Category Archives: Business

Why Warren Buffett pays 0% social security tax

Social Security is billed along with Medicare (health care for the poor) as an anti-flat tax called FICA where middle class workers pay 7.65 -15.3%, and rich people pay essentially 0%. The reason that Warren Buffet and other rich people pay 0%, on a percentage basis, far less than their secretaries, is that there is a FICA cap of $127,200 currently, and he earns far more than $127,200. Buffett’s secretaries pays 7.65%, or which 6% approximately is social-security payment, and the rest Medicare. Buffett’s company then matches the 7.65% — a situation that applies to virtually every employee in the US.

A self employed person though, a gardener say, pays both the employee and employer portion or 15.3%. The same $127,200 cap applies, but since few gardeners make more than this amount, they are likely to pay 15.3% on all earnings, with no deductions. FICA really socks the poor and middle class, and barely touches a rich man like Buffett. This is the tax-inequality that most needs addressing, in my opinion, and one I have not heard discussed.

A short history of FICA

A visual history of FICA rates (right), and of the salary cap (left). Medicare contributions were added in 1966.

As I write this, there is a debate about tax reform that mostly involves income tax, but not at all FICA. Income tax could be improved, in my opinion, and should be. We could remove some exemptions that are being abused, and we should lower the general rates, especially for foreign-earnings, but the current income tax isn’t that bad, in my opinion. Buffett likes to brag about the high rate he pays, but it’s not a bad rate compared to the rest of the world. And Buffett benefits from a lot of things we don’t. His income is taxed at a lower rate than a worker’s would be since most of it is unearned. And, like most rich folks, he has exemptions and deductions that do not apply to most. He can deduct cars, private airplanes, and interest; most folks don’t deduct these things since they don’t spend enough to exceed the “standard deduction”. I’m happy to say these issues are being addressed in the current tax re-write.

The current, House version of the GOP tax proposal includes a raise in the standard deduction and a cap on interest and other deductions. There is a general decrease in the tax rate for earnings, and a decrease for earnings made abroad and repatriated. I’d like to see tariffs, too but they do not appear in the versions I’ve seen. And I’ve very much like to see a decrease in the FICA rate coupled with a removal of the salary cap. Pick a rate, 4% say, where we collect the same amount, but spread the burden uniformly. Why should 7.65%-15.3% or the workmanship wages got to the window, the orphan, and healthcare of the poor, while 0% of Buffett’s go for this?

Some other tax ideas: I’d like to see shorter criminal sentences, especially for drugs, and I’d like to see healthcare addressed to reduce the administrative burden.

Robert E. Buxbaum, November 17, 2017. In the news today, the senate version puts back the tax exemption on private jets. The opposite of progress, they say, is congress.

The energy cost of airplanes, trains, and buses

I’ve come to conclude that airplane travel, and busses makes a lot more sense than high-speed trains. Consider the marginal energy cost of a 90kg (200 lb) person getting on a 737-800, the most commonly flown commercial jet in US service. For this plane, the ratio of lift/drag at cruise speed is 19, suggesting an average value of 15 or so for a 1 hr trip when you include take-off and landing. The energy cost of his trip is related to the cost of jet fuel, about $3.20/gallon, or about $1/kg. The heat energy content of jet fuel is 44 MJ/kg or 18,800 Btu/lb. Assuming an average engine efficiency of 21%, we calculate a motive-energy cost of 1.1 x 10-7 $/J, or 40¢/kwhr. The amount of energy per mile is just force times distance: 1 mile = 1609 m. Force is calculated from the person’s weight in (in Newtons) divided by lift/drag ratio. The energy per mile is thus 90*9.8*1609/15 = 94,600 J. Multiplying by the $-per-J we find the marginal cost of his transport is 1¢ per mile, virtually nothing.

The Wright brothers testing their gliders in 1901 (left) and 1902 (right). The angle of the tether reflects the dramatic improvement in the lift-to-drag ratio.

The Wright brothers testing their gliders in 1901 (left) and 1902 (right). The angle of the tether reflects a dramatic improvement in lift-to-drag ratio; the marginal cost per mile is inversely proportional to the lift-to-drag ratio.

The marginal cost for carrying a 200 lb person from Detroit to NY (500 miles) is 1¢/mile x 500 miles = $5: hardly anything compared to the cost of driving. No wonder airplanes offer crazy-low, fares to fill seats on empty flights. But this is just the marginal cost. The average energy cost per passenger is higher since it includes the weight of the plane. On a reasonably full 737 flight, the passengers and luggage  weigh about 1/4 as much as the plane and its fuel. Effectively, each passenger weighs 800 lbs, suggesting a 4¢/mile energy cost, or $20 of energy per passenger for the flight from Detroit to NY. Though the fuel rate of burn is high, about 5000 lbs/hr, the cost is low because of the high speed and the number of passengers. Stated another way, the 737 gets 80 passenger miles per gallon, a somewhat lower mpg than the 91 claimed for a full 747.

