Sunday, January 20, 2019

Stay Where You Are, Young Man

Americans have a long tradition of moving towards opportunity. Does anyone remember, "Go West, young man"? What about the thousands upon thousands of people who left Appalachia to work in the steel mills and manufacturing plants of the Midwest after World War II? What about all of the African Americans who moved from the deep south to seek employment in Chicago, Detroit and other northern cities?

I documented some of this movement in another post a couple of years ago, "Less Cheese, More Moves".

At the peak, more than 30 percent of southern-born blacks moved north, from 1920 through the 1960s. Even when technological limitations made long-distance travel extremely onerous, in the late 19 century, we were willing to travel in search of opportunity. In the second half of the 1800s, more than two-thirds of US men over 30 had moved away from their hometowns, and more than a third of those moves were for more than 100 miles.


Despite the fact that our transportation systems and technological advances make it easier for all of us to be more mobile, mobility within the United States continues to decline.

The percentage of those who change residence within the same locality each year is half what it was in 1950.

The same is true for those moving within the same county or same state.

People moving from one state to another has dropped 51% from the post-war years.




We have also come a long way from the 1930's when 2.5 million people in the central United States left their homes in a desperate migration in search of work and better living conditions. They moved from an area that became known as The Dust Bowl which suffered severe dust conditions during a drought that lasted a decade.





During that period, 440,000 people from Oklahoma migrated elsewhere. 250,000 of that number alone ended up in California inspiring the storyline in John Steinbeck's book, The Grapes of Wrath.

Oklahoma's entire population was only 2.4 million in 1930. That means almost 1 in 5 left the state in the 1930's. 1 in 10 ended up in California.

Can you imagine a similar migration today? Of course not. It is unimaginable.

The drought would be blamed on climate change and a massive government program would be enacted to bail everyone out. Billions and billions and billions of dollars later, no one would see the need to move for other opportunity.

You can probably cite the aging population as the biggest reason that people are not changing residences within the same locality as much as they did in the past.

However, the massive government safety net that has been developed since the 1960's has to be responsible for so many more people not moving from state to state.

The social safety net has become so large and all encompassing that it no longer provides protection--it has reached the point that it has trapped and ensnared millions of people. People don't move because they don't need to move. Their situation may be less than ideal but they have subsidized housing, they have food stamps, they have Medicaid. Millions gets a government check each month. There is no need to move.

People used to move because they needed to put money in their pockets and a roof over their heads. They were willing to take a risk to better a bad situation. There are few situations anymore where Americans feel the pain of a bad situation like people used to. We have taken care of that by removing much of the discomfort. However, we have also destroyed people's incentive to do something about bettering their lives in the process.

Our intentions are good but in the process we are destroying the spark within their human spirit that motivates people to seek opportunity and remove the chains that keep them locked to their current circumstances.

You see this in this map of opioid deaths in the United States. In 2013, there were about 25,000 deaths from opioids in the U.S. By 2016 that number had grown to 60,000. In 2018 it is estimated that deaths from opioid overdoses will have grown to 72,000 when the final numbers are in.

Let's put that number in context. 58,220 died in the Vietnam War in a conflict that lasted over a decade.

There were 39,773 deaths by guns in 2017---two-thirds due to suicide.




I also find it interesting that so many of the opioid deaths are clustered in Appalachia and the area that was once referred to as the Dust Bowl area.

Previous generations in these areas moved for opportunity. The current generation, supported by government programs, stays put with the support of those subsidies. That support even includes Medicaid which is often the payment source for the opioids they use in an attempt to take away the pain that accompanies hopelessness.

"Go West, young man" has been replaced with "Stay where you are, young man."

Rather than the social safety net providing a temporary cushion against economic woes it has ensnared millions upon millions of people in a permanent trap of hopelessness.

The road to hell is surely paved with good intentions.

Thursday, January 17, 2019

Chinese College Invasion

I have written recently about how increasingly dependent the global economy has become on China.

I had no idea how that also extends to American colleges and universities until I read this article on the University of Illinois purchasing an insurance policy against a drop in Chinese student enrollment. The policy pays the university should there be more than a 20% drop in revenues from Chinese students in a single year following "triggering events". These events include such "triggers" as visa restrictions, a pandemic, or trade wars. In other words, something out of the control of the university.

Why is the University of Illinois so concerned?

Chinese students have become a huge revenue source for the school. 51% of foreign students and 12% of the total student body now come from China.

The same is true for many American colleges and universities.

The number of international students has been growing and a big part of that growth has been due to the influx of Chinese students to American schools.

According to the Brookings Institute, between 2008-2012, Chinese students paid nearly $7 billion in college tuition. It is undoubtedly much, much higher today. A group of Texas universities, concerned about limitations on students visas, estimated that Chinese college students contributed $12.55 billion to the U.S economy in 2016 alone.



Here is a chart that shows the growth of international students studying at U.S. colleges.


https://www.migrationpolicy.org/article/international-students-united-states


A third of those students are from China alone. Together, China and India now make up half of international students at American colleges.


Credit: https://www.migrationpolicy.org/article/international-students-united-states



As recently as 2006 Chinese students made up only 10% of international students.

You can also see how far the numbers and mix of international students has changed by looking at the same chart for the 1979-80 school year.


Credit: https://www.migrationpolicy.org/article/international-students-united-states


Here are the universities that were most dependent on Chinese students for the 2014-15 school year. This is the most recent data I could find. I think you can see why the University of Illinois took out that insurance policy.




I was curious what was going on at my own undergraduate institution regarding Chinese students. Miami University is about as midwestern as it gets. It is located in the small rural town of Oxford, Ohio. The environment in Oxford is about as far removed from China as you could imagine.

