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A Unifying Theory of Trumpism and Puerto Rico

Last week, officials in Puerto Rico announced that it would be several more months before the island would have its electricity restored. The logistical challenges of repairing the devastated infrastructure across the island are unprecedented, certainly. But part of the issue likely comes from a lack of energy from the executive branch, where President Donald Trump’s worldview is having an influence. In short: the Trumpian worldview is all about freeloading and how to respond to it.

For decades, Trump has been associated with “deals.” In The Art of the Deal, Trump offers a romantic view of them on the very first page, declaring, “Deals are my art form. Other people paint beautifully on canvas or write wonderful poetry. I like making deals, preferably big deals. That’s how I get my kicks.”

Trump fancies himself a brilliant businessman who has made hundreds of millions of dollars by being on the winning side of deals with various counterparties. His prowess as a negotiator in the business world should be a model for governments and politics. As head of a business, the interests of the business in various deals were his paramount objective. As head of America, the interests of the American people in various deals are his paramount objective. As president, Trump has cast this as “America First.” He laid out his case in his September speech to the United Nations General Assembly.

In foreign affairs, we are renewing this founding principle of sovereignty.  Our government’s first duty is to its people, to our citizens — to serve their needs, to ensure their safety, to preserve their rights, and to defend their values.

As President of the United States, I will always put America first, just like you, as the leaders of your countries will always, and should always, put your countries first.  (Applause.)

All responsible leaders have an obligation to serve their own citizens, and the nation-state remains the best vehicle for elevating the human condition.

But making a better life for our people also requires us to work together in close harmony and unity to create a more safe and peaceful future for all people.

The United States will forever be a great friend to the world, and especially to its allies.  But we can no longer be taken advantage of, or enter into a one-sided deal where the United States gets nothing in return.  As long as I hold this office, I will defend America’s interests above all else.

This was an extension of the fundamental conceit behind Trump’s campaign. Trump argued that America has been on the wrong side of deals because of bad negotiation and stupidity, and that putting him in charge would ensure that the raw deals stopped.

Stated differently, Trump argues that the goodwill of America has been exploited by freeloaders and enabled by naive or stupid American leaders. Indeed, we see this across many areas; it is a sort of grand-unifying Trumpian worldview. In remarks to pharmaceutical companies:

We’re going to be ending global freeloading. Foreign price controls reduce the resources of American drug companies to finance drug R&D innovation. I think you people know that very well. Very unfair to this country. Our trade policy will prioritize that foreign countries pay their fair share for US manufactured drugs so our drug companies have greater financial resources to accelerate the development of new cures. And I think it’s so important, because right now it’s very unfair what other countries are doing to us.

On the Paris Climate Accord:

Our government rushed to join international agreements where the United States pays the costs and bears the burdens while other countries get the benefit and pay nothing. This includes deals like the one-sided Paris climate accord. Where the United States pays billions of dollars while China, Russia, and India have contributed and will contribute nothing.

On trade with South Korea and China:

We are being absolutely devastated by bad trade deals. We have the worst of all trade deals is with China. We have a bad deal with South Korea. We’re just starting negotiations with South Korea. South Korea, we protect, but we’re losing $40 billion a year with South Korea on trade. We have a trade deficit of $40 billion. The deal just came up.

On NATO:

I have been very, very direct with Secretary Stoltenberg and members of the Alliance in saying that NATO members must finally contribute their fair share and meet their financial obligations, for 23 of the 28 member nations are still not paying what they should be paying and what they’re supposed to be paying for their defense.

This is not fair to the people and taxpayers of the United States.  And many of these nations owe massive amounts of money from past years and not paying in those past years.  Over the last eight years, the United States spent more on defense than all other NATO countries combined.  If all NATO members had spent just 2 percent of their GDP on defense last year, we would have had another $119 billion for our collective defense and for the financing of additional NATO reserves.

We should recognize that with these chronic underpayments and growing threats, even 2 percent of GDP is insufficient to close the gaps in modernizing, readiness, and the size of forces.  We have to make up for the many years lost.  Two percent is the bare minimum for confronting today’s very real and very vicious threats.  If NATO countries made their full and complete contributions, then NATO would be even stronger than it is today, especially from the threat of terrorism.

On NAFTA:

And you know that one of the worst deals that anybody in history has ever entered into. we have begun formal renegotiation with Mexico and Canada on NAFTA. Personally, I don’t think we can make a deal, because we have been so badly been taken advantage of. They have made such great deals, both of the countries, but in particular Mexico. And I don’t think we can make a deal. So I think we’ll end up probably terminating NAFTA at some point. Probably. But! But! I told you from the first day we will renegotiate NAFTA, or we will terminate NAFTA. I personally don’t think you can make a deal without a termination, but we’re gonna see what happens.

