To Accompany the June 14, 2012 edition of Tidbits
Bob Jensen at Trinity Universit
Have a nice life while the getting is good!
"Earth Is Headed for Disaster, Interdisciplinary Team of Scientists Concludes," by Paul Basken, Chronicle of Higher Education, June 6, 2012 ---
"Getting to Zero, by Elephant or F-18," by John Elkington, Harvard
Business Review Blog, June 7, 2012 ---
The Strange Thinking of Our U.S. Supreme Court Justices: Who says
Justice Thomas cannot agree with Justices Kennedy, Ginsburg, Sotomayor, and
"Taxation and Orwell's Animal Farm." The Faculty Lounge, June 5, 2012 ---
The major TV networks are aglow with the "Made in America" additions of
hundreds of thousands of new jobs in America since 2007
"A hidden surprise in the US employment report," Sober Look, June 1, 2012 ---
Thank you Jim Mahar for the heads up.
Bloomberg: - The Citigroup Economic Surprise Index for the U.S., which measures how much data is missing or beating the median estimates in Bloomberg surveys, fell to minus 53.6, the lowest since September. It turned negative this year in April after remaining above zero since October. The Federal Reserve announced a program dubbed “Operation Twist” to boost growth on Sept. 21, 2011, four months after the index turned negative.One of the worst surprises buried in the report however was the fact that all the job growth came from increases in part-time jobs. The number of full-time jobs actually declined significantly.
WSJ: - ... the job growth is coming entirely from workers getting part-time jobs. The number of Americans working full-time fell by 266,000 in May, erasing all the gains of the past three months. The total employment figure only rose because 618,000 more people got part-time jobs. Many of those people would rather be working full-time: The number of people classified as “part time for economic reasons” — meaning they’re working part-time because they can’t find a full-time job — rose by 245,000 to 8.1 million.
It appears that both business firms, government agencies, and schools are avoiding those full-time new jobs that carry with them the burden of paying for benefits. We most certainly are seen tenure track positions in higher education being replaced by part-time adjunct teaching positions.
From The Wall Street Journal Accounting Weekly Review on June 8, 2012
Dire CBO Report Urges Fiscal Fixes
by: John D. McKinnon
Jun 06, 2012
Click here to view the full article on WSJ.com
TOPICS: Governmental Accounting
SUMMARY: "The Congressional Budget Office [CBO] released new projections of a worsening U.S. fiscal outlook...By the end of this year, the CBO said, cumulative federal debt will reach roughly 70% of gross domestic product...the highest level since just after World War II.[and] up from about 40% in 2008.
CLASSROOM APPLICATION: The article can be used in governmental accounting classes to differentiate between budget deficits and total U.S. debt.
1. (Introductory) Summarize the findings in the Congressional Budget Office report according to the description in this article.
2. (Advanced) What two numbers comprise the 70% ratio forecasted by the end of 2012? How does this ratio help to be able to compare our country's circumstances over time? How do you think each component has changed since the 2008 measure of 40% to result in this rise to 70%?
3. (Introductory) Define the term budget deficit. Does this 70% ratio have anything to do with the U.S. budget deficit?
4. (Advanced) Consider the graph labeled Components of Spending and Revenue. What two amounts result in the U.S. budget deficit? What are the major components of U.S. governmental spending?
Reviewed By: Judy Beckman, University of Rhode Island
"Dire CBO Report Urges Fiscal Fixes," by John D. McKinnon, The Wall Street
Journal, June 6, 2012 ---
The Congressional Budget Office released new projections of a worsening U.S. fiscal outlook, adding fuel to the election-year debate over the causes of rising government debt.
By the end of this year, the CBO said, cumulative federal debt will reach roughly 70% of gross domestic product—the value of all goods and services produced by the economy—the highest level since just after World War II. That's up from about 40% in 2008. Without changes in current policies, federal debt would reach about 200% of GDP in 25 years, the report said.
"The explosive path of federal debt…underscores the need for large and timely policy changes to put the federal government on a sustainable fiscal course," CBO director Doug Elmendorf wrote on his blog on Tuesday.
Budget watchdogs have long warned the U.S. was on an untenable fiscal path, due largely to the projected growth in spending on Medicare and other entitlement benefits as baby boomers age. Tax cuts enacted under former President George W. Bush also have contributed to the current fiscal plight.
Without changes in benefits or higher taxes—or both—the federal debt held by the public could reach 199% of GDP in 25 years, the CBO said, up from 187% in last year's projection.
The CBO said this course would likely have dire consequences for the economy, as well as forcing cuts in non-entitlement programs such as defense and social services. Without changes to stave off high debt and interest payments, U.S. GDP would be lower than otherwise over time.
The report showed that under current tax and spending policies, Social Security, Medicare and Medicaid—the three major programs that benefit older people—would amount to 16.6% of GDP in 2037, up from 10.4% now. That would tend to increase deficits dramatically and push interest costs to almost 10% of GDP in 2037, up from 1.4% now.
Republicans and Democrats blamed each other for the worsening budget outlook.
In a statement, Lanhee Chen, a top aide to Mitt Romney, the presumptive GOP presidential nominee, said the report showed President Barack Obama "has placed us on a path to fiscal ruin" by allowing debt to rise so quickly.
Obama campaign spokesman Ben LaBolt alluded to the policies of Mr. Obama's Republican predecessor, Mr. Bush, saying, "The president inherited a $1 trillion deficit as a result of two unfunded wars and tax cuts for the wealthiest." Mr. LaBolt added that Mr. Obama has "signed $2 trillion in deficit reduction into law and proposed a balanced plan to reduce the deficit by more than $4 trillion."
The political sniping also reflected the parties' sharp disagreement over several budget issues, including how to reduce the deficit, how to fuel stronger economic growth and how to handle the large tax increases and spending cuts scheduled to occur at the end of 2012.
Former President Bill Clinton, for example, appearing with Mr. Obama on Monday night, urged more short-term spending to boost the economy, and suggested Republicans were endangering growth with their zeal to cut spending.
"If you do not have economic growth, no amount of austerity will balance the budget, because you will always have revenues go down more than you can possibly cut spending," Mr. Clinton said of Republican budget plans.
Continued in article
Bob Jensen's threads on entitlements ---
Alan Blinder --- http://en.wikipedia.org/wiki/Alan_Blinder
I've never been a fan of the progressive scholarship of Alan Blinder. He's been a promoter of low (virtually zero) interest rates for megabanks that I think are turning into a disaster in this economic recovery. Ben Bernanke can do no wrong in the eyes of Professor Blinder. In my opinion, the real Bernanke-Blinder disaster is their support of restraining the government budget deficit with Zimbabwe economics that entails printing more greenbacks (over $2 trillion to date) rather than taxing or borrowing what is needed to fight the deficit. Actually the government does not add to the money supply by literally printing greenbacks. But having the Fed buy up over 60% of the new government debt is tantamount to printing greenbacks.
Taxing and borrowing to support government spending are going out of
The main problem with Zimbabwe economics is that it does little to restrain the excesses of government spending --- which we are now witnessing in the economic mess in Greece. Greece, of course, cannot simply print Euros to continue to feed government spending excesses. Greece has to get out of the Euro Zone to engage in the Zimbabwe economics of Benanke and Blinder. Of course all of Europe might soon engage in Zimbabwe economics to pay its debts. Taxing and borrowing to support government spending is going out of style.
The budget should be balanced, the Treasury
should be refilled, public debt should be reduced, the arrogance of officialdom
should be tempered and controlled, and the assistance to foreign lands should be
curtailed lest Rome become bankrupt. People must again learn to work, instead of
living on public assistance.
Taylor Caldwell, A Pillar of Iron (wrongly attributed to Cicero in 55 B.C.)
But under my philosophy of sharing all sides of arguments, I forward the
Teaching Case from The Wall Street Journal Accounting Weekly Review on May 25, 2012
The Long and Short of Fiscal Policy
by: Alan S. Blinder
May 22, 2012
Click here to view the full article on WSJ.com
TOPICS: Governmental Accounting, Income Tax, Tax Laws, Tax Policy, Taxation
SUMMARY: Alan S. Blinder "...is a former vice chairman of the Federal Reserve [and is now] a professor of economics and public affairs at Princeton University." This opinion page piece provides a clear explanation of macroeconomic effects of budget deficits, tax cuts, and spending cuts, emphasizing the "macroeconomic effects of budget deficits in the short and long runs."
CLASSROOM APPLICATION: The article is useful in either a tax course or a governmental accounting class. The related article presents letters to the editor with more Republican viewpoints than Mr. Blinder's.
1. (Advanced) What are budget deficits?
2. (Introductory) Why can budget deficit spending be beneficial for the U.S. economy in the short run?
3. (Introductory) Why are budget deficits bad for the U.S. economy in the long run?
