#like yeah of course I care about those things…as well as us fiscal policy and the political strategy of getting bills through congress

[brontes]

nearly allergic to women’s anything — “women’s issues” like taxes? infrastructure? foreign policy? “women’s theology” like the nature of the trinity? calvinism vs arminianism? this also extends to girl math, girl dinner, and even to some extent girl talk

[rebelwheelssoapbox]

What's The Tea with Anita Mya Rhites (#1) : Cuomo's Shade

So much, kittens for the “Justice Agenda”.

Don't get me wrong. It has done some good, but lately, it seems like we can't go a month without hearing about another attack on the disability community, from New York State Governor Andrew Cuomo.

[Illustration of a drag queen in an elaborate wig (pink, orange, and yellows) and outfit (yellow and orange). She is sitting at a table (seen from the chest up) that has a blue tea cup that reads “What’s The Tea?” on it. Next to and slightly underneath the cup is a white napkin with black print that reads “with Anita Mya Rhites . The text around her reads “I am living for this new wig. What I am not living for is Cuomo’s attacks on disabled people!”] And let us not forget, that an attack on the disability community, is also an attack on every single marginalized community. After all, kittens you can be disabled and black, disabled and Muslim, disabled and an immigrant, disabled and queer and so on. 

[image description: Three Black and disabled folx (a non-binary person holding a cane, a woman sitting in a power wheelchair, and a woman sitting in a chair) looking seriously at the camera while a rainbow pride flag drapes on the wall behind them. Photo credit: Disabled And Here] And while I do believe that it is vital that we leave no oppressed group behind, especially in these times, fun fact, kittens: besides being fabulous and fierce, this queen, yours truly Ms. Anita Mya Rhites, is also disabled. And so, yes kittens. That means Andy, is also going, after queens, like me.

[an illustration of a drag queen Ms. Anita, not only revealing her full outfit - which is a very elaborate, colorful and couture dress, but also showing that she uses a stylish black cane to help her mobility, and that she is also disabled. The graphic reads “Ta-daaa!!!” and “Disabled drag queens represent!”] Now, the attacks have been many, but in this issue, kittens we're going to focus on CDPA aka Consumer Directed Personal Assistance program. Horribly boring name, kittens – I know, but besides creating over 100,000 jobs, this medicaid program empowers disabled queens like me to choose and hire who comes into my home and helps me stay the independent queen that I am. (Well... with some help). With traditional services, I don't get a choice, they send whoever is available, regardless if they speak the same language as you (which is kind of helpful when you need to communicate with each other), and regardless if they have experience in assisting someone with your needs. After all kittens, disabled people's needs do vary. But another reason I adore the CDPA is that, I do the hiring, which means I can make sure the people I hire, won't be queer and drag-phobic (nor ableist). The last thing I need kittens, is some homophobic, drag queen hating, ableist, shade throwing ignoramus, giving me crap for being my fabulous self, let alone in my own home. Can you imagine having to then be reliant on a person like that? I've been there, kittens and the thought of going back to traditional services... I don't even want to think about it. So, what's the tea? Why would Mr. Justice Agenda attack a program that is clearly fabulous for New York? Good question, kittens.

[Image Description: Illustration of Ms Anita from the eyes up. She is showing us her snazzy yellow business card, which has her name in a punk styled pink font and the words  in black at the bottom in a more handwritten styled font. “Fierce Drag Queen. Hard Hitting Journalist.” ] I sat down with Ms. Kendra Scalia (Consumer and Policy Analyst and fellow disabled activist) to find out why Cuomo is throwing so much visceral shade at disabled people, and what can be done to stop him. ANITA: Girl, what is going on? Does Cuomo just hate disabled people? Why is he so hell bent on destroying our services? KENDRA: It certainly feels like Cuomo and his administration are purposefully targeting the disability community. ANITA: Ugh, I'm almost afraid to ask, but let's hear it: What is the latest on the attacks on the CDPA? KENDRA: Basically the Department of Health wants to radically change the way they fund and reimburse the FI's or Fiscal Intermediaries. ANITA: FI's, kittens are basically like Go Between Agencies. I do the hiring, but the Go Betweens handle the paperwork, payroll, and in many cases help my peoples make the most of what help is available in our areas - which is needed, because that be can pretty complicated. On top of that, these agencies also create jobs for the community, so really it's a win-win for all.

KENDRA: Exactly. So basically this new policy says that these Go Between Agencies, as you put it, will be paid for their services on a per member per month basis, where the rate they are reimbursed will be determined by how many hours each member is authorized to receive. ANITA: Well, alright, I mean... is that a bad thing?

KENDRA: Well, the problem is that the new reimbursement rates are not sufficient to cover all costs of running the business, which includes rent and health benefits and salaries and so on. As a result, the majority of these Go Between Agencies will be forced to shut down, which will not only destroy jobs for the community...

ANITA: Ugh, as if that's what our state needs right now – less jobs. KENDRA: But would also damage, if not destroy the CDPA program as we know it in New York, making it harder on disabled and senior people to get the proper help they need. ANITA: Ugh, as if the state doesn't make it hard enough as it is.... So, how much does it cost to run a Go Between? KENDRA: Well, I mean of course it varies on location, but here's the weird thing about it: We don't know. Cuomo doesn't know. The Department of Health doesn't know.

[Image Description: White graphic with the words “How is that even a thing?” in a black handwritten font] ANITA: Um... what?! KENDRA: Yeah, there are no real numbers publicly available regarding current costs of running a Go Between Agency. And this is why the community has been calling on the Department of Health, to delay the changes until they, at the very least, have all the information on the actual costs. ANITA: What?! Why... and what?!

KENDRA: Anita, your eye is twitching... ANITA: I just...okay wait, so if they don't even have all the information, then how are they deciding on cuts to the program? KENDRA: Exactly. ANITA: Well wait, so if they get their way, what's gonna happen to the over 70,000 people who rely on the program? Have they even thought about that? KENDRA: Well, if the majority of Go Between agencies are forced to shut down, due to lack of proper funding, people will technically have the right to transfer to another Go Between, but that's only if there is another Go Between in their area, and assuming there's one in their area, that can take on this extra workload, while still running on reduced funding. We may not know the exact costs of running a Go Between, but the math is obvious. Less funding, more workload. Most of the Go Between agencies will be forced to shut down. ANITA: That is going to be a hot... mess. KENDRA: Yes and unfortunately, a lot of people will be booted from the program, and forced onto traditional home care or... into nursing homes. ANITA: Why would Cuomo and the DOH do that? Traditional services is having a hard enough time covering hours as it is? How do they think these same agencies will be able to take on all these extra cases? KENDRA: Oh yeah. There's actually a nationwide home care workforce shortage crisis happening right now. In fact, traditional agencies, in some areas of the state, currently rely on consumer enrollment in CDPA to cover part of their weekly care hours. Because agencies are unable to fully staff and fill shifts, they push the responsibility onto the consumer. These cuts will negatively impact traditional home care agencies, as they will have no other program to support their client’s needs as it becomes more challenging to hire quality caregivers.

