on February 23, 2010
To Accompany the February 23, 2010 edition of Tidbits
Bob Jensen at Trinity University
How Can We Help Haiti --- http://www.insidehighered.com/views/2010/01/15/fitzsimmons
Emergency Fund for Students From Haiti --- http://www.iie.org//Content/NavigationMenu/Programs7/Haiti-EAS/Haiti-EAS.htm
everything in my power to prevent Iran from obtaining a nuclear weapon.
Presidential Candidate Barach Obama, April 6, 2008 --- http://www.haaretz.com/hasen/spages/990201.html
Once Doubted" the Surge Would Do Exactly What I Promised It Could Never Do, Ever
Vice President Joe Biden
"Jared Diamond Explains Haiti’s
Enduring Poverty," Open Culture, January 21, 2010 ---
Available on MP3
Video of Detroit in Ruins --- http://www.youtube.com/watch?v=1hhJ_49leBw
The Disgraceful Personal Spending of House Speaker, CNN --- http://www.youtube.com/watch_popup?v=A6_xgKWzhRw
Bob Jensen's fraud updates --- http://www.trinity.edu/rjensen/fraudUpdates.htm
Huffington Post State of the Union Address Drinking Game --- http://www.huffingtonpost.com/2010/01/26/state-of-the-union-drinki_n_436932.html
And for More
Laughs at the Party
Video: Jon Stewart Mocks Olbermann (hilarious) ---
Olbermann reduced to name calling.
Some of Jon Stewart's
more famous "comedy" clips ---
Not linked are his latest clips portraying a negative image of President Obama (which surprise me greatly) ---
"Tougher Jon Stewart Obama Jokes May Signal Collapse of Remaining Vestiges of Obama Support" ---
Saturday Night Live's
Scott Brown Dance Party ---
Hey, Ben (Nelson): can you
hear us now?
Nebraska billboards after Scott Brown's victory in Mass.
Excuse me. I was just distracted by the new 66-page federal indictment of Larry
Seabrook, a New York City councilman who, along with multitudinous other
charges, is accused of altering a receipt from a deli so he could get a $177
reimbursement for a bagel and diet soda.
Gail Collins, The Biggest Losers, The New York Times, February 10. 2010 --- http://www.nytimes.com/2010/02/11/opinion/11collins.html?hpw
But his attorney says that no crime was committed. This is just acceptable behavior of elected officials.
574 Shields Against Validity Challenges in Plato's Cave
Ascendancy Government union members now outnumber private for the first time,"
The Wall Street Journal, February 3. 2010 ---
"Hugh Hendry' 'Nassim Taleb' Hendry Taleb inflation deflation hyperinflation
euro USD dollar forex economy bubble" ---
Even If Acquitted He'll Never Be Set Free: What Joe Biden said on the
program today will be laughed at around the Arab world
Yeah, well, this is a policy in transition. Eric Holder, the attorney general, took this decision without consulting the president, without consulting the national security apparatus, did it on his own. And slowly, and now quickly, the White House is pulling that back. And so they are going to try to, I think, take--well, take it out of New York. But they're not there yet. The idea that we can try someone and, and guarantee a conviction and guarantee they won't walk free, I mean, this, this is a betrayal of our values. I mean, what--the, the correct charges against Gitmo were that it's a betrayal of our values. We're fighting our values in a way that--we're fighting this war in a way that betrays who we really are. And this is the essence of that. What Joe Biden said on the program today will be laughed at around the Arab world.
David Brooks of the New York Times as reported by Noel Sheppard, Newsbusters, February 14, 2010 ---
"Suddenly Concerned About Historical Accuracy, Leftists Attempt to Kill JFK (History Channel) Miniseries," by John Nolte, Big Hollywood, February 19, 2010 --- http://bighollywood.breitbart.com/jjmnolte/2010/02/19/suddenly-concerned-about-historical-accuracy-leftists-attempt-to-kill-jfk-miniseries/
This is America and leftist filmmaker Robert Greenwald and his ilk have every right to wage a propaganda war to pressure the History Channel to kill their upcoming JFK miniseries. The miniseries’ script might not be done yet, but that’s how we roll in this country and until Senator Harry Reid steps in and threatens to put the History Channel out of business, like he did ABC in order to muscle a “Path to 9/11″ edit to his and the Clintons’ liking, Greenwald and Co. can all knock themselves out. And knocking themselves out they are: a website, petition, videos, and an all-too expected personal attack against “24″ co-creator Joel Surnow, an openly conservative producer and creator of “The Kennedys.”
The New York Times reports that Greenwald appears to have gotten his hands on an early draft of the script for the 10-hour miniseries and found parts of it objectionable. According to a video Greenwald put together — where he has bad actors recreate the “offensive” scenes — JFK was some kind of serial adulterer. Who knew, right? Then there’s longtime Kennedy friend and counsel Ted Sorenson who appears in the video with a not very subtle threat to sue the History Channel should they proceed. He claims the screenplay contains Oval Office conversations that never happened. Who do you think is more worried about Sorenson winning a lawsuit against dramatic license? Surnow or Oliver Stone?
The most important fact in this dust up is that it’s occurring over a project that’s still in the development stage. The script is still being written and will be vetted:
Mr. Kronish, the “Kennedys” screenwriter, said that the History channel’s standards for producing its mini-series are more rigorous than the broadcast networks’, and that his finished scripts will require bibliographic annotations and legal vetting before filming proceeds. He also said that he was drawing upon nonfiction works, including books by Seymour Hersh, Robert Dallek, David Talbot and others. “If I’m wrong,” he said, “I guess all of them are wrong.”
Mr. Kronish acknowledged that some factual details, like the date that the Peace Corps was established, were changed for concision or dramatic license, but not with malicious intent.
“This is not a documentary,” he said. “It is a dramatization.” As its author, Mr. Kronish said, it was his job to “take these people off the dusty pages of history and make them come alive.”
“We do not go into this with an agenda other than to be factually accurate and entertaining,” he said. “The rest of it, let the chips fall where they may.”
David McKillop, the senior vice president of programming and development for the History channel, said that Mr. Kronish had already begun submitting annotated drafts of his scripts, and that the channel stands by their accuracy.
Keep in mind, however, that we’re talking about the History Channel and the irony of The History Channel suddenly getting all worked up over historical accuracy is rich and, not surprisingly, completely lost on Greenwald (and the New York Times):
“Anyone has a right to do whatever they want,” Mr. Greenwald said. “I would never suggest that History channel doesn’t have a right. What I’d suggest is something called the History channel should not be doing political propaganda.”
You have to stop and savor nine of Greenwald’s words: “The History Channel should not be doing political propaganda.”
Does he mean, this History Channel…? Because I Googled and Googled and Googled searching for Robert Greenwald’s Stop ‘The People Speak’ website and came up empty.
Maybe Surnow should cast Matt Damon as JFK and all this “political propaganda” will stop being a problem.
But is it really propaganda? Pulling a few scenes out of the early draft of what must be a 500-plus page screenplay isn’t a very convincing argument. Truth is found in context not cherry-picking.
The Left will point to the conservative uproar over the 2003 CBS Reagan miniseries as some sort of cover for their History Channel assault. But that miniseries was already completed when conservatives started their campaign to have it pulled, and it did eventually air on Showtime. Also, unlike “The Path to 9/11,” the trashing of Ron and Nancy enjoyed a DVD release. I know this because there’s still a copy of it in the used 5 for $20 bin at my local Hollywood Video store — right next to “Welcome to Mooseport.”
Overall, this new uproar from our friends on the left should be looked at as a positive change. Now that they and the History Channel have discovered and embraced the idea of historical accuracy, those of us on the right who have grown disgusted and tired of these awful Hollywoodists and their decades-long smear campaign against our country, beliefs, heroes, religion, and troops, can now rest easy that those days are over.
"Napolitano Secretly Hosts Terrorist Groups In D.C.," Corruption
Chronicles, February 18, 2010 ---
In the Obama Administration’s latest effort to befriend radical Muslims, the cabinet official in charge of protecting the country’s safety covertly met with a group of extremist Arab, Muslim and Sikh organizations to discuss national security matters.
Briefing radical Islamists who want to murder Americans about homeland security measures may seem like a bizarre tactic to counter terrorism, but it’s the center of Obama’s famous change rhetoric. Homeland Security Secretary Janet Napolitano, most concerned about a wave of anti-Muslim backlash after the Ft. Hood massacre, and her senior staff privately met in Washington D.C. with the groups. Among them was the terrorist Muslim Brotherhood, which is a sort of parent organization of Hamas and Al Qaeda.
Not surprisingly, the mainstream media ignored the two-day event which was exclusively reported this week by an alternative internet news company that regularly breaks big stories. Napolitano actually spent and hour and a half briefing the Middle Easterners about the U.S. government’s new “counter-radicalization” and “anti-terrorist” programs largely aimed at their followers.
Continued in article
"Homeland Security Loses Hundreds Of Weapons," Corruption
Chronicles, February 18, 2010 ---
In a baffling example of government incompetence, the federal agency created after the 9/11 terrorist attacks to keep America safe has lost hundreds of weapons and some have ended up in the possession of violent gangbangers and felons.
Remiss officers working for the embattled Department of Homeland Security have lost government-issued guns in bowling alleys, public bathrooms, unlocked cars and a variety of unsecure areas, according to a scorching 27-page report published by the agency’s inspector general.
Most of the lost weapons—including military rifles, handguns and shotguns—have never been found and at least 15 have been recovered by local law enforcement officials in the possession of criminals, gang members and known drug dealers.
The majority of the losses occurred because Homeland Security officers did not sufficiently secure firearms in their possession, investigators determined. They further point out that the lost firearms created an unnecessary risk to the public, which goes without saying. Americans may be relieved to know however, that the abhorrent negligence has been met with “extra training” and in some cases disciplinary actions.
This may seem laughable considering the Department of Homeland Security is supposed to keep the nation safe from foreign threats. The crucial agency was created after the 2001 terrorist attacks by encompassing Immigration and Customs Enforcement, Customs and Border Protection, Citizenships and Immigration Services and the Transportation Security Administration.
In theory, their combined forces are more effective in preempting terrorist attacks. In reality, various branches of the agency have become best known for their perpetual mishaps, especially the Transportation Security Administration which was created to protect the nation’s transportation system.
It's not so much that Obama's leaders reached out to the radical Muslims. But it is discouraging that the mainstream media takes its marching orders from the Obama administration while it, especially the New York Times, delighted in leaking classified information when Bush was in office.
Europe Revs Up New Money Laundering Machines
"Europe Not So Swift: Our friends nix an antiterror program,"
The Wall Street Journal, February 17, 2010 ---
Since its creation after September 11, the Terrorist Finance Tracking Program—known as the Swift program—has been a key antiterror tool. But now this once-top-secret initiative may go out of business, and we can thank the European Parliament.
Citing civil liberties and privacy concerns, the Parliament last week rejected an agreement between the Obama Administration and the 27 European Union governments that gave the U.S. access to financial information from Swift, an international banking consortium. U.S. authorities had direct access to the data until the consortium's American servers were moved to Europe at the end of 2009. Even last-minute lobbying from Vice President Joe Biden and Cabinet officers Hillary Clinton and Timothy Geithner were of no avail.
Contrary to popular fears of "data mining," European Commissioner Cecilia Malmström said before the vote that the information remains "anonymous" and "only if there is reason to believe that an identified person is a terrorist can the data of that person be seen." She also told Parliament the data could only be used in the antiterror fight and couldn't be stored for more than five years.
So far, the program has produced more than 1,500 reports and numerous leads for U.S. and European security services, according to the State Department. In 2003, it helped net Riduan Isamutddin—better known as Hambali—mastermind of the 2002 Bali nightclub bombing that killed 202 people. The European Commission, which also backed the deal, says the program helped thwart the 2006 Heathrow Airport liquid-bomb plot. Swift data also helped prevent a terror attack on Barcelona, according to Spain's Interior Minister, Alfredo Perez-Rubalcaba.
So far, the media are treating the vote as a stand on principle. The New York Times, which first exposed the Swift program in 2006, wrote that the vote "underlined the differences between the United States and the European union over how to balance personal privacy guarantees with concerns on national and international security."
But the truth is more prosaic and distressing: While pretending to stand on principle, the Parliament was flexing new muscles under last year's Lisbon Treaty—while also indulging anti-American reflex. Previously, the Parliament did not have the power to approve agreements on internal security.
The vote underscores how slight a difference President Obama's election has made in trans-Atlantic cooperation. Had this decision come two years ago, it would have been cast as a vote of global no-confidence in the Bush Administration. Instead, it is a reminder that countries and institutions cooperate according to their own purposes, some of which have little to do with the merits.
The U.S. and Europe may still salvage a deal, probably through the cumbersome process of negotiating separate treaties with 27 European governments. If the European Parliament thinks that it has made itself more relevant through its obstructionism, its conceit comes at the expense of our collective safety.
Elizabeth Warren warns of looming crisis in the commercial real estate
"Climategate's Phil Jones Confesses to Climate Fraud," by Marc
Sheppard, American Thinker, February 14, 2010 ---
"The Continuing Climate (Science) Meltdown: More embarrassments for the U.N. and 'settled' science," The Wall Street Journal, February 16, 2010 --- http://online.wsj.com/article/SB10001424052748703630404575053781465774008.html?mod=djemEditorialPage_t
It has been a bad—make that dreadful—few weeks for what used to be called the "settled science" of global warming, and especially for the U.N. Intergovernmental Panel on Climate Change that is supposed to be its gold standard.
