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A friend in Cambridge shared this article about Bernie Sanders proposing a 90 percent top income tax rate. I tried to figure out how it would work in practice given our not-so-simple tax code.

My friend’s justification for the higher tax rate was “You want to live in a country? With paved roads and safe bridges and lots of customers for your products? Then pay for it!” Some of his other friends observed that the most productive citizens might be motivated to emigrate (e.g., Eduardo Saverin fled to Singapore, where the entire government is run for about 15 percent of GDP (compare to roughly 40 percent here); almost anywhere in the EU or Switzerland would also become a low-tax option were the U.S. to adopt the proposed rate). He responded “If the threat is: rich people will take their money and go live somewhere else, you know what I say to that? Good riddance! You want to be an American and take advantage of the biggest army on the planet defending your shit? Pay for it. You want access to the best consumer market in the solar system? Pay for it. Capitalists: always looking for a handout.” His friend chimed in “Yea I love the anti-government folks. They are the ones who live in this weird world where the government is useless…but take advantage of it the most” and he responded “Exactly: handouts. You don’t get to be rich without taking maximal advantage of the system.”

I then asked “Where do you define rich? Personally I would choose the threshold for high taxation at $1 more than whatever I happen to earn in any given year. And you are making powerful arguments that all wealth properly belongs to the government for enabling it to be created or preserved. Why not a higher tax rate than 90% then?” and that generated a consensus that the threshold for the 90% rate should be $1 million per year (given state and local taxes, therefore, it would become tough to take home more than $500,000 per year).

Given that the same people who support higher taxes on the rich also support higher profits for child support plaintiffs I asked “How would you address the issue of child support in your ‘90% over $1 million’ system? Many states, including Massachusetts, set child support based on pre-tax income. If a woman met a finance industry guy in a bar and got pregnant following their one-night encounter, she might get a $1-1.7 million/year child support revenue stream (depending on the state) based on his $10 million/year income. But under your system the child support (not tax deductible, unlike alimony) would exceed the defendant’s after-tax income.”

The answer to that conundrum was that only a small percentage of child support plaintiffs get more than $500,000 per year in revenue from any one defendant (which still does leave open the problem of what to do with those defendants whose child support obligation exceeds after-tax income).

I then asked “What happens to mid-career people who have already saved a lot? Suppose an entrepreneur has $100 million in savings from a previous company. Why does she keep working if the most she can possibly take home is about $1 million? Do we accept that people like her exit the workforce?”

The response from the the original sharer “People who have $100 mil in the bank should be figuring out how to spend that money in the most productive possible way, not working their butts off trying to make more money from a salary! What the hell is the point of that?!” I pointed out to him that he was a big admirer of Tesla “which was founded by Elon Musk after he already made $165 million from PayPal (and started PayPal after making $22 million from Zip2). Would Musk would have done the same thing with no way to earn more than $500k to $1 million per year? Or would be better for society not to have rich people like Musk at all?”

The answer regarding Musk, who has gone from being worth about $22 million (pre-tax) to $12 billion was that “Elon Musk is trying to save the world. That’s why I admire him. He’s not in it for the money; that’s the last damn thing he needs. He’s way smarter than that. He knows money does him no good on a burning planet [global warming reference]. And he didn’t make $165 mil from PayPal in salary payments smile emoticon He did that by creating massive shareholder value.” [Nobody commented on the irony of a person so uninterested in money earning $12 billion.]

So it turned out that at least this advocate for a 90 percent tax rate wants to distinguish between “unproductive” W2 income and “productive” capital gains income. But how does that work in practice? Couldn’t companies issue employee stock options that would be tax-free at the time of issue (see irs.gov) and then take the money that they would have paid in W2 salary and use it to buy back shares, thus lifting the price of the stock? The formerly high-paid W2 workers would now be high-paid option exercisers. Perhaps this would work out better for public company shareholders because the insiders couldn’t enrich themselves without returning cash to shareholders as well.

