This is an article printed on A4 of WSJ today that is probably more important than any news we have today, like CNN’s news about Bill Clinton meeting Obama. The WSJ says Obama is spending hours on voter registration. This news is not on the front page because it is not about policy / platform. However, this is probably more important than Obama’s policy / platform or gossip about the when and where Obama meeting Bill Clinton.
America requires voter registration, unlike other democratic and developed countries where voter registration is more like an address change notification to the election office from the voter. As a result, voter registration rules becomes a tool to suppress the votes of the less informed voters, not too different from what Zimbabwe’s Mugabe does. This hurdle creates an opportunity for customer-facing politicians – those who register more voters are more likely to win.
Each new voter registration is worth about one to two hours of labor. It is labor intensive and expensive. However, the reward is greater than what one election can deliver. A voter who walks into a voting booth is voting for more than one race anyway. So, one hour of labor rewards more than one candidate. A newly registered voter tends to lower voting attrition rate. Voters tend to continue to vote for a party that they voted for in their first voting experience. Therefore, the party is likely to get a new voter for life.
Over time, air war becomes more and more important in elections and emphasis on the ground war fades away. There are numerous precincts without a captain from both of the political parties in America. Voter registration drives become less and less frequent as we have less and less precinct captains.
What has been happening over the years is elections are slowly determined by fewer and fewer voters. Elections are getting more and more expensive due to air wars. More seats are becoming uncompetitive to the degree that challenging candidates are no longer an effective way to check on the incumbents.
Higher voting participation, similar to the statistics regarding attendance to religious institution, increases the participation to local charities, be it fundraising effort or volunteer hours. A more involved citizenry is also more likely to press the government to address the causes of the local charities. Voter reigistration can simply be done at the receptionist’s desk of any charity. Voter registration is not partisan and has no direct or indirect impact on a non-profit’s tax status.
Obama is pouring resources into voter registration for his own benefit. Moreover, he is not just doing a favor for his party, he is doing a favor to the democracy of America.
June 30, 2008
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CNN reports the destruction of North Korea’s nuclear facilities. What are the implications?
The most directly impacted nation is Japan. The confrontation pressure in the Korea peninsula is weakened. The need for US military presence is also weakened. The economic incentives are there. But Japan is not Thailand. Japan can live without that. The impacts will be political and military for Japan due to a nuke free North Korea.
With such a hawkish new president of South Korea, it will take quite a few years for the relations between North and South Korea to warm again. The immediate impact on the unification movement is minimal. After all, the nuke free decision has nothing to do with unification with the South, from North Korea’s perspective. For North Korea, warming up with the America is one step toward having a normal diplomatic relationship. Strengthening this relationship weakens the relationship of America and South Korea. With any luck, North Korea wants the American bases to move out of the peninsula. All these impacts realized by North Korea are shorter term.
Impacts on Japan are longer term. Japan has been having influence in Korea for centuries. A nuclear North Korea is obvious a threat to the security of Japan. However, it has always been a common knowledge that nuclear activity is only a bargain chip. North Korea is perceived to be aware that they cannot keep the nuclear forever, since China does not want North Korea to have it, America does not and certainly Japan does not.
With a smaller conflict, the weight of Japan will become smaller. This nuclear free ending of the affair also demonstrates Japan has been unable to influence the outcome of the Korea peninsula affairs, or unable to influence America’s intent in the peninsula affairs.
An Obama administration will be able justify a reduction of military presence in South Korea and Japan and cut some spending.
If US military decreases, especially in Okiana, the negativity generated by US military in Okinawa fades. Therefore, a weaker Okinawan independence movement will be, although it was not that a strong one to start with, more less like the Puerto Rican. However, with the incentives by US military gone, the incentives for Okinawa to stay in Japan also go away.
That will create more space for Chinese military in the area. China will gradually gain its edge against Japan in territory dispute. However, the dispute is fairly settled since both sides have agreed to mutually develop the area. Again, this loss of strategic importance against Japan cannot be ignored.
The fact that Japan is losing control over the development in Korean peninsula is a sign of Japan’s HR risk. Japan had a hard filling in their chief of central bank earlier this year. They are unable to keep themselves abreast of the peninsula, let alone influence the outcome. Only very few international enterprises of Japan are as innovative or as quick as they used to be. Japan is having a high turn over of politicians and an even short life span of governments. The ageing population is showing signs of weakness in every area.
With that, the six party talks now prove to be useless. Japan is now concluded to be ineffective. South Korea lost its edge during the negotiation. Russia has been reduced to an attendant only. China has become more less the notary public for the talks. The real talk somehow happened between North Korea and America behind the curtain.