First it turns out that the Himalayan glaciers are not going to melt anytime soon, notwithstanding dire U.N. predictions. Next came news that an IPCC claim that global warming could destroy 40% of the Amazon was based on a report by an environmental pressure group. Other IPCC sources of scholarly note have included a mountaineering magazine and a student paper.
Since the climategate email story broke in November, the standard defense is that while the scandal may have revealed some all-too-human behavior by a handful of leading climatologists, it made no difference to the underlying science. We think the science is still disputable. But there's no doubt that climategate has spurred at least some reporters to scrutinize the IPCC's headline-grabbing claims in a way they had rarely done previously.
Take the rain forest claim. In its 2007 report, the IPCC wrote that "up to 40% of the Amazonian forests could react drastically to even a slight reduction in precipitation; this means that the tropical vegetation, hydrology and climate system in South America could change very rapidly to another steady state."
But as Jonathan Leake of London's Sunday Times reported last month, those claims were based on a report from the World Wildlife Fund, which in turn had fundamentally misrepresented a study in the journal Nature. The Nature study, Mr. Leake writes, "did not assess rainfall but in fact looked at the impact on the forest of human activity such as logging and burning."
The IPCC has relied on World Wildlife Fund studies regarding the "transformation of natural coastal areas," the "destruction of more mangroves," "glacial lake outbursts causing mudflows and avalanches," changes in the ecosystem of the "Mesoamerican reef," and so on. The Wildlife Fund is a green lobby that believes in global warming, and its "research" reflects its advocacy, not the scientific method.
The IPCC has also cited a study by British climatologist Nigel Arnell claiming that global warming could deplete water resources for as many as 4.5 billion people by the year 2085. But as our Anne Jolis reported in our European edition, the IPCC neglected to include Mr. Arnell's corollary finding, which is that global warming could also increase water resources for as many as six billion people.
The IPCC report made aggressive claims that "extreme weather-related events" had led to "rapidly rising costs." Never mind that the link between global warming and storms like Hurricane Katrina remains tenuous at best. More astonishing (or, maybe, not so astonishing) is that the IPCC again based its assertion on a single study that was not peer-reviewed. In fact, nobody can reliably establish a quantifiable connection between global warming and increased disaster-related costs. In Holland, there's even a minor uproar over the report's claim that 55% of the country is below sea level. It's 26%.
Meanwhile, one of the scientists at the center of the climategate fiasco has called into question other issues that the climate lobby has claimed are indisputable. Phil Jones, who stepped down as head of the University of East Anglia's Climatic Research Unit amid the climate email scandal, told the BBC that the world may well have been warmer during medieval times than it is now.
This raises doubts about how much our current warming is man-made as opposed to merely another of the natural climate shifts that have taken place over the centuries. Mr. Jones also told the BBC there has been no "statistically significant" warming over the past 15 years, though he considers this to be temporary.
*** All of this matters because the IPCC has been advertised as the last and definitive word on climate science. Its reports are the basis on which Al Gore, President Obama and others have claimed that climate ruin is inevitable unless the world reorganizes its economies with huge new taxes on carbon. Now we are discovering the U.N. reports are sloppy political documents intended to drive the climate lobby's regulatory agenda.
The lesson of climategate and now the IPCC's shoddy sourcing is that the claims of the global warming lobby need far more rigorous scrutiny.
, "CRU Chief Admits Warming May Not Be Unprecedented," by Ed Morressey, HotAir, February 14, 2010 --- Click Here
In a rather stunning series of admissions, the suspended chief of the East Anglia CRU now admits that the warming seen in the late 20th century may not be unprecedented after all, that the planet has stopped warming for the last 15 years despite the predictions of AGW advocates, and that his own record-keeping has been poor. Phil Jones, who stepped down at least temporarily from his position at the CRU when its e-mails exposed a series of embarrassing attempts by climate scientists to undermine careers of skeptics and to hide contradictory data, now says that the entire basis of the “hockey stick” graph could have been invalid:
The academic at the centre of the ‘Climategate’ affair, whose raw data is crucial to the theory of climate change, has admitted that he has trouble ‘keeping track’ of the information.
Colleagues say that the reason Professor Phil Jones has refused Freedom of Information requests is that he may have actually lost the relevant papers. … The data is crucial to the famous ‘hockey stick graph’ used by climate change advocates to support the theory.
But that’s just the start:
Professor Jones also conceded the possibility that the world was warmer in medieval times than now – suggesting global warming may not be a man-made phenomenon.
And he said that for the past 15 years there has been no ‘statistically significant’ warming. …
And he said that the debate over whether the world could have been even warmer than now during the medieval period, when there is evidence of high temperatures in northern countries, was far from settled.
Sceptics believe there is strong evidence that the world was warmer between about 800 and 1300 AD than now because of evidence of high temperatures in northern countries.
But climate change advocates have dismissed this as false or only applying to the northern part of the world.
Professor Jones departed from this consensus when he said: ‘There is much debate over whether the Medieval Warm Period was global in extent or not. The MWP is most clearly expressed in parts of North America, the North Atlantic and Europe and parts of Asia.
‘For it to be global in extent, the MWP would need to be seen clearly in more records from the tropical regions and the Southern hemisphere. There are very few palaeoclimatic records for these latter two regions.
‘Of course, if the MWP was shown to be global in extent and as warm or warmer than today, then obviously the late 20th Century warmth would not be unprecedented. On the other hand, if the MWP was global, but was less warm than today, then the current warmth would be unprecedented.’
The “hockey stick” graph has already been shown to be mainly a creation of graph-scaling bias, but this gets to the heart of the entire argument. During the MWP, farmers grew crops on Greenland for a couple of centuries. Until now, AGW advocates insisted that the warming only took place in the northern hemisphere. If that warming was indeed global, then it dwarfs anything seen in the 20th century, as these two charts from Climate Audit, via Sonic Frog, demonstrate:
Continued in article
"Climate bill: All cost, no benefit," Milwaukee Journal Sentinel, January 30, 2010 --- http://www.jsonline.com/news/opinion/83069547.html
It's common practice in politics to market legislation in a way that hides its true intent. The so-called Clean Energy Jobs Act, praised by a Journal Sentinel editorial on Jan. 17 is one of the most misnamed bills of all time.
In 2007, Gov. Jim Doyle appointed his Global Warming Task Force. He gave the task force the duty of recommending policies to fight global warming in Wisconsin - without considering cost. The report was published in July 2008 and contained more than 50 recommendations for cutting greenhouse gas emissions. The report was the blueprint for Assembly Bill 649 and its companion Senate Bill 450, the so-called Clean Energy Jobs Act.
The governor directed the task force to accept "the substantial scientific consensus that exists that climate change is occurring and human activity . . . is a major contributor to such change." Much of that consensus is based on the findings of the United Nations' International Panel on Climate Change. A number of the prominent member scientists are now embroiled in "Climategate," a scandal involving e-mails showing the scientists were involved in unethical research techniques.
If the science is settled, why fudge the data? Why didn't the climate alarmists' high-tech computer models predict the recent cooling trend? If they can't even predict 10 years ahead, should we believe their predictions for the next several decades?
The task force was told by the governor not to consider cost-benefit analysis when developing the recommendations. Not surprisingly, AB 649/SB 450 is all cost, no benefit.
AB 649/SB 450 will mandate more expensive electricity in the form of windmills, solar panels, biofuels and storage batteries. Cost estimates show the mandates will cost at least $1,000 per year for the average family. This doesn't even include possible federal cap and trade legislation.
Higher energy costs will lower profit margins for manufacturers, who will either pass the costs onto customers or cut jobs. One study estimates Wisconsin could suffer a net loss of 31,000 jobs if some of the task force recommendations become law.
The bill has other oppressive mandates and regulations, including adopting California vehicle emissions standards. Do we want California bureaucrats to set emission standards in Wisconsin? And who will be in charge of administering AB 649/SB 450? The deer-counting-challenged Department of Natural Resources.
Finally, how will the climate benefit if this bill is passed? It won't. Even if Wisconsin reduced greenhouse gas emissions to zero, there would be no measurable effect on background levels of greenhouse gases and, therefore, no effect on temperatures.
Conservation and a cleaner environment make sense, but AB 649/SB 450 is not the answer. Wisconsin does need a sensible energy policy. We should start by increasing our use of nuclear energy. Mandating utility rate increases and oppressive government regulations will only raise the cost of living and cost our state jobs
"Climate could warm to record levels in 2010," Met Office,
December 10, 2009 ---
A combination of man-made global warming and a moderate warming of the tropical Pacific Ocean, a phenomenon known as El Niño, means it is very likely that 2010 will be a warmer year globally than 2009.
Recently released figures confirm that 2009 is expected to be the fifth-warmest year in the instrumental record that dates back to 1850.
The latest forecast from our climate scientists, shows the global temperature is forecast to be almost 0.6 °C above the 1961–90 long-term average. This means that it is more likely than not that 2010 will be the warmest year in the instrumental record, beating the previous record year which was 1998.
A record warm year in 2010 is not a certainty, especially if the current El Niño was to unexpectedly decline rapidly near the start of 2010, or if there was a large volcanic eruption. We will review the forecast during 2010 as observation data become available.
Looking further ahead, our experimental decadal forecast confirms previous indications that about half the years 2010–2019 will be warmer than the warmest year observed so far — 1998.
Continued in article
"GM Exec: Hybrids Are Money Losers," by Henry Payne, Planet Gore,
February 2010 --- ,
General Motors vice chairman Bob Lutz continued his habit of talking truth to power last week — despite the fact that his company is now a subsidiary of the U.S. government. GM owners Barack Oama and Nancy Pelosi routinely claim that America is transitioning to a green transportation future, but Lutz stepped all over their lines at an industry event Friday when he said that hybrids will never comprise more than 10 percent of the U.S. market. Lutz was only expressing an industry consensus that hybrid-electrics are niche vehicles (like muscle cars) that enhance a company’s image but are too limited in appeal to go mainstream.
Worse, Lutz said that hybrids are money pits that will have to be subsidized by other GM vehicles.
Lutz has spearheaded GM’s plug-in Chevy Volt (due later this year) as a “halo car” enhancing GM’s green image. But he has also been skeptical of hybrids, pointing out the paradox of consumers who say they like fuel-efficient vehicles even as they are unwilling to pay hybrid premiums.
Meanwhile, Washington is pushing Detroit companies to build more hybrids. A good idea? GM’s taxpayer shareholders may want to listen to car guy Lutz.
Henry Payne is an editorial writer and cartoonist for the Detroit News.
"CIT TARP Wipeout is Official," The Street, February 9, 2010 --- http://www.thestreet.com/story/10677453/1/cit-tarp-wipeout-is-official.html
The U.S. Treasury has officially lost its entire $2.33 billion TARP investment in CIT Group(CIT Quote), according to a company filing with the Securities and Exchange Commission after Monday's closing bell.
The Treasury made the investment in CIT in December 2008, but CIT then ran into trouble after the Federal Deposit Insurance Corp. refused to guarantee its debt, as the FDIC did for larger lenders, including General Electric(GE Quote) and large banks like Citigroup(C Quote), Bank of America(BAC Quote) and Wells Fargo(WFC Quote).
CIT ended up filing for bankruptcy protection on Nov. 1 but was able to reorganize and return to a public listing on Dec. 10. Contrary to what many assumed, the bankruptcy filing did not extinguish all hope for a taxpayer recovery. The Treasury and other preferred shareholders received complex securities called contingent value rights (CVRs) which could have been worth something if CIT Group's stock had reached the mid-50s ahead of Monday's session, according to the estimate of another investor who held CVRs.
CIT Group is the largest loss on record under the TARP, though AIG (AIG Quote) General Motors, GMAC, Fannie Mae(FNM Quote), Freddie Mac(FRE Quote), Chrysler and Citigroup each owe the Treasury at least $10 billion each, according to ProPublica.
Continued in article
Bob Jensen's threads on the bailout mess are at
"The U.S. Goes Wobbly on Russia Iran's dictators feel secure too," by
Garry Kasparov, The Wall Street Journal, February 12, 2010 ---
. . .
The U.S. is taking a weak approach to problems other than Russia—specifically, Iran, homeland security and the economy.
Nearly every day brings news of Iran's nuclear progress. The American response is always the same. The White House repeatedly makes statements about how "unacceptable" Iran's actions are and threatens sanctions it knows will not pass—thanks to China and Russia—and would not deter Iran's nuclear programs even were they to pass.
On homeland security, one maniac with explosive powder down his pants has become the mouse that roared, sending the bureaucrats and politicians into a frenzy. More charades. Travel delays are up, security costs rise by billions of dollars, and we're told that the attack was a failure? Not by the measure of total war, including economic war, that the terrorists have declared on the civilized world.
It's plain politics to make people feel safe instead of doing what's required to make them safer, and to admit that they can never be completely safe on an airplane or anywhere else. Instead of a profiling system in which 10% of the highest-risk passengers get 90% of the attention, we have a political-correctness culture that gives priority to protecting feelings instead of lives.
It is easier for a terror group to obtain a surface-to-air missile and blow a jetliner from the sky than to perform the attempted detonations we have witnessed recently. So why aren't such attacks common? A missile might kill hundreds, but it is a poor terror plot simply because there is so little that can be done about it. Antimissile systems would be installed—effective or not—and the self-inflicted economic impact would be negligible. One failed suicide bomber, on the other hand, and institutional paranoia and political grandstanding do the rest.