Passengers must pay more than $20, of course because of wages, capital, interest, profit, taxes, and landing fees. Still, one can see how discount airlines could make money if they arrange a good deal with a hub airport, one that allows them low landing fees and allows them to buy fuel at near cost.

Compare this to any proposed super-fast or Mag-lev train. Over any significant distance, the plane will be cheaper, faster, and as energy-efficient. Current US passenger trains, when fairly full, boast a fuel economy of 200 passenger miles per gallon, but they are rarely full. Currently, they take some 15 hours to go Detroit to NY, in part because they go slow, and in part because they go via longer routes, visiting Toronto and Montreal in this case, with many stops along the way. With this long route, even if the train got 200 passenger mpg, the 750 mile trip would use 3.75 gallons per passenger, compared to 6.25 for the flight above. This is a savings of 2.5 gallons, or $8, but it comes at a cost of 15 hours of a passenger’s life. Even train speeds were doubled, the trip would still take more than 7.5 hours including stops, and the energy cost would be higher. As for price, beyond the costs of wages, capital, interest, profit, taxes, and depot fees — similar to those for air-tragic – you have to add the cost of new track and track upkeep. While I’d be happy to see better train signaling to allow passenger trains to go 100 mph on current, freight-compatible lines, I can see little benefit to government-funded projects to add the parallel, dedicated track for 150+ mph trains that will still, likely be half-full.

You may now ask about cities that don’t have  good airports. Something else removing my enthusiasm for super trains is the appearance of a new generation of short take-off and landing, commercial jets, and of a new generation of comfortable buses. Some years ago, I noted that Detroit’s Coleman Young airport no longer has commercial traffic because its runway was too short, 1051m. I’m happy to report that Bombardier’s new CS100s should make small airports like this usable. A CS100 will hold 120 passengers, requires only 1463m of runway, and is quiet enough for city use. The economics are such that it’s hard to imagine Mag-lev beating this for the proposed US high-speed train routes: Dallas to Houston; LA to San José to San Francisco; or Chicago-Detroit-Toledo-Cleveland-Pittsburgh. So far US has kept out these planes because Boeing claims unfair competition, but I trust that this is just a delay. As for shorter trips, the modern busses are as fast and energy efficient as trains, and far cheaper because they share the road costs with cars and trucks.

If the US does want to spend money on transport, I’d suggest improving inner-city airports. The US could also fund development of yet-better short take off planes, perhaps made with carbon fiber, or with flexible wing structures to improve the lift-to-drag during take-offs and landings. Higher train speeds should be available with better signaling and with passenger trains that lean more into a curve, but even this does not have to be super high-tech. And for 100-200 mile intercity traffic, I suspect the best solution is to improve the highways and busses. If you want low pollution and high efficiency, how about hydrogen hybrid buses?

Robert Buxbaum, October 30, 2017. I taught engineering for 10 years at Michigan State, and my company, REB Research, makes hydrogen generators and hydrogen purifiers.

Health vs health administration

One of the great patterns of government is that it continually expands adding overseers over overseers to guarantee that those on the bottom do their work honestly. There are overseers who check that folks don’t overcharge, or take bribes, or under-pay. There are overseers to check shirking, and prevent the hiring of friends, to check that paperwork is done, and to come up with the paperwork, and lots of paperwork to assert that no one is wasting money or time in any way at all. There have been repeated calls for regulation reform, but little action. Reform would require agreement from the overseers, and courage from our politicians. Bureaucracy always wins.

The number of health administrators has risen dramatically; doctors, not so much.

By 2009 the number of health administrators was rising dramatically faster than the number of doctors; it’s currently about 20:1.

The call for reform is particularly strong in healthcare and the current, Obamacare rules are again under debate. As of 2009 we’d already reached the stage where there were fourteen healthcare administrators for every doctor (Harvard Business Review), and that was before Obamacare. By 2013, early in the Obamacare era, the healthcare workforce had increased by 75%, but 95 percent of those new hires were administrators: we added 19 administrators per doctor. Some of those administrators were in government oversight, some worked in hospitals filling out forms, some were in doctors offices, and some were in the government, writing the new rules and checking that the rules were followed. A lot of new employment with no new productivity. Even if these fellows were all honest and alert, there are so many of them, that there seems no way they do not absorb more resources than the old group of moderately supervised doctors would by laziness and cheating.

Overseers fill ever-larger buildings, hold ever-more meetings, and create ever-more rules and paperwork. For those paying out of pocket, the average price of healthcare has risen to $25,826 a year for a family of four. That’s nearly half of the typical family income. As a result people rarely buy healthcare insurance (Obamacare) until after they are too sick to work. Administering the system take so much doctor time that a Meritt Hawkins study finds a sharp decline in service. The hope is that Congress will move to reverse this — somehow.

With more administrators than workers, disagreements among management becomes the new normal.

With more administrators than workers, disagreements among management becomes the new normal. Doctors find themselves operating in “The Dilbert Zone”.

