Category Archives: Econ & Money

Progress!

Matt Levine writes:

Every time I see an article like this:

Starting from Dec. 30, chocolate makers that sell or produce in the EU will have to show that the cocoa they use wasn’t grown on land cut from forests since the end of 2020. In practice, it means that each morsel of cocoa that makes its way into the bloc will need to be linked to the GPS coordinates of the farm where it was harvested.   That’s where people like [Brice-Armel] Konan, who helps monitor cocoa farm data in Ivory Coast for the Rainforest Alliance, a nonprofit based in New York and Amsterdam, and his smartphone come in. Such nonprofits, along with industry groups, governments and chocolate companies, are racing to help farmers record the data they need in time.   Ivory Coast’s cocoa and coffee regulator says it has mapped just over 80% of the country’s estimated 1.55 million cocoa farms. That leaves some 300,000—or about 2,000 a day—to be mapped or otherwise accounted for by Oct. 1, the start of the new cocoa season.

I immediately search for the word “blockchain.” Five years ago, this article would absolutely have used the word “blockchain.” In 2024 it does not. I suppose that is some sort of progress.

Go read the post. Stay for the shrimp….

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Ukraine Aid in Perspective

2023 Aid to Ukraine Through Aug 3. This year the US promises about six times more than last year.

The Ukraine Aid bill appropriates $61 billion, a very large portion of which will actually be spent in the US to pay US arms makers to replace the stockpiled weapons we will be sending abroad.  That number, however is both too large for me to grasp, and lacks context.  So here goes.

There are about 340 million US persons, making each person’s share of the bill for Ukraine aid about $170.41.  But maybe you don’t want to count babies?  The IRS processes about 169 million income tax returns last year. That makes the individual taxpayer’s share about $360.95. Or, if you prefer, there are 127 million households in the U.S., making each household’s share about $480.31.

Those are numbers I can comprehend.  But compared to what?  The US federal government spent $6.1 trillion last year, so the Ukraine aid amounts to a tidy 1% of than number.  The entire overt US military budget for 2024 is $825 billion, so the Ukraine aid appears substantial–almost 7.4% of the (overt) Pentagon spending (there’s also a large ‘black budget’ that is thought to well exceed $50 billion).

Ukraine aid is also about 50% more than the US spent on agricultural price supports last year.  And, although it’s a little harder to calculate, it’s probably about double what the federal government spent on disaster relief.

Working through these numbers didn’t change my view that the aid bill was important and necessary, but it helped me understand this is a genuinely significant commitment (Trump insurance?).  As the late Senator Everett Dirksen (really) said, “A billion here, a billion there, and pretty soon you’re talking about real money.”

Posted in Econ & Money, Ukraine | 5 Comments

The Government You Deserve?

Back in November, right after it became clear that Democrats would keep a tiny grip on the Senate, and Republicans would have a small majority in the House, but only subject the hardest core rump of the ultra-rightist ‘Freedom Caucus’, the Washington Post’s Greg Sargent wrote a column (now paywalled) on 5 ways to ‘crazyproof’ the country against the chaos of a GOP House.

The five measures Sargent recommended were:

  1. Remove the debt ceiling
  2. Fix the method by which Congress ratifies the electoral vote
  3. “Avert chaotic gridlock on immigration”
  4. Prevent defunding of aid to Ukraine
  5. Protect investigations of Trump via a long-term appropriation for the Justice Department

The lame-duck Congress only managed one in full, although it did two in part. Unfortunately, the most critical short-term fix got almost no traction at all.

Congress did pass the Electoral Count Reform Act. So that is #2 taken care of, and future Vice-Presidents should not have to worry about their boss encouraging others to threaten to kill them if the Veep doesn’t reject a state’s slate of electors.

And Congress did pass a spending bill that will fund the Justice Department for the coming year, and also has more aid for Ukraine in it. So there’s #5 good for a year, and #4 sorted until we use up the money and need more.

But there was no action on immigration, not even the DREAM Act, and worst of all the insane man-made debt limit crisis is due to raise its ugly head again fairly soon.

The debt ceiling currently stands at around $31.4 trillion, and we’re getting closer (I’ve inserted a copy of the real-time debt clock.) As we get very close the Treasury has a few games it can play to stretch things out a few weeks. There is no science to the ‘limit’ — it is just an arbitrary statutory limit, enacted to force votes to allow the US Government to pay for borrowing mandated by the gap between enacted spending and enacted taxes (aka “deficit spending”, aka “charging future generations for expenditures (some of which) pay future benefits). The original idea was to create painful votes for Democrats that lent themselves well to campaign commercials.

But the current crazies, as Sargent euphemistically describes them, have a different plan. They have vowed not to raise the debt ceiling unless Congress first cuts spending in general, and Social Security and/or Medicare in particular. You might not think this is winning politics, although it’s clear that a decent chunk of the GOP is all in for it (example).

