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One of the greatest tragedies of my lifetime has been watching as the idea of free trade, which has built the immense wealth we enjoy today in the west, come to be rejected by both major parties. What makes it even more painful, is that we literally won the fight! Clinton, Blair et al conceded free trade was good! Everyone was onboard! And yet a mere 30 years later and both parties have traded away free trade so we can’t they about the literal dumbest culture war BS.

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RIP TPP

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Something that was so frustrating was seeing Hillary cynically oppose the TPP because she felt pressure from Bernie also opposing it. Unlike Bernie and Trump, she was smart enough to know better, but was too much of a political coward to stand up for what she actually believed.

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I tend to think that *if* free trade was really that important and *if* it was necessary for Clinton to abandon TPP in order to defeat Sanders without taking excessive damage that would hurt her in the general election, then it would actually have been wrong and a betrayal of free trade for Clinton *not* to abandon TPP. But the ifs are debatable as a factual matter.

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At the time, I remember the TPP being unpopular and that's what forced Hilary to abandon her line calling it the "gold standard' of trade agreements.

But I just found some polling here that shows it as relatively popular, not nearly as much as in some of the countries that were in the agreement, but a margin that is fairly decisive for US politics: https://www.pewresearch.org/short-reads/2015/06/23/americans-favor-tpp-but-less-than-other-countries-do/

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The thing that I legitimately wish that mainstream Democratic politicians would figure out is that the sort of people they think they need to appease are either not actually gettable voters -- they're always going to move the goalposts and end up staying home or voting Green -- or they're just going to cope and seethe and vote Dem no matter what they do.

Basically there's nothing to be gained by meeting their demands. The people who legitimately care about Gaza are either super-dialed-in partisans or they're the kind of people who wrote in Harambe, with no in between.

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I'd say most Democrats still thought TPP was a good idea, just like most Democrats are still on balance pro-Israel (maybe not pro-this Israeli government but definitely not viewing Israel as a "settler colony" that needs to be wiped off the map), but Democratic politicians can't stop bending over backwards to accommodate a cranky minority of the party. To some degree we voted for Biden and got Warren anyway and it's annoying.

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The Republicans have the same problem.

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Arguably a much worse problem. On paper most elected Republicans want more border restrictions and funding for Ukraine, but they're refusing the half-loaf given to them by Democrats.

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We didn’t get nearly enough Warren

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Notably, the death of the TPP and Biden’s unwillingness to commit to any of its successors has really stymied efforts to counter China and the Belt & Road initiative. The big carrot the US can offer is an FTA with the worlds largest economy. But Biden’s Build Back Better World has explicitly kept trade deals off the table.

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Then again, China's Belt & Road Initiative has basically imploded on itself.

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Yeah, it doesn’t really need to be blocked and it’s probably not useful to do so since it’s a source of ongoing financial problems for China. Ongoing financial problems that are going to wreck their balance sheet as the population continues to age.

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TPP is why I will never get over the Bernie movement. They forced Hillary Clinton into abandoning it as a policy goal.

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Feb 6·edited Feb 6

Free trade was never actually popular. There was an elite consensus that created a cordon sanitaire around an idea that a large section of the population (a plurality?) supported, which is an unstable situation in a democracy.

Then said elites immediately set about committing an own goal by giving China most favored nation status and wto membership. Acts that, at the least, very much over promised and under delivered in terms of reciprocal trade and political and economic reform in China.

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Yes. Just going on my unreliable memory, the NAFTA debate included serious discussion of whether US manufacturers could compete with all 80 million Mexicans. Fortunately the pro-NAFTA group carried the day, with Al Gore in favor debating Ross Perot.

Sadly, the China in free trade/ WTO debate did not achieve the same intensity and focus. As many economists have noted, US manufacturers really struggled trying to compete with a billion Chinese. Ooops.

https://www.wto.org/english/res_e/reser_e/gtdw_e/wkshop13_e/peter_schott_e.pdf

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A big difference between the two is that Mexico is an honest-ish country and China... isn't.

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But most of the struggle would have been there w/o MFN. The important drivers were the fiscal deficit, CHINA's opening its economy and the container ship.

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Yeah. We shouldn’t have done free trade with China at all, just started a third opium war with China to make them open their markets and buy our stuff. Would have been waaaaaaay more strategic, and it couldn’t happen to a more deserving place

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Yup, that was definitely the other option on the table...

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Feb 6·edited Feb 6

I don't want to say it's simple but I think it comes down to diffuse benefits and concentrated losers from the deal. The failure has been to find productive ways to pivot the latter. Instead grievances, real and imagined, have been allowed to boil over.

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The sense I get is that America's relatively hole-ridden safety net is a big contributor to this. Protectionism qua protectionism seems a less potent force in other rich countries. I wonder if any political scientists have made a study of this.

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I don't think it's really a question of the traditional welfare state. What we actually need is to do a better job a facilitating career changes. At the same time that global trade accelerated industry disruptions we've also had a bunch of stuff that makes it really hard to ditch locations/industries for greener prospects. Nimbyism/credentialism/DEI/regulatory capture/labor protectionism/etc etc, all make it much harder than it should be to go to where the work is.

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Given your libertarian lean, do you think that defeating all the things in your list delineated by slashes would sufficiently facilitate the needed career changes?

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Feb 6·edited Feb 6

It's hard to say how much of the problem would go away, but it would certainly be far more reasonable to administer a more value agnostic transfer/UBI-ish safety net system covering the remainder in the absence of the huge overhead imposed by our wildly overcomplicated regulatory/tax environment.

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Sounds good to me. Government job training tends to cross some libertarian lines, and I know you think things through more than the doctrinaire libertarian does.

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Credentialism needs to be unwound very slowly or it would destroy a lot of lives. How many people with families and house payments would suddenly find themselves several steps down on the marginal tax rate ladder?

