Trump on Taxation

President Trump has announced the intention to make sweeping tax reform, and a significant tax reduction for companies, at present reducing from 35% to 16%. His argument is that by doing this, he will encourage multinational companies to stop hoarding money in offshore tax shelters and bring it back to invest in the US. So what to make of this? The tax reform is an extremely good idea. The simpler and more transparent the tax law is, the less time everybody wastes on minimizing tax and the more they devote to actually earning money. Everybody accepts tax reduction is good for them, but the problem then is, does the government earn enough money to pay for what it wants done? That is a detail that has to be left because it depends on what is available to tax, and how much the government wants to spend.

Company tax is an odd animal because one argument is that you collect more or less the same tax irrespective of the rate. It goes like this. A company earns money, but those earnings are spent in four basic ways: investing in new plant; buying goods/services from other companies; paying staff; paying dividends. Looking at these in inverse order, money transferred to dividends becomes personal income, and that is taxed, so what we are avoiding is double tax. Many countries avoid such double taxation by giving company tax credits with the dividends, and while I am unaware of US tax policy on this, as a general rule as long as there is no double taxation, lowering the company tax rate has no adverse effect on dividends because those on the low tax rates in general cannot afford the stock. The important thing is that unlike people, companies do not spend on themselves, leaving aside “perks” such as company jets. My view is such “luxury expense” for senior staff should be taxed as a personal benefit to them.

Paying staff means the staff pay tax on their earnings. Now, if the staff are low paid, lowering company tax does reduce the tax collected, because most staff do not pay the 35% rate, although some may be on a higher rate. Similarly, buying goods and services from other companies simply transfers the taxable profits, although if the goods are imported, the profits go elsewhere. The question here is, then, will the US increase local production? The reason many multinationals manufacture offshore is that wages there are seriously lower, and they do not have to pay benefits and compliance is less strict. There is rationality in thinking that such goods manufactured offshore should be taxed as if the company met home compliance and had paid home benefits and wages because that levels the playing field from the “own country” point of view, but of course it hurts developing countries.

The virtuous part, according to Trump, is that by lowering company tax, multinationals will bring back more of the offshore funds accreted, and all companies will have more money to invest and create new jobs, or pay dividends. The next question is, is this valid reasoning? I am not so sure. The problem with investing to create new jobs is you have to have something to invest in. That is not so easy to find. There is no real evidence that company tax is inhibiting investment because there is no real evidence that, leaving aside small individual companies in trouble, there is a widespread shortage of money. What I see is more a general shortage of ideas. Thus we see the new product is another mobile phone that is only a little bit different from the last one. Ask yourself this: what would you really want that is not currently available if you had the money to buy it?

What that suggests is the economic slowdown is not caused by higher corporate tax, but more through inequality. Those with money already have most of what they want, and those without money cannot afford much of what is there. If we really want to promote growth, then I am afraid the poorer have to have more purchasing power, because they are the only ones at the moment who could power acceleration in sales. Of course the rich will keep on buying, but only at their current rate, and that will not power the growth President Trump wants. So my question is, will President Trump do anything to reduce inequality?

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The Killing of Syrian Evacuees, and MOAB

One of the biggest news items the previous week was “the mother of all bombs” was dropped on Afghanistan. My first thought was, how come the children came first? My next thought was, why did the Americans use those words? Suppose they had said, “We dropped an 11 t bomb to break up the ISIS tunnels,” they could have still shown the same footage, but it would not have sounded so arrogant. Since this bomb had to be dropped from a cargo plane, it would presumably only be used on populations that have no significant air defence. The Americans also claimed that they killed thirty-six ISIS fighters and no civilians. Exactly how do they know that? (Sorry, but I persist. I want evidence, or at least some reasonable explanation that evidence has been seen by someone who will tell the truth.) One of the clips showed the ground around where the blast took place, and there was plenty of green there. Explain to me why there were no tribal farmers there?

Another disturbing event occurred at al-Rashideen, in Syria. Busloads of Shia evacuees from Foua and Kefraya permitted to leave the al Qaeda held Idlib province were attacked by what appears to have been a van-bomb. At least a hundred and twenty-six were killed, and more will die, and of those who died, at least sixty-eight were children. You may recall President Trump spreading empathy for the innocent children who died at Khan Sheikhun; silence on this incident, though, and the question is, why? There was also essentially silence from the Western press. Why, after all the fuss made of the sarin event? Particularly since these people were being evacuated under an agreed exchange whereupon rebels were permitted to leave Aleppo in exchange for free passage for them. They were obviously killed by al Qaeda affiliates, so why no bombing of them? Presumably because they are “nice” Muslims. Has he already forgotten 9/11? More to the point, this is a clear indication that you cannot negotiate with such terrorists because they have no honour.