Both Democrats and Republicans have complained about Obamacare and campaigned to change or repeal it, but now that they are elected, most in congress seem content to do nothing and blame each other. If they can not come up with any other change, may I suggest a sharp decrease in the requirements for administrative oversight, with a return to colleague oversight, and a sharp decrease in the amount of computerized documentation. The suggestion of colleague oversight also appears here, Harvard Business Review. Colleague oversight with minimal paperwork works fine for plumbers, and electricians; lawyers and auto-mechanics. It should work fine for doctors too.

Robert Buxbaum, September 19, 2017. On a vaguely similar topic, I ask is ADHD is a real disease, or a disease of definition.

Detroit 1967 to 2017: unemployment comes down, murder rate doesn’t.

Almost 50 years ago today, July 23, 1967 white policemen raided an unlicensed, “blind pig” bar in a black neighborhood, the 12th street of Detroit, and the city responded with four days of rioting, 43 killings (33 black, 10 white), 2509 stores looted, and over 1000 fires. In 2017, at last the city is beginning to show signs of recovery. By 2015 the city’s unemployment had gone down from about 20% to 12%, and  in the first six months 2017, the firs six months of the Trump presidency, 2017 it’s gone down again to 7 1/2%. It’s not that 7 1/2% unemployment is good, but it’s better. Per-hour salaries are hardly up, but I take that as better than having a high average salary at very low employment. As a point of reference, the unemployment rate in Detroit in 1967, before the riots was 3.4%. Within weeks, 150,000 jobs were lost, and anyone who could leave the city, did.

Detroit Unemployment rates are way down, but the city still looks like a mess.

Detroit Unemployment rates are way down, but the city still looks like a mess.

Another issue for Detroit is its uncommonly high murder rate. In the mid-80s, Detroit had the highest murder rate in the US, about 55 murders per 100,000 population per year (0.055%/year). As of February 1, 2017, the murder rate was virtually unchanged: 50 per 100,000 or 0.05%/year, but two cities have higher rates yet. At present rates, you have a 3.5% of dying by homicide if you live in Detroit for 70 years — even higher if you’re male. The rate in the rest of the US is about 1/10th this, 0.005%/year, or 5 per 100,000, with a dramatic difference between rural and urban populations.

Murder rate in 50 cities with Detroit highlighted. From The Economist, February 2017.

Murder rate in 50 cities with Detroit highlighted, from The Economist.

One of the causes of the high murder rate in Detroit, and in the US generally, I suspect, is our stiff, minimum-penalties for crime. As sir Thomas Moose pointed out, when crime is punished severely, there is a tendency to murder. If you’re going to spend the next 20 years behind bars, you might as well try any means you can to escape. Another thought — the one favored by social liberals — is that it’s the presence of guns in the US encourages murder. It may, but it also seems to prevent crime by allowing the victim to defend himself or herself. And the effect on murder is not so clear, if you consider suicide as a form of murder. In countries like Canada with few guns, people kill themselves by hanging or by throwing themselves off high buildings. My hope is that Detroit’s murder rate will drop in 2017 to match its improved economic condition, but have no clear reason to think it will.

Robert Buxbaum, July 20, 2017. Here are some suggestions I’ve made over the years.

If the wall with Mexico were covered in solar cells

As a good estimate, it will take about 130,000 acres of solar cells to deliver the power of a typical nuclear facility, 26 TWhr/year. Since Donald Trump has proposed covering his wall with Mexico with solar cells, I came to wonder how much power these cells would produce, and how much this wall might cost. Here goes.

Lets assume that Trump’s building a double wall on a strip of land one chain (66 feet) wide, with a 2 lane road between. Many US roads are designed in chain widths, and a typical, 2 lane road is 1/2 chain wide, 33 feet, including its shoulders. I imagine that each wall is slanted 50° as is typical with solar cells, and that each is 15 to 18 feet high for a good mix of power and security. Since there are 10 square chains to an acre, and 80 chains to a mile we find that it would take 16,250 miles of this to produce 26 TWhr/year. The proposed wall is only about 1/10 this long, 1,600 miles or so, so the output will be only about 1/10 as much, 2.6 TWhr/year, or 600 MW per average daylight hour. That’s not insignificant power — similar to a good-size coal plant. If we aim for an attractive wall, we might come to use Elon Musk’s silica-coated solar cells. These cost $5/Watt or $3 Billion total. Other cells are cheaper, but don’t look as nice or seem as durable. Obama’s, Ivanpah solar farm, a project with durability problems, covers half this area, is rated at 370 MW, and cost $2.2 Billion. It’s thus rated to produce slightly over half the power of the wall, at a somewhat higher price, $5.95/Watt.

Elon Musk with his silica solar panels.

Elon Musk with his, silica-coated, solar wall panels. They don’t look half bad and should be durable.