ANITA: So, the cuts will shut down the majority of Go Betweens... what happens if Traditional agencies can't cope? What? Is the state just going to just ship the majority of us off into nursing homes and institutions - against our will, I might add? Even if they tried, where will we all go? As it is, there is already a huge waiting list for open beds. KENDRA: There are more than 70,000 people using CDPA today. It is impossible for all of those people to find a nursing home bed because New York State does not have that many nursing home beds open. The math simply doesn’t add up. If people can't get traditional services in their area, some consumers will have to rely on support through family willing to work for free or, for those who are lucky enough, private pay for some level of care. ANITA: Please. We all know, that is not an option for most people. Even if you do have family or friends in the area, people need to work. People need to make money to eat and pay rent. And Private Care? People have CDPAP via Medicaid which is like taking a vow of poverty. Who has money for that? KENDRA: Exactly. I mean unfortunately, if these cuts go through, a lot of disabled and senior New Yorkers will be forced to leave New York, running to any other state with CDPA. ANITA: But a lot us just can't get up and move to another state... KENDRA: I know. It is a bonafide mess. Sadly, a lot of people as a result, will die in their homes without the necessary daily care that keeps them healthy. ANITA: OMG, kittens. What the living hell? Meanwhile, I heard Cuomo and the Department of Health were telling people, that the cuts won't impact the quality of service? Are they just lying to the people or do they just really not understand how this program works? KENDRA: Anyone who knows the facts, knows that these changes are going to impact the disability and senior populations, not to mention the workers. How can it not? Many Go Between agencies have even told Cuomo and the DOH their concerns, but still the Department of Health continues to say that it is “not the intent" of the cuts to impact consumers or the integrity of the CDPA program. But how can they have good intent, when they don't even have all the information needed to make an educated decision? Anita, your eye is twitching again... ANITA: This is so exhausting...and the attacks... they just feel so relentless sometimes... I gotta take off my wig. This is just too damn much. KENDRA: Well, that's why while activism and taking action is important, so is doing self care.

[Image Description: An illustration of Anita who is looking very sad and drained. There are tears coming her left eye and she just looks drained. She has also removed her wig seen in previous illustrations, revealing her bald head.] ANITA: Is there even time for that? Aren't the changes to the program kicking in September? KENDRA: Well, that's if we don't stop it, and we can. That said, yes. There is time for self care. We must make time. We can't neglect our emotional health. Plus, how will we be able to fight if we are so burnt out that we can't even take action? ANITA: True. Well, that said, what are some ways people (inside and beyond our community) can take action? KENDRA: We must mobilize the community to get loud, get proud and get public! We must take this fight to #SaveCDPA to the streets with some old-fashioned protesting, letter writing to your local news outlets, and community conversations to educate your neighbors on CDPA and the devastation these unnecessary cuts will cause to disabled and senior New Yorkers!

[Image Description: White background graphic with text in a black handwritten styled font that reads “How To Take Action!” in larger text with smaller text on the side “Solidarity is fierce!” and “Yaaas Queen!”]

1.) You can sign up to join a Rapid Response Team. When Cuomo is scheduled to be in your area, you will be notified. This helps to easily coordinate a group of individuals to show up at Cuomo’s location to protest the cuts to CDPA.

2.) Join a Facebook group, such as CDPAP Watch Discussion Group. 3,) Join the conversations and share social media messaging by using #SaveCDPA. 4.) Share this interview 5.) Write blog posts about this. 6.) Make videos and post them online. 7.) Call Cuomo @ 518-474-8390 8.) Send him a message on Twitter @NYGovCuomo and via his website I know there is a lot of injustice going on in the world right now, but we can't let them do this to 70,000 people plus the workers! In the end, the people of New York, deserve better. ___

Well, that's the tea, kittens. I'm gonna do some self care and then take action, and I hope you will do the same. Have a question about the attacks on CDPA? Email me : AskAnitaMyaRhites@gmail.com and I'll ask Kendra your questions for a future issue! Until next time, sending love and solidarity, XOXO Anita

[jeroldlockettus]

This Economist Predicted the Last Crisis. What’s the Next One?

The economist Raghuram Rajan is gravely concerned by the rise of populism around the world — on both the left and the right. (Photo: Ella87/Pixabay)

In 2005, Raghuram Rajan said the financial system was at risk “of a catastrophic meltdown.” After stints at the I.M.F. and India’s central bank, he sees another potential crisis — and he offers a solution. Is it stronger governments? Freer markets? Rajan’s answer: neither.

Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.

*      *      *

Stephen DUBNER: In 2005, you attended the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming. And it was essentially a celebratory send-off for Alan Greenspan, the outgoing Fed chairman. But you, going quite against the grain, gave a talk based on a paper you’d written that was called “Has Financial Development Made the World Riskier?” And your answer was a firm “yes.” You argued that financial engineering and skewed incentives in banking and elsewhere could create“a greater, albeit still small, probability of a catastrophic meltdown.” Again, this is 2005.

Raghu RAJAN: Yeah, well let me put it this way: it was clear there was a reason for concern, but what was comforting was that we hadn’t had a crisis in major economies for 70 years.

DUBNER: What lessons are we to draw, we non-economists, from that severe miscalculation — or mischaracterization, at least — by most economists?

RAJAN: I think there was a sense of complacency. Put differently, we were living in well-run houses where the plumbing was not a problem. And the reality was the plumbing was actually getting corroded by poor incentives in that system, and we didn’t realize it until it backed up in a really big way, and we said, “What is that smell?”

I’d like you to meet today’s guest.

RAJAN: My name is Raghu Rajan. I am a professor at the University of Chicago’s Booth School.

  Raghuram Rajan at the World Economic Forum Annual Meeting in 2011. (Photo: Michael Wuertenberg/Flickr)

Rajan is more than just a professor, as we’ll hear. That said, it’s likely you’ve never heard of him. You should have. And not just because he was one of the very few people who foresaw the risk of a “catastrophic meltdown” that indeed came to pass — in the form of a global financial crisis and the Great Recession that followed. You probably remember this:

    CBS: Lehman Brothers, bankrupt; Merrill Lynch, sold in haste.