And what about people who have a high income because they operate a business as a sole proprietor or partner? Are they also subject to this 90 percent tax? If so, do they cut back to working 15 hours per week and let the business shrink? If they’re not subject to this 90 percent tax does that simply mean that companies bring in their most important/valued people as 1099 consultants on a project-by-project basis? Then the “consultants” can keep more than 10 percent of their income. With a high minimum wage (previous posting) and a high top tax rate, the U.S. becomes a nation of consultants at the top and bottom end of the income scale?

What do readers think? Could the 90 percent tax rate work? If so, how? And let’s say that that it does work but results in the high-income people that make us sick with envy emigrating to Europe and Singapore, is that good or bad? We lose the people who pay about half of current federal income taxes (source) but prices for downtown apartments, fancy suburban mansions, and beach houses will all presumably fall. A variety of European countries had very high tax rates in the 1970s and average citizens didn’t get upset when their most successful peers emigrated to Monaco (or just moved their productive assets offshore, like U2).

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“Hedge-Fund Manager Paulson to Donate $400 Million to Harvard” is a WSJ story about what will become the “John Paulson School of Engineering and Applied Sciences” at Harvard.

What I find interesting about the story is not that a rich guy gave money to Harvard (dog bites man) but the hostility of the Wall Street Journal readers to Harvard and Paulson. In my opinion Paulson made money more or less straightforwardly and without exploiting any special connections. He recognized that most of America’s financial institutions were defrauding investors by lending out mortgage money that would never be repaid (except by taxpayers!). He charged a fee to his own investors, of course, but he made them a lot of money in a time period when other funds were tanking. I would have thought that Paulson would be a hero to market-following WSJ readers, not a villain.

Here are some representative comments:

• So a guy who knows that the mortgage market is heading for a fall (inside info) bets against it and makes a billion dollars off the American people, who get screwed. Then he feels somewhat guilty (maybe) and donates it to one of the wealthiest colleges in the World. What a joke!!
• REALLY …. all it does is add to INEQUAlITY in America giving more $$$ to a college whose principle purpose is as a place for the children of the American Ruling Class to enjoy themselves for 4 years while getting their ticket punched and increasing the size of their own personal network of the privileged which will serve them well in the Real World.
• While very noble, why don’t some of these gazillionaires make a big donation to a particularly bad school system with the conditions that it FIRE the incompetent teachers and hire good ones. (like the Facebook founder did with Newark Public Schools? (my May 2014 posting))
• Paulson will pay no income or estate taxes on $400 million made from soaking the American people. Harvard, which doesn’t need the money, and increasingly neglects educating America children, especially African-American children, won’t pay any taxes, either.
• $400 million to cook up more liberal ideas and citizens. Way to go.
  It’s interesting how the monster feeds itself and grows, and notice that the biggest chunks of money come from people who play with other people’s money, not people who actually produce any goods or services, which are what constitutes the real wealth of the nation.
• Down the street or river, whichever you prefer to go, stands M.I.T. Now, there they educate people who actually contribute to the wealth by producing actual goods, not like at Harvard where the biggest donors play with other people’s money as per this article (fund managers). The latter make Barack and Hillary, who are good only at using other people’s money, proud.

Related:

• what would John Paulson pay as child support defendant in Wisconsin?
• “For the love of God, rich people, stop giving Harvard money” (Vox)
• Malcolm Gladwell suggests volunteer jobs for Paulson (e.g., at a Hermes store in Manhattan)

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“Small Group of Doctors Are Biggest Medicare Billers: Top 1% of billers of the federal insurance program in 2013 reaped 17.5% of all payments that year” is a June 1, 2015 Wall Street Journal piece whose most interesting angle, to me, is how tough it can be to get information on how tax dollars are spent:

That release [of data] followed a yearslong legal effort by The Wall Street Journal, which overturned a 1979 court ruling that such records must be kept secret. The American Medical Association obtained the injunction to block Medicare from releasing such records by arguing doctors’ right to privacy trumped the public interest in how the federal programs’ money was spent.