It’s possible that the space devoted to the wall will be wider than 66 feet, or that the length will be less than 1600 miles, or that we will use different cells that cost more or less, but the above provides a good estimate of design, price, and electric output. I see nothing here to object to, politically or scientifically. And, if we sell Mexico the electricity at 11¢/kWhr, we’ll be repaid $286 M/year, and after 12 years or so, Republicans will be able to say that Mexico paid for the wall. And the wall is likely to look better than the Ivanpah site, or a 20-year-old wind farm.

As a few more design thoughts, I imagine an 8 foot, chain-link fence on the Mexican side of the wall, and imagine that many of the lower solar shingles will be replaced by glass so drivers will be able to see the scenery. I’ve posited that secure borders make a country. Without them, you’re a tribal hoard. I’ve also argued that there is a pollution advantage to controlling imports, and an economic advantage as well, at least for some. For comparison, recent measurement of the Great Wall of China shows it to be 13,170 miles long, 8 times the length of Trump’s wall with China.

Dr. Robert E. Buxbaum, June 14, 2017.

Solving the savings dilemma (how to have savings)

A few days ago, I wrote a post about the lack of savings in America, the social causes for it, and the damage it causes. I had some governmental suggestions, but suspect I didn’t emphasize that the main responsibility is personal: if you want savings, you’ve got to save.

Every rich person spends less than he earns. If you aspire to be rich, spend less on clothes than you can afford.

Every rich person spends less than he earns. If you aspire to be rich, spend less on clothes than you can afford.

If you want to have savings, it is up to you to spend less than you earn. If you don’t, you’ll never be rich, you’ll never have savings or net-economic worth, and you’ll always be strung-out over emergencies. Income and gifts won’t help if spending rises to match. At all incomes, the people who get richer are those who tailor spending to be less than earnings.

There is another personal honesty issue here, and a marriage issue too. If you spend more than you earn, someone will be cheated, and that person (your wife, husband, neighbor, friend) is likely to get mad. Earn $100 and spend $99.99, you can be honest and well liked. if you earn $1000 and spend $1000.01 and you will cheat someone you love sooner or later. Be an honest fellow and spend less. Clothes is a good place to start: say no to the fancy dress and the fancy wedding, and to fancy clothes in general. If you smoke, vaping can be a life and money saver. And try to avoid pot-smoking, at $400/oz that’s got to be a killer. And here are some water savers.

A good way to know if you are doing things right :Start a bank account, and check the balance and resolve to see it $10 higher at the end of the week than before. And that’s my two cents.

Robert Buxbaum, April 26, 2017.

Black folks have no savings (poor whites too)

The wealth of the mean American household has dropped significantly since 2007, a result of the general de-industrialization of America. It’s not that America has gotten poorer, but in the last 8 years we’ve increased the economic divide, enriching the richest few percent while leaving behind the working and bourgeoise classes. We are beginning to come back, but a particularly nasty legacy remains, especially among black families. Some 47% of black families have no liquid savings  — a far greater fraction than in 2007. The lack of savings also appears in white families (19%), and Hispanics (41%), but it’s most desperate among blacks.

College graduation rates have increased among black students, and along with the increase there has been an increase in salaries, but savings have declined. As of 2015, 22.5% of black students and 15.5% of Hispanic students had completed four years of college. This compares to 36.2% of white students, an inequality, but not a horrible one. By 2013, the average salary of a black college grad was somewhat over $1000/week, somewhat less than the average for whites, but enviable compared to the world as whole. The problem is that black workers manage to save very little compared to other ethnic groups, and compared to previous savings rates as shown by the graphic below. By 2013, the net worth of the median black family (savings, plus paid-off part of home and car) was a mere $11,000 (Pew Research Data, below), down from $19,200 six years earlier, and much lower than the net worth of white families (also down since 2007). Liquid savings among blacks are much lower — near zero — and this is just the mean. Half of all black families are doing worse.

Net worth disparity 2007 - 2011. Black folks are doing poorly and it's getting worse.

Net worth disparity 2007 – 2011. Black folks are doing poorly and it’s getting worse.

The combination of low savings and low net worth puts black folks at a distinct disadvantage to their condition six years earlier. Without savings, it is near-impossible to weather the loss of a job, or even to fix a car or pay a ticket, Surviving through a disease is basically a one-way ticket to the welfare office. Six years ago, when people saved more and prices were lower, problems like these were major annoyances. Now, a job loss or a major repair is a family disaster.

The growth of check-cashing services in black neighborhoods is a symptom, I suspect, of the lack of liquidity. A person without savings will not have a checking account. As such, he or she will not have a credit card or check cashing privileges.  The only way to cash a check will be via a for-fee service, and these tend to come at a steep cost (2-5%). People with savings accounts can cash checks essentially for free, and can usually borrow money by way of a credit card. People without savings can’t get approved. Black people and poor whites tend to use debit cards instead. They look and work like credit cards, but they incur fees upon use, and do not provide instant loans. When black folks and poor whites need quick cash, their options are the loan-shark or the pawn shop: high-cost options that take a giant toll on the family.

