Apple Scruffs

Our story this morning is not about the George Harrison song, which paid tribute to the folks who used to hang around Savile Row and Abbey Road in the late days of Beatlemania. We're talking about a totally different Apple Nothing scruffy about this news:

Apple Inc. said it would pay a one-time tax of $38 billion on its overseas cash holdings and ramp up spending in the U.S., as it seeks to emphasize its contributions to the American economy after years of taking criticism for outsourcing manufacturing to China.

The world’s most valuable publicly traded company laid out its plans Wednesday in a statement that was full of big-dollar figures, though it said that much of the money reflected Apple’s current pace of spending.

Apple said it would invest $30 billion in capital spending in the U.S. over five years that would create more than 20,000 jobs. The total includes a new campus, which initially will house technical support for customers, and $10 billion toward data centers across the country. It also will expand from $1 billion to $5 billion a fund it established last year for investing in advanced manufacturing in the U.S.

Would that have happened if the tax reform package that Trump championed had been killed? We don't know for sure, but it's a reasonable surmise. More from the Wall Street Journal:

Apple’s $38 billion tax commitment is the largest such sum announced in response to the major overhaul of the U.S. tax code that President Donald Trump signed into law late last year. That law included an incentive for U.S. companies to bring home offshore holdings, with companies required to pay a one-time tax of 15.5% on overseas profits held in cash and other liquid assets.

15.5% is far less than the 34% or 35% that the government would ostensibly had collected under Obama, but it's far more than nothing, which is what the government actually received when Apple and other companies kept their money overseas. There's more:

U.S. companies have long pushed for such a change to enable them to repatriate overseas cash without what they considered an excessive tax hit. Apple on Wednesday cited the tax changes as the reason for its $38 billion payment. It didn’t say how much of its $252.3 billion in overseas cash holdings it plans to bring home, though it will be the vast majority, Chief Executive Tim Cook told ABC News in an interview.

All told, Apple said it would directly contribute $350 billion to the U.S. economy over the next five years, with the bulk—about $55 billion this year, for example—coming from ongoing spending on parts and services from U.S. suppliers. That number also includes the federal tax payment and capital spending.

Back in the late 1960s, the Apple Scruffs hung out at the gates, always hopeful of getting the attention and favor of the Fab Four:

Can we get some?

We've now lifted the gates and money is coming in, from Apple and a variety of other companies. You'll see more stories of this sort in the coming weeks and months.

Everybody must get zoned

Back in the early 1990s, before we moved to to the Twin Cities, I lived in the Chicago area and worked for a big law firm in Chicago that had over 300 attorneys. Much of the firm's work was in real estate, including big real estate deals for properties like shopping malls. One of the attorneys at the firm was an expert in zoning and he was proud to tell anyone who would listen that he was going to be helping the city of Houston develop its first zoning laws. I don't think he got very far.

Houston has been in the news because it took a huge shot from Hurricane Harvey. As you may know, among the many features of Houston is that the city doesn't have the sorts of zoning laws that you find in other areas. This has always bothered the bien pensants of the world, who equate Houston with being benighted and profligate, the embodiment of urban sprawl and bad carbon footprints, like that. And because Houston suffered so much damage from Harvey and had so many problems, the bien pensants are blaming Houston's lack of zoning for exacerbating the problems. Here's a typical example from the website Quartz.com:

Largely unobstructed either by rules or by natural features such as mountains, the Houston area sprawled. Between 1992 and 2010 alone nearly 25,000 acres (about 10,000 hectares) of natural wetland infrastructure was wiped out, the Texas A&M research shows. Most of the losses were in Harris County, where almost 30% of wetlands disappeared.

Altogether, the region lost the ability to handle nearly four billion gallons (15 billion liters) of storm water. That’s equivalent to $600 million worth of flood water detention capacity, according to the university researchers’ calculations.

Sounds bad, right? But would it have made much difference? The invaluable Joel Kotkin doesn't think so:

Much blame for Harvey has been linked to development on the fringe, a major component of the region’s growth. Over an 18-year period, Houston lost about 25,000 acres of wetlands, which took away about 4 billion gallons of storm water detention capacity. In contrast Harvey dumped about 1 trillion gallons, meaning those wetlands could have only absorbed about 0.4% of Harvey’s deluge. Many flooded roads were consciously designed to hold storm water temporarily when there is nowhere for it to drain.

