B12 Solipsism

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Archive for the ‘economics’ tag

Easy Useless Economics

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dismissals
dismissals

Paul Krugman muses on the dismal science a bit, and the dismal scientists known as structural economists

So what’s with the obsessive push to declare our problems “structural”? And, yes, I mean obsessive. Economists have been debating this issue for several years, and the structuralistas won’t take no for an answer, no matter how much contrary evidence is presented.

The answer, I’d suggest, lies in the way claims that our problems are deep and structural offer an excuse for not acting, for doing nothing to alleviate the plight of the unemployed.

Of course, structuralistas say they are not making excuses. They say that their real point is that we should focus not on quick fixes but on the long run — although it’s usually far from clear what, exactly, the long-run policy is supposed to be, other than the fact that it involves inflicting pain on workers and the poor.

Anyway, John Maynard Keynes had these peoples’ number more than 80 years ago. “But this long run,” he wrote, “is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the sea is flat again.”

I would only add that inventing reasons not to do anything about current unemployment isn’t just cruel and wasteful, it’s bad long-run policy, too. For there is growing evidence that the corrosive effects of high unemployment will cast a shadow over the economy for many years to come. Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn’t the future burden of debt — a burden, by the way, that premature spending cuts probably make worse, not better. It is, rather, the lack of jobs, which is preventing many graduates from getting started on their working lives.

So all this talk about structural unemployment isn’t about facing up to our real problems; it’s about avoiding them, and taking the easy, useless way out. And it’s time for it to stop.

(click here to continue reading Easy Useless Economics – NYTimes.com.)

I vowed I was going to stop making drive-by posts1 like these, but here’s the quandary. I know next to nothing about economics and even economic history, so I can’t dispute or amplify what Dr. Krugman asserts. However, I like his turn of phrase, and his reasoning sounds plausible. Maybe in the future, I’ll be able to use this post as a footnote to a different post?

What do I know about partying or anything else?

Footnotes:
  1. posts where I don’t add much to the discussion []

Written by Seth Anderson

May 11th, 2012 at 7:26 am

Taking Back Wasted Tax Breaks

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Illinois Department of Revenue
Illinois Department of Revenue

Speaking of corporate welfare, who will be the first state to start demanding corporate welfare recipients pass drug tests? Or at least do what the taxpayer funded subsidy was supposed to accomplish?

For example: Many states compete for new jobs by offering taxpayer-funded subsidies to companies to entice them to open in their state. In many ways, these states are just like consumers: those willing to pay the most (in this case, offer the most generous subsidy) ultimately get the product they demand (the jobs a company promises to provide in exchange).

So if these companies ultimately fail to produce the jobs they promised, shouldn’t the taxpayers get their money back? Seems right, but according to a new report from Good Jobs First, this is hardly ever the case. Their analysis of  “clawback” efforts for 238 different state-based business subsidies reveals just how tough it is to demand fairness and accountability when it comes to public handouts to private companies.

At first glance, many of these subsidies do appear to have return policies in place: fully 90 percent of these programs actually require companies to deliver regular reports to state agencies estimating how many jobs they have successfully created thanks to public subsidies; furthermore, 75 percent of the programs they studied contain some type of penalty measure in the event that job creation fails to meet the agreed upon standards.

But here’s the bad news: 31 percent of the programs that require proof of job creation do not require any independent third-party reviewer to ensure that the data these companies submit is actually accurate. And those penalty provisions? Forty-seven percent of them are only enforced voluntarily, meaning that they are basically never enforced at all — in fact, only 21 of the 178 programs with penalty provisions actually publish any documentation of enforcement efforts.

 

(click here to continue reading No Subsidies For You: Taking Back Wasted Tax Breaks – The Demos Blog – PolicyShop.)

Flag Waving
Flag Waving

What about your state? What is its ranking on this list of Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs? Illinois scored 52/100 on the Monitoring, Enforcement & Penalty Score, covering 5 projects totaling nearly $150,000,000 of state budget.