Massive U.S. borrowing, and the false sense of liquidity it produces, is currently all that is supporting large swaths of the debt-ridden Russian economy by providing cheap credit to the overextended oligarchs. Mr. Putin's cronies and other leaders sitting on failed economies benefit as America continues to move from Keynesian to Ponzian economics, desperate to postpone the inevitable reckoning. Runaway inflation in the U.S. is being put off because dollars are making their way out of the country—not by creating jobs or industry, but by boosting gains in the speculative stock and currency markets.
The Obama administration seems to be engaged in an endless campaign to make people believe these problems can and will be solved eventually instead of taking the tough steps required to solve them. It is true that doing what must be done can be a thankless task and that telling the truth does not always poll well. But promises are for candidates. Fulfilling promises is for leaders.
Mr. Kasparov, leader of The United Civil Front in Russia, is a contributing editor of The Wall Street Journal.
"Taliban make children plant IEDs to thwart Army snipers," by
Christopher Leake, Daily Mail, February 7, 2010 ---
Boys as young as 12 are being used by the Taliban to plant bombs designed to kill and maim British troops in Afghanistan. Army commanders say insurgents are forcing children to lay improvised explosive devices (IEDs) because they know they will not be shot by British snipers. Senior military sources say the children’s parents and families are likely to have been threatened by the Taliban to allow their sons to carry out the dangerous task.
Details of the new tactic were revealed last night in Sangin, Helmand Province, where soldiers of the 3 Rifles Battle Group have been fighting the Taliban for the past four months. Troops say they have seen insurgents sending out boys to lay IEDs, sometimes only 150 yards from British positions. A senior Army source said: ‘The Taliban know that if they get caught in the sights of our snipers, they don’t last long, so they have resorted to hiding behind compound walls and directing children to plant bombs for them. ‘Lots of home-made IEDs detonate before they have even been laid, but the Taliban don’t seem to care whether a child gets killed or maimed. Some boys are as young as 12.’
"Another Obama Tax Hike: The Senate health-care bill would raise
effective marginal tax rates on lower and middle-income singles and families up
to 41%," by Douglas Holtz-Eakin and Alex Brill, The Wall Street Journal,
February 3, 2010 ---
The stunning victory of Scott Brown in Massachusetts may prove to be a game-changer for the President's health-care "reform" agenda. This is good news for the ability of lower-income families lacking insurance to climb up the ladder of American prosperity. His associated rhetoric notwithstanding, the President's policies in the stimulus bill and health-care debate increase current barriers to the American dream. These legislative efforts (we use the Senate health-care bill for illustration) raise to shocking levels the effective marginal tax rates (EMTR) on lower and middle-income singles and families--with the government taking up to 41% of each additional dollar.
The mechanics are simple. The effective marginal tax rate is the answer to the question: "If I earn $1 more, how much less than $1 do I get to save or spend?" If you can keep that full dollar for your disposal, the effective marginal tax rate is zero. If earning another dollar does not raise your disposable income by even a penny, the effective marginal tax rate is 100 percent.
Obviously, neither extreme is realistic. But exactly where federal policies come down in between has dramatic implications for the ability of families to rise from the ranks of the poor, or to ascend toward the upper end of the middle class. This mobility is the heart of the American dream that has made the United States a beacon of economic light for centuries. Equal opportunity to achieve that dream – not equal paychecks or equal government handouts – is the real-world litmus test for fairness in government policy.
Consider, then, the figure below constructed for a two-earner family with two school-age children, one of whom is in college. The solid line shows the EMTR based on income tax law prior to the health-care bill (it excludes the impact of the payroll taxes). The dashed line displays the damaging increases in the EMTR assuming the health insurance premium subsidies contained in the Senate health-care bill and insurance cost estimates provided by the Kaiser Family Foundation. As a family's income rises above 133% of poverty, Medicaid eligibility will be eliminated but a family that does not receive health insurance from their employer will receive a subsidy to purchase health insurance in the "exchange." In turn, however, as their efforts yield higher income, subsidies are clawed back or effectively taxed away. The current law policies show that there are already some lower income families facing EMTRs above those in the middle class. But the barrier to success imposed by health-care reform is even more striking. According to the Congressional Budget Office, about 20 million people would receive a subsidy to purchase insurance through an exchange and thus face a higher EMTR.
How can a family be expected to get ahead when taking an extra shift, finding a way for a second parent to work, or investing in night school courses to qualify for a raise means handing the government as much as 41% of the additional income earned? Parents already juggle the tough trade-off between working more to build their family's future and spending time at home with their children. The bigger the EMTR, the tougher that tradeoff becomes.
How could this happen? In part, it may reveal ignorance about the long-term impacts class warfare-based programs. For decades, both parties have employed refundable tax credits (i.e., disguised spending programs) as a way of providing benefits to low-income families while appearing to favor low taxes and small government. The class-conscious left has insisted that these benefits be "targeted" – i.e., that they disproportionately help those lower-income families that pay no taxes and be phased-out for the tax-paying middle class. The result fit their agenda of wealth redistribution. The right, eager to achieve any tax cuts they could muster, accepted the income limitations as the price of getting any tax relief. With progressives' hell-bent effort to soak the rich, the outlook for the poor and middle class quietly and steadily deteriorated to the condition we find it today.
Every "phase-out" of a tax credit or subsidy program is an EMTR in disguise. The cumulative impact is a cruel twist on "targeting," as families are anchored near the bottom of the income distribution by layers of fiscal cement. Ignorance is a dangerous animal in the hands of tax policymakers.
A second possibility is subtle paternalism toward the poor. Unlike the rich who are presumed to know what they want (which progressives are dead set on thwarting), it may be that poorer Americans are presumed to need guidance on how to live their lives (or a "nudge" in the parlance of the faddish behavioralists in the Obama Administration). They need to be told that it is a good idea to work, take care of your children, go to college and have health insurance, hence a tax credit for every virtue.
In the end it does not matter how we got here. Taxes interfere with the basic rewards for work, thrift, and saving. Excessive EMTRs damage these incentives, discourage the taxed, and threaten to rob America of a vitality that is its signature.
This year marks a crucial time in the future of tax policy. The tax laws enacted in 2001 and 2003 will sunset, along with the recent tax credits included in the so-called stimulus bill. As Congress thinks about the future, we hope it puts full weight on the importance of a tax code that supports the ability of the poor and middle-class to achieve their dreams.
The Massachusetts special election sends the strong message that voters want Washington to scale back its interference in their lives. Re-thinking the policies that get in the way of their pursuit of success is a good place to start.
If a healthcare bill is passed, I hope that it is paid for with tax increases for all beneficiaries of the plan, including the poor and the middle class. The people that benefit from the high cost of healthcare should pay for most of the cost of that care, although there will obviously have to be subsidies for the unemployed and the unemployable (for which Medicaid already exists).
"The Jimmy Carter Jobs Credit Congress's latest stimulus idea is a bust from the past," by Jimmy Carter, The Wall Street Journal, February 10, 2010 --- http://online.wsj.com/article/SB10001424052748704820904575055394016616742.html?mod=djemEditorialPage_t
. . .
This latest Senate Democratic bill will cost $85 billion and is shaping up to be largely a rehash of last year's stimulus: extended unemployment insurance, Medicaid cash for the states, and some public works spending. The one new twist is a proposal for a one-year $5,000 tax credit for small businesses for each new worker hired. President Obama calls the credit "the best way to cut taxes" to help small businesses.
But we've also seen this economic movie before—in 1977 under Jimmy Carter. During the two years it was in effect, a jobs credit worth about $7,000 in today's dollars became a $20 billion free lunch as businesses claimed the handout for one of every three new employees.
In the short term, the Jimmy Carter jobs credit appeared to reduce unemployment. The jobless rate dropped by 1.2 percentage points (to 5.8% in 1979 from 7% in 1977). But that effect was short-lived, and when the subsidies ended two years later the layoffs resumed and the unemployment rate rose again and by 1980 was back to 7.2%.
Citing this not-so-happy experience, Wisconsin Democrat Ron Kind says the tax credit is evidence that Congress doesn't "do anything new around here except the history we repeat." The left-leaning Tax Policy Center recently looked at a proposal for a $5,000 payroll tax credit, which is similar in concept to the Senate jobs credit, and concluded that "The problem with subsidies such as this is that they are exceedingly sloppy. A lot of money goes to those firms that would have hired anyway."
They're right: The Labor Department reports that in December 2009 there were 2.5 million job openings. Will the government pay $5,000 for every one of these new jobs that would have existed anyway? In the dynamic American economy, thousands of workers are hired, fired or quit each day.
The President is trying to lure Republicans to support this policy as a "business tax cut." But they should know that it violates sound tax principles. Pro-growth tax cuts, as adopted so successfully by JFK in the 1960s and Ronald Reagan in the 1980s, are broad-based and lower tax rates for as many people as possible. This reduces the distortions of the tax system, while permanently adding to the rewards for investment and risk-taking.
That's the opposite of Mr. Obama's tax strategy, which is to dole out special tax credits and loopholes for favored behavior or industries—hybrid cars, buying a new house, wind power—and then paying for these by raising tax rates on anyone making more than $200,000 starting next year. The result will be higher tax rates paid on a shrinking tax base, with a misallocation of capital toward projects chosen by politics rather than by prices or potential return on investment.
A 2009 study by the World Bank and Harvard University examined growth and entrepreneurship in 85 countries and found that lower tax rates on firms are powerful spurs to job growth and business start-ups. Perhaps Mr. Obama and Senate Majority Leader Harry Reid need a tax policy refresher from Dick Gephardt, Bill Bradley and other Democratic champions of tax reform from the 1980s.
Republicans and Democrats looking for a better way should call for a permanent reduction in the top personal and corporate tax rate to 25% to attract capital to the U.S. Making the current 15% tax rate on capital gains permanent, rather than raising it next year as Mr. Obama wants to do, would also help.
Recent surveys by the National Federation of Independent Business, the small business association, suggest that small employers don't want tax credits. They want a future in which Congress and federal agencies stop imposing new tax and regulatory burdens. Given the damage done by the current Congress, doing no more harm would do far more to increase hiring than a reprise of Carternomics.
Continued in article
"Huge Deficits May Alter U.S. Politics and Global Power," by
David E. Sanger, The New York Times, February 1, 2010 ---
David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)
Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson
Call it the fatal arithmetic of imperial
decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk: How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.
. . .
In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.
. . .
Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.
Continued in article --- http://www.newsweek.com/id/224694/page/1
Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.
"A Double-A U.S.A.? A primer on the national debt," The Wall Street
Journal, February 5, 2010 ---
Fear of defaults by European countries sent stocks reeling yesterday, but that could never happen in the U.S. Or could it? Moody's Investors Service caused a market stir this week by saying that on Washington's present spending and debt track, maybe it could.
Specifically, the credit rating outfit issued a statement following the release of President Obama's fiscal 2011 budget: "Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the Aaa government bond rating."
So there it is: The threat of a double-A U.S.A. This warning could use some perspective.
As a reality-check to politicians, the Moody's blast is useful as far as it goes. But it doesn't go very far. In particular it shouldn't be cause for rending garments or selling Treasurys, much less laying in canned goods. The U.S. isn't in imminent danger of losing its Aaa rating, and it won't do so even in the medium or long term if our political class responds in the right way.
The ratio of U.S. federal public debt to GDP soared in World War II but then fell steadily until the defense buildup and recession of the early 1980s. (We use the debt-held-by-the-public figure because that is the amount the U.S. government has borrowed from others. The total debt is larger, but that includes Social Security IOUs that are promises that politicians have made to taxpayers and can repudiate. You can't repudiate public debt except at great cost, as Greece is discovering.)
The debt ratio stabilized for a time, as the nearby chart shows, then reached a postwar record of 49.3% in 1993 after the recession of the early 1990s. But it quickly fell in the 1990s as the economy grew rapidly and the post-1994 Republican Congress restrained spending for a time and struck a balanced budget deal with Bill Clinton.
It's worth noting that when Democrats took over Congress in 2007, the debt ratio was 36.2%, but within a year it had climbed to 40.2% and was heading north. Now the public debt ratio is climbing even faster amid slow economic growth and a spending binge, reaching an expected 63.6% this year, 68.6% next year and above 70% later this decade even by White House reckoning.
These White House estimates are surely understated if current U.S. policies continue. The Obama budget assumes its tax increases won't affect investor behavior or reduce growth. Passing ObamaCare would send the debt ratio even higher, probably past 100% within a few years as spending soared and the illusionary cost savings failed to appear.
But debt that goes up can come down. The key policy variables for future debt are spending restraint and, especially, economic growth. The burden of debt climbs most rapidly amid recessions as tax revenues decline, but it can also decline rapidly when the economy expands by 3% or more a year and Congress controls itself. The latter didn't happen under the Tom DeLay GOP and it won't happen as long as Nancy Pelosi is House Speaker, but it did happen for some time after the election of the GOP Congress in 1994.
Which brings us to the necessity of economic growth. This is where we part company with Moody's, which in handing out country credit ratings cares most about balanced budgets. How countries do the balancing counts for less. If tax increases do the job, that's fine with the green eye shades.
The wrong lesson to take from this fretting over the national debt is that the only answer is a tax increase. That's clearly part of the White House strategy, which explains its emerging theme that debt is a "national security" problem. Having lifted spending to a peacetime record of 25% of GDP, Democrats now want to point to the national debt and claim they must raise taxes—for the national good!
Neither the public nor Republicans in Congress should fall for this. The $2 trillion in tax hikes that Mr. Obama proposed this week, which will start hitting in 2011, are the larger threat to national solvency and prosperity because they will strike an economy still emerging from a deep recession. A weaker or shorter expansion will mean less tax revenue, and thus higher deficits and more debt over time.
