Category: US business

(Company you don’t like)‘s taxes

Tyler Cowen:

The main reason Amazon as a corporate entity does not pay much in taxes is because the company so vigorously reinvests its profit. The resulting expensing provisions lower their tax liabilities, in some cases down to zero or near-zero.

That is, in fact, the kind of incentive our tax system is supposed to create, and does so only imperfectly, noting that many economists have suggested moving to full expensing.

Amazon pays plenty in terms of payroll taxes and also state and local taxes. Nor should you forget the taxes paid by Amazon’s employees on their wages. Not only is that direct revenue to various levels of government, but the incidence of those taxes falls somewhat on Amazon, which now must pay higher wages to offset the tax burden faced by their employees.

Not everyone wants to live in NYC or Queens! (Do you agree with Paul Krugman’s charge that the Trump tax cuts are mainly a giveaway to capital? If so, you probably also should believe that the wage taxes paid by Amazon employees fall largely on capital.)

There is no $3 billion that NYC gets to keep if Amazon does not show up. That “money” was a pledged reduction in Amazon’s future tax burden at the state and local level.

When it comes to the discussion surrounding Amazon and taxes, I can only sigh…

As do I, because businesses don’t pay taxes; their customers do as part of the cost of a product or service. Reducing business taxes is the source of considerable campaign spending. So if business taxes were zero, there would be less money donated to candidates. In addition, prices would be lower, or companies would have higher profits, which would be returned to shareholders in higher dividends, reinvested in companies, or sent to workers in higher pay.

 

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Trump’s tariffs are so big …

Brett Arends wrote this last week:

I’m used to partisan, inaccurate drivel from all sides these days, but the media’s coverage of President Trump’s tariffs and the so-called “trade war” takes some kind of cake.

There’s no serious doubt that some in the media would absolutely love to tank the stock market. They figure that would hurt Trump’s re-election chances in 2020. Monday’s stock market slump, which saw the Dow Jones Industrial Average DJIA, -1.41% tumble 2.4% and the Nasdaq Composite 3.4%, looked just like what the doctor ordered.

I write this, incidentally, as someone who is no fan of the president. But I remember when politics was supposed to stop at the water’s edge.

And, anyway, facts are facts. Most of what the public is being told about these tariffs is either misleading or a downright lie.

I’ve been following the coverage all weekend with my jaw on the floor.

Yes, tariffs are “costs.” But they do not somehow destroy our money. They do not take our hard-earned dollars and burn them in a big pile. Tariffs are simply federal taxes. That’s it. The extra costs paid by importers, and consumers, goes to Uncle Sam, to distribute as he sees fit, including, for example, on Obamacare subsidies.

It wasn’t long ago the media was complaining because Trump was cutting taxes. Now it’s complaining he’s raising them. Confused? Me too.

And the amounts involved are trivial. Chicken feed.

President Trump just hiked tariffs from 10% to 25% on about $200 billion in Chinese imports. In other words, he just raised taxes by … $30 billion a year.

Oh, no!

The total amount we all paid in taxes last year — federal, state and local — was $5.51 trillion. This tax increase that has everyone’s panties in a twist is a rounding error.

Meanwhile, the total value wiped off U.S. stocks during Monday’s panic was about $700 billion. More than 20 years’ worth of the new tariffs.

Even if Trump slapped 25% taxes on all Chinese imports, it would come to a tax hike of … $135 billion a year. U.S. gross domestic product (GDP) last year: $20.5 trillion.

So even this supposedly scary “escalation” of this “tariff war” would, er, raise our total tax bill from 26.9% of GDP all the way to 27.5% of GDP.

Oh, and isn’t it interesting to see some people’s priorities? Apparently the most shocking part of this trivial tax hike is that it might raise the price of new Apple iPhones.

Last I checked, these were luxury items, right?

Meanwhile, the trade spat seems to be bringing down food prices. China is going to take less of our farm products. So wheat prices are down 20% since the start of the year. Soybeans are at 10-year lows.

Good for consumers, right?

No, no, of course not! Silly you. This is also bad news … for farmers!

And all this ignores the much bigger picture, anyway.

The tariffs are simply a means to an end. The president is trying to get China to start buying more of our stuff. He knows the so-called Middle Kingdom, which now has the second-biggest economy in the world, responds to incentives more than to nice words. These tariffs give China an incentive to open up.

OK, so China’s first reaction is just to retaliate. Big deal. That’s just posturing.

Right now we export less to China than we do to Japan, South Korea and Singapore put together. That’s the point. So the effect of China’s new tariffs on the U.S. are yet another rounding error. Even if China banned all imports from the U.S., that would amount to only 0.6% of our gross domestic product. And we’d sell the stuff somewhere else.

Don’t buy the hysteria. President Trump is simply trying to pressure our biggest competitor to buy more American goods. That should be a good thing, even if you don’t like him.

Arends is not, as far as I know, a Republican or a conservative. Marketwatch lists him as “an award-winning financial columnist with many years experience writing about markets, economics and personal finance. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a Chartered Financial Consultant. His latest book, Storm Proof Your Money, was published by John Wiley & Co.”

So Arends may be right. We better hope he is.

 

A story you probably thought you’d never see

Douglas A. McIntyre:

Fiat Chrysler Automobiles proposed a merger with Renault that would create the world’s third-largest carmaker. The eroding economics of the industry make such deal more likely by the day. Deep trouble at Ford Motor and General Motors’ need for more heft to compete with rivals Toyota and Volkswagen make a marriage between the two largest car companies increasingly probable.

Fiat Chrysler argues that a tie-up with Renault will lead to $5.5 billion in savings. As car sales have flattened in the United States and started to drop in China, the two largest markets in the world offer less hope for revenue improvement. Neither company has much of a sales footprint in China. Renault has none at all. Both have a strong market share in Europe, but it is one of the most competitive markets in the world. At the low end of the market, VW is the dominant force. At the high end, it is BMW and Mercedes.

While GM and Ford both have a strong market share in the United States, Ford has stumbled. It has withdrawn most of its sedans in the American market because sales have shifted from cars to sport utility vehicles, crossovers and pickups. Ford’s only bright spot in the United States is its F-Series full-sized pickup, which is the top-selling vehicle in the nation. Ford’s sales in China are abysmal and falling. GM’s are strong, but it is up against other car companies, both local and global, that need the largest car market to be successful.