4. (Advanced) What tax law changes are imminent in January 2013? How do they relate to the comic graphic associated with this opinion piece? In your answer, comment on the size of these changes relative to the total economy.
5. (Introductory) How might specific choices in spending be more helpful than other possible choices? In your answer, explain the use of return on investment in these decisions, defining that finance concept as well.
6. (Introductory) What is the biggest cost component that could most readily reduce the long term budget deficit problem we face in the U.S.?
7. (Introductory) What does Mr. Blinder recommend as a plan for our national fiscal policy?
Reviewed By: Judy Beckman, University of Rhode Island
Perhaps the 2013 Fiscal Cliff Presents an Opportunity
by Letters to the Editor: Carroll Hoke, Frank Peel, and Keith Colonna
Mar 23, 2012
"The Long and Short of Fiscal Policy," by: Alan S. Blinder, The Wall Street
Journal, May 22, 2012 ---
Can we talk about the federal budget deficit? Better yet, can we think about it? For there has been a lot more talking than thinking. One persistent point of confusion arises from the radically different macroeconomic effects of larger budget deficits in the short and long runs.
In the short run—let's say within a year or so—a larger deficit, whether achieved by spending more or taxing less, boosts economic growth by increasing aggregate demand. It's pretty simple. If the government spends more money without raising anyone's taxes to pay the bills, that adds to total demand directly.
That's true, by the way, whether you like the specific expenditures or hate them. Similarly, cutting somebody's taxes without also cutting spending raises spending indirectly—again, whether you like the tax cut or not.
A second layer of subtlety recognizes that some types of spending and some types of tax cuts have larger effects on spending than others, and similarly, that some types are more sharply targeted on job creation than others. Such details matter in designing a cost-effective stimulus package. But for present purposes, let's keep it simple: Higher spending or lower taxes speed up growth by adding to demand.
So, as long as the government can borrow on reasonable terms, the crucial short-run question is: Does the economy need more or less demand? For the last several years, the answer has been clear: more. Bolstering demand was the rationale for fiscal stimulus under President Bush in 2008 and under President Obama in 2009. It remains a persuasive rationale for further stimulus today.
But that's not going to happen. Instead, the operational budget objective for the coming months is to ensure that we don't shoot ourselves in the collective foot with fiscal austerity while the economy is still weak. Sounds foolish, but we could make that grievous error either by letting ourselves fall off the so-called fiscal cliff that awaits us in January (tax increases and spending cuts amounting to 3.5%-4% of GDP), or by crashing headlong into the national debt ceiling, as we almost did last summer.
But don't we need to reduce the deficit—and by large amounts? Yes, we do, but that's in the long run, where the effects of larger deficits are mostly harmful to economic growth. In the jargon, more government borrowing tends to "crowd out" private borrowers by pushing interest rates up. Those crowded-out borrowers include both consumers who want to buy cars and businesses that want to buy equipment. In the latter case, higher government budget deficits take a toll on growth by slowing down capital formation.
There is an important exception, however, which is highly germane to today's situation. Suppose government borrowing is used to finance productive investments in public capital—such as highways, bridges, and tunnels. Right now, the U.S. government can borrow for 10 years at under 2% per annum. At these super-low interest rates, you don't have to be a genius to find many public infrastructure projects with strongly positive net present values. Borrowing to make such investments will enhance long-run growth, not retard it. And I can't, for the life of me, understand why we are not doing more of it.
But other types of spending, and any tax cut that does not boost capital formation enough, will slow down growth. And that's the fundamental indictment of large deficits.
To think clearly about how to shrink the long-run deficit, we must understand its origins. Looking ahead, the lion's share of projected future deficits comes from rising health-care expenditures.
Some of this cost escalation stems from heavier usage—consuming more health services per capita. But most of it comes from ever-rising relative prices; health care just keeps getting more expensive relative to almost everything else. The good news is that, if we could somehow limit health-care inflation to the overall inflation rate, much of the long-run budget problem would virtually vanish. The bad news is that nobody knows how to do that.
Given this ignorance, President Obama's health-care reform law, which Republicans want to repeal and the Supreme Court may vacate, takes a sensible approach to cost control. It includes—either on an experimental, small-scale, or pilot basis—virtually every cost-containment idea that has been suggested. The pragmatic attitude is: Let's try everything and go with what works.
But what about the middle, between the short run and the long run? When should the federal government get serious about paring its deficit? There is no formulaic answer, but U.S. Treasury borrowing rates will provide a clue. When they start rising on a sustained basis, it will be time to push deficits down. Another important clue will be the health of the economy. The government should stop supporting aggregate demand when the economy is strong enough to stand on its own two feet.
Continued in article
What Blinder does not admit to is that government borrowing rates are not allowed to go up as long as the Fed buys over 60% of the new debt issues in its Zimbabwe economic policy. I think I'm going to throw up!
Alan Blinder is all smoke and mirrors in an election year.
"Britain can’t afford to fall for the charms of the false economics
Messiah Paul Krugman," by Jeremy Warner, The Telegraph, May 24,
What does the future hold as Europe slides, ever more hopelessly, towards the abyss? As David Cameron has pointed out, there have been 18 EU summits since he became Prime Minister little more than two years ago, and none of them has produced anything remotely resembling a solution.
The stand-off got a whole lot worse this week. France and Germany are now in open conflict over the way forward, if indeed there is one. For the UK, already bleeding badly from the after-effects of the financial crisis, the situation could scarcely look more threatening.
The fiscal consolidation chosen by the Coalition was always likely to have a negative impact on output, at least in the short term. To make it work, the Government needed the following wind of decent growth elsewhere in the world economy. Instead, it’s facing a hurricane. We look set to be broken by the storm.
But fear not – salvation is at hand. Next week, there comes to these shores a Messiah, a prophet of great wisdom and understanding whose teachings promise to vanquish despair and “end this depression”. He is Prof Paul Krugman, a superstar polemicist who has been described by The Economist as “the most celebrated economist of his generation”. Actually, “celebrated” is not exactly the right word, for Krugman divides opinion like no other. To his followers, he’s a saint; to his detractors, he’s a false prophet with satanic intent.
I’ve been a little misleading here. He’s not really coming to Britain to save us, but rather to promote his latest book, End This Depression Now! Krugman is an economist with attitude, and he thinks Britain is in the midst of a “massive blunder” in economic policy. The UK is the very worst example of austerity economics, he believes, for unlike the poor beleaguered nations of the eurozone periphery, we’ve not had this misery forced on us by the ghastly euro, but have opted for it as an unnecessary penance for the sins of the boom. If only we could be persuaded to forsake “Osbornomics” and tread the path originally set out by our dearly beloved former leader, Gordon Brown – that of spending our way back to growth – then all would be well again.
Put like that, of course, it sounds ridiculous, but the fact that Krugman is a Nobel prize-winning economist gives Labour’s calls for a U-turn on the economy an intellectual credibility they would otherwise struggle to attain.
All the great economists – from Adam Smith to John Maynard Keynes – were as much moral philosophers as dispassionate analysts of events, and Krugman is no exception, preaching his message with all the passion of the religious zealot. He feels our pain and begs us to let him help. “The road out of depression and back to full employment is still wide open,” he insists. “We don’t have to suffer like this.”
Krugman may appear loud and radical, but he follows a fairly standard Keynesian text. By his own admission, the social cost of the present downturn doesn’t come anywhere close to the Great Depression of the interwar years, or not yet. None the less, there are parallels, and we already meet Keynes’s classic definition of a depression as a “chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse”.
In such circumstances, monetary policy can help, but only up to a point. In a depression, even those with the balance sheet strength to spend and invest won’t do so, whatever the encouragement offered through ultra-low interest rates. It follows that governments should step into the breach and do the job instead, as a kind of spender of last resort. They can worry about the accumulated debt later, once output has picked up again.
To Krugman, it’s understandable that policymakers screwed up so monumentally in the Great Depression; they didn’t understand what was going on and there was no template for the circumstances they found themselves in. To his mind, there is no excuse this time around; it’s textbook stuff, which is being wilfully ignored.
But haven’t we already tried borrowing to stimulate? And what did it deliver other than fiscal ruin, which in the eurozone periphery is so serious that markets have stopped lending altogether? Krugman has an answer for these questions, too. It’s not the policy that was wrong, merely that the stimulus wasn’t big and sustained enough. As for the eurozone, again, it wasn’t the policy, but the euro. Countries with their own currencies and central banks won’t run into this kind of problem. In extremis, they can always print the money.
Easy peasy, then. What’s not to like? Well, I’m sorry, but I just don’t buy it. It may or may not be possible for a vast, largely internalised economy such as the US, with its reserve currency status, to run double-digit deficits into the indefinite future without adverse consequences, but for the UK it is a much more questionable policy.