The real debt problem is that, in a mere two years, Democrats have taken more than 4% of annual U.S. national output from the private economy and handed it to the government. Politicians do not typically make wiser investment choices than people investing their own money to make a profit. This is a misallocation of resources that is sure to reduce growth and private income over time. This is the real root of America's emerging debt problem, and what has to be reversed.
"The Job-Subsidy Plan," by Judge Richard Posner, The Becker-Posner
Blog, January 31, 2010 ---
The President is asking Congress to enact a one-year $33 billion job-subsidy plan. An employer would receive a $5,000 tax credit in 2010 credit for increasing his labor force by one person and an additional subsidy for giving an employee a wage increase greater than the inflation rate. The total subsidy would be limited to $500,000 per employer, in the hope that the principal recipients would be small businesses. I do not know why the ceiling should be expected to have that effect. Even big businesses like $500,000 windfalls. If a big business happens to be increasing its hiring or its wages, why wouldn’t it claim the subsidy?
That point to one side, and disregarding also the abundant possibilities of gaming the program, stressed by Becker, the proposal is unlikely to be effective because it violates the economic principles that ought to guide stimulus programs.
The theory of stimulus is Keynes’s, is (in my opinion) sound, and is as follows. If, because a high rate of unemployment creates pessimism about the economic situation, people increase their savings at the same time that business is reducing its investing—and that is our situation today—the government can by financing projects through borrowing put the inert savings to work (inert because businesses aren’t borrowing people’s savings). The projects require workers, so unemployment falls, and with it pessimism and the cash hoarding, by consumers and businesses alike, that pessimism induces.
With Keynes’s theory understood, it becomes possible to list the principles of effective stimulus:
- The stimulus must be large in order to make a substantial dent in unemployment. The $787 billion stimulus enacted last February may have been too small; a $33 billion jobs subsidy is a drop in the bucket.
- The stimulus must be implemented before recovery from a depression or recession is well under way—otherwise the government’s borrowing to finance the stimulus will slow the recovery by pushing up interest rates. (That is, at some point in the recovery, business will resume investing and so will be competing with the government for capital.) If enactment of the job subsidy is delayed in Congress, or if procedures for preventing the gaming of the program are cumbersome, the subsidy expenditures may come too late to do any good.
- The stimulus must be targeted on industries, and areas of the country, in which unemployment is high. Like the $787 billion stimulus, the job-subsidy plan flunks this test as well.
- Most important, a stimulus is designed to stimulate demand, not supply. The economic problem for which a stimulus program is a solution is insufficient demand relative to the economy’s labor and other resources. Because of overindebtedness and continued weaknesses in the financial system, consumers and businesses are reluctant to spend. Businesses are reluctant to hire (that is one aspect of their reluctance to spend), so unemployment is high and wages are stagnant, which further depresses demand. The idea behind the stimulus is for government demand to take the place of the missing private demand. Government “buys” new roads, in lieu of consumers’ buying SUVs, and contractors meet the government’s demand by hiring unemployed construction workers. The job-subsidy plan is not demand-focused, and so is unlikely to contribute to the economic recovery. Suppose a firm in a depressed economy sells 100 earth-moving machines a year, and employs 200 workers. If the government tells the firm it can save $5,000 on its taxes by increasing its work force to 201, the firm’s total costs will increase (by the wages and benefits of the additional worker less $5,000), but its revenues will not increase because adding a worker does not increase the demand for its product.
There is an enormous amount of idle productive capacity in the
economy at present. There is thus a case, as liberal economists such as Paul Krugman keep urging, for further stimulus spending. The problem is that such spending is irresponsible unless coupled with a credible commitment to repay, after the economy recovers, the money borrowed to finance the spending. Not only is there no such commitment; at present the only realistic prospect is of staggering deficits stretching indefinitely into the future. As a result there is at present no stomach for additional stimulus spending. The government is reduced to impotent gestures, of which the job-subsidy plan is one. U.S.
"Obama's Budget Freeze and America's Economic Decline," by
Umhair Hague, Harvard Business Review Blog, January 27, 2010 ---
A budget freeze in the middle of a (curiously depression-like) recession? That's about as smart an idea, economically speaking, as gulping down a bucketful of magma just because you're thirsty. It's even worse than Hoovernomics, because we have, today, the benefit of hindsight.
And though it's probably just PR shadowboxing, a "spending freeze" is actually perfect illustration of the big problem with Obama's economic policy. So far, it has accelerated — instead of decelerated — three transfers of wealth:
A transfer of wealth from Main Street to Wall Street. As Robert Reich has noted, the freeze disproportionately hurts Main Street. Wall Street got bailed out — and a spending freeze, now, is just another way of saying Main Street has to pay for it. In my last post, I referred to it as a War on the American Dream.
A transfer of wealth from young to old. America's debt wasn't racked up just last year, but over several decades. Its burden will fall disproportionately on tomorrow's citizens. (That's what my Generation M Manifesto was really about.)
A transfer of wealth from human people to corporate "people." America's debt, in a very real sense, is a consequence of corporations evading their responsibilities as citizens, and failing to provide services that matter. If we had a working healthcare industry, for example, healthcare might not have to be so heavily subsidized. Instead, pharma players have booked huge profits for decades, while America's racked up debt to essentially pay for it. (Connect the dots: one of the biggest components of the deficit is healthcare costs; healthcare costs so much, in part, because drugs are sold at significantly higher prices to Americans than abroad; higher drug prices yield nice margins for pharma players.) Today, it's real people who carry corporate people on their shoulders — not vice versa.
Let me put it as simply as I can: These are fatal vectors.
Economies that transfer wealth in these directions cannot survive — let alone prosper. Their resource bases, productive bases, knowledge bases, skills bases all implode. And the very fabric of trust that binds all of the above frays and disintegrates.
The problem we face isn't the problem we think we face. America's looming debt crisis is the consequence, not the cause. What are the root causes of America's addiction to debt?
The root cause is what I've been calling dumb growth: short-term, consumption-driven, polluting, economically meaningless growth. Think Hummers, Big Macs, and McMansions. America doesn't make products and services of earth-shaking, awesome value — it consumes stuff. So much stuff that we failed to adequately build yesterday's industries — which is why they needed bailing out. And today, we're bailing them out, instead of building tomorrow's industries. Worse, the stuff we so ravenously hyperconsume is traded on an uneven playing field. We're eating the future.
The way to close the gap between what we spend and what we earn isn't to stop investing in tomorrow — a spending freeze. That's a recipe for economic implosion.
The answer is a smarter kind of growth. Here are its four pillars. Smart growth reverses the fatal vectors above. When economies set the stage for smart growth, wealth isn't just transferred — unfairly and self-destructively. It is created anew. That's the key to an authentic, shared prosperity — not just the illusion of one.
Fire away in the comments with thoughts, questions, etc.
Budget Freeze" is an Oxymoron
"Deficit to Hit All-Time High" Obama's $3.8 Trillion Budget Forecasts a $1.6 Trillion Shortfall for 2010 Before It Drops," by Jonathan Weisman, The Wall Street Journal, February 1, 2010 ---
President Barack Obama will propose on Monday a $3.8 trillion budget for fiscal 2011 that projects the deficit will shoot up to a record $1.6 trillion this year, but would push the red ink down to about $700 billion, or 4% of the gross domestic product, by 2013, according to congressional aides.
The deficit for the current fiscal year, which ends on Sept. 30, would eclipse last year's $1.4 trillion deficit, in part due to new spending on a proposed jobs package. The president also wants $25 billion for cash-strapped state governments, mainly to offset their funding of the Medicaid health program for the poor.
To get the deficit down by the middle of the decade, Mr. Obama will be relying on some cuts that have previously been proposed without success, on cooperation from a wary Congress and on a yet-to-be set up debt commission to suggest politically difficult choices.
At the same time, Mr. Obama is under pressure to address the country's continued high unemployment rate. And he will propose increases in spending for priorities such as education and domestic scientific research. All of this raises questions about how much progress the president is likely to make in trying to fulfill his pledge to halve by 2013 the $1.3 trillion deficit he inherited.
The budget embodies Mr. Obama's larger predicament of needing to contain the deficit without harming the economy, which remains fragile. The deficit has become a major political issue, as antigovernment activists swing independents against what they describe as Mr. Obama's big-government policies and Republicans try to regain the mantle of fiscal responsibility after the Bush years saw surpluses swing to deficits.
Republicans have said they aren't likely to cooperate with Mr. Obama on his deficit-reduction approach, opposing tax increases even as they attack Democrats for proposing cuts to Medicare. Meanwhile, senior Democrats in Congress have shown themselves reluctant to cut spending with unemployment hovering at 10%.
Under the Obama budget, this year's $1.6 trillion deficit would fall to $1.3 trillion in the fiscal year that begins Oct. 1. It would drop to $700 billion in 2013 and 2014, the budget projects, on the assumption that the economy recovers, tax receipts start rising again with incomes, and stimulus spending drops off.
The deficit would drop to the equivalent of 5% of GDP in 2013 through expected economic improvement alone. Policy changes proposed by the president, such as a proposed freeze in nonsecurity domestic spending, would shave an additional percentage point.
Mr. Obama plans to rely on a new debt commission to come up with recommendations on how to meet his promise to bring the figure down to the equivalent of 3% of GDP by 2015, according to budget analysts briefed on the proposal.
The deficit is forecast to stabilize at $800 billion between fiscal years 2015 and 2018 before beginning to rise again, according to the White House projections. The projected rise is due to the retirement of the baby boomers, which is expected to result in increased spending on Medicare and Social Security.
With unemployment still at 10%, the president is finding it difficult to meet his promise to halve the $1.3 trillion deficit he inherited by January 2013. Job creation has become his top priority, and he is showing no sign of skimping on tax cuts and spending measures in the short term.
A bipartisan 18-member debt commission would forward any deficit-reduction proposals they come up with to Congress after this year's midterm elections. Issues it would face would include how to cut the deficit further in the short term and how to rein in long-term growth of entitlement programs, such as Medicare, Medicaid and Social Security. Commission members would have to come up with between $180 billion and $190 billion in cuts to meet the president's target.
Congressional leaders have promised the president that they would submit the panel's recommendations to an up-or-down vote in the lame-duck session of Congress, after the elections but before the newly elected House and Senate take office.
White House officials say they are ready to make some tough choices to get the deficit under control. White House communications director Dan Pfeiffer wrote on the White House Web site this weekend that the president's budget would propose to terminate or cut back more than 120 programs, saving about $20 billion in the fiscal year beginning in October.
The proposals include consolidating 38 education programs into 11, cutting the National Park Service's Save America's Treasures and Preserve America grant program, and eliminating the Advanced Earned Income Tax Credit, which allows low-wage workers to get tax-credit checks in advance but which is rife with abuse, White House officials say. The Brownfields Economic Development Initiative, which converts decayed former industrial sites to new uses, would be cut, and payments ended to states to restore abandoned mines, many of which have been long cleaned up.
But some of those efforts, such as the abandoned mines and Advanced Earned Income Tax Credit cuts, were proposed last year in Mr. Obama's first budget. They were ignored by Congress. Other planned cuts are presidential perennials, attempted without success by Presidents Bill Clinton and George W. Bush before Mr. Obama, such as eliminating whaling partnerships and implementing deep cuts to the Army Corps of Engineers.
The president is also expected to call for halting the National Aeronautics and Space Administration's plan to return astronauts to the moon, a tough sell in vote-rich Florida.
"There's no question there's a range of domestic discretionary that can be scaled back," said one Democratic budget analyst. "Politically, they will never get through."
Meantime, the president will ask for large increases in spending on education and civilian scientific research, according to analysts briefed on budget plans.
Mainly, the president plans to rely on the budget commission and budget rules in an effort to try to force Congress's hand, budget analysts say. The budget assumes the enactment of pay-as-you-go rules that would force any tax cut or spending increase to be offset by tax hikes or spending cuts.
Isabel Sawhill, a budget expert at the Brookings Institution, criticized the president's goal— a deficit of 3% of GDP long after the recession has ended—saying it amounted to "defining deficits down."
"The pay-go rules will make it more difficult for Congress to dig the hole deeper but won't affect currently projected red ink; and the commission will likely be a paper tiger," she wrote on Friday. "In short, these proposals will still leave us with unsustainable deficits as far as the eye can see. It is depressing to discover that we can no longer even aspire to balance the budget once the recession is over."
"Geithner's AIG Bailout," by Greg Kaughmann, The Nation,
January 29, 2010 ---
Bob Jensen's threads on the Bankster Bailout --- http://www.trinity.edu/rjensen/2008Bailout.htm#BailoutStupidity
Today test scores are up, charter schools
proliferate and schools have improved to the point that Louisiana is a leading
contender for Race to the Top education grants that the Obama Administration has
set aside for model school systems. As tragic as Katrina was, its destruction
also replaced a failed system of public education and created a political
opening for reform.
"Sorry for What? Team Obama apologizes for being right," The Wall Street Journal, February 5, 2010 ---
"Tony Blair's Iraq Statesmanship: The former PM reminds the world
why Saddam had to go, and the lesson for Iran," The Wall Street Journal,
January 31, 2010 ---
Instead, Mr. Blair offered a ringing defense of the decision to invade Iraq, and a very different set of lessons for the present. "This isn't about a lie, or a conspiracy, or a deceit, or a deception. It is a decision," Mr. Blair told a packed room that included relatives of soldiers killed in Iraq. "And the decision I had to take was, given [Saddam's] history, given his use of chemical weapons, given the over one million people whose deaths he had caused, given 10 years of breaking U.N. resolutions, could we take the risk of this man reconstituting his weapons program?"