Miami has 17,000 undergraduates and 2,500 graduate students on the Oxford campus.

There are 2,832 international students in those numbers. (14.5%)

2,682 Chinese students (includes some who may be at branch campuses) are enrolled at Miami. That is over 13% of the student body.

The next highest country that is represented among international students? India---98!

You might as well call the International Study Society at Miami the Chinese Student Society.

Why are Chinese students attractive to Miami?

Undoubtedly, they are smart and hard working.

However, consider the economics.

Miami is a state school. In-state tuition for an Ohio resident is $15,378 for the 2018-19 academic year. For non-Ohio residents it is $34,895.

Looking at the numbers of Chinese students and the dollars involved, it might not be a bad idea for Miami to also be looking into that insurance.

I wrote recently that we need to keep our eye on China.

I had no idea that it was particularly true for college administrators.

Tuesday, January 15, 2019

We Need A Red Card-Six Years Later

A loyal BeeLine reader reached out to me and told me he thought my recent blog post on illegal immigration was incomplete. He did not disagree with what I wrote but pointed out that the reality is that many jobs in the United States would go unfilled if immigrants were not here to take those jobs.

He argued that most Americans were simply unwilling to do the jobs that are now filled by many legal (and illegal) immigrants. Too many native born Americans simply would rather live off of public assistance than get their hands dirty at a job they considered beneath their status.

This is undoubtedly true for too many Americans. However, in my view, this is only the case because the incentives are not aligned properly. The public assistance is too rich and the going wages for work are too low. People do what is in their self-interest. If this is what is occurring we have created a system that gives us this result.

That being said, I have long been on record as favoring comprehensive immigration reform. The system I favor is one in which we provide legal immigration status to those who can, above all else, contribute something to our economy and society.

Those that are permitted to come to the United States should not be principally determined by family ties or a lottery. It should be determined by who can contribute to making America better and stronger.

Most everyone who migrates to the United States (legally and illegally) has done so in search of opportunity---for themselves and their family. We need to insure that they also make us better as well.

The other reality is that we have anywhere from 11 million to 22 million illegal immigrants in the United States today. I have no problem with these people remaining in the country as long as they are law abiding and they are contributing economically to our society.

Most are hard-working people who would leave us weaker economically if they were deported.

We need a system that recognizes this. That should include some provision for a guest worker program that allows for an immigrant to work in the United States permanently but does not allow the worker to be eligible for any of the benefits of a green card, or ultimately, citizenship.

However, no immigration system of the future will work unless illegal immigration is brought under control and we have a secure border. If this is not done, there is nothing that will work. In fact, if we were to do something similar to what I suggest below we would actually make things far worse if the border was not secure and we enforced the law like we do now.

We have already learned that lesson by the total failure of the 1986 effort at immigration reform during the Reagan administration. We simply cannot do that again.

That is why there can be no amnesty and any violations of the law going forward have to be such that most will think of the punishments I suggest are draconian. There is no other way if there is to be a common sense solution to this problem.

This problem is not going to get solved by ignoring it, trying to demonize Donald Trump or allowing the federal shutdown to continue solely because some don't want Trump to get even a token sum for a wall. A wall that almost every Democrat was for, before they were against it.

We need common sense. A commodity that is very rare these days in Washington, D.C.

This is a common sense proposal. This recognizes the way the world works. This recognizes the incentives and disincentives that drive people's behavior.

Here is what I wrote almost six years ago. It is as true today as it was when I first proposed it six years ago. What is sad is the problem is much worse today and yet we seem even further way from a solution.


Do We Need A Red Card And A Green Card?
(originally published June 17, 2013) ( edited for length and clarity)

I have long been in favor of some form of immigration reform.  There is little question that our current immigration laws have not been effective and are in need of reform.  The United States is a nation of immigrants and it needs a rational, practical, balanced and equitable set of immigration laws for the 21st Century.

The most explosive issue in the immigration debate, especially among conservatives, involves amnesty.  Simply stated, are we going to allow people who violated our laws by entering our country illegally the rights and privileges of legalized status?

What about the millions of people who want to come to our country, obeyed the law and have waited patiently in line for their turn?  For example, in 2012 there were almost 15 million people who applied for the green card diversity lottery for just 50,000 openings hoping to come to the United States from underrepresented countries!  How is it fair and equitable to reward those who broke the law and deny others who play by the rules?  More importantly, what precedent does that establish for the future?

After all, we have already been down this road once before in 1986 when 3 million undocumented immigrants were granted amnesty and provided legal status in this country.  How has that worked out?  Not real well. We now have at least 11 million undocumented immigrants.  It is also estimated that those 11 million have another 4.5 million children that were born in this country.

If we were to enforce the law it is clear that those 11 million should be required to pack up and return to their home countries.  However, the practical reality is that is not going to happen. This is particularly true in light of the parents who have minor children that were born in this country and are legal citizens under the law. The Democrats therefore argue that we should legalize all of these undocumented aliens, since they are here and they are not going anywhere, and get them on the path to citizenship with a green card.

The green card is the term used to signify an individual that has been granted permanent residence in the United States.  The general rule is that someone with a green card can apply for citizenship after five years. In my mind there is no way that this existing legal grant of residency should be granted to anyone who entered this country illegally.

However, we also must recognize the practical reality that the undocumented illegal immigrants are not going home and it is to everyone's benefit that they come out of the shadows and have some status under the law.

My solution is to create what I call the "Red Card".  Of course, this assumes that the border is secure and we don't have to worry about doing this all over again. Nothing is going to work if we don't prevent future illegal immigration.  We will be an even worse position in another ten years.