And then this:

CNN: Breaking news here: stocks all around the world are tanking because of the crisis on Wall Street.

And then this:

CBS: The federal government loans American International Group, AIG, $85 billion.

George W. BUSH: The house of cards was … much bigger.

CBS: The President’s plan would allow the Treasury to buy up to $700 billion worth of bad loans.

The U.S. Senate held some investigations:

Carl LEVIN: How much of that shitty deal did you sell to your clients?

Susan COLLINS: How do you account for all of these references to “the big short?”

David VINIAR: I feel — I think that’s very unfortunate to have on email.

But the damage had been done. The recession caused by the financial crisis cost the U.S. alone nearly 9 million jobs and more than $8 trillion in household wealth. But of course the recession spread around the world; it had massive economic, social, and political ramifications, many of which are still being felt today, a decade on. The crisis was all the more distressing because the political and economic elite had been so badly blind-sided; in fact, they’d been basking in what they called “the Great Moderation,” an almost magical era in which financial crises were inconceivable.

RAJAN: During the Great Moderation, there was a general sense that the system worked and that the plumbing was all fine, incentives were all fine. I remember after I gave my speech at Jackson Hole, two very senior people in the Federal Reserve System came up to me and said, “This is not a problem, because the private sector knows how to take care of itself. These are very smart people who are very well paid. They would simply not take these risks that you’re talking about.”

Raghu Rajan draws a straight line between the financial crisis and what he sees as one of the biggest dangers in the world today: the rise of populism, on both the right and left, driven by a deep distrust of those same elites who told everyone not to worry the last time around. Rajan has developed this perspective while serving as chief economist of the International Monetary Fund, as well as the head of India’s central bank.

RAJAN: If you start thinking about the responsibility, it becomes overwhelming. So you try not to think about it.

Rajan’s prescription for addressing the risks of runaway populism? That may surprise you, especially coming from an economist:

RAJAN: In this anonymous world, with anonymous markets, and anonymous bureaucracy, what allows you to have meaning in your life is really the people around you.

*      *      *

DUBNER: Professor Rajan, can you hear me okay? This is Stephen.

RAJAN: I can, and please do feel free to call me Raghu.

DUBNER: Very good. I will. Thank you. Let’s do a very quick biography: you were born in India but then moved about quite bit with your family, returned for university in India, got an M.B.A. in India, and then a Ph.D. in finance at M.I.T., and you ultimately took up what turned out to be a very lengthy residence at the University of Chicago, where you still are now. In 2003, after several years in academia and zero years in policy, you became chief economist of the International Monetary Fund in D.C. You were the youngest economist ever in that post, also the first non-Western economist. You also weren’t known for doing macroeconomics at all. So why did you get that job and why did you take it?

RAJAN: Well, I think the I.M.F. realized that it needed to understand finance a little better, that they were composed largely of macroeconomists. They were interested in getting somebody who knew finance, and I had met the deputy managing director Anne Krueger at a number of conferences and I’d sent her my first book, Saving Capitalism from the Capitalists. It happened to arrive at the time they were looking for a new chief economist, so she called me and she said, “Why don’t you interview for this post?” I said, “Anne, I don’t know any macroeconomics.” She said, “That makes two of us.” So, I was sold.

DUBNER: Many people who are not economists, when they hear these different sections of economic thinking and research — macroeconomics, finance, microeconomics, etc. — it’s all a little bit murky to them. What would you say that your finance background brought to an institution that did macroeconomics that maybe was missing?

RAJAN: So, the difference between these various streams is like the difference between various streams in engineering. The civil engineer knows how to build bridges, but doesn’t fully understand the motors that drive the machines he uses to build the bridges, and so on. So, the electrical engineer knows more about the motors. Similarly in economics, the macroeconomist worries about monetary policy, fiscal policy. And what the financial economists — especially somebody who has experience in banking and so on — does is brings an understanding of the financial system and how it interacts with these other pieces. To give you an example: one reason we have financial crises is because in a period of moderation, perhaps interest rates are kept really low. With plentiful liquidity around, people are willing to take on more debt, and as they take on more debt, it increases the risk that when the environment changes, when growth slows, when liquidity dries up, these companies and these banks that have taken on more debt will be left high and dry. And that’s what often happens in these crises.

Rajan here is essentially describing the risks he warned about back in 2005 at the Federal Reserve’s Jackson Hole symposium — in front of the financial system’s architects: Larry Summers, Tim Geithner, and the Fed chairman himself, Alan Greenspan. Rajan was at the I.M.F. at the time.

RAJAN: I was asked to give this talk because I was a finance guy and I would probably end up saying all these wonderful things that have happened in finance over the last 20 years in Greenspan’s time, and that was also my expectation when I agreed to give the talk. But then, as I started writing, I said, “This is standard, sort of, conventional wisdom. What is it that I’m missing? Why am I writing this?” And as I started probing, and I looked at the numbers on the risk of bank equity, for example, I started wondering whether the conventional wisdom was in fact right.

Rajan learned, for instance, that credit default swaps, a relatively new and potentially volatile financial instrument, were surging; in 2001, they made up just 5 percent of private-sector bank credit; by 2004, they made up more than 30 percent. So he told the symposium about that. He also warned that investment managers were concealing “tail risks” — that is, adverse events that had a very small probability but, if they did come to pass, would have catastrophic consequences.

RAJAN: And it was a strange paper to give in the midst of a conference where the question was whether Mr. Greenspan, a really formidable central banker, was either the best central banker in history or the second-best central banker in history. And it was, a little bit, sort of raining on a parade of compliments.

DUBNER: You were “heavily criticized.” As you recall later yourself, “I felt like an early Christian who had wandered into a convention of half-starved lions.” And yet, just a couple years later, the catastrophic meltdown that you warned could happen did happen. And it was largely caused by the very factors that you had identified. I am curious whether — over the years, as the financial meltdown happened and the recession deepened — I am curious how the academic economist community responded to you over time: did people call or write to you, or say to you, “I thought you were nuts, but you really called it, explain to me how and why.” Did that kind of thing happen?

RAJAN: No, I think you see more of the, “I also thought it wasn’t working and agree that we could have done more.” I mean, the reality is that in a period of fairly peaceful growth, there are a lot of people who warn about problems. Today, there are people who are warning about problems, say, with leveraged loans, which I am worried about also. But for a policy maker who’s at the receiving end of all this advice, you have to ask, “What do I really want to pay attention to and what do I want to dismiss?” If you take all the warnings to heart, you will never ever let the system grow. You will never ever let the system take risks, because everything could actually implode. So, it is a tough act for regulators to figure out what they should pay attention to and what they should not.