As mentioned above, black individuals and families have lower incomes than whites at all education levels. While racism, no-doubt plays a role, as best I can tell, the largest single cause seems to be family stability. Employed, college-educated blacks earn, on average, 95% as much as employed, college-educated whites — not great, but not bad. The real problem with black income is that black unemployment rates are higher, black education rates are lower, and single-parent families are significantly more common among blacks than among whites and Orientals. Roughly 40% of black families are single-mother, or mother+grandparent households compared to “only” 26% in the population generally. In both populations, the number of single parent households have increased dramatically in the last few years, a result I suspect of the government’s desire to help. The government gives more aid to a split-up couple than to one that stays together, but the aid brings with it long-term damage to net worth. A family with one parent will naturally have a lower-income and savings rate than a family with two. The lack of stability and savings that comes from having a single parent family, I suspect, has contributed to crime, births out-of-wedlock, and the tendency of blacks to drop out of college.

Black families don't benefit as much from college --in part a result of the choice of courses.

Black families don’t benefit much from college –in part a result of course choices, in part the result of borrowing. (Forbes, 2015).

One finds that do-gooders in the white communities want to eliminate check cashing businesses and pawn shops in a misguided desire to help the low-income neighborhoods, but the success of these companies tell me that they are needed. Though check services and pawn brokers take a nasty bite, urban life would be much worse without them, I suspect.

Another so-called solution of the do-gooders, is to tax savings and transfer the wealth to the poor. This form of wealth redistribution has been a cornerstone of the Democratic party for the last century. The idea of the tax is that it will transfer “idle wealth” from rich savers to poor folks who will spend it immediately. The problem is that great swathes of the nation don’t save at all currently; net worth is down all across the US — among white and black families both. Taxing savings will almost-certainly reduce the savings rate even further. Besides, savings are the stuff of self-determination and dreams — far more than spending, it is savings that allows a person to start a new business. One does not provide for the dreams of one group by taking them from another — particularly another group chosen to be immediate spenders. That is a route to community disaster, is seen by looking at Detroit.

As it is, many poor, inner city children do not see a path out via education. Detroit school attendance hovers around 50%, and business startups are lacking. As best inner city people can tell, the only ways out are sports, music, prostitution, crime, and the church. With higher savings rates and higher family stability, folks could start businesses, and/or take advantage of job opportunities that come along. People seem to think that wealth redistribution should help, but it just seems to reduce savings and family stability. Every effort to increase wealth redistribution only seems to make things worse in Detroit.  It sometimes seems that the only businesses in Detroit are check cashing, pawn brokers, churches, hair-salons, fast food, and medical marijuana — businesses that require little investment, but provide little community return too. Detroit has lost its manufacturing center, and now has more medical marijuana providers than groceries — a sad state of affairs.

The Check cashing services of south-eastern MI are concentrated in poor black and white neighborhoods.

The Check cashing services of south-eastern MI are concentrated in poor black and white neighborhoods.

In 2016, both presidential candidates touted major infrastructure projects, highways and the like, to help the inner city poor. In principle this can help, but I have my doubts. One basis of doubt: inner city youth do not have the training to build roads and bridges — they have barely the training to work at McDonald’s. For another thing, if the project itself isn’t needed, it becomes another form of income redistribution. There tends to be a lack of pride in doing it well, and the benefits are basically nothing. A major war could provide jobs, of course, but most sane people prefer peace. Trump has made the case for tariffs (closing off free trade) as a way to rebuild the industrial center of cities like Detroit. It’s an approach that I think has merit. He’s also suggested closing the border to low-wage, Mexican workers, and recently signed a bill that raised the minimum wage for foreign workers. This is expected to raise the price of California lettuce and NY hotel stays, but is likely to increase employment among low-skill Americans — blacks and poor whites. Small steps, I think, to solving a serious national problem.

Robert E. Buxbaum, April 21, 2017. I ran for water commissioner 2016 (Republican). I lost. I also have some infrastructure suggestions, including daylighting some rivers and adding weirs to improve water quality and stop flooding. If you like my ideas (or don’t) please provide comments.

pee in the shower and other water savers

Do you want to save the planet and save money at the same time? Here are some simple tips:

The first money and planet saver, is to pee in the shower. For those who don’t have a lawn, or who don’t water, your single biggest water cost is likely the toilet. Each person in your household will use it several times per day, at roughly 1.6 gallons per flush. In Oak Park, Michigan the cost of water is 1.5¢/gallon, so each flush costs you, roughly 2.5¢. If you pee in the shower every morning, you’ll save yourself about one flush per day, or 2.5¢. Over the course of a year you’ll have used about 500 gallons less, and will have saved yourself somewhere between $5 and $10. Feel good about yourself every morning; the effort involved is truly minimal.