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Brexit is a pretty big data point against this theory unfortunately. Britain's safety net is not a strong as other countries in Europe but it is definitely stronger than ours. And the people who benefit most from the strong social safety net (pensioners) were the people most in support.

By the way, similar dynamics here. A huge part of the anti-immigrant/anti-free trade animus in this country comes from retirees or the very group of people who actually do benefit from something approaching a continental Europe welfare state.

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I don't think that's true. Immigration, not exposure to imports, was what drove Brexit.

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The French welfare state does not make unemployed workers particularly well off, nor do any of the Nordic models.

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Well, sure, unemployed people in most countries aren't "well off." There's plenty of right wing populism in many countries, but I think it's driven mostly by immigration and ethnic change. Americans seems particularly susceptible, though, to the siren call of protectionism. The Nordics run some of the most open economies in the world. Or, consider the example of the Trans Pacific Partnership: Australia, New Zealand, Japan and Mexico all managed to summon the political will to join. The US didn't because buying from foreigners here is more controversial than elsewhere.

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"Americans seems particularly susceptible, though, to the siren call of protectionism"

Relative to where we were, yes. Relative to most other countries, no. We continue to be more open than most of the EU and way more open than almost anyone else.

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>We continue to be more open than most of the EU and way more open than almost anyone else.<

Not so. It's just the opposite. EU external trade is higher (percentage of GDP) than the corresponding figure for the US, and individual EU states, of course, engage in much more trade than America does. Also, your "anyone else" seems questionable, as any number of countries outside Europe (Australia, Canada, South Korea etc) are more engaged in trade than the US is. Indeed, these last three all joined the TPP. Heck, look at the hue and cry over the US Steel sale to Japan: A) the firm is no longer a remotely important American company, and B) Japan is a highly valuable ally that has an excellent track record of investing in the overseas assets it buys. This transaction shouldn't be remotely controversial, and yet one would think it wasn't Japan and US Steel, but China and Lockheed Martin. I'm not saying the situation is remorselessly negative: the US still does a huge volume of trade with foreign countries in absolute terms, and it still attracts giant investment flows. But once upon a time the United States was THE primary champion in advancing the cause of trade liberalization (I mean, kinda makes sense given the high productivity of American workers). Those days, sadly, are gone (at least for the present).

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There’s a difference between well off and secure. A robust welfare state prevents people from falling too far but it isn’t there to give everyone a super high standard of living

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"Protectionism qua protectionism seems a less potent force in other rich countries. I wonder if any political scientists have made a study of this."

Europeans were masters of industrial policy and national champions. You could argue that the Euro is just a big industrial win for Germany now that the over subsidizing and spliffing are banned by the EU rules.

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Plus the Germans get the best industrial policy of all, a currency union with much weaker economies that keeps their exports significantly cheaper on the global market, without the sordid business of deliberately weakening their own currency.

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Spliffing? The smoking of cigarettes comprising both marijuana and tobacco?

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Whoops, I guess it’s a spiff, not a spliff.

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Thanks for the clarification (and like City of Trees I just learned something!) Sadly I'm totally failing in Googling what EU trade policies relate to spiffing bans or why such bans are a good idea -- can you expand on that?

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I thought you just typoed splitting, so today I learn a new word. (Not spliff, of course, I learned that one in college, like many others.)

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Didn't Hillary Clinton have some kind of skills training for people whose jobs got outsourced? People didn't want to hear it, though

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I've read more than one account that these retraining programs just aren't very good at what they claim to do. It's compensating the 'losers' with something worthless.

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I’ve been saying for years that we need these coal miners to jack into the matrix and learn kung fu so they can defeat our machine overlords and rescue humanity from the flesh battery fields!!

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For reasons I don't understand there is incredible nostalgia for boring, monotonous jobs that were essentially putting knobs on widgets, and the people who did those jobs don't want anything else.

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I have a son who has a job putting knobs on widgets (well, sorting lottery tickets and putting them in boxes to ship out). It is a LOT less stressful than what many other people with a high school diploma do - front-facing jobs with the public where people put a lot of demands on you, but you have little power (retail, food service, front-line government jobs).

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She did, but the sound bite was "coal is going away and people will lose their jobs" without including the part about mitigation.

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Wouldn't surprise me if the programs didn't work as well as theorized, but I'm skeptical that they're actually "worthless"

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My father in law worked on a bunch of them and just take was-they didn’t work at scale for training 50 year olds. They worked really well for training 20 years olds for new careers in relevant industries. So you have this big demographic hold-over issue.

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While I think this makes intuitive sense, do you know what precisely didn't work about them? Is it too difficult for older people to learn new skills? More set in their ways? Something else?

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The hard part about scaling job training for 50-year-olds is that other obligations have a tendency to get in the way.

Finding a time when a group of 20-year-olds can all get together to attend a job training session is easy, because they basically have nothing but free time. Now try doing that for a group of 50-year-olds and you'll quickly find that finding a time when *all of them* are available is difficult.

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I can speculate on root cause, but as a proximate cause, at least according my FIL, they just didn't get very good enrollment numbers.

Maybe that is due to marketing and awareness, or maybe other obligations as Thomas mentions, or maybe interested, stubbornness and not wanting to restart a career back on the bottom-rung even if that is better than unemployment.

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Also, if it works well for, say, people in their 20s and 30s, maybe that's good enough to offset the decreased demand for those jobs? Wouldn't work if an industry suddenly collapses, but maybe for industries that are moderately contracting

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Also you have the problem of geographic specialization. A set of a companies, even those in the same industry, failing in a vibrant metropolis is very different than in a one-factory company town.

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That was specifically about coal miners in West Virginia, not so much about free trade. (I think I read that it was actually a very well-thought-out proposal, btw.) But job retraining has also generally been something that centrist Dems have strongly supported and emphasized since her husband was President.

