Will Trump get his wall? A look at possible outcomes

Game theory is a useful tool for examining problems where there are two or more players and each player takes into consideration the reaction of the others.  I see three possible scenarios over the next 2.5 weeks before we hit President Trump's deadline for Congressional action.
1) Congress passes a bipartisan bill on border security with protection for dreamers and over $5.7b in spending for border security.  The language on barriers is kept sufficiently vague so that Democrats can say fence and Trump can say wall.  Trump vetos the bill because he fears the loss of support from his core supporters (no wall and amnesty, all in one package).
2) Congress is unable to pass a bill.  Trump shuts down the government again.
3) Congress is unable to pass a bill.  Trump declares a national emergency so he can reallocate funds to start work on a wall.

From a game theory perspective there are two players: Congress and Trump.  The obstacles of getting a bipartisan bill through a Democratic House and a Republican Senate (with 60 votes needed to bust a filibuster) are massive.  Assuming time-consistent behavior by Trump (he has already turned down the wall-for-dreamers trade multiple times), there will be little incentive to reach an agreement and vote in favor of it.  So I put the odds of a bipartisan bill being passed as extremely low.

With no bill, Trump has to decide whether to go through another shutdown.  Well five weeks of shutdown did not work, so does Trump really think another 5+ weeks will?  Despite Trump's apparent issues with impulse control, I have trouble seeing this happening as well.  As my fellow-Kentuckian Mitch McConnell said, there is no education in the second kick of a mule.

But the emergency is the perfect solution for both sides.  Not a single brick or girder will be put in place between now and the 2020 election because the emergency wall declaration will be tied up in the court system.  Trump looks decisive to his base and can blame the Democrats in Congress and Obama judges for his failure to deliver.  Democrats are happy because (1) Trump will lose some support from his Republican base for ignoring the Constitution and (2) there won't be a wall before the election.

You can take my advice and monetize it on the betting markets.

A radically different model for higher education

In today's world expertise in data science and web development is highly rewarded.  You can learn those skills by going to private licensing programs, community colleges and universities.  In each case the learner dedicates tuition and time up front in the hope of a rewarding career.

Lambda School offers a different approach, offering 30-week courses tuition free in exchange for 17 percent of your income for two years after program completion.  Graduates have to make more than $50k before having to pay back anything and total payments are capped at $30k.

Lambda is expanding into nursing and cybersecurity in the not too distant future.  One can envision Lambda and its inevitable imitators becoming widespread in disciplines where job market prospects are strong.  I do not see Lambda getting into elementary education or philosophy, but it could be a genuine threat to universities with programs that cost more and last much longer.

This NYT quote shows how Lambda's incentives vary from the typical education provider:

The school is incentivized to only enroll motivated students who won't drop out; it is incentivized to successfully teach them the skills they will need on the job; it is incentivized to find them a job; and it is incentivized to make sure that are a success once they're on the job because the school relies on employers to keep hiring its graduates.  

Should income tax rates climb to 70 percent?

Newly elected politicians sometimes bring fresh ideas to the table.  In the case of US Rep. Alexandria Ocasio-Cortez (D-NY), we have a stale idea recycled -- raising income tax rates to 70 percent.  The top federal marginal tax rate in the US used to be 90 percent in the 1950s and early 1960s and remained at 70 percent through the early 1980s.  Ocasio-Cortez is pushing for the 70 percent rate to kick in at personal income above $10 million and would use the funds to pay for a Green New Deal.

As always, you will find some economists in support (see this summary by Matthew Yglesias) and others who are highly critical (see this Bloomberg column by Tyler Cowen and John Cochrane's blog).  The supporters back their arguments up with theoretical frameworks containing curious assumptions.  One has to do with diminishing marginal utility: an extra thousand dollars for Warren Buffett does nothing for Warren but can be life-changing for a homeless person.  (But do you trust the federal government to make these calculations?  Maybe another Congress  in 2030 decides the 70% rate should kick in at $100,000?)  Other key assumptions: 100% tax compliance and near-zero labor supply elasticities.

Eventually all income tax rates are going to have to go up because (1) the US budget deficit is not in a sustainable position and (2) the required compromise will have to include revenue enhancement along with expenditure reduction.  Although a 70 percent rate might look initially attractive from a  revenue generation standpoint, people make choices about how they get paid (cash versus benefits), how many hours they work and what professions they enter.  I doubt NC State would have as many MBA students as it does now if the top tax rate were above 50 percent.

Tough times for chain restaurants

Bloomberg predicts 2019 will be a tough year for chain restaurants with rising labor costs and falling consumer demand.  I live in a section of Cary where Carrabba's, Five Guys, Romano's Macaroni Grill, and TGI Friday's have all closed their doors within the last year.  What gives?

Overall demand for food continues to grow with population, income and other factors.  Chain restaurants are getting a smaller share of a growing market.  Also there is no evidence of a surge in visits to the fresh produce and meat aisles of groceries.

The prepared food market has become more competitive thanks to grocery store delivery, meal kits by mail and food trucks.  Food trucks have a particular competitive advantage in their lower fixed costs and ability to relocate to meet customer demand.  We also could be seeing a shift in consumer preferences away from mass-market menus.  The generation that disdains Bud Light in favor of microbrews could very well be giving the same treatment to chain restaurants.