LEAVE APPLE ALONE! (*sob*)

What’s that? Political commentator Ben Shapiro tweeted about Apple? Delightful:

Like cheap Apple products? Like that Apple has approximately 600,000 Americans working for it in some capacity? Then STOP BOTHERING THEM.

I wonder if, in his world, there are circumstances under which it’s permissible to criticize a private company that employs hundreds of thousands of Americans in the manufacture of reasonably priced electronics. (I would hesitate to call them “cheap,” but perhaps that’s the Winnipegger in me talking. We get mad over five-cent grocery bags.) In this case, it is on the disingenuous side to blame Apple for using accounting methods that they’re legally free to use. It hurts, but it’s not aggravated assault. Here’s what Apple did, according to a Senate investigation:

1. They arranged a sweetheart deal with Ireland, whose corporate tax rate is generally 12 percent, that allows them to pay below 2 percent on paper, and as little as 0.06 percent in reality.
2. They created shell companies around the world that sold products and intellectual property to one another at a “substantial” markup. (The U.S. was not a base for one of these shell companies, as Apple went out of its way to note.)
3. They took advantage of a U.S. tax loophole that effectively allows them to decide which subsidiary gets taxed.

This is rightfully called “creative accounting.” Remember when Apple’s creativity was concentrated in its product development? Now we know where that went, along with the taxable income.

I’m sorry, what? Sen. Rand Paul (R-KY) has a solution to all this? Let’s hear it:

A couple years, we did repatriation of foreign capital. If we want the capital to come home, don’t double tax it. We tax it 35 percent. Let’s tax it at 5 percent.

Fair enough, if the end game is simply to bring the profits back to the U.S. Just don’t make the mistake of assuming this will automatically lead to job creation, as many defenders of across-the-board tax cuts have an unfortunate tendency to do. If anything, according to the nonpartisan Congressional Research Service (CRS), the benefits to Americans would only be seen by the few who hold company stock. I suppose you could argue that the real amount of revenue from dividend taxes could go up, if the dividends are larger, but that’s assuming the people who hold them can’t navigate loopholes as well as Apple does.

Closing loopholes is the most sensible thing Congress can do about this kind of tax avoidance (not evasion). It’s not completely nonsensical to lower corporate tax rates, either. Let’s just be honest about what good that would do. And let’s not cross the line into essentially applauding Apple, or any other company, for tax avoidance. There are less suspect ways to maximize profits.

Today’s column is about beer

My copy editing instructor taught us that including action verbs was one of the best ways to write a good headline. With apologies to him (sorry, Duncan), I figure this blunt beer-related headline will be even more compelling. If you have been compelled to read it yourself, here’s what’s happening: Craft brewers want a tax cut, and larger brewers are arguing against it on much more reasonable grounds than I would expect from market dominators.

It all started when Rep. Jim Gerlach (R-PA) introduced the Small Brewer Reinvestment and Expanding Workforce (BREW) Act, which would not only reduce federal excise taxes on beer from small producers, but expand the definition of “small producer” to include those who produce up to six million barrels per year, up from two billion. The Brewers Association, which lobbies on behalf of small producers, is backing the bill. Here’s its chief operating officer (COO) Bob Pease:

Our industry is an example of small, main-street American businesses creating jobs — manufacturing jobs in the United States, making an American product, putting Americans to work for the product that is by and large consumed in the United States.

Agreed. I have yet to meet a friend who has visited the U.S. and hasn’t preferred something locally brewed over mass-produced swill. But the purveyors of said swill are playing the game much better by lobbying for the Brewer’s Employment and Excise Relief (BEER) Act, which would reduce excise taxes on all beer producers. Here’s Chris Thorne, vice-president of communications for the Beer Institute:

If the entire industry is unified and has one ask, we stand a far better chance of succeeding than when we have multiple bills to push.

He has a point. Still, neither he nor Pease beats Mike Johnson, chief lobbyist for the National Beer Wholesalers Association:

While we oppose any increase in taxes on beer because they are regressive and are paid primarily by working men and women, we have concerns about any legislation that would seek a tax cut in the current fiscal environment.

Or Mark Gorman, senior vice-president of government relations for the Distilled Spirits Council of the United States:

Given the budgetary circumstances, we didn’t think it was worth going to the Hill to talk about rolling back federal alcohol excise taxes.