What should be done about Syria? In my opinion, ISIS and the al Qaeda factions should be eliminated. As von Manstein noted, in terms of military strategy the first requirement is to prioritize. It is true that Assad is currently handling his population rather badly, but nobody else seems to have any constructive suggestions as to what should happen. Everyone says, negotiate a peaceful settlement, but it is difficult to do this when the issues are discrete and if, as shown by the example above, one side will not honour the terms of any agreement. If it is one or the other, the absence of middle ground makes compromise near impossible. Neither al Qaeda factions nor ISIS will moderate their extreme views, so I am afraid they must be removed. Assad at least ran a secular government, and in my opinion, he is the only one visible who has any chance of doing that in the future and do it for long enough to be effective, so swallow the dead rat. The best example of what I fear was Saddam Hussein. Nobody would accuse him of being “good”, but nevertheless he ran a secular government, and under his government, there was no al Qaeda of any significance in Iraq. The US deposed him and executed him, and did not attempt to govern, despite the antics of Paul Bremer. Why not? Insufficient troops. The net result was that disgruntled Iraqi soldiers got tangled up with ISIS, and look where we are now. It is better to do nothing about Syria than make it much worse.

Why do I discount the military option? The troops needed for a military occupation depend on what is expected of the occupied population. During the Czech invasion, everybody expected the Czechs to behave, and from memory five divisions comprised the invasion. That would be somewhere between 50,000 – 75,000 men, and probably about another 30,000 support staff. However, they concentrated on “important” sites. I recall that if you stayed out of city squares, or around things like radio stations, the chances of actually seeing Russian troops were very low. You saw them on roads if they were moving, and of course they had bases, but otherwise they were invisible. I even drove essentially across the country and only saw troops using the road to go from A to B. That would not work in a place like Syria, where you have to assume everybody there will hate you. Al Qaeda and ISIS, and their sympathizers will definitely hate you; the Alawites will most likely hate you for overthrowing their man, and that leaves the Kurds and Turkmen, both of whom will fear your leaving with whatever ISIS morphs into remaining. In an occupation where you are hated, you have to remove all the weapons, you have to check all transport, and have frequent checks on people in the open. That is why Israel, which has recognized what occupation means, does what it does in Palestine, and overall, while the Palestinians hate it, it does a good job of occupying. For Syria, I think you would need at least 500,000 soldiers, and preferably about 700,000. Who wants to pay for that? And on top of that, if you want it to succeed, you had also better spend a lot on reconstruction. To make a job of it, it would probably take ten to fifteen years, and initially there would be a lot of body bags because the likes of ISIS will have secreted arms dumps. Not very attractive, is it?

KDP Discount from April 13th over Easter.

Dreams Defiled, 99c. US and UK only, thanks to Amazon. A tragedy wherein after receiving an alien message, five characters are involved in separate ambitious goals: terraforming Mars; building a massive space station at L5 to house a million citizens; preparing to defend against aliens; and to make life better on Earth for the oppressed. The fifth is merely to be more important than the others, and the easiest way to do that is to sabotage their efforts. Action, some real science, and multiple tragedies, as all failures arise in part from character flaws. One such character bears a certain resemblance to my interpretation of the downfall of Michael Flynn. Technically the second in a trilogy, but intended as stand-alone if you can accept the background outlined in the first pages.

https://www.amazon.com/dp/B01N24ATF7

Chemicals over Syria

The news over the past week was dominated by a “chemical attack” in Syria, and the US response. However, there was then a flurry of various theories as to what had happened, the most usual one being that Assad was at it again, using sarin on his own population. So, what do we know, and what theories are consistent with what we know? In my scientific books, I have maintained that for any subset of facts, the smaller that subset the more likely there is that there will be at least one other theory consistent with the facts. What one then does is design experiments to s falsify some of them, so that eventually you end up with just one, and that is most likely to be correct. With human activities that is a little harder to do, and we have to relax somewhat the Royal Society’s motto Nullius in verba, which loosely translated means, take nobody’s word. With something like Syria, you cannot check everything rigorously, but you can look for self-consistency and reliability.

So what do we know? First, a number of people, including children, died in Khan Sheikhun some time on the morning of Tuesday 4th April. Some survivors were taken to hospitals elsewhere. According to US surveillance, one SU 22 took off from Shayrat air base and dropped objects on Khan Sheikhun. That is about all we know. What is most likely to be true? First, the symptoms of the survivors were argued to be consistent with their having experienced sarin, although one of the hospitals reported the symptoms were consistent with sarin, but the clothing showed signs of chlorine, which implies there were two gases present. Strictly speaking, sarin does not give unique symptoms, and a number of other organophosphorus compounds would also give these symptoms, although not so acutely. One such compound might be methylphosphonyl difluoride, the precursor to sarin.