June 27, 2008
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Energy is increasingly becoming an important topic since it touches security (energy independence), pocket book (gasoline prices) and environment (egg head issue). Of all, social security will have the greatest impact on the biggest voting block: seniors. WSJ is having an article today about Obama’s social security plan. The options for social security are very limited if America has no intent to privatize social security. Obama is taking the least electorally costly option to him. In Obama’s vocab, that is “gimmick”. Those options are listed here:
http://royho.wordpress.com/2008/03/25/what-options-do-they-have-for-social-security/
There are very few options available to Presidential candidates. There are options outside of the social security program he can consider:
1) Make retirement age more flexible. In particular, make the age of social security flexible.
2) Tightening the control on the border to prevent illegal immigrants. This will of course have some impact on inflation. However, it could help the people who make minimum wage, i.e. higher social security payments.
3) Modify the poll of immigrants. Obama need not change the amount of immigrants. Obama can simply modify the quota pool to attract the immigrants with higher productivity. This could only work if there is enough buyer in the country. So the fundamental philosophy of the American H visa system remains unchanged.
4) Attract more investment immigrants. The point is not only about taxing them, but also having them create more jobs here.
5)
Lift up aggregate domestic demand without increasing fiscal expenditure.
6) Increase the amount in personal exemption and increase taxes on pollution to create more incentives for the next industrial upgrade.
The last point is the most difficult one. How can Obama lower its fiscal expenditure when the military spending is so high?
June 25, 2008
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McCain announced his $300 million prize for a next generation of cars. This election is increasingly turning to an election about environment due to the high gasoline prices. While money is still favoring Obama, McCain is finally trying to close the gap on ideas. If McCain can get more media exposure on his issues and ideas, McCain can sharpen Obama presidency.
McCain still needs to catch up with Obama on ideas. So far, McCain is still reacting to Obama’s idea. McCain’s $300 million prize is a good example. McCain needs to be ahead of Obama.
In addition, McCain can use security issue to frame the debate on energy, such as energy independence of Middle East. McCain can also use religion to frame the debate on energy: save all God’s creatures on earth, not just fetus.
Obama is actively courting the religious votes. And he is very comfortable with his religion before the TV, comparable to Bush 2. In a way, Obama can split the religious vote. For Republicans to protect and expand the religious vote, abortion may fail in this year. However, religious environmentalism may work.
McCain’s move can also help revitalize the auto industry in America and compete against foreign car makers. His idea is actually more cost effective since this program’s overhead costs is a lot smaller in dollar amount as well as a percentage of the funds than Obama’s venture capital fund.
An oil independent America is not only about disengaging itself from the Middle East, but also about compteting against China and India for resources. The supply line between America and Middle East is simply too long. Being oil independent is about production cost. And it will be too late for America if India or China can beat this against the States too.
McCain’s team needs to be more flexible and recycle the same issue to different audiences.
Although the environmental issues are getting into the debate, the Green Party cannot benefit any of it in the United States.
June 23, 2008
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Obama changed his mind: he will not use public funding now. Obama’s decision also reflects his comfort level of this campaign. McCain says he will consider opting out as well. The truth is McCain cannot afford not to. McCain’s funding is so low that he can barely run a competitive campaign against Obama. With Republican side running low on campaign personnels due to removals of lobbyists from the presidential campaign, low morale of loyalists and casualties’ from Bush years, McCain will have such a disadvantage that Obama may have a easy ride.
For it not because Obama is a populist and a challenger with a very unpopular incumbent, his decision of using private donation would draw some fire. America, because of Obama’s decision, now missed a great opportunity to debate what kind reform the US election laws should take, especially election financing.
America champions itself as the model of democracy. However, America has not spent much time formulating what kind of election financing system works best. Obama’s decision actually buries this important question for at least another decade.
No one likes politicians. And using tax money to help politicians is unlikely popular.
Why is this question important? And isn’t his micro-donor system good enough?
Money is the mother’s mile of politics. There are a few other big items we will not have a chance to reflect on the great intellectual capacities both McCain and Obama can provide us before the TV box:
1) What shall we do with campaign surplus?
2) Who can lend money to a campaign? And what to do when a candidate cannot pay off the debt?
3) Who can be a donor? Certainly only citizens. What about companies? Unions? Non-profits?
4) Who can accept political donations? Are political parties and candidates the only entities who can accept donations?
5) What about third party campaigns during election times? Say WWF or NRA running ads during election times without any references to candidates?