True, Britain has lived with much higher debts relative to GDP in the past, but this has nearly always coincided with major wars. With demilitarisation, much of this borrowing to spend falls away and domestic consumption comes roaring back. No such get-out-of-jail-free card exists this time around. Further, the demographic is completely different from that of the post-war baby boom generation, where growth and therefore debt erosion were more or less guaranteed. Today, the unfunded liabilities of an ageing population stretch menacingly into the long-term future.
As it is, government spending in the UK is already approaching 50 per cent of GDP. Just how high does Prof Krugman propose it should go? It’s all very well to say “jobs first” and worry about the deficit later, but once government spending becomes entrenched, it’s very difficult to get rid of it. Even Reagan and Thatcher struggled to make significant inroads.
In any case, the picture Krugman presents of wrong-headed British austerity is a caricature of the reality, though one admittedly encouraged by the Coalition’s rhetoric. Yesterday’s revised GDP figures, showing that the country is even deeper in recession than we thought, would appear to support the mocking tone in which Krugman condemns the idea of “expansionary austerity”. But where is this austerity? In fact, one of the few positive contributors to output in the last quarter was government spending, which grew by 1.6 per cent. Krugman seems to have forgotten the automatic stabilisers, which because of our welfare state are considerably bigger than in the US. In America, much current UK spending would count as a discretionary fiscal stimulus of the sort End This Depression Now! advocates.
As Raghuram Rajan, a former IMF chief economist, has argued, today’s troubles are not simply the result of inadequate demand, but of major changes in the world economy brought about by globalisation. The old monopoly of knowledge and expertise once enjoyed by advanced economies has been swept away. For decades, we compensated for the jobs and income lost to technology and cheaper foreign competition with unaffordable government spending and easy credit. Much of the growth enjoyed in these pre-crisis years was simply unsustainable.
Paul Krugman’s message is seductive, but it’s also unrealistic. If only the solutions to our plight were as simple as he thinks.
Bob Jensen's threads on The Greatest Swindle in the History of the World
Does this appear to be deception using statistics (whether intentional or unintentional)?
It might be interesting for students to debate how rate of change (the first derivative) differs from absolute change.
Professor Krugman in this and many instances appears to be somewhat deceptive in his choice of graphs and tables.
"1937," by Paul Krugman, The New York Times, June 3. 2012 ---
Remember all the talk a few years back about how we wouldn’t repeat the mistakes of 1937, when FDR pulled back too soon on support for the economy? Here, from FRED, is the rate of change of real government spending per capita (federal, state, and local):
Gosh, I wonder why the economy is underperforming?
Continued in Krugman's update
There were over 160 comments on this piece. The one that caught my eye from the standpoint of teaching statistics reads as follows:
"...rate of change" is a misleading statistic as a large increase in any one period can lead to declining rate of change even though absolute spending is still higher than before. That is exactly what has happened here. Let's face it, the massive government spending/stimulus of the first two years of Obama's presidency (the 6%+ increase following a prior 6% increase) have skewed any 'rate of change' numbers. There has to be a reason why we aren't shown absolute per capita spending figures for the same time period.
My purpose of this is not really to debate the politics of government spending in this election year or even to enter into a Keynesian versus Austrian School debate at this point in time. My sole purpose at this moment, however, is to question whether a rate of change graph in this case should've been accompanied by an absolute per capita spending chart to avoid suspicions of an academic playing with statistics to deceive readers.
There are a few other comments on this issue but they appear to be more political and less interesting to me.
Federal government spending has been increasing in absolute terms ---
But I don't have a reference for total inflation-adjusted government spending (including towns, counties, states, and public schools) in those same years. The negative growth rate in 2010 was most likely impacted heavily by steep declines in tax revenues in some states like California, New York, and New Jersey. The Federal Government has not reduced absolute spending in those same years ---
My point is that an academic journal would probably be more demanding than the NYT of data presentation and analysis.
"The endangered public company: The rise and fall of a great invention,
and why it matters," The Economist, May 19, 2012 ---
AS THIS newspaper went to press, Facebook was about to become a public company. It will be one of the biggest stockmarket flotations ever: the social-networking giant expects investors to value it at $100 billion or so. The news raises several questions, from “Is it worth that much?” to “What will it do next?” But the most intriguing question is what Facebook’s flotation tells us about the state of the public company itself.
At first glance, all is well. The public company was invented in the mid-19th century to provide the giants of the industrial age with capital. That Facebook is joining Microsoft and Google on the stockmarket suggests that public listings are performing the same miracle for the internet age. Not every 19th-century invention has weathered so well.
But look closer and the picture changes (see article). Mark Zuckerberg, Facebook’s young founder, resisted going public for as long as he could, not least because so many heads of listed companies advised him to. He is taking the plunge only because American law requires any firm with more than a certain number of shareholders to publish quarterly accounts just as if it were listed. Like Google before it, Facebook has structured itself more like a private firm than a public one: Mr Zuckerberg will keep most of the voting rights, for example.
The number of public companies has fallen dramatically over the past decade—by 38% in America since 1997 and 48% in Britain. The number of initial public offerings (IPOs) in America has declined from an average of 311 a year in 1980-2000 to 99 a year in 2001-11. Small companies, those with annual sales of less than $50m before their IPOs—have been hardest hit. In 1980-2000 an average of 165 small companies undertook IPOs in America each year. In 2001-09 that number fell to 30. Facebook will probably give the IPO market a temporary boost—several other companies are queuing up to follow its lead—but they will do little to offset the long-term decline.
Companies are like jets; the elite go private
Mr Zuckerberg will be joining a troubled club. The burden of regulation has grown heavier for public companies since the collapse of Enron in 2001. Corporate chiefs complain that the combination of fussy regulators and demanding money managers makes it impossible to focus on long-term growth. Shareholders are also angry. Their interests seldom seem to be properly aligned at public companies with those of the managers, who often waste squillions on empire-building and sumptuous perks. Shareholders are typically too dispersed to monitor the men on the spot. Attempts to solve the problem by giving managers shares have largely failed.
At the same time, alternative corporate forms are flourishing. Once “going public” was every CEO’s dream; now it is perfectly respectable to “go private”, like Burger King, Boots and countless other famous names. State-run enterprises have recovered from the wreck of communism and now include the world’s biggest mobile-phone company (China Mobile), its most successful port operator (Dubai World), its fastest-growing big airline (Emirates) and its 13 biggest oil companies.
No doubt the sluggish public equity markets have played a role in this. But these alternative corporate forms have addressed some of the structural weaknesses that once held them back. Access to capital? Private-equity firms, helped by tax breaks, and venture capitalists both have cash to spare, and there are private markets such as SecondMarket (where $1 billion-worth of shares has changed hands since 2008). Limited liability? Partners need no longer be fully liable, and firms can have as many partners as they want. Professional managers? Family firms employ them by the HBS-load and state-owned ones are no longer just sinecures for the well-connected.
Make capitalism popular again
Does all this matter? The increase in the number of corporate forms is a good thing: a varied ecosystem is more robust. But there are reasons to worry about the decline of an organisation that has spread prosperity for 150 years.
First, public companies have been central to innovation and job creation. One reason why entrepreneurs work so hard, and why venture capitalists place so many risky bets, is because they hope to make a fortune by going public. IPOs provide young firms with cash to hire new hands and disrupt established markets. The alternative is to sell themselves to established firms—hardly a recipe for creative destruction. Imagine if the fledgling Apple and Google had been bought by IBM.
Second, public companies let in daylight. They have to publish quarterly reports, hold shareholder meetings (which have grown acrimonious of late), deal with analysts and generally conduct themselves in an open manner. By contrast, private companies and family firms operate in a fog of secrecy.
Third, public companies give ordinary people a chance to invest directly in capitalism’s most important wealth-creating machines. The 20th century saw shareholding broadened, as state firms were privatised and mutual funds proliferated. But today popular capitalism is in retreat. Fewer IPOs mean fewer chances for ordinary people to put their money into a future Google. The rise of private equity and the spread of private markets are returning power to a club of privileged investors.
All this argues for a change in thinking—especially among the politicians who have heaped regulations onto Western public companies, blithely assuming that businessfolk have no choice but to go public in the long run. Many firms now go (or stay) private to avoid red tape. The result is that ever more business is conducted in the dark, with rich insiders playing a more powerful role.
Public companies built the railroads of the 19th century. They filled the world with cars and televisions and computers. They brought transparency to business life and opportunities to small investors. Because public companies sell shares to the unsophisticated, policymakers are right to regulate them more tightly than other forms of corporate organisation. But not so tightly that entrepreneurs start to dread the prospect of a public listing. The public company has long been the locomotive of capitalism. Governments should not derail it.