All of these fit very neatly into the worldview of the dealmaker. Trump sees America as uniquely strong: why doesn’t America use its strength to bully others into getting a better deal for itself? Instead, America has made “bad deals.” Indeed, Trump is skeptical, on balance, of the benefits of the Pax Americana, and it has fallen on Secretary Tillerson and Secretary Mattis to explain to him why America benefits from its overseas commitments.

It’s reasonable to suspect that all of this comes out of Trump’s experience in the zero-sum business world. Businesses are interested in making a profit, first and foremost; concerns outside of that are secondary at best, and foolish if they interfere with the primary objective. Where Trump errs on this is his incomprehension of international affairs and government as non-zero sum game. America is as much of a beneficiary of the Pax Americana as the “winners” in the individual deals. Of course the US spends more than its allies on NATO; it is generally richer and is a major beneficiary of the stability NATO provides. Security and stability are positive goods for American businesses. Even if on paper America is getting less, the intangible benefits of a predictable trade environment, freedom of the seas, and a lack of major wars far exceed the costs of these deals. (Not to mention the “unseen” benefits of economic dynamism and comparative advantage.) An American withdrawal from its commitments would endanger those intangible advantages and risk creating a world of increased proliferation, arms races, trade wars, and conflict.

Trump’s misunderstanding aside, this zero-sum approach to governance is at the core of his worldview: there are Americans on one side, and everyone else on the other side. America can help someone else, but it must “put on its oxygen mask first before helping others,” as former Trump spokesperson Katryna Pierson put it.

The natural disasters of the summer of 2017 have offered an instructive case study of the Trumpian worldview of freeloaders. Texas, Florida, and Puerto Rico suffered from significant hurricanes in the summer. But based on what we’ve seen so far from the administration: if there is a dividing line between “Americans” and “everyone else,” Texas and Florida are on one side of the line. But Puerto Rico may be on the other side of that line. Instead of seeing Puerto Ricans as American citizens that the federal government has a responsibility to assist in the face of a natural disaster, Trump at times appears to see Puerto Rico as just another freeloader, expecting the benefits of American largesse.

As such, assistance to Puerto Rico becomes discretionary charity rather than responsibility. And Trump sees his mission as to stop the largesse. Note these tweets: the implication is that Puerto Rico is not contributing enough to the recovery.

Later, he suggested that the military really “shouldn’t have” to be distributing water on Puerto Rico, even though this is standard practice in a domestic natural disaster.

Trump’s ideal view of America often seems limited to the map of the 50 United States, and as such extracting itself from its commitment to Puerto Rico is no different from extracting itself from its commitment to operating military bases in Germany or protecting South Korea and Japan. “We don’t have a country” if we don’t have control of the border, he often says. The “border” becomes the dividing line between the American president’s responsibility and the American president’s potential competitor or adversary. That Puerto Rico is not a foreign country but a United States territory full of US citizens seems less relevant, under the circumstances.

This worldview on freeloading essentially infects the rest of the executive branch. In a large bureaucracy, executives often exercise influence indirectly; there is too much going on for an executive to micromanage all of the ongoing activities, and the ones they manage directly are the ones they deem the most important. In the absence of executive energy in a given direction, a bureaucracy will move slowly, checking all of its boxes and avoiding risk; autopilot government lumbers. The logic of the bureaucracy is self-preservation, and the scariest thing for a given segment of the bureaucracy is executive scrutiny. Thus the bureaucracy follows the rhetorical cues of the chief. (This is likely why, for example, Immigration and Customs Enforcement (ICE) has acted more aggressively since Trump took office. This need not have been in response to direct orders from the president. But front-line managers aren’t stupid, and they can read tea leaves. Under a different president–say, one more friendly to immigration–ICE implementing its mandate so thoroughly might invite a rebuke.)

Put this all together: Trump does not appear to see Puerto Rico as part of his mandate. As such he puts very little pressure on the bureaucracy on the issue, and autopilot government does what it does. There simply has not been rhetorical urgency from the Oval Office on this issue. This has downstream effects, namely that things move slowly.

It is unlikely that Trump will move beyond his zero-sum view of global affairs at this stage; he has been touting his views on global freeloading for decades. In the meantime, one can hope that he moves that dividing line out a bit between America and the global freeloaders. At some point, people are going to pay attention to Puerto Rico, right?


Staff Writer
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Dan Scotto lives and works in Oregon. He has a master's degree in history, with a focus on the history of disease and the history of technology.

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82 thoughts on “A Unifying Theory of Trumpism and Puerto Rico

      • My point was that the OP was a “zero value” post, which is the same thing you said about my comment. However, my way of phrasing it was less rude than yours, so I’d encourage you to be more civil in the future.
        BTW, the value added was point ing out that the OP was so obvious as to not be worth writing. That’s valuable feedback for authors and editors.

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        • Sorry, I should have been more clear. I was acting as the moderator. Claiming that a post was pointless is not, actually, the constructive criticism that you are framing it as.