6) What is the definition of a volunteer? Some people may have very strong interests in being a volunteer full time.
These items may be mundane and uninteresting when compared to jobs, health care and foreign policy. However, they decide who will have more face time with any aspiring candidates, running candidates and incumbents. These items are no different than defining what an “eligible voter” is or what a valid ID is at the voting precinct.
June 19, 2008
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Gore finally made the endorsement to obama. At about the same time, obama WSJ published their interview with obama regarding the other half of the fiscal policy, the spending side. WSJ’s article does not capture everything Obama has in his website. But then, WSJ’s responsibility is to synthesize the information, not to copy and paste.
WSJ highlights Obama’s $150B spending. The source of the funding comes from the cap and trade energy auction. The price of energy of course will go up. No one has produced figures on how much the gas, heating gas and electricity will cost with this tax revenue source. However, the tax revenue is expected to rebate back to the consumers’ utility bills. If we assume the 300 million Americans are all eligible for this rebate, then each gets $500 back. If we assume only the 100 million American tax filers are eligible, then it is $1,500 each.
This has not figured in the program admin cost. My usual figure is 1/6 of the total amount is program admin cost, i.e. $25B of the $150B.
Obama can achieve the same goal without incurring new program admin cost. Instead of incurring new program admin cost, Obama can increase the personal exempt. $1,500 in utility bill rebate is equivalent to $15,000 increase in tax exemption. And this is not only about taxes, but also about strengthening his cause for energy independence. Here is why.
When there is a rebate to the utility bill, the consumer needs to consume a certain amount of utilities, be it gas, heating gas or electricity. Therefore, the incentive to modify energy usage is at best unchanged. Consumers will be less mindful of usage simply because they may think they will get some money back. The price after rebate maybe unchanged and if that were the case, then it is simply a job creation program for more civil servants. All these unintended consequences are defeating the purpose of minimizing energy consumption and energy reliance on fossil fuel, foreign dependence and minimizing trade deficit.
However, if the cap and trade revenue is refunded through income tax exemption, then the incentive to save energy consumption is stronger. The tax refund can now be recycled into the discretionary income. One may pay down his mortgage debt or buy another bicycle. But having a rebate on the utility bill requires a consumer to consume a certain amount of energy. Obama already refuses to cut corporate tax and chooses to cut personal income tax exactly because his platform is focusing (knowingly or not) on lifting domestic aggregate demand.
Fiscal expansion policy does lift domestic aggregate demand. However, an increase in aggregate demand by a single decision maker is not as effective as having the increase decided by the consumers themselves. There is an efficiency issue. And it is also a democratic issue. Who is to say what is wanted by whom?
June 17, 2008
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Beijing and Taipei just signed their agreement to have direct flights (36 flights / annum). In addition to establishing direct flights, both sides will also establish visa granting offices. What are the important and relevant points here?
It is too early to say which entity will carry this function on the Taipei side. On the Beijing side, it is obvious that will be China Travel Services . This is a company total owned by the Beijing government. The implication here is Taipei needs to have a debate about what to be done about Mainland China companies operating in Taiwan. This is something Taiwan did not prepare for.
What Taiwan should really want is: if there is any grease to be distributed on the Mainland side, make sure the grease is distributed to a non-government owned entity. If that is not possible, then make the recipient as remotely government controlled as possible. Diluting (or weakening) the influence of Communist Party is the goal when unification comes. Since reciprocity is a must in an agreement like this, Taiwan has no problem in instituting such a condition on its own end. If Mainland doesn’t like it, it just becomes another chip on the table. So the requests can work out like these: the tourist companies need to be publicly traded which no stocks are owned by government or government owned companies. The visa applications will be collected by tourist companies and forwarded to a government agency.
In fact this office establishing was not on the original agenda. This again shows Taiwan has a lot more development potential for its negotiation staff. And it also shows Taiwan needs to check its own inventory: what chips does Taiwan have, especially Mainland China will get stronger annually?
Outside of this agreement and moving forward, what Taiwan needs is some space in the international arena. And Mainland China President Hu is really selling the co-inhabitant atmosphere. Hu is selling so hard for the following reasons:
1) Hu is having his second and final term of presidency. Taiwan is the holy grail for any Mainland China or Taipei president;
2) Tibet gave China a bad rep and Olympics is coming;
3) Sichuan earthquake, no matter how well Mainland China government performed during the crisis, is still a negative.