Ford’s management, under CEO Jim Hackett and Executive Chair William Ford, has shown it can cut costs. It recently cut 7,000 white-collar workers. That will save $600 million. Hackett has set total savings of $14 billion for the five-year period that began last year. He also said the company will invest $11 billion to have 40 electric and hybrid cars by 2022. Not many outsiders believe he can make his goal. Ford may build more electric cars and hybrids, but selling them is another matter. The competition in this market runs from tech companies like Alphabet’s Waymo to Tesla, startups and every major manufacturer in the world. There is no evidence Ford is ahead of this wave, and so far, it appears the company is behind it. Confidence in Hackett, in particular, is low.

GM is better regarded than Ford, primarily because of the work of CEO Mary Barra. She has been CEO of GM since 2014. It also has cut costs. However, many outsiders believe it is ahead of most of its rivals in both the electric and self-driving car businesses. GM owns 75% of Cruise Automation, a leader in artificial intelligence of future cars.

GM has two other advantages over most global manufacturers. It is among the leaders in car sales in China. With its joint venture partners, it sold 813,973 vehicles in the first quarter. GM is also the leader in U.S. car sales, with about 17% of the market.

One of the primary hurdles GM would have if it took over Ford is that the market share of the two in the United States would be close to 30%. Either U.S. regulators would need to accept that, or the combined company would need to sell or spin out some of its brands. The most likely of these are GM’s Buick or GMC truck business.

While GM may have a future as a standalone car company over the next decade, Ford does not. Its market cap is down 42% over the past five years, while GM’s is close to flat. The savings in a combination would be well into the billions of dollars. A marriage of the two also could compete effectively with Toyota, VW and perhaps the new Fiat Chrysler and Renault combo. GM also has the advantage that it is considered to make among the most dependable American cars.

Who would have predicted a GM–Ford merger at any point?

The possible irony here is that GM has fallen out of favor with many car buyers due to its bailout in 2008. And GM clearly has issues with those not turned off by the bailout, as GM Authority reports:

During GM’s Q1 2019 earnings call, a Barclays Capital analyst asked GM CEO Mary Barra a rather interesting question: whether the automaker’s products lack the desirability of key rivals, particularly when it comes to vehicle design and effective marketing tactics that attract buyers.

“We’ve talked over the years about the cultural change you did at GM and a greater focus on cost accountability, making sure you’re in the right product and geographies to drive profit,” asked Brian Arthur Johnson of Barclays Capital. “But one thing I do hear from investors is, if they look at GM design, broadly speaking, both the vehicles, the interiors, the advertising it just doesn’t, in some people’s view, have the kind of pizzazz as you might see. I don’t always like going back to Tesla, but it’s not lost on some of us that one of your designers created Elon’s vehicle lineup.

So just, how are you thinking about the state of design overall at GM? Is it an important differentiator? Or do you think it’s more important to get capable vehicles out there and kind of play it more on the profit and the cost game? And if it is more important, what would you — what are you trying to do to kind of move it to the next level?”

GM CEO Mary Barra responded with the following, providing some insight into the automaker’s thinking and processes:

“I think it’s incredibly important. You have to do everything to win in this market. And design is a very important piece of it. I think we have a very disciplined process where we clinic data and understand the customers in segment and what they’re looking for, how they view products. Full-size truck is different than a Cadillac is different than a compact SUV like the Chevrolet Equinox. And so, we have a very rigorous process on how we develop trucks and really focus on putting the customer at the center as we do those designs.

But all aspects are critically important. I think if you – you mentioned advertising as well. I think Cadillac is a really good example as you’ve seen the shift that we’ve made. And Steve Carlisle can do a better job of telling you, but the list that we’ve had with Cruise, with the right campaign has been very very successful. And I would also say, when you look at brand building, there’s been tremendous improvement across all of our brands and strengthening from the key brand metrics.

So we’re focused on having beautifully designed products that people want and desire and got to have to having the right contenting, so we could have the right package and efficiency and affordability for the customer and winning in the marketplace and then having advertising that breaks through. But sometimes the advertising that breaks through and is most effective with the customers isn’t the one that wins all the awards.”

That seems like a nice reply, but it still doesn’t really explain what the automaker will do to solve the elephant in the room, which is that a significant amount of U.S. car buyers do not desire GM, its brands or products when shopping for a car – whether due to prior quality or reliability issues, image-related factors, or an entire list of other potential reasons. It’s a serious problem, one that leaves GM competing for a smaller portion of buyers.

Meanwhile, some of the automaker’s newest vehicle designs have been critiqued for being bland or unattractive, including such models as the all-new 2019 Chevrolet Silverado, refreshed 2019 Camaro, and the all-new 2020 Cadillac CT5.

In addition, the Super Cruise campaign mentioned by Barra might make for a good talking point, but its success is very limited. The spot in question – called Pioneers – isn’t focused on Super Cruise, but rather mentions it in passing, while also bringing up a whole bunch of other Cadillac attributes. But apparently, it’s effective.

Or not if it’s not actually selling GM cars.

This will be really interesting to watch.

 

贸易战中的输家

I’m not sure I buy Tyler Cowen‘s claim, but it is an interesting point of view:

With the U.S.-China trade talks now at a halt, odds are that the recent U.S. tariffs on China will continue — and perhaps even rise and multiply. So it’s worth considering what effects those tariffs will have. One prominent argument, which can also serve as a criticism of President Donald Trump, is that the U.S. consumer is the loser. Yet in reality, China is probably in the more vulnerable position.

To be clear, there are well-done studies showing that the recent tariffs have translated into higher prices for U.S. consumers. I am not contesting that research. The question is whether those studies give sufficient weight to all relevant variables for the longer run.

To see why the full picture is more complicated, let’s say the U.S. slaps tariffs on the industrial inputs (whether materials or labor) it is buying from China. It is easy to see the immediate chain of higher costs for the U.S. businesses translating into higher prices for U.S. consumers, and that is what the afore-mentioned studies are picking up. But keep in mind China won’t be supplying those inputs forever, especially if the tariffs remain. Within a few years, a country such as Vietnam will provide the same products, perhaps at cheaper prices, because Vietnam has lower wages. So the costs to U.S. consumers are temporary, but the lost business in China will be permanent. Furthermore, the medium-term adjustment will have the effect of making China’s main competitors better exporters.