They’re right. The Beer Institute may have outdone the Brewers Association in terms of the actual legislation, but both of them, along with Gerlach, couldn’t have timed this effort worse. By taking congressional reality into account, the other two groups have assured themselves a better reputation on the Hill.

Sometimes Congress just isn’t smart enough

I’ve called for congressional vetoes for earmarks; since those originate from Congress for political reasons, it’s appropriate to have them killed by Congress for political (and, we’d hope, long-term economic) reasons. Federal regulations, on the other hand, are a whole other ball game, as they typically originate from people with some kind of expertise in the field, who work for the executive branch. Maybe you’d like those killed by members of Congress. I’d rather not – at least not immediately.

Originally introduced by Rep. Geoff Davis (R-KY) in 2011, the Regulations in Need of Scrutiny (REINS) Act would give Congress the authority to review any new federal regulation with an estimated economic impact of $100 million or above. It would first go to its related House committee for a vote; if the committee decides not to vote on it within 15 days, all of Congress would have that opportunity for 70 days. This bill passed a Judiciary subcommittee on a 6-3 party line vote. If you can’t guess which party put up which numbers, please leave now.

You’re probably aware that the Obama administration issued $518 billion in new regulations in his first term, as estimated by the conservative American Action Forum (AAF). That’s a pretty big price tag, however you look at the regulations therein themselves. Having written about more absurd regulations than I can remember, I’d have a very hard time believing each one’s benefits outweighed their costs. But you can’t always tell before you see them in action.

Then there’s the separation of powers issue, summarized by Rep. Steve Cohen (D-TN):

I think it’s illogical and gets us into the weeds where Congress was never supposed to go.

Of course, the framers of the Constitution didn’t have an untold number of federal agencies, boards, commissions, committees and administrations to figure out. And, certainly, taking authority away from unelected bureaucrats is an easy political sell. But it’s entirely possible that those unelected bureaucrats will get it right the first time.

Here’s what I propose: All new regulations will be subject to a Congressional Budget Office (CBO) review a year from their implementation. If they do more harm than good – and I don’t just mean in terms of finances; health, safety, cleanliness, etc. should be factors – Congress can vote to roll them back according to the method prescribed by Davis. Except Congress should get less than 70 days, because Jebus.

Given the choice, I would rather take advice on regulations from unelected bureaucrats who probably know about this kind of stuff as opposed to elected assholes who probably don’t. Federal regulations should be based on considerations far beyond popular assumptions. Ferreting out the lobbyists would help, but that’s another bill.

Or we could remit it all to Seattle

Not until I got my first credit card at the age of 21 did I truly appreciate the benefits of online shopping. (Except for DVDs. I’ve had some disappointments buying those online. And don’t even think about shoes.) If Sen. Dick Durbin (D-IL) thinks his proposed online sales tax will “help traditional brick-and-mortar stores compete with online giants,” he’s not giving much credit to human nature. Who shops online because of opposition to sales taxes on principle, compared to opposition to going from store to store looking for one thing?

At the moment, states are only permitted to collect sales taxes from retailers if they are physically present in that state. Technically, they could collect online sales taxes if consumers declared those purchases on their tax forms, but very few do, and states haven’t bothered trying to make them. Durbin’s bill, the Marketplace Fairness Act, would “level the playing field” by requiring online retailers to collect sales taxes and remit them to the state of the purchaser, with an exemption for retailers earning less than $500,000 from out-of-state sales.

Here’s a pro tip: If a bill has the word “fairness” in the title, and its way of “leveling the playing field” involves new tax collection authority, which in effect is a tax hike of sorts, be on special alert. Granted, if online retailers are required to collect the same taxes as physical ones, it would make that playing field a little more level. Whether it would make the physical ones more appealing to consumers, as Durbin seems to think, is a different story.

The issue of implementation is much more complex. Proponents of the bill are correct in pointing out that thanks to modern technology, the act of making an interstate transaction is considerably simpler than it used to be. But why, under this legislation, would the purchaser’s state collect the revenue? That hardly seems “fair,” especially if economic and tax conditions in that state are such that online retailers don’t headquarter there.

Republican opponents point out that all this bill would do is empower states to decide whether or not to target that revenue, as 24 states currently could, having already adopted the sales tax simplification measures that are a condition of said empowerment. Whether they actually do target the revenue is their choice. Seeing as most haven’t made a vigorous effort to get residents to declare their online purchases, I have to wonder how much appetite for this exists in earnest on the part of the states.