That's a point worth remembering over all the Monday-morning recriminations about "dodgy dossiers" and missing WMD. We have never for a moment believed that the British or U.S. governments deliberately misled their publics over what they thought they knew about Saddam's weapons. Every Western country, including those opposed to the war, believed Saddam had WMD.
But the important point was never so much about what Saddam did or did not possess so much as it was about what he intended. And as Mr. Blair pointed out Friday, "What we now know is that he [Saddam] retained the intent and the intellectual know-how to restart a nuclear and a chemical weapons program when the inspectors were out and the sanctions changed, which they were going to do. . . .
"Today we would be facing a situation where Iraq was competing with Iran, competing both on nuclear weapons capability and competing more importantly perhaps than anything else . . . in respect of support of terrorist groups. . . . If I am asked whether I believe we are safer, more secure, that Iraq is better, that our own security is better, with Saddam and his two sons out of office and out of power, I believe indeed we are."
Mr. Blair was no less clear-eyed about the threat posed today by Iran and its nuclear program, against which he counseled that the international community had to take a "very hard, tough line." Iranian interference was a large reason why the Iraq war "very nearly" failed. Iran remains a sponsor of terrorism and a cause of instability from Afghanistan to Lebanon. The lesson from the Iraq war isn't to avoid action for fear of unanticipated consequences, which are inevitable in any war. It is to take action to prevent the most foreseeable of disasters, namely the combination, in a single regime, of fanaticism, links to terrorism and nuclear weapons.
"The decision I took—and frankly would take again—was, if there was any possibility that he [Saddam] could develop weapons of mass destruction, we would stop him," Mr. Blair told the commission. Listening to him, we are reminded why he ranks with Margaret Thatcher as a pre-eminent statesman of postwar British politics, an achievement unlikely to be matched by the Lilliputians who seek to embarrass him.
"Obama Administration Steers Lucrative No-Bid Contract for Afghan Work to
Dem Donor," Free Republic, January 25, 2010 ---
Despite President Obama's long history of criticizing the Bush administration for "sweetheart deals" with favored contractors, the Obama administration this month awarded a $25 million federal contract for work in Afghanistan to a company owned by a Democratic campaign contributor without entertaining competitive bids, Fox News has learned. The contract, awarded on Jan. 4 to Checchi & Company Consulting, Inc., a Washington-based firm owned by economist and Democratic donor Vincent V. Checchi, will pay the firm $24,673,427 to provide "rule of law stabilization services" in war-torn Afghanistan.
"Big government's business cronies," by John Stossel, WorldNetDaily,
February 3, 2010 ---
Many window-making companies struggle because of the recession's effect on home building. But one little window company, Serious Materials, is "booming," says Fortune. "On a roll," according to Inc. magazine, which put Serious' CEO on its cover, with a story titled: "How to Build a Great Company."
The Minnesota Freedom Foundation tells me that this same little window company also gets serious attention from the most visible people in America.
Vice President Joe Biden appeared at the opening of one of its plants. CEO Kevin Surace thanked him for his "unwavering support." "Without you and the recovery ("stimulus") act, this would not have been possible," Surace said.
Biden returned the compliment: "You are not just churning out windows; you are making some of the most energy-efficient windows in the world. I would argue the most energy-efficient windows in the world."
Gee, other window-makers say their windows are just as energy efficient, but the vice president didn't visit them.
Biden laid it on pretty thick for Serious Materials: "This is a story of how a new economy predicated on innovation and efficiency is not only helping us today but inspiring a better tomorrow."
Serious doesn't just have the vice president in his corner. It's got President Obama himself.
Milton Friedman's classic "Capitalism and Freedom" explains how individual liberty can only thrive when accompanied by economic liberty
Company board member Paul Holland had the rare of honor of introducing Obama at a "green energy" event. Obama then said: "Serious Materials just reopened ... a manufacturing plant outside of Pittsburgh. These workers will now have a new mission: producing some of the most energy-efficient windows in the world."
How many companies get endorsed by the president of the United States?
When the CEO said that opening his factory wouldn't have been possible without the Obama administration, he may have known something we didn't. Last month, Obama announced a new set of tax credits for so-called green companies. One window company was on the list: Serious Materials. This must be one very special company.
But wait, it gets even more interesting.
On my Fox Business Network show on "crony capitalism," I displayed a picture of administration officials and so-called "energy leaders" taken at the U.S. Department of Energy. Standing front and center was Cathy Zoi, who oversees $16.8 billion in stimulus funds, much of it for weatherization programs that benefit Serious.
The interesting twist is that Zoi happens to be the wife of Robin Roy, who happens to be vice president of "policy" at Serious Windows.
Of all the window companies in America, maybe it's a coincidence that the one that gets presidential and vice presidential attention and a special tax credit is one whose company executives give thousands of dollars to the Obama campaign and where the policy officer spends nights at home with the Energy Department's weatherization boss.
Or maybe not.
There may be nothing illegal about this. Zoi did disclose her marriage and said she would recuse herself from any matter that had a predictable effect on her financial interests.
But it sure looks funny to me, and it's odd that the liberal media have so much interest in this one company. Rachel Maddow of MSNBC, usually not a big promoter of corporate growth, gushed about how Serious Materials is an example of how the "stimulus" is working.
When we asked the company about all this, a spokeswoman said, "We don't comment on the personal lives of our employees." Later she called to say that my story is "full of lies."
But she wouldn't say what those lies are.
On its website, Serious Materials says it did not get a taxpayer subsidy. But that's just playing with terms. What it got was a tax credit, an opportunity that its competitors did not get: to keep money it would have paid in taxes. Let's not be misled. Government is as manipulative with selective tax credits as it is with cash subsidies. It would be more efficient to cut taxes across the board. Why should there be favoritism?
Because politicians like it. Big, complicated government gives them opportunities to do favors for their friends.
Bob Jensen's fraud updates are at http://www.trinity.edu/rjensen/fraudUpdates.htm
"How do you spell brazen," by Neill Amhart, Canada Free Press,
January 30, 2010 ---
In listening to the State of The Union Address, and other recent pondering of President Obama, I am constantly amazed at his ability to say things that he knows can be fact checked. Let me give you a few examples.
Lobbyists. President Obama promised during his campaign that lobbyists “won’t find a job in my White House.”
Then, once he was in, and hired a lobbyist a day for several weeks, he explained that there had to be exceptions.
In the State of the Union Address, he nuanced it further.
“That’s why we’ve excluded lobbyists from policymaking jobs, or seats on federal boards and commissions.”
Now, I grant that he may have many lobbyists in non policy making positions, but here are a few that definitely DO make policy.
Eric Holder, Attorney General, lobbied for Global Crossing, a telecommunications firm.
Tom Vilsack, secretary of agriculture, lobbyist for the National Education Association.
William Lynn, deputy defense secretary, was registered to lobby as recently as last year for defense contractor Raytheon where he was a top executive.
Trying not to lose readers with mind numbing detail, here is a list of names, and you can google them if you want, but the one thing that they all have in common, is that they are all in policy making positions.
William Corr, David Hayes, Mark Patterson, Ron Klain, Mona Sutphen, Melody Barnes, Cecilia Munoz, Patrick Gaspard, Michael Strautmanis, and there’s more. This isn’t counting the ones that didn’t take the job, or the ones who couldn’t pass muster. Tom Daschle comes to mind.
Hiring the very type of people that he swore not hire, and do it from the very first day of his presidency, is the epitome of brazen.
Did he think that no one would notice?
Stimulus Bill. In regard to the Stimulus Bill, the President said, ”Economists on the left and the right say this bill has helped save jobs and avert disaster.”
Then, two paragraphs later, he says ”That is why jobs must be our number-one focus in 2010, and that’s why I’m calling for a new jobs bill tonight.”
Most of the time, he waits at least 24 hours before contradicting himself. In this case, the contradictory statement out of his mouth while the echo’s of the first statement could still be heard bouncing around the chamber.
Is that brazen, or what?
My question is, which time was he telling the truth?
And, in my opinion, the President, through words and deeds, has demonstrated that he believes that prosperity comes from the government.
Maybe in some other dimension of time and space, this would be true, but in this universe, prosperity comes from the private sector.
Earmark spending. In the campaign, the President said that he would outlaw the practice of earmark spending. That was his word. Outlaw. I’m not making this up.
Then, when the stimulus bill came to him for his signature, it was full of earmark requests. He signed it, rationalizing that some earmarks are good.
Does that make him an outlaw?
In the State of the Union Address, he called on the House and Senate to control their earmark requests, but no mention of outlawing them.
How can he say some many different things about the same subject, and not expect to be caught?
Oh, I forgot for a moment. He is brazen.
Supreme Court. The President, using a verbal baseball bat, lambasted the Supreme Court for its recent ruling on campaign finance, uttered, “I don’t think American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities.”
I don’t want to debate the wisdom the ruling here, knowing that there are plenty of good arguments on both sides. But I do want to address the last two words of that sentence. Foreign entities.
Regardless of your opinion of allowing corporations to donate to campaigns, there is, and always has been, a law that prohibits foreign interests contributing to them, directly or indirectly.
The President was a professor at WHAT university?
He graduated from WHERE?
He passed the bar exam HOW?
Was it a snow day on the day that his teacher was going to cover that?
To be fair, I don’t think that the President is ignorant of this law. I just think he is brazen enough to believe that he can say anything, and the people who like him will believe him, and the people who don’t like him won’t be taken seriously when they speak out.
Has any other President bashed the Supreme Court like this in a State of the Union Address? I haven’t heard or read all of them, but, I’ve skimmed the text of all of them that happened in my lifetime, and I can’t find any evidence of it.
Final note on campaign finance.
This is from a man who promised to accept, and abide by the rules of, public financing, so as to keep the playing field level. Then a few weeks later, upon discovering that he could raise more money, with less accountability, using the internet, he did an abrupt about face, describing the public finance system as “broken”. This allowed him to outspend McCain by a very large margin. A cynic might say that he bought the election.
What’s the word to describe this type of behavior? Lemme think. Starts with B, and rhymes with raven.
The last eight years. I’m going to get down on my knees and pray, “Lord, in order to help the struggling people of America, please arrange for them to get a dime every time the President uses the phrases, ”....the last eight years…”, “we inherited….”, “we walked into a mess…...”, or any other phrase that puts the blames for the problems of the country on the last administration, or tries to excuse his failure by pointing out what a hard job he walked into.
I’m going to run for President one day, but only if I can follow an administration that did everything perfect from the point of view of both democrats and republicans, so that I don’t inherit any problems.
If this were an email or facebook post, I would end the previous remark with an LOL.
Here is a quote from George Bush’s State of The Union Address from January, 2008.
“And Congress can help even more. Tonight I ask you to pass legislation to reform Fannie Mae and Freddie Mac, modernize the Federal Housing Administration, and allow State housing agencies to issue tax-free bonds to help homeowners refinance their mortgages. These are difficult times for many American families, and by taking these steps, we can help more of them keep their homes.”
And if he had been successful in persuading the democrat controlled Congress to go along with him, we might have averted the crisis, or at least blunted it.
Bush didn’t cause the economic collapse. That was in motion long he was sworn in. Mortgage companies were passing around bad paper for decades. Many of the mortgages that went bad were written in the 90’s. Many others were written under policies that began in the 90’s.
I remember reading of a family that obtained a $720,000 mortgage, based on a combined income of under $15,000 dollars, that they earned by picking strawberries. You can find their story here.
In 2004, House Republicans tried to bring more regulation to mortgage lending, but the Dems fought against it tooth and nail. Said Barney Frank: “But I have seen nothing in here that suggest that the safety and soundness (of Fannie Mae and Freddie Mac) are at issue. I think it serves us badly to raise safety and soundness as kind of a general shibboleth when it does not seem to me to be an issue.”
There is a video that can be found here, showing some house deliberations, that pretty well destroys that argument the President uses. It shows republicans trying to put the brakes on Fannie Mae and Freddie, and how they are ridiculed by democrats for even suggesting such thing.
I dare anyone to invest 7 minutes of their life to look at this video, and then put the blame for the mortgage crisis anywhere but in the laps of Nancy Pelosi, Barney Frank, Lacy Clay, Maxine Waters, Gregory Meeks, Franklin Raines, Arthur Davis, and the Community Reinvestment Act.
In another matter concerning the last eight years, how many close calls have we had in the way of terrorist attacks in the past year, compared to Bush administration after 9/11?
I’ve lost count.
Now, I don’t believe for one second that the President isn’t aware of this. He’s not a stupid man.
I just believe that he is brazen enough to say things like that, regardless of whether they have any foundation in truth.
So, in answer to the question I started this essay with, here is how I spell “brazen”.
I spell it O. B. A. M. A.
That’s the way I see it.
Yeah Right! Scott Brown's Nae Vote is Really Going to Help Pass Obamacare
Obama Administration is in Denial
We are getting into real mental health issues here. Robert Gibbs is on Fox News Sunday, "explaining" what the Brown win in MA means. Gibbs stated forcefully that last week Brown was elected not because of anger at Obama's policies, but because voters were angry at George Bush and because Obama hasn't moved forcefully and quickly enough in implementing Obamacare.
"Gibbs: Brown win in MA means that the voters really want Obama's policies," Free Republic, January 24, 2010 ---
The Washington Post retracts support for Obama's treatment of
Christmas Bomber as a criminal case, by Scott Johnson, Powerline, January 24,
The Washington Post supported the Obama administration's treatment of Christmas day bomber Umar Abdulmuttalab as a criminal rather than as an enemy combatant. In an editorial published yesterday, It has nevertheless retracted its support. The Post writes that it "originally supported the administration's decision in the Abdulmutallab case, assuming that it had been made after due consideration. But the decision to try Mr. Abdulmutallab turns out to have resulted not from a deliberative process but as a knee-jerk default to a crime-and-punishment model."