          My judgment goes on these matters and if you push this, or do it again, you’ll be suspended.

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          • The judgment of the editors cannot be questioned? You sound like Kellyanne Conway.
            The quality of articles on this site is generally high, which is why editors and authors need to know when a bad article fails to meet the standard readers expect from this site.
            If you’re going to ban readers for offering negative feedback of any sort, then you’re an epic fail as a moderator.

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            • You’re exaggerating on several counts here. I originally said, quit leaving comments that have *only* the content of claiming some article is pointless/bad.

              That’s not constructive, far from it.

              And arguing with people about whether it’s constructive isn’t constructive, or a good use of my free time either.

              There are plenty of forms of negative feedback that don’t count as that, and which are welcomed by editors and authors alike. If you just don’t like a piece, though, vote with your feet by ignoring it.

              Last warning, stop arguing with me about this now, and don’t leave unconstructive negative feedback again, or be suspended. Your choice.

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              • As you are probably aware, originality is a crucial consideration for any editor of a scholarly journal. An article, no matter how well reasoned, would not be publishable if its thesis is unoriginal or derivative. I thought this article unworthy of publication for that reason.
                This has been my point from the beginning, and for you to characterize this constructive criticism as “zero value” shows a real lack of intellectual charity. You might disagree with me on this point, but this does not make me a troll.
                Ban me if you must, but that move would just be you making a power play to shut down someone making civil and reasonable points with which you happen to disagree.

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                • I’m not banning you but I am suspending you. For one week. As I’ve said I would all along, and gave you a last warning about in the previous comment.

                  This is not a scholarly journal and the use of the same criteria to judge its articles would be absurd at best.

                  Also I’m not suspending you for making civil and reasonable points with which I happen to disagree, I’m suspending you for refusing to accept the guidance of the moderator as to what is and isn’t welcome commentary at this site. Repeatedly refusing, in the face of clear feedback as to what you were doing that needed to stop.

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  1. “experience in the zero-sum business world”

    If the business world was zero-sum, there would be no business, because what would be the point of it?

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    • A more refined version of that theory is that certain forms of business like real estate are zero sum. If I build a hotel on a plot of land, no one else can do so.
      Ditto for being a con artist, which is probably a more accurate description of Trump’s business model.

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      • I don’t think “zero-sum” is what you think it means. A hotel on a piece of scrub land is not the same value as a piece of scrub land. Note that not every piece of land has the same cost per acre. Note that the cost per acre of all land used to be so close to zero as to be indistinguishable from zero. That is not the case anymore. Some land is priced by the square foot because the value has skyrocketed, which is something that can’t happen if the value could never go up because all transactions were zero sum.

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        • Zero sum means that for me to win, you have to lose. If we’re both bidding for a finite resource like land, I can only win the bidding contest if you lose.
          You’re right that it also has non-zero sum aspects, but they will be less prominent in areas that are already developed like Manhattan.

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          • I still don’t think you get it. If real estate transactions were zero-sum they’d be extremely rare. Why would you do a deal with someone if you think you must lose if he wins, knowing that if he doesn’t know he’s going to win he wouldn’t be asking you to do the deal in the first place?

            Say British Petroleum comes to you and offers twice what your little lot is worth. They’re going to put in a new gas station and you get twice the value of your property. Which one of you is losing on that deal?

            Say Trump comes to you and says he wants to buy your two acre plot with some dilapidated outbuildings to build a mega casino. He offers you a ridiculously large amount of money. What do you do?

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            • You are focused on the relationship bw buyer and seller, which I already conceded has non-zero sum aspects.
              I am pointing to the competition bw two potential buyers over a finite resource.
              If you and I both want an iphone, apple just pumps out another iphone. You can’t do that with real estate, which is why it has zero sum aspects not present in most other areas of business.

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      • I took it more this way, that Trump’s business practice model, and entire worldview is zero sum, divided into winners and losers (and you better not get caught on the wrong side of that line).

        In the Econ 101 textbook view, of course every transaction is win-win,like where a guy with food exchanges with a guy with clothing and everyone ends up warm and fed.

        But in any interaction involving flawed humans, the transaction itself takes on the characteristics of the people doing it.

        For Trump, sales and con jobs merge together. He doesn’t actually believe he is exchanging something of value, but instead he believes that his ability to convince you is the actual value.

        He’s proud of his ability to simply take a regular thing and transform its value through marketing alchemy just by adding his name to it.

        Implicit in this is the view that anyone so gullible as to fall for this is a loser, and he is the winner.

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      • I would say real estate on Manhattan is about as close to zero-sum as you get as business.

        That being said, it isn’t really a sign of intelligence in taking the view of one business and transplanting it to another business or even government. That is kind of like when your only tool is a hammer.

        But I think even in real estate, Trump is more zero-sum than others. In Trumpian “deals”, there needs to be winners and losers. He always needs to be the winner, everyone else needs to be a loser. Notice how he treated his contractors who were building his casinos, etc.