Related to peeing in the shower, I should mention that many toilets leak. A significant part of your water bill can often be cut by replacing the “flapper valve on the inside of your toilet tank, and/or by cleaning the needle fill valve. To see if you need this sort of help, put a few drops of food dye in the toilet when you leave in the morning. If the color is largely gone by the time you get back, the toilet is leaking the equivalent of a few volumes per day, that is at least as much water as is flushed. If the color goes faster, or you hear the tank refill when no one used it, you’re leaking more. Check the flapper and replace it if it’s worn — it’ll cost about $3 — and check the needle-fill valve. They don’t work forever. Cleanliness is near godliness.

Mulch is good, this is too much concentrated by the tree trunk. Use only 2 inches and spread it out to save water and weeding.

Mulch is good, this is too much concentrated by the tree trunk. Use only 2-3 inches and spread it out from the trunk to save water and weeding without attracting bugs.

If your valve is leaking and you decide to replace it, you may want to replace with a variable flush valve. Typically, there are two options: a big vale for big flush (1.6 gal) and a small valve for small flush (1 gal or less). These are widely used in Europe. You can make up for this cost rather quickly at 1.5¢/gallon.

The next big issue is lawn-care. If you water your lawn and flowers daily, you’ve likely noticed that you pay about $300/month for water in the summer: a lot more than in the winter, or than your lazes-faire neighbor in the summer. Every $150 of summer-excess, water bill you pay represents about 10,000 gallons applied to your lawn. That’s a cubic foot, or 1¢ to 2¢ of water applied per ft2 per month for typical watering. While many sites advise that you can save by adding a rain barrel, I disagree. Rain barrels are costly, ugly, and are a lot of work ago plumb in. And each barrel only holds 55 gallons of water, 82¢ worth when full. You do a lot better, IMHO by putting down an inch or two of mulch around your flowers and vegetables. This mulch requires no work and will keep you from needing to water these areas for the 3-4 days after every rainfall. A layer of 1″ to 2″ will help your soil hold 0.5 to 1 gallon of water per square foot. At typical prices of mulch and water, this will pay for itself in 1-2 years and will help you avoid weeding. Mulch is a far better return than the rain-barrels that are often touted, and there’s far less effort involved. Buy the mulch, not the barrel, but don’t put down too more than 2″ on flowers and vegetable. Trees can take 3 -4″; don’t use more. Avoid a mulch mountain right next to a tree, it causes the roots to grow weird, and provides a home for bugs and undesirable anaerobic molds.

A little more work than the above is to add a complete rain garden or bioswale. Build it at the bottom of any large incline on your property, where the water runs off (It’s likely a soggy swamp already). Dig the area deeper and put, at the bottom of the hole, a several-inch layer of mulch and gravel. Top it off with the soil you just removed, ideally raising the top high enough that, if the rain garden should fill, the water will run off to the street. Plant in the soil at the top long-rooted grasses, or flowers, vegetables, or water-tolerant trees. You may want to direct the water from your home’s sump pump here too (It can help to put a porous pipe at the bottom to distribute this water). If you do this right, you’ll get vegetables or trees and you won’t have to water the garden, ever. Also, you’ll add value to your property by removing the swampy eyesore. You’ll protect your home too, since a major part of home flooding comes from the water surge of sump water to the sanitary sewer.

Robert E. Buxbaum, April 14, 2017. I ran for water commissioner, Oakland County, MI, Nov. 2016. Among my other thoughts: increased retention to avoid flooding, daylighting rivers, and separating the sanitary from the storm sewers. As things stand, the best way to save money on water– get the same deal the state gave to Nestle/ Absopure: they pay only $200/year to pump 200 gal/minute. That is, they pay only 1/3000 of what you and I pay. It helps to have friends in government.

The argument for free trade is half sound

In 1900, the average tariff on imported goods was 27.4% and there was no income tax. Import tariffs provided all the money to run the US government and there was no minimum wage law. The high tariffs kept wage rates from falling to match those in the 3rd world. Currently, the average tariff is near-zero: 1.3%. There is a sizable income tax and a government income deficit; minimum wage laws are used to prop up salaries. Most economists claim we are doing things right now, and that the protective tariffs of the past were a mistake. Donald Trump claimed otherwise in his 2016 campaign. Academic economists are appalled, and generally claim he’s a fool, or worse. The argument they use to support low tariffs was made originally by Adam Smith (1776): “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy…. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry.” As a family benefits from low cost products, a country must too. Why pay more?  How stupid would you have to be to think otherwise?

A cartoon from Puck 1911. Do you cut tariffs, and if so how much. High tariffs provide high wages and expensive prices for the consumer. Low tariffs lead to cheap products and low wages. Uncle Sam is confused.

A cartoon from Puck, 1911. Should tariffs be cut, and if so, how much. High tariffs provide high prices and high wages. Low tariffs lead to low prices for the consumer, but low wages. Uncle Sam is confused.