Obviously, no final long-run estimates are possible right now. But it is quite plausible that China will bear the larger costs here, not the U.S.

Another risk for China is this: As its access to U.S. markets becomes more difficult, China may be tempted to look to Europe. It remains to be seen whether the European Union will adopt additional protectionist measures, but China must consider that the possibility is more than zero.

To understand another feature of the longer-term perspective, consider that the impact of tariffs can be felt in at least two ways. In highly competitive markets, prices have to match costs, and so a cost-boosting tariff really does translate into higher consumer prices. (This is the case with many of the recent U.S. tariffs on China.) But for profitable branded goods, the economics aren’t the same. If the U.S. puts higher tariffs on Mercedes-Benz, for example, the prices of those cars will still exceed their costs of production. Mercedes, wishing to keep some of its strong market position, will probably decide to suffer some of the cost of the tariffs in the form of lower profits, rather than passing them along to its customers.

China has prominent brands as well, be it Huawei in electronics or other firms in exotic food products, and over time it aspires to climb the value chain and sell more branded goods to Americans. In fact China has an industrial policy whose goal is to be competitive in these and other areas. Tariffs will limit profits for these companies and prevent Chinese products from achieving full economies of scale. So this preemptive tariff strike will hurt the Chinese economy in the future, even if it doesn’t yet show up in the numbers.

There is also a broader reason why a trade war with the U.S. hurts China, and this gets to an important point with trade agreements more generally. A U.S. trade agreement with China would (if enforceable) certify China as a place where foreigners can invest and be protected against espionage, intellectual property theft and unfair legal treatment. That prospect of certification is now suspended. That makes investing in China less desirable for many multinationals, not just U.S. ones. That, in turn, limits Chinese domestic wages as well as long-term learning and technology transfer. A U.S. certification of China might even boost Chinese domestic investment, but again that is now off the table.

In my numerous visits to China, I’ve found that the Chinese think of themselves as much more vulnerable than Americans to a trade war. I think they are basically correct, mostly because China is a much poorer country with more fragile political institutions.

And finally: My argument isn’t about whether Trump’s policy toward China is correct. I am only trying to get the basic economics straight. Next time you hear that the costs of the trade war are simply being borne by Americans, be suspicious. In their zeal to make Trump look completelywrong, on tariffs or other issues, too many commentators pick and choose their arguments. A more fair and complete economic analysis indicates that China is also a big loser from a trade war. Trump’s threats are exerting some very real pressure on the country.

This question of who is worse off omits one important detail. If Trump wants to stay president, he has to run for reelection next year, as do Congressional Republicans supporting and opposing his trade policies. China’s leaders have no such concern; they could tank their entire country’s economy and remain in power. So ask yourself what China really has to lose from this trade war.

中国的贸易战

Brian Wesbury and Robert Stein:

Since hitting new all-time highs two weeks ago, the S&P 500 has fallen about 2.2% as trade negotiations with China hit a snag. Last week, the US announced new tariffs on Chinese imports. This morning, China announced new tariffs on some US goods. Many fear a widening trade war.

Don’t get us wrong. We want free trade, and we understand the dangers of trade wars and tariffs (which are just taxes on consumers). At the same time, we think trade deficits themselves are not a reason for trade wars. We all run personal trade deficits with the local grocery store and benefit from that. Even if the entire world went to zero tariffs, the US would almost certainly still run trade deficits, even with China.

But today, the trade deficit with China is partly due to the fact that China has higher tariffs on imports than the US does – working to eliminate these lopsided tariffs is worthwhile.

In 1980, China was an impoverished nation. Then it began adopting tools of capitalism – property rights, markets, free prices and wages. Chinese businesses started to import the West’s technology, and growth accelerated.

Initially, China didn’t have to worry about intellectual property. When you replace oxen with a tractor, all you have to do is buy the tractor, not reinvent the internal combustion engine. But China has now picked, and benefited from, the lowest hanging fruit. So, China decided to steal the R&D of firms located abroad. Some estimates of this collective theft run into the hundreds of billions of dollars.

That’s why normal free market and free trade principles don’t neatly apply to China.

Remember President Reagan’s old story supporting free trade? “We’re in the same boat with our trading partners,” Reagan said. “If one partner shoots a hole in the boat, does it make sense for the other one to shoot another hole in the boat?” The obvious answer is that it doesn’t, and so our own protectionism would hurt us.

But China hasn’t just shot a hole in the boat, they’ve become pirates. If Tony Soprano and his cronies robbed your house, would free market principles require you to trade with them to buy those items back? Of course not!

It’s true tariff increases will not help the US economy. But $100 billion of tariffs spread over $14 trillion of consumer spending is not a recession inducing drag. It’s true some business, like soybean farmers, are hurt. But the status quo means accepting hundreds of billions in theft from companies that are at the leading edge of future growth.

Either way, if tariffs nick our economy, China’s gets hammered. Last year we exported $180 billion in goods and services to China, which is 0.9% of our GDP. Meanwhile, China exported $559 billion to the US, which is 4.6% of their economy. We have enormous economic leverage that they simply can’t match.

An extended US-China trade battle means US companies will shift supply chains out of China and toward places like Singapore, Vietnam, Mexico, or “Made in the USA.” If that happens, the Chinese economy is hurt for decades.

Anyone can invent a scenario where some sort of Smoot-Hawley-like global trade war happens. Realistically, though, that appears very unlikely. We’re not the only advanced country China’s piracy has victimized, and China may realize it’s more isolated than it thought. In the end, China wants to trade with the West, not North Korea, Russia, and Venezuela. China needs the West. And all these trade war hysterics just aren’t warranted.

 

Tax cuts and the economy

M.D. Kittle:

The booming economy of 2019 continues to be fueled in large part by the GOP Tax Cuts and Jobs Act of 2017. 

And Badger State companies and their employees continue to reap the rewards of tax relief. 

“Also, what may not be as immediate is (the tax savings) have allowed us to bank some cash…It’s a fact that there are going to be funds there for us to be able to put toward capital expenditures when the time is right,” Jung said.

U.S. gross domestic product (GDP), according to initial reports from the U.S. Commerce Department, grew by a whopping 3.2 percent in the first quarter, crushing estimates and soothing worries of a looming economic slowdown.

