Friday, January 11, 2019

Predictions for 2019

It's that time of year! It appears the last time we did our predictions was December 31st, 2016. Although we didn't do one last year, it still appears to be instructive to see how our predictions panned out over 2017 and 2018. We actually fared very well!

Happy New Year! It has been a long time since we blogged together. Has anything happened in the country over the last couple of years? We didn't really predict anything specific that occurred.

Well, maybe this time around, we can be a little more specific. Here are some of the topics we covered before. Let's see how we fare this time:

I missed the mark with ObamaCare's demise. It's still hanging on, although it will once again be heading to the Supreme Court. As I mentioned in my blog about Nancy Pelosi, sometimes you have to pass a bill to see if it works or not. Republicans found that there were two Senators that wouldn't vote to completely eliminate the law, and Democrats learned that young, healthy people will pay a tax rather than fork out a ton of money that they don't have. A Federal judge recently ruled the entire law is unconstitutional. I predict that at least some major portions of the law will get shot down at the Supreme Court in the next go around. Republicans in the Senate and Democrats in the House will put together a new bill that will be very ObamaCare-esque (Not good). It will cover pre-existing conditions, and will allow purchase of health plans across state lines.

Predictions aren't just what you hope for. One can't really make very specific predictions about Obamacare because "it" was a wide and vast set of sweeping rules, laws, deals, philosophies, and mandates. The mandate made it affordable. Without the mandate, I predict we are headed for single-payer healthcare.

Two years ago I would have thought that Republicans would tweak what everyone knew needed tweaking in the Affordable Care Act, slap the name Trumpcare on it, and claim success. But that didn't happen. Maybe because things named "Trump" usually fail. Think: steaks, universities, airlines, casinos, magazines, mortgages, and governments. Or maybe Republicans don't want everyone to be guaranteed affordable healthcare.

I don't know how long it will take to get a single-payer system, but it will happen. Republicans will hate it, like they hated social security when it was being setup. When we get single-payer, we can all stop talking about healthcare, and if we can afford it.

I did pretty well with my predictions for the economy. I said we'd have 3.5% growth in 2017. It took until 2018 for the numbers to get to that point, but we saw 4.2% growth in the second quarter of 2018, 3.4% in the third, and 2.8% in the forth. That came out to a 2.9% average for 2018. Consumer spending continues to thrive at greater than 3% for the final two quarters of the year. I predict that the economy will see a slight slowdown in 2019 as we continue to press China to stop their unfair practices. A trade deal will get done with China by July, but may take the entire year, or even extend into 2020 to see the fruition in GDP. Overall, I predict the economy will keep plugging along at 2.8-3%.

You're a genius! You have a degree in economics? No, and you said "Economic growth [in 2017] will exceed 3.5%." You act like you spotted some kind of trend, and it didn't get there quite as fast as you predicted. Here is the "trend" over the last 70 years. It bounces around between -1% and +5%. That would be my guess for the next year as well. No one could predict otherwise because it depends on things that will or will not happen.
Trump's tariff wars are causing turmoil in lots of markets. I predict that will continue as long as Trump is sitting in the White House. The turmoil may have adverse effects on the GDP as well. The Trump shutdown may go on for another few weeks. Trump doesn't care how long, but some of the Republicans will force a vote and we can get back to normal. Or what passes for "normal" in the age of Trump.

Independent production companies did well, as predicted, and continue to drive an entirely new market. Netflix has movies and series that are doing very well. Their most recent offering, "Bird Box", had a reported viewing audience of 45 million (Reported by Netflix...). I predict this trend will continue, to the detriment of theater movie-going.

Self-driving cars and electric vehicles will continue to expand into the marketplace. Batteries will keep advancing, making these vehicles better, faster, more reliable, and more fun.

Private space companies will continue to see success, with some big moves in 2019. A private space vehicle will orbit the Moon and return to Earth this year.

You are right, and wrong, regarding movies. Here is the summation in a nutshell: 2017 Box Office: Global Revenue Hits Record $40B Even as Movie Attendance Plummets in U.S. That is, they are making more money, but fewer people are going less often. I predict the opposite from what you predict: I see that there will be more in-theater/Netflix combos. See a movie at home, or at the theater. I predict movie attendance and profits will be up in 2019.

