioned is that eliminating the personal exemption is extremely regressive, since that already phases out.

From Forbes, the top Google hit with the following summary text:

The personal exemption amount for 2017 is $4,050, the same as 2016. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly).

So the elimination only affects families with AGI's under $436,300.

I am not tied to any of the changes individually, but cumulatively they should achieve simplistity and ageneral reduction. Maybe leave a deduction go kids, those can be counted pretty simply.

I don't think anybody (other than tax preparers) would object to more simplicity.

But it seems to me that a general reduction ought to be preceded by concrete action to reduce spending. Or not done. Shifting who pays how much? Fine -- we can argue about which groups ought to gain or lose and why. Preferably with actual evidence from real-world experience about what the impact would be, for various groups of individuals and overall.

I'm not the absolute deficit hawk that some in Congress at least purport to be (when the other party is in power anyway). But I just can't see a justification for cutting rates overall, when we are still running a deficit at this point in the economic cycle.

its clear if you read the link.

Natty don't do no paywall.

It "feels" low to me

Most folks will contribute enough to take advantage of the employer match. Average employer match in the US is just under 3%. Let's call it 3%.

$2400 is 3% of $80K, which is well into middle class territory in most places. You could argue that, if you're making more than $80K, you don't need the tax break.

The folks who are going to get hurt by this are the folks who spent their 30's and 40's and 50's paying off the house and sending their kids to college, and who are trying to sock it away in the last 10 or 15 years of their working life.

Those folks are gonna be screwed.

The goal here is apparently to encourage people to begin saving earlier in life, which is laudable. The thing is, you can't go back in time and retro-actively start saving when you're 25 or 30.

Long story short, of all of the "tax reform" ideas that could possibly be on the table, this one strikes me as colossally stupid. A really large number of people are facing near-term retirement with zippo. An even larger number of people, with retirement still pretty far in the future, are hard pressed to save significant amounts of money.

This is a great big disincentive to participate in what is about the only remaining vehicle for building up any kind of wealth over a lifetime of working.

Which is stupid, and harmful.

Natty don't do no paywall.

Past the shortcut into a private/incognito browsing window. Paywalls aren't very smart.

Past the shortcut into a private/incognito browsing window.

Natty don't have time to horse around with that BS.

If Marty wants to explain his point, fine. If he doesn't, fine.

If the answer is "go read my link", I'll have to continue in ignorance of what his point was.

russell,

That's a good point. In fact, the last few years I had a job I took advantage of the accelerated feature and saved a third of what I have left.

But I might have been able to directly save a lot of it at that point because I was at peak income.

Actually, I don't do no paywall either, didn't realize there was one. I just clicked on it.

You haven't clicked on it enough times in the last month (or whatever) to be subject to it. When you use a private browser, it is always as though you're clicking on a link to whatever site for the first time (since forever).

The goal here is apparently to encourage people to begin saving earlier in life,

the goal is to generate a bunch of tax income quickly in order to balance all the tax cuts they want to do, because they want to do this through reconciliation and that means it can't increase the deficit.

i think the current cap is too high, but $2400 is crazy low, especially since hitting it means you're taxed twice on the excess.

people who hit the limit will just put money that would have gone into the 401k into a Roth IRAs and avoid the tax hit on the back end. (assuming they don't make enough that they're ineligible)

brokers, who will get another account to take fees on, will like this.

But I might have been able to directly save a lot of it at that point because I was at peak income.

Yes, most folks that do that do so because they are (a) at peak income and (b) have paid down other debt over the course of 25 or 30 years.

And now they will be getting that much less bang for the buck.

Compared to other changes that could be made to the tax code, this particular one just seems stupid. As in, counter-productive in the larger context.

It removes an incentive - one of the few broad-based publicly sponsored incentives - for people to save.

Next they'll be after the mortgage interest write-off. That will create a lot of revenue, short-term, and long-term will immediately depress the value of everybody's house.

Which is the other way in which middle class people build wealth over time.

The logical outcome of stuff like this will be push the upper end of the middle class down toward the lower end. Which seems ass-backward to me.

In any case, folks with serious money are not going to give a crap about stuff like this. They are not sweating the 401k max, regardless of what it is. They have access to other ways of sheltering their income and wealth from taxes.

Bringing this thread full circle:
It appears that the contract referenced in the original post is being cancelled.
https://www.washingtonpost.com/business/economy/puerto-rico-governor-says-contract-to-whitefish-company-should-be-canceled/2017/10/29/e5336cda-bcb8-11e7-97d9-bdab5a0ab381_story.html

"Distraction" is the reason given. I guess saying flat out that it was an attempt to butter up the Sec of the Interior by pushing money at his buddy would have been . . . tactless.

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