If anyone is interested in the legal factor, one of the Supreme Court rulings barring sales tax on interstate purchases explicitly states that new legislation could override the ruling. Proponents can be happy about that. But this bill might not generate nearly enough state revenue for them to stay happy.

The recommended intake of conflict minerals

Today’s story has participants from all three Linnaean kingdoms: Congolese militias (animal), American business leaders who aren’t half as concerned with them as they ought (vegetable) and the components produced by the former and bought by the later (mineral). The name “Linnaeus” hasn’t come up for me since History of Science in first year, an experience I do not care to revisit. But that’s what happens when said business leaders won’t go the whole hog when it comes to conflict minerals.

A lesser-known element of the Dodd-Frank financial reform law concerns metallic elements like gold, tin, tungsten and tantalum, often used in consumer electronics and sourced from the militia-ravaged Democratic Republic of the Congo (DRC) and surrounding countries. The militias use the profits from foreign sales of these minerals to finance unimaginable abuses, child labor and rape among them. Interestingly, the provision of Dodd-Frank requiring companies to disclose their use of these minerals was the work of then-Sen. and current Gov. Sam Brownback (R-KS).

Earlier in the year, The Hill reported on the labyrinth companies have to go through to satisfy the requirement. Every outcome involves filing a new type of report with the Securities and Exchange Commission (SEC) and at one point paying to have their findings validated. It’s hard not to sympathize with the U.S. Chamber of Commerce and the National Association of Manufacturers when they call this “burdensome.”

And it’s true that all of this disclosure would do little to stop the militias, especially when you consider that the SEC would have no authority to penalize companies that use conflict minerals. However, the companies’ failure to commit not to use those minerals at all speaks volumes, on the same level of Congress’s failure to crack down on this use in a real way. Like most bureaucracy, this law amounts to large, expensive piles of paperwork that ultimately benefit nobody.

The two Republican SEC commissioners dissented from the original provision, claiming it would amount to an embargo against the DRC. So? The ore from which these metals are sourced can be found in Australia, Brazil, Canada, Malaysia, Indonesia, Bolivia, Portugal, Thailand, South Korea, Russia, China and even the good old U.S. of A. Why pass them over for the DRC?

If we’re going to make any company pay extra to avoid using conflict minerals, let’s forget the paperwork and outright ban minerals from countries that can’t or won’t clean out their militias. But for the U.S. to be consistent on this, they’ll have to spearhead an international effort to wipe out the “conflict” of these minerals for good. Americans’ inability to profit from it might spare us some guilt, but not much else.

Those assholes who fired you

It’s time once again for The Future American’s FAIL OF THE WEEK! Every Saturday, I name a person or group who has spent the past seven days behaving in a particularly idiotic way. Since it’s my belief that idiocy knows no politics, nobody is safe.

This week’s fail was brought to you by every CEO who has ever encouraged their employees to vote a certain way, implicitly or otherwise. It’s become a trend in this election, with CEOs with known preferences for former Gov. Mitt Romney (R-MA) and other conservative candidates leading the charge. In this example, Dave Robertson, the president of Koch Industries – yes, that Koch – sends a “voter information packet” to 45,000 people working for the company’s Georgia-Pacific subsidiary, listing candidates endorsed by KOCHPAC who are “the most market-based and willing to support economic freedom for the benefit of society as a whole” in their respective races.

Of course, that’s not quite as bad as the mailer from David Siegel, head of Westgate Resorts, who warns that new taxes will force him to lay off his workers. (This is what his house looks like. I’m just saying.) Or the mailer from Arthur Allen of ASG Software Solutions, who fears that his company will no longer be able to “stay independent” if President Obama is re-elected. What does that mean? Does he think Obama will nationalize his company? If he did, I couldn’t imagine that the political propaganda coming down from the new head office would be all that different from this stuff, except for the names.

Now I don’t expect any of these CEOs to have the resources or the know-how to find out how their employees end up voting, unless they announce it somehow. (The CEO in this book might. But I’m not going to elaborate here.) That’s the problem. While it’s generally frowned upon to discuss politics at work, depending on the workplace, what employee would even think of it after reading mailers like these? If you were in their position, you’d probably be worried about some kind of retribution.

But it’s not illogical to worry about retribution whether you keep your mouth shut or not. We’ve already established why it makes little sense to blame Obama alone for the threat of massive tax hikes. But is it really as simple as 1. taxes go up and 2. people get laid off? Surely CEOs who rose to preside over companies these size are smart enough to think up some ideas for avoiding those, right? Anyone? Anyone?