Illinois’ worst score was for IDOT Economic Development Program ‐ a funding stream for road infrastructure built primarily to benefit specific companies, primarily big‐box retailers, for these reasons:

  • Agency awarding subsidy does not verify performance outcomes reported by recipient
  • No penalty
  • No recalibration of award
  • No online publication of statistics regarding award
  • No online publication of names of companies penalized and dollar amounts
And yet our state is in dire financial straits, and our leaders cannot seem to figure out why…

Written by Seth Anderson

January 27th, 2012 at 10:09 am

Jobs, Jobs and Cars

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Chrysler Royal
Chrysler Royal

Paul Krugman writes, in response to the lame Mitch Daniels response to the 2012 State of the Union speech:

Why does Apple manufacture abroad, and especially in China? As the article explained, it’s not just about low wages. China also derives big advantages from the fact that so much of the supply chain is already there. A former Apple executive explained: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away.”

This is familiar territory to students of economic geography (corrected link, PDF): the advantages of industrial clusters — in which producers, specialized suppliers, and workers huddle together to their mutual benefit — have been a running theme since the 19th century.

And Chinese manufacturing isn’t the only conspicuous example of these advantages in the modern world. Germany remains a highly successful exporter even with workers who cost, on average, $44 an hour — much more than the average cost of American workers. And this success has a lot to do with the support its small and medium-sized companies — the famed Mittelstand — provide to each other via shared suppliers and the maintenance of a skilled work force.

The point is that successful companies — or, at any rate, companies that make a large contribution to a nation’s economy — don’t exist in isolation. Prosperity depends on the synergy between companies, on the cluster, not the individual entrepreneur.

But the current Republican worldview has no room for such considerations. From the G.O.P.’s perspective, it’s all about the heroic entrepreneur, the John Galt, I mean Steve Jobs-type “job creator” who showers benefits on the rest of us and who must, of course, be rewarded with tax rates lower than those paid by many middle-class workers.

And this vision helps explain why Republicans were so furiously opposed to the single most successful policy initiative of recent years: the auto industry bailout.

The case for this bailout — which Mr. Daniels has denounced as “crony capitalism” — rested crucially on the notion that the survival of any one firm in the industry depended on the survival of the broader industry “ecology” created by the cluster of producers and suppliers in America’s industrial heartland. If G.M. and Chrysler had been allowed to go under, they would probably have taken much of the supply chain with them — and Ford would have gone the same way.

Fortunately, the Obama administration didn’t let that happen, and the unemployment rate in Michigan, which hit 14.1 percent as the bailout was going into effect, is now down to a still-terrible-but-much-better 9.3 percent. And the details aside, much of Mr. Obama’s State of the Union address can be read as an attempt to apply the lessons of that success more broadly.

(click here to continue reading Jobs, Jobs and Cars – NYTimes.com.)

 

Written by Seth Anderson

January 27th, 2012 at 9:18 am

Taxes at the Top

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Shouldn't That Be a Right Turn?
Shouldn’t That Be a Right Turn?

Mitt Romney isn’t the only clown who pays too little in taxes.

Paul Krugman writes, in part:

Defenders of low taxes on the rich mainly make two arguments: that low taxes on capital gains are a time-honored principle, and that they are needed to promote economic growth and job creation. Both claims are false.

When you hear about the low, low taxes of people like Mr. Romney, what you need to know is that it wasn’t always thus — and the days when the superrich paid much higher taxes weren’t that long ago. Back in 1986, Ronald Reagan — yes, Ronald Reagan — signed a tax reform equalizing top rates on earned income and capital gains at 28 percent. The rate rose further, to more than 29 percent, during Bill Clinton’s first term.

Low capital gains taxes date only from 1997, when Mr. Clinton struck a deal with Republicans in Congress in which he cut taxes on the rich in return for creation of the Children’s Health Insurance Program. And today’s ultralow rates — the lowest since the days of Herbert Hoover — date only from 2003, when former President George W. Bush rammed both a tax cut on capital gains and a tax cut on dividends through Congress, something he achieved by exploiting the illusion of triumph in Iraq.

Correspondingly, the low-tax status of the very rich is also a recent development. During Mr. Clinton’s first term, the top 400 taxpayers paid close to 30 percent of their income in federal taxes, and even after his tax deal they paid substantially more than they have since the 2003 cut.