In 2010, Rajan published a book, called Fault Lines, about what he saw as the underlying causes of the financial crisis. One big factor was a rise in income inequality, coupled with weaker social-safety nets. Rajan paid particular attention to what he called the “college premium” for workers — or, really, the “non-college penalty”: that is, the median high-school graduate was earning 72 percent less than the median college graduate. He also identified the many components of the housing bubble — financial profiteering, consumer overreach, and a federal government that pushed home ownership too far, in both Democratic and Republican administrations. All this led to too much credit that was too easy to get, which led to too many bad loans that were too aggressively commodified and ultimately blew up like — well…

RAJAN: We said, “What is that smell?”

Rajan also warned that these underlying problems — societal, financial, and political problems — would need to be addressed to prevent a recurrence.

DUBNER: Here we are roughly 10 years out from the crisis. Talk to me about the degree to which you believe these underlying factors have or have not been addressed.

RAJAN: Well, I think I was talking at two levels. One was the deeper underlying societal problems. And I thought that that was an important factor in why credit was emphasized so much in Western economies as the answer. Because once you can see your house as an A.T.M. from which you can take out the home equity and spend, you’re much less worried about your stagnant income, and consumption inequality went up much less than income inequality.

DUBNER: The easy credit was kind of a compensation for the lack of wage growth, then, yes?

RAJAN: Absolutely. And far too many politicians ran away from the problem, saying they were nowhere near it when, in fact, the whole political system was pushing for easier credit in the years preceding the crisis. Now, that said, I think there was a second level which was — given these broader incentives I think the financial system also went haywire. It’s very easy to look for scapegoats, for a few bad apples. Much more worrisome is when the whole system is part of the problem, and then you have to do much more careful work. I think we’ve done some of that. I think mandating banks to carry more capital was part of the answer. But we mustn’t become complacent and think that solved everything, because even as you ask banks to carry more capital, they still have to make profits, and they have to find new ways of making profits, because the old ways don’t work. But my sense is also that risks in the system don’t necessarily go down. They get shifted. So even as we’ve made the banks safer, there are parts of the system which may in fact have taken on some of those risks.

DUBNER: Can you give some details? What do you mean — where do those risks lie now, or where do you suspect they may lie now?

RAJAN: Okay, let me give you an example. The problem before the financial crisis in the United States was: households levered up too much with this home equity line of credit and on. Right? I think households have become more, sort of, careful given their experience during that crisis. But corporations, which didn’t lever up that much before the crisis, have levered up more. In private equity, the kind of leverage ratios you see today for transactions that are done are approaching the ones that were done before the crisis. Also, loans without covenants, loans without controls for the lender. And who’s holding these loans? Well, it turns out the pension funds, insurance companies. All those entities.

Here’s some data to consider: U.S. corporate debt grew from around $5 trillion in 2007 to more than $9 trillion in 2018. At the same time, about 60 percent of the activity in the leveraged-loan market now falls under what’s called “covenant-lite” terms — that is, with fewer restrictions on collateral, payment terms, and income levels, and fewer protections for the lender. Given Rajan’s history of correctly identifying risks in the past, it’s probably worth hearing him out today. That said, it’s one thing for an academic or an I.M.F. economist to point out risks in the system and quite another for a policymaker to strike the proper balance. As it happened, Rajan soon got his turn in the policymaker role too, back in India. He was an economic consultant to the federal government — and then, in 2013, he was installed as Governor of the Reserve Bank of India, the R.B.I.; his job was the equivalent of Chairman of the Federal Reserve in the U.S.

DUBNER: Your appointment was met with devout enthusiasm, I guess I’d call it. The rupee immediately rose 2 percent against the dollar, there was a big rally in the Sensex, the stock market. One commentator said that you “put the sex back into the limp Sensex.” You were cast as a sort of economic superhero. And, additionally, a homecoming hero. Can you — before we get into the policy and the things that you actually did — tell me a bit about the state of the Indian economy when you first began consulting. Because, as I understand it, there was a rather deep crisis, multi-level crisis. I’m very curious to see what you saw and what you thought policy should do to help correct that.

RAJAN: Well, we were one of the countries that essentially was growing quite strongly before the global financial crisis, and then growth started dropping off very sharply post-crisis. So, as growth started dropping off, the government did what governments naturally do, which is expand spending so that growth would keep up. And the central bank essentially was more easy on policy. And before we knew it, first, growth had picked up after the recovery in Western economies and growth was actually very strong. But we had all the sort of problems of an overheating economy. We were running large fiscal deficits. We had very high inflation. We had the classic symptoms of a country which was going towards financial difficulty. As we went into 2013 with all these numbers really large and alarming, when Ben Bernanke speculated about ending the era of easy money, money started leaving the Indian economy, and our exchange rate started plummeting. So that was a really difficult period, because we had elections coming in 2014, and usually the uncertainty created by elections creates more anxiety amongst investors. And that, coupled with our bad numbers, meant we really had to do something to build confidence.

DUBNER: Had you had Ben Bernanke’s job at that moment and India said to you, “Listen, if you do this the wrong way, it’s going to punish us unduly,” what would you have done? Would you have changed the method or rate at which you pulled the money back?

RAJAN: No. Look, I think every central bank has a mandate of its own, and it has to respect that mandate. I think given the mandate of the Federal Reserve, I think you really don’t have the ability to take significant cognizance of the effects of your policies on other countries — except to the extent it feeds back onto your own country.

DUBNER: You once said in an interview, during the time that you were governor of the R.B.I., you said, “Central bankers have had enormous responsibilities thrust on them to compensate essentially for the failings of the political system, and my worry is we don’t have sufficient tools to do that but we’re not willing to say it. And as a result we push as hard as we can on the existing tools and they may create more risk in the system.” Can you talk about that for a moment: what do you mean by central bankers compensating for the failings of the political system?

RAJAN: I think the problem was that governments weren’t even doing some of the basic stuff that governments do in recovery. And as a result, monetary policy was — as Ben Bernanke once said — the only game in town. Moving interest rates up and down is not going to improve the quality of education or the ability of the fired worker to essentially retrain himself or herself. Yes, you can recreate some of the old jobs, but they may not be what the worker needs or wants. So that’s the sense in which — what, really, industrial countries need is structural change.

DUBNER: So, in retrospect, what would you say were some of your best decisions?

RAJAN: Well, I think to stabilize the currency. We needed to bring inflation down.

DUBNER: Which you did.