Companies like Pewaukee-based Trico Corp.have much to do with the U.S. economy’s impressive expansion. Bob Jung, CEO of the century-old industrial lubricants business, will tell you that the $1.5 billion tax relief package passed by the Republican-controlled Congress and signed into law by President Trump continues to benefit businesses like his — and Trico’s employees. 

A year ago, Jung confirmed that, thanks to the tax cuts, Trico would provide $650 bonuses to its workforce, and the employer planned to increase contributions to employee 401(k) accounts. The company also expected to hire more full-time workers. Jung said Trico paid out those additional benefits earlier this year. 

The lower tax rates for S corporations like Trico have made a big difference to the bottom line. But the reform package also included beneficial accounting changes. Jung’s company was able to change from accrual to cash accounting, allowing Trico to recognize revenue and expenses only when money changes hands, not when revenue is earned and expenses are billed (but not paid) under accrual accounting. 

Jung said the tax cuts have helped the company expand products and services to customers. Trico sales are up 10 percent on the year, he said.

“Also, what may not be as immediate is (the tax savings) have allowed us to bank some cash,” the CEO said. “It’s a fact that there are going to be funds there for us to be able to put toward capital expenditures when the time is right, perhaps in the fourth quarter.” 

Such sentiment bodes well for economic expansion ahead. 

Economists’ consensus had pegged GDP growth at about 2.5 percent to start the year. Many are upping their full-year estimates following the latest numbers on top of a healthy 2.9 percent growth rate in 2018. On average, the U.S. economy has added 180,000 jobs in the first three months of the year, while the major markets continue to break records. 

Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department.

Grover Norquist, president and founder of Americans for Tax Reform, said the GOP tax reforms were designed to ramp up economic growth over the next three to four years. When you cut corporate income tax rates from 35 percent to 21 percent, however, that frees up a lot of capital to reinvest, Norquist said. And U.S. companies have done just that. 

Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department. That’s a considerable amount, even as Bloomberg and other media outlets chortled that it was a far cry from the $4 trillion President Trump predicted would return post-tax reform. 

“We saw the growth immediately from the first year, so imagine what will happen over the next two, three, four or five, six years (with) the most powerful, pro-growth, pro-wage increase” tax reform law, Norquist told MacIver News Service in a recent edition of the MacIver NewsMakers podcast. 

U.S. businesses continue to pass along their tax savings to employees, to consumers, and to their communities. 

Americans for Tax Reform has tracked some 800 examples of new hires, pay raises, benefit increases, bonuses, facilities expansions, and utility rate reductions directly related to the tax cut package. This incomplete list, which only notes firms that have made public announcements, includes the largest corporations to the smallest shops — including dozens of Badger State companies, like Trico.  

And Madison-based Musicnotes, Inc. 

Last year, the worldwide leader in digital sheet music, announced it was giving 3 percent salary increases to its 55 employees, thanks to the corporate tax cuts. Tim Reiland, the company’s executive chairman, said Musicnotes intended to expand its workforce. 

“We definitely benefitted from the tax reform and we have passed some of that along and continue to do that,” Reiland said.

It has done that and more. 

“This is a really positive story for us and it continues,” Reiland told MacIver News last week. “We definitely benefitted from the tax reform and we have passed some of that along and continue to do that.” 

Musicnotes has added six positions, boosted salaries by an average of 10 percent, and expanded office space by about 15 percent since the beginning of 2018, Reiland said. He calls it the “virtuous circle.” 

A lot of the company’s growth has to do with its products and the people behind them, Reiland said, but a significantly lower corporate tax rate certainly helps. 

“It’s very real. It’s cash flow. That’s what you need to grow a business,” he said. “It has been a significant benefit to us, and we’ve shared, we’ve rewarded, we’ve plowed back and we continue to do that.” 

Beyond business expansion and employee bonuses, a lot of companies have used a portion of their tax savings to benefit their communities. Case in point, CUNA Mutual Group. The Madison-based mutual insurance provider was able to make the largest contribution ever — $20 million — to its philanthropic foundation, thanks in part to tax reform. 

“The reform benefit is helping us,” said CUNA Mutual spokesman Phil Tschudy. “The reason we did this is so we could ensure that our foundation is funded for years to come, regardless of economic situations.” The foundation turned 50 this year.

Consumers, too, continue to benefit from the 2017 tax reform law. 

State regulators announced last year that WE Energies’ electric customers would receive a one-time credit in July and a slight decrease in rates “from a portion of the savings from the company’s lower federal corporate tax rate.” The Milwaukee utility’s customers received a combined $374 million in refunds, through bill credits, in 2018, according to WE Energies spokesman Brendan Conway. 

“We have also lowered the amount of debt customers would have had to repay us $47.2 million,” he said in an email. 

On top of that, the utility’s recent filing with the state Public Service Commission proposes to use an additional $111.3 million in tax savings to lower customer costs in 2020 and 2021. 

Democrats, led by Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer called the benefits delivered by the tax cuts “crumbs.” But employers and workers nationwide have been able to keep a lot more bread — and impressive economic growth shows the power unleashed when taxpayers are freed from the burdens of taxation.

The last Corvette

Dave Cruikshank:

The front-engined Corvette is dead. GM head honcho Mary Barra delivered the news last week the final production C7 would be auctioned off this summer.

While the press skimmed the surface of this historic automotive event, The C7’s demise has received little in-depth coverage. Not only is this a melancholy milestone for us ‘Vette fans, but a little bit of an automotive Groundhog’s Day as well.

Case in point, take the introduction of the GM’s LS powerplant way back in 1996. It debuted in the 1997 C5 Corvette and then GM quietly phased out the Gen 1/Gen II small-block motors with little fanfare. By the time production halted, GM produced over 50 million old-school V8s, easily dwarfing the Model T, Corolla, and the VW Bug for all-time automotive sales goliath. Yet, it went out with a whimper and folks hardly noticed.

Fast forward to last week’s announcement the C7 was dead, and GM seems to be taking a similar tack, quietly pulling the plug on the the last front-engined ‘Vette. Lasting just six model years, the C7 will match the C2 as one of the shortest running generations in Corvette history.

It also quashes the conventional wisdom that the Corvette would be a two-platform lineup, at least for the time being. Let’s back up and review key events that led to the euthanization of the old-school Corvette.