The Obama administration's treatment of Abdulmutallab as a criminal accorded the constitutional rights of an American citizen is absurd and indefensible. Yet the administration persists in it.
It is highly unusual to see a prominent newspaper editorial board publicly change its mind. The stated ground for the Post's original editorial position is lame. It criticizes the decision on procedural grounds. Is the Post incapable of judging its substance?
A defective decision making process is more likely to have resulted in a defective decision, but who cares what process the Obama administration used to come to the wrong decision? The administration is full of world-class liberal chin pullers who would come to the same decision if they had taken more time to think about it. They are simply on the wrong track.
Yesterday's Post editorial also concludes on a lame note. The Post can't quite bring itself to the conclusion that the Obama administration's treatment of Abdulmutallab as a criminal is in fact a mistake. Maybe, maybe not. It professes to have an open mind on that question.
It notes, on the one hand: "The administration claims Mr. Abdulmutallab provided valuable information -- and probably exhausted his knowledge of al-Qaeda operations -- before he clammed up. This was immediately after he was read his Miranda rights and provided with a court-appointed lawyer."
That sounds bad. Abdulmutallab was singing like a bird until the FBI read him a Miranda warning. Reasonable people would conclude that he stopped singing because of the warning.
But here the Post injects a note of epistemological uncertainty befitting a college philosophy class. The Post asserts, on the other hand: "The truth is, we may never know whether the administration made the right call or whether it squandered a valuable opportunity." The truth is, we may never know this only if we are prohibited from employing the most basic common sense to assess the situation.
More importantly, however, the administration's decision to treat Abdulmutallab as a criminal is mistaken on its face. It cannot be defended on the merits in principle and the administration has not chosen to do so. It is an obvious mistake that can be rectified -- the administration can dismiss the criminal proceedings and remit Abdulmutallab to the custody of the armed forces as an enemy combatant -- but it would be helpful to have reasonable administration allies like the Post editorial board say that it should do so forthrightly.
If the administration now chose to treat Abdulmutallab as an enemy combatant, he might well remain "clammed up." At that point we would have a good case in which to debate the folly of the administration's abandonment of the CIA's enhanced interrogation program.
"A Glacier Meltdown: The Himalayas and climate science," The Wall
Street Journal, January 23, 2010 ---
Last November, U.N. climate chief Rajendra Pachauri delivered a blistering rebuke to India's environment minister for casting doubt on the notion that global warming was causing the rapid melting of Himalayan glaciers.
"We have a very clear idea of what is happening," the chairman of the U.N. Intergovernmental Panel on Climate Change (IPCC) told the Guardian newspaper. "I don't know why the minister is supporting this unsubstantiated research. It is an extremely arrogant statement."
Then again, when it comes to unsubstantiated research it's hard to beat the IPCC, whose 2007 report insisted that the glaciers—which feed the rivers that in turn feed much of South Asia—were very likely to nearly disappear by the year 2035. "The receding and thinning of Himalayan glaciers," it wrote in its supposedly definitive report, "can be attributed primarily to the [sic] global warming due to increase in anthropogenic emission of greenhouse gases."
It turns out that this widely publicized prediction was taken from a 2005 report from the World Wildlife Fund, which based it on a comment by Indian glacier expert Syed Hasnain from 1999. Mr. Hasnian now says he was "misquoted." Even more interesting is that the IPCC was warned in 2006 by leading glaciologist Georg Kaser that the 2035 forecast was baseless. "This number is not just a little bit wrong, but far out of any order of magnitude," Mr. Kaser told the Agence France-Presse. "It is so wrong that it is not even worth discussing."
On Wednesday, the IPCC got around to acknowledging that the claim was "poorly substantiated," though Mr. Pachauri also suggested it amounted to little more than a scientific typo. Yet the error is of a piece with other glib, and now debunked, global warming alarms.
Among them: that 1998 was the warmest year on record in the United States (it was 1934); that sea levels could soon rise by up to 20 feet and put Florida underwater (an 18-inch rise by the year 2100 is the more authoritative estimate); that polar bears are critically endangered by global warming (most polar bear populations appear to be stable or increasing); that—well, we could go on without even mentioning the climategate emails.
For the record, most Himalayan glaciers do seem to be retreating, and they have been "since the earliest recordings began around the middle of the nineteenth century," according to a report from India's ministry of environment and forests. The reasons are complex and still poorly understood, and we're glad to see responsible scientists acknowledge as much. If more of them could help the IPCC get its facts straight, we might put more stock in its reports.
"MIT economist finds temporary jobs may actually reduce workers' income and employment prospects," by Christine Daniloff, PhysOrg, January 20, 2010 --- http://www.physorg.com/news183385347.html
While the U.S. economy struggles, one form of employment is on the rise: Temporary jobs. In December, the country lost 85,000 jobs overall, but added 47,000 temp positions, according to the Bureau of Labor Statistics. Increasingly America relies on these contingent employees -- or “disposable workers,” as Business Week put it in a recent cover story.
For many workers, these jobs are stop-gap measures, but social scientists have long floated another idea: That temp positions help low-skill workers to acquire experience and eventually join the permanent workforce in better long-term jobs. Now, a new working paper co-authored by MIT economist David Autor throws cold water on that notion. Not only do many temp employees struggle to find long-term or “direct-hire” work, the study says, but holding a temp job generally lowers a worker’s employment and income prospects over time.
“Temp jobs have some initial positive impact,” says Autor. “But not only do they end quickly, they tend to displace what a person would have done instead, either taking a direct-hire job or engaging in the kind of search that could lead to a direct-hire job.”
Autor and his co-author, Susan Houseman of the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., came to this conclusion after examining a welfare-to-work program in Detroit called Work First. The program offers some job-seeking training and attempts to put people in either temporary or long-term positions. Using Work First data for over 37,000 cases from 1999 to 2003, combined with state employment information, Autor and Houseman examined how workers fared in the two years before and after they participated in Work First.
Their findings showed that workers placed into direct-hire jobs increased their earnings by about $2,000 per year, compared to their earnings before trying the Work First program. By contrast, workers initially placed into temp jobs saw their earnings lowered by about $1,000 per year, compared to their previous average income.
The study, “Do Temporary-Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from ‘Work First,’” (PDF) which will be published in the American Economic Journal: Applied Economics, has clear policy implications. “Work First as a model is not a bad idea, but I think these programs should be more focused on getting people into direct-hire positions,” says Autor. “In terms of what state agencies should be spending their money on, it should not be temporary-help placements, at least for this part of the population.”
The study’s surprising results have already gained notice among labor researchers, who have often assumed a solid correlation between temp employment and better job prospects. “I would have expected them to find a positive result, but they didn’t,” says Mary Corcoran, a professor of political science, public policy, social work, and women's studies at the University of Michigan, who is conducting her own study of temporary employment in Michigan. Corcoran thinks the Autor-Houseman paper is “one of the best pieces out there on the effects of using temp agencies, because it’s more like an experiment than other studies.”
Indeed, the study uses a key feature of Work First to create what economists call a “quasi-experiment” — research that uses a random element found in data to duplicate the structure of a laboratory trial. In general, it is hard to separate the employment status of people from their skills and motivation; temp workers might have temp jobs because they are less predisposed to have long-term jobs. But in Detroit, Work First arbitrarily rotated job-seekers through different job-placement contractors which themselves had varying tendencies in terms of placing workers in temp positions or long-term jobs. Because each group of job-hunters assigned to each job placement contractor was essentially identical, Autor and Houseman could rule out differences in workers as the primary explanation of differences in workers’ employment trajectories; in this case, even some workers who were highly motivated to find full-time work started out in temp jobs.
To be sure, a valid question is how broadly these findings apply, given Michigan’s acute economic struggles. However, as Autor notes, the study’s data starts when the state economy was growing in the late 1990s, then continues through the slump of the early 2000s and the subsequent rebound; it ends before the current recession began.
Moreover, Autor and Houseman believe there is no regional bias in the study because the overall figures for people finding both temporary and long-term jobs through Work First in Detroit closely match the equivalent data for other regions, including North Carolina and Missouri. The researchers also say temp workers fared no differently in the production-line jobs associated with Michigan than in the kinds of clerical jobs found everywhere.
“I don’t think it’s anything specific about Detroit, or the type of work in which temps are placed,” says Autor. “In terms of the external validity of the conclusions, my main concern is how this relates to a more skilled population. There we don’t have a clear answer yet.” It is possible that temp jobs for people with college degrees do lead to greater opportunities and earnings — something the researchers would study if the right data set presents itself, Autor says. Given the way America’s temporary workforce keeps growing, there may be plenty of those numbers for Autor to scrutinize in the future.
Continued in article
"One quarter of US grain crops fed to
cars - not people, new figures showNew analysis of 2009 US Department of
Agriculture figures suggests biofuel revolution is impacting on world food
supplies," The Guardian, January 22, 2010 ---
One-quarter of all the maize and other grain crops grown in the US now ends up as biofuel in cars rather than being used to feed people, according to new analysis which suggests that the biofuel revolution launched by former President George Bush in 2007 is impacting on world food supplies. The 2009 figures from the US Department of Agriculture shows ethanol production rising to record levels driven by farm subsidies and laws which require vehicles to use increasing amounts of biofuels.
Go Canada Even If You've So Boring
"Good and Boring," by Paul Krugman,
The New York Times, January 31, 2010 ---
On the other hand, Canada’s experience does seem to support the views of people like Elizabeth Warren, the head of the Congressional panel overseeing the bank bailout, who place much of the blame for the crisis on failure to protect consumers from deceptive lending. Canada has an independent Financial Consumer Agency, and it has sharply restricted subprime-type lending.
Above all, Canada’s experience seems to support those who say that the way to keep banking safe is to keep it boring — that is, to limit the extent to which banks can take on risk. The United States used to have a boring banking system, but Reagan-era deregulation made things dangerously interesting. Canada, by contrast, has maintained a happy tedium.
More specifically, Canada has been much stricter about limiting banks’ leverage, the extent to which they can rely on borrowed funds. It has also limited the process of securitization, in which banks package and resell claims on their loans outstanding — a process that was supposed to help banks reduce their risk by spreading it, but has turned out in practice to be a way for banks to make ever-bigger wagers with other people’s money.
There’s no question that in recent years these restrictions meant fewer opportunities for bankers to come up with clever ideas than would have been available if Canada had emulated America’s deregulatory zeal. But that, it turns out, was all to the good.
So what are the chances that the United States will learn from Canada’s success?
Actually, the financial reform bill that the House of Representatives passed in December would significantly Canadianize the U.S. system. It would create an independent Consumer Financial Protection Agency, it would establish limits on leverage, and it would limit securitization by requiring that lenders hold on to some of their loans.
But prospects for a comparable bill getting the 60 votes now needed to push anything through the Senate are doubtful. Republicans are clearly dead set against any significant financial reform — not a single Republican voted for the House bill — and some Democrats are ambivalent, too.
So there’s a good chance that we’ll do nothing, or nothing much, to prevent future banking crises. But it won’t be because we don’t know what to do: we’ve got a clear example of how to keep banking safe sitting right next door.
"Will $1 Billion Bonding Bill Stimulate Minnesota Employment?" by Larry J. Paulson, Ph.D., February 3, 2010 ---
Video: Air Pelosi Scandal
The Disgraceful Personal Spending of House Speaker, CNN --- http://www.youtube.com/watch_popup?v=A6_xgKWzhRw
"House Speaker’s Military Travel Cost the United States Air Force
$2,100,744.59 over a Two-Year Period, Including $101,429 for In-Flight Expenses,"
Judicial Watch, January 28, 2010 ---
Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it has obtained documents from the Air Force detailing House Speaker Nancy Pelosi’s use of United States Air Force aircraft for Congressional Delegations (CODELs). According to the documents, obtained by Judicial Watch through the Freedom of Information Act (FOIA), the Speaker’s military travel cost the United States Air Force $2,100,744.59 over a two-year period — $101,429.14 of which was for in-flight expenses, including food and alcohol. The following are highlights from the recent release of about 2,000 documents:
- Speaker Pelosi used Air Force aircraft to travel back to her district at an average cost of $28,210.51 per flight. The average cost of an international CODEL is $228,563.33. Of the 103 Pelosi-led congressional delegations (CODEL), 31 trips included members of the House Speaker’s family.
- One CODEL traveling from Washington, DC, through Tel Aviv, Israel to Baghdad, Iraq May 15-20, 2008, “to discuss matters of mutual concern with government leaders” included members of Congress and their spouses and cost $17,931 per hour in aircraft alone. Purchases for the CODEL included: Johnny Walker Red scotch, Grey Goose vodka, E&J brandy, Bailey’s Irish Crème, Maker’s Mark whiskey, Courvoisier cognac, Bacardi Light rum, Jim Beam whiskey, Beefeater gin, Dewars scotch, Bombay Sapphire gin, Jack Daniels whiskey, Corona beer and several bottles of wine.
- According to a “Memo for Record” from a March 29—April 7, 2007, CODEL that involved a stop in Israel, “CODEL could only bring Kosher items into the Hotel. Kosher alcohol for mixing beverages in the Delegation room was purchased on the local economy i.e. Bourbon, Whiskey, Scotch, Vodka, Gin, Triple Sec, Tequila, etc.”