The Problem in a Nutshell is the Age-Old Problem of Accounting Itself ---
Inability to Value Intangibles (including the enormous Facebook audience)
"The Facebook IPO: What Went Wrong?" Knowledge@Wharton, May 23, 2012 ---
"DOES FACEBOOK STILL DESERVE
AN (Our) “A” FOR ITS FINANCIAL
REPORTING?" by Anthony H. Catanach and J. Edward Ketz, Grumpy Old Accountants,
May 23, 2012 ---
"Crony Capitalism for Intellectuals," by Luigi Zingales, Chronicle
of Higher Education, May 20, 2012 ---
Bob Jensen's threads on valuation of intangibles and contingencies ---
"High-Income Tax Returns for 2009," by Justin Bryan, IRS, Spring
Less than three percent of all taxpayers have an AGI of $200,000. Can we really depend on increasing their taxes to wipe out the deficit and the National Debt? Get real!
Taxes will never be "fair" until the middle class stops getting
so many tax breaks:
Case Studies in Gaming the Income Tax Laws ---
Democrats versus the Unions
"Rahmbo vs. Springfield: Chicago's mayor says Illinois pensions are breaking his city," The Wall Street Journal, May 29, 2012 ---
As White House chief of staff, Rahm Emanuel helped stick the country with ObamaCare, but as Chicago mayor he's trying not to let a crisis go to waste in a good way. If only lawmakers in Springfield would heed his advice on pension reforms.
Regarding benefits for public employees, Illinois makes California look tough. Many teachers don't pay a penny toward pensions but can retire at age 60 with an annuity equal to 65% of their final salary plus a 3% annual compounded cost-of-living increase. The state's pension bill, which has quadrupled in five years, consumes all $7 billion of additional revenue from last year's income and corporate tax hikes. Even so, the pension funds are projected to go bust in a decade.
Rating agencies have threatened Illinois with a multiple-notch downgrade if lawmakers don't restructure benefits in their budget due this week. The raters worry that pensions are causing the state to delay payments to creditors—Illinois has a $9 billion backlog of unpaid bills—and squeezing local budgets, thereby making municipal defaults more likely. Mr. Emanuel is warning that retirement costs could drive up Chicago's property taxes by 150% over the next three years and increase class sizes to 55 students.
Maybe the embarrassment of being compared to Greece is finally getting to Illinois Governor Pat Quinn. Last month the Democrat proposed to increase worker pension contributions by three percentage points of their pay to 11% from 8% for most state employees, raise the retirement age to 67 from 60 and modestly reduce cost-of-living raises. The changes would be voluntary, though Mr. Quinn wants to rescind retirement health benefits for workers who reject his plan.
Unions say they'll sue if lawmakers approve the Governor's reforms. They argue that reducing pensions for current workers and retirees is illegal and that the "voluntary" plan is coercive. But state and federal courts have ruled that lawmakers can tweak benefits if necessary to protect public welfare. Minnesota and Colorado defended their reductions in cost-of-living increases on such grounds.
Illinois could do the same by quoting Mr. Emanuel's press conference earlier this month advocating bolder reforms: "Costs associated with maintaining the retirement system has come to a point that you cannot do the basic things that you need to do as a city, in providing for your residents—whether that's garbage collection, recycling, areas of public safety—and maintain those obligations."
Legislators are nonetheless skittish about passing significant reforms in an election year. While they want to get credit with voters for doing something about pensions and don't want another credit downgrade, they fear union wrath.
Continued in article
"Chicago Called Most Corrupt City In Nation," CBS Chicago TV, February
14, 2012 ---
A former Chicago alderman turned political science professor/corruption fighter has found that Chicago is the most corrupt city in the country.
He cites data from the U.S. Department of Justice to prove his case. And, he says, Illinois is third-most corrupt state in the country.
University of Illinois professor Dick Simpson estimates the cost of corruption at $500 million.
It’s essentially a corruption tax on citizens who bear the cost of bad behavior (police brutality, bogus contracts, bribes, theft and ghost pay-rolling to name a few) and the costs needed to prosecute it.
“We first of all, we have a long history,” Simpson said. “The first corruption trial was in 1869 when alderman and county commissioners were convicted of rigging a contract to literally whitewash City Hall.”
Corruption, he said, is intertwined with city politics
“We have had machine politics since the Great Chicago Fire of 1871,” he said. “Machine politics breeds corruption inevitably.”
Simpson says Hong Kong and Sydney were two similarly corrupt cities that managed to change their ways. He says Chicago can too, but it will take decades.
He’ll be presenting his work before the new Chicago Ethics Task Force meeting tomorrow at City Hall.
University of Illinois at Chicago Report
on Massive Political Corruption in Chicago
"Chicago Is a 'Dark Pool Of Political Corruption'," Judicial Watch, February 22, 2010 ---
A major U.S. city long known as a hotbed of pay-to-play politics infested with clout and patronage has seen nearly 150 employees, politicians and contractors get convicted of corruption in the last five decades.
Chicago has long been distinguished for its pandemic of public corruption, but actual cumulative figures have never been offered like this. The astounding information is featured in a lengthy report published by one of Illinois’s biggest public universities.
Cook County, the nation’s second largest, has been a “dark pool of political corruption” for more than a century, according to the informative study conducted by the University of Illinois at Chicago, the city’s largest public college. The report offers a detailed history of corruption in the Windy City beginning in 1869 when county commissioners were imprisoned for rigging a contract to paint City Hall.
It’s downhill from there, with a plethora of political scandals that include 31 Chicago alderman convicted of crimes in the last 36 years and more than 140 convicted since 1970. The scams involve bribes, payoffs, padded contracts, ghost employees and whole sale subversion of the judicial system, according to the report.
Elected officials at the highest levels of city, county and state government—including prominent judges—were the perpetrators and they worked in various government locales, including the assessor’s office, the county sheriff, treasurer and the President’s Office of Employment and Training. The last to fall was renowned political bully Isaac Carothers, who just a few weeks ago pleaded guilty to federal bribery and tax charges.
In the last few years alone several dozen officials have been convicted and more than 30 indicted for taking bribes, shaking down companies for political contributions and rigging hiring. Among the convictions were fraud, violating court orders against using politics as a basis for hiring city workers and the disappearance of 840 truckloads of asphalt earmarked for city jobs.
A few months ago the city’s largest newspaper revealed that Chicago aldermen keep a secret, taxpayer-funded pot of cash (about $1.3 million) to pay family members, campaign workers and political allies for a variety of questionable jobs. The covert account has been utilized for decades by Chicago lawmakers but has escaped public scrutiny because it’s kept under wraps.
Judicial Watch has extensively investigated Chicago corruption, most recently the conflicted ties of top White House officials to the city, including Barack and Michelle Obama as well as top administration officials like Chief of Staff Rahm Emanual and Senior Advisor David Axelrod. In November Judicial Watch sued Chicago Mayor Richard Daley's office to obtain records related to the president’s failed bid to bring the Olympics to the city.
"The Democrat Who Took on the Unions: Rhode Island's treasurer Gina
Raimondo talks about how she persuaded the voting public, labor rank-and-file
and a liberal legislature to pass the most far-reaching pension reform in
decades," by Allysia Finley, The Wall Street Journal, March 23, 2012 ---
So this is Gina Raimondo? The state treasurer who single-handedly overhauled Rhode Island's pension system and has unions screaming bloody murder? I had imagined her a bit, well, bigger. If not larger than life like New Jersey Gov. Chris Christie, then at least life-size. Ms. Raimondo couldn't be much taller than five feet, which may have caused some to underestimate her. That isn't the only thing that may have surprised people.
The former venture capitalist is a Democrat, which means that she believes in government as a force for good. But "a government that doesn't work is in no one's interest," she says. "Budgets that don't balance, public programs that aren't funded, pension funds that are running out of money, schools that aren't funded—How does that help anyone? I don't really care if you're a Republican or Democrat or you want to fight about the size of government. How about a government that just works? Put your tax dollar in and get a return out the other end."
Yes, that would be nice. Unfortunately, public pensions all over the country are gobbling up more and more taxpayer money and producing nothing in return but huge deficits. It's not even certain whether employees in their 20s and 30s will retire with a pension, since many state and municipal pension systems are projected to run dry in the next two to three decades.
That included Rhode Island's system until last year, when Ms. Raimondo drove perhaps the boldest pension reform of the last decade through the state's Democratic-controlled General Assembly. The new law shifts all workers from defined-benefit pensions into hybrid plans, which include a modest annuity and a defined-contribution component. It also increases the retirement age to 67 from 62 for all workers and suspends cost-of-living adjustments for retirees until the pension system, which is only about 50% funded, reaches a more healthy state.