You are also very wrong about self-driving cars. You will not ride in a self-driving car in 2019. No one will. There are still too many problems to solve. But the technology behind self-driving cars (Deep Learning and Machine Learning) will keep changing the interactions we have with tech in profound ways.

I wouldn't be surprised that the constant eroding of Obamacare has had an impact on technology startups. For a startup company, healthcare costs are dominating factors.

Here is some tech to keep your eye on: roll-up TVs and monitors. You heard it here first, folks.

You were correct that Democrats protested anything and everything Trump. But some things still got done in Washington. 2019 will start off as a sideshow, with Democrats in the House starting dozens of new probes into every aspect of the Trump White House. But it won't lead to anything new. In any other universe, it would actually help Trump by making him a sympathetic victim, but this is the Trumpverse, where he will continue to use Twitter to make himself an unlikable bully. But my surprise prediction will be for Trump (who is not an ideologue) to work with Democrats on immigration, infrastructure, and other big projects. Unfortunately, deficits will soar, and the National Debt will continue on the same trajectory (or worse) than the Obama Years (when the debt doubled). The Tea Party may even be revived as spending once again takes center stage.

Oh, boy! I'm going to make you remember this prediction forever. I'm going to repeat your crazy and baseless prediction: Trump will work with Democrats. I'm going to tell your grandchildren about the time that Grandpa predicted that Trump would work with Democrats.

You are very right about Trump not being a ideologue. He doesn't care about any aspect of any policy. Healthcare? He could not care less. War? He could not care less? Economy? Oh, he might care about that, because it effects his number one focus: himself.

Trump will not work with Democrats. Trump will resign. In a bargain so that he won't be prosecuted. Maybe Paul Ryan will come back and be Pence's VP. Otherwise, we will never hear about Paul Ryan again. Do you remember what Paul Ryan did in government? Neither do I.

Deficits already soared, so you can't predict that. But they always do under a Republican-controlled government. That would have been an easy prediction.

The millennials and underrepresented groups will start to make their presence felt  in congress. Well, not on the Republican side, because they are still old, white, men. But on the Democratic side, expect to see some really new, fresh ideas. Keep an eye out for the Green New Deal.

I predict that Democrats will lead the way to stop hating on immigrants. No wall will be built. Mexico will not pay for it.

Social Media
Government will step in to start regulating social media companies, to the detriment of free speech. Facebook, specifically, will continue to lose, as it finds that censorship is a sure way to turn away users. FaceBook is now the least trusted tech company in the US. Different, smaller social media sites will spring up catering to specific groups. This is already happening to a certain degree, but will accelerate in 2019.

How would you measure the detriment of free speech? Oh, you can't. It is an amorphous phrase meant to try to scare people.

Facebook will lose, but not because of that big, scary government. Facebook will lose out to small communities of Facebook-like groups not owned by any single mega-conglomerate. This may take more than a year, but keep your eye on the Federverse.

2020 Elections
There will be 26 Democratic candidates by the time the first primaries begin. This will quickly wind down to a group of seven, with three or four hanging on briefly. There just isn't enough money to go around. It will settle down to two or three candidates, one being far to the left, and the other(s) being more centrist, and electable. The big story will be moderate Democrats agreeing to put forth a candidate that doesn't represent all of their ideological desires, but projects reasonableness and steadiness in the age of Trump. It will also be someone younger than 55 years old.

You are right that elections are too much about money. How could a single person represent all of the "ideological desires" of the Progressive Left? Yes, we will nominate an electable person. That might be someone that you have personally tried to demonize, like Elizabeth Warren. She would make a fine President. But so would many of the 26. Yes, they are largely young, diverse, and hopeful.

Since both my Indianapolis Colts and your Philadelphia Eagles are in the playoffs, maybe we can make a prediction on this year's Super Bowl winner. The Colts are the hottest team in the NFL right now, and have a great shot at getting to the Super Bowl. The Eagles will lose in the first round. I'm predicting the Kansas City Chiefs will win over the Chicago Bears in the Super Bowl by a final score of 24-13.

(Editor's note from David: My original draft for this blog picked the Chiefs to defeat the Seahawks in the Super Bowl. After Seattle lost in their first game, I edited this section so that the Chiefs would meet and defeat the Bears, who promptly the Eagles. Rather than continuing to edit this section, I'll just admit I know nothing about football, a fact the members of my fantasy football league will confirm. Oh well.) 