The Red Card would be available to anyone who is in the country currently that does not have proper documentation. Application for the card would have to be made within 90 days of the enactment of the law.  Holders of the Red Card would be granted conditional residency as long as they were gainfully employed and contributing to the economy of the United States.  After all, we should encourage people who want to work and contribute to our society in a positive manner. The Red Card would permit the individual to stay in the United States as long as they remained employed, paid all taxes and committed no crimes.

The Red Card would also be used in the future to grant status for temporary guest workers in situations and job sectors where it was necessary. Red Cards would be issued where job shortages exist and our Immigration Service would institute a system by which available jobs would be matched with qualified immigrants willing to do that work.

If a holder of a Red Card should lose their employment status, they would be given a grace period of 120 days to find other employment. If they could not find employment in that period they would have to leave the country within the next 60 days.

The Red Card will also be allowed to be extended to a spouse (if minor children 12 or under) and dependent children 18 and under). However, if the primary Red Card holder loses job status all family members also lose their status.

Holders of Red Cards would be entitled to no government benefits currently (welfare, Medicaid) or in the future (Social Security and Medicare). They must pay all required income and other taxes in the United States while here. They must carry health care insurance. They must commit no crimes. Any violations will result in immediate deportation and the loss of the right to future entry into the United States for their lifetimes.

All immigrants would be required to have their green or red card in their possession at all times. Beginning 90 days after enactment if someone does not have proper documentation, is here illegally, has overstayed a visa, or violated the terms of the Red Card status, they will be deported and will never be entitled to return to the United States. This may sound harsh but without a strong provision like this you have little hope in insuring compliance with the law and getting everyone to register and comply with it going forward.

Holders of Red Cards could apply for Green Cards by getting in the back of the line for their respective category under the law.

What does this accomplish?  It provides a method by which we can provide a method for allowing hard working people to stay in this country if they are contributing to the economy and are positive forces in the community.  However, it establishes a clear delineation between people who came to this country legally and those who did so illegally.

It also insures that those here illegally will not benefit from our government programs and have no path to citizenship and no amnesty.  They are free to work to make a living for themselves and their family. They will not be allowed to take advantage of the taxpayer or get an unfair advantage over legal immigrants. They are not allowed to vote. Proof that they voted in a U.S election will also be grounds for immediate deportation and a lifetime ban from ever entering the U.S again.

I see this as a common sense compromise to bridge the liberal and conservative divide on the issue. Common sense should also be determining all of the decisions on immigration reform.

Why have an immigration policy at all?  Why do we let anyone in? The only logical reason is to improve your country by importing human talent that will provide a benefit to the nation.  This is the thinking that drove our immigration policy for most of our history.  Immigrants with illness or who could not support themselves and their families were turned away.  Often this was at Ellis Island after they had already faced an arduous journey here by ship. Those who were willing to work and contribute were welcomed. Why should it be any different today?

Sunday, January 13, 2019

Something We Should All Agree On

There are three big reasons in my mind that illegal immigration should be taken seriously by any citizen of the United States irrespective of your political allegiance.

Yes, I understand the empathy one should feel for any human being that wants to escape a bad situation and better themselves. However, as I wrote recently, there are literally millions and millions of people in the world who want to migrate to the United States.

The United States already has 4 times as many immigrants living within its borders as any other country in the world. We can't take everyone. Where do we cut it off? 5 times? 6 times? 10 times?
Who decides?

Let's look at three rational reasons to have immigration laws and secure borders. I have to believe that almost everyone would find something they agree on here if they looked at this issue rationally rather than emotionally--Republican, Democrat, Conservative, Liberal, Young or Old.

A Nation of Laws

First, we are a nation of laws. Society does not operate if we do not adhere to the laws that are written and are on the books. There may be those who do not like the laws. If that is the case, there is a constitutional process to change the law.

A society that functions is based on law and order. It does not work if everyone decides what the law should be and takes the law into their own hands. That brings chaos and, ultimately, anarchy.

Our laws should also be applied in such a way as to insure equal justice. Why should we let millions flood over our Southern Border or overstay temporary visas when there are millions waiting in line to come to this country legally? There is absolutely no justice in that.

Many opponents of the Border Wall claim it is racist. However, the fact is that there are 3.8 million people on the current waiting list to gain legal immigration status in this country due to family or employment reasons. Almost all are from what we would consider minority populations. A third of them are actually from Mexico.

However, current law only permits any one country from receiving more than 7% of the annual visa issuances for permanent legal immigrant residency annually. This is the case in order that any one country does not dominate the legal immigration process. Again, the law is about fairness and equal justice.

For 2019, the per country limit is estimated to be 25,620.



Divide the number of applicants by the per country limit and you will see that most of these people have a rather long wait ahead of them to gain admittance to the United States legally.

Are we supposed to just wink and tell those in Mexico, El Salvador or Honduras to not worry about our laws? Come ahead. There is nothing to stop you.

What about those in the Philippines, India, Vietnam, China and Bangladesh? How is this fair to them?

Sustainability

Second, there seems to be no recognition of the enormous sustainability issues regarding illegal immigration. This is especially surprising considering the importance of this issue with Democrat and younger voters in particular.

Too many immigrants puts too much strain on our resources. It puts unnecessary strain on everything in our society---our water, our sewer systems, our roads, our infrastructure and our environment. It contributes to congestion and urban sprawl.

Add to this what it does to increase the financial strain on our schools and our health system, not to mention our law enforcement and justice system.

As this report points out, there are 730,000 illegal immigrants currently imprisoned in the United States for crimes other than illegally entering the country. Illegals make up an estimated 3% of the population of the United States but account for 20% of federal prison inmates. 91% of criminal aliens are from Mexico, Honduras, El Salvador, the Dominican Republic, Colombia or Guatemala.