So is it essential that the rich receive such a big tax break? There is a theoretical case for according special treatment to capital gains, but there are also theoretical and practical arguments against such special treatment. In particular, the huge gap between taxes on earned income and taxes on unearned income creates a perverse incentive to arrange one’s affairs so as to make income appear in the “right” category.

And the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration.

(click here to continue reading Taxes at the Top – NYTimes.com.)

Just seems like greed to me, and short-sightedness on the part of the 1%. If the US continues its slow, inexorable decline into a banana republic, that can’t bode well for the rich. Hard to stay wealthy when the risk of kidnapping and robbing is real, and omnipresent. America did the best when the middle class had enough money to spend on things…

Written by Seth Anderson

January 22nd, 2012 at 9:25 am

650,000 customers fled corporate banks last month

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Bank of America - Kodachrome
Bank of America – Kodachrome

We did close a Bank of America account (presumedly), but haven’t yet closed our Chase accounts.

Yes, The Big Banks DO Care If We Move Our Money

650,000 customers moved $4.5 billion dollars out of the big banks and into smaller banks and credit unions in the last month.

But there is a myth making the rounds that the big banks don’t really care if we move our money. For example, one line of reasoning is that no matter how many people move their money, the Fed and Treasury will just bail out the giants again.

But many anecdotes show that the too big to fails do, in fact, care.

Initially, of course, if the big banks really didn’t care, they wouldn’t have prevented protesters from closing their accounts.

(click here to continue reading Big Banks Plead with Customers Not to Move Their Money | The Big Picture.)

A Fool Too Long
A Fool Too Long

and no matter how much the One Percenter Banks claim they don’t care if we move our money elsewhere, of course they do care:

Even though the government may keep throwing money at the dinosaurs, the Basel regulations do have some capital requirements, and so the big banks need to bring in some actual deposits to fund their casino gambling.

Moreover, if too many depositors leave, the illusion that the big banks are serving the American public will be burst, and a critical mass of consciousness will occur, so that the banks’ questioned control over the American political and financial systems will start to be questioned.

So moving our money is an effective step towards reclaiming America.

Written by Seth Anderson

November 10th, 2011 at 3:00 pm

Posted in Business

Tagged with , ,

Fed Setting Their Hair on Fire

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Federal Reserve Bank of Chicago
Federal Reserve Bank of Chicago

Surprisingly, Paul Krugman liked President Obama’s speech:

First things first: I was favorably surprised by the new Obama jobs plan, which is significantly bolder and better than I expected. It’s not nearly as bold as the plan I’d want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment.

Of course, it isn’t likely to become law, thanks to G.O.P. opposition. Nor is anything else likely to happen that will do much to help the 14 million Americans out of work. And that is both a tragedy and an outrage.

Before I get to the Obama plan, let me talk about the other important economic speech of the week, which was given by Charles Evans, the president of the Federal Reserve of Chicago. Mr. Evans said, forthrightly, what some of us have been hoping to hear from Fed officials for years now.

As Mr. Evans pointed out, the Fed, both as a matter of law and as a matter of social responsibility, should try to keep both inflation and unemployment low — and while inflation seems likely to stay near or below the Fed’s target of around 2 percent, unemployment remains extremely high.

So how should the Fed be reacting? Mr. Evans: “Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.”

(click here to continue reading Setting Their Hair on Fire – NYTimes.com.)

And if you had the intestinal fortitude to watch the latest GOP debate12 – you heard the GOP repeatedly criticize the Fed, without having any factual reasons to do so…

Now, however, leading Republicans are against tax cuts — at least if they benefit working Americans rather than rich people and corporations. And they’re against monetary policy, too. In Wednesday night’s Republican presidential debate, Mitt Romney declared that he would seek a replacement for Ben Bernanke, the Fed chairman, essentially because Mr. Bernanke has tried to do something (though not enough) about unemployment. And that makes Mr. Romney a moderate by G.O.P. standards, since Rick Perry, his main rival for the presidential nomination, has suggested that Mr. Bernanke should be treated “pretty ugly.”

So, at this point, leading Republicans are basically against anything that might help the unemployed.