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        • I’m going to go out on a limb and say that a lot of reflexive pro-market/pro-business sentiment is rooted in the notion that it really is a zero sum game with winners and losers [1], one which divides the wheat from the chaff, as it were. There’s always going to be a constituency for any system that puts and keeps the undeserving in their place.

          [1] This is hardly a rare motivation for anti-market or anti-business sentiment, of course.

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          • There is something to this, in that ideally, and I think in the strictest sense, it is true that no one makes a deal where they don’t perceive some value to be gained by the transaction. But I think when you dig into the details a bit of any given transaction, the deals are a lot more one-sided than one would hope. The Wal-Marting of supply chains comes to mind, or deals where their is an element of “an offer you can’t refuse”. Especially when it a vendor-customer relationship, rather than a direct competitor relationship.

            When such cut-throat and strong-arm tactics are the norm, the only people who want to participate in business are people who relish those tactics.

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            • Yeah, I think this is a fair reading. Also, one of the markets that people are involved with most intimately and intensely—the labor market—can be really coercive if you’re the one selling your labor. Less so if your labor involves the use of skills and knowledge that are sufficiently hard to come by, but that places you in a pretty small subset of laborers almost by construction.

              I also have a completely unsubstantiated but strongly held belief that a lot of the shit workers have to put up with is due to what is (basically) an agency problem, where it’s done to satisfy some need of their immediate management [1] rather than any real business need.

              Then again, Walmart isn’t ruthless because they think it’s fun. They’re ruthless because it gets them billions of dollars.

              [1] Not nearly infrequently enough, that need may be, “Indulging petty sadism.”

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              • Once upon a time, someone explained that for a lot of big business types, it isn’t about the money as a means to an end. They don’t need the billions of dollars because they want to fund an undersea evil villain lair or launch a generation ship to Barnard’s Star. The money is really just a way of keeping score.

                Wal-Mart is ruthless not because it wants billions of dollars, but because it wants to be number 1, and the money is how they keep score.

                What makes it all not fun for the non-ruthless isn’t that Wal-Mart wants to be number 1, it’s that they are sociopathic about it. They will do anything and everything they can get away with to be number 1, as will so many others in the space. And when the space gets crowded, you need to occupy every inch of it, which quickly and ruthlessly crowds out the smaller players.

                And then every one complains about how hard it is to be an entrepreneur, and big companies and politicians lament the loss of that spirit, while they do everything they can to squash it (probably without really meaning to). There are real benefits to having massive companies, in that they can, if smart, achieve efficiencies smaller firms can never hope to achieve, and they can bring resources to bear on a problem that rivals those of governments. But they have costs as well that people like to ignore.

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      • Since the example given is building a hotel on a plot of land, is what is being mentioned actually Ricardian land rents?

        Then there are rents on the Trump brand. So it’s an … innovation to move from risky real-estate rents to a no-brainer branding exercise – it is just that there is no apparent consumer surplus from branding. It’s quite prevalent anyway.

        Because as an actual real-estate developer, he had multiple sucking-chest-wound disasters ending in bankruptcy.

        No, I suspect the “other” factor with respect to Puerto Rico is much closer to the Jets v. the Sharks in West Side Story ( which isn’t quite age-appropriate for Trump by a decade or so, but ) …

        Trump would be a Jet, you see… so Those Guys Are Not Jets….so it’s about “branding”, us-ness , and differentiation yet again…

        And finally – a Puerto Rico disaster would have been used as a photo op by the (D) ( and even some (R)) people ; not doing so says “I’m different.” Which is rather the point of his sort of reactionary milleau.

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        • I suspect it’s a harder row to hoe than most, but from what little I’ve read it’s not some new objection just dragged up. Like most things in 2017, it’s in an area that’s simply not very explored because nobody’s tried to shove things into that particular corner.

          My entirely baseless and pure unfounded opinion is there’s enough there to get a real hearing, but I’m dubious they’ll manage an injunction much less have this thing move up to SCOTUS.

          On the other hand, who knows what the Roberts Court thinks these days? Ditching the SALT deductions is pretty much 100% against conservative “ideology” on taxation (it literally is the double taxation they’re constantly harping on), and unlike Mitch McConnell, SCOTUS doesn’t have some arbitrary 1.5 trillion number to meet.

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          • Ditching the SALT deductions is pretty much 100% against conservative “ideology” on taxation

            But it’s very GOP because it attacks blue states and attacks the high tax, high service model. To Republicans, the only legitimate functions of state and local government are policing and building football stadiums.