The financial and human cost is enormous and it is made more difficult when the flow of immigrants is not managed and controlled as it is supposed to be through our legal immigration system.

This says nothing of the challenge it presents to social order as masses of illegal immigrants find it hard to assimilate into a society and culture they are unfamiliar with. This inevitably results in problems as Europe as discovered to their regret.

Economics and Jobs

Third, there is the economic dimension. Has there been a need in the United States for the labor that many illegal immigrants provide? Absolutely. However, it has come at a significant cost to those American workers who are most vulnerable in the U.S. economy today---those with lower education or few skills.

The added supply of illegal immigrant workers has substantially reduced opportunities and wages for those Americans at the bottom of the economic ladder. It has simply been a question of supply and demand. The supply of workers coming here illegally has artificially suppressed incomes of those Americans who are most vulnerable economically.

What concerns me even more today is that we seem to be on the cusp of a technology and innovation revolution that will put even more pressure on low-skills jobs. This will further squeeze American citizens at the bottom of the economic rung. In addition, what are we to do with the millions and millions of illegal immigrants who are already here and yet may end up unemployable due to low education and skills?

I wrote previously about the recent Bain report that predicts that 40 million current jobs could be eliminated by automation in the United States by 2030. That is just over 10 years away.




It is a recipe for disaster that makes our current state of affiars look tame by comparison. And the current state is not that great.

Consider this recent report from several economists with the Federal Reserve Bank of Atlanta entitled "Building A Skilled Workforce For A Strong Southern Economy."

The thesis of the article is that there is already a significant job skills gap in the South (where there are substantial numbers of illegal immigrants)  There are many more low skill workers than there are low skill jobs. The South also has more high skills workers than high skills jobs. However, most jobs today require middle skills (more than a high school education but less than a college degree).

We see the effects of this every day. Too many people with low education and skills that unemployable. In addition, many recent college graduates who are underemployed because they are overqualified for the available middle skills jobs.




Can you see the obvious problem of permitting millions of  low education and low skilled immigrants to flood across the southern border while we already have a skills gap and the gap is likely to get much larger in the year ahead?

Something We Can Agree On Somewhere?

It should not matter what your political persuasion is.

Law and order conservative. See Reason #1.

Far-left liberal environmentalist. See Reason #2.

Pragmatic independent who is most concerned about economic issues. See Reason #3.

Illegal immigration must cease.

Sensible immigration reform needs to be enacted.

There is simply no excuse that this issue has been allowed to fester for decades.

This is something we should all be able to agree on.

Thursday, January 10, 2019

Keep Your Eye On China

It used to said that "when the United States sneezes the rest of the world catches a cold."

That may still be true but it may now be true of China as well.

The growth of China's economy and the sheer size of its population means that anything that occurs in China today will invariably have reverberations around the world.

As we begin 2019 it may make sense to keep your eye on China to see where the world economy is heading. You can be sure that what happens in China's economy will also have major effects on the United States.

We saw evidence of this last week when Apple revised its revenue forecasts down for the first quarter principally due to lagging sales in China. Mind you that is the first time in 15 years that Apple lowered quarterly sales estimates. Apple's stock immediately fell 7.6% in the hours after the announcement was made.

The fact is that most U.S. and multi-national companies have come to rely on China for growth.

General Motors now sells one-third more vehicles in China than it does in the United States. Starbucks is in the midst of opening one new store in China every 15 hours. Adidas has seen its growth expanding at 26% per year in China while its home market of Europe is flat.

A lot of this has been driven by a 400 million (and growing) middle class in China. To put that in perspective, the total population of the United States is only 330 million. Most estimates suggest that the middle class is 50-60% of that total.

The problem is that a lot of the growth of the economy (and the middle class) in China the last decade has come about through a great deal of debt-financed spending. That spending provided wages for construction, manufacturing and service workers but interest and principal payments on that debt needs to be paid.

You get an idea of how large the debt load the Chinese have taken on by viewing this chart.




When I was in China recently I saw evidence of this debt fueled spending everywhere I looked.

There are scores of newly built apartment building complexes like this one I photographed in Tianjin, China.





The problem is that millions of the apartment units in these buildings around China are unoccupied.

This New York Times article on the problems in China's housing market cites a statistic that there are currently 65 million unoccupied apartment units in the country.

Let's put that number in context.

According to the National Multifamily Housing Council, there are a total of 20.8 million apartment units in the United States. Those are all the apartment units in the USA---occupied and unoccupied.

Therefore, China has 3 times as many UNOCCUPIED apartment units as the entire number of apartment units in the United States!!!

Do you think this might pose a problem to those holding the debt on those apartment units in China?

Add to this the recent news that births in China for 2018 are estimated to have fallen 2 million from the numbers in 2017. The government's family planning authority had expected births to rise by 3 million compared to last year due to fact that the previous one-child policy has been replaced by a 2-child policy. That works out to 5 million fewer births than predicted in China.

Let's put that in context. The United States had a grand total of 3.8 million births in 2017.

I would not be surprised to see the Chinese soon paying parents to have babies.

In addition to unoccupied apartments there is also a lot of excess production capacity that is not producing any economic return on the debt used to build those manufacturing plants.

Victor Shih, an economist who follows China closely, calculates that interest on all the debt in China now exceeds $3 trillion per year---22% of GDP.  In fact, interest payments on that debt are now higher than China's incremental increase in GDP.

Enda Curran in an article at Bloomberg.com titled "China's Debt Bomb" describes it this way.