Footnotes:
  1. I watched about half, and then ate a pound of laxatives []
  2. not really []

Written by Seth Anderson

September 9th, 2011 at 8:10 am

Posted in politics

Tagged with , , ,

Self-inflicted Decline Of United States

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Neon Green Tea
Neon Green Tea

The United States has deep, serious structural problems with our economy, and yet the morons in Congress debate trivialities.

Malcom Fraser, former Prime Minister of Australia writes, part:

The United States’ friends around the world watched with dismay the recent brawl over raising the federal government’s debt ceiling, and the US congress’ inability to come to anything like a balanced and forward-looking compromise. On the contrary, the outcome represents a significant victory for the Tea Party’s minions, whose purpose seems to be to reduce government obligations and expenditures to a bare minimum (some object even to having a central bank), and to maintain President George W Bush’s outrageous tax breaks for the wealthy. The United States’ current fiscal problems are rooted in a long period of unfunded spending. Bush’s wars in Afghanistan and Iraq, and the manner in which he conducted the “global war on terror” made matters much worse, contributing to a totally unsustainable situation. Indeed, Obama inherited an almost impossible legacy.

In the weeks since the debt ceiling agreement, it has become increasingly clear that good government might be impossible in the US. The coming months of campaigning for the US presidency will be spent in petty brawling over what should be cut. The example of recent weeks gives us no cause for optimism that US legislators will rise above partisan politics and ask themselves what is best for America.

In these circumstances, it is not surprising that financial markets have returned to extreme volatility. The expenditure cuts mandated by the outcome of the debt-ceiling debate will reduce economic activity, thereby undermining growth and making debt reduction even more difficult. Providing further fiscal stimulus to boost economic growth would carry its own risks, owing to the debt ceiling and another, more ominous factor: the US is already overly indebted, and there are signs that major holders of US government securities are finally tired of being repaid in depreciated currency.

Most importantly, China’s call for the introduction of a new reserve currency stems from its frustration with the failure of major governments – whether in the US or Europe – to govern their economic affairs with realism and good sense. China recognises that the US is in great difficulty (indeed, it recognises this more clearly than the US itself), and that, given the poisonous political atmosphere prevailing in Washington, there will be no easy return to good government, economic stability, and strong growth.

(click here to continue reading America’s self-inflicted decline – Opinion – Al Jazeera English.)

Bank of China
Bank of China

One more important excerpt from Mr. Fraser’s Op-Ed:

The counter-argument – that any sell-off or failure by China to continue to buy US government securities would hurt China as much as the US – is not valid. As each year passes, China’s markets expand worldwide, and its domestic market comes to represent a greater percentage of its own GDP. As a result, China will not need a strong dollar in the long term. Americans need to get their economic house in order before China loses its incentive to support the dollar.

On several occasions in the post-WWII period, the US has learned with great pain that there are limits to the effective use of military power. US objectives could not be achieved in Vietnam. The outcome in Iraq will not be determined until the last American troops have been withdrawn. In Afghanistan, where withdrawal dates have already been set, it is difficult to believe that a cohesive unified state can be established.

As the efficacy of military power is reduced, so the importance of economic power grows. Recognition of these central realities – and bipartisanship in addressing them – is critical for America’s future, and for that of the West.

We ignore these realities at our peril – and allowing the Tea Party to control policy is akin to letting someone hepped up on bath salts pilot your airplane. Dangerously stupid, in other words.

Written by Seth Anderson

September 5th, 2011 at 8:53 am

EPA Regulations Will Create Jobs!

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Homage to George L. Kelling

Homage to George L. Kelling

Speaking of green jobs, and of the moronic statement that EPA regulations will “cost jobs” that is the GOP mantra so compelling even Obama chants it in unison with the Koch Brothers and their Republican Party employees, Paul Krugman writes:

As some of us keep trying to point out, the United States is in a liquidity trap: private spending is inadequate to achieve full employment, and with short-term interest rates close to zero, conventional monetary policy is exhausted.