RAJAN: We moved to creating a structure which would create credibility that we would do it, and that structure’s in place today. We have an inflation-targeting framework, we have a monetary policy committee, and inflation is still low — in fact, it’s probably where we wanted it be: 4 percent. This is a problem India has grappled with for decades. To my mind, the fact we could bring it down is very important. But, of course, this was not all that we needed to do — liberalizing the markets; we licensed 23 new banks in an environment where there was enormous worry that this process would be corrupt. The Economist ran a feature saying people were selling these licenses for $75 million apiece. I said, “Where’s that money. I don’t see any of it.” No, we created a really transparent process with three layers of committees to ensure that no single person controlled the process and gave away licenses, and nobody has raised a peep about how those licenses were granted.

So, on the payments system, we transformed the payment system from — especially on the retail level. Now in India you can send money from my bank account to your bank account without knowing anything else. You just tell me where your bank is and I can zap it across. And I’m not locked into a monopoly provider, one of the big tech companies. It’s done over public bridge.

DUBNER: Now, shortly after your departure as governor of the R.B.I., Prime Minister Modi executed a sudden, controversial plan to abolish 500- and 1,000-rupee banknotes, hoping to crack down on the shadow economy and tax evasion. I understand you had not been in favor of that idea, correct?

RAJAN: Absolutely. It didn’t make sense. I was asked for my opinion, and I said, “Look, it is taking away money that people use in transactions. It’s going to create enormous disruption unless we replace it overnight with freshly printed money.” And it’s very important that we have all that in place, difficult to maintain secrecy, and then the fundamental sort of objective of this, which was to get people to bring out the money that they hoarded in their basements and pay taxes on them — I said, “That’s probably not going to work out, because they’re going to find ways to infuse the money back into the system without paying those taxes.”

DUBNER: It’s been roughly two years now. What have been the effects of this demonetization?

RAJAN: Well, I think more than the numbers suggest, because India was growing at that time. And we had numbers which were in the 7.5 percent growth range at that point, at a time, in 2016, when the world was actually growing quite slowly. When growth picked up in 2017, instead of going along with the world, which we typically do and we exceed world growth significantly, we went down. That suggests it had a tremendous effect on growth, but that, the numbers don’t capture it all, because what actually got killed was the informal sector — the people who were doing work with notes rather than with checks, who didn’t have formal bank accounts. And when you look at the job numbers that some private-sector people estimate 10, 12 million jobs were lost in that episode. And, of course, we haven’t recovered them yet. It was one of those places where more economic thinking would have helped.

DUBNER: Was it a coincidence that Prime Minister Modi went ahead with the plan only after you’d left?

RAJAN: Well, I can’t speak on that. I can only say that I made my objections very, very clear.

DUBNER: Some of your comments as governor were not well received by some members of the political class, and you did not seek a second term as governor of the R.B.I. Could you just describe that decision for us, please?

RAJAN: Well, I think that was relatively straightforward. I had a three-year term that came to an end. I think we — the government and I — talked about whether I could be useful for a little more while. And I think we really didn’t agree on an extension. I mean, they didn’t want to extend it, and I didn’t, at that point, on those terms, want an extension.

DUBNER: Your name has been mentioned as a potential Prime Minister of India. What sort of probability would you assign to that?

RAJAN: Pretty close to zero. Look, I’m not a politician. That requires enormous capabilities in a very different direction, which I don’t have. I certainly will stick to what I know, which is advice and policy. If I can have some influence on public policy in the future, I certainly would think about it, but I’m perfectly happy where I am.

For what it’s worth: the man who succeeded Rajan at the Indian central bank didn’t even last his full three-year term, resigning over frustration with the government. And the Modi government, heading into a reelection campaign, was recently accused of having suppressed troublingly high unemployment numbers. It’s really too soon to judge Rajan’s term as India’s central banker. It is worth noting he did help stabilize a fragile economy; it was also an economy that, over the past decade or so, had gravely disappointed a lot of global investors. India had been one of the fastest-growing economies in the world, but as India faltered, China started running away with the race. Over the past few years, that dynamic has been reversed; the Indian stock market has absolutely crushed the Chinese markets, and it’s outperformed the U.S. markets by a good bit too.

If your job was to look around the world and hire a central banker with crisis experience, a good track record, and the sort of equanimity that is rare among the political and economic elite, you’d almost inevitably cast your eye on Raghu Rajan. So what’s he worried about now?

RAJAN: The kind of disruption we are seeing, the rise of strong authoritarian regimes across the world — too many strong leaders around, if you will, for a peaceful world.

*      *      *

Raghuram Rajan is a professor of finance at the University of Chicago; he’s also been chief economist for the International Monetary Fund and head of India’s central bank. His first book, Saving Capitalism from the Capitalists, helped get him his I.M.F. job. His second book, Fault Lines, performed a post-mortem on the Great Recession and the underlying financial crisis — a crisis that Rajan was nearly alone in warning about. This month, he’s publishing a new book, called The Third Pillar: How Markets and the State Leave the Community Behind. It’s a fairly radical argument for an economist. To understand where Rajan is coming from, and where his economic and political views developed, it’s maybe best to go back to his beginnings.

DUBNER: You were born in India. I understand your father worked in intelligence for the Indian government. He was a spy, although you didn’t know it at the time, and that you moved around a lot: India, Indonesia, Sri Lanka, Belgium, back to India. Talk about what that experience and what your family was like.

RAJAN: Well, it was a very warm childhood. We were four siblings, and our parents tried to give us the best education they could. Part of that education was moving to really interesting places. We were in Indonesia during The Year of Living Dangerously, when there was a coup. And I remember gunfire in the evenings as the army executed — some people say — over 250,000 communist sympathizers. And we were at home worrying about what was happening, but it was still a very warm and loving environment. We went to Sri Lanka. There was an insurgency there. We had a year off because the rebels were on the streets.

DUBNER: A year off from school, yes?

RAJAN: Yeah, a year off from school, and my parents were really worried that we weren’t really getting any education. The next place we moved to was really staid and boring Belgium.

DUBNER: You got back to India in time for what’s referred to as “The Emergency.” For those who don’t know about it, just describe what the Emergency was, and I’m particularly interested to hear how it affected you and your family.