There are also video clips of white helmets as first responders helping the victims. They had no protection. Sarin is a liquid, and it is absorbed thorough skin. Had this been sarin, we would expect those first responders to die. There is a further problem with white helmets; there are also statements on the web that the white helmets, operating only in al Qaeda controlled territory, give preference to militants, and have staged scenes on behalf of al Qaeda. That does not mean they did so here, but it also raises questions as to the reliability of their statements.

Whether there were one or two agents is also important, and this point is not entirely clear. Two agents is more consistent with a dump having been hit. More confusion comes from one report that the town was struck by one rocket. Further, the town is a stronghold of al Qaeda affiliates, who are not necessarily going to tell the truth. Apparently, UN inspectors are trying to piece together what really happened, and in principle, these uncertainties should be clarified. The US intelligence statement states that at least one of the items dropped from the SU 22 was a canister of sarin, but how would they know that? There are also clips showing a shed that has no bomb damage and hence what came in must have been a gas canister. However, there is no evidence anything came in. The makers of such clips refuse to show holes in the roof, and while there is a clip of what looks like an undamaged munition being tested, from the way it is laying, either it was irrelevant or it had been moved.

There are at least three theories circulating for what happened. The first is the most popular: Assad’s air force dropped bombs with chemical weapons. The second is the Russian version: Assad’s air force dropped bombs on a dump of chemical weapons, or material for chemical weapons. The third is that ISIS/al Qaeda did it deliberately to get US involvement. A fourth might be that ISIS/al Qaeda did it accidentally. At this point it is important to determine whether the delivery was by one rocket. If so, the Syrian air force is off the hook, although the Syrian army could have fired it.

One argument against Assad having done it is that it makes no sense for him to have done so. He is gradually winning the war, and President Trump has indicated the US did not want to get involved with Syria. He would know that the US would be really irritated if he did, so why would he? To do so would be just plain stupid, but unfortunately this argument has a flaw: there appears to be no shortage of stupidity in the world.

Another argument against it is he handed over his chemical weapons. The problem then is, how truthful is this? On the other hand, if he had complied, the likes of al Qaeda definitely did not. They, and ISIS, control so much of Syria it is almost certain they would have had control over some such dumps.

Very shortly after, the US navy fired 59 cruise missiles at Shayrat air base. The US says all fifty-nine reached their target; some reports indicate that only 23 struck it. What happened to the others? Here is an example of the fundamental problem: some people are asserting statements that are not true. However, we have not heard anything of where rogue ones struck, so either Assad missed a trick, or the US story is true. Assad also missed another trick here. The US in some reports claims there were chemical weapons at Shayrat. If so, why did they fire weapons that would liberate sarin when it would almost certainly go to the local residential area? They would be doing what Russia asserts Assad did. So what is the outcome?

For me, the most obvious one is we cannot trust any report on this matter so far. Too many politics are involved. On a lesser scale, President Trump showed that he was not going to wait for evidence from the UN inspectors. He was an action man. What did he achieve by doing this? Apparently he damaged at least six Syrian aircraft, although five of them, from the photographs, look not hopelessly damaged but they also look obsolete. Relations with Russia have taken a dive. For me, there are two consequences I fear. The first is, if ISIS has any chemical weapons, now is the time to use them on innocent civilians. That will bring the US in demolishing Assad’s forces. One of the more bizarre aspects of this incident is that the US has entered a civil war (always a bad idea) and is actively supporting both sides. The second is that President Trump has also threatened North Korea. Bombing Assad’s forces is superficially consequence-free (in the long term it is anything but) but bombing North Korea would reset the Korean war. I only hope some real thinking goes on soon.

Author (me) Interview

An author interview (of me) at

http://ritaleechapman.com/guest-authors

This will be alive for a week from today.

Michael Flynn (Misha to his Russian friends?)