This puts us in a world of topsy-turvy, in which many of the usual rules of economics cease to hold. Thrift leads to lower investment; wage cuts reduce employment; even higher productivity can be a bad thing. And the broken windows fallacy ceases to be a fallacy: something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment. Indeed, in the absence of effective policy, that’s how recovery eventually happens: as Keynes put it, a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plant and equipment.

And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.

More broadly, if you’re going to do environmental investments — things that are worth doing even in flush times — it’s hard to think of a better time to do them than when the resources needed to make those investments would otherwise have been idle.

(click here to continue reading Broken Windows, Ozone, and Jobs – NYTimes.com.)

Seems so obvious to me, and others, that I wonder what else is going on. Perhaps the rumors of Koch Brothers investing in Obama’s 2012 campaign are true, or maybe they’ve told him they’ll sit on the sideline instead of investing billions to defeat Obama. Or else Obama is just getting horrible, horrible advice from his staff…

Written by Seth Anderson

September 5th, 2011 at 8:42 am

Posted in environment,politics

Tagged with , ,

Muddying the Budget Waters With Social Security

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Forget-me-not Social Security
Forget-me-not Social Security

We’ve mentioned this before, but it bears repeating…

And that is the issue hanging like a dark cloud over the broader discussion to bolster Social Security, especially in such a politically charged atmosphere.

Many people misunderstand how the program operates. Payroll taxes stream into the trust fund that is used to pay current retirees’ benefits. When there is a surplus, that money is invested in a special type of Treasury bond that pays interest to the trust fund. At the end of last year, the trust fund had about $2.6 trillion. And though last year was the first year since 1983 that the fund paid out more than it received in tax revenue, it still continued to grow because of the interest accrued — and it is estimated to continue to grow through 2022.

Since the money in the trust fund is held in Treasury securities, taxes collected are essentially being lent to the federal government to pay for whatever it wants (and this allows the government to borrow less from the public). That is where some of the confusion comes into play about how Social Security is used to pay for things that are unrelated to the program. But it is really no different from China lending the government money by investing in Treasuries.

Social Security does not, and cannot by law, add a penny to the federal debt,” said Nancy Altman, co-director of Social Security Works, an advocacy organization that promotes the preservation of the program. “It, by law, cannot pay benefits unless it has sufficient income to cover the cost, and it has no borrowing authority to make up any shortfall.”

And, she added, it is not in crisis. “Its long-range funding shortfall should be dealt with on its own legislative vehicle, separate from deficit-reduction talks and after those talks are concluded,” she added.

(click here to continue reading Muddying the Budget Waters With Social Security – NYTimes.com.)

 

Written by Seth Anderson

July 30th, 2011 at 9:44 am

Posted in government

Tagged with ,

Meanwhile In Another Universe

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Office toys
Office toys

Budget cuts for Social Security, debt ceilings, and yet the Pentagon gets more than it needs. Go figure. I agree with Representative Barney Frank: the military is the over-eater in the room…

The House on Friday overwhelmingly passed a $649 billion defense spending bill that boosts the Pentagon budget by $17 billion and covers the costs of wars in Iraq and Afghanistan.

The strong bipartisan vote was 336-87 and reflected lawmakers’ intent to ensure national security, preserve defense jobs across the nation and avoid deep cuts while the country is at war. While House Republican leaders slashed billions from all other government agencies, the Defense Department is the only one that will see a double-digit increase in its budget beginning Oct. 1. Amid negotiations to cut spending and raise the nation’s borrowing limit, the House rejected several amendments to cut the Pentagon budget, including a measure by Rep. Barney Frank, D-Mass., to halve the bill’s increase in defense spending.

“We are at a time of austerity. We are at a time when the important programs, valid programs, are being cut back,” Frank said. Scoffing at the suggestion that “everything is on the table” in budget negotiations between the Obama administration and congressional leaders, Frank said, “The military budget is not on the table. The military is at the table, and it is eating everybody else’s lunch.

(click here to continue reading House passes $649B defense spending bill – USATODAY.com.)