RAJAN: Well, India is a democracy, and Indira Gandhi, who was the Prime Minister at that time, in 1975, the courts ruled against her and said that she had won her seat illegally. Instead of accepting the ruling of the court, Indira Gandhi declared an emergency where she basically shut down all questioning of her authority. And this was a two-year period where she attempted to run India on authoritarian lines. And as with such regimes, initially people were very happy. The trains ran more on time. But then some of the excesses started showing up. For example, to control population, there were camps where people were forcibly sterilized. There was heavy censorship of the press, and there’s, of course, the jailing of the opposition. She eventually, two years later decided to go for elections. There’s a lot of controversy about why she did that. Some people say it was because she was going back to a democratic instinct; some people say it was just that in that authoritarian regime, the domestic intelligence agencies basically told her, “You’re going to win for sure,” and they were being sycophantic and she actually believed them.

Gandhi lost that election, but she ran again and won in 1980, in what was considered a free and fair election. Four years later, she was assassinated by her own bodyguards.

RAJAN: It was an interesting time, because that is when India realized how fragile its democracy was.

The fragility of democracy is essentially the theme of Rajan’s new book, The Third Pillar.

RAJAN: The book emphasizes a society held up by three pillars.

The first pillar is:

RAJAN: Markets, which ensure that society is productive and efficient by allocating resources to the right place, and taking them away from places where their resources aren’t being used well.

The second pillar is:

RAJAN: The state, which is the composite of the executive, the judiciary, the legislature, and its role, really, is security.

And the third pillar?

RAJAN: It’s the third pillar which has been underemphasized; that is, the social aspects. We’ve talked about economic. We’ve talked about political. The social aspects; that is, the community, which ultimately offers meaning in our lives.

The Third Pillar is an interesting book, and an odd book. It’s largely a work of economic history, even though Rajan isn’t an economic historian. It covers a lot of politics and sociology even though he’s not a political scientist or sociologist either. More than anything, it’s a plea to reset society — a cri de coeur, really, although given Rajan’s rather moderate bearing, it’s a somewhat moderate cri de coeur. His main argument is that the markets and the state have grown so big and powerful and institutional that they’re choking off the lifeblood of actual communities. That we’ve gotten so good at scaling up that it’s time for a concerted effort to scale down. Because when communities erode, when people feel the state and the markets are running their lives, the result is often an angry populism.

CNN: Breaking news: the far-right candidate, Jair Bolsonaro, has won Brazil’s presidential race.

BBC: A four-point lead for leaving the EU, and that’s the result.

Channel 4 News: The shock result was the AfD, which became the third-largest party.

CBS: There are more protests in France today, even after President Emmanuel Macron promised concessions to angry demonstrators.

AUDIENCE: USA! USA! USA!

Donald J. TRUMP: Thank you. Thank you very much everyone. Sorry to keep you waiting. Complicated business.

RAJAN: Most people actually are quite frightened. We see strong political movements around the world which are looking to disrupt the kind of system we’ve had for the last 70 years. And people are asking, “Why now? What’s going on?” and “What’s the future hold for me?” At the same time, they see technological disruption create threats to the jobs they have, and they worry whether their children will have as good a life as they’ve had, let alone a better life.

The populism Rajan’s talking about exists on both the left and right wings of the political spectrum. In each case, there’s deep dissatisfaction and distrust of political institutions. It wasn’t always thus.

RAJAN: The balance before was what one might call liberal market democracies, which essentially created the prosperity that we’ve seen post-World War Two. Now, that is under threat, and part of the reason for that threat is because the community in many parts of the developed world is imploding under the pressure of both global markets, as well as technological change, as well as a government which isn’t doing the right things to support both the opportunities that people should have as well as the safety nets that they should have.

DUBNER: What you’re describing sounds foreboding to the point of dangerous. How much danger do you think we’re in?

RAJAN: Well, I think there is a danger for sure and I think we’ve seen these kinds of environments before. It’s all too easy to point to the 1930’s and say it looks like that. Nothing really looks like the past in exact detail, but the kind of disruption we are seeing, the rise of strong authoritarian regimes across the world, too many strong leaders around, if you will, for a peaceful world. I think all this makes you wonder if the risks have gone up. And I think they have.

DUBNER: In the book you write that “a populist movement believes that ruling elite are corrupt and undemocratic, that the masses have been treated poorly, and that the system ought to be changed because the general will of the people demands it.” That sentence to my ear doesn’t sound nonsensical, especially given the fact that governments and markets can both be fairly punishing to the median person. So why does populism — or maybe it’s Populism — have such a terrible reputation at the moment?

RAJAN: I don’t think the problem is identifying what’s going wrong. I absolutely think populists are necessary to jolt the establishment, to say, “Look, this is not reaching so many people.” It’s the answers they provide which often are too easy and wrong at the same time.

So, let’s take a standard answer which has appealed to both sides, the left and the right. Let’s close down trade. Free trade is very problematic, right? Or let’s put constraints on it. So what do we do? We raise steel tariffs, right? The economist would tell you, “Okay, but be aware of the unintended consequences.” As you raise steel tariffs, the price of steel domestically goes up. As the price of steel goes up, car companies find it harder to compete because they buy a lot of steel. Now, remember, they are competing with car companies abroad, who don’t have the tariffs that you just put on your steel. They are buying steel cheap, in fact even cheaper, because steel that used to come to the States now is going elsewhere. Their prices actually are much more competitive than car companies in this country. So G.M. announces it’s going to close down a bunch of plants. That is the consequence of the easy solution. The cost of saving a steel job could be jobs lost in other industries, and typically, economists say, more than the jobs that you save in steel — and you’re increasing costs overall for the consumer, also, to boot.

DUBNER: You argue that communities have been left behind, often, by technological change and globalization, and that the solution lies in restoring power to communities. Now, what do you mean by that, restoring power to communities?

RAJAN: One of the tendencies with the growth of markets is for government to also grow, and then in order to maintain uniformity across which markets can operate, there’s a tendency to take more decisions into the government. There’s also the problem when markets implode — again, government grows to bail out individual communities, right? And what I’m arguing is: this essentially leaves people in the community frustrated. There’s much less to engage on when, for example, your school is being paid for largely out of state or federal grants, and the state or federal bureaucracy is what decides what will be taught and how it’ll be taught and how teachers will be compensated. The school no longer pays attention to the local community. Similarly, if regulations on how you can produce locally are determined elsewhere, then, I think, you have a sense of disempowerment. Why bother about the local ward elections when the ward does pretty much nothing?

DUBNER: So, when community is successful — and it’s not always — but when it is, how important is simply the fact that it operates in much smaller units than the typical government or market? You write about a poverty-relief program in Germany called the Elberfeld system. Talk about how that worked and why you think it worked.