So what happens if 41 Democrats in the Senate won’t budge and filibuster any bill that would cut bedrock entitlement plans? Then, at some point, the US can’t issue new debt, some of which would be needed to pay bills including interest on old debt, and the ‘full faith and credit’ of the US is shot. This could upend the economy and destabilize the world financial markets:

The Treasury Department is projected to hit its borrowing limit next year, though it is unclear exactly when the agency will run out of so-called extraordinary measures to ensure payments continue for a few months.

Failure to act could result in staggering consequences for the U.S. economy, forcing American officials to choose between the continuity of assistance like Social Security checks and the payment of interest on the country’s debt. The threats from Republicans recall brinkmanship in 2011, when congressional Republicans sought to pressure President Barack Obama to accept similar spending cuts in exchange for raising the debt limit.

That standoff led to the downgrading of the credit of the United States and rattled American investors and the economy.

Goldman Sachs economists warned in an analysis this week that bipartisan support to raise the debt limit “will be necessary, but hard to achieve,” and that the United States could veer the closest it had come to the economic tumult of 2011 since that standoff. The analysts also noted that less than a quarter of Republicans and less than a third of Democrats who will serve in the House in 2023 were there in 2011.

Why is that Democrats didn’t push harder to fix this? I think there are two reasons. First, the votes in the Senate needed to overcome a filibuster just were not there. There were not ten Republicans willing to go out on that limb without allowing some brinkmanship first. Second, I suspect that some Democrats, noting the wild unpopularity of previous partial government shutdowns in the face either of looming debt ce4iling or the failure to pass a budget, have decided that if the ‘ultra-MAGAS’ crowd takes it the mat they will be cutting off their own political heads.

This calculation, however, has two problems. First, it is entirely possible that the GOP as whole might get punished badly, but the instigators, who tend to come from very safe districts, will not feel the pain directly. Second, if we do have an actual default, anyone who isn’t shorting Treasuries, which is to say almost everyone, is going toe get hurt. It’s that second fact that has in the past caused either GOP leadership or rank and file to find the votes to prevent a default. If, however, Kevin McCarthy finds a way to get elected Speaker it will only be due to such major concessions to his rabid right flank that it likely will be impossible for the party leadership to act. And whether there is a handful of members willing to defy their caucus and cast a vote that might well get them the Liz Cheney treatment – expulsion from any party role, and a well-funded primary opponent — is maybe too much to hope for.

Posted in Econ & Money, Politics: US | 2 Comments

Why “Sender Pays” Is a Terrible Rule for Internet Traffic

Reading national treasure Harold Feld‘s occasional “tales of the sausage factory” at Wetmachine.com (I think it is a play on ‘wetware’?) makes you smarter.

I learned stuff from S. Korea “Sender Pays” Is a Warning, Not a Model, or Why (Almost) Everyone Keeps Telling the EU This Is a VERY Bad Idea. If you haven’t been paying close attention to the telco side of traffic provision, you’ll learn stuff too.

“Sender pays” for Internet traffic always seemed a bad idea, or rather a way to gouge even more from customers; the idea is occasionally resurrected,  this time as a way to stop spammers.

Feld explains why it’s a bad idea. Now if someone could explain why latency seems to be going up around here even without ‘sender pays’ …

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A Number I Can Grasp

The US is planning to send $13.6 billion in aid to Ukraine, about half of it military.

I like to divide federal spending by the number of US households (c. 130 million in 2021) to help me grasp what it means.

So that $13.6bn becomes $104.62 per US household. Of course that’s just an average as federal tax incidence is not uniform. Personally I’m happy to pitch in, but it’s easy for me to say that.

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Good Tax Policy (Ukraine Edition)

Yours tax-free if you can get it out of the mud.

Bloomburg’s Matt Levine points us to the latest Ukrainian tax announcement: Feel free to capture Russian tanks tax-free:

Ukraine’s National Agency for the Protection against Corruption (NAPC) has declared that captured Russian tanks and other equipment are not subject to declaration.

“Have you captured a Russian tank or armored personnel carrier and are worried about how to declare it? Keep calm and continue to defend the Motherland! There is no need to declare the captured Russian tanks and other equipment, because the cost of this … does not exceed 100 living wages (UAH 248,100),” NAPC’s press service said.

Also, there is no need in this case to submit reports of significant changes in property status within 10 days.

“Speaking by the letter of the law, combat trophies are not subject to reflection in the declaration for the following reasons: they were acquired not as a result of the conclusion of any type of transaction, but in connection with the full-scale aggression of the Russian Federation on February 24, 2022 against the independent and sovereign Ukrainian state as a continuation the insidious attack of the Russian Federation on Ukraine launched in 2014. Thanks to the courage and victory of the defenders of the Ukrainian state, enemy military equipment usually comes to you already destroyed and disabled, which makes it impossible to evaluate it in accordance with the law On the valuation of property, property rights and professional valuation activities in Ukraine. Therefore, it is also impossible to find out how much such property costs,” the NACP said.

Wouldn’t want to discourage capturing tanks, would we?

Posted in Econ & Money, Ukraine | Comments Off on Good Tax Policy (Ukraine Edition)