Of course, a country is not a family, and it is clear that some people will benefit more from cheap products, others less, and some folks will even suffer. Consumers and importers benefit, while employees generally do not. They are displaced from work, or find they must compete with employees in very low wage countries, and often with child labor or slave labor. The cartoon at right shows the conundrum. Uncle Sam holds a knife labeled “Tariff Revision” trying to decide where to cut. Any cut that helps consumers hurts producers just as much. Despite the cartoon, it seems to me there is likely a non-zero tariff rate that does not slow trade too much, but still provides revenue and protects American jobs.

A job-protecting tariff was part of the Republican platform from Lincoln’s time, well into the 20th century, and part of the Whig platform before that. Democrats, especially in the south, preferred low tariffs, certainly no more than needed to provide money for government operation. That led to a diminution of US tariffs, beginning in the mid- 1800s, first for US trade with developed countries, and eventually with third world as well. By the 1930s, we got almost no government income from tariffs, and almost all from an ever-larger income tax. After WWII low tariff reductions became a way to promote world stability too: our way of helping the poor abroad get on their feet again. In the 2016 campaign, candidate Donald Trump challenged this motivation and the whole low-tariff approach as anti- American (amor anti America-first). He threatened to put a 35% tariff on cars imported from Mexico as a way to keep jobs here, and likely to pay for the wall he claimed he would build as president. Blue-collar workers loved this threat, whether they believed it or not, and they voted Republican to an extent not seen in decades. Educated, white collar folks were uniformly appalled at Trump’s America-first insensitivity, and perhaps (likely) by the thought that they might have to pay more for imported goods. As president, Trump re-adjusted his threat to 20%, an interesting choice, and (I suspect) a good one.

The effect of a 20% tariff can be seen better, I think, by considering a barter-economy between two countries, one developed, one not: Mexico and the US, say with an without a 20% tax. Assume these two countries trade only in suits and food. In the poor country, the average worker can make either 4 suits per month or 200 lbs of food. In the developed country, workers produce either 10 suits or 1000 lbs of food. Because it’s a barter economy with a difference in production, we expect that, in the poor country, a suit costs 50 lbs of food; in the rich country, 100 lbs of food. There is room here to profit by trade.

The current state of tariffs world-wide. Quite a few countries have tariffs much higher than ours. Among those, Mexico.

Tariffs world-wide. While we put no tax on most imported products, while much of the world taxes our products rather heavily.

With no tariff, totally free trade, an importer will find he can make a profit bringing 100 lbs of US food to Mexico to trade for 2 suits. He can return two suits to the US having gotten his two suits at the price of one, less the cost of transport, lawyers, and middlemen (relatively low). Some US suit-makers will suffer, but the importer benefits immediately, and eventually US consumers and Mexican suit workers will benefit too. Eventually, US suit prices will go down, and Mexican wages up, We will have cheaper suits and will shift production to produce what we make best —  food.

In time, we can expect that an American suit maker will move his entire production to Mexico bringing better equipment and better management. Under his hand, lets assume his Mexican workers make 6 suits per month. The boss can now pay them better, perhaps 100 lbs of food and two suits per month. He still makes a nice profit, more than before: he ships two suits to the US to buy the 200 lbs of food, and retains now two suits as profit. Hillary Clinton believed this process was irreversible. “Those jobs are gone and they’re not coming back,” her campaign told CNN. She claimed she’d retrain the jobless “for the jobs of the future” and redistribute the wealth of the rich, a standard plank of the democratic platform since 1896. But for several reasons industrial voters didn’t trust her. Redistribution of wealth rarely works because, for example, the manufacturer can keep his profits off-shore, as many do.

While a very high tariff would stop all trade, but lets see what would happen with Trump’s 20% tariff. With a 20% tariff, when the first two suits come to the US, we extract 0.4 suits in tax revenue, but nothing on export. The importer still makes a profit, but it’s now 0.6 suits, the equivalent of 60 lbs of food. He can sell his suits for less than the American, but not quite as much less. If the manufacturer moves to Mexico he makes more money than by trade alone, but not quite as much. Tax is still collected on every suit brought to America — now 20% of the 3 suits per Mexican worker that the Boss must export. The American worker’s wages are depressed but he/she isn’t forced to compete with the Mexican dollar-for-dollar (suit for suit). In barter terms, he isn’t required to make 6 suits for every 100 lbs of food.lincoln-national-bank-internal-improvements-tariffs

Repeating the above for different tax rates, we find that, in the above fictional economy a 50% tariff in the maximum to allow any trade (or the minimum rate to stop trade completely): the first two suits might enter; but they’d be taxed at one suit, just enough to pay for the 100 lbs of food. There would be no profit for the importer, and he/she would stop importing. At 50% tariff, we would get no new goods, and we’d collect no new revenue – a bad situation. Lincoln’s “protective tariffs” of 1861 may have contributed to Southern succession and the start of the civil war. While there is a benefit to trade, it seems to me that some modest tariff (10%, 20%) is better for us — a conclusion that Trump seems to have intuited, and that many other countries seem to have come to, too (see map-chart above). As for the academic economists, I note that they also predicted that stock market crash should Trump be elected; it’s gone nearly straight up since November 8, 2016. For experts on money, I find that most economists are not rich.