 

Written by Seth Anderson

July 8th, 2011 at 1:47 pm

Posted in politics

Tagged with ,

Taxes and Billionaires

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Curvaceous
Curvaceous

The Republicans are not really concerned with people like you and me1 – the GOP instead is worried that the filthy rich continue to pay 15% income tax…

Nicholas D. Kristof reports:

take a look at one of the tax loopholes that Congressional Republicans are refusing to close — even if the cost is that America’s credit rating blows up. This loophole has nothing to do with creating jobs and everything to do with protecting some of America’s wealthiest financiers.

If there were an award for Most Unconscionable Tax Loophole, this one would win grand prize.

Wait, wake up! I know that “tax policy” makes one’s eyes glaze over, but that’s how financiers have gotten away with paying a lower tax rate than their chauffeurs or personal trainers. Tycoons have bet for years that the public is too stupid or distracted to note that in many cases they’re paying just a 15 percent tax rate.

What’s at stake is the “carried interest” loophole, and President Obama is pushing to close it. The White House estimates that this would raise $20 billion over a decade. But Congressional Republicans walked out of budget talks rather than discuss raising revenues from measures such as this one.

…This carried interest loophole benefits managers of financial partnerships such as hedge funds, private equity funds, venture capital funds and real estate funds — who are among the highest-paid people in the world. John Paulson, a hedge fund manager in New York City, made $4.9 billion last year, top of the chart for hedge fund managers, according to AR Magazine, which follows hedge funds. That’s equivalent to the average per capita income of 184,000 Americans, according to my back-of-envelope calculations based on Census Bureau figures.

Mr. Paulson declined to comment on this tax break, but here’s how it works. These fund managers are compensated mostly with a performance bonus of 20 percent or more of the profits they make. Under this carried interest loophole, that 20 percent is eligible to be taxed at the long-term capital gains rate (if the fund’s underlying assets are held long enough) of just 15 percent rather than the regular personal income rate of 35 percent.

This tax loophole is also intellectually vacuous. The performance fee is a return on the manager’s labor, not his or her capital, so there’s no reason to give it preferential capital gains treatment.

“The carried interest loophole represents everyone’s worst fear about the tax system — that the rich and powerful get away with murder,” says Victor Fleischer, a law professor at the University of Colorado, Boulder, who has written about the issue.  “Closing the loophole won’t fix the budget by itself, but it gets us one step closer to justice.”

(click here to continue reading Taxes and Billionaires – NYTimes.com.)

Get that? The GOP is insisting the rich pay less in tax, percentage-wise, than average citizens, yet simultaneously the Rethuglicans want to destroy the social safety net because there isn’t enough revenue. Slime balls…

Footnotes:
  1. assuming you are not a billionaire. If you are, can you contact me about a business idea I have? []

Written by Seth Anderson

July 8th, 2011 at 7:02 am

Posted in politics

Tagged with , ,

links for 2011-04-14

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  • That pill-popping, boy-crazy nincompoop Ayn Rand has got a lot to answer for. Indeed, it’s not too much of a stretch to say that we owe at least part of the recent economic crisis to her and her philosophy of Objectivism, since former Fed chief Alan Greenspan was a lifelong disciple of both. The two first met in the ’50s. Back then, a gang of acolytes, calling themselves the Collective, used to gather at Rand’s apartment on East 36th Street every Saturday night so they could tell each other how smart they all were. Along came Greenspan one evening, shy and somber.

  • America has two national budgets, one official, one unofficial. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we’re broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year’s retirees from the IRS, the SEC and the Department of Energy.

    Why Isn’t Wall Street in Jail?

    Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.

  • The budget plan that Budget Committee Chair Rep. Paul Ryan (R-WI) has put forward for the House Republicans is truly stunning. It takes the war on America’s middle class not to the next level but about three levels down the road.

    There’s something we should start with, though, when we think about this budget. And that’s where we are now. Mark Sumner points us to this graph:

    That’s the deficit, and that big orange stripe, the one getting wider by the year, is how much of the deficit the Bush tax cuts are creating.

    8c52104u.jpg

  • (tags: privacy browsers )
  • Apple Inc. has added a do-not-track privacy tool to a test version of its latest Web browser for keeping customers’ online activities from being monitored by marketers.

    The tool is included within the latest test release of Lion, a version of Apple’s Mac OS X operating system that is currently available only to developers. The final version of the operating system is scheduled to be released to the public this summer. Mentions of the do-not-track feature in Apple’s Safari browser began to appear recently in online discussion forums and on Twitter.