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The best one-sentence summary I've ever read on this subject is from a nearly 25 year-old Reason Magazine article:

"[I]t often seems as though free traders are trapped in a public policy version of Groundhog Day, forced to refute the same fallacious arguments over and over again, decade after decade."

https://reason.com/2003/10/30/lous-blues-2/

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Funny! This was my first thought: https://youtu.be/rw7PUrgU3N0?si=Ez90IN38-xQy_FA2

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He also makes fun songs for Magic: The Gathering which I've inflicted on my husband who doesn't play.

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I was wondering if that was the same guy. Weird crossover.

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Ha ha! 😀 I had somehow missed that one.

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Libertarians really punch well when it comes to comedy.

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Indeed. "Desperate Mayors Compete for Amazon HQ2" is possibly the most brutal piece of satiric comedy since Jonathan Swift: https://www.youtube.com/watch?v=H_eG7leM6ew

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And Reason videos are only scraping the surface. Penn and Teller have been Cato fellows for a long time, and above them, Trey Parker and Matt Stone have been favorable to a fair amount of common libertarian principles as part of their skewering of everybody that does dumb things.

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When Trump was first elected, working class wages had been stagnant for a generation. At a minimum, free trade did not create enough benefits for the working class to offset the harms of other policies. It’s also possible that manufacturing workers in the only major economy left standing were a privileged class, whose rents gradually withered through free trade.

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I for the most part agree. But I really do think the downsides to the 90s free trade consensus was way underexplored and underestimated in the late 90s and early 2000s. The "China shock" was a very real phenomenon and something clearly underestimated by economists. The idea that free trade would also lead more democracy and specifically more democracy in China has proven to be wildly incorrect as well.

Also, "learn to code" became a mocking joke for very good reason. The complete inability from our political system to confront the fact there are very real losers in a world of every increasing trade is a real failure.

So while yes I wish our world would turn back to embracing the benefits of free trade, I think we need to acknowledge the backlash is not entirely misplaced.

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"Learn to code" became a mocking joke because it treated tech work as the only work of any real value, which is actually the opposite of the truth -- I'm not sure "code a bunch of games for people to play on their phone" produces any value.

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Also, as a coder, I have high confidence that the people who used this phrase mockingly would be woeful coders themselves.

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I mean, sure, but doesn't that only reinforce their point that it's kind of vapid advice as a catchphrase?

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yes, most people majoring in the humanities -- and *especially* people still majoring in the humanities after the STEMlords have been beating everybody over the head to go into STEM for two decades -- would not be good at STEM careers.

I can count on one hand the number of attorneys I know who are good at math.

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I once worked for lawyers and many of them told me how they got into this profession due to their hatred toward math. It was fun telling one of them later how coding has a lot more in common with law than with professions with a ton of actual math in them.

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Unfortunately, the commitment to global free trade wasn’t accompanied by any real effort to support communities who were built around industries that were devastated by international competition.

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I think this is correct, but I'm not sure there is a model for the "real effort to support communities who were built around industries that were devastated" that works. But perhaps someone has more insight--were other countries, likely with more centralized governments (say, France or Japan), able to implement successful economic development models for former industrial towns? Or did any US states implement a successful model for this? (I know eventually we got to "eds & meds" in places like Pittsburgh...)

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It's also worth asking how much of the economic problems caused by looser mergers & acquisitions regulations and anti-union policies caused middle/working class wage problems that were subsequently blamed on trade.

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It's a little more complicated than that; I do think that there was a cost to inviting China into the freer trade orbit, which did hurt American manufacturing and hollowed out many American towns. America was better off in this scenario, but the transition was not painless.

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Free trade makes the world richer. Additional wealth has diminishing marginal utility. America today is the wealthiest society that has ever existed; it is not surprising to me that there’s now less support for free trade.

Would you give up X for a little more economic growth? Every year that becomes a worse deal, for every X.

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You aren't wrong about the economic bounty produced by free trade, but we made a pretty obviously bad application of it, induced mostly by campaign contributions, when we extended it to a billion person totalitarian Communist dictatorship in China without demanding that they moderate as a condition.

And I suspect that's the original sin here. People hate not only that the factories closed, but that the jobs were shipped to one of the worst regimes on the planet, and help make that country into a superpower and a very pernicious one.

The problem is you can't turn back the clock and re-run the 1990's with Bill Clinton not whoring his policy out for campaign contributions this time. What's done is done so outside of keeping some crucial supply lines and sectors within our control, we might as well just capture the benefits of free trade.

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The China policy is fairly subject to criticism, but in my observation, the popular understanding of free trade among regular people who hate free trade is *much* more focused on Mexico than China.

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There is certainly plenty of concern about Mexico. But I do think the China stuff carries a different level of vehemence, and it goes back to what I am calling the original sin. To be clear, it wasn't simply that we obviously sold out our China policy to campaign contributors, but that our elites so blatantly lied about it. They knew exactly what the Communists were trying to do but made transparently false claims about how trade would lead to the liberalizing of Chinese society.

So shipping the jobs + to Communist dictatorship + in response to campaign contributions/corruption + lying about how this would lead to reform in China + ultimately empowering China as geopolitical competitor makes the China issue far more toxic than Mexico. Indeed, Trump concluded a replacement deal for NAFTA with Mexico and nobody complained.

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founding

I think this is too uncharitable to Clinton-era thinking. The elites didn't lie about it -- they really believed economic liberalization and integration would lead to political liberalization. Being wrong doesn't mean they lied*.

*This applies to Bush-era thinking around Iraq also.

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I choose to believe they were not that stupid.

But if they really truly did believe that allowing all those businesses to come into China would somehow disempower the Communists, when the entire time China was carefully managing its trade so this wouldn't happen AND had engaged in brutal suppression of dissent already, then the Clinton people are some of the dumbest people to have ever served in government. This was not hidden or non-obvious.