No wonder it’s so easy to turn former Gov. Mitt Romney (R-MA) into a caricature. The people who carry his water already are caricatures – a small but powerful horde of Bill Lumberghs. “Mmmm, yeeeah . . . we’ve got some new taxes that have been imposed on us, so I’m just gonna go ahead and do some housecleaning around here. M’kay?”

Regulating the regulators to regulate less

First, let me thank Sens. Mark Warner (D-VA), Rob Portman (R-OH) and Susan Collins (R-ME) for compiling their bill into a simple three-page summary, found here. Not wading through acres of “i) strike ‘and’ in subsec. d. and ii) replace with ‘or’” or whatever is refreshing. The blogosphere owes you one. So do observers of the legislative process for your idea not to give more power to Congress, which would be a good idea if not for all the morons.

The Independent Agency Regulatory Analysis Act would empower the White House to require that all independent government agencies – including the Securities and Exchange Commission (SEC), the National Labor Relations Board (NLRB) and the Federal Communications Commission (FCC) – perform full cost-benefit analyses of all new rules and work to minimize their negative economic impacts. They counted 58 such rules, only one of which had a full analysis. Identifying those rules would have been helpful, though.

You might worry about the administration of the day getting too close to these entities, and that’s a legitimate worry: Part of the bill would require rules with impacts in excess of $100 million to be vetted by the White House Office of Information and Regulatory Affairs. If the White House in particular is stacked with former Wall Streeters or other ex-insiders, as it typically is, I wouldn’t trust them with those rules. Same goes for a White House stacked with those who seek to drown the government in a bathtub.

The cost-benefit mandate is something different. Previous presidents, Ronald Reagan among them, have achieved that kind of authority over the Treasury and Commerce departments, not even having to go through Congress to do it; they did it with executive orders. It’s worth noting that the Federal Reserve is exempt from this legislation, however. Let the caterwauling from the bathtub-drowners commence.

For you government efficiency fans who fear more backlog as a result of having to carry out these analyses: It actually might help to speed up the process. The Dodd-Frank law, for one, has “encountered significant delays” due to the financial industry’s legal challenges. Had regulators presented them with a) a full cost-benefit analysis and b) proof that they explored alternatives and found them lacking, some of those challenges may have been tempered.

Except for the White House vetting, this bill could help create the more stable regulatory environment sought by its authors, with a minimal amount of legal or political tug-of-war. But the Fed’s rules should be thought out in full as well.

Your jobs are important to us

If and when I compose my memoirs, the month I spent working at an outbound call center at the age of 17 will be mentioned as a minor, irrelevant, yet painful life event. If not for the money, which can actually be quite good, call centers rank somewhere between meatpacking plants and Wal-Marts on the list of excruciating places to work. If you’ve managed to avoid it thus far, I salute you. Nonetheless, they are jobs, and two U.S. senators want them back.

Sens. Sherrod Brown (D-OH) and Bob Casey (D-PA) are pushing the United States Call Center Worker and Consumer Protection Act, which would do three things:

1. Deny federal grants or loans to any company that offshores its call centers.

2. Require companies to disclose to callers when they’re talking to overseas center.

3. Make a list of companies that offshore their call centers and require federal agencies to give preference to companies off said list.

I can handle the first item on that list. Denying federal grants and loans to offshoring companies might not be the silver bullet to getting them back; demand from shareholders, and customers who make the calls themselves, might have more of an impact. But there’s nothing wrong with saving a little money on American companies who can’t repay the favor by keeping as many jobs American as possible.

The third item, I can take or leave; it doesn’t merit a new paragraph. The second item is just absurd. Most of us can tell when call center operations have been outsourced; all we have to do is wait for the telltale audio delay, then listen for an East Indian accent belonging to some guy named Jack. (Or so he says.) This really solves nothing for someone who is experiencing technical difficulties and just wants their problem solved. I have been one to abuse tech support people (mostly when I had a Belkin router), and for their own good, it’s best not to make them deliver more boilerplate.

In the grand scheme of job creation, this bill is nothing much, especially when you consider how many higher-skilled jobs could be targeted for reshoring instead. But think of it this way: Most of the people you’ll find working in a call center, at least in my experience, are students, recent grads with limited prospects, single parents, new immigrants and older people. And they need money, period. This is a better way to get it in their hands than a spate of new tax credits.

