Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

Portugal’s Prime Minister Tells Citizens to Emigrate

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Portugal is an EU and Euro member with a population of 10.5M. Portugal is one of the “PIIGS” (along with Ireland, Italy, Greece and Spain) that are having severe debt and austerity problems caused by a lack of confidence in their ability to service their huge financial burdens.

Portugal is relatively uncompetitive within the EU. They benefited from inflows and subsidies from the EU over the years and used it to raise living standards and develop a large and expensive public sector.

One advantage Portugal does have is their connections to former “empire” countries that also speak Portuguese including Angola and Brazil. These countries, while they have their own very significant problems, are not shackled with the anti-competitive rules and regulations that burden companies in the EU. While Portuguese citizens are not at the top of the education group in EU terms, in Angolan or Brazilian (general) terms they are very well educated and can assist multi-nationals taking advantage of the natural resources that Angola and Brazil are blessed with.

In this context, when asked what young people should do when faced with high unemployment, this article the conservative prime minister told them to “just emigrate”.

While many thought that his comments were not appropriate, there are few avenues for ambitious young people since the gravy train of EU subsidies is drying up and EU labor policies make it very difficult for companies to remove redundant staff in order to make room for more productive and cost compeititive new graduates.

This is a practical, if sad, solution to the problem of a non-competitive state which is forced to support the high cost and social benefits of the EU. It also perfectly crystalizes the “fixed pie” view of the left – keep jobs and barriers high for those that have them, and watch as the nation slowly loses competitiveness, falling hardest on those newest to the work force.

It is a blessing to the former colonies, however, who will receive the youngest, most productive and aggressive citizens who can make their fortune overseas rather than waiting in line (in vain) for a spot in the bureaucratic system.

Cross posted at LITGM

Rolling Stone Botches Top 100 Guitarists

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Rolling Stone magazine compiles “top lists”. Their top lists used to be very bad; they seemed to solely represent the personal preferences of their editor. Recently the lists have gotten better as they use a “panel” of musicians and critics to select which is an improved system. And in any list, there is a lot of judgement, and should be a little fun.

Even with these improvements, in my opinion, Rolling Stone botched the Top 100 Guitarist list. The list is far too tilted to the past; their #1 guitarist, Jimi Hendrix, DIED OVER FORTY YEARS AGO. Thus my methodology includes “relevance” in the calculation, and someone who died over forty years ago, correspondingly scores lower. I read through the list carefully, consulted outside sources, reviewed my own music, and built a “methodology” that resulted in my own list.

Alternative Methodology:

In reading through the list Rolling Stone and the musicians doing the evaluations obviously employed a lot of criteria. This isn’t the “most talented” list, or we’d be looking at Steve Vai and John Petrucci as #1 and #2, but they don’t make the Rolling Stone(nor mine)list at all. Rather than use a “subjective” evaluation criteria, I made my own up, and made it more explicit.

– Skills – ranked 1-3, with Neil Young a 1 and Eddie Van Halen a 3
– Innovation – ranked 1-3, with Jimi Hendrix a 3 and Nick Mars a 1
– Relevance – ranked 1-3, with Dave Grohl a 3 and Hendrix a 1
– Songwriting – ranked 1-3, with Neil Young a 3 and Yngwie Malmsteen a 1
– “Bonus” – an arbitrary category I added which allows for 0-2 points to be added for outsized contributions beyond the above categories. Dave Grohl gets 2 points for being the best rock drummer in the entire world; Matthew Bellamy gets 1 point for being the best singer on the entire list

In the process you were either a “top 100” guitarist or you weren’t; then I started scoring the methodology on the top 100. Then I looked at the results and seemed if they made sense, and adjusted the scores accordingly.

Results of the Analysis:

As a result, the list I came up with is dramatically different than the Rolling Stone list, since it doesn’t just contain dead blues or rockabilly musicians and it weighs newer contributions higher than what happened 40+ years ago.

– only 46 of the 100 guitarists on the RS 100 list made the adjusted list
– 4 of the top 10 in the adjusted list weren’t even ranked in the Top 100 by RS
– 13 of the top 25 guitarists in the adjusted list weren’t even ranked in the Top 100 by RS

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What Norway Can Teach Illinois About Toll Roads

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When I was in Norway at the tiny (and picturesque) town of Mundal, I noted what appeared to be an abandoned highway toll booth near the edge of town. Since the meticulous Norwegians would never leave behind something like this without good reason, I started looking more closely at this find.