RAJAN: This was in the first flush of industrialization in Germany. Germany was one of the first countries to put together some kind of social support in an explicit way, as in the town of Elberfeld. And there what they did was: they got volunteers from each ward who would come together under an overall structure run by the city. They would go into the homes of people who were not doing well and ask them what their needs were, and essentially approve very quickly some kind of financial support for those families, but also give them contacts, give them opportunities: here is where there might be jobs — they were essentially acting as voluntary counselors, and a lot of people volunteered.

The engagement helped, in a sense, tie people back into the community, and helped them stand on their feet. And these were people volunteering to do this, rather than part of a bureaucracy. This was what they did in their spare time. And therefore, you got engagement and enthusiasm and people doing this got local, social prestige. As we go forward into a more technologically enhanced world, it’s the people around us who are going to be much more important. In this anonymous world, with anonymous markets, and anonymous bureaucracy, what allows you to have meaning in your life, is really the people around you.

DUBNER: I have to say, some of these words that you’re using now, Raghu, “community” and “meaning,” if I did not know better, I would not think that you were an economist at all. I’m curious whether this represents an evolution for you as a human and an economist, or was this always who you were and economics was just a route that helped you further your thinking.

RAJAN: I think, as you sort of progress in life more, you understand a little more, and to some extent, I think, as you read outside your field, you learn what’s been done elsewhere. You realize there are many parts which are missing. I mean, look: to be fair to economists, they’ve expanded what they focus on so much.

DUBNER: You do argue in the book that community has long been undervalued as the third pillar of a society, and especially undervalued by economists. I’m curious why you think that is?

RAJAN: Well, I think it’s harder to analyze. I think that we are very comfortable with explicit contracts. We understand prices. But in a community, many of these transactions are not priced. You may do more favors than you get. You may not even get greater status as a result of something you do. But sometimes you do it because it’s ingrained in your sense of who you are, that you have to help the community. And I mean, think of it as almost seared in your utility function. I think some of these features are hard for economists to analyze. For example, we don’t have a good theory of what sometimes is called “the norm of reciprocity,” that when people get a favor, they feel almost compelled to return it at some point. And why do we feel that that norm so strongly? Unclear.

DUBNER: Have you lost some faith in the markets, or would you not put it that way?

RAJAN: I would say the capacity of markets to take care of themselves — which I was much more convinced about — I’ve lost some faith. Now, the automatic answer doesn’t mean that you replace them with governments. It’s all about balance.

DUBNER: In some ways your book is frightening, and it describes the potential for — really — disaster. You, however, sound in this conversation, and in some moments in the book, to be quite hopeful. Can you just distill your, kind of, over/under for the hope factor, in terms of the global economy and society continuing to enjoy prosperity and progress versus potentially backsliding?

RAJAN: Look, I think the potential for progress is certainly there. I mean, if you look at what’s happening across the world — certainly in many of the emerging markets — how tremendous changes have happened in the last few decades. You have to be really happy that a country like Vietnam, which was enmeshed in war 50 years ago, is now where it is.

The dangers, well, we see them when we read the papers every day. I mean, this fight between China and the United States just now on trade — but there are geopolitical concerns. If we have another Cold War, or potentially, even places of hot war — here are two enormously rich countries. If they go at each other and use all the capabilities that they have for new technologies in fighting each other, rather than building a common sort of world, I think the path down could be very, very steep. We need to engage with each other for the good. And we need to figure out ways to do that. So I am worried, but what gives you some confidence is: we’ve always figured it out.

*      *      *

Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Zack Lapinski. Our staff also includes Alison Craiglow, Greg Rippin, and Harry Huggins. Our theme song is “Mr. Fortune,” by the Hitchhikers; all the other music was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts.

Here’s where you can learn more about the people and ideas in this episode:

SOURCES

Raghuram Rajan, economist at the University of Chicago’s Booth School.

RESOURCES

Saving Capitalism from the Capitalists by Raghuram Rajan and Luigi Zingales (Crown Business 2003).

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan (Princeton University Press 2010).

The Third Pillar: How Markets and the State Leave the Community Behind by Raghuram Rajan (Penguin Press 2019)).

“Has Financial Development Made the World Riskier?” Raghuram Rajan (2005).

EXTRA

“Cash and the Economy: Evidence from India’s Demonetization,” Gabriel Chodorow-Reich, Gita Gopinath, Prachi Mishra, and Abhinav Narayanan (2019).

“Why Larry Summers Is the Economist Everyone Hates to Love,” Freakonomics Radio (2017).

The post This Economist Predicted the Last Crisis. What’s the Next One? appeared first on Freakonomics.

from Dental Care Tips http://freakonomics.com/podcast/rajan/

[christophergill8]

6 tax matters that will dominate 2018

Welcome to the first work day of 2018. By now you (and I) have had enough coffee (maybe, even this late in the day) to think about what the year ahead will hold for taxes.

Chippy the Dog via Giphy.com

Since my personal orbuculum is still a little blurry — I'm blaming equally the aftermath of New Year's Eve festivities and the craziness that now rules Washington, D.C. — I have only six tax-related prognostications.

But even with the fuzzy focus, one thing is clear. Most of what we'll see happen in the tax world in 2018 will be related to the new tax laws now in effect, and which topped my list of last year year's top 10 tax matters.

So, with my mug reloaded with caffeine, here goes my 6 tax forecasts for 2018.

1. Glitches in the new tax measure will mean lots of cleaning up. Or not. Even under the best of legislative circumstances, changes to the Internal Revenue Code mean unintended consequences and flat-out mistakes. The process used to hurriedly ram the Tax Cuts and Jobs Act (yeah, I know that's not the formal title, but it's catchier that what we ended up with) though Congress was far, far from the best.

The phrase "holy crap" was one of the few printable descriptions of the bill used by folks with experience shepherding tax legislation through Congress.

That means that Capitol Hill will be consumed in 2018 with technical corrections. Typically, this is the effort by the House and Senate to fix a bill's drafting or policy problems, that range from minor mistakes to total rewrites of provisions.

But things are far from typical in Washington, D.C., right now. And that will complicate the tax bill's correction process.

First, there is the size of the bill. It's huge. Many provisions were added and tweaked during unofficial debate of the bill in an effort to get the bare-minimum 51 votes the GOP needed to pass it. That means there are lots and lots of areas that need a once (or more) over.

Second, it's vague and depending on the Internal Revenue Service to help clarify things. (See #6 in my 2017 tax review). What the IRS decides here could help or hinder things.

Third, there's the political issues. To make corrections to the tax bill, Republicans will need more help from the Democrats than they got in passing it, which was none. The Senate used budget reconciliation, which required the aforementioned simple majority, to clear the tax bill. The correct it, the upper chamber will need help from at least nine Democrats to get to the necessary 60-vote majority to correct the bill.