For relationship and confidence building purposes, now is the time to give more exposure to Taiwan. APEC could be a place for it since Mainland China should be very confident about its own influence there. WHO is another place since sovereignty is not as prominent as health security in that organization. If Hu wants this as his accomplishment, then he needs to dance with Taiwan: Give more love offense to Taiwan.
We all know the famous line of Roosevelt: “we have nothing to fear but fear itself.” However, will this same line work if a Mainland Chinese president says it while the audience is Taiwan voters?
June 13, 2008
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The Irish vote against the Lisbon treaty becomes the Florida 2000 to EU. 3 million Irish blocked 490 million of Europeans. Is this comparison fair? What did they prevent? What does it matter? Who gets the most out of it? What can we learn from it?
Ireland closed its referendum polls for the EU treaty called Lisbon Treaty. CNN reports it is the only country that has a referendum because the treaty affects the Irish constitution while all the other countries make their parliaments ratify the treaty. This is a close vote because the Lisbon Treaty means a lot. Well, it meant so much that France and Netherland rejected the almost the same text back in 2005.
Most quoted difference this treaty produce is all countries will cede their veto rights. New rules will become effective when the committees pass the rules.
This gives less accountability to the new EU body. Voters of all countries will not vote on anything that EU does or the officers in the body. In the post SOX era, governance or accountability becomes more and more important. However the governance structure (accountability) in the new Europe is slipping away. Power without accountability is a bad omen. In America, governance requirement has evolved from publicly traded companies to charities now. Europe is stepping back in this regard.
All EU countries will cede some powers to EU and create a president and an EU foreign minister to be called “High Representative for the Common Foreign and Security Policy”.
EU has been having a chair for European Commission. However, that position is half a year long currently and without a budget. The newly created position of president will have tenure of 2.5 years, renewable once and with a budget. High Representative will also have a budget. Once these two offices get their own budget, they will get their own legs to all sorts of places that voters cannot possibly dream of.
Multi-National Corporations (MNC) will get the most of it. MNC have access to Brussels. EU has no accountability. The already hierarchical society/economy in Europe will be even more restrictive. Regulations will be more difficult. Market entry barrier will be higher to starve off competitions from young companies. A market environment like this will lead more mega mergers once these institutions matured.
The Secretary of State of America will immediately see a big difference. No longer will America be the representative of the West, of the democratic world. There will be a strong voice about what “democracy” means. And Europe may put an emphasis that America did not think of: peace. Europe will give diversity to the interpretation and approach to the promotion of democracy. However, Europe may not want to compete in that keyword. Europe may find its own voice with the concept of peace. With that, Europe may find itself more popular in the international arena than America.
The lack of referendum in so many countries shows politicians want to keep the voters out of the decision process because politicians want to be brokers. Letting voters have a direct say is making the outcome unpredictable (let’s assume this is not about their jobs and grease). However, who else is a better jury for an important decision? Should we not have a jury?
June 13, 2008
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Mainland China and Taiwan started their first negotiation in a decade. A big topic of this negotiation is the direct flight between two sides. This negotiation serves as an example to America how election campaign promises should be carefully drafted since the presidential election is under way, for instance the date of Iraqi withdrawal, whether to negotiate with Iran, North Korea, Cuba and the like.
This negotiation is the first priority for President Ma of Taiwan since one of his campaign promises is direct flight starting on July 1 of 2008.
This campaign promise possibly led the negotiation team to have a very short time frame to draft their agenda and options during the negotiation and subsequently affect the negotiation result.
Passenger flights are of top priority since the photo op of passengers getting off the plane is too valuable. Therefore, the goods transportation is likely to be off the table. However, that can be of higher importance to Taiwan.
Furthermore, Taiwan possibly left other aviation priorities off the tables. Here are a few:
1) Can flights fly to a second destination within the territory? Example: can a flight from Taiwan to Shanghai fly to Beijing afterwards?
2) Can flights fly to another country afterwards? Example: can a flight from Taiwan to Shanghai fly to Japan afterwards?
3) Can airlines establish maintenance hubs in the other’s territory?
All these questions actually benefit more for the Taiwan side than the mainland side. However, once a negotiation is over, another aviation negotiation probably will take another few years while the governments tackle other big political items, such as sea ports. Thus, the next aviation negotiation probably will begin with another president term at best.
Now why are they important?
For the first question, Taiwan is a much smaller space. It has a lot fewer air traffic nodes. The gain for Mainland airlines is actually small, especially the number of flights and airlines are supposed to be reciprocal in aviation negotiations. However, Mainland China has another 100 cities each with a population of 1 million. The gain for Taiwan aviation industry will take years to realize financially.