Surely enough, the meticulous Norwegians had a sign on the booth (in English, no less) describing why this toll booth was historic in their eyes.

Per the sign:

This toll station was situated on rv5 (close to Nork Bremuseum) from November 1994 to November 2010. The toll financed the road between Fjaerland and Sogndal. For most of the period, this was the road with the highest toll in Norway. The Norwegian Booktown and Fjaerland’s Historical Society will use the house to document the history of Fjaerland’s struggle for road-connection with the outside world. Until 1986 you could only travel to Fjaerland by boat / ferry.

As they noted on the sign the toll was very expensive. From what I have been able to find the toll cost 180 kroner each way (approximately $20 USD) but cut a substantial amount of time out of the drive to Mundal. However, once the road was paid for, the Norwegians dismantled this toll booth and stopped charging drivers, which is why they now have plans to use it as part of the historical site.

On the other hand, you have the State of Illinois, whose toll authority plans to dramatically increase tolls starting January 1, 2012. Per this article – Illinois toll road increase:

The cost of a trip on the Tollway system for the average I-Pass driver would increase to $1.18, up from today’s average of 63 cents per trip

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Point Reyes, California

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Recently I traveled to California and visited Point Reyes National Seashore. This park is north of San Francisco along the coast, accessible through the town of Point Reyes Station. This park is large considering how close it is to populated areas and has a lot of different types of scenery from coastline to meadows to wildlife.

We had unbelievably clear weather the entire time we were in California. Not only did it not rain a single drop for an entire week, most of the time there wasn’t even a cloud in the sky. To put this in perspective, they filmed the movie “The Fog” in Inverness, a small town in Point Reyes… so we were very lucky.

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What Do Hungry Children in Oregon Have to do with Tax Policy?

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The recent edition of “Parade” magazine when I saw a list of things that you can do to help others in need. I was struck by their plea to “Feed Hungry Children in Oregon” where they said that

Oregon has the nation’s highest rate of “child food insecurity.” About 252,000 kids – or nearly 30% of the state’s youth – aren’t sure where their next meal is coming from.

This surprised me because I never thought of Oregon as a state that had this sort of poverty. The example they gave in the article was as follows:

My husband and I both work full-time, but we make minimum wage, and some months it’s either pay our bills or buy food, says his mom, Nichole (her child is featured in the photo, above).

While this is a sad and heart rending story, there is another connection as to why their parents are having a hard time finding higher wage work. Per the Tax Foundation:

Oregon’s personal income tax system consists of five separate brackets with a top rate of 11% kicking in at an income level of $250,000. That rate ranks the highest among all states levying an individual income tax.

While tax policy may seem arcane to individuals worrying about food security, it is important to realize the CRUCIAL impact that state income tax rates play in state competitiveness. Of all the components of a tax burden, the ONE element that can be most easily modified or avoided is the personal income tax levied by a particular state. For instance, if you earn $1M a year, you’d be paying about $75,000 more in tax in Oregon than you would in Texas, Florida, Nevada, or other states that don’t levy a personal income tax (it isn’t $1M times 11% because of the graduated nature of the tax up to $250,000 and the fact that state taxes are deductible on Federal returns, so the $75,000 is a rough estimate).

A high marginal personal income tax rate falls DIRECTLY on those most likely to invest in a business that would hire someone like the family in this photo. A high marginal tax is analogous to seeking out the very individuals that could bring a state jobs and economic prosperity and telling them to invest elsewhere. You could go door-to-door and punch them in the face, or just set the nation’s highest personal income tax rate, the net effect is exactly the same.

The biggest fallacy the high marginal tax crowd falls into is the “fixed pie” thinking – since businesses and high income earners are unlikely to move, if you tax them more they will just sit like sheep and take it and pay into the state to fund their myriad social programs. That may be true in the short run and for individuals that are tied to their community, but I guarantee that every wealthy person has an accountant who carefully tells them the negative impact of residing in such a high tax state and the benefits of moving elsewhere on their take-home pay. If they have a choice to invest more in Oregon or go elsewhere, other states look much more inviting. Over time, investment slows, and then there are more and more articles with the sad faced children just like this one, and pleas for the rich to pay their “fair share”.

The problem is, the rich aren’t stupid, and a high state income tax is basically pushing them to invest and live elsewhere, particularly somewhere warm with a tax friendly climate like Nevada, Florida or Texas.

Cross posted at LITGM