Weaving the Strands: Business, Economics, and Tax Policy 2.0

[FreshFish]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

I don't think the world is quite as simplistic as you make it out to be. Businesses can't always pass every incremental cost onto customers. Sometimes they either need to become more efficient or accept less profit in the face of rising costs, particularly if there's the availability of substitute products, or if demand fluctuates with price.

We have said complementary things. Fundamentally, it is indeed quite simple: (unless you are a startup burning through seed capital, or an established business bridging a temporary deficit by drawing down retained earnings) if costs consistently exceed revenues you are done for.

It seems quite apparent that there are quite a few people with strong opinions who just cannot comprehend such a simple truth.

[FlagDUDE08]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

We have said complementary things. Fundamentally, it is indeed quite simple: (unless you are a startup burning through seed capital, or an established business bridging a temporary deficit by drawing down retained earnings) if costs consistently exceed revenues you are done for.

It seems quite apparent that there are quite a few people with strong opinions who just cannot comprehend such a simple truth.

There's no question in determining between positive and negative. What they're referring to, though, is the aggregate number that is trying to be maximized. Call it a quibble over nickels and dimes if you must, but they still have a point.

[ScoobyDoo]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

It seems quite apparent that there are quite a few people with strong opinions who just cannot comprehend such a simple truth.

Yeah, we're all stupid. We can't even read a simple chart.

http://www.washingtonpost.com/blogs/...verage-worker/

[LynahFan]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Yeah, we're all stupid. We can't even read a simple chart.

http://www.washingtonpost.com/blogs/...verage-worker/

You're right. That chart proves beyond a shadow of a doubt that businesses can charge whatever they want and pay their workers whatever they want. What were we thinking?

[ScoobyDoo]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

You're right. That chart proves beyond a shadow of a doubt that businesses can charge whatever they want and pay their workers whatever they want. What were we thinking?

Wooooooooooooooosh.

[LynahFan]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Wooooooooooooooosh.

Enlighten me, then.

[FreshFish]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Yeah, we're all stupid. We can't even read a simple chart.

http://www.washingtonpost.com/blogs/...verage-worker/

The stupid part comes in when you (along with the article's author) draw the wrong conclusion. What that chart says to me is that all workers should ask to be paid in part with company stock, since the majority of CEO pay comes from stock price increases not from salary.

Ever since 2002, the Sarbanes-Oxley Act basically put a cap on executive pay from salary at $1 million per year unless it was performance based. If you notice, executive pay started to increase just after that limit was imposed.

We all should want to have performance-based pay based in part by the value we contribute in excess of a baseline, based on your evidence, and we all should want stock options too.

That chart is somewhat biased, if you were to compare salary to salary the gap wouldn't be anywhere near so striking.

[FreshFish]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

The stupid part comes in when you (along with the article's author) draw the wrong conclusion. ... the Sarbanes-Oxley Act basically put a cap on executive pay from salary at $1 million per year unless it was ["]performance based["]. If you notice, executive pay started to increase just after that limit was imposed.

Another stupid part (on the part of the staff members of Messrs Sarbanes and Oxley (I surmise that neither Congressman actually wrote much of the bill, they merely co-sponsored it) was allowing "performance-based" to be defined by the people whose performance is being measured.

More on this later....basically, the contrapositive of what I said earlier, in that I do have to agree with something Scooby would say if he had sense enough to notice!

There are two different and connected problems.
1) most employees are not offered incentive pay commensurate to the incremental value they can create to the company. This is so screwed up in so many ways, I hope it is obvious enough to all as to require no further explication.
2) the ratio of incentive pay to base pay for senior executives is out of line. In other words, I do believe that reported pay for senior executives is indeed somewhat disproportionate to the incremental value that they do create, and in this way Scooby and I are in total agreement.
-- part of the problem is the Sarbanes - Oxley limit: most executives would probably prefer to have a somewhat higher salary and less stock options if they were allowed to. The unintended consequences of the $1 million cap is that the rest of the total package became riskier, and any rational human would prefer more certainty to more risk. If you contrain certainty by an arbitrary limit, you shift more to risk, and simply because it is risk it demands a higher premium.
-- part of the problem is Quantitative Easing. What a disaster! Collective hallucinations. Stock prices have been artificially pumped higher by Ben and the Expansioneers, as they print trillions of dollars of paper money to prevent nominal adjustments in market prices (i.e., the Fed is indirectly buying real estate and stocks in a roundabout manner through QE, and stock prices are insane but there is nothing else to do with all the cash the Fed is pumping out).
-- so the law forced executives to take on more risk, and then government policy artificially and capriciously rewarded one segment of the economy at the expense of the rest of us (the opportunity cost of interest foregone on savings accounts and bond portfolios is staggering, hundreds of thousands of frugal people who really did work hard for decades and depended upon a steady 4% interest on their certificates of deposit...all that interest they could have earned in "normal" times, deliberately transferred away from them to prop up financial institutions). that is something to be angry about, to be sure, but the executives didn't do this, they merely went along for the ride...
-- the executives negotiate with the Board over what constitutes "performance-based" in the first place? C'mon, folks. Whatever target you give them, they will do their dammedest to hit. With the wrong incentives....too many people are rewarded by the change in share price when the better measure would be the incremental change in share price above a given baseline. that at least would reduce the payout from inflated stock prices in boom times, and also would reduce the executive's risk premium in down times (if you are rewarded based on performance above a baseline, and everyone has a bad year, you can still come out ahead even if your stock price is down).