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          • Ditching the SALT deductions is pretty much 100% against conservative “ideology” on taxation (it literally is the double taxation they’re constantly harping on)

            That’s not true. That is generally not what people mean when they talk about double taxation. Conservatives, at least of the economic variety, have long criticized the SALT deduction. And there is a group that formed to oppose getting rid of the SALT deduction, who have branded themselves Americans Against Double Taxation. Here is a list of their members (https://www.americansagainstdoubletaxation.org/#lp-pom-block-98); it included a bunch of local government advocates and the AFT and the SEIU. Not exactly conservatives.

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            • That is generally not what people mean when they talk about double taxation

              If double taxation has any meaning at all, it certainly refers to paying taxes on money that was taken from you as taxes.

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              • No. Double taxation does have a meaning (let’s not go full PoMo here) and it doesn’t refer to state and local taxes. The two most widely-used examples of double taxation are corporate shareholders being taxed twice (once through corporate income taxes and then again through taxes on dividends) and people being taxed in two jurisdictions (like, an expat who pays full taxes to her home country and her country of residence). Calling state and local taxes double taxation makes about as much sense as calling FICA double taxation.

                The area where conservatives have tried to misapply the double taxation claim is in support of repealing the estate tax. There really is no record of conservatives opposing state and local taxes on the grounds of double taxation.

                PS – there is a very easy way to prove me wrong and that’s to find instances of major right-leaning tax groups deploying the double taxation claim against state and local taxes.

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                • Double taxation does have a meaning (let’s not go full PoMo here) and it doesn’t refer to state and local taxes.

                  Could you give a clear definition of “double taxation” and why these groups think it’s bad when other forms of double-ish taxation aren’t? The whole thing seems pretty arbitrary.

                  It seems to me that taxes become “double taxation” when the tax is one that someone wants to eliminate, which is why they tend to come up with examples of what it is rather than a consistent principle to explain it.

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                  • I’m not sure that there is a “clear definition” of double taxation; at least there isn’t one that exhaustively includes what does and does not count. The two most widely used instances of the term are corporate dividend taxes and two countries taxing the same income. State and local taxes don’t really fall into that later category, because they are all U.S. taxes. The United Stated just happens to have a federal system where the federal government provides some public services and the states others, so you’re taxed at those two levels for the respective services that they provide.

                    That is different than an American expat who lives in France being taxed the full U.S. income tax and the full French tax on income earned in France. This is why we have double taxation treaties. I’m an American expat. I still pay U.S. taxes and taxes in the place that I live, but the law is structured so that I pay significantly less in U.S. taxes than I would if I were still living there.

                    It is somewhat of a contested term, because, as you note, opponents of this or that tax often use the term against whatever they oppose.

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                    • Canada does this BS thing where they tax their taxes.

                      Like, let’s say a thing costs $10. Canadian. The Province you’re in has a 10% Province Sales Tax. Okey doke. Now you’re paying $11 for the thing. Canadian. Now it’s time to do the National Sales Tax. Do they apply the calculation to the $10? Canadian?

                      NO!

                      They apply it to the $11! Canadian!

                      And that’s some BS.

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                    • Right. What drives me nuts about this is that it’s basically a laundry list of taxes some factions don’t like, updated by faction. And yet they all think that applying the “double taxation” label to something makes it obviously wrong and immoral like they’ve done some sort of mathematical proof.

                      That would at least make some sense if “double taxation” had some concrete definition and if we all agreed that things that meet that definition are bad for some concrete reason, but neither one of those things seems to be true.

                      So is this tax marklar, or is it marklar? Think carefully. The distinction is important.

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                • But… state and local taxes are taxes levied by different jurisdictions?

                  We’re splitting a very fine hair if that doesn’t count, especially from a political movement that allegedly values federalism as an important principle.

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                  • Interesting, I’d say exactly the opposite.

                    It seems to me that if one views Government revenues as a single thing… that is, if we see the States and localities as purely districts of a unified State, then I can see how one might call it double taxation. But its specifically the end of Federalism that makes this sort of argument possible. Now, I think it is possible to *argue* that Federalism is dead; but Federalism isn’t actually dead. So, I’m seeing this as an interesting Rorschach test on how we view the unified state.

                    The only possible argument I could see the states making is some sort of “targeting” argument which under ordinary circumstances would be dismissed rather quickly…but, even though I’d call this 100% legal, I can’t discard the pretty obvious political targeting… but even though its bad policy from a political point of view, I’d agree that the suit is mostly baseless. And if I may hedge a third time, I won’t rule out at least one appellate court agreeing with the plaintiffs… but no way I see it getting past the supremes.

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                    • Well, I was responding to arguing that “double taxation” is applied to different jurisdictions taxing the same income. So that applies much more clearly if you think that states are independent under federalism, instead of just entirely subordinate administrative units.

                      I’d also argue that SALT laws give states the first bite at taxes, which is good from both the “local control” and “laboratories of democracy” perspectives on federalism.

                      On the other hand, I think federalism is kind of silly and bad, so I don’t particularly care, except my taxes are probably going up quite a bit in order to finance other tax cuts I like even less.