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founding

Protests and uprisings really did happen all across China, culminating in the situation at Tiananmen Square. The belief that there was going to be a loosening of political repression wasn't crazy -- hundreds of thousands of Chinese people believed it too.

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We didn't manage the distributional challenges. So voters who benefit, but not as much, want to kill free trade because they think it'll solve their problems.

That won't solve their problems, as we can see in brexit. But they'll still vote for it. Cool stuff.

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I actually see Trump (and the new GOP) anti-market positions push a lot of the left into a new appreciation of the free market. If it sticks, I think it will be Trump's single greatest accomplishment.

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I am as anti-Trump as they come but I would say Trump's biggest accomplishment was bringing to the forefront, the conversation about how big a problem China has become.

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He just immediately took it to a really stupid place.

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Operation warp speed was pretty incredible. His base didn’t appreciate it but it was probably the most amazing thing the government has done since the moon landing

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If free trade was the magic elixir of "the west," how do you explain the situation in South America?

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A combination of Peronism, overregulation and autocracy explains a lot of Latin America’s lacklustre performance.

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Also unstable governments.

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Free trade is only good if you use the profits of the winners to subsidize the losers, and we didn’t

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Doesn’t that raise a question? If it’s so self evident and so successful why has the consensus been abandoned by *both* sides ? There is more to the story.

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>All they see is Miller talking about how amazing it will be for South Carolina to tumble backward to a more primitive state of development.<

What the MAGA faithful really see is a return to an era when a high school education got you a decent factory job with which you could support a family and buy a house (They don't know the houses were small, drafty in winter and sweltering in summer—mostly because they weren't alive back then). I think they also tend to believe turning back the clock on the economy will somehow go hand in hand with restoring 1954's social conditions and cultural practices.

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Feb 6·edited Feb 6

> 1954’s cultural practices

The reason people want to bring back steel manufacturing and coal mining is because they’re manly. Today’s paths to a good career are not manly, like being a nurse, and to some extent even studying and behaving well in school. I don’t have any evidence for these assertions, and don’t believe them myself, but it seems to explain Trump’s industrial policy pretty well.

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Good point. I'd love to see a crosstabs by gender on nostalgia for the world of 1954. I bet men are far more nostalgic than women.

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I can’t find data on 1954 specifically. However, some Pew surveys include a question on whether life today is better or worse than 50 years ago.

Pew reports on these surveys haven’t included respondent gender, but, they do allow access to their raw data for surveys more than 2 years old.

I downloaded the data for 2021 American Trends Panel Wave 92. Both men and women in that survey said that life in 2021 was worse than life 50 years ago. There was not a substantial difference between rates of men and women finding 2021 worse than the past.

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Since that contradicts my claim, I dispute this and think you're totally wrong.

Just kidding. Data >> uninformed opinion. Thanks for diving into this!

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Also likely explains the subtle shift rightward of Hispanic and black voters. If I'm not mistaken, the shift is concentrated among men.

It's sort of an inconvenient truth for progressives (like me) that there are men of all backgrounds (not just white men) who have some pretty reactionary views about women and feminism.

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So another version of "unemployment is too high because men are playing too many video games in their basement". Pretty well debunked when it turned out the real issue is that the Stimulus was too small and we pivoted to austerity way too soon in 2011.

Also, how does internet addiction only effect men and not women? I missed the part where only men are on their smartphones all the time. In fact, I'm pretty sure women are heavier users of social media than men.

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founding

Is pornography interfering with work more than social media? That would be surprising to me. (I’m open to the idea that one or the other is a bigger factor in declining social relationships, but not work.)

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Is that in fact obvious? Feels like the causality on both fronts is pretty complicated and there is a strong possibility of other variables driving both observed outcomes (worse economic outcomes and higher addiction rates).

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Feb 6·edited Feb 6

Maybe the modern economy selects more for contentiousness and agreeableness. Maybe being less risk adverse leads to poorer educational or service economy job performance. Maybe it’s all downstream of incarceration rates. Maybe it is the longer tales and squatter normal distribution of outcomes (more outliers) men experience. Maybe it’s a million things that lead to both bad outcomes.

“It is obvious that addiction problems are the cause of economic underperformance” is a very strong claim, is all!

All for trying to solve that problem however you can.

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This. So much this.

Politicians can't simply say out loud that a lot of men's (and specifically white men's) failures are their own fault, but I can, as a white man who will not be running for office. When conservative politicians talk about how people don't want to do honest work any more, this is who they're talking about -- it's just bizarre that these are their base voters.

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founding

He has a whole book about it: Big White Ghetto: Dead Broke, Stone-Cold Stupid, and High on Rage in the Dank Woolly Wilds of the "Real America" https://a.co/d/0C48NSG

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>Politicians can't simply say out loud that a lot of men's (and specifically white men's) failures are their own fault<

It's hard to argue with this.

On the other hand, Homo sapiens americanus hasn't evolved (or devolved) much in the last 50/60 years. So, it doesn't seem to be related to DNA. As a free will skeptical consequentialist, the apparently very large numbers of American working class men dealing with these problems—especially compared to their counterparts in Canada or Finland or Japan (all of them quite a bit poorer than the US)—makes me suspect public policy plays a large role. In short, we don't have an effective, comprehensive system or set of policies in place to help working class folks navigate the vicissitudes of economic change. But we ought to.

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It's really sad that a lot of people just want to stay in their status quo jobs instead of striving for better, no matter how relatively poorer they become--indeed, they almost seem content with accepting that as well. How to address that politically is tricky--Matt's giving it his best shot on this site.

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In fairness, striving is hard (not being sarcastic). I live for my career, but a lot of people don't want to do that.