    The move by the Cupertino, Calif., company leaves Google Inc. as the only major browser provider that hasn’t yet committed to supporting a do-no-track capability in its browser, called Chrome. Microsoft Corp. and Mozilla Corp. both offer do-not-track features in their latest browsers.

  • (tags: law )
  • The Other Writers: “We did all of that writing for free, and now that you made a bunch of money, we’re entitled to some of it!”

    AOLHuffPo: “LOL!”

    1496-2.jpg

Written by swanksalot

April 14th, 2011 at 7:02 am

Posted in Links

Tagged with , , ,

Why Isn’t Wall Street in Jail?

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Symbolic

Matt Taibbi wonders, as do we all, why teachers in Wisconsin have to give up their pensions, and Wall Street crooks get to sleep on1 bags of krugerands without consequence.

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

This article appears in the March 3, 2011 issue of Rolling Stone. The issue is available now on newsstands and will appear in the online archive February 18.

The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

Invasion of the Home Snatchers

Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. “If the allegations in these settlements are true,” says Jed Rakoff, a federal judge in the Southern District of New York, “it’s management buying its way off cheap, from the pockets of their victims.”

 

To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. “You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street,” says a former congressional aide. “That’s all it would take. Just once.”

But that hasn’t happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.

 

(click here to continue reading Why Isn’t Wall Street in Jail? | Rolling Stone Politics.)

The chairman of Goldman Sachs isn’t going to a pound-me-in-the-ass prison for one six-month term, nor is any CEO. Unfortunately. Not that anyone should be raped, even Jamie Dimon, but you get the idea. A little bit of actual penalty would be good for these assholes.

Looks like Matt Taibbi has written a book on the subject:

Taibbi eviscerates Wall Street for what he considers frauds perpetrated on the American people over the last ten years. Deftly delving deeply into complicated financial history and lingo, Taibbi deftly lays the subject bare, rendering heretofore-dense subject matter simple without being simplistic. Blame for the recent mortgage collapse, commodities bubble, and tech bubble are laid at the feet of a relatively small number of bankers and traders who, in the author’s opinion, act without fear of reciprocity from a U.S. government no longer representative of the American people. He begins by awarding the title “Biggest Asshole In The Universe” to former-Fed Chief Alan Greenspan, taking him to task for willfully or stupidly disemboweling what little regulation the financial markets may have had before his tenure. This theme resounds throughout, and Taibbi asserts that the collusion between Wall Street and the White House has effectively turned the United States into a massive casino, in which working Americans are regularly bilked out of their savings and homes while the wealthy are repeatedly rewarded for their graft. It’s an important and worthy read, but not for the Randian disciple or Goldman-Sachs alum

But if you are too cheap to buy Taibbi’s book, at least read his article.

Footnotes:
  1. metaphoric []

Written by Seth Anderson

February 26th, 2011 at 9:11 pm

Posted in Business,Suggestions

Tagged with ,

Out of Control in the House

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Lights Out

The Teabaggers don’t really care about reality, logic, or established practice, or the economic health of the nation. They just want to crow about kicking ass.

Are there any adults in charge of the House? Watching this week’s frenzied slash-and-burn budget contest, we had to conclude the answer to that is no.

Some members want to go still further. On Tuesday, the House began debating the list of proposed cuts, and more than 500 amendments were filed, mostly from Republicans trying to cut still more out of — or end — programs they dislike. One would stop paying dues to the United Nations. Others would cut all financing for the health care reform law, or Planned Parenthood, or any foreign aid to a country that regularly disagrees with the United States at the United Nations.

If the Republicans got their way, it would wreak havoc on Americans’ lives and national security. This blood sport also has nothing to do with the programs that are driving up the long-term deficit: Medicare, Medicaid and, to a lesser extent, Social Security.

The House freshmen seemed even less concerned about the effect of their budget slashing. “A lot of us freshmen don’t have a whole lot of knowledge about how Washington, D.C., is operated,” Representative Kristi Noem, a Republican of South Dakota, told the Conservative Political Action Conference last week. “And, frankly, we don’t really care.”