And would zoning have helped? Kotkin is skeptical:

The zoning argument is, simply put, bogus. Cities in the area that were heavily zoned, like West University, or intensely planned like Sugarland, got hit as hard as more haphazard areas. Harvey, it turns out, was an equal opportunity devastator. Similarly, Sandy dropped barely one-third the rain from Harvey, yet overwhelmed a dense and very zoned area. New Orleans before Katrina was dense and zoned; a lot of good it did them.

There can be advantages to zoning; I wouldn't want my neighbor to sell his property to someone who turned it into a micro-sized oil refinery, nor would I want to move my house a mile or so north so I'd be downwind from the telephone pole yards. But rules and rulemaking aren't what make a city work. It's the sense of people in the community itself, the commitment to making the community a place where you can live and thrive, that makes the difference. Back to Kotkin:

In the decades before Katrina, as southern cities like Houston and Atlanta were burgeoning, New Orleans stagnated. Joel Garreau in his Nine Nations of North America described the Crescent City as a “marvelous collection of sleaziness and peeling paint.” The aristocracy enjoyed the city’s unparalleled culture while many ambitious people from its neighborhoods migrated elsewhere. Without a strong, engaged business community and middle class, there was little attempt to fix the infrastructure. This weak civic culture has left a city with huge economic challenges that a regenerated local business community is now gamely trying to address.

Houston performed very differently during Harvey. Mayor Turner and the Harris County Judge, Ed Emmett, epitomized level-headed leadership. Gov. Abbot, unlike Louisiana’s dithering Gov. Kathleen Blanco, swung immediately to action. Local volunteers pitched in, so much so, notes Houston-based analyst Tory Gattis, that many found themselves unable to participate because each Facebook call for help spurred more volunteers than could be accommodated. Houston can also count on something New Orleans lacked: a strong, and philanthropically inclined business establishment who are pouring millions into recovery efforts.

We won't be talking much about the recovery in Houston in a year or so, because the people there will be making it happen without commentary. We're still worrying about the fate of New Orleans a dozen years after Katrina. You can plan all you want, but if people aren't buying the plan, it won't matter.

Good news for Roseville, St. Louis Park, Richfield. . .

We will soon find out whether Minneapolis values its businesses:

A Hennepin County judge on Monday overruled the Minneapolis City Council's decision to block a $15 minimum wage charter amendment, ordering that the issue be placed on the November ballot.

Judge Susan Robiner issued her decision more than a week after she heard arguments from advocates who gathered enough signatures to send the issue to voters. The City Council, following the legal opinion of City Attorney Susan Segal, previously had voted to prevent the proposal from reaching the ballot. A majority of council members said they believed the issue was not a proper subject for a charter amendment, the only type of action allowed to be put to a direct vote.

And the folks who think they'll be getting rich are mobilized:

Barring a higher court reversal, the judge's decision means supporters of the higher wage, including the groups 15 Now Minnesota, Centro de Trabajadores Unidos en Lucha and Neighborhoods Organizing for Change, will have just over two months to convince voters that Minneapolis' minimum wage should be among the highest in the nation. Only a handful of other cities, including Seattle, San Francisco and Los Angeles, have approved a $15 minimum wage.

Advocates said Monday that they are optimistic. They pointed to poll results they released last week that showed 68 percent of 400 voters surveyed said they'd vote in favor of a $15 minimum wage.

As the economists say, there's no such thing as a free lucha. We'll find out soon if the citizenry figures it out, or whether they get the H. L. Mencken treatment.

Hillary Hoover

Is the presidency a poisoned chalice? How would you like to deal with this mess in your first 100 days?

The next president could be dealing with an ObamaCare insurer meltdown in his or her very first month.

The incoming administration will take office just as the latest ObamaCare enrollment tally comes in, delivering a potentially crucial verdict about the still-shaky healthcare marketplaces.

The fourth ObamaCare signup period begins about one week before Election Day, and it will end about one week before inauguration on Jan. 20. After mounting complaints from big insurers about losing money this year, the results could serve as a kind of judgment day for ObamaCare, experts say.