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One thing that my mom's dad did for her was put just a few hundred bucks in a diverse portfolio and told her to do nothing with it, to learn how compound interest works. My mom did the same with me just a few years after Vanguard was founded. I'm obviously quite lucky to have family that knew how money works really well, I wish more other people had that knowledge.

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The problem is that unemployment is at historically low levels. Plenty of people with high school educations already have good jobs! Like.. the majority of the contracting business, for instance, makes about 2x the salary that a factory worker would make.

On top of that, if we ever do build textile factories in south carolina... there won't be any human workers there. It will be machines all the way down, with a barebones staff for maintenance + engineering + security.

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All throat clearing about how Trump is worse than Biden aside, Biden preferencing union contractors and made-in-America provisions is just different in degree rather than in kind, right?

I really wish there was a party that Believed the Science on free trade.

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Union contractors is different from made-in-America.

Union contractors preferences adequately paid workers over inadequately paid workers (I'd prefer just raising the federal minimum wage, but one is possible and the other isn't). Given that contractors are necessarily working in the US (this is mostly construction workers, and you can't import things that have to be built on site), it's not something that interferes with trade.

Made in America is just bad; in several cases, American-made goods are worse, or even just don't exist. When it amounts to forcing foreign companies to create factories in the US to assemble parts that are overwhelmingly imported (the worst examples of this are probably the Acela Express trains, which contain no more US-made components than the TGVs they are derived from) it is just a wasteful cost burden on the US taxpayer. If there is a genuine domestic industry, then at least there is a case for choosing the domestic supplier over the foreign one, but there are way too many cases where projects spend vast amounts of time and money obtaining waivers for things that are clearly never going to be made in the US (e.g. tunnel-boring machines; there are only three factories for large TBMs in the world) or waste enormous amounts forcing the creation of a US assembly plant that immediately gets closed at the end of the project.

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I mean, both things involve making things less efficient and more costly in order to favor a preferred group. Feels kinda similar imo

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I think it depends on whether you think of union preference as preferring the pre-existing group of "union members", or whether you think of it as preferring a form of contract that offers better pay and conditions to workers, a form of contract that is available to anyone.

Considered the second way it only "[makes] things less efficient and more costly" by paying people more and giving them more generous working conditions. If you take the view that not maximally exploiting the workers is an inefficiency, then sure, you can see that as similar. But there's no "preferred group" in the sense that there are a bunch of other people who are being denied the work. Anyone could join the union and get the union job.

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"Anyone could join the union" is just factually incorrect for some unions. Some examples you might want to look into: longshoremen, IATSE (e.g. my understanding is that in California to be eligible to join in practice you have to have worked a certain amount on the sort of jobs the union covers, which is obviously hard when you are not a member of the union, etc). And those two are just off the top of my head; I would be very surprised if there are not more like that.

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One correction: the "worked a certain amount on the sort of jobs the union covers" is one of a small number of things that can _force_ the union to take you as a member under CA law. The union generally can and does reject applicants, so the only ways to get in are to know someone already in who will make it happen or to get lucky in one of a small number of possible ways.

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Given that union preferences are typically (in my view correctly) viewed as attempts to sway the votes of current union members, I tend to favor the first view and I think that it likely both predominates and better characterizes the situation.

(Although in fact yes, not maximally exploiting workers clearly is an inefficiency essentially by definition.)

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"maximally exploiting workers" = paying market rate for labor

just as:

"giving a taxpayer-funded handout to politically favored groups" = awarding contracts to union shops

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I can't remember if we've talked about this or it was Kenny E. But my experience in Light Rail for Siemens was the total opposite. The Sacramento production facility is now world class with many of the sub-sub-components produced. There's no way it becomes world class without the Buy America requirements and there's no way we have the degree of light rail adoption in the US without that facility either.

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Ooh, thanks! New information is useful.

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founding

That’s good to know! Over the years, when I’ve heard of this Siemens light rail Sacramento thing, it always sounded like they opened it up when some American transit agency was required to buy American, and closed it down again between contracts. But if it has actually become a sustainable and good factory, that’s a great correction to hear!

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Feb 6·edited Feb 6

Probably true but (to go all Reece Martin on you) Siemens light rail--and particularly Siemens low-floor light rail--was a bad choice, since low-floor light rail has become the de facto standard for new systems. By its nature, "light rail" designed for use in mixed traffic (the only reason you'd have a low-floor system) can't be automated and has lower capacity than pretty much any other rail system (mainly because the space for the wheels reduces the available space for standees). While that might be fine for smaller networks--like, I could see a case for it in Birmingham--it's been actually adopted by much larger metros like Portland, Seattle, Minneapolis-St Paul, and Houston (*Houston!*) which (1) have the higher capacity that high-floor systems demand and (2) could probably use automation as a way to maintain high levels of service while keeping labor costs low. The Sacramento plant does produce high-floor light rail for San Francisco (and Calgary) as well, which is better, but still inadequate for some of the larger cities/metros (like, Houston should have either heavy rail or a fully automated, grade-separated light metro).

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Look. Starting points matter. If the option is / was low-floor, mixed traffic networks or nothing -- I'm still selecting low-floor if I'm the Transit Authority. You have to start building network density (i.e., ridership) somewhere. But separate from which vehicle the factory is producing ... the point is the US now has a legit, world-class production facility. That's an investment both the US and Siemens made. That talent now exists here and all the lobby $$$ for new rail networks are coming to the US. That's all good news if you're a rail fan.

NOTE: This is the same story for Alstom. Their Hornell facility is world-class.

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MBTA orange line trains keep falling apart, because the factory in Springfield MA keeps screwing them up, because it’s a Chinese company running an American factory, and setting up a culture of quality in a multinational enterprise is a hard thing to do.

https://mass.streetsblog.org/2023/02/03/the-ts-new-train-factory-has-gone-off-the-rails

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I'm still shocked they awarded the contract to CRRC. Just note ... it's not just a factory issue. The design is complete shit too.