So in short, while executives do deserve some incentive pay, the amount of incentive pay they do receive is disproportionate to the incremental value they do create (translation: "they are only somewhat overpaid, but not grossly overpaid").

Regular employees also do deserve some incentive pay. Suppose everyone who worked at walmart recevied 10 shares of stock for every year they worked there...suppose every kid who ever had a minimum wage job at McDonalds also got 5 shares if they worked there long enough and well enough....all of those folks would be thousands or tens of thousands of dollars better off than they are now.

[FreshFish]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Enlighten me, then.

[joecct]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Thinking of kicking the bucket in 2014? States where it's better to live.

http://www.forbes.com/sites/ashleaeb...tax-landscape/

And although NYS upped the exemption amount, there is a little (hah!) catch.. http://www.forbes.com/sites/ashleaeb...marginal-rate/

[FreshFish]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

It amazes me sometimes how a roomful of smart people can all be afflicted with a collective blindness. Reminds me of the fable about the emperor's new clothes sometimes.

The Federal Reserve Board seems to profess puzzlement at why their Quantitative Easing hasn't worked to revive the economy.

Well, they all are aware of something called aggregate demand. What every one of them seems to have overlooked is that, whatever the supposed merits of QE, it is not completely a good thing. Like many things in life, it has both advantages and drawbacks, and the Fed seems to have overhyped the advantages and ignored the drawbacks.

Savers, fixed-income investors, many retirees depend upon yield from their assets. Yields have been near zero. Those folks have had no money to spend. The absence of that spending is a significant drag on aggregate demand, apparently to such an extent that it completely offset whatever benefits QE was supposed to provide. Yet none of the Fed Governors has ever alluded to something so obvious in any public statement as far as I can tell.

and then

[Bill]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

It amazes me sometimes how a roomful of smart people can all be afflicted with a collective blindness. Reminds me of the fable about the emperor's new clothes sometimes.

The Federal Reserve Board seems to profess puzzlement at why their Quantitative Easing hasn't worked to revive the economy.

Well, they all are aware of something called aggregate demand. What every one of them seems to have overlooked is that, whatever the supposed merits of QE, it is not completely a good thing. Like many things in life, it has both advantages and drawbacks, and the Fed seems to have overhyped the advantages and ignored the drawbacks.

Savers, fixed-income investors, many retirees depend upon yield from their assets. Yields have been near zero. Those folks have had no money to spend. The absence of that spending is a significant drag on aggregate demand, apparently to such an extent that it completely offset whatever benefits QE was supposed to provide. Yet none of the Fed Governors has ever alluded to something so obvious in any public statement as far as I can tell.

and then

We'd be better off if they went back to their original dual mission of establishing an elastic money supply and holding prices steady, instead of their more modern mission of trying to manage the economy.

[Rover]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Savers, fixed-income investors, many retirees depend upon yield from their assets. Yields have been near zero. Those folks have had no money to spend. The absence of that spending is a significant drag on aggregate demand, apparently to such an extent that it completely offset whatever benefits QE was supposed to provide. Yet none of the Fed Governors has ever alluded to something so obvious in any public statement as far as I can tell.

and then

Gotta call you out on this one Fishy. On the one hand you whine about the Fed not running the economy into the ground via higher interest rates which is apparently pinching yield loving oldies who's retirement investments are now being squeezed.....but in the next breath you want to privatize Medicare and cut Social Security! Wouldn't that ALSO have a negative affect on the economy, only much much much more so than the 2% difference on someone's CD?

[ScoobyDoo]

Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

It amazes me sometimes how a roomful of smart people can all be afflicted with a collective blindness. Reminds me of the fable about the emperor's new clothes sometimes.

The Federal Reserve Board seems to profess puzzlement at why their Quantitative Easing hasn't worked to revive the economy.

Well, they all are aware of something called aggregate demand. What every one of them seems to have overlooked is that, whatever the supposed merits of QE, it is not completely a good thing. Like many things in life, it has both advantages and drawbacks, and the Fed seems to have overhyped the advantages and ignored the drawbacks.

Savers, fixed-income investors, many retirees depend upon yield from their assets. Yields have been near zero. Those folks have had no money to spend. The absence of that spending is a significant drag on aggregate demand, apparently to such an extent that it completely offset whatever benefits QE was supposed to provide. Yet none of the Fed Governors has ever alluded to something so obvious in any public statement as far as I can tell.

and then

Just buy gold. Problem solved.

[unofan]

It amazes me sometimes how a roomful of smart people can all be afflicted with a collective blindness. Reminds me of the fable about the emperor's new clothes sometimes.

The Federal Reserve Board seems to profess puzzlement at why their Quantitative Easing hasn't worked to revive the economy.

Well, they all are aware of something called aggregate demand. What every one of them seems to have overlooked is that, whatever the supposed merits of QE, it is not completely a good thing. Like many things in life, it has both advantages and drawbacks, and the Fed seems to have overhyped the advantages and ignored the drawbacks.

Savers, fixed-income investors, many retirees depend upon yield from their assets. Yields have been near zero. Those folks have had no money to spend. The absence of that spending is a significant drag on aggregate demand, apparently to such an extent that it completely offset whatever benefits QE was supposed to provide. Yet none of the Fed Governors has ever alluded to something so obvious in any public statement as far as I can tell.

and then

Since 2009, the stock market has soared, unemployment has fallen from 11% to under 6.5%, housing has rebounded, corporate profits are at record highs, and inflation has remained at normal levels. And the Fed will end q.e. by the end of the year or early next year.

But yes, please tell us how nothing has worked...