Robert E. Buxbaum, March 27, 2017. I learned such economics as I have from my one course in economics, plus comic books like the classic “Once upon a dime” produced by the New York Federal Reserve. Among the lessons learned: that money is a distraction, just a more convenient way to carry around a suit, 100 lbs of food, or a month of work. If you want to understand economics, I think it helps to work things out in terms of barter. As

Rethinking fluoride in drinking water

Fluoride is a poison, toxic tor a small child in doses of 500 mg, and toxic to an adult in doses of a few thousand mg. It is a commonly used rat poison that kills by robbing the brain of the ability to absorb oxygen. In the form of hydrofluoric acid, it is responsible for the deaths of more famous chemists than any other single compound: Humphrey Davy died trying to isolate fluorine; Paul Louyet and Jerome Nickles, too. Thomas Knox nearly died, and Henri Moissan’s life was shortened. Louis-Joseph Gay Lussac, George Knox, and Louis- Jacques Thenard suffered burns and similar, George Knox was bedridden for three years. Among the symptoms of fluoride poisoning is severe joint pain and that your brain turns blue.

In low doses, though, fluoride is thought to be safe and beneficial. This is a phenomenon known as hormesis. Many things that are toxic at high doses are beneficial at low. Most drugs fall into this category, and chemotherapy works this way. Diseased cells are usually less-heartythan healthy ones. Fluoride is associated with strong teeth, and few cavities. It is found at ppm levels many well water systems, and has shown no sign of toxicity, either for humans or animals at these ppm levels. Following guidelines set by the AMA, we’ve been putting fluoride in drinking water since the 1960s at concentrations between 0.7 and 1.2 ppm. We have seen no deaths or clear evidence of any injury from this, but there has been controversy. Much of the controversy stems from a Chinese study that links fluoride to diminished brain function, and passivity (Anti-fluoriders falsely attribute this finding to a Harvard researcher, but the Harvard study merely cites the Chinese). The American dental association strongly maintains that worries based on this study are groundless, and that the advantage in lower cavities more than off-sets any other risks. Notwithstanding, I thought I’d take another look. The typical US adult consumes 1-3 mg/day the result of drinking 1-3 liters of fluoridated water (1 ppm = 1 mg/liter). This < 1/1000 the toxic dose,

While there is no evidence that people who drink high-fluoride well water are any less-healthy than those who drink city water, or distilled / filtered water, that does not mean that our city levels are ideal. Two months ago, while running for water commissioner, I was asked about fluoride, and said I would look into it. Things have changed since the 1960s: our nutrition has changed, we have vitamin D milk, and our toothpastes now contain fluoride. My sense is we can reduce the water concentration. One indication that this concentration could be reduced is shown below. Many industrial countries that don’t add fluoride have similar tooth decay rates to the US.

World Health Organization data on tooth decay and fluoridation.

World Health Organization data on tooth decay and fluoridation.

This chart should not be read to suggest that fluoride doesn’t help; all the countries shown use fluoride toothpaste, and some give out fluoride pills, too. And some countries that don’t add fluoride have higher levels of cavities. Norway and Japan, for example, don’t add fluoride and have 50% more cavities than we do. Germany doesn’t add fluoride, and has fewer cavities, but they hand out fluoride pills, To me, the chart suggests that our levels should go down, though not to zero. In 2015, the Department of Health recommend lowering the fluoride level to 0.7 ppm, the lower end of the previous range, but my sense from the experience of Europe is that we should go lower still. If I were to pick, I’d choose 1/2 the original dose: 0.6 to 0.35 ppm. I’d then revisit in another 15 years.

Having picked my target fluoride concentration, I checked to see the levels in use in Oakland county, MI, the county I was running in. I was happy to discover that most of the water the county drinks, that provided by Detroit Water and Sewage, NOCWA and SOCWA already have decreased levels of 0.43-0.55 ppm. These are just in the range I would have picked, Fluoride concentrations are higher in towns that use well water, about  0.65-0.85 ppm. I do not know if this is because the well water comes from the ground with these fluoride concentrations or if the towns add, aiming at the Department of Health target. In either case, I don’t find these levels alarming. If you live none of these town, or outside of Oakland county, check your fluoride levels. If they seem high, write to your water commissioner. You can also try switching from fluoride toothpaste to non-fluoride, or baking soda. In any case, remember to brush. That does make a difference, and it’s completely non-toxic.

Robert Buxbaum, January 9, 2017. I discuss chloride addition a bit in this essay. As a side issue, a main mechanism of sewer pipe decay seems related to tooth decay. That is the roofs of pipe attract acid-producing, cavity causing bacteria that live off of the foul sewer gas. The remedies for pipe erosion include cleaning your pipes regularly, having them checked by a professional once per year, and repairing cavities early. Here too, it seems high fluoride cement resists cavities better.