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Genuinely curious on this point "(the worst examples of this are probably the Acela Express trains, which contain no more US-made components than the TGVs they are derived from)".

What am I missing? Amtrak and Alstom are both reporting 95% Buy America at the component level. I'd be - genuinely shocked - if the entire propulsion system isn't produced in the US. I didn't work for Alstom but my understanding was they had ~ fully integrated US production for the all NYCTA projects going back to the 80s (4,200 cars and now 11 projects).

https://www.alstom.com/high-speed-rail-america-already-here-alstom

https://www.amtrak.com/next-generation-high-speed-trains

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OK, I am clearly remembering information completely wrong from the 2000-era original Acela Express - the new generation I knew was much better in terms of US-sourced components.

I'll need to have a completely new look at the Buy America rules, because you've convinced me that I had a complete misread on them.

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It’s worse actually. A tax is less disruptive than a ban. The made in America stuff means things don’t get built at all or get built poorly.

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What's "The Science" on free trade?

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It's that free trade is good.

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Sounds like a moral judgement, not science.

Weird how that works.

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With a little charity, he is rounding off a bunch of empirical things that he assumes you and most people think are good and arguing The Science says they are produced by free trade (lower prices, better products, surplus split by both parties, fewer starving peasants, etc).

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"Believing the science" of vaccines but not GMOs is also a moral judgement.

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What's your preferred policy in this regard?

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It’s better for everyone when you specialize in something you’re really good at and trade that for something else somebody else is really good at. We want people to open kickass Mexican restaurants and Chinese restaurants instead of everyone opening a terrible Mexican-Chinese-Polish-Indian restaurant.

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"a terrible Mexican-Chinese-Polish-Indian restaurant"

I'm trying to picture the menu. A pierogi-samosa hybrid with salsa and soy sauce for dipping?

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Lol, you reminded me when, in my Russian class, we looked at menus from, like, Georgia (the country). The "American" restaurant was the wildest range of dishes you ever heard of :-).

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While I agree, I do think the Biden administration has softening in stance on “Buy American” by possibly expanding the countries that can get waivers

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deletedFeb 6
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Feb 6·edited Feb 6

It's possible it's a different calculation for bucket trucks but for "rolling stock" contracts (e.g., light rail, heavy rail, buses) the threshold is 60% including final assembly and calculated at the sub-component level. But you can't get there just with final assembly. 50% of the sub-components must be produced in the US. The components and sub-components are defined in the contracts - so you can't just game the definition of the production hierarchy either. I'm sure there are countless examples of wasteful spending but critics of buy America within the rail community (looking at you Alon Levy) just ignore completely the success stories like this:

https://www.mobility.siemens.com/us/en/portfolio/rolling-stock.html

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This isn’t a success story — it is precisely the waste against which we must fight.

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Feb 6·edited Feb 6

Find me the waste. The projects are bid at marginal cost.

EDIT: OR BELOW!! Look at all the trouble Bombardier got in bidding projects below cost with the expectation of scale curve benefits.

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If they were providing it best, then no protection would be needed.

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Again -- where's the waste? And what do you mean "protection"? The buy America(n) requirements don't "protect" anyone. They solve a prisoner's dilemma for the individual Transit Agencies and require investment by the OEMs. For the rolling stock contracts it's been a huge win for long-term US rail growth - which has been awesome these last 20 years. Anyone that tells you otherwise -- doesn't understand the US market.

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deletedFeb 6
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Feb 6·edited Feb 6

Just to close the thought ... it's completely possible your Dad's company was faking it too. If the contract was small enough - there might not even be audits. But for the big transit projects (e.g., >$500M) - the sub-component production facilities must pass a First Article Inspection (FAI) and the full bill of materials is ripped apart.

Also -- this isn't just to help the workers. It's to create long-term stickiness to service and maintain these massive fleets. There were countless disasters in the 70s and 80s of fleets becoming obsolete early due to OEMs going bankrupt or pulling their US support.

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deletedFeb 6
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Feb 6·edited Feb 6

Yeah. Of course. When a company wants to buy a project with a below-market bid -- it's a tough business case on the TA who are facing funding challenges. So they roll the dice. But just look below at the trouble MBTA is having with that disaster CRRC project. They can't even produce them. How are they going to service them? This was the ~ norm for in the 80s.

https://mass.streetsblog.org/2023/02/03/the-ts-new-train-factory-has-gone-off-the-rails

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What is particularly striking is how many Americans say they pay too many Federal Income tax is the same share of the population that roughly paid any Federal Income tax for the 2022 tax year. I will say that most Americans reflexively oppose paying taxes even when their tax burdens are relatively modest. It's always someone else's civic responsibility that government services get provided. Sigh.

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Everyone thinks that people at their income level and lower pay too much in taxes, and people making more pay too little in taxes. Just like everyone that drives slower than you is an idiot and everyone that drives faster than you is a maniac.

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I pay too little in taxes, but too much doing my taxes.

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You can donate money to the IRS if you believe you are not paying enough: https://www.fiscal.treasury.gov/public/gifts-to-government.html

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That doesn’t solve the collective action problem necessary for a properly functioning civil society.

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The problem is everyone has a different definition of a "properly functioning civil society." We resolve these differences through the democratic and legislative processes. You may think tax rates are too low, but other people think they are just right, and others think they are too high. The Congress we have elected has settled on the current tax rates for now.

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That's fair but if I'd rather donate elsewhere(GiveWell/Directly) with that money to the extent I'm willing to donate.