The Journal’s parent company, Dow Jones, intervened in that suit in 2011, arguing that the records should be releasable and, in May 2013, a judge reversed the injunction.

The data themselves are not very surprising. The doctors with the best connections to politicians are the ones who made the most money:

For instance, the No. 3 biller in 2013 was Salomon E. Melgen, a Florida eye doctor who had close ties to Sen. Robert Menendez and was indicted on health-fraud charges in April. He received $14.4 million in 2013 payments.

The second-biggest individual recipient of Medicare payments was Florida cardiologist Asad Qamar, who received $16 million in 2013, much of it for inserting stents. He was a top biller in 2012, too—and a major contributor to Democratic political campaigns in recent years, according to federal election data.

… The case of Dr. Melgen illustrates how politics can sometimes play a role in efforts to rein in waste and abuse in Medicare. After agency auditors identified about $9 million in overpayments in Dr. Melgen’s billings over the years, the doctor lavished his friend Sen. Menendez with nearly $1 million in gifts and campaign contributions to lobby CMS to resolve the issue, according to an indictment filed earlier in the spring.

[But of course when we want to find examples of corruption we must look to foreign countries and FIFA rather than at our own system…]

One little gem, though, is that Medicare doctors can make a lot of money testing the over-65-crowd for rave drugs such as Ecstasy (previous Journal article): “The program spent $14 million that year just on tests for angel dust, or PCP. Sue Brown, a laboratory director in Brunswick, Ga., said she has never seen someone over 65 test positive for angel dust, in 25 years in the business.” The cost of checking to see which retirement home dwellers are just back from Burning Man is $1,265 per patient at one successful lab.

People sometimes talk about the death of traditional media in favor of citizen journalists but what citizen journalist would have the budget or endurance to spend years in litigation with the American Medical Association and Federal government in order to get the information necessary for the story?

Related:

• American Economics Association convention report (paper on how “A payment from a pharmaceutical company [to a doctor] corresponds to, on average, an additional 29 Medicare prescriptions per year, and this number rises to nearly 100 prescriptions if the payment is at least $1,000.”)

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The Redistribution Recession: How Labor Market Distortions Contracted the Economy by Casey Mulligan, an economist at the University of Chicago, looks at the extent to which Americans will withdraw from the work force if you pay them to stay home and not work. This is kind of a companion piece to my review of Peter Wallison’s book on what caused the Collapse of 2008. Wallison asks “Why did things fall apart?” and Mulligan asks “Why can’t Americans put their economy back together [in less than 7 years]?”

The book is written for professional economists but readable for anyone with an undergraduate Econ 101 background.

If you live in an expensive city and are acquainted with families collecting welfare the book confirms what you might have noticed, i.e., that it would be irrational for the adults in the family to enter the workforce. Here in Cambridge, Massachusetts, for example, the welfare families that I have spent the most time with occupy apartments with a market rent of about $4,500 per month ($54,000 per year in post-tax income) in a building with a swimming pool, two gyms, and a variety of other luxurious facilities. Their health care is free through some combination of Medicaid, Obamacare, and a city-run health system. Their food is mostly free through food stamps. They can get cash from TANF and some similar programs. They would need to earn at least $160,000 per year pre-tax to obtain the same standard of living at market prices. However, even if someone were to offer the adults in the family a $160,000 per year job it would not be rational for them to accept it. If they were ever to lose that job it would take many years of paperwork, bureaucracy, and waiting lists to get back to their current welfare lifestyle.

Able-bodied American adults who live off alimony and child support, as chronicled in Real World Divorce, face a similar situation and, according to the attorneys we interviewed, respond similarly. If an adult tapping into a former spouse or sexual partner gets a high-paying job there is a risk of the defendant going to court and getting the payments reduced due to a lack of need. If the job were lost for some reason it is possible that the original cash flow might never be reestablished.