If you haven't been paying attention, we've been seeing a steady stream of insurers heading for the exits, along with projections of vastly higher insurance premiums next year. If you are President Hilllary Clinton, how do you deal with that issue? After that, how do you deal with the slow-motion public pension crisis now underway? And how do you deal with the national debt? Maybe you've seen a chart:

That was two years ago -- it hasn't improved since then.

Too much of the government is on auto-pilot and most of the spending is mandatory:

Yes, the Heritage Foundation is right-leaning, but the numbers are the numbers. We've been kicking the can down the road for the last 50 years. It's been a bipartisan abdication of responsibility. The only president in recent years who has publicly broached these issues is George W. Bush, but he backed down in a hurry. That was ten years ago. As the old saying goes, something that can't go on, won't go on. Have fun with that, Madame President.

The moment

The journey will be difficult. The road will be long. I face this challenge -- I face this challenge with profound humility and knowledge of my own limitations, but I also face it with limitless faith in the capacity of the American people.

Because if we are willing to work for it, and fight for it, and believe in it, then I am absolutely certain that, generations from now, we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs to the jobless...

(APPLAUSE)

... this was the moment when the rise of the oceans began to slow and our planet began to heal...

(APPLAUSE)

... this was the moment when we ended a war, and secured our nation, and restored our image as the last, best hope on Earth.

(APPLAUSE)

This was the moment, this was the time when we came together to remake this great nation so that it may always reflect our very best selves and our highest ideals.

Thank you, Minnesota. God bless you, and may God bless the United States of America.

Meanwhile, back home:

A violent September in Chicago ended with more homicides than any other month this year and the second-most shootings, according to data kept by the Chicago Tribune's breaking news desk. Though the summer months in Chicago have traditionally been the most violent, shootings last month decreased little from August and there were about 50 percent more shootings than September 2014.

Elsewhere,

A crowded hospital in the embattled city of Kunduz that treats war wounded came under attack on Saturday and the American military acknowledged that it may have killed 19 patients, staff members and others at the facility while firing on insurgents nearby.

The attack, which the military said in a statement might have been “collateral damage” that occurred while engaging militants, drew a fierce international outcry. The head of the United Nations, Ban Ki-moon, condemned it and called for a “thorough and impartial investigation.” It also renewed scrutiny of the United States military’s record of causing civilian casualties, which has alienated the Afghan public and often undermined relations with the government here.

And while we're at it,

While Russia has said that it is conducting military operations to wipe out ISIS, U.S. officials have questioned that aim given that many of its airstrikes have not targeted places ISIS is active. Instead, they have seen the effort mostly as a move to bolster close Moscow ally President Bashar al-Assad.

The latest U.S. assessment of Moscow's activity in western Syria indicates Russia has moved several ground combat weapons and troops into the area to potentially back up Syrian forces in the field planning to attack anti-regime forces, according to two U.S. defense officials.

And we really ought to mention:

The U.S. economy created 142,000 jobs in September, a number that missed expectations and could cool expectations that the Federal Reserve will start raising interest rates soon.

The participation rate plunged to 62.4 percent in September, its lowest since October 1977. The total labor force fell to a 2015 low, losing another 350,000 people. The household survey was even worse than the headline establishment number, showing a decrease of 236,000 in employment. However, the number reporting they were unemployed declined as well, by 114,000. Those reported not in the labor force increased by 579,000.

In addition to the weak headline numbers, wages were flat, indicating little inflationary pressures for the Fed, and the average work week actually fell a fraction to 34.5 hours.

As always, I blame George W. Bush.

That nasty ol' blank screen

Most mornings I observe the same ritual. Get up early, post a "Song of the Day" on Facebook, then start looking for something to write about for a blog post. Some days it's easy to find a topic. So if you'll settle for a few ruminations, here we go.

• The financial news isn't particularly encouraging. I don't doubt that we are heading into a period of financial difficulty that could prove quite severe. Still, the shrieking of various Cassandras seems self-serving. It's not coincidental that many of the people casting the warnings are suggesting that precious metals are a safe haven. It's also not coincidental that most of them are selling precious metals. If holding precious metals is the only way to avoid ruin, it's odd that so many people are trying to sell them to you.
• I'm getting the distinct impression that any number of people want us to start a stampede. It's not just the Cassandras; I get the same vibe from some of the more vocal supporters of Donald Trump. While I'm largely sympathetic to the disgruntled conservatives who are flocking to the Trump banner, there's a lot of nonsense involved. If somehow Trump were to get elected, the best case scenario would be a presidency along the lines of the governorship of Arnold Schwarzenegger. We don't have time for that.
• As a Packers fan, I'm bummed out about losing Jordy Nelson for the season. If it had to happen, though, this is a good time for it to happen. An ACL injury is typically a year-long event, which mean that Nelson will be available for 2016. There is also sufficient time for the Packers to identify a replacement for Nelson and a number of candidates are available. I'm guessing they have a Plan B.