Also, that's not quite the same because I'm then going to have to pay the higher house purchase prices etc. against people who aren't doing that - I'd rather everyone in my area (250k+ family income) paid a bit more (and not just the 400k+)

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I have to wonder whether this is at all because the federal income tax involves so much unpleasant paperwork. Other taxes are less unpopular, though admittedly there are other confounding factors. https://apnews.com/article/taxes-poll-high-mistrust-local-government-bad406b062041ea2d0626058cab5491b

(Of course, the fact that the paperwork makes people hate the federal income tax is half the reason why we have it, thanks to the bootleggers-and-Baptists alliance between Intuit and Grover Norquist.)

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It’s fun to blame Intuit’s lobbyists but the reason filing your taxes is complicated is that our tax code is complicated. Grover Norquist isn’t the one who made Ticketmaster send 1099s to people who sold half their football season tickets.

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That affects a nontrivial number of people, but it doesn't affect the majority of Americans whose only income is W-2 wages, interest from investments at large financial institutions, and/or government transfer payments, and who take only the standard deduction plus some similarly-institutional above-the-line deductions. Those Americans' income taxes can be computed from information that the IRS already has.

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Good thing the IRS is doing a pilot program to streamline filing.

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I was super excited to try it this year, but turns out that the high interest rates made my savings/CDs perform well enough to put me just outside of the 1099-INT threshold :/

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lol why the hell is there a 1099-INT threshold? Interest earnings are slightly more complicated than income earnings but this is absolutely not the main thing that makes taxes hard...

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I am sure it will go great.

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You'll notice that the taxes more likely to be perceived as 'fair' as flatter/less progressive taxes. (SS, sales tax)

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It was a fascinating graph as tolerance of taxes did not seem to correlate at all to the tax rates themselves?

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founding

The rates were only part of the equation. As marginal rates fell, the number of deductions, exclusions and tax preferences fell also, plus a growing stock market led to more income being subject to tax. The result is that total taxes levied as % of GDP didn't change much at all.

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Very good to know !

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I have been saying for a while that beliefs have become decoupled from material reality.

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The only taxes people actually like are lottery tickets, because they don't understand that it's a tax...

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If the federal government doesn't get the deficit under control by fixing the long-term trajectories of Social Security, Medicare, and interest payments, in 10-15 years Americans are going to end up paying Europe-level taxes without Europe-level benefits. Imagine the outcry in that situation.

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The claims you are repeating about Medicare and Social Security are just a mirage created by peak boomer retirement and the “line goes up” fallacy. It’s wrong once you account for demographics and just creates a few bad years.

I have sat in on the SSA meetings covering this. Social Security and Medicare are fine.

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SS is "fine" if you believe it is okay for SS to pay only 75% of future benefits defined by current law, because that is the limit of future tax revenue. Or we can fund 100% of future benefits defined by current law by borrowing money. Unless you are claiming the CBO and SSA are lying: https://www.cbo.gov/publication/59340

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Yeah, that chart is at best incorrect and at worse lying

I guess it is correct if you think the number of people retiring will continue to climb and the number of people working will stay flat. How exactly that math is supposed to work is a bit mystifying to me.

I am not saying it will be great, because there are a lot of boomers. But, at some point the retirees has to start declining, because population is shrinking.

Unless, of course, you do like Matt suggests in 1b Amaericans and you start importing workers via immigration. At which point, tax revenues would go up.

So worst case we continue being stupid, and it sure will suck for 7 millenials to pay for 10 boomers for a while, but then as the boomers start to die, it sucks less, and we go back to equilibrium.

Best case we start importing workers, and problem solved.

Neither case leads to Europe-level taxes. And indeed, if you ever DID get to that point, I think if you present to the American public "Option A 20% more immigration, option B 20% more taxes" I think you'll discover that the public opinion on immigration will magically flip flop. And at some point, in the world you are predicting, the math really wouyld get obvious enough that one or both parties would put forth that choice, and it will probably the party in power, because while raising immigration *might* cost you a few house/senate seats, raising taxes like that would probably cost you the trifecta for a decade.

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>"But, at some point the retirees has to start declining, because population is shrinking." That is incorrect according to the Census Bureau: https://www.census.gov/data/tables/2023/demo/popproj/2023-summary-tables.html.

The Census Bureau projects that US population won't begin declining until the 2090s, way after all the Boomers and most Millennials are gone. The Census Bureau also projects that the age 65+ population will increase from ~60 million today to ~100 million in the 2090s.

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The census bureau predicts that the.... currently declining population... won't decline until 2090? Oh, well then.

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founding

Will Americans be paying then-current European level taxes, or 2010-era European level taxes? Presumably Europe will be feeling the same sort of demographic crunch and will have its own tax issues to deal with.

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Feb 6·edited Feb 6

The CBO publishes a report every two years or so on ways to reduce the federal deficit: https://www.cbo.gov/system/files/2022-12/58164-budget-options-large-effects.pdf

The Manhattan Institute has summarized the revenue-raising options from that report (slide 75): https://media4.manhattan-institute.org/wp-content/uploads/BudgetChartBook-2023.pdf#page=41

SS and Medicare will face ~5.5% of GDP yearly tax revenue shortfall by the 2040s if no changes are made before then. The CBO numbers suggest that raising all payroll tax rates or all income tax rates by 10% plus implementing a 20% VAT could close the SS and Medicare tax revenue gap (not pay for any new spending). Those tax rates are similar to current Europe-level tax rates, especially for the middle class.

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founding

I guess the question is whether current European tax rates are projected to support their equivalent programs, or if the shrinking of the workforce and growth of the retired population will result in further increases of the same size.

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Feb 7·edited Feb 7

I don't know how much room European countries have on the left side of the peak of the Laffer curve. They certainly have less than America does.

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If taxes worked on the principle that we need to procure some fixed basket of services & we care about doing so cost-effectively, that would be one thing. The actual social function of taxes is to cut down to size those who are seen as being too comfortable. If the money taken from them fails to convert to services or the services are worth less than they cost, only an extremely tiny minority of nerds even notice.