Several states have increased the retirement age or created a new tier of benefits for future workers, but reforms that only affect not-yet-hired employees don't save much money. A lot of "people say we've done pension reform when all they've done is tweaked something," Ms. Raimondo points out. "This problem will not go away, and I don't know what people are thinking. By the nature of the problem, it gets bigger and harder the longer you wait."
The problem was particularly acute in Rhode Island since there are more retirees collecting pensions than workers paying into the system. Plus, as Ms. Raimondo says, "it's a small state with not a lot of growth, an expensive cost structure in government, and it's not a good combination." Making the state even more expensive by raising taxes would have caused many Rhode Islanders to leave. When the now-bankrupt town of Central Falls raised property taxes to finance worker pensions, many residents fled, sending the city into a tailspin.
Because there has been little legislative or public support for raising taxes, the Ocean State has been cutting public services to pay its pension bills. A few years ago Ms. Raimondo read "an article in the paper about libraries closing and public bus service being cut nights, weekends and holidays, and I just thought it doesn't have to be this way." The story made her consider a bid for treasurer.
In the last 15 years, Ms. Raimondo, who is 40 and the mother of two children, has helped found two venture-capital firms, Village Ventures and Point Judith Capital. She was a Rhodes Scholar at Oxford and has a bachelor's in economics from Harvard and law degree from Yale. Still, serving as treasurer of the smallest state in the country probably wouldn't be the next career step for someone with such impressive credentials and ambition.
Continued in article
Bob Jensen's threads on the
sad state of governmental accounting are at
Bob Jensen's threads on political
corruption are at
Bob Jensen's Fraud Updates are at
Should Greece Exit the Euro Zone?
The adjustment to the drachma would take a minimum of 18 months and possibly longer, and during this period the real income and prestige of Greeks would slide a lot. But countries like South Korea and Indonesia came back strong after their defaults and currency depreciations due to the Asian crises of the late 1990s. I said earlier that Greece has no good choices, and exit from the euro would carry large costs. Nevertheless, I believe Greece in the long run would be better off through having the additional flexibility from controlling its own currency. My major concern is that this flexibility will not be used properly because the added flexibility through devaluations might take away the urgency of reforms in its government sector and labor markets. Greece really needs these reforms to become a more effective economy in the longer run.
Nobel Laureate Gary Becker, Becher-Posner Blog, May 20, 2012 ---
Should Greece Exit the Euro Zone?
Richard Posner, echer-Posner Blog, May 20, 2012 ---
I agree with Becker that it would make sense for Greece (from the standpoint of Greek self-interest) to replace the euro with its own currency, but my reason is slightly different; it is that it is the politically more practicable solution to Greece’s economic woes. I also suggest a caveat based on the costs to Greece of transitioning from the euro to a homegrown currency: Greece would be better off in the long run with its own currency, but it may not be able to avoid or tolerate the short-run costs.
From a narrowly economic standpoint, disregarding politics, abandoning the euro would have consequences for the Greek economy comparable to the consequences of adopting a further set of “austerity” measures, as urged by the Germans. Such measures might include laying off a large number of public sector workers, cutting public pensions, curtailing the powers of unions, cracking down on tax evasion and corruption more generally, and eliminating restrictions on competition, such as licensing requirements for new businesses and for professionals such as lawyers and accountants. The problem with enacting such austerity measures is that they are politically infeasible in the circumstances in which Greece finds itself. This is partly due to Greeks’ hatred of Germans (rooted in the brutal German conquest and occupation of Greece during World War II, and also in the disdain for Greeks that Germans feel and make little effort to disguise), but more to distrust by the Greek people of the Greek government and to the understandable resistance of the beneficiaries of Greece’s economically unsound policies (public sector workers, public pensioners, professionals protected from competition, and so forth) to give up any of their benefits.
The beauty of replacing the euro with a Greek currency is that this single, politically feasible—if not downright popular—legislative measure is likely to bring about indirectly economic results similar to those that explicit austerity measures would be likely to bring about. Euros held by Greeks, including Greek banks, would be exchanged for the new currency (the drachma—the name of the Greek currency before Greece substituted the euro), which because of Greece’s parlous economic state, and the benefits of devaluation, would be worth substantially less than the euro. One result would be that Greek exports would be substantially cheaper, and this would increase demand for them, which would stimulate an increase in their supply, leading to increased employment in the export sector of the Greek economy. The prices of imports would be higher, and this in turn would encourage substitution of domestically produced goods for imported goods; domestic production would thus increase to serve domestic as well as foreign markets, further increasing employment.
Such mechanisms make devaluation an almost surefire way of bringing an economy out of a depression by lifting emplooyment. Successful recent devaluers include Russia, South Korea, Indonesia, and Argentina. In addition, increased demand for workers in productive industries would lead to higher wages, which would draw workers from the bloated public sector, thus reducing the size of that sector (one of the goals of austerity measures). Increased demand for Greek products would also place pressure on government to relax restrictions on competition (another goal). There would also be pressure for a more rational system of taxation and public benefits. A thriving private sector, in short, would exert pressure for greater economic efficiency, just as the austerity measures that are political poison would do.
Still another consequence of abandoning the euro and of the ensuing devaluation would be a reduction in Greece’s huge public debt. Much of that debt has been financed by the European Central Bank, and one of the main aims of the austerity measures it to avoid Greece’s defaulting on that debt. With the change in currencies and ensuing devaluation, creditors would be paid in drachmas worth much less than the euros in which the debt to those creditors was denominated. The pressure for politically destabilizing short-run austerity measures would be relaxed; instead those austerity measures would unfold gradually as a consequence of an increasingly productive and prosperous private sector, a trend that would reduce the demand for government services along with incentives for tax evasion and corruption.
Default would of course reduce the ability of the Greek government to borrow at tolerable interest rates, but that would exert a further indirect pressure for efficiency and for a reduction in the bloated (and therefore expensive) public sector.
The main objections to Greece’s abandoning the euro are twofold:
First, because of the possible domino effect of that abandonment, and of the ensuing default, on other financially precarious euro nations such as Spain and Italy, Greece may be able, by threatening to leave the euro rather than actually leaving it, to obtain further substantial financial aid from the European Union, though this seems unlikely and would in any event be only a short-term solution to Greece’s economic problems. Yet the threat route seems to be the one the Greek government is on at the moment.
Second and more ominous, the transitional costs involved in switching currencies could be immense, creating its own political risks. Most of the benefits of devaluation, namely the benefits in increased exports and in substitution of domestic for imported goods, and resulting pressure for overall increases in efficiency, will not be felt immediately. But the transitional costs will be.
Suppose Greece were to announce that in three months it would be freezing transfers of capital to other countries and requiring that all euros in Greece be exchanged for drachmas at a specified rate of exchange. The reason for the three-month waiting period would be that it takes time to create (in this case, re-create) a currency, print the new currency, and price all goods and services in the new currency. (In 2003 it took the United States three months to create a new Iraqi currency.) But given such advance notice, Greek individuals and companies would forthwith transfer to other countries all the euros they could spare from immediate consumption or other expenditures, thus draining enormous wealth from the country before the switchover data prevented further capital flight. What the Greek government needs somehow to do is prepare for the changeover in currencies in secret, so that euro holders are unable to transfer their euros abroad. It is not clear that this is feasible. Devaluing an existing currency is much simpler than changing currencies, especially changing out of a foreign currency, such as the euro. Greece cannot devalue the euro.
And even if the currency changeover proceeded smoothly, the immediate effect on the prices of imported goods (immediately much higher), and on savings (immediately worth much less—the obverse of the effect of devaluation in reducing debt), would be economically destabilizing, with potentially serious political as well as economic consequences in an already depressed economy.
If the transitional costs can be reduced to a tolerable level, however, abandoning the euro seems the best bet for a Greek economic recovery. But it’s a big “if,” and the alternatives are not appealing.
Perhaps a better question is whether California should abandon the dollar zone?
"The 5th Avenue to Serfdom: Nobody thought about taking away your
Big Gulp until the government began to pay for everyone's health care," by
Holman W. Jenkins Jr., The Wall Street Journal, June 1, 2012 ---
Mike Bloomberg's move to regulate the size of sodas sold in his city illustrates why it's a good thing he is a mayor of New York and not the czar of all the Russians. American big cities tend to be one-party states to begin with, but at least their totalitarian impulses end up being merely cute because they're so easy to evade.
Under the Bloomberg plan, any cup or bottle of sugary drink larger than 16 ounces at a public venue would be verboten, beginning early next year. You'll still be able to buy as much Coke as you want in a supermarket. Go home and pour yourself a bucketful. As Mr. Bloomberg himself was the first to note, you'll also still be free to buy two medium drinks in place of today's Big Gulp at ballgames, theaters, delis and other venues where the ban would be in effect.
"New York City is not about wringing your hands; it's about doing something,'' added Mr. Bloomberg, peculiarly.