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                      • said everything that I was going to say. For tax purposes, state and local governments aren’t so much different jurisdictions than the federal government and each other, but different levels of the same jurisdiction, each collecting taxes for the tranche of public services that they provide.

                        Also, if you look at how tax treaties work, you can still end up being taxed by two different countries, but the structure is such that your tax rate should always be something significantly lower than the sum of the two countries’ rates. With the U.S., if you reside outside of the country, generally you are credited for the taxes that you pay the other country and the U.S. collects the difference. Alternately, you can get everything you earn under a certain amount, it’s presently ~100k per year, exempted and you owe taxes on everything above. Which method you choose would depend on your income and the tax rate of the country in which you live.

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                • PS – there is a very easy way to prove me wrong and that’s to find instances of major right-leaning tax groups deploying the double taxation claim against state and local taxes.

                  You mean…people decrying a thing that’s never happened?

                  Because until now, for the entire history of the US income tax, SALT were fully deductible.

                  So I’m pretty sure that no one complained about the non-deductibility of things that have always been deductible.

                  All of which ignores the point — which remains, of course, that
                  if taxing someone on money they never had because it was immediately paid as taxes isn’t “double taxation” then the term has no real meaning.

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                  • All of which ignores the point — which remains, of course, that if taxing someone on money they never had because it was immediately paid as taxes isn’t “double taxation” then the term has no real meaning.

                    No. I assure you that double taxation has a real meaning. There is a Wikipedia page on it, an Investopedia page, and if I dug up my old Public Finance textbook, I could cite the section on it. The United States has double taxation treaties with around 70 sovereign nations, which would be a little odd if “the term has no real meaning.”

                    Being taxed by the federal government and by your state government simply doesn’t fall under what economists and tax policy folks mean when they talk about double taxation as a problem. If you were being taxed by two states (the one you lived in and the one you worked in) at the full state tax rate, that would be a double taxation problem. The government taxes you according to the federal income tax code, but then it also collects a payroll tax to fund Social Security and Medicare. Is that double taxation? No. It’s just the government levying two different taxes for two different purposes. And so it is with state and local taxes.

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                    • I’m not using a technical term. I’m specifically referring to the way the GOP has attacked “double taxation” for over a generation, using it to refer from everything to the estate tax to (from some of them) the capital gains tax.

                      Which was my entire point, which is if the GOP has some ideological unhappiness with “double taxation” when describing things like the estate tax, then there is no way eliminating the SALT deduction isn’t double taxation by their standards.

                      Which means that they have no real problem with “double taxation”, it’s just a bullsh*t term used to sell cutting taxes on the ultra-wealthy to the rubes.

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                  • That’s not really how it works, state and local taxes are not deductible unless you have high income. My household income is in the top quintile in a high tax state, and I haven’t received a deduction for any state taxes for several years. If the Tax Code worked the way you are implying, there would be an adjustment to gross income like there is for FICA taxes.

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          • It’s also kind of a kick in the balls to the “keep the money under local control” and, “let’s do 50 policy experiments at the state level” theories they seemed so big on a few months ago.

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  2. The PR electrical system mess is roughly equiv of the Detroit Bankruptcy, or what we expect to happen to California/New Jersey/Illinois.

    They’ve been enjoying government mismanagement for decades, and as a direct result they’ve been not upgrading the infrastructure and not preparing for hurricanes.

    Yes, this was a nasty hurricane. Yes, there was always going to be damage. However the bulk of this problem was self inflicted.

    http://thehill.com/opinion/energy-environment/364911-the-key-to-helping-puerto-rico-is-removing-politics-from-electricity

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    • I don’t know very much about how Puerto Rico handles its electrical grid differently than say, Texas or California, but I found the article to have some curious gaps even within its own internal logic.

      It identifies one problem as “subsidies for for-profit businesses and a $300 million contract that is under FBI investigation.”

      The 300 Million contract is of course, the one awarded to a small company in Trump’s Interior Secretary’s hometown, and is headed by a donor to Trump. So apparently Trump himself is one of the problems plaguing Puerto Rico.

      Then the article goes on to say that the reasons for mismanagement are (surprise) that it is publicly owned, and privatization would improve it’s efficiency.

      But of course, electrical grids are natural monopolies, and the history of private contracts for electrical grid work, are shown in this very article, to be rife with corruption and political favoritism.

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      • I don’t know very much about how Puerto Rico handles its electrical grid differently than say, Texas or California…

        Think of PR’s electrical grid as the equiv of Venezuela’s oil industry. Subsidies are sent to politically popular projects, infrastructure and maintenance upgrades can always wait (because it’s long term and past the current election cycle), the money generated by the electrical system is used for other purposes, the system needs to pay back loans taken out where the money was used for something-other-than-electricity, etc.

        It’s big, it has money, politicians have other uses for that money, and long term that causes problems. The power grid has never been trustable, and not because the United States doesn’t understand electricity.