In all of their posturing, Republican lawmakers have studiously avoided making clear to voters what vital government services would be slashed or disappear if they got their way — like investment in cancer research or a sharp reduction in federal meat inspections, or the number of police on the street, or agents that keep the borders secure, or the number of teachers in your kids’ schools. Those cuts will never get past the Senate, and, on Tuesday, Mr. Obama said he would veto such job-killing cuts if they arrive at his desk.

That puts the House leadership on notice. Will they follow the mob and allow the government to shut down if the cuts are not enacted? Or will they take back control of the House and steer it toward reality?

 

(click here to continue reading Out of Control in the House – NYTimes.com.)

Written by Seth Anderson

February 17th, 2011 at 8:06 am

Posted in politics

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Pink Light Over Boeing

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Pink Light Over Boeing

Boeing, one of our corporate overlords.

Behold, 2007’s expenditures, estimated. These numbers have gone up several percentage points since then:

Total Purchases: $306,521,269,483

Rank Parent Company Total Air Force Army Navy
1 Lockheed Martin Corp. $27,320,616,068 $13,134,039,297 $4,129,352,342 $9,368,161,063
2 Boeing Co. 20,861,418,122 9,066,016,130 4,571,754,905 5,047,577,486

(click here to continue reading Top 100 Defense Contractors (8/15/07) — GovExec.com.)

And for a little perspective:

Top Ten Miliitary Spending 2009

2009 defense budgets, by nation, showing just the top ten. Notice how much bigger the U.S.’s percentage is…

This is a list of countries by military expenditures. The list is based on the Stockholm International Peace Research Institute (SIPRI) database which calculates military expenditures in 2009 (in constant 2008 US$)

Rank↓ ↓ Country↓ Military expenditure, 2009[2]↓ % of GDP, 2008↓
1 United States United States 663,255,000,000 4.3%
2 People's Republic of China China 98,800,000,000 2.0%
3 United Kingdom United Kingdom 69,271,000,000 2.5%
4 France France 67,316,000,000 2.3%
5 Russia Russian Federation 61,000,000,000 3.5%
6 Germany Germany 48,022,000,000 1.3%
7 Japan Japan 46,859,000,000 0.9%
8 Saudi Arabia Saudi Arabia 39,257,000,000 8.2%
9 Italy Italy 37,427,000,000 1.7%
10 India India 36,600,000,000 2.6%

 

Even in these lean economic times, the right of Boeing, Lockheed Martin and similar companies to make obscene profits is sacrosanct, and Obama’s 2012 Budget gives Defense a 5% increase. Domestic programs must be sliced to balance the federal budget, but defense contractors remain fat.

Defense Secretary Robert Gates already has revealed the Pentagon will seek $553 billion in its 2012 Pentagon budget plan — the largest request ever — and slower growth than planned over the next four years. He also has revealed proposals to end several major weapons programs, including the Marine Corps’ Expeditionary Fighting Vehicle (EFV).

That means the spending plan “will be anti-climactic in the broad sense,” according to one senior House defense aide.

Indeed, while Gates promised to cut $78 billion over five years, most of that reduction would take place in 2014 and 2015. As Center for American Progress senior fellow and President Reagan’s former assistant secretary of defense Larry Korb points out, Obama’s request is “5% higher than what the Defense Department plans to spend this year. In inflation-adjusted dollars, this figure is higher than at any time during the Bush years or during the Cold War.” In fact, the total military budget this year “comes in at a thumping $750 billion — an annual tax of more than $7,000 on every household in the country.” And while there are clear ways to cut $1 trillion from the Pentagon budget, it seems that many in the GOP have no intention of doing so.

(click here to continue reading ThinkProgress » Pentagon’s 2012 Spending Proposal Is ‘The Largest Request Ever’ Since World War II.)

These are only the budgeted amounts, the Pentagon manages to go over budget nearly every year since General Eisenhower was in office.

So are you willing to give $7,000 to the military this year? and more the year after? and more the year after that?

Written by Seth Anderson

February 14th, 2011 at 6:43 pm

Posted in Business,government

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