- The Department of Defense advanced a CODEL of 56 members of Congress and staff $60,000 to travel to Louisiana and Mississippi July 19-22, 2008, to “view flood relief advances from Hurricane Katrina.” The three-day trip cost the U.S. Air Force $65,505.46, exceeding authorized funding by $5,505.46.
“Speaker Pelosi has a history of wasting taxpayer funds with her boorish demands for military travel. And these documents suggest the Speaker’s congressional delegations are more about partying than anything else,” said Judicial Watch President Tom Fitton.
Judicial Watch previously obtained internal DOD email correspondence detailing attempts by DOD staff to accommodate Pelosi’s numerous requests for military escorts and military aircraft as well as the speaker’s last minute cancellations and changes.
"Judicial Watch Announces List of Washington's "Ten Most Wanted Corrupt
Politicians" for 2009," Judicial Watch ---
Rep. Nancy Pelosi (D-CA): At the heart of the corruption problem in Washington is a sense of entitlement. Politicians believe laws and rules (even the U.S. Constitution) apply to the rest of us but not to them. Case in point: House Speaker Nancy Pelosi and her excessive and boorish demands for military travel. Judicial Watch obtained documents from the Pentagon in 2008 that suggest Pelosi has been treating the Air Force like her own personal airline. These documents, obtained through the Freedom of Information Act, include internal Pentagon email correspondence detailing attempts by Pentagon staff to accommodate Pelosi's numerous requests for military escorts and military aircraft as well as the speaker's 11th hour cancellations and changes. House Speaker Nancy Pelosi also came under fire in April 2009, when she claimed she was never briefed about the CIA's use of the waterboarding technique during terrorism investigations. The CIA produced a report documenting a briefing with Pelosi on September 4, 2002, that suggests otherwise. Judicial Watch also obtained documents, including a CIA Inspector General report, which further confirmed that Congress was fully briefed on the enhanced interrogation techniques. Aside from her own personal transgressions, Nancy Pelosi has ignored serious incidents of corruption within her own party, including many of the individuals on this list. (See Rangel, Murtha, Jesse Jackson, Jr., etc.)
At the end of every year, Judicial Watch publishes a top ten list of the most corrupt politicians in Washington, D.C.
The motto of Judicial Watch is "Because no one
is above the law". To this end, Judicial Watch uses the open records or freedom
of information laws and other tools to investigate and uncover misconduct by
government officials and litigation to hold to account politicians and public
officials who engage in corrupt activities.
Judicial Watch --- http://www.judicialwatch.org/
Air Pelosi Scandal
In March 2009, Judicial Watch received documents from the Department of Defense detailing Nancy Pelosi's abuse of a system which provided military aircraft for the transportation of the Speaker of the House. The documents, which were acquired through the Freedom of Information Act (FOIA), detail the attempts by DOD staff to accommodate Pelosi's numerous requests for military escorts and military aircraft as well as the speaker's last minute cancellations and changes.
- Judicial Watch Uncovers Documents Detailing Pelosi's Repeated Requests for Military Travel - March 10, 2009
- Judicial Watch Uncovers New Documents Detailing Pelosi's Use of Air Force Aircraft - January 28, 2010
- Pelosi staff emails
- Pelosi staff emails
- Pelosi staff emails
- Pelosi authorization letters
- DOD FOIA response letter
- Documents regarding travel on military aircraft in the custody of the US Air Force
- US Air Force Weekly Travel Reports
- Pelosi authorization letters and CODEL participants lists from the US Army
- Pelosi authorization letters and CODEL and Tribute documents from the US Navy
- DOD documents regarding former Speaker Dennis Hastert's use of military aircraft
- Comparison of Pelosi and Hastert flights
- Air Force CODEL documents - produced January, 2010
The Sad State of Government and Government Accountability ---
Forwarded by a good friend on February 21, 2010
Wall Street's Bailout Hustle
Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash
Posted Feb 17, 2010 5:57 AM
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."
Translation: We made a shitload of money last year because we're so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.
Goldman wasn't alone. The nation's six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?" asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America's populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what's the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is because there's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.
The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.
That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off."
To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and taking scores, and to realize that the profits these banks are posting don't so much represent national growth and recovery, but something closer to the losses one would report after a theft or a car crash. Many Americans instinctively understand this to be true — but, much like when your wife does it with your 300-pound plumber in the kids' playroom, knowing it and actually watching the whole scene from start to finish are two very different things. In that spirit, a brief history of the best 18 months of grifting this country has ever seen:
CON #1 THE SWOOP AND SQUAT
By now, most people who have followed the financial crisis know that the bailout of AIG was actually a bailout of AIG's "counterparties" — the big banks like Goldman to whom the insurance giant owed billions when it went belly up.
What is less understood is that the bailout of AIG counter-parties like Goldman and Société Générale, a French bank, actually began before the collapse of AIG, before the Federal Reserve paid them so much as a dollar. Nor is it understood that these counterparties actually accelerated the wreck of AIG in what was, ironically, something very like the old insurance scam known as "Swoop and Squat," in which a target car is trapped between two perpetrator vehicles and wrecked, with the mark in the game being the target's insurance company — in this case, the government.
This may sound far-fetched, but the financial crisis of 2008 was very much caused by a perverse series of legal incentives that often made failed investments worth more than thriving ones. Our economy was like a town where everyone has juicy insurance policies on their neighbors' cars and houses. In such a town, the driving will be suspiciously bad, and there will be a lot of fires.
AIG was the ultimate example of this dynamic. At the height of the housing boom, Goldman was selling billions in bundled mortgage-backed securities — often toxic crap of the no-money-down, no-identification-needed variety of home loan — to various institutional suckers like pensions and insurance companies, who frequently thought they were buying investment-grade instruments. At the same time, in a glaring example of the perverse incentives that existed and still exist, Goldman was also betting against those same sorts of securities — a practice that one government investigator compared to "selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars."
Goldman often "insured" some of this garbage with AIG, using a virtually unregulated form of pseudo-insurance called credit-default swaps. Thanks in large part to deregulation pushed by Bob Rubin, former chairman of Goldman, and Treasury secretary under Bill Clinton, AIG wasn't required to actually have the capital to pay off the deals. As a result, banks like Goldman bought more than $440 billion worth of this bogus insurance from AIG, a huge blind bet that the taxpayer ended up having to eat.
Thus, when the housing bubble went crazy, Goldman made money coming and going. They made money selling the crap mortgages, and they made money by collecting on the bogus insurance from AIG when the crap mortgages flopped.
Still, the trick for Goldman was: how to collect the insurance money. As AIG headed into a tailspin that fateful summer of 2008, it looked like the beleaguered firm wasn't going to have the money to pay off the bogus insurance. So Goldman and other banks began demanding that AIG provide them with cash collateral. In the 15 months leading up to the collapse of AIG, Goldman received $5.9 billion in collateral. Société Générale, a bank holding lots of mortgage-backed crap originally underwritten by Goldman, received $5.5 billion. These collateral demands squeezing AIG from two sides were the "Swoop and Squat" that ultimately crashed the firm. "It put the company into a liquidity crisis," says Eric Dinallo, who was intimately involved in the AIG bailout as head of the New York State Insurance Department.
It was a brilliant move. When a company like AIG is about to die, it isn't supposed to hand over big hunks of assets to a single creditor like Goldman; it's supposed to equitably distribute whatever assets it has left among all its creditors. Had AIG gone bankrupt, Goldman would have likely lost much of the $5.9 billion that it pocketed as collateral. "Any bankruptcy court that saw those collateral payments would have declined that transaction as a fraudulent conveyance," says Barry Ritholtz, the author of Bailout Nation. Instead, Goldman and the other counterparties got their money out in advance — putting a torch to what was left of AIG. Fans of the movie Goodfellas will recall Henry Hill and Tommy DeVito taking the same approach to the Bamboo Lounge nightclub they'd been gouging. Roll the Ray Liotta narration: "Finally, when there's nothing left, when you can't borrow another buck . . . you bust the joint out. You light a match."
And why not? After all, according to the terms of the bailout deal struck when AIG was taken over by the state in September 2008, Goldman was paid 100 cents on the dollar on an additional $12.9 billion it was owed by AIG — again, money it almost certainly would not have seen a fraction of had AIG proceeded to a normal bankruptcy. Along with the collateral it pocketed, that's $19 billion in pure cash that Goldman would not have "earned" without massive state intervention. How's that $13.4 billion in 2009 profits looking now? And that doesn't even include the direct bailouts of Goldman Sachs and other big banks, which began in earnest after the collapse of AIG.
CON #2 THE DOLLAR STORE
In the usual "DollarStore" or "Big Store" scam — popularized in movies like The Sting — a huge cast of con artists is hired to create a whole fake environment into which the unsuspecting mark walks and gets robbed over and over again. A warehouse is converted into a makeshift casino or off-track betting parlor, the fool walks in with money, leaves without it.
The two key elements to the Dollar Store scam are the whiz-bang theatrical redecorating job and the fact that everyone is in on it except the mark. In this case, a pair of investment banks were dressed up to look like commercial banks overnight, and it was the taxpayer who walked in and lost his shirt, confused by the appearance of what looked like real Federal Reserve officials minding the store.
Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley, applied for, and received, federal permission to become bank holding companies — a move that would make them eligible for much greater federal support. The stock prices of both firms were cratering, and there was talk that either or both might go the way of Lehman Brothers, another once-mighty investment bank that just a week earlier had disappeared from the face of the earth under the weight of its toxic assets. By law, a five-day waiting period was required for such a conversion — but the two banks got them overnight, with final approval actually coming only five days after the AIG bailout.
Why did they need those federal bank charters? This question is the key to understanding the entire bailout era — because this Dollar Store scam was the big one. Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of "free money" by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.
When Goldman Sachs and Morgan Stanley got their federal bank charters, they joined Bank of America, Citigroup, J.P. Morgan Chase and the other banking titans who could go to the Fed and borrow massive amounts of money at interest rates that, thanks to the aggressive rate-cutting policies of Fed chief Ben Bernanke during the crisis, soon sank to zero percent. The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008. "They had no other way to raise capital at that moment, meaning they were on the brink of insolvency," says Nomi Prins, a former managing director at Goldman Sachs. "The Fed was the only shot."
In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.
"You're borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way," says the manager of one prominent hedge fund. "It's free money." Which goes a long way to explaining Goldman's enormous profits last year. But all that free money was amplified by another scam:
CON #3 THE PIG IN THE POKE
At one point or another, pretty much everyone who takes drugs has been burned by this one, also known as the "Rocks in the Box" scam or, in its more elaborate variations, the "Jamaican Switch." Someone sells you what looks like an eightball of coke in a baggie, you get home and, you dumbass, it's baby powder.
The scam's name comes from the Middle Ages, when some fool would be sold a bound and gagged pig that he would see being put into a bag; he'd miss the switch, then get home and find a tied-up cat in there instead. Hence the expression "Don't let the cat out of the bag."
The "Pig in the Poke" scam is another key to the entire bailout era. After the crash of the housing bubble — the largest asset bubble in history — the economy was suddenly flooded with securities backed by failing or near-failing home loans. In the cleanup phase after that bubble burst, the whole game was to get taxpayers, clients and shareholders to buy these worthless cats, but at pig prices.
One of the first times we saw the scam appear was in September 2008, right around the time that AIG was imploding. That was when the Fed changed some of its collateral rules, meaning banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything — including some of the mortgage-backed sewage that got us into this mess in the first place. In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. "All of a sudden, banks were allowed to post absolute shit to the Fed's balance sheet," says the manager of the prominent hedge fund.
The Fed spelled it out on September 14th, 2008, when it changed the collateral rules for one of its first bailout facilities — the Primary Dealer Credit Facility, or PDCF. The Fed's own write-up described the changes: "With the Fed's action, all the kinds of collateral then in use . . . including non-investment-grade securities and equities . . . became eligible for pledge in the PDCF."
Translation: We now accept cats.
The Pig in the Poke also came into play in April of last year, when Congress pushed a little-known agency called the Financial Accounting Standards Board, or FASB, to change the so-called "mark-to-market" accounting rules. Until this rule change, banks had to assign a real-market price to all of their assets. If they had a balance sheet full of securities they had bought at $3 that were now only worth $1, they had to figure their year-end accounting using that $1 value. In other words, if you were the dope who bought a cat instead of a pig, you couldn't invite your shareholders to a slate of pork dinners come year-end accounting time.
But last April, FASB changed all that. From now on, it announced, banks could avoid reporting losses on some of their crappy cat investments simply by declaring that they would "more likely than not" hold on to them until they recovered their pig value. In short, the banks didn't even have to actually hold on to the toxic shit they owned — they just had to sort of promise to hold on to it.
That's why the "profit" numbers of a lot of these banks are really a joke. In many cases, we have absolutely no idea how many cats are in their proverbial bag. What they call "profits" might really be profits, only minus undeclared millions or billions in losses.
"They're hiding all this stuff from their shareholders," says Ritholtz, who was disgusted that the banks lobbied for the rule changes. "Now, suddenly banks that were happy to mark to market on the way up don't have to mark to market on the way down."
CON #4 THE RUMANIAN BOX
One of the great innovations of Victor Lustig, the legendary Depression-era con man who wrote the famous "Ten Commandments for Con Men," was a thing called the "Rumanian Box." This was a little machine that a mark would put a blank piece of paper into, only to see real currency come out the other side. The brilliant Lustig sold this Rumanian Box over and over again for vast sums — but he's been outdone by the modern barons of Wall Street, who managed to get themselves a real Rumanian Box.