Panic?

Headed for the exits?

U.S. stock index futures screamed lower, with Dow futures tumbling as much as 350 points, as fears surrounding the health of China's economy multiplied.

These concerns saw the benchmark Shanghai Composite index notch up its biggest one-day percentage loss since 2007 on Monday, closing down 8.5 percent.

I have friends who are in full freakout mode right now, convinced that "The Collapse"is nigh and that we're inevitably headed for some sort of Hobbesian State of Nature -- you know, the ol' "solitary, poor, nasty, brutish and short" thing. I'd like to have a little more faith than that in our ability to recover from our mistakes. Is that faith misplaced?

Let's talk about it. But first, a poll?

Is it time to panic?

Yes

No

I can't hear you; I have bought so much silver that I've soundproofed my walls with it

Don't ask me and get off my lawn

I'm sure Barack will think of something

That "Hobbesian State of Nature" idea really wrecked my enjoyment of "Calvin and Hobbes"

I want to buy tulips. Is that so wrong?

 

pollcode.com free polls

Uh-oh

Here it comes:

What happens when the Federal Reserve loses its stranglehold over debt markets? Investors are finding out.

The selloff in corporate bonds is deepening and investors are seeking safety in the longest-dated government debt, which does best when the economy does worst. Defaults are rising as oil tumbles and investors are looking for the best ways to hedge against credit losses.

That's the thing about a stranglehold -- eventually it leads to a strangling.

Shifts and shiftlessness

A caveat at the outset -- I do not want Jeb Bush to be president. In fact, the entire Bush family really ought to go away from national politics and stay away. Okay, we've cleared that up. Now, let's get to the mendacity built into the reaction he's getting for something he said earlier this week:

During an interview that was live-streamed on the app Periscope, Bush made the comments to New Hampshire’s The Union Leader answering a question about his plans for tax reform.

“My aspiration for the country and I believe we can achieve it, is 4 percent growth as far as the eye can see. Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours” and, through their productivity, gain more income for their families. That's the only way we're going to get out of this rut that we're in.”

The reaction I've seen to this statement is ridiculous. A sample, from my social media feed:

The obscenely wealthy have a robust history of believing that everybody who isn’t obscenely wealthy is not so simply by virtue of being shiftless. If they weren’t already dead inside, I guess that would make it easier for them to sleep at night and look themselves in the mirror.

What makes someone "obscenely wealthy" is a discussion for another day. So, did you sense that ol' Jeb is saying people are shiftless? I didn't. Bush is talking about the workforce participation rate, which is at a lower point than it has been in generations. A lot of people aren't working full time hours at present. For some, it's a conscious decision. For some others, it's because full time work isn't readily available. For some people, the job search has been so fruitless that they've given up.

In my job, I manage 7 people. Five of the seven are full time employees; the other two are contractors. One of the two contractors works 3 days a week; the other works the full week. I have enough work to hire these people and probably one more, but the cost of adding a new employee is so high that it's simply easier to have them work as contractors. We pay our contractors very well, but we don't have to take on any of the other associated costs of employing someone, especially benefits.

I'm not particularly crazy about the arrangement, but we make it work. Employers everywhere do similar things. Would my 3 day-a week contractor have a better life if she worked all five days? Maybe, but not necessarily. Her current schedule allows her time for her family, which is important to her. Mrs. D works part-time as well; she could increase her hours by taking another job, but at this point in our lives it doesn't make sense for her to do so.

I do think a lot of people would like more hours. I know a lot of full time workers would like to work less hours than they currently do. Getting there is difficult and will require a lot of people to change how they operate. Making it easier for people who are unemployed, or underemployed, to find full time work is the challenge. How do you do it? The election hinges on how we answer that question.