It’s been called a mountain, a horror movie, a bomb and a treadmill to hell. To doomsayers, China's $34 trillion pile of public and private debt is an explosive threat to the global economy. Or maybe it's just a manageable byproduct of the boom that created the world’s second-biggest economy. Either way, the buildup has been breathtaking, with borrowing having quadrupled in seven years by one estimate. (China doesn't give a complete tally). President Xi Jinping has taken note, pushing authorities to announce a slew of measures that target risks lurking in the financial system. The challenge is how to wean the country off its debt drip without intensifying an economic slowdown. Since China is a key driver of global growth, it's a matter of concern for everybody.

On top of all of this, President Trump has turned up the heat on China's trade practices that have systematically worked against the United States for decades. Tariffs are now in place on over $250 billion in imports from China. More tariffs are set to be imposed in March if a trade agreement with China is not reached by then.

Trump has also worked to build a relationship with North Korea which surely has the Chinese concerned about losing control on the Korean Peninsula which borders China.

The United States also ordered that the CFO of Chinese tech giant Huawei be arrested and detained by Canada as part of a large criminal investigation in New York.

No one should ever doubt that Donald Trump does not know to use leverage when he has a goal to achieve an objective.

Trump knows that China is in a tough spot. There is a lot of debt to service. There are a lot of mouths to feed. Over 400 million Chinese have begun to taste the good life in that country. The last thing the Communist Party in that country wants is an economic implosion.

Can China avoid a financial crisis? Can it accede to Trump's demands without crashing their own economy? Can it continue to grow without taking on more debt?

All of these answers are keys to China's economic future.

However, due to the interconnected world we live in, what happens in China could very likely spillover to the rest of the world.

Keep your eye on China.

If it sneezes it might signal a cold wave for the rest of us.

Tuesday, January 8, 2019

70%---A Fair Share

Alexandria Ocasio-Cortez kicked off her first week in Congress with an appearance on 60 Minutes calling for the imposition of a 70% income tax rate on the super rich.

She said that tax rates must become much more progressive in order to pay for her "Green New Deal" ideas to fight climate change.

I particularly liked the look on Anderson Cooper's face as he listened to this. It seemed to me as if he was quickly adding up in his head how much these far-left ideas were going to cost him.

There actually seems to be a bit of fear in Anderson's eyes as he listens to AOC explain how she thinks he should pay more.





After all, it is great to talk about these things in the abstract. However, at the end of the day, someone actually has to open up their wallets and pay.

We already saw this with the Trump tax bill last year. Big, liberal states like California, New York and Illinois are filled with people who vote Democrat. From their votes you have to believe that they think they should be paying more in taxes.

However, as soon as they lost their unlimited deduction for state and local income taxes all they talked about was how "unfair" it was.

Ocasio-Cortez got a fair amount of people expressing shock at the 70% tax suggestion. However, liberals came to her defense and stated, "Don't worry, that rate would just be imposed on incomes over $10 million---the truly super, super rich. She is only talking about a marginal rate of 70% on a small group of the rich."

I'm sorry. Progressive taxation systems don't work like that.

They are, by definition, progressive. Each dollar of additional income is exposed to higher levels of taxation.

These are the current marginal tax rates.




If you were to enact a 70% top rate you would undoubtedly need a number of additional brackets leading up to 70%. A 40%, 45%, 50%, 55%, 60% and 65%.

Enacting a 70% marginal tax rate on income above $10 million but having a 37% tax rate at $9,999,999 would insure that most people would make sure that the did not earn $10 million. You can count on it. There would have to be additional brackets to make the rate progressive to that point. Otherwise, the 70% tax rate is a cliff tax, not a progressive tax.

The current brackets also might have to pushed downward.

Why?

There simply isn't enough tax revenue to be had at the higher levels of income to enable the socialists to spend want they want to.

In the latest IRS data available (2016), there were only 16,000 individuals who reported more than $10 million of income. Even if you doubled the effective tax rate on the income tax collected from these individuals it would only bring in $120 billion in additional revenues. That only represents 2.7% of current annual spending. It is about the same as an annual inflation adjustment on the federal budget.

The Washington Post is more conservative with their numbers than I am. They suggest a 70% marginal rate would raise $72 billion annually if just applied to income over $10 million.  That is about 1.6% of the budget.

As stated above, all of this also assumes that there would still be 16,000 taxpayers with $10 million in income. My prediction is that number would fall drastically with a 70% tax rate.

To get the kind of money Ocasio-Cortez and her fellow Socialist Democrats want you have to tax everybody much higher across the board.

As I saw Ocasio-Cortez make her argument for much higher income taxes I could not help but think back to the post I wrote last year on Tax Day on the zip codes that pay the most in income taxes.

We always hear that the Republicans are the party of "the rich."

I wanted to do some research on how those high earners voted in the last Presidential election to see if it was those "rich people" who put Donald Trump in The White House.

I am also curious to see how those rich people, in those high income zip codes, think about a young, high profile Democrat arguing they need to have their income tax rate doubled.

This is the list of the highest income zip codes in the United States.




This is the vote for Donald Trump in the ten richest zip codes according to the voting analysis interactive tool that The New York Times has online.

Miami Beach, FL (33109)     52%
Atherton, CA (94027)            23%
Palm Beach, FL (33480)       64%
Palo Alto, CA (94301)           10%
Harrison, NY (10577)             4%
Gladwynne, PA (19035)         37%
Los Angeles, CA (90067)      20%
Kenilworth, Il (60043)           38%
Weston, MA (02493)             28%
San Francisco, CA (94111)    12%

If you take a rough average from the 10 highest income zip codes, Trump only got 28% of the vote from those rich Republicans  Democrats.