Mulligan makes some attempt to model these high switching costs and long switching delays with (a) a “model of take-up” of government benefits (Appendix 3.2), and (b) program participation weights, which make a dollar of assistance worth less to the recipient than a dollar of cash picked off the sidewalk. But the core of Mulligan’s analysis is that income-based government handouts function as a high marginal tax rate in that if the low-income person earns a bit more he or she qualifies for fewer government benefits and therefore has only slightly more spending power than before. Mulligan looks at the 2009 expansion of means-tested welfare in at least the following areas:

• unemployment benefits
• food stamps
• mortgage forgiveness
• non-mortgage debt forgiveness
• health insurance subsidies (Obamacare; not yet implemented during the period of Mulligan’s analysis)

Underlying Mulligan’s work is an assumption that policymakers (and family court judges) reject:

A basic economic principle in this chapter, and much economic analysis of the labor market, is that the pecuniary reward to working is an important determinant of how much people work. When social programs increase what they pay to someone who does not work, they diminish this difference, and the result is that some people work less.

Nobody who believed in this principle would offer to pay people to sit home and play Xbox for 99 weeks (January 2011 posting and January 2013 follow-up citing economic analysis). Yet that is apparently what the American people wanted their elected government to do. Thus it may be the case that Mulligan’s book will have limited impact because more than half of Americans disagree with the assumption that payments to non-workers encourage non-working.

Mulligan makes some effort to justify this assumption:

Before the recession began, well over one hundred million Americans were not working. To be sure, some of them could find no reward in the labor market and would be stuck without gainful employment no matter how lean the safety net got. But many others were not working by choice. We all know skilled stay-at-home mothers or fathers who could readily find a job but believe that the pay from that job would not justify the personal sacrifices required. They are examples of people who deliberately do not maximize their income. Others are people who turn down an out-of-town promotion in order to avoid relocating their family, and workers who eschew higher-paying but less safe occupations. Earning income requires sacrifices, and people evaluate whether the net income earned is enough to justify the sacrifices. When the food stamp or unemployment programs pay more, the sacrifices that jobs require do not disappear. The commuting hassle is still there, the possibility for injury on the job is still there, and jobs still take time away from family, hobbies, sleep, etc. But the reward to working declines, because some of the money earned on the job is now available even when not working.

And he cites research that tries to put numbers on the correlation between increased welfare and reduced working hours:

Decades of empirical economic research show that the reward to working, as determined by the safety net and other factors, affects how many people work and how many hours they work. To name a small fraction of the many studies: Hoynes and Schanzenbach (2012) show how potential participants stopped working or reduced their work hours when the food stamp program was introduced. Studies of unemployment insurance (see Appendix 4.2) find that program rules have a statistically significant effect on how many people are employed, and how long unemployment lasts. Yelowitz’s research (2000) shows how a number of single mothers found employment exactly when, and where, state-level Medicaid reforms increased their reward from working. Gruber and Wise (1999) and collaborators show how the safety net for the elderly results in less employment among elderly people. Autor and Duggan (2006) and the Congressional Budget Office (2010) explain how the number of disabled people who switch from work to employment-tested disability subsidies depends on the amount of the subsidy relative to the earnings from work. Murphy and Topel (1997) show how poor wage growth among less-skilled men helps explain their declining employment rates during the 1970s and 1980s. Jacob and Ludwig (2012) show that means-tested housing assistance reduces labor force participation and earnings among able-bodied working-age adults.

But most of the book assumes that readers are convinced by Econ 101 that economic incentives will change peoples’ behavior and proceeds with analysis based on that assumption.

If you’re wondering why you can’t get anyone to come over and fix your roof when supposedly millions of Americans are unemployed, Mulligan explains:

Traditional labor and macroeconomic theory predicts that marginal labor income tax rates and binding minimum wages distort the labor market and thereby reduce aggregate labor usage, reduce aggregate consumer spending and investment, and, in the short term, increase wages, labor productivity, and the usage of factors that can take the place of labor hours. As a result of greater labor productivity, part of the population—those (if any) not subject to the marginal tax rates or minimum wages—actually works more, even while aggregate work hours are less.