Besides, if demographic trends – or at least stereotypes – hold, Brown and Casey have something tangible to offer to two of the most electorally important states in the union. So, good for them.

The summer uniforms of our discontent

I don’t plan on paying much attention to this year’s Summer Olympics in London; most of the sports I enjoy are winter sports, and since the 2010 Winter Olympics were in Canada, of course I was more interested in our team’s performance. Already Team USA has kicked up some controversy for this year’s Games. Not them, exactly, but their uniforms – and where they were manufactured, which was not the USA. According to six Senate Democrats, the solution lies with them.

The Team USA Made in America Act, created by Sens. Bob Menendez and Frank Lautenberg (both D-NJ), Kirsten Gillibrand and Chuck Schumer (both D-NY), Sherrod Brown (D-OH) and Bob Casey (D-PA), would, as you have probably already guessed, would mandate the U.S. Olympic Committee to adopt a procurement policy requiring uniforms to be manufactured in the United States. Under pressure, Ralph Lauren has already promised to make the uniforms for the 2014 Winter Olympics in Sochi in the U.S. For the record, yes, Ralph Lauren is a natural-born citizen.

Never mind that the uniforms themselves look like a Chinese parody of how those militaristic Americans actually dress. (I’m not fervently anti-militarism, but come on.) Of course it’s embarrassing for anything emblazoned with the letters “USA” and patriotic colors not to match the label. But the near-reflexive introduction of legislation to resolve this makes the Democrats look like any Republican who introduced a new constitutional amendment this year, or anyone who ever grumbled “There oughta be a law.” That’s not always true.

Why? Because in this case, a new law not only poses significant questions about congressional authority, but does nothing to address the real problem. Why, the Senate Dems should be asking, would an American designer of American uniforms even think about manufacturing them offshore? And what can they do to resolve that? This bill is a response to a PR problem that belies an economic one. Maybe people who only understand PR will be impressed by this move, but the rest of us find it childish.

If this group of Dems and Senate Majority Leader Harry Reid (D-NV) were operating on any foresight at all, they wouldn’t be exacerbating the PR problem by breaking out quotables like this one from Reid: “I think they should take all the uniforms, put them in a big pile and burn them and start all over again. If they have to wear nothing but a singlet that says USA on it, painted by hand, that is what they should wear.”

It’s too bad he didn’t offer to paint all the singlets himself. That I would tune into.

Gramm, Leach and Bliley ruined everything

No one outside the economic community is a more forceful opponent of market concentration than I am, and the 2008 financial crisis is a big reason why. My family was not affected, but we’re all extremely conservative about money. So is the Canadian banking system. The American one used to be, but the inescapable truth is that if that hadn’t changed, much of the fallout might have been avoided – leading some experts to wonder if it isn’t time to go back to the future.

The discussion centers on two important pieces of banking legislation: the Glass-Steagall Act of 1933 and the Gramm-Leach-Bliley Act of 1999. While both bills cover multiple facets, they mostly come up because of their effects on the nature of the banking industry. The former restricted activities between commercial banks and securities firms. The latter repealed those barriers, on the grounds that individuals could put money into savings and investments at the same time and only have to worry about the investments in hard times.

While I don’t consider myself knowledgeable enough about banking to conclude whether or not Glass-Steagall should be revived, I do wish to address a couple of arguments made against the idea. The first, from Moshe Orenbuch of Credit Suisse: “You could get a financial system that could not be able to sustain itself in times of crisis if you don’t have large banks. There’s ample evidence that large, well-run banks provide benefits to the economy.” This financial system wasn’t able to sustain itself in times of crisis. Furthermore, Canada has large banks, too!

The second, from Dick Bove of Rochdale Securities: “There are in fact laws in this country, and you can’t simply go and tell a company you’ve got to be broken up because we want you to be broken up.” Does he not realize that the process that breaking up the largest banks would entail comes from a law? Nobody’s overstepping any boundaries.

The third, from Bove again, is that “conventional banking” is no guarantee because plenty of regional banks failed during the financial crisis and afterward. Would he then like to argue that these banks should have been bigger and fewer, because then they could have been bailed out and saved? Conventional banking allows for failure that is natural for any marketplace. You’d think someone as clearly anti-regulation as he is would agree.

It’s possible that, rather than breaking up the banks, they might simply be regulated more strongly to increase transparency and decrease complex risk. I would personally favor something faster than that, but if it works to end “too big to fail,” I’ll take it.