Looking at these numbers, if I were Trump, I would call Ocasio-Cortez and tell her I was onboard with her idea to implement the 70% top rate. However, he should propose that only half the revenue raised would go to Green New Deal infrastructure spending. The other half would be allocated to the border wall and any excess funds would be used (in equal shares) to shore up the Social Security Trust Fund, the Medicare Trust funds and reduce college loan interest rates.

There would be a lot of excess funds to spread around. Trump is only asking for $5 billion for border wall funding in this budget. It is estimated that the entire wall would cost $25 billion. Using the Post's estimates, the 70% tax would raise three times that in one year!

It is called the "Art of the Deal".

Let's see any Democrat candidates for President put a better proposal than that together for attracting votes for 2020.

Would it fly?

Of course not. However, I enjoy thinking of scenarios where President Trump could drive the Democrats absolutely crazy.

After all, it is only fair.

Sunday, January 6, 2019

A Wild Ride Ahead?

In 2017 the U.S. stock market enjoyed one of the smoothest rides in history. Volatility (the up and down movement of stocks) was low. There were no wild gyrations. What movement there was mostly followed a smooth, upward trend.

Contrast that with the last few trading days of 2018 and early days of 2019 and it is a far different picture.

Here are the Dow Jones daily changes over the last ten trading days (December 20, 2018- January 4, 2019).






It was one wild ride.

There were 5 up days and 5 down days.

6 out of the 10 days saw changes of over 400 points either way.

However, the net effect after ten days was a net positive change of 110 points.

If you had gone away for two weeks and had not checked the market in the interim you would have thought nothing of it when you got back.

"I see the market advanced 110 points while I was gone. I was a little worried about my 401(k) when I left for vacation. I am happy to see there was nothing to worry about."

If you had your phone in your hand and were checking the market hourly you had a completely different perspective. You were probably afraid to even peek at the numbers on those big down days

It seems that we may be in for a wild ride this year based on what we are seeing.

There is plenty of worry to go around right now.

Democrats taking control of Congress.

The "government shutdown".

The Mueller investigation.

The Fed raising interest rates and the tightening of credit.

An inverted yield curve.

Trade wars.

Slowing worldwide economic activity.

China.

Brexit.

You could go on and on.

There is always something to worry about.

One of the things I find interesting in looking at the markets in 2018 is how well the United States held up compared to the rest of the world.

There were a lot of stock market losses around the world in 2018 in US dollar-denominated terms.
The reality is, that despite all the hand-wringing about the U.S. market, it was just about the best place in the world to have your money invested.




If you get a little depressed when look at your year-end 401(k) balance you might want to think about the chart by Charlie Bilello below.

That does not mean you should not expect a wild ride in 2019. However, everything is relative.

Most people around the world (especially in Europe) would say the United States has been on a wild ride the last 11 years. However, it was almost always going one way---up.

USA       +111%
France        -3%
UK              -7%
Germany    -7%
Spain         -29%
Italy           -48%


Credit@CharlieBilello
Returns as of 12/28/18


My advice--when investing, it is always prudent to have your seat belt fastened. Wild rides are to be expected every once in awhile.

Thursday, January 3, 2019

Why Is Trump "The Bad Guy" On Immigration?

2.7 million persons deported.

Migrant children held in holding cells with temperatures as low as 50F degrees.

The death of 18 migrants while in the custody of U.S. immigration authorities.

Pepper spray or tear gas used an average of once a month on immigrants trying to enter the U.S.

All of the members of the President's party in favor of a 700 mile fence and other security border security measures along the U.S. border with Mexico.

From what you read in the media today you would think I am referring to the Trump administration regarding these actions.

However, all of these are related to things that happened during the administration of Barack Obama.

It might be difficult to understand that based on what you see and hear from the media and the Democrats in Congress these days. In fact, new Speaker of the House Nancy Pelosi and most Democrats are now saying that walls are immoral.

I guess the Vatican didn't get the memo.


Part of the wall surrounding The Vatican
Credit:Live Science

If walls are immoral are we to expect the Democrat House to also pass a law to dismantle the portions of the wall that already exists along the southern border?

For example, this is the wall that currently exists between Tijuana, Mexico and Pelosi's home state of California. Should we tear it down because it is immoral?





There were no laws limiting immigration into the United States for the first one hundred years of its existence. If you could get here, you could stay.

However, Congress was very concerned about who gained citizenship and who could vote from the very beginning. In fact, Congress passed its first naturalization law in 1790.

The first comprehensive immigration law regulating who was allowed into the country was not passed until 1891. It established an "Immigration Bureau" and directed it to enforce the immigration law.

These laws have been revisited a number of times since then but the long-standing principle was a limitation on the number of immigrants who could gain entry into the country. A numerical annual limit on the annual number of immigrants allowed to enter the country has been in place for almost 100 years.

The President of the United States swears an oath upon taking office that he will faithfully execute his duties in respect to enforcing and upholding the laws of the United States. Are there any Presidents since Eisenhower who took this oath seriously regarding immigration? Reagan tried in 1986 and even provided amnesty to the 3 million illegals who were here at that time. What happened? We now have even more illegals here today. (see below).

The current immigration laws are generally tied to a framework that was passed in 1965 which gave preferences to those with family connections first, refugees and asylum seekers. Necessary job skills were also factors but these were less important than family ties. It also set numerical limits on where those immigrants came from placing specific limits on areas that had provided most of our previous immigration (e.g. Western and Eastern Europe).

Interestingly, at the time of passage of the bill, Senator Edward Kennedy who was Chairman of the Senate Subcommittee on Immigration said this,

"The bill will not flood our cities with immigrants. It will not upset the ethnic mix of our society. It will not relax the standards of admission. It will not cause American workers to lose their jobs." 