In other words we’re trending toward a society where about half of the working-age adults will kill themselves with 60-80-hour weeks while the other half will relax on the sofa.

Just how much has the welfare state expanded?

With the exception of Medicaid, subsidies flowing to the unemployed and to financially distressed households in the forms of consumer loan forgiveness and government transfers almost tripled after 2007. A minority of that increase is due to an increase in the number of people who would have been eligible for subsidies under prerecession rules, and a majority is the result of more than a dozen changes in benefit rules made possible by several new federal and state government statutes.

Mulligan says that “businesses perceive labor to be more expensive than it was before the recession began” and that’s why they aren’t hiring a lot of workers. Shouldn’t we then see a huge spike in capital spending as companies buy robots to replace the former human employees? Mulligan gives us the academic version of “no”:

Assuming, as economists usually do in aggregate analysis, that capital enhances the productivity of labor, and labor enhances the productivity of capital, then the efficient reaction to less labor is to have less capital. Investment is the rate of change of the capital stock, so even small reductions in the capital stock may be achieved by large investment reductions for a short period of time. For this reason, investment is expected to decline by a much greater percentage than consumption in the short term, and by the same percentage in the long term. In this view, the investment decline is entirely a reaction to the labor market, and not a cause of the low rates of labor usage.

Welfare is not equally available to everyone, however, and Mulligan digs into the demographics. Single mothers are in the best position to get cash without working. Custody of their child can yield payments from the father (over $100,000 per year tax-free if they use the information in Real World Divorce thoughtfully). If they didn’t choose a high-income father for their child(ren) then “Single mothers are much more likely than [married women without children] to be eligible for SNAP, Medicaid, and other means-tested government programs when not working because (1) they do not have a spouse present whose income by itself would likely put household income above FPG and (2) the latter group has no children (children are the target of a number of means-tested programs).” Mulligan finds that American women behaved in accordance with Econ 101. The married women who could not get welfare worked similar hours to their 2005-2007 hours. Single mothers, however, even those with at least some college education, dramatically reduced their working hours as welfare became more lucrative.

What about old people? Mulligan notes that they actually increased their working hours in response to the recession due to a lack of new welfare programs available to the elderly: “marginal tax rates [including the tax-like effect of reduced welfare eligibility] for the nonelderly increased sharply, while marginal tax rates for the elderly hardly changed.”

What about the minimum wage discouraging employment from the employer side? Mulligan looks at this carefully: “My 2011 paper (Mulligan 2011c) estimated a monthly time series model of national part-time and full-time employment per capita for each of twelve demographic groups distinguished according to race, gender, and age, relative to prime-aged white males, whose employment rates were assumed to be unaffected by the July 2009 minimum wage hike. I used the model to estimate the amount and composition of employment losses due to the hike for the average month between August 2009 and December 2010, and found that lower-skill groups had the greater employment losses. The net nationwide employment loss estimate was 829,000, which includes employment gains among more skilled people. … Thus, the minimum wage hikes since July 2007 might explain about roughly one-third to one-half of the employment decline among persons aged sixteen and over who were neither elderly nor household head or spouse.” [Personal experience: I have taken on a recent high school grad (friend’s son) as an intern in my web development business. He was an above-average student in a Harvard University intro CS class and also completed AP Computer Science in high school plus an additional programming class. His current productivity is about 1/100th of a $25/hour Ukrainian or Filipino contract programmer so any wage+benefit package above 25 cents per hour would be above the market-clearing price. Yet he can never reach the productivity of

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Folks:

Suppose that I want to transport a road bike in a minivan without getting everything greasy. It would be good to have a big bag for the bike that keeps everything together, maybe with the front wheel removed and placed next to the bike so that the whole thing isn’t too long. A lot of companies make bike travel bags and cases but they seem to be designed for checking through the commercial airline system and require a lot of disassembly (wheels, pedals, skewers, etc.).