How they accomplished this is a story that by itself highlights the challenge of placing this era in any kind of historical context of known financial crime. What the banks did was something that was never — and never could have been — thought of before. They took so much money from the government, and then did so little with it, that the state was forced to start printing new cash to throw at them. Even the great Lustig in his wildest, horniest dreams could never have dreamed up this one.
The setup: By early 2009, the banks had already replenished themselves with billions if not trillions in bailout money. It wasn't just the $700 billion in TARP cash, the free money provided by the Fed, and the untold losses obscured by accounting tricks. Another new rule allowed banks to collect interest on the cash they were required by law to keep in reserve accounts at the Fed — meaning the state was now compensating the banks simply for guaranteeing their own solvency. And a new federal operation called the Temporary Liquidity Guarantee Program let insolvent and near-insolvent banks dispense with their deservedly ruined credit profiles and borrow on a clean slate, with FDIC backing. Goldman borrowed $29 billion on the government's good name, J.P. Morgan Chase $38 billion, and Bank of America $44 billion. "TLGP," says Prins, the former Goldman manager, "was a big one."
Collectively, all this largesse was worth trillions. The idea behind the flood of money, from the government's standpoint, was to spark a national recovery: We refill the banks' balance sheets, and they, in turn, start to lend money again, recharging the economy and producing jobs. "The banks were fast approaching insolvency," says Rep. Paul Kanjorski, a vocal critic of Wall Street who nevertheless defends the initial decision to bail out the banks. "It was vitally important that we recapitalize these institutions."
But here's the thing. Despite all these trillions in government rescues, despite the Fed slashing interest rates down to nothing and showering the banks with mountains of guarantees, Goldman and its friends had still not jump-started lending again by the first quarter of 2009. That's where those nuclear-powered balls of Lloyd Blankfein came into play, as Goldman and other banks basically threatened to pick up their bailout billions and go home if the government didn't fork over more cash — a lot more. "Even if the Fed could make interest rates negative, that wouldn't necessarily help," warned Goldman's chief domestic economist, Jan Hatzius. "We're in a deep recession mainly because the private sector, for a variety of reasons, has decided to save a lot more."
Translation: You can lower interest rates all you want, but we're still not fucking lending the bailout money to anyone in this economy. Until the government agreed to hand over even more goodies, the banks opted to join the rest of the "private sector" and "save" the taxpayer aid they had received — in the form of bonuses and compensation.
The ploy worked. In March of last year, the Fed sharply expanded a radical new program called quantitative easing, which effectively operated as a real-live Rumanian Box. The government put stacks of paper in one side, and out came $1.2 trillion "real" dollars.
The government used some of that freshly printed money to prop itself up by purchasing Treasury bonds — a desperation move, since Washington's demand for cash was so great post-Clusterfuck '08 that even the Chinese couldn't buy U.S. debt fast enough to keep America afloat. But the Fed used most of the new cash to buy mortgage-backed securities in an effort to spur home lending — instantly creating a massive market for major banks.
And what did the banks do with the proceeds? Among other things, they bought Treasury bonds, essentially lending the money back to the government, at interest. The money that came out of the magic Rumanian Box went from the government back to the government, with Wall Street stepping into the circle just long enough to get paid. And once quantitative easing ends, as it is scheduled to do in March, the flow of money for home loans will once again grind to a halt. The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year.
CON #5 THE BIG MITT
All of that Rumanian box paper was made even more valuable by running it through the next stage of the grift. Michael Masters, one of the country's leading experts on commodities trading, compares this part of the scam to the poker game in the Bill Murray comedy Stripes. "It's like that scene where John Candy leans over to the guy who's new at poker and says, 'Let me see your cards,' then starts giving him advice," Masters says. "He looks at the hand, and the guy has bad cards, and he's like, 'Bluff me, come on! If it were me, I'd bet everything!' That's what it's like. It's like they're looking at your cards as they give you advice."
In more ways than one can count, the economy in the bailout era turned into a "Big Mitt," the con man's name for a rigged poker game. Everybody was indeed looking at everyone else's cards, in many cases with state sanction. Only taxpayers and clients were left out of the loop.
At the same time the Fed and the Treasury were making massive, earthshaking moves like quantitative easing and TARP, they were also consulting regularly with private advisory boards that include every major player on Wall Street. The Treasury Borrowing Advisory Committee has a J.P. Morgan executive as its chairman and a Goldman executive as its vice chairman, while the board advising the Fed includes bankers from Capital One and Bank of New York Mellon. That means that, in addition to getting great gobs of free money, the banks were also getting clear signals about when they were getting that money, making it possible to position themselves to make the appropriate investments.
One of the best examples of the banks blatantly gambling, and winning, on government moves was the Public-Private Investment Program, or PPIP. In this bizarre scheme cooked up by goofball-geek Treasury Secretary Tim Geithner, the government loaned money to hedge funds and other private investors to buy up the absolutely most toxic horseshit on the market — the same kind of high-risk, high-yield mortgages that were most responsible for triggering the financial chain reaction in the fall of 2008. These satanic deals were the basic currency of the bubble: Jobless dope fiends bought houses with no money down, and the big banks wrapped those mortgages into securities and then sold them off to pensions and other suckers as investment-grade deals. The whole point of the PPIP was to get private investors to relieve the banks of these dangerous assets before they hurt any more innocent bystanders.
But what did the banks do instead, once they got wind of the PPIP? They started buying that worthless crap again, presumably to sell back to the government at inflated prices! In the third quarter of last year, Goldman, Morgan Stanley, Citigroup and Bank of America combined to add $3.36 billion of exactly this horseshit to their balance sheets.
This brazen decision to gouge the taxpayer startled even hardened market observers. According to Michael Schlachter of the investment firm Wilshire Associates, it was "absolutely ridiculous" that the banks that were supposed to be reducing their exposure to these volatile instruments were instead loading up on them in order to make a quick buck. "Some of them created this mess," he said, "and they are making a killing undoing it."
CON #6 THE WIRE
Here's the thing about our current economy. When Goldman and Morgan Stanley transformed overnight from investment banks into commercial banks, we were told this would mean a new era of "significantly tighter regulations and much closer supervision by bank examiners," as The New York Times put it the very next day. In reality, however, the conversion of Goldman and Morgan Stanley simply completed the dangerous concentration of power and wealth that began in 1999, when Congress repealed the Glass-Steagall Act — the Depression-era law that had prevented the merger of insurance firms, commercial banks and investment houses. Wall Street and the government became one giant dope house, where a few major players share valuable information between conflicted departments the way junkies share needles.
One of the most common practices is a thing called front-running, which is really no different from the old "Wire" con, another scam popularized in The Sting. But instead of intercepting a telegraph wire in order to bet on racetrack results ahead of the crowd, what Wall Street does is make bets ahead of valuable information they obtain in the course of everyday business.
Say you're working for the commodities desk of a big investment bank, and a major client — a pension fund, perhaps — calls you up and asks you to buy a billion dollars of oil futures for them. Once you place that huge order, the price of those futures is almost guaranteed to go up. If the guy in charge of asset management a few desks down from you somehow finds out about that, he can make a fortune for the bank by betting ahead of that client of yours. The deal would be instantaneous and undetectable, and it would offer huge profits. Your own client would lose money, of course — he'd end up paying a higher price for the oil futures he ordered, because you would have driven up the price. But that doesn't keep banks from screwing their own customers in this very way.
The scam is so blatant that Goldman Sachs actually warns its clients that something along these lines might happen to them. In the disclosure section at the back of a research paper the bank issued on January 15th, Goldman advises clients to buy some dubious high-yield bonds while admitting that the bank itself may bet against those same shitty bonds. "Our salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research," the disclosure reads. "Our asset-management area, our proprietary-trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research."
Banks like Goldman admit this stuff openly, despite the fact that there are securities laws that require banks to engage in "fair dealing with customers" and prohibit analysts from issuing opinions that are at odds with what they really think. And yet here they are, saying flat-out that they may be issuing an opinion at odds with what they really think.
To help them screw their own clients, the major investment banks employ high-speed computer programs that can glimpse orders from investors before the deals are processed and then make trades on behalf of the banks at speeds of fractions of a second. None of them will admit it, but everybody knows what this computerized trading — known as "flash trading" — really is. "Flash trading is nothing more than computerized front-running," says the prominent hedge-fund manager. The SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice.
Over the summer, Goldman suffered an embarrassment on that score when one of its employees, a Russian named Sergey Aleynikov, allegedly stole the bank's computerized trading code. In a court proceeding after Aleynikov's arrest, Assistant U.S. Attorney Joseph Facciponti reported that "the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."
Six months after a federal prosecutor admitted in open court that the Goldman trading program could be used to unfairly manipulate markets, the bank released its annual numbers. Among the notable details was the fact that a staggering 76 percent of its revenue came from trading, both for its clients and for its own account. "That is much, much higher than any other bank," says Prins, the former Goldman managing director. "If I were a client and I saw that they were making this much money from trading, I would question how badly I was getting screwed."
Why big institutional investors like pension funds continually come to Wall Street to get raped is the million-dollar question that many experienced observers puzzle over. Goldman's own explanation for this phenomenon is comedy of the highest order. In testimony before a government panel in January, Blankfein was confronted about his firm's practice of betting against the same sorts of investments it sells to clients. His response: "These are the professional investors who want this exposure."
In other words, our clients are big boys, so screw 'em if they're dumb enough to take the sucker bets I'm offering.
CON #7 THE RELOAD
Not many con men are good enough or brazen enough to con the same victim twice in a row, but the few who try have a name for this excellent sport: reloading. The usual way to reload on a repeat victim (called an "addict" in grifter parlance) is to rope him into trying to get back the money he just lost. This is exactly what started to happen late last year.
It's important to remember that the housing bubble itself was a classic confidence game — the Ponzi scheme. The Ponzi scheme is any scam in which old investors must be continually paid off with money from new investors to keep up what appear to be high rates of investment return. Residential housing was never as valuable as it seemed during the bubble; the soaring home values were instead a reflection of a continual upward rush of new investors in mortgage-backed securities, a rush that finally collapsed in 2008.
But by the end of 2009, the unimaginable was happening: The bubble was re-inflating. A bailout policy that was designed to help us get out from under the bursting of the largest asset bubble in history inadvertently produced exactly the opposite result, as all that government-fueled capital suddenly began flowing into the most dangerous and destructive investments all over again. Wall Street was going for the reload.
A lot of this was the government's own fault, of course. By slashing interest rates to zero and flooding the market with money, the Fed was replicating the historic mistake that Alan Greenspan had made not once, but twice, before the tech bubble in the early 1990s and before the housing bubble in the early 2000s. By making sure that traditionally safe investments like CDs and savings accounts earned basically nothing, thanks to rock-bottom interest rates, investors were forced to go elsewhere to search for moneymaking opportunities.
Now we're in the same situation all over again, only far worse. Wall Street is flooded with government money, and interest rates that are not just low but flat are pushing investors to seek out more "creative" opportunities. (It's "Greenspan times 10," jokes one hedge-fund trader.) Some of that money could be put to use on Main Street, of course, backing the efforts of investment-worthy entrepreneurs. But that's not what our modern Wall Street is built to do. "They don't seem to want to lend to small and medium-sized business," says Rep. Brad Sherman, who serves on the House Financial Services Committee. "What they want to invest in is marketable securities. And the definition of small and medium-sized businesses, for the most part, is that they don't have marketable securities. They have bank loans."
In other words, unless you're dealing with the stock of a major, publicly traded company, or a giant pile of home mortgages, or the bonds of a large corporation, or a foreign currency, or oil futures, or some country's debt, or anything else that can be rapidly traded back and forth in huge numbers, factory-style, by big banks, you're not really on Wall Street's radar.
So with small business out of the picture, and the safe stuff not worth looking at thanks to the Fed's low interest rates, where did Wall Street go? Right back into the shit that got us here.
One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the crap toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
"I said, 'Fuck it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"
This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street.
The research report published by Goldman Sachs on January 15th underlines this sort of thinking. Goldman issued a strong recommendation to buy exactly the sort of high-yield toxic crap our hedge-fund guy was, by then, driving rapidly toward the cliff. "Summarizing our views," the bank wrote, "we expect robust flows . . . to dominate fundamentals." In other words: This stuff is crap, but everyone's buying it in an awfully robust way, so you should too. Just like tech stocks in 1999, and mortgage-backed securities in 2006.
To sum up, this is what Lloyd Blankfein meant by "performance": Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices — and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit — who wouldn't deserve billions in bonuses for doing all that?
Con artists have a word for the inability of their victims to accept that they've been scammed. They call it the "True Believer Syndrome." That's sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn't so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn't matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn't going to work, no matter what we do. Sure, mugging old ladies is against the law, but it's also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.
That's why the biggest gift the bankers got in the bailout was not fiscal but psychological. "The most valuable part of the bailout," says Rep. Sherman, "was the implicit guarantee that they're Too Big to Fail." Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. "It's evidence," says Rep. Kanjorski, "that they still don't get it."
More to the point, the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.
[From Issue 1099 — March 4, 2010]
Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm
the Tidbits Archives ---
Shielding Against Validity Challenges in Plato's Cave ---
Shielding Against Validity Challenges in Plato's Cave
By Bob Jensen
Table of Contents
What went wrong in accounting/accountics research?
The Sad State of Accountancy Doctoral
Programs That Do Not Appeal to Most Accountants ---
AN ANALYSIS OF THE EVOLUTION OF RESEARCH
CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
Bob Jensen's threads on accounting theory
Tom Lehrer on Mathematical Models and
Systemic problems of accountancy (especially the
vegetable nutrition paradox) that probably will never be solved ---
Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm
Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm
Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/