Like that's going to happen. Democrats still remember how the GOP wouldn't help fix problems in the Affordable Care Act. So their message to their Republican colleagues, at least right now, is "you broke the tax bill, you bought it."

And that means we taxpayers might just be living with the new tax law problems for longer than we want.

2. Tax changes will be a key midterm elections campaign issue. Will the tax law changes help or hurt Republicans seeking re-election to the House and Senate in November? That depends.

The GOP is counting on the bill, it's only major legislative victory of 2017, to give them a boost. Before the vote, South Carolina Republican Sen. Lindsey Graham told Fox News Radio, "I think all of us realize that if we fail on taxes, that's the end of the Republican Party's governing majority in 2018. We'll lose the House, probably lose ground in the Senate."

Well, the GOP got its tax bill, but will the savings for most middle-income voters show up in paychecks soon enough and, more importantly, be enough to win voters?

That's a big if, especially since throughout the tax bill debate and even after its enactment, public opinion of the measure has been less than supportive.

Democrats, meanwhile, will emphasize the much larger savings the tax changes will provide wealthier Americans. Plus, they'll point out that the bill's major corporate tax cut is permanent, but individual tax breaks are set to expire at the end of 2025.

Yep, it's going to be a loooong campaign season.

3. The SALT deduction limit will alter America's housing industry. Among those voters the Democrats are counting on are those in high-tax states. Even with lower tax rates for many, a lot of these folks will take a tax hit because of the new law's $10,000 limit on itemized state and local taxes (SALT).

That cap, they argue, is way too low to account for the income or sales taxes and residential property taxes that they are used to deducting.

A lot of folks in such situations will simply deal with the loss of tax breaks and try to hold on until the provision expires in 2025. Or they'll vote (see #2 above) for candidates they think might be able to repeal or at least ease the limit.

Or, say some in the housing industry, they'll move to lower-tax tax locales. There's some data to support this possibility.

In a recent survey by real estate brokerage Redfin of 900 homebuyers, one-third of respondents said that they would consider moving to another state if they could no longer deduct state and local taxes.

Nela Richardson, Redfin's chief economist, forecast in the company's 2018 prediction of the state of housing that the elimination of these deductions will adversely impact high-tax states like California, New York, New Jersey, Maryland, Massachusetts and Illinois.

And that, worry real estate and housing industry officials, could send the housing markets in high-tax states into a downward spiral. An exodus will lead to a flattening or decline in prices, especially in the luxury markets as high-wealth individuals leave.

The loss of richer residents' income and home-related taxes ultimately will lead to state government revenue losses, say the opponents of the tax bill's SALT deduction cap. And that will lead to state and local service cuts, that will prompt an increase in taxes in those areas or elimination of the services.

I think folks in the realty/housing sectors are being a bit hyperbolic. Yes, some folks will move, but I doubt it will be droves. There's a lot more to consider than taxes when it comes to relocations.

Remember, too, that wealthier homeowners will have access to high-paid tax professionals who should be able to make the most out of tax glitches mentioned in forecast #1, so they won't have to move.

But it is true that as all homeowners adjust to the changes in tax breaks they've likely used for as long as they've owned their houses, there will be some short term real estate effects. It's more likely, however, that people will stay in their current homes or, if they buy, they'll choose smaller homes that are more appropriate for their needs.

And that's not necessarily a bad thing.

4. States will revise their tax systems, too. To keep residents from relocating or getting hit too hard by federal tax law changes, look for states, especially those (few) run by Democrats and/or high-tax locales, to tweak their state tax codes.

One idea being floated is replacing an income tax with a payroll tax levied only on employers. If employers pay the payroll tax and reduce employees' salaries by the same amount, workers wouldn't have to deduct anything and would wind up being paid the same. States also would collect the same amount of revenue.

My favorite idea, though, is to essential restore the full SALT federal deduction by making the amount in excess of the $10,000 cap a charitable contribution to the collecting, I'm sorry, donee government. That amount then could be fully deducted as an itemized charitable gift on Schedule A, which is still allowed under the new tax law.

5. Social Security, Medicare will be under fire. Entitlements, the Washington, D.C. code word for federal benefits like Social Security, Medicare and Medicaid, have always been in Republican sights. Now those most opposed to these program will use the huge deficits created by the new tax law as an excuse to trim them.

Or at least try.

House Speaker Rep. Paul Ryan (R-Wisconsin) has already made it clear that's his plan. He's getting some support from colleagues, especially so-called deficit hawks who stifled their fiscal tendencies briefly to OK the costly tax bill.

Senate Majority Leader Mitch McConnell (R-Kentucky), however, is not as committed to this course, at least pre-midterms. With a reduced majority thanks to the Democrats surprise victory in the Alabama special election, McConnell is at least giving lip service to a bipartisan approach in that body.

If that happens, at least for some specific measures, it definitely won't happen on entitlement reform. If fact, Democrats will be using the possibility of Medicare and Social Security cuts as part of their campaign efforts to unseat Republicans (see #2) since older voters who rely on or about to qualify for these programs already are the most reliable voting bloc.

So that actually means, notes the Kaiser Family Foundation, that tax cuts could make it harder to make entitlement changes.

6. Robots will continue to make tax inroads. Finally! Something in 2018 that's not related to the new tax law. But it's just as scary.

Despite warnings for the last few years, robots aren't doing out taxes. Yet.

But artificial intelligence and more automation is continuing its inexorable march into the tax world.

Don't worry. There won't be Westworld tax preparation chains; nobody would trust any of those animatronic figures. But H&R Block has explored virtual tax reality.

And more tax AI is inevitable.

Some accounting pros reportedly are using Google's DeepMind and Amazon's Alexa to gain better insights and anticipate challenges.

And changes are being made at the support staff level. Some entry level workers who input data already have been replaced by automated ways to accomplish this.

Overall, though, the key concept to keep in mind is that nonhuman help is a tax accessory, not the full package.

As I told Silverfin, a major provider of accounting automation software to European financial services companies, last August: "You’ll never be able to automate the individual, personal analysis that is key to an accountant's job. Face-to-face advice and explanations to clients can never be replaced."

AI will give tax pros ways to hand off routine taxes, freeing up time for what they do best: provide knowledge, strategy and one-on-one counselling to clients for bigger-picture financial advice.

So in 2018, welcome your robot tax helpers. You're going to need all the extra time you can get to sort through the new tax laws!

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from Tax News By Christopher http://www.dontmesswithtaxes.com/2018/01/6-tax-topics-that-should-dominate-2018.html