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My favorite line by a mainstream journalist was Matt pointing out that one of the overriding problems with Donald Trump was that “as a human being, he is a piece of shit”. I add this observation from today’s post: “ Unless it benefits him personally, Trump just pulls ideas out of his ass because he likes the vibe.” Two basic truisms that explain the descent of the GOP and this country more generally.

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I actually think opposition to free trade is one of Trump's few deeply held beliefs. He's wrong but if you go back through his media appearances long before he got into politics he espoused it. Somewhere along the line he convinced himself that politicians are bad dealmakers (unlike himself and his counterparties in business who knew how to drive hard bargains) and that they routinely traded away American workers' jobs to foreign countries and got little in return.

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There's probably also something to Trump's repeated behavior of stiffing contractors, daring them to sue, and settling for a reduced cost that he thinks the US should be doing on a global scale.

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deletedFeb 6
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Along these lines, views on Trump acted as a bit of a shibboleth in the Northeast for a while. Well-off people who knew a variety of successful entrepreneurs and rich people saw him as a joke and a bad businessman. (The type of person who knew who Indra Nooyi or Jaime Dimon are off the top of their heads.) Less well-off people who viewed him through the lens of celebrity saw him as one of the most successful billionaires ever since they didn't know a lot of actually rich or successful people.

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My cousin on Long Island married a man from a pretty wealthy family there and her father-in-law told a story (circa 2010) the weekend of the wedding about Trump cheating at golf at his own tournament. Definitely the type of stuff everyone of a certain class knew.

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I thought this video was a deep fake the first time I saw it. It might be misguided (e.g., irrational fear of Japan becoming the world superpower) but it's somewhat coherent.

https://www.oprah.com/own-oprahshow/what-donald-trump-told-oprah-about-his-presidential-hopes-video

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Trump has always given off Ross Perot vibes, more on less, on trade.

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I remember him going on Bill O'Reilly's show way back in the aughts and he was going off on how foreign oil suppliers were gouging American consumers.

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deletedFeb 6
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He's Archie Bunker in a $3,000 suit (except he's a lot meaner than Archie ever was, and, he's definitely not getting his money's worth for those suits).

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The vibes smell like ketchup and body odor.

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Matt's right, and Dems should not concede this issue.

Here in Ohio, the Republicans are talking about eliminating the income tax (presumably) in favor of hiking the sales tax. That's a straightforward tax cut for the rich and tax hike on the poor and middle class. I can't wait until seniors with fixed incomes hear about it. https://www.dispatch.com/story/news/politics/2024/01/23/ohio-republicans-propose-eliminating-state-income-tax-business-tax/72285903007/

I'd also like to see more people talking about Project 2025's proposal to eliminate the Fed's dual mandate, focusing only on price stability and eliminating the full employment mandate. They say it's to reduce inflation, but we know it's to lower wages for their corporate donors. I could see this gaining traction in right-wing media because it's a fun conspiracy that they like.

And what's going to happen to grocery prices when Trump throws half of our agricultural workforce into relocation camps?

There's a reason they prefer to talk about trans folks ...

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Yep, I get frustrated when I see Democrats go hard on the niche culture war stuff. It's so easy to just keep it simple and say "I believe in treating others how I would want to be treated and in the American idea of individual liberty". So much of what gets called "woke" is just basic manners at this point because of how far the right has gone. Unfortunately, social media boosts the most insane left wing takes, which doesn't help anyone at all.

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A price only mandate would also lower the wages of customers so that doesn’t make sense. I think it’s just goldbuggery and nothing more than that.

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Republicans don't want full employment because you can't have full employment and an industrial reserve army.

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The Ohio thing is bad, but there are several places that have that policy for a long time, with Washington being the most famous in my region. I wonder how successful they can be by just pointing to those examples.

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deletedFeb 6
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Texas has sales & property tax and no income tax.

The sales tax _is_ regressive but everyone is used to it - status quo. There's a little support with a "sales tax holiday" near the end of summer for back-to-school stuff, but yeah, pretty regressive(but less distorting, as you say in another comment)

I think it's perfectly reasonable for Ohio to point to Texas as a state that makes this work, but it's _also_ reasonable for people to talk about how this will drive up costs for current Seniors who already don't pay (much) state income tax and now will pay this.

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FWIW, the sales tax rate in Texas appears to be 6.25-8.25%, which is comparable to most places that have one in my experience (even a bit low). The property tax rate is high, although a handful of blue states are higher still (including the infamous NJ and Illinois).

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deletedFeb 6
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They give an exception for all agricultural usage, not just big ranches. I'm of several minds about this:

1) It actually directly benefits me via lower property taxes on some land I own that is leased agricultural. So I'm biased in favor.

2) It theoretically protects doing more agriculture here - if you think that is valuable, then it can be worth it.

3) Sometimes it seems too easy to get the exemption even for not really doing all that much agricultural.

4) The land value is partly higher _because_ of this exemption, so just turning it off would seem to equalize things nicely.

I would probably support removing it because I try to support good tax policy, but I'm very much open to reasons not to since it helps me.

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And your city in particular is perfectly located to leverage all the tax favorability.

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I continue to think that taxes should be spread across a number of methods. Small to moderate sales tax, income tax, LVT, property tax, business tax, sin taxes, etc. Make it so that no single tax is big enough to cause distortions and people have an enormous reason to try to avoid them.

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Heh, I'm the complete opposite on this, and I know I'm in the minority on this among Slow Borers.

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I know that you don't like pigouvian taxes, but is there a distaste for otherwise spreading out taxation across different forms?

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My dream is for taxes to be as boring as interest rates, where there's one base rate that we adjust upward or downward as appropriate to what the economic conditions merit, and what we want the government to provision. I've long accepted that this is just that, a dream that will never happen.

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A VAT could work this way, maybe.

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