It did not quite turn out the way Senator Kennedy predicted.

As I wrote in a previous blog post, there are 3 million immigrants who were born out of the country living in New York City alone. 500,000 of that number are from one country---the Dominican Republic.

There were less than 10 million total immigrants living in the United States in 1970. That was less than 5% of the population. Today there are close to 45 million immigrants in this country. This includes an estimated 11 million illegal immigrants. However, a recent MIT/Yale study suggests that the actual number of illegals in the U.S. is 22 MILLION. If that number is accurate, people born outside the United States make up over 16% of the population.






The current U.S. immigration laws provide the opportunity for slightly more than 1 million immigrants a year to migrate to the United States LEGALLY.  1.1 million were granted permanent legal immigrant status in 2017.

Although the United States has less than 5% of the world's population, 20% of all international migrants reside in the United States. By pure numbers, the estimated immigrant population of 44 million is 4 TIMES as many who live in any other country in the world.

Why have immigration laws at all?

The original reason was to protect American workers, their wages and the country's culture. These all hold true today but I would argue sustainability is now an equally important factor. Too many immigrants puts too much strain on our resources. Schools, hospitals, health care resources, roads, infrastructure, the environment. Adding too many immigrants, too quickly, also puts added pressure on the social order if those immigrant numbers outpace the ability to integrate and assimilate them into the general population. This is exactly what is happening in Europe right now.

If you think the United States could survive an "open borders" policy as some Democrats advocate  I suggest you look at this recent Gallup World Poll survey which found that 750 million people worldwide want to migrate to another country.

21% of these people worldwide stated they would like to migrate to the United States. That is 158 million people---equal to about 50% of the current population of the United States.

Compare that 158 million that want to come to the United States with the numbers that want to come to the next highest countries on the target list for migrants. Canada (47 million), Germany (42 million), France (36 million), Australia (36 million), United Kingdom (34 million). In fact, the United States and the countries listed above are the desired destination of almost half of all those who want to migrate from their own countries.

How many migrants want to move to China? 1%

Russia? 1%

Venezuela? 0%

North Korea? 0%

For additional perspective, these are the countries in which Gallup found that at least half of the adults wanted to permanently migrate to another country.





Let's just consider the countries above that are in the Western Hemisphere in which it is relatively easy to reach the United States compared to the rest of the world. You have to assume that most in those countries who want to migrate would prefer to live in the United States if given the opportunity.

There are the current populations of these countries.

Haiti   11 million
El Salvador   6.5 million
Dominican Republic   11 million
Honduras   9.5 million

If half of the people in these countries migrated to the United States under an open borders policy it would add almost 20 million people to the United States.

It would overwhelm the system, our resources, our infrastructure and our social order.

That is why you simply cannot take anyone seriously who argues for open borders or is stating that they want to abolish ICE (Immigration and Customs Enforcement).

What we should get serious about is enforcing the laws that are on the books, securing our borders and taking the necessary steps to modernize our immigration laws that are generally based on the world as it was 50 years ago.

Who is the one guy who is serious about all of this and has made a determined effort to do something about it in accordance with his oath of office?

President Donald J. Trump.

So why is he made out to be the bad guy in all of this?

Consider the facts above and keep asking that question.

Tuesday, January 1, 2019

How It Begins

No one knows how 2019 will unfold.

Where is the economy headed?

What about the stock market?

Will House Democrats do anything this year other than investigate Trump?

Will Trump crater in the face of the unrelenting attacks on him or will he continue to confound his considerable enemies?

Which Democrats will announce they are running for President and who will actually have the support to be on primary ballots early in 2020?

There are thousands and thousands of unanswered questions as we begin the new year.

I try to not make predictions. I have enough trouble trying to understand what is happening today. I often am not totally sure of why something happened yesterday.

I am not alone. Two years later half the country still can't understand why Donald Trump is President.

All that being said, I came across some interesting polling data on how the American people feel about their current situation.

Who knows how the year will end? However, this data provides some interesting insights on how it begins.

Before we get to the polling data, here is an interesting chart to provide some necessary context about the world we live in today. We hear a lot in the media about how bad things are. We hear a lot about conflicts around the world. We hear that the world is coming apart. We hear a lot about how violent the world is. Some think we are near the end times.

The reality is that we are living in what may be the most peaceful period there has ever been on earth. Global deaths due to conflicts and wars has not been this low in over 600 years of recorded history.




Now to the recent polling data that I found interesting.

Let's first look at a Gallup poll on what Americans say is the country's biggest problem. Gallup has been asking this questions for years and years and invariably it seems that the economy and jobs are at or near the top of the list.

People care most about what goes in and out of their wallet.

That is not the case in this poll that was done between December 3-12.

19% cited government was the biggest problem facing the country followed by 16% who said immigration was the biggest problem.

That is pretty remarkable. Government is viewed as the problem rather than the solution?

Where are the economy and jobs in the poll? Each is only cited by 3% as the biggest problem. That is also pretty remarkable. Most people seem fairly content with their economic situation right now. To put that in perspective, 40% cited economic issues as the biggest problem facing the country in 2016 right before Trump was elected.

Will the same be true at the end of 2019? Or in Fall, 2020? The answer may determine the 2020 election.





The other thing that is interesting looking at the poll is comparing the November and December results. By doing this you clearly see how much current events and media attention shape public opinion.

Note how immigration was cited as the country's top problem in November as the migrant caravan marched towards the United States. This issue dropped 5 points in December as attention waned in the media.