For the second question, President Ma of Taiwan’s business plan is to be the bridge to China for the West, analogous to UK to continental Europe for America. For that to realize, the first item to tackle is for Taiwan to become a transportation hub. The second question becomes vital.
The negotiation is about flight between 2 sides and not about domestic aviation market. However, having a hub in the other side is beachhead to fight the domestic market. Since the mainland China’s domestic aviation is the ultimate price for Taiwan aviation industry, if economic integration is to follow through, eliminating this big hurdle is important. The scale of a hub is of course negligible at this stage. However, this will be an expensive item to negotiation in the future. While the goodwill is overloaded, this should be item to cash in right now, right here.
Aviation business has a long investment cycle. Aviation manufacturing has defense implication. Taiwan needs to muster every advantage at every step to prevent a big swallow by Mainland China in the future. Therefore, this third question will add a lot of points to Taiwan. If ignored, Taiwan will give up a great asset for a future show down of unification negotiation.
Because of a promise on a date of direct flight, Taiwan probably forgot a basket of items. American voters have to see if the candidates are giving promises that will put the future presidency at an inflexible corner.
June 12, 2008
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This is written on 2008.06.11, Obama made his tax plan announcement on 2008.08.12. Please consult this link for taxes, especially personal income tax:
http://royho.wordpress.com/2008/08/15/obama-vs-mccain-platform-part-3-your-taxes/
For foreign policy:
http://royho.wordpress.com/2008/07/21/obama-vs-mccain-platform-part-2-foreign-policy/
Below is the original on 2008.06.11:
___________________________
CNN is giving out a good introduction of the Obama vs. McCain platform contrast.
http://money.cnn.com/2008/06/11/news/economy/candidates_taxproposals_tpc/?postversion=2008061113
I figure this is the right time for me start as well. Obama has deep roots not only in the city of Chicago, but also the Chicago School of economics since he has been a faculty in the law school there. Click here to read a contrast by Tax Policy Center.
http://www.taxpolicycenter.org/taxtopics/election_issues_matrix.cfm
One central theme across the revenue side of the Obama’s fiscal policy is he is concentrating his effort on invigorating domestic demand: he is trying to lift up aggregate demand. All tax cuts are focused on low income groups. A typical Democrat policy is to tax the rich and create programs for the poor. This Democrat is minimizing the tax burden on the poor.
Taxing a low income filer and then distribute welfare check to him is make work for the bureaucrats. The real gain is among the civil servants. The first relief to the poor is not the welfare checks but to make sure they do not even qualify to pay taxes. There are too many of these points Obama raised that would any economics professor happy. This, Obama is heading toward.
And there are too many of those points to get listed here. Please consult the Tax Policy Center website.
A contentious point to-be for McCain is the corporate tax reduction from 35% to 25%. If we consider the fiscal revenue since 1945, anyone can see that the tax burden of corporates reduce from 35% to 14% in 2007, while personal income tax continues to hover around 45% for the same period.
McCain makes (or will make) the argument that employers need to be able to create jobs. Most of the jobs are created by small businesses. For that, Obama has a tax credit of 20 percent on up to $50,000 of investment in small owner-operated businesses; Eliminate capital gains taxation of start-up businesses; Provide capital gains tax break for landowners selling to beginning family farmers.
What is really indefensible of Obama’s platform is capital gain. Obama will increase capital gain tax. What does it matter, you may ask, since capital gain is a rich man’s business. It may not exactly be there. It can affect your mutual funds, pension funds and alike. Given social security is shaky, capital gain tax can have unintended consequences. This will require a closer look at the proposal, compare it against the tax code and check the statistics.
Obama is also encouraging saving through mandating 401(k) and IRA accounts. It of course increases administration cost on the employer side. However, a detailed look at the proposal is important for this one since this requirement can elevate some of the pains on Social Security. The trade may be worth it.
A real electioneering tax gimmick is the elimination of taxes for seniors with income below $50k. this is on the platform because seniors are vote rich. Increasing the personal exemption from $4k to, say, $8k is more effective in lifting aggregate domestic demand than concentrating on the seniors.
Fiscal policy is a good place to address the environment agenda. However, that is missing from both candidates. Both advocate to close oil and gas loopholes. Obama specifically want to make the R&D for renewable energy production permanent. However, this is supply side economics. Obama could levy taxes on this area and reduce more income tax.
A simple glance at the fiscal revenue policy can tell that Obama team has put more effort into fiscal revenue policy than McCain team, although McCain is the Republican candidate.
Is McCain having a retirement party?
June 11, 2008
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