Half of the city's residents allegedly are obese or overweight—a stat seemingly belied by the ladies who lunch and the impression on the subway that New York remains one of the few places in America where people have not ballooned to supersize. But by the state's own estimate, it spends $8 billion annually treating obesity-related ailments under Medicaid, which is how 40% of city residents now get their health care.
Here is the ultimate justification for the Bloomberg soft-drink ban, not to mention his smoking ban, his transfat ban, and his unsuccessful efforts to enact a soda tax and prohibit buying high-calorie drinks with food stamps: The taxpayer is picking up the bill.
Call it the growing chattelization of the beneficiary class under government health-care programs. Bloombergism is a secular trend. Los Angeles has sought to ban new fast-food shops in neighborhoods disproportionately populated by Medicaid recipients, Utah to increase Medicaid copays for smokers, Arizona to impose a special tax on Medicaid recipients who smoke or are overweight. New York itself, with private money, some of it from Mr. Bloomberg's own pocket, has also tried the carrot approach, dangling direct payments to encourage beneficiary families to adopt healthier habits.
So perhaps the famous "broccoli" hypothetical during the Supreme Court ObamaCare debate was not so fanciful after all. It flows naturally from the state's fiscal responsibility for your health that it will try to regulate your behavior, even mandating vegetable consumption.
As we never tire of pointing out, the unlikely roots are found in the 1998 tobacco settlement. Those cases weren't filed on behalf of smokers, whom courts ruled repeatedly accepted the risks of smoking. Under an even more ancient principle, known as subrogation, courts long held that if a customer doesn't have a case against a product that injured him, his insurer doesn't have a case either.
In 1994, Florida legislators bulldozed these principles so the state Medicaid agency could sue cigarette makers for the cost of treating sick smokers. When the state is the insurer and can change the rules to suit itself, after all, why brook any limitation on its ability to pass the buck? Law is a convenience for our rulers only when it gets them off the political hook of having to mediate purely private disputes between their cranky subjects. The one thing the state has no interest in using the law to restrain is itself.
Yes, we're still a long way from tyranny in America. The right to smoke in a bar; the right to snarf a transfat-soaked french fry; the right to lug a 32 oz. tub of Grape Nehi into the movie theater—these are not precious rights. But it's also true that nobody thought of taking them away until the government itself became responsible for our runaway health-care spending.
Continued in article
Ernst & Young's annual outside audit of the HHS
balance sheet last November was considered a triumph because several material
weaknesses were downgraded merely to significant deficiencies. But on a
"day-to-day or even monthly basis" HHS cannot accurately track its spending,
according to the audit. The agency is in violation of numerous federal
accounting rules written specifically for the bureaucracy, to say nothing of the
financial reporting required of public companies.
"Fannie Med: Health and Human Services gets into the venture capital game," The Wall Street Journal, June 4, 2012 ---
Perhaps you thought that the Affordable Care Act is all about making insurance more affordable. Too bad no one told Americans that the law also turned the Health and Human Services Department into a giant venture capital investor for health care. This won't turn out well.
Awash in ObamaCare dollars, HHS has a growing investment portfolio that includes everything from new insurance companies to health-care start-ups to information technology. Secretary Kathleen Sebelius is rushing out loans and subsidies like nobody's business in case the Supreme Court overturns the law or Mitt Romney wins.
"We're moving forward with implementing this law, including moving forward with this very important commitment by the President, by the Administration, to community health centers and the people they serve," said senior White House aide Cecelia Munoz on a recent conference call with reporters. She was referring to $728 million in seed money for new clinics that HHS dispensed last month.
HHS already makes more grants than all other agencies combined, and it is the purchaser of health care for about one of three Americans via Medicare, Medicaid or both. The problem is that HHS spends its money—$788 billion for entitlements in 2012 and another $78 billion to run HHS's 300-odd programs—so badly.
Ernst & Young's annual outside audit of the HHS balance sheet last November was considered a triumph because several material weaknesses were downgraded merely to significant deficiencies. But on a "day-to-day or even monthly basis" HHS cannot accurately track its spending, according to the audit. The agency is in violation of numerous federal accounting rules written specifically for the bureaucracy, to say nothing of the financial reporting required of public companies.
The HHS inspector general revealed this year that his team can barely monitor HHS because its staff is too busy chasing the criminals exploiting HHS's incompetence. Experts disagree about how much is stolen from taxpayers through entitlement fraud—the Government Accountability Office puts it at $48 billion annually—but one sign of the problem is that Medicare allows doctors (or "doctors") to register for billing privileges as "other."
One particular ObamaCare boondoggle that needs fly-specking is the HHS decision to finance nonprofit insurance companies with up to $7.25 billion in ultra-low-cost loans. These co-ops were a consolation prize for liberals after Democratic opposition killed the government-run public option, and the co-ops are supposed to be managed by and for consumers. But it turns out that running an insurance company is hard for amateurs who can't attract private financing.
HHS officially estimates that the default rate on the loans will hit between 35% and 40%, which would be bad enough. But White House budget documents show that HHS expects to lose $3.1 billion of the $3.4 billion appropriated so far—which implies a default rate of 91%. The lack of accountability to shareholders or capital markets may help explain this propensity for failure.
Another problem is the way HHS chose to structure the co-op loans. To protect the insured, states require insurers to maintain reserves in the event they go bankrupt—and debts that are supposed to be repaid are viewed as liabilities. To end run these solvency requirements, HHS is issuing "surplus notes" that subordinate the taxpayer to everyone else for repayment if a co-op fails.
That seems likely, given the challenges of building a provider network and attracting members when expertise in such matters is legally prohibited under HHS rules. Any organization that wrote insurance policies prior to 2009—as it were, the pre-existing insurers of the Bush era—is barred from applying for loans or any significant role in the operations of a co-op. So the co-ops can't benefit from the business experience that might give them a chance to succeed.
Continued in article
Bob Jensen's threads on the sad state of governmental accounting ---
Bob Jensen's threads on health care ---
Alan Dershowitz --- http://en.wikipedia.org/wiki/Alan_Dershowitz
How liable is a university for personal opinions of faculty expressed to the media?
"Dershowitz: Zimmerman Prosecutor Threatening to Sue Harvard for My
Criticism," by Alan Dershowitz, Newsmax, June 2012 ---
I really do not want to get into any debate over the Zimmerman case. However, this is a rather interesting sidebar concerning academic freedom.
There are both AAUP rules and policies in most universities that discourage engaging politics in courses where politics are not part of the curriculum plan such as the debate over the use of drone aircraft against terrorists in Yemen when teaching a basic accounting or calculus course. However, nothing to my knowledge prevents any professor from discussing politics outside the classroom even though fund raisers for the universities may be unhappy with certain outbursts of faculty to the media.
Generally, responsible professors will make an opening statement that the
views expressed to the media are not necessarily the views of their employers.
This probably comes as some relief to the employers of The Grumpy Old Accounting
This essay reflects the opinion of the authors and not necessarily the opinions of The Pennsylvania State University, The American College, or Villanova University.
However, I doubt that something similar to the above statement would've sufficed to quell Florida State Attorney Angela Corey's outburst toward Harvard University. It would really be sensational if she lived up to her threats to file a lawsuit against Harvard University.
I once spent a year with Alan in a think tank. By his own admission he's probably best described as more of a Brooklyn-born pit bull than a library scholar. I have no doubt he's thrilled that Angela Corey was dumb enough to threaten to sue Harvard University. He'd be overjoyed if she sued him personally with or without Harvard as a co-defendant.
Alan Dershowitz --- http://en.wikipedia.org/wiki/Alan_Dershowitz
What is the difference between political/religious indoctrination versus education?
"Freedom in the Classroom (2007)," AAUP ---
The report that follows, prepared by a subcommittee of the , was approved in June 2007 by the committee for publication. Comments are welcome and should be sent to the Washington office by ground mail or e-mail.
The 1940 Statement of Principles on Academic Freedom and Tenure affirms that "teachers are entitled to freedom in the classroom in discussing their subject." This affirmation was meant to codify understandings of academic freedom commonly accepted in 1940. In recent years these understandings have become controversial. Private groups have sought to regulate classroom instruction, advocating the adoption of statutes that would prohibit teachers from challenging deeply held student beliefs or that would require professors to maintain "diversity" or "balance" in their teaching.1 Committee A has established this subcommittee to assess arguments made in support of recent legislative efforts in this area.
II. The Contemporary Criticism
Critics charge that the professoriate is abusing the classroom in four particular ways: (1) instructors "indoctrinate" rather than educate; (2) instructors fail fairly to present conflicting views on contentious subjects, thereby depriving students of educationally essential "diversity" or "balance"; (3) instructors are intolerant of students' religious, political, or socioeconomic views, thereby creating a hostile atmosphere inimical to learning; and (4) instructors persistently interject material, especially of a political or ideological character, irrelevant to the subject of instruction. We address each of these charges in turn.