One of the more tragic figures currently in the news is the retired army Lieutenant General Michael Flynn. He had a distinguished military career, which involved 33 years service, and most of the latter part was involved with military intelligence. He retired a year earlier than necessary, but there are assertions he was forced to retire as Director of the Defense Intelligence Agency. There are two versions on the web as to why he was effectively fired. One side says he did not listen, worked against policy, he was a bad manager, and various other things. One such incident involved what Flynn described as a twenty minute meeting with Svetlana Lokhova, who had claimed to have access to Soviet GRU files and was writing a book about them. The meeting was in the presence of an ex-Director of MI6, and a senior person in MI5. Apparently Flynn has been accused of subsequently inviting Lokhova to go to Moscow with him to act as a translator, but that trip did not occur. According to the New York Times, Flynn, as Director of the DIA, exhibited a loose relationship with facts, i.e. initiating “fake facts”. The other version is that Flynn argued al Qaeda was nowhere near defeat, that it would be wrong to topple Assad because radical Islamists were the main force in the Syrian insurgency and that Turkey was looking the other way regarding Daesh in Syria. He criticized Obama for letting al Nusra grow in Syria. The second version suggests he was in fact right, but somewhat inconvenient.

After retiring, he set up a private company as a means of further earning income. This raises a question I cannot answer: what is the exact status of a retired General? Obviously he will be required to keep secure any information he acquired as a General, but as far as I am aware, there is no accusation that he has violated that. However, quite naturally his means of earning income drew on his previous experience. Amongst other things, he had given paid interviews for RT (a Russian television network, which as far as I know, broadcasts in the US), and he also gave an interview unfavourable to Turkish President Erdogan, accusing him of taking Turkey away from secularism. However, after this he was hired by a company indirectly owned by the Turkish Government, to investigate Erdogan’s opponent Fethullah Gulen. Later, Flynn joined the Trump campaign, and spent some time attacking Hillary Clinton. Flynn has been accused of conflict of interest over these events, of accepting money from a foreign agent (although it was an American company) without registering. He also gave a talk in New York for Kaspersky Laboratories (a Russian based company dealing with internet anti-virus software) and received money from these talks. Ex-Presidents are notorious for earning money this way, so it should not be prohibited.

He is also accused of receiving money from Russia in 2015, and he did not fill out the required paperwork and receive consent from Congress, which might violate a clause of the US Constitution. The US Constitution forbids military officers from receiving money from foreign governments, but Flynn could well argue that once he retired from the army, he was no longer a military officer. Added to which, his interview appearing on RT is hardly a covert action. Flynn apparently did report most of these activities to the DIA, so there is no case that he tried to conceal what he was doing. Merely he did not report to all the right places. The essence of all this is, as far as I can see, is that he may or may not have violated laws regarding registration/permission to work, reporting to the required bureaucrats, and he may or may not have done good jobs for those who paid him, but apart from that it is hard to see any problem. Sally Yates, the previous Attorney General, has maintained Flynn would be open to Russian blackmail, but how? Also, like most of the accusers, Yates has several bones to pick with Trump.

President-elect Trump then offered Flynn the job of national security advisor. On the day President Obama announced retaliatory measures in response to Russia’s alleged interference in the US election, Flynn spoke to Russian ambassador Kislyak. The argument was that any secret deal could have violated the Logan act, a rather antique example of a strange law prohibiting a private citizen from discussing anything with a foreign government that might subvert the cause of the US Government, and passed by the 5th Congress. Nobody has ever been prosecuted under it so there is no case law. Flynn argues he never discussed these sanctions. However, somewhere in the mix, Flynn was asked by Mike Pence what happened and Flynn admits he misled Pence. Accordingly he was fired.

Did Flynn offer some deal on sanctions? The evidence that he did seems to be indirect. Immediately after they were announced, Sergei Lavrov announced that Russia would certainly respond. So did some others, but nothing happened. Putin announced there would be no retaliation. The argument is that Flynn had assured Kislyak that the sanctions would not last, and hence had undermined US policy, although how is more questionable, since Russia still received the sanctions that still apply and did nothing back. The US comes out ahead here. A strange way of undermining the government.

The next accusation against Flynn is that he has committed a significant crime. Why? Well, he has been asked to give evidence to Congress about Russian involvement in the US election, and he has demanded immunity from prosecution. According to various experts, this “proves” there was serious wrong-doing. I am not so sure. Various people have already accused him of violating various regulations, such as the Logan Act and the requirement to register as representing foreign agents, and when you know there are accusations against you, wouldn’t you ask for immunity? You would be stupid not to. At the very least, by making it a condition to give evidence he can refuse by arguing the Constitutional Amendment against self-incrimination, which, even if he feels he has nothing to hide, at least gets him out of the expense of having to have lawyers present through what could be an extended witch-hunt. If nothing else, you don’t get to be a Lieutenant General by being stupid. You get there by doing things, which is what Flynn apparently did. That was a mistake. According to Congress, he should have sat on his backside for two months, and maybe that says something about Congress.

As an aside, I tried to write a similar tragic figure in my Dreams Defiled, which is on discount over Easter. I don’t think I quite managed someone like Flynn, though, but I would be curious to know what others think.