The Myth of Japan’s Failure

CAPITAL GAINS

In last night’s Republican debate the point was made that a zero capital gains tax would be a powerful way to create new jobs. But can you think of a single scenario where having such a rate would lead to new jobs? I can’t. Seriously: this is ridiculous. And went unchallenged. People invest in new ventures and in expanding existing ones whether they expect to keep 100% of the profit or 75% of it. Sure beats the (fully taxed) return from a savings account or government bonds. No?

As I’ve long suggested, if we were to zero out the tax on capital gains, then for heaven’s sake let’s do so only on gains from newly issued securities – not for the 98% of gains (or whatever the accurate figure) from gains in secondary trading. That would cost just 2% as much in lost tax revenue (and tilt incentives slightly toward funding more financings).

JAPAN

A point made in passing last night was that Japan has still not recovered from ITS terrible recession. That’s certainly the perception. I’ve been waiting to post this illuminating opinion piece from the New York Times – “The Myth of Japan’s Failure” by Eamonn Fingleton – since it appeared January 6.

Here now, in part:

By many measures, the Japanese economy has done very well during the so-called lost decades, which started with a stock market crash in January 1990. By some of the most important measures, it has done a lot better than the United States.

Japan has succeeded in delivering an increasingly affluent lifestyle to its people despite the financial crash. In the fullness of time, it is likely that this era will be viewed as an outstanding success story.

How can the reality and the image be so different? And can the United States learn from Japan’s experience?

It is true that Japanese housing prices have never returned to the ludicrous highs they briefly touched in the wild final stage of the boom. Neither has the Tokyo stock market.

But the strength of Japan’s economy and its people is evident in many ways. There are a number of facts and figures that don’t quite square with Japan’s image as the laughingstock of the business pages:

• Japan’s average life expectancy at birth grew by 4.2 years — to 83 years from 78.8 years — between 1989 and 2009. This means the Japanese now typically live 4.8 years longer than Americans. The progress, moreover, was achieved in spite of, rather than because of, diet. The Japanese people are eating more Western food than ever. The key driver has been better health care.

• Japan has made remarkable strides in Internet infrastructure. Although as late as the mid-1990s it was ridiculed as lagging, it has now turned the tables. In a recent survey by Akamai Technologies, of the 50 cities in the world with the fastest Internet service, 38 were in Japan, compared to only 3 in the United States.

• Measured from the end of 1989, the yen has risen 87 percent against the U.S. dollar and 94 percent against the British pound. It has even risen against that traditional icon of monetary rectitude, the Swiss franc.

• The unemployment rate is 4.2 percent, about half of that in the United States.

• . . . Japan has increased its exports to China more than 14-fold since 1989 and Chinese-Japanese bilateral trade remains in broad balance.

• . . . Tokyo, according to the Michelin Guide, boasts 16 of the world’s top-ranked restaurants, versus a mere 10 for the runner-up, Paris. Similarly Japan as a whole beats France in the Michelin ratings. But how do you express this in G.D.P. terms?

. . . Japan should be held up as a model, not an admonition. If a nation can summon the will to pull together, it can turn even the most unpromising circumstances to advantage. Here Japan’s constant upgrading of its infrastructure is surely an inspiration. . . .

WHOM WILL THEY NOMINATE?

Peter Kaczowka: “Michael Steele now gives my prediction of a brokered Republican convention a 50:50 chance. If it happens, I expect credit in your column, because I CALLED IT FIRST! 🙂 No one in the media has proposed this, not even on the Huffington Post before this article. The media has zero imagination. . . . I have no idea who would emerge. Jeb Bush, Mitch Daniels, Marco Rubio, Chris Christie, or maybe even Tim ‘Good and’ Pawlenty :-). It won’t be easy for them. The split in the Republican Party is deep, I’m not sure how they’ll agree on a candidate. And their smart candidates did not run, because they knew they couldn’t beat Obama, particularly after appeasing the Right. . . . I look at it simply: Obama beat McCain fairly easily. McCain had the Bush legacy as an albatross, but so will this one. My parents grew up in the Depression, and nobody called it FDR’s. The shanty towns were called Hooverville even five years after FDR took over. And the economy was much worse under FDR than now, yet FDR was reelected in ’36. The idea that voters will blame Obama for this recession is an insult to US voters, as is the implication that that big money controls their votes.”