        It’s issues have been political far more than technical.

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          • Smart guy formerly inside that specific room here.

            Actually, ‘s description of the Puerto Rico Power and Water Authority (except the very unnecessary Venezuela dish) is fairly accurate. It’s a 1950s style, completely vertically integrated, utility unlike (to my knowledge) anything In the USA, or most anywhere in the Western Hemisphere. It has been run for decades as a political football, both to attract voters and to reward politicians and their backers.

            Bringing utilities to people is difficult work. Politicians meddle with it at their, and their constituents (mostly the latter), peril. Be it PREPA giving electricity away for decades, the Flint water debacle to save some cents, the shocking 300 million contract because how difficult could it be to restart a devastated utility, it’s all part and parcel of the same problem: politicians that believe that THEY are the smartest guys in the room, and that engineers and specialists should shut up and let them drive the business.

            None of them would dare tell a heart surgeon how to operate, but everybody seems to feel they can run a utility (to the ground, maybe). It can’t be that difficult, can it. Just put water inside those pipes. Any cheap water will do.

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              • What are some examples of how to do it successfully?

                If you nitpick, successfully is a very high bar. You have to balance quality and realibility of service, minimize costs, manage a long-term Investment plant that will accommodate the demand growth, and, every once in a while, manage systemic changes ( for instance cellphones replacing land lines, the price drop of renewables, the impact of fracking and the displacement of coal, the internet of things, etc.)

                In general, succesfullish (instead of successful) regimes include a strong, politically isolated regulatory body, a stable, predictable tariff regime that allocates risk between customers and owners, a mechanism to handle sunk costs associated to long-term Investments that might be displaced by the systemic changes I mentioned.

                I don’t work with USA utilities, but, in Latin America, Colombia’s system works excedenly well, and Brazil’s is decent enough. I’m not a fan of the British system, because it’s done a poor job of managing price volatility.

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          • To add to what and @j_a said, add the relative stability of state budgets. With one exception, states have balanced budget requirements that keep them from borrowing to pay operating expenses. PR, in comparison, piled up a staggering amount of debt that was, for practical purposes, used to pay operating expenses. Now, when PREPA needs a (relatively) huge infusion of capital, PREPA and the PR government were both already bankrupt.

            Compare that to California where a combination of the state legislature leaving holes in their new regulatory regime, and Enron using those holes (both legally and illegally), bankrupted Southern California Edison. The state government was in a position to borrow $50B at quite modest rates and bail them out.

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            • Just a random note: As I live in Houston, I’ve got a lot of relatives in the oil and gas industry. One of those (now retired) was part of one company’s internal investigation on Enron.

              This was when Enron was flying high, well before their actual business model came to light and they cratered.

              There were about twenty of them, including a passel of finance guys who ran their numbers. About two months before Enron collapsed, they reported to the board on their findings.

              What that found was, per my relative’s summation: “Either they’re geniuses so far beyond us that we cannot understand even a tiny iota of how they’re doing this — or they’re crooked as hell.” The higher-ups (ie: the Board level folks) weren’t really thrilled, because that was a lot of money on the table, and they couldn’t believe Enron could be crooked enough to make that kind of cash without having been caught already.

              It’s was like hearing “Your neighbor either won the lottery, or he’s been printing his own money off a printer he got at Best Buy for a year, and nobody’s noticed”.

              They were mulling over whether to bring in more people to take another look at it when Enron died.

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              • One of the great lines in the book, that didn’t make it into the movie, was attributed to someone on an internal audit team after they had been out to California: “Do you know what they’re doing out there? Do you know how illegal it is?”

                In hindsight, turning down a chance to go to Enron and help them develop their bandwidth market was probably one of the better decisions I made in my technical career.

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                • In hindsight, turning down a chance to go to Enron and help them develop their bandwidth market was probably one of the better decisions I made in my technical career.

                  It was, the Broadband Business was a complete bust. They were trying to replicate the concept of gas pipelines with trunk communication lines, and went the Fields of Dreams route, build them and the customers would come, which they didn’t.

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                • Do you know what they’re doing out there? Do you know how illegal it is?”

                  I don’t think it was illegal, or very illegal. Enron was very, very, good at reading the letter of the law, ignoring the spirit. But they were very, very much a stickler for coloring ONLY inside the lines.

                  Now, if you never wrote a law forbidding people to offer electricity at one billion/ MWh and another one forbidding people to contact capacity in a line and then not using it, creating a blackout, and having to take the one billion /MWh offer, well, who’s fault is that.

                  Is not unlike us being told that there’s is no law that mandates doing or not doing whatever Trump doesn’t or does do, the fact thT no president before ever did it doesn’t mean laws are being broken.

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                  • From memory, what they got nailed on with large judgements was manipulating the natural gas supplies so that they could claim “We couldn’t generate the electricity we promised because our fuel supplies were cut off.” Lots of gas got held up at the Arizona border on hot days.