Does anyone have any ideas for something that would provide less protection and less compactness perhaps but much quicker packing/unpacking?

Thanks in advance for any ideas.

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On a recent Acela ride from New York to Boston, when I wasn’t remarking on my good fortune at not having derailed, I read two articles from what seems to be American journalism’s deep well of “Women can’t succeed in the workforce” pieces.

The first was from the sub-well of “Women yearn to sit at a desk for 30 years and stare at a computer (until they’ve outlived their utility to employers) but men are preventing them from taking these programming jobs.” “A big documentary on Silicon Valley’s sexism problem” (Claire Suddath, Bloomberg Business, May 14, 2015) says that

Gender equality in Silicon Valley isn’t just an altruistic ideal but a way for women to start earning fair wages. According to a 2014 White House report, more than 1 million jobs will be created in computing and related fields by 2020; less than 1 percent of those will go to American women. The average salary for a Bay Area software engineer is about $130,000, says San Francisco placement firm Riviera Partners. “I really think this is a Rosie the Riveter moment,” says Jocelyn Goldfein, a director of engineering at Facebook. “The jobs are here, and we don’t have the people to fill them.”

The ADP Paycheck Calculator says that $130,000 in California works out to $82,000 per year after taxes. That is enough to cover the median rent ($43,740 per year) on a Palo Alto apartment but there won’t be a huge amount left over after paying for a car, food, etc. Why would anyone, male or female, be desperate to go through years of training to take an all-consuming job where the income was just 2X the cost of an apartment near the job?

[Related: “Women in Science” — asking if it is possible that bright hardworking women are able to find better jobs than academic science.]

The second was “While at War, Female Soldiers Fight to Belong” (Benedict Carey, New York Times, May 24, 2015), concentrating on Lt. Courtney Wilson. Here’s what the Times implies is the typical experience of being a female U.S. Army officer:

In the months to come, that sense of exclusion would deepen into depression. Halfway through her deployment, she sent an email to a friend at home saying she was determined not to kill herself.

The psychic distress is measurable. More than 38 percent of women report depressive symptoms after deployment,

Women are 10 times more likely than men to have reported serious sexual harassment.

“She experienced depression and panic attacks after being deployed to Afghanistan.”

http://www.goarmy.com/benefits/money/basic-pay-active-duty-soldiers.html shows that a lieutenant earns roughly $55,000 per year (taxable). On a strictly economic basis that hardly seems worth the aggravation and mental anguish described, not to mention the potential for combat risk (though if one reaches the rank of four-star general, Bloomberg says that cash may follow).

“Women in Science” focuses on the professions as an alternative to seeking an academic science faculty job. The theory being that anyone capable of getting a PhD in science and doing work interesting enough to make it at a top academic institution would be likely to have an above-average career as a medical specialist. Compared to the above jobs, however, it might be enough simply to have sex with an above-average medical specialist. Consider the person who goes into Manhattan and has sex with a doctor or dentist earning $360,000 per year. Under New York law, if custody of the resulting child can be obtained, this results in a 21-year tax-free cash flow of $61,200 per year (17 percent of pre-tax income; about $1.3 million total). That’s plainly more than the Army lieutenant’s $55,000/year pre-tax income. If the recipient of the $61,200/year decides to live in the artists’ community of Beacon, New York, for example, where the average rent is less than half of what it costs in Silicon Valley, the child support profiteer will enjoy a better lifestyle than the Silicon Valley software engineer. [Note that the child support revenue can be doubled or tripled with additional children.]

Given the ever-present alternative of child support, if the journalists’ portrayals of life in the workforce are accurate, can waged employment be an economically rational choice for American women of childbearing age?