(Editor's note from Doug: Blame me for the delay in getting this post published. But we better hurry up and post it before something else happens! Too late.)

I predict that the Superbowl will be played, and probably a good many people will watch it. Football is getting boring and dangerous. I know you know what "chronic traumatic encephalopathy" is. I certainly wouldn't let my kids play the game these days. Will football players become the gladiators of the 21st century?

You didn't make any predictions about Trump's impending doom? That is weird. There are a lot of bad things that can happen to him. But which one?

And Go Eagles! I had to say that, for the fans.

Speaking of fans, I hope many of the Blank Versus Blank fans are excited to see the blog once again. There is certainly a lot to discuss. I think we can both agree that there will be many interesting things going on in a lot of different topical areas in 2019! 

Thursday, January 4, 2018

Sometimes, You Have to Pass a Bill to Find Out What's In It.

This is a Special Edition of Blank versus Blank. This post is the presentation of a single side of an issue. Because it is only one perspective, we call this a Blank Verse.

This Blank Verse is presented by David.

"But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy."

This may go down as Nancy Pelosi's most infamous quote. In the context of the times, when Obamacare was struggling to find enough Democrats to support it, and with Scott Brown being elected in the bluest-of-blue states, Massachusetts, the quote established in the minds of many Americans that mega-bills in Congress were too big and cumbersome for members to read or comprehend. It firmly established the idea that Congressmen and women don't read the bills they are passing. It remains the narrative, even though Republicans are now in charge of Congress. Ms. Pelosi's quote may have been one more building block in the argument that allowed an outsider like Donald Trump to win the presidency.

But to paraphrase Ms. Pelosi, sometimes you do need to pass a bill to find out just how the bill will work in the real world. In one way, she was right. The way legislation is supposed to work out, and the way it materializes are not the same.

America is full of smart people. We have many smart men and women in the field of economics. Too often, those people craft their analyses and projections based on static models. They make their calculations based on the here-and-now, but don't (or can't) factor in that outcomes change based on the changes that are introduced. These smart people refuse to acknowledge the multitude of variables affecting their projections. Or they know about the variables, but just don't know how to model for them. Obamacare is an example of this reality.

The knowledge we gained from the passage of Obamacare was to see how all of the projections from the Congressional Budget Office (CBO) and healthcare experts like Ezekiel Emanuel and Jonathan Gruber faired when the rubber hit the road. They didn't fair well.

Everyone in America was supposed to get coverage, but we fell well short of that. President Obama promised dozens of times that we'd all get to keep our plans and doctors. That didn't prove to be true (and, according to Gruber, Obama knew that was not going to be true from the beginning). Rates were promised to go down. Instead, rates have doubled for the majority of Americans, and most have deductibles that they will never meet.

While the CBO score on paper looked great, common-sense should have told them that their static model wouldn't work out in a dynamic world. For instance, if politicians make changes to health insurance that causes the cost of health insurance to double, people will be less likely to purchase it. Even if your model forces people to purchase insurance or pay a fine, they will pay the fine if it is much smaller than the insurance costs, particularly if that individual is young and healthy, and unlikely to need the insurance.

But what worked? It turns out people like free stuff. Who would have ever figured? Americans like to have their children stay on their plans until they are twenty-six years old. They like having their pre-existing conditions covered without having to pay any extra for the costs. Older Americans like having young, healthy Americans pay for their care. And states like having the federal government pick up almost the entire tab for their medicaid. These things, too, were easy to forecast.

There were fierce arguments both for and against Obamacare before passage, but it is only now, when we've seen the bill's effects in the real world that we can know with certainty how it worked. The variables were many, and the outcomes were not completely known. Proponents were certain the bill would be a success, and opponents were certain of it's complete failure. It was necessary for the bill to pass, and for the variables to play out, for us to know for sure how society would react, and what the bill would actually accomplish.

So what about the Tax Reform Bill passed last month? Again, economists are split into polarized camps. And once again, we have a bill that has many moving parts, and too many variables to count to know for certain how the legislation will actually play out. The economy has already improved considerably just on the promise of corporate tax cuts. Many of the key benefits that Republicans promised the bill would deliver are already showing signs of fruition. But will the economy actually bring more money into the IRS coffers as Republicans have stated, or will the bill add to the deficit, as Democrats claim? Will corporations repatriate their oversea's cash for the benefit of workers, or will they use the money to buy back stocks to benefit shareholders? Will the bill raise the wages of workers, or raise the pay of CEOs at the top of the heap? Is the bill a panacea for the middle-class, or a Christmas gift to the one-percent?