A. "Education, Not Indoctrination!"
The caption is taken from a statement of the Committee for a Better North Carolina, which in 2003 condemned the assignment of Barbara Ehrenreich's Nickel and Dimed: On (Not) Getting By in America to incoming students at the University of North Carolina at Chapel Hill. We agree, of course, that indoctrination is to be avoided, but the question is how education is to be distinguished from indoctrination.
It is not indoctrination for professors to expect students to comprehend ideas and apply knowledge that is accepted within a relevant discipline. For example, it is not indoctrination for professors of biology to require students to understand principles of evolution; indeed, it would be a dereliction of professional responsibility to fail to do so. Students must remain free to question generally accepted beliefs if they can do so, in the words of the 1915 Declaration of Principles on Academic Freedom and Academic Tenure, using "a scholar's method and . . . in a scholar's spirit." But professors of logic may insist that students accept the logical validity of the syllogism, and professors of astronomy may insist that students accept the proposition that the earth orbits around the sun, unless in either case students have good logical or astronomical grounds to differ.
This process is instruction, not indoctrination. As John Dewey pointed out a century ago, the methods by which these particular conclusions have been drawn have become largely uncontested.3 Dewey believed that it was an abuse of "freedom in the classroom" for an instructor to "promulgate as truth ideas or opinions which have not been tested," that is, which have not been accepted as true within a discipline.4
Dewey's point suggests that indoctrination occurs whenever an instructor insists that students accept as truth propositions that are in fact professionally contestable. If an instructor advances such propositions dogmatically, without allowing students to challenge their validity or advance alternative understandings, the instructor stands guilty of indoctrination.
Under this test, however, the Committee for a Better North Carolina could not possibly have known whether the assignment of Ehrenreich's Nickel and Dimed, which explores the economic difficulties facing low-wage workers in America, was an example of indoctrination or education. It is fundamental error to assume that the assignment of teaching materials constitutes their endorsement. An instructor who assigns a book no more endorses what it has to say than does the university library that acquires it. Assignment of a book attests only to the judgment that the work is worthy of discussion; it says nothing about the kind of discussion that the work will provoke or inspire. Classroom discussion of Nickel and Dimed in North Carolina could have been conducted in a spirit of critical evaluation, or in an effort to understand the book in the tradition of American muckraking, or in an attempt to provoke students to ask deeper questions about their own ideas of poverty and class.
Even if the University of North Carolina's assignment of Nickel and Dimed were to be understood as in some sense endorsing the book, moreover, the charge of indoctrination would still be misplaced. Instructors indoctrinate when they teach particular propositions as dogmatically true. It is not indoctrination when, as a result of their research and study, instructors assert to their students that in their view particular propositions are true, even if these propositions are controversial within a discipline. It is not indoctrination for an economist to say to his students that in his view the creation of markets is the most effective means for promoting growth in underdeveloped nations, or for a biologist to assert her belief that evolution occurs through punctuated equilibriums rather than through continuous processes.
Indoctrination occurs when instructors dogmatically insist on the truth of such propositions by refusing to accord their students the opportunity to contest them. Indoctrination occurs when instructors assert such propositions in ways that prevent students from expressing disagreement. Vigorously to assert a proposition or a viewpoint, however controversial, is to engage in argumentation and discussion-an engagement that lies at the core of academic freedom. Such engagement is essential if students are to acquire skills of critical independence. The essence of higher education does not lie in the passive transmission of knowledge but in the inculcation of a mature independence of mind.
"Freedom in the classroom" is ultimately connected to freedom of research and publication. Freedom of research and publication is grounded in the exercise of professional expertise. Investigators are held to professional standards so that the modern university can serve as "an intellectual experiment station, where new ideas may germinate and where their fruit, though still distasteful to the community as a whole, may be allowed to ripen until finally, perchance, it may become part of the accepted intellectual food of the nation or of the world."5 Academic freedom therefore includes the freedom to publish research results on controversial questions of public policy. A faculty committee at the University of Montana put it well in 1918:
If professors of economics and politics can discuss none of these questions, their departments should not be permitted to continue in the University, for the very fact that we have faculty employed in these subjects implies that they must make a study of them and give the result of their investigations to the people of the state. It does not follow that their conclusions must be accepted, for the opinions of members of the faculty are worthy of consideration only so far as they are supported by indisputable facts and sound logic. In case their arguments are weak, the weakness can be detected and exposed.6
It follows that if an instructor has formed an opinion on a controversial question in adherence to scholarly standards of professional care, it is as much an exercise of academic freedom to test those opinions before students as it is to present them to the public at large. Josiah Royce stressed this point more than a century ago in response to the assertion of the regental right to control what is said in the classroom:
Advanced instruction aims to teach the opinions of an honest and competent faculty member upon more or less doubtful questions. . . . The advanced instructor . . .has to be responsible not only for his manner of presenting his doctrines, but for the doctrines themselves, which are not admitted dogmas, but ought to be his personal opinions. But responsibility and freedom are correlatives. If you force me to teach such and such dogmas, then you must be responsible for them, not I. I am your mouthpiece. But if I am to be responsible for what I say, then I must be free to say just what I think best.7
Some instructors may prefer to dissect dispassionately every question presented, maintaining a studied agnosticism toward them all. Some may prefer to expound a preferred theory. Dewey regarded the choice of teaching style as a "personal" matter. One style may resonate better with some students than with others. Much depends on the "chemistry" of a particular class, as all seasoned instructors recognize. The fundamental point is that freedom in the classroom applies as much to controversial opinions as to studied agnosticism.8 So long as opinion and interpretation are not advanced and insisted upon as dogmatic truth, the style of presentation should be at the discretion of the instructor.
Current charges of pedagogical abuse allege that instruction in institutions of higher education fails to exhibit a proper balance. It is said that instructors introduce political or ideological bias in their courses by neglecting to expose their students to contrary views or by failing to give students a full and fair accounting of competing points of view.
We note at the outset that in many institutions the contents of courses are subject to collegial and institutional oversight and control; even the text of course descriptions may be subject to approval. Curriculum committees typically supervise course offerings to ensure their fit with programmatic goals and their compatibility with larger educational ends (like course sequencing).9 Although instructors are ethically obligated to follow approved curricular guidelines, "freedom in the classroom" affords instructors wide latitude to decide how to approach a subject, how best to present and explore the material, and so forth. An instructor in a course in English Romantic poetry is free to assign the poetry of the Harlem Renaissance so long as the course remains focused more on John Keats than on Countee Cullen.
To make a valid charge that instruction lacks balance is essentially to charge that the instructor fails to cover material that, under the pertinent standards of a discipline, is essential. There may be facts, theories, and models, particularly in the sciences, that are so intrinsically intertwined with the current state of a discipline that it would be unprofessional to slight or ignore them. One cannot now teach biology without reference to evolution; one cannot teach physical geology without reference to plate tectonics; one cannot teach particle physics without reference to quantum theory. There is, however, a large universe of facts, theories, and models that are arguably relevant to a subject of instruction but that need not be taught. Assessments of George Eliot's novel Daniel Deronda might be relevant to a course on her Middlemarch, but it is not a dereliction of professional standards to fail to discuss Daniel Deronda in class. What facts, theories, and models an instructor chooses to bring into the classroom depends upon the instructor's sense of pedagogical dynamics and purpose.
To urge that instruction be "balanced" is to urge that an instructor's discretion about what to teach be restricted. But the nature of this proposed restriction, when carefully considered, is fatally ambiguous. Stated most abstractly, the charge of lack of balance evokes a seeming ideal of neutrality. The notion appears to be that an instructor should impartially engage all potentially relevant points of view. But this ideal is chimerical. No coherent principle of neutrality would require an instructor in a class on constitutional democracy to offer equal time to "competing" visions of communist totalitarianism or Nazi fascism. There is always a potentially infinite number of competing perspectives that can arguably be deemed relevant to an instructor's subject or perspective, whatever that subject or perspective might be. It follows that the very idea of balance and neutrality, stated in the abstract, is close to incoherent.
The ideal of balance makes sense only in light of an instructor's obligation to present all aspects of a subject matter that professional standards would require to be presented. If a professor of molecular biology has an idiosyncratic theory that AIDS is not caused by a retrovirus, professional standards may require that the dominant contrary perspective be presented. Understood in this way, the ideal of balance does not depend on a generic notion of neutrality, but instead on how particular ideas are embedded in specific disciplines. This is a coherent idea of balance, and it suggests that balance is not a principle that can be invoked in the abstract but is instead a standard whose content must be determined within a specific field of relevant disciplinary knowledge.