Similarly, healthcare dropped from 11% in November to 5% in December. Healthcare was top of mind for many people in November as they dealt with 2019 plan enrollments and Democrats talked about it leading up to the mid-terms elections. A month later it no longer holds the attention it did.

The second poll is a Morning Consult survey on the attitudes of Americans on whether certain things in their personal lives had gotten better or worse for them over the past year.




This survey suggests that the attitude of Americans on most things in their lives has improved a great deal in 2018.

However, it seems to have gotten a lot better for Republicans than it has for Democrats.

How can that be?

Do your political views have that much affect on your attitudes about how good your work-life balance, mental health, personal life and love life is?

It apparently does.

My advice to Democrats is to lighten up a bit in 2019.

You may recall all of the predictions of gloom and doom when Donald Trump was elected President.

Two years later we are still standing. In fact, objective facts (see this blog post) and subjective opinions (see above) both suggest that things are much better today than they were before Trump was elected.

What transpires during 2019 may change that. However, this is where we are as the new year begins.

Enjoy it. Embrace it. If you are a Democrat, elevate your attitude a bit. Is Donald Trump really that bad if you look around you today and look at the data? You might also take a minute to empathize with Republicans who might have had the same feelings you have today during eight years of Barack Obama.

No one knows where we will be when the new year closes.

However, this is how it begins. And it has been a pretty good two years despite the wailing and whining we hear every day.

We are sure to see grimmer times at some point ahead. It is the natural order of things. However, we will not be able to meet that challenge if we remain so divided.

It is worth reflecting on all of this as we begin the New Year.

Happy New Year one and all!

Sunday, December 30, 2018

The Best of BeeLine-2018

Here is a Top 10 List for the Best of BeeLine for 2018. The first 5 are the most popular posts I wrote during the year based on the number of views. The second 5 are a few of my personal favorites out of the 139 blog posts I wrote during the year.

If you missed reading these "Best of Beeline" posts the first time around, here's another opportunity to get to "the shortest route to what you need to know" to start 2019 off right.

BeeLine readership continues to expand. Total readership grew by over 50% during the year and 800 now have email subscriptions. All of that growth is organic. I don't actively promote or advertise this blog. New readers almost always come from one of you passing it along to someone else.

If you enjoy BeeLine, please pass a recommendation on to your friends and family. I enjoy writing it but it is a lot easier to sit down, research and write when I know more are reading my blog.

If you want to make sure you don't miss a post, consider putting yourself on the BeeLine email list. You will receive an email the first thing in the morning when I post a new piece. You can sign up in the upper right hand corner on this page. You will receive a follow-up email (from FeedBurner) that you will need to confirm to begin delivery.

Thank you to all my loyal BeeLine readers and a Happy New Year to each one of you!

Best of BeeLine-2018

Food or Fraud- February 18, 2018

The incredible abuses in the food stamp program.


Where Does It Go From Here?- August 21, 2018

What do the indictments (and guilty pleas) of Paul Manafort and Michael Cohen mean to the future of the Trump Presidency?


The Science of Success- February 8, 2018

How West Point shows us how the science of success works.


Leverage and the Long Game- March 4, 2018

Understanding Trump's strategy on foreign trade.


It is Miraculous- April 2, 2018

We are told every day how awful and unpopular Trump is. However, why are his approval numbers higher than Obama at the same time in his Presidency? It is miraculous.


The Genius and the Dunderhead- January 11, 2018

The media called Steve Jobs a genius. They tell us Donald Trump is a dunderhead and unfit for office. The remarkable similarities between the two men.


Bitcoin- Boom, Bubble, Bust?- January 14, 2018

Buyer beware when buying Bitcoin. Written when Bitcoin was $14,000. It is now below $3,800.


Our Brains Lead Us Astray- March 27, 2018

How easily our brains are ruled by emotion and the extent it so often leads us astray.


How Did You Meet?-  October 4, 2018

Tracking how couples meet with a personal story of how Mrs. BeeLine and I met.


The Melting Pot- October 15, 2018

There are 3.3 million immigrants in New York City who were not born in the United States. There are nearly 500,000 from the Dominican Republic alone.

Wednesday, December 26, 2018

2018 In Pictures

Over 7.5 trillion photos were taken last year. It is estimated that 8.8 trillion images will be taken in 2018.

Only 5% of those were taken with digital cameras. The rest were taken with smartphones, tablets or apps (Instagram, Snapchat) on these devices.




The average iPhone user takes 2,100 pictures a year on their phone. Android users snap 1,332.





The most common images are of ourselves and our loved ones. In fact, it is estimated that the average Millennial will take 25,000 selfies in their lifetimes.

Only 10% of all images are deleted by most people. On the other hand, professional photographers delete 80%-90% of what they take.

Here are a few of the images on my iPhone over the last year that I took during my travels.

Sorry, no selfies, just the incredible beauty and majesty of God's creation and what mankind has done with it.


Footprints in the Sand
Miramar Beach, Florida



9th Tee, Woodlands Course, Shaker Run Golf Club
Lebanon, Ohio




State Capitol
Boise, Idaho



Point Fermin Lighthouse
San Pedro, CA


Creek Street
Ketchikan, Alaska


Glacier Bay National Park
Alaska

Sunrise
Kodiak, Alaska



Yokohama, Japan at night


Sunset on the Yellow Sea



The DMZ
Korea



The Great Wall of China



Shanghai at night


Miami University
Oxford, Ohio


Asbury First United Methodist Church
Chattanooga, Tennessee


How do I find time to write when there is so much to see and do? It is not easy.  However, I plan to continue writing due to the many kind words I receive from you. Thanks for reading BeeLine. I sincerely appreciate it.

All the best to you and yours in 2019.