As Nancy Pelosi says, the bill has passed, now, we'll just have to wait to see what's in it for America.

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Sunday, December 10, 2017

Lies, Damned Lies, and SALT statistics

This is a Special Edition of Blank versus Blank. This post is the presentation of a single side of an issue. Because it is only one perspective, we call this a Blank Verse.

This Blank Verse is presented by David.

As the Tax Reform bill heads to a conference committee, now that a version of it has passed both the House and the Senate, one of the issues that has come up, and generated quite a bit of debate, is whether or not state and local taxes (SALT) should be able to be deducted from federal taxes.

Mark Twain popularized the quote, 'There are three kinds of lies: lies, damned lies, and statistics." The SALT exemption, and arguments for and against its elimination exemplify this sentiment perfectly. The SALT debate also illustrates that there are two sides to an argument, and both sides can be right.

Politicians in high, state-tax states want to keep the SALT exemption.  The argument they make is that their states provide more taxes to the federal government than they receive, so residents of their states should be able to deduct their SALT taxes.

But is that actually true? It depends on how you measure it.

It is true that more populous states pay more in federal taxes than those smaller states with less population. More people living in the state equals more people paying taxes. It is also true that people living in large, urban areas are wealthier, and therefore pay more in taxes than those in more rural areas.

But do they get less of their federal dollars returned? Do they get fewer services? Well, it gets a bit trickier to answer that question. There are many variables to take into account, and they aren't determined by whether a state leans blue or red.

Poorer states contribute less in taxes, and because they are poorer, they are more likely to receive money for programs that serve the poor. States that have military bases receive huge amounts of government funding, regardless of whether their SALT taxes are high or low.

Here's a nice, data-rich article describing various ways to run the numbers looking at the states as collective tax-paying entities:

Are Red States Tax Takers and Blue States Tax Makers? ~The Federalist, Kyle Sammin.

When the author breaks down the numbers by inter-governmental payments based on individual tax payments, he found that "against a national average of $1,935 in intergovernmental spending per American, red states receive just $1,879. Blue states get considerably more, at $2,124 per resident."

Which is a nice segue to a different way of evaluating the SALT exemption. Rather than running the numbers based on how much a state pays as a collective, how about comparing individual tax payers and their rates.

A Texan making $100,000 dollars a year doesn't get to deduct any SALT from his Federal taxes. Texas doesn't have a state income tax. So the Texan has to pay the entire federal-tax bill that comes his way. A New Yorker making $100,000, on the other hand, gets to deduct his rather large SALT bill from the federal taxes he pays. Based upon individual tax burdens, the Texan is paying much more to fund the federal government and all of its programs than the New Yorker. Is that fair?

As a Hoosier, I'm proud that my state legislators and governors have kept our tax burden low. But I find it unfair that folks in big-government blue states, that are making the same amount of money I am, are paying less than I am for federal programs and bureaucracy, some of which I don't support.

(As a side note, it was Democrat Evan Bayh who oversaw Indiana's largest tax cut during his tenure as governor. So taxes and tax cuts are not simply a Republican/Democrat issue.)

But income tax isn't the entire story either:

What are the Best and Worst States to Pay Taxes In? ~Investopedia, J.B. Maverick

I wish I had a dollar for every time I've heard a liberal say that this group or that group wasn't paying their fair share. I could retire. As I've tried to illustrate here, deciding what is a fair share depends largely on how you lay out the numbers. Do you count as part of a collective, or as an individual? Since we pay income taxes as individuals, and not as states, I believe anyone who tries to parse the statistics based on collective data, is being misleading. Or, as Mark Twain would say, lying.

Will the SALT exemption remain in place, or will it disappear in the tax bill's final form? It probably depends on which statistics get the most media support. Since most of the big-media headquarters are located in big cities located in states with high-tax rates, I'm going to guess the media will focus on statistics that make their states look like victims, even though individual citizens are not paying into federal programs at the same rate as their smaller, low-tax states.

Numbers don't lie. Or do they?