                    Of course, a billions to tens of billions of dollars judgement isn’t worth much if there are only millions of dollars worth of assets left because other people got there first.

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              • “…geniuses so far beyond us that we cannot understand even a tiny iota of how they’re doing this…” might have seemed the more reasonable alternative.

                At the time Enron was thought to be the smartest guy in the room. Cover of multiple business magazines “smart”, with a visionary new way of doing things, high tech, and much other marketing hype.

                “Famous for being good”, not “famous for being famous”. They were a publicly traded firm with a market cap of (at max) of something like $70 Billion dollars and something like 4500 employees.

                It’s like doing a database search and finding the “world’s best and highest paid movie actor” has never actually made a movie. The results are so absurd they have to be wrong.

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                • might have seemed the more reasonable alternative.

                  Not once you took a solid look.

                  The guy in question said that everyone on the team had concluded Enron was flagrantly breaking the law or outright lying about their methods and returns.

                  They caveated it in their report because that wasn’t what their bosses wanted to hear. Their bosses wanted to hear “We can make Enron money”.

                  Even if Enron had been full of geniuses — that might have been needed to make some sort of business or paradigm breakthrough. But after other people got bits of the puzzle? You don’t need geniuses to fill in the gaps and reconstruct it.

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  3. I wonder how different Trump’s attitude to say a tsunami in Hawai’i would be.

    That being said, I also wonder how much better we’d be for Puerto Rico under other administrations. Probably much better – I think we’re routinely better than this with foreign relief missions. But this is a test case for a question that has always lurked underneath our ambiguous relationship with Puerto Rico. It’s almost like this tragedy was timed to put that question to the test at the moment the answer is perhaps most unflattering, or shall we say challenging, to us.

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        • I say that snarkily but also seriously: Trump seems so motivated by petty grievances it would not shock me if he took a different approach with situations arising in Hawaii or Chicago given Obama’s connection to those areas. NY provides an interesting conundrum, given its connection to Hillary but also his own affiliation. Maybe the city gets help while Westchester burns to the ground.

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          • Trump seems to be a quintessential New Yorker who vacations in NJ and Florida. Recall that initially he said he was going to continue to live in Manhattan and use the White House only for formal events. I suspect that he himself has no more interest in Hawaii than in Puerto Rico. The administration might have responded differently simply because Hawaii being a state would have required certain things to be in place. I have seen estimates that the amount of additional federal money Puerto Rico would receive if they were a state as high as $20B per year — far more than the residents would pay in additional federal taxes.

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          • The Atlantic ran an article about Puerto Rico’s power situation a couple of days ago. Its only mention of Trump was in this sentence:

            Still, according to the FOMB, it’s almost impossible to do any of these things without significant funding beyond what’s been provided from the federal government, and the tax bill recently signed by President Trump introduces more fiscal challenges for the island to overcome that might further hamper recovery.

            That’s only one more mention than The Atlantic gave to Taylor Swift or Katy Perry regarding the power situation down there.

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            • Trump 2020- “He’s no less effective at governance than a pop singer!

              Trump 2020: “He has done almost as much to fix the economy as that guy from last season’s American Idol!

              CNN: “Yes, Brian, this twister has absolutely devastated Oklahoma. And of course, the question on everyone’s mind- When will Taylor Swift issue a statement? We already have reports of Katy Perry meeting with the heads of FEMA and the Oklahoma National Guard to direct relief efforts.
              Meanwhile in celebrity news, Donald Trump has purchased a solid gold toilet seat, and is displaying it for the press at Trump Tower.

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          • Trump seems so motivated by petty grievances it would not shock me if he took a different approach with situations arising in Hawaii or Chicago given Obama’s connection to those areas.

            Na, the dominant issue would be what is Trump’s connection, i.e. “does Trump own any hotels there”? So NY would get lots of help. PR presumably never “invested” in Trump (or vise versa).

            However, the larger question is “what should he do”?

            PR’s problem wasn’t and isn’t the hurricane, it’s their bankruptcy. They’re just the first “state” in line (for some value of “state”).

            There’s an argument a message should be sent to the rest of the line (Illinois, New Jersey, California) that they need to get their fiscal house in order on their own. Politically painful choices need to be made, pensions and/or unions broken, etc.

            I’m not convinced bailing out PR and it’s mishandling of it’s electrical grid would be good for the US as a whole. Some major states need to go through a lot of pain, having an example on what not to do may be a requirement.

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  4. Good piece, and I fully agree(?) that the US federal goverment should be doing a lot more to assist Puerto Rico (regadless of how many of the problems or their complexity is ‘self-inflicted’)

    I am though, far more skeptical that the juice is worth the squeeze in trying to maintain unrivalled American hegemony (or pseudo-hegemony) and the notional Pax Americana. Both on practical and moral grounds.

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