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The most famous toy store in the U.S. will be closing on July 15 (USA Today). They can’t justify the rent on Fifth Avenue now that everything in New York is gold-plated. I’m wondering if this also shows the dominance of electronic games. A $1500 stuffed giraffe is great but do kids value it as much as $100 of apps?

What do readers think? Is there is a long-term downward trend for non-electronic physical toys?

[Separately I wonder what New York is going to look like going forward. Any part of the city exposed to the market economy seems to trend toward high-end stuff that is not useful for day-to-day living. Yet the government is passionate about “affordable housing” and the lucky few (55 out of 88,000 in this example) end up with an apartment worth perhaps $5 million that they can occupy for life, but not sell. So they can’t take the $5 million and move to the Midwest (or Mexico?) and enjoy being rich. Instead they will stay in Manhattan, have a job at Starbucks, and have to order everything from Amazon because the local retailers sell only furs and diamonds.]

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If you like graphic novels, here’s one from 1941: Jacob Lawrence’s Migration Series, on view at New York’s Museum of Modern Art through September 7 (all images and captions can be viewed online as well). One of my personal favorites is Panel 58, showing three children at a blackboard.

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On May 5 I wrote in support of same-sex marriage on the grounds that what the government offers as a civil marriage no longer bears any relationship to what traditionalists and religious people think of as “marriage.” The Irish recently voted to approve same-sex marriage and this represents a clean experiment due to the fact that “religious marriage” or “traditional marriage” in Ireland must mean Roman Catholic marriage.

Civil marriage and Roman Catholic marriage in Ireland were more or less synonymous until 1997 at which point no-fault divorce was introduced in Ireland. As noted in my previous posting, once a country establishes no-fault divorce and the possibility for citizens to make a profit by marrying and divorcing a higher-income or wealthier partner, denying the right to marry is primarily the denial of an economic opportunity. Irish voters, even ones with a strong Catholic faith, apparently realized that it didn’t make sense to keep mixing church and state.

[As a measure of how much social change has occurred in Ireland over the past few decades, note that it seems that Ireland also enables parents to profit from obtaining custody of children following a one-night encounter. This courts.ie page explains that marriage is not a bar to obtaining a potentially unlimited amount of child support (though if you want to get more than $8500/year you have to go to a Circuit Court or High Court rather than a District Court). Not too many years ago having a child out of wedlock would be a source of shame in Irish society; today the child is a source of cash, albeit probably not as much as one could get from a U.S. court (see Real World Divorce).]

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It seems that an organization with billions of dollars in revenue and no supervision is roughly 1.5 percent corrupt ($150 million in bribes, kickbacks, etc. against $10 billion in revenue from the news reports that I’ve seen). That would be comparable to $60 billion siphoned off to cronies out of the $4 trillion annual U.S. federal budget. Here’s a fun quote (WSJ):

After Mr. Bin Hammam said he was seeking their support [to become president of FIFA], Mr. Warner allegedly told attendees that they could pick up a “gift” at a hotel conference room. Officials were allowed to enter one at a time, the indictment said, and each person was handed an envelope with $40,000 inside.

The next day, Mr. Warner allegedly told recipients that the money came from Mr. Bin Hammam. “If you’re pious, open a church, friends,” Mr. Warner allegedly said. “Our business is our business.”

It seems reasonable to assume that any organization that is structured like FIFA would be susceptible to the same kinds of corruption. What could replace it? Forgive an American’s ignorance of all things soccer-related, but what does FIFA do that is important? Is it mostly picking countries to host events, collecting broadcast and sponsorship revenues, and dividing up the cash? If so, why not replace it with a system in which any country can apply to host the World Cup or some other event and then the winner is chosen at random via a process everyone can agree is transparent (something like Bitcoin)? And have the money division be done by mid-level officials at a bank (maybe not one of those recently fined for market rigging)?

And more importantly, how will the FIFA prosecution affect the Eurovision Song Contest, which Americans cannot live without?

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