There is another sense in which critics of higher education use the idea of "balance" to circle back to the question of indoctrination. It is hard to escape the impression that contemporary calls for "balance" imagine that an instructor's "freedom in the classroom" is merely the freedom to offer a neutral summary of the current state of a discipline, abjuring controversial and individual views. But this is to misunderstand the nature of higher education. More than fifty years ago, Edward C. Kirkland, a former chair of the AAUP's Committee A on Academic Freedom and Tenure, observed that departments of economics often housed professors of sharply conflicting views—views that simply could not be reconciled. It seemed to follow that some of them had to be teaching error. But, he concluded,
Colleges and universities do not possess or teach the whole truth. They are engaged in the quest for truth. For that reason their scholars must be free to examine and test all facts and ideas, the unpleasant, the distasteful, and dangerous ones, and even those regarded as erroneous by a majority of their learned colleagues.10
If scholars must be free to examine and test, they must also be free to explain and defend their results, and they must be free to do so as much before their students as before their colleagues or the public at large. That is the meaning of "freedom in the classroom." To charge that university and college instruction lacks balance when it does more than merely summarize contemporary debates is fundamentally to misconstrue the nature of higher learning, which expects students to engage with the ideas of their professors. Instructors should not dogmatically teach their ideas as truth; they should not indoctrinate. But they can expect their students to respond to their ideas and their research. As students complete different courses taught by different professors, it is to be hoped that they will acquire the desire and capacity for independent thinking.
C. Hostile Learning Environment
Contemporary critics of the academy have begun to deploy the concept of a "hostile learning environment," which was first developed in the context of antidiscrimination law. The concept has been used in universities to support speech codes that suppress expression deemed offensive to racial, ethnic, or other minorities. The concept is now being used in an attempt to suppress expression deemed offensive on religious or political grounds.
The statement On Freedom of Expression and Campus Speech Codes, adopted as Association policy in1994, acknowledges the need to "foster an atmosphere respectful of and welcoming to all persons." An instructor may not harass a student nor act on an invidiously discriminatory ground toward a student, in class or elsewhere. It is a breach of professional ethics for an instructor to hold a student up to obloquy or ridicule in class for advancing an idea grounded in religion, whether it is creationism or the geocentric theory of the solar system.11 It would be equally improper for an instructor to hold a student up to obloquy or ridicule for an idea grounded in politics, or anything else.
But the current application of the idea of a "hostile learning environment" to the pedagogical context of higher education presupposes much more than blatant disrespect or harassment. It assumes that students have a right not to have their most cherished beliefs challenged. This assumption contradicts the central purpose of higher education, which is to challenge students to think hard about their own perspectives, whatever those might be. It is neither harassment nor discriminatory treatment of a student to hold up to close criticism an idea or viewpoint the student has posited or advanced. Ideas that are germane to a subject under discussion in a classroom cannot be censored because a student with particular religious or political beliefs might be offended. Instruction cannot proceed in the atmosphere of fear that would be produced were a teacher to become subject to administrative sanction based upon the idiosyncratic reaction of one or more students.12 This would create a classroom environment inimical to the free and vigorous exchange of ideas necessary for teaching and learning in higher education.
D. Persistent Irrelevance
The 1940 Statement of Principles provides that teachers "should be careful not to introduce into their teaching controversial matter which has no relation to their subject." The origin of this admonition lies in the concern of the authors of the 1925 Conference Statement on Academic Freedom and Tenure for immature youth or, more accurately, a concern by the administrators of small and often denominational colleges for potential adverse parental reaction to their children's exposure to thought contrary to the conventional pieties.13 The admonition was reconsidered and addressed in an interpretive comment to the 1940 Statement, appended by the joint drafting organizations in 1970:
The intent of this statement is not to discourage what is "controversial." Controversy is at the heart of the free academic inquiry which the entire statement is designed to foster. The passage serves to underscore the need for teachers to avoid persistently intruding material which has no relation to their subject.
The 1940 Statement should not be interpreted as excluding controversial matter from the classroom; any such exclusion would be contrary to the essence of higher education. The statement should be interpreted as excluding "irrelevant" matter, whether controversial or not.
The question, therefore, is how to determine whether material is "irrelevant" to classroom discussion. In some contexts, the meaning of "irrelevance" is clear. Students would have every right to complain if an instructor in ancient history dwelled on internecine conflict in her department or if an instructor in American literature engaged in lengthy digressions on his personal life. But such irrelevance is not the gravamen of the contemporary complaint.
The group calling itself Students for Academic Freedom (SAF), for example, has advised students that "your professor should not be making statements . . . about George Bush, if the class is not on contemporary American presidents, presidential administrations or some similar subject."14 This advice presupposes that the distinction between "relevant" and "irrelevant" material is to be determined strictly by reference to the wording of a course description. Under this view, current events or personages are beyond the pale unless a course is specifically about them. But this interpretation of "relevance" is inconsistent with the nature of higher education, in which "all knowledge can be connected to all other knowledge."15 Whether material is relevant to a better understanding of a subject cannot be determined merely by looking at a course description.
Continued in article
Liberal Bias in the Media and in Academe ---
"We Are the 119% MSNBC: My Schadenfreude Now Blankets Cable,"
by James Taranto, The Wall Street Journal, June 6, 2012 ---
Last night we got home from a dinner and discovered something wonderful when we switched on the television. There's an entire cable network called MSNBC devoted to the entertainment of conservatives. Apparently all they have on this station is disconsolate lefties 24/7. We assume it's part of the Fox empire. Roger Ailes is a genius, isn't he?
A guy named Lawrence O'Donnell hosts a show called "The Last Word," a misleading name, since here we are getting in a latter word. Even so, the show is awesome. O'Donnell cracked us up when he opened yesterday's show: "Tonight, the really big winner in Wisconsin's recall election is--President Obama." Later he had one of his fellow hosts, Rachel Maddow, on as a guest, and she agreed: "It's going to be hard to see this as a bad night for Obama," she declared, citing the president's "11-point margin of theoretical victory . . . over Mitt Romney." (Charlie Spiering has a video montage.)
Theoretically, Obama was on the side of the government employee unions that were behind the unsuccessful attempt to oust Gov. Scott Walker, who last year signed legislation abolishing most of their corrupt "collective bargaining" arrangements. "Understand this," the future president declared in 2007: "If American workers are being denied their right to organize and collectively bargain when I'm in the White House, I'll put on a comfortable pair of shoes myself, I'll walk on that picket line with you as president of the United States of America. Because workers deserve to know that somebody is standing in their corner."
In practice, Obama tweeted "present": "It's Election Day in Wisconsin tomorrow, and I'm standing by Tom Barrett. He'd make an outstanding governor." But he was only theoretically present. Not only was he standing, not walking; he was standing someplace far from Wisconsin. In fact, for all we know he was sitting at the time. We can't be sure he was even wearing shoes.
Even the sad clowns of MSNBC couldn't deny the election was a big loss for the man who was standing nowhere near Obama. Milwaukee's Mayor Tom Barrett received just 46% of the vote to Walker's 53%, slightly widening Walker's margin of victory over Barrett in 2010, the year that Middle America gave Republicans their biggest landslide perhaps in living memory.
This despite what the Boston Globe's Derrick Z. Jackson calls "huge turnout in Wisconsin's liberal strongholds," especially Milwaukee and Dane counties. The latter includes Madison, the ultralefty capital, where turnout was as high as 119% by some accounts.
That mathematically dubious figure was possible because Wisconsin allows same-day voter registration, so a 119% turnout would mean that the number of voters countywide was 19% higher than the number who were registered at the beginning of the day. In any case, Politico reported later that the actual projected turnout in Madison was "on a pace for 96 percent, not 119 percent."
Jackson concluded his column with a quote from an Amy Noble, who describes herself as "a social worker who works with the homeless." She says: "What Walker did, it was as if I touched something radioactive and it turned me into the Hulk or Spider Man. That's how strongly I feel."
So how did Wisconsin become a big victory for Obama, who wasn't even on the ballot and avoided the state like kryptonite? "I'm not going to sugarcoat it," blogs Markos "Kos" Moulitsas, the Angry Left's answer to the Htoo twins, who then proceeds to do just that:
This is what the exit polls tell us:
If the presidential election were today, for whom would you vote?
Barack Obama 51
Mitt Romney 44
A seven-point lead, Obama over 50 percent, despite lacking participation of one of Obama's biggest constituencies (young voters), does not suggest a particularly close race this November.
Hmm, somehow between Maddow last night and Kos this morning Obama's 11-point theoretical victory narrowed to 7 points. Presumably this was because the raw exit poll numbers, which reportedly showed a 50-50 split between Walker and Barrett, were massaged to bring them into line with the actual results.
In any case, it is hardly promising for Obama that his supporters are boasting that he has a single-digit