GM invested almost two-thirds of a BILLION dollars in the expansion of Bowling Green. We were certain it was to accommodate two Corvette models. Some thought it would be a Cadillac variant or at the very least, the C7 would live on to appease traditional Corvette buyers.

Now that the C7 is dead, what’s going on in Bowling Green that required doubling the size of the factory? Is there a second model we don’t know about? In an SUV/CUV crazy market, it seems unlikely that GM would field a high-zoot sports car as the crown jewel of Cadillac. A more profitable Escalade would make sense, but a low volume sports car? Seems far-fetched at this point.

We know that high-performance engine assembly for Corvette (and now Cadillac’s Blackwing V8) has been brought in-house, and the paint shop is completely new, but what exactly will GM do to fully allocate a mega-expanded Bowling Green is up for debate. As we’ve all seen in the past few months, GM isn’t shy about shuttering plants if they aren’t running at darn near 100 percent capacity.

Especially risky for Bowling Green when you’re completely rewriting the rules of the brand and the jury is still deliberating if a mid-engine car will be warmly regarded by the Corvette faithful.

We would have loved to have been a fly-on-the-wall when Corvette Chief Engineer Tadge Juechter and gang pitched GM brass on the C8 Corvette. It was probably the hardest sales job ever in the annals of automotive history. Could you imagine the following scenario? Let’s cue up the wiggly lines on the TV and go back in time…

Picture Tadge at a round table with GM brass, “Hey, we are the undisputed king of sports cars in the North American market, selling between 25 to 40,000 units annually at a huge profit to the company. What we’re proposing is completely re-writing the template of the car, with a more exotic design. Even if it means alienating our fiercely loyal customers…”

As we know now, GM brass approved this strategy and we’ll have to see how it pans out at the end of the year when the C8 hits the market. If that weren’t enough change, there is most likely an electric or electric-assisted versions of the C8 waiting in the wings as well. Whether Chevrolet can maintain sales volume with a completely different car remains to be seen, which hints there could be more going on.

So if the C7 is dead, could a Corvette branded SUV be in the wings? This would make the most sense. Before you dismiss this as heresy, one only needs to look to the Porsche line-up and note its 2.5 ton Cayenne SUV accounts for the majority of Porsche sales and probably helped it survive and remain a semi-autonomous car company.

Chevrolet critics have long lobbied for a spin-off of the Corvette because they think the Bow Tie image is damaged or not cool enough to attract younger, foreign-brand leaning customers. We say Corvette and Chevrolet are intrinsically linked forever and busting them up is a long-shot, but still believe the Corvette as a multiple-platform brand has not been ruled out.

We speculated that the Camaro would replace the C7 as the front-engine, rear wheel drive “entry level” Corvette and we now feel vindicated. For decades, “the pony can’t outrun the horse” was an unwritten rule at Chevrolet. Corvette was the performance king, period. That credo was obliterated in slow-motion starting almost 10 years ago with the introduction of the Fifth Gen Camaro.

Chevy’s pony has since matched Corvette tit-for-tat with shared engines, an equally sophisticated chassis and the best tuning and refinement (thanks Al Oppenheiser) GM can bring to life. Not only has the Camaro been groomed (right before our eyes) to take the Corvette’s crown, it is one of the best performance cars on the market at any price. A fitting successor to our “old-fashioned” C7 and good news that we can all rejoice in.

I can personally attest how mystical the idea of a mid-engine Corvette has been for the last zillion years. I can remember as a kid, I’d hit the drugstore at the end of the month to see new issues of the big car magazines. Staring back at me from the news stands were headlines that barked “Secret Mid Engine Corvette Coming!”

Time and space would stand still, and I would plop down, right there on the spot, and read the story, hanging on every word. The pictures of Zora Arkus-Duntov and Bill Mitchell next to advanced Corvette prototypes at GM’s Warren, Michigan Design Center were exotic and beguiling.

Bristling with the latest high technology, these future Corvettes not only captured my imagination, but an entire generation of car lovers as well. Entire forests were clearcut over the years to print the latest scuttlebutt on a car which until this coming July 18th, 2019, never materialized.

    • The Mid-Engine Corvette story is decades in the making. Photos: General Motors

    You would think the announcement that the car is indeed slated for production would be heralded as the second automotive coming but sadly, that’s not reaction on the internet. Social media forums are the latrine walls of our generation and feedback on the new car has been brutal.

    “Oh look, a new Fiero,” is a common, fairly kind response. Another reader posts, “If I wanted a Ferrari, I’d buy a Ferrari..” Others are more blunt in their disdain for the new car, “It looks like sh*t…”

    Fair enough, but the hardpoints of a mid-engine car design are fixed and unmovable, and lend itself to look-a-like styling. Cab-forward passenger compartment, short hood, the elimination of aft stowing, and a rear bulkhead in the cabin, are just a few of the aforementioned obstacles engineers face, not to mention stylists.

    Which leads us to um, the styling. Chazcron over at MidEngineCorvetteForum always has the most up to date renders.

    Here’s our take: We predict the new-age C8 Corvette will be a game changer. We speculate the performance will be such a quantum leap ahead of the C7 that it makes the old car obsolete. We think once people see and drive the new car, it’s risky approval by GM will seem like a no-brainer.

    If it comes in at $75,000 (with the anticipated exponential leap in performance,) it will put the foreign exotics on the trailer – for a third of the price – and will change the global sport car market forever.

    It would serve us well to remember Zora Arkus-Duntov at this time. He was convinced the mid-engine layout was the evolution the Corvette was destined to undergo. He tried in vain for years to get a mid-engine car approved and sadly, died without seeing the birth of such a Corvette. We know he’s watching from up above with a smile…

    The childlike faith that GM will not screw up America’s only sports car boggles the mind. Everyone with the remotest interest in cars should know of GM’s record of new technology — the melting aluminum engine for the Chevy Vega, the Oldsmobile diesel V-8, Computer Command Control, the V-8-6-4 … shall I go on? How about the powerhouse Corvettes that got all of 165 horsepower in 1981 and 205 horsepower in 1984?

    A rear-mounted engine will be an engine that no normal person can do anything with beyond maybe checking the oil. Corvettes have always been cars their owners could work on, but apparently not anymore. Nor will a rear-engine Corvette have any room for luggage, unlike the C4 through the current C7. (So much for weekend getaways.) Nor will be the C8 be a car its drivers can shift, since they will all have automatic transmissions, a point Cruikshank ignored. (Manual transmissions require driver skill.)

    No one with any sense believes GM will sell the C8 for only a little more than the C7. This car will be more expensive to build, and Government Motors already has too many vehicles that don’t make money. Nevertheless, snobs who don’t buy Corvettes now because they’re not Ferraris or Porsches won’t buy Corvettes when they are rear-engine and more expensive. So this is likely the final Corvette, because GM will not sell as many Corvettes as they think, they will lose money, and they can’t lose money.

    The greatest analysis of Trump of all time

    Lexington of The Economist:

    The first time Lexington thought of Donald Trump at WrestleMania [last] week was when, to the fading strains of “America the Beautiful”, a helicopter flyover churned the night sky over the MetLife Stadium in New Jersey. Was the president about to make a surprise reappearance at the annual WWE sports-entertainment extravaganza to which he owes so much of his political method? The second time, well into the seven-hour grapplefest, was as the veteran star-wrestler “Triple H” was ripping out his grudge-rival’s nose-rings with a pair of pliers.

    That was not only a reflection on how Mr Trump treats his cabinet. Paul Levesque, as Triple H was originally known, these days spends most of his time as a senior executive in the billion-dollar WWE business, having married into the McMahon clan that owns it. In reality-bending WWE style, he first married and divorced Stephanie McMahon, daughter of WWE founder Vince, fictitiously. This was part of a story-line in which she and her brother Shane, both WWE executives who appear in WWE productions as villainous executives and wrestlers, tried to steal their parents’ business. Triple H then actually married and had three children with her.

    Those developments are now part of his wrestling character. As Triple H was mock-torturing his rival Batista this week, a WWE commentator—broadcasting live to 180 countries and one of America’s biggest television audiences—said mock-fearfully: “That’s my boss…” This disorienting mix of business, dynasty and entertainment—scrambling performance and reality, ham interests and financial ones—is the defining characteristic of professional wrestling and of its chief emulator, the president.

    Mr Trump is another sometime WWE performer with close ties to the McMahons. A longtime fixture at WrestleMania, he launched a semi-scripted assault on Vince McMahon at the 2007 version. Having been inducted into the WWE Hall of Fame, he returned the favour by appointing Vince’s wife Linda to his cabinet, as head of the Small Business Administration. She will soon leave it to run a pro-Trump SuperPAC. Yet such personal links do not begin to do justice to Mr Trump’s stylistic debt to spoof wrestling.

    To appreciate that, consider why it has proved so alluring. It is not because fans think the fights are real, exactly. Testifying before the New Jersey Senate in 1989—when the McMahons were trying to evade regulations on competitive sport—Mrs McMahon admitted they were fake. After this unprecedented flouting of “kayfabe”, as wrestlers call their scripted reality, some said the industry was finished. That it has instead grown hugely is chiefly owing to the power of escapism. The 80,000 wwe fans at the MetLife, typically young men with defiant slogans such as “I’m not dead yet muthafucker!” on their T-shirts, are the heroes of their own imaginations. Many carried chunky replicas of WWE (fake) championship belts. “It’s like Santa Claus, not real, but that’s not the point,” said Jason, a banker from Manhattan with a $300 belt over his shoulder.

    WWE has also found new ways, in its scripting and use of digital media, to buttress the fantasy. Most important, it constantly shifts between different registers of make-believe, from real to credible to absurd. Thus, for example, its use of executives as characters. Similarly, its stars appear in and out of character on social media. In a pre-WrestleMania rant Ronda Rousey, a former mixed martial arts champion, slammed WWE as “not real” and vowed henceforth to do “whatever the hell I want”. Such tricks create sufficient doubt about what is real for WWE fans to keep living their dream.

    A blurring of the age-old distinction between “faces and heels” also supports this shift towards realism: Triple H, once a heel, is now considered a good guy. So does the frenetic way WWE scriptwriters distract their audience with new talking-points: while it was legal for Triple H to take a sledge hammer to Batista, did it make sense, given his (actual) torn pectoral muscle, tactically?

    Mr Trump’s success lies in applying WWE principles where the line between performance and reality is even finer. In “The Apprentice” he played a successful businessman. In politics he saw that the contest of ideas its participants claimed to be engaged in was really a partisan slugfest almost as contrived and absurd as the WWE. He therefore offered a more ghoulishly watchable version of what voters were already getting. Why choose Jeb Bush trying to be a pantomime bad-ass when you could have the real thing?

    The president also employs the WWE’s new stagecraft. Mixing family, business and politics infuriates sticklers for the law, but makes his fans think he is somehow more real—or “authentic”—than his rivals. He is also a master of shifting between degrees of make-believe. “I’m not supposed to say this,” he interjects into his speeches, “but what the hell?” And then there are his constantly distracting micro-dramas, breathlessly echoed by a commentariat every bit as emotionally invested in the drama as the press gallery at WrestleMania, which often erupted into spontaneous gasps or applause. How much of Mr Trump’s behaviour is concocted is debatable; private Trump is also pretty pantomime. But that uncertainly merely adds, WWE style, to the reality-tumbling effect.

    Mr Trump’s ham performance has been endangered by its own success—represented by two years of unified Republican government. A WWEperformer without an adversary would be a pitiful spectacle. It is therefore testament to the president’s genius that he was able to fill the void, not with policies, obviously, but rather a parade of new enemies: immigrant children, black football players, the late John McCain. Yet with the Democrats soon to choose a new champion, his performance may be about to get easier.

    His opponents should be advised by this. The WWE’s popularity suggests their main hope, that voters will tire of Mr Trump’s grim clowning, may be wishful. More specifically, they should recognise that no professional politician can beat him in a grudge match. They would do better, where possible, to ignore him.

    You may say that pro wrestling is fake. It is. Real sports do not have storylines and predetermined outcomes. And yet Sports Illustrated covers pro wrestling.

     

    Don’t dislocate your shoulder from patting yourself on the back

    Roy Peter Clark:

    The disappearance of a pregnant woman out West became national news. What possibly could have happened to her? Her husband expressed his grief and anxiety in front of a national TV audience. I turned to my wife next to me on the couch. “He did it,” I said. And so he did.

    Between cop shows and real-life crime stories, we all recognize the trope: The first suspect is the partner or spouse, often the one who reports the crime.

    Detectives are trained to sniff out the truth. That’s why the slang for them is bloodhounds — because they “track down” the killer. The metaphor is apt.

    Science writer Marc McCutcheon notes that “The bloodhound’s epithelial membrane, or ‘sniffing organism’ is 50 times larger and thousands of times more sensitive than a human’s. The trace of sweat that seeps through your shoes and is left in your footprints … is a million times more powerful than the bloodhound needs to track you down.”

    Let’s hear it for the nose. Journalists have all kinds of noses, or maybe just one nose, but a nose with a third nostril.

    Among professionals, journalists are the dogs. They are guide dogs and watchdogs, trackers and pointers, but never lap dogs. They stand guard in the public’s yard. When danger, or even uncertainty, approaches, they bark. It’s a form of news telling. Hey, pay attention! Look at this! This guy doesn’t smell right!

    Reporters as dogs.

    My wife and I are again on the couch. A story out of Chicago of a young celebrity, Jussie Smollett, black, gay, the victim of a hate crime. At 2 a.m. on a frigid Chicago street, he is assaulted by two vicious thugs who claim allegiance to President Donald Trump, pour some liquid over him, and place a noose over his neck.

    “This doesn’t smell right,” I said. She gave me a disgusted “you doubt everything” look.

    I have spent 40 years listening to journalists and learning their lingo, their slogans, their metaphors. “If your mother says she loves you, check it out.” That’s an old one. But at one time it may have been even more cynical. Melvin Mencher, an influential and curmudgeonly teacher at the Columbia Graduate School of Journalism, offered this version: “If your mother calls you Sonny, check it out.”

    In other words, not only may your dear mother not love you, but how can you be sure that she is your real mother at all?

    The distinction that most matters is the one between skepticism and cynicism. The practical skeptic doubts what he knows. His concern is about knowledge. The skeptical editor asks: “How do we know that?” Or “How can we know that?” The cynical editor has doubts about the ability of humans to act with good will. Her concern is about morality. That editor assumes the worst about people in general, especially those being covered.

    “I better check that out,” comes from the skeptic. “They all lie, all the time,” comes from the cynic, a word, by the way, that comes from the Greek meaning “dog.”

    Cover politics for any length of time and you will learn that, indeed, they all lie, all the time. Cover police and courts for any length of time and you will learn that, indeed, most of them lie, most of the time. However cynical you are about politics, you’re not cynical enough. Abyone who has something to gain by lying will.

    I polled my Facebook friends — mostly the journalists among them — to get their sense of what it means when “something doesn’t pass the smell test.” How did journalists come to grow a third nostril?

    Here are some of their ideas:

    • Veteran editor Walker Lundy wrote, “I always used the Two-Minute Mile Rule. It’s impossible for a human to run a two-minute mile. If you come across a story that sounds impossible, it probably is.”
    • Adam Hardy wrote: “If something doesn’t pass the smell test for a journalist, I think that’s shorthand for ‘More reporting is needed.’”
    • Dean Miller riffed on that strategy: “If too good to be true, too starkly good guy/bad guy, more reporting is needed.”
    • Tamara Lush wrote, “If you’ve covered crime long enough, you come to notice patterns. In motives, how events unfold, even how perpetrators/witnesses/victims tell stories. When things don’t fit those patterns, the intuition kicks in. That’s not to say a reporter shouldn’t pursue the story, but it’s one of the caution lights.”

    Every veteran journalist I have ever met could tell me a story about being fooled or misled by sources. As a result of those experiences, reporters learn to be cautious with the statements of public figures, but sometimes the source seems so reliable that fabrications, falsehoods and distortions sneak through.

    When editors intervene, they are looking for holes in stories, gaps of important information. At times, an editor will smell something in the text that is a little off and requires verification. In a collaborative spirit, the editor prosecutes the story, a kind of journalistic devil’s advocate. We love this story and want it to be true, and because we want it so much, we owe it to everyone to check it out, down to the last factoid.

    Andrew Meacham, an expert practitioner of feature obituaries, shared this classic case on Facebook:

    As an obit writer on a daily deadline, I was delighted to learn of a recently deceased physician who only did house calls. How quaint! Usually I checked backgrounds on potential subjects before investing a lot of time. But because he was a doctor, somehow that didn’t strike me as something to do immediately.

    For me the “something isn’t right” element was physical but not olfactory. More like a nausea you try to deny or ignore until it’s just about time. In this story it was the too-pat responses from the widow about why he gave up his clinic to treat elderly shut-ins. He just enjoyed it more! He found it fulfilling. No anecdotes about that decision, maybe something he said about why he liked house calls better. It felt like a false bottom.

    Four hours into my reporting I started searching his name, and quickly learned that four female patients had accused him of improver behavior. It was the state’s Board of Medicine that said he could no longer work out of an office, not some nostalgic desire to return to small-town America of the 1950s. We killed the story.

    In summary, here are things I have learned about the smell test:

    1. Think of your nose as an early-warning detector. If you smelled something unusual in your house, you would get up off the couch and check it out.
    2. In the process of getting a story, more reporting is the antidote to many poisons.
    3. Both writers and editors must be willing to “prosecute” stories, especially the ones we most want to believe.
    4. A good question reporters can ask themselves: “How do I know this?” A good question for editors to ask reporters: “How do we know this?”
    5. If “everyone” believes something, it is still worth checking out. If that thing turns out to be wrong, that will make its own important story.
    6. You will not become a better reporter by assuming that everyone is lying to you. That makes you a cynic. Double-checking the assertions even of trusted sources makes you a dutiful, practical skeptic.
    7. The best way for an inexperienced reporter to develop a third nostril is to hang around with reporters who have one. Follow the work of such reporters and ask them how they sniffed out the evidence.
    8. All of these are versions of the same sensibility: “This doesn’t smell right.” “This doesn’t feel right.” “Why does my gut hurt?” “Where’s my B.S. detector?” “My spidey-sense is tingling.”
    9. You are not born with a third nostril; you grow one. In other words, this alert response is not based on instinct, which, technically, you are born with. These responses are learned, which is why more experienced journalists recognize and trust them.
    10. Your nose is more powerful than you think.

    This last point is confirmed by science writer Marc McCutcheon in the book “The Compass in Your Nose”:

    All humans have a trace amount of iron in their noses, a rudimentary compass found in the ethmoid bone (between the eyes) to help in directional finding relative to the earth’s magnetic field.

    Studies show that many people have the ability to use these magnetic deposits to orient themselves — even when blindfolded and removed from such external clues as sunlight — to within a few degrees of the North Pole, exactly as a compass does.

    And, for the record, if your mother says she loves you, you should probably say “I love you too, Mom,” but don’t be surprised or offended if she checks it out.

    Well, aren’t we full of self-regard. Care to guess how much real investigative reporting most reporters do in your careers? Answer: None. We might like to tell ourselves we investigate as part of our jobs, but the fact is that most of us lack the time and resources to dig very far into stories.

    How much investigative reporting do you think political reporters did during the Obama administration? Even worse, how much investigative reporting took place during the Clinton administration? (Notice any investigative reporting taking place in Wisconsin about the current governor, in stark contrast to his predecessor?) Similar to the way that dissent becomes patriotic during Republican presidential administrations, investigative reporting becomes cool again once the occupant of the White House has an R after his name.

    Until I read this I had no idea who Clark was, or is. Maybe it’s unfair, but I have a hard time believing Clark has ever met a reporter from a real newspaper — that is, a newspaper where the staff isn’t angling for an appearance on the Sunday morning TV talk shows in order to further their careers. In other words, the veracity of this opinion doesn’t pass the smell test, since discerning readers can count the number of times big-time media either screws up something or fails to report what it should report. Bloviating such as this is a big reason the media is in poor regard in the eyes of the public, and getting worse by the day.

     

    How socialist are the socialists?

    Rick Newman:

    Sen. Elizabeth Warren insists she’s a capitalist who “sees the value of markets.” But an exclusive Yahoo Finance analysis of her policy proposals puts her on the more socialistic edge of the Democratic field, barely to the right of Bernie Sanders.

    Former Colorado Gov. John Hickenlooper, by contrast, has resisted efforts to label him a capitalist. Yet he lands at the more capitalistic end of the Yahoo Finance analysis, along with Washington Gov. Jay Inslee and former Maryland Rep. John Delaney.

    As the field of Democratic presidential contenders swells, the primary-election process is shaping up as a tug-of-war over what type of economy is best for the nation. Leftists want far more government intervention in health care, energy, transportation and other sectors, to address worsening income inequality. Centrists insist pragmatic, market-based policies can solve pressing problems. And some candidates claim to be one thing while backing policies suggesting they are something else.

    To clear the smoke and identify who stands for what, Yahoo Finance analyzed four key economic policies of 15 leading candidates (including Joe Biden, reportedly set to announce soon), and placed each of them on a spectrum ranging from more socialistic to more capitalistic. We used a 3-point scale to rank the candidates’ policies on health care, taxes, trade and climate change, then tallied the scores to reveal an overall economic orientation for each. (Please check out our complete methodology.)

    Here’s where each of the 15 candidates stands:

    There are several useful takeaways for voters. It’s no accident that the two declared candidates with gubernatorial experience—Hickenlooper and Inslee—are at the capitalistic end of the field, since governors have to work with businesses to develop pragmatic tax and regulatory policies that generate jobs. Joining them at the capitalist frontier is Delaney, who made millions starting and running two successful businesses, and only ran for office after that.

    Sen. Bernie Sanders, not surprisingly, is the most socialistic candidate among Democrats, with a well-developed plan to sharply raise taxes, nationalize health care, cover college costs for many families and roll out other generous government benefits. Sanders has also signed on to the Green New Deal, which would border on a government takeover of the energy sector and force radical change in transportation, as well.

    At least 7 of these candidates—Sanders and Warren, along with Senators Kirsten Gillibrand, Kamala Harris and Cory Booker, plus Rep. Tulsi Gabbard and businessman Andrew Yang—support Medicare for all, which would essentially nationalize the health care industry and eliminate the private insurance that now covers nearly 180 million Americans. That might lower the total cost of health care, while covering more people, but it would also be massively disruptive and require sharp tax hikes. There are other ideas for working toward universal coverage with a broader government role, while keeping the private health care system mostly intact.

    On taxes, we considered plans to redistribute wealth through taxation—such as Elizabeth Warren’s wealth tax—as more socialistic. Politicians don’t often tout tax hike plans, but they do sometimes favor sweeping new programs—such as Sanders’ free-college plan—that necessitate higher taxes. We also rated those more socialistic. Tax hikes aren’t inherently bad, but economists generally say growth is strongest with the lowest possible level of taxation needed to meet public needs. And there are other ways to raise up those left behind, such as Delaney’s plan to incentivize investment in underperforming parts of the country.

    On climate policy, we consider the Green New Deal to be the most socialistic plan out there for addressing global warming. At least five of the candidates—Booker, Harris, Sanders, Warren and Gabbard—support the GND, which would put the government in charge of the much of the energy and transportation sectors and require large tax increases. In this instance, there are clear market-based alternatives that are more capitalistic, such as imposing carbon taxes and letting the market sort out the most efficient way to cut pollution. Inslee, who’s campaigning primarily on a “climate mission,” would push reforms down to the state and local level, end existing carbon subsidies (capitalistic!) and involve businesses in his crusade to reduce emissions.

    On trade, Trump-style protectionism is the socialist bookend, and only Bernie Sanders favors such an aggressive effort to protect American jobs by raising the prices consumers pay for imports. Trump has effectively, if mistakenly, vilified free trade, and few candidates these days are full-throated globalists. But Inslee, Hickenlooper, Delaney and to a lesser extent former Rep. Beto O’Rourke are all on record touting the virtues of open trade. Biden, as President Obama’s vice president, supported the Trans Pacific Partnership, which the Obama administration cultivated.

    Some of the candidates, including O’Rourke and former San Antonio mayor Julian Castro, haven’t spelled out their views on every one of these issues, so we analyzed past actions and other policy positions to estimate where they’re likely to fall on the socialism-capitalism spectrum. And Biden, widely expected to enter the race soon, hasn’t detailed his economic views since he ran for president in the primaries in 2008. Much has changed since then, and Biden will have to update his views to account for Medicare for all, the Green New Deal and other recent developments. We’ll track all the moves as socialism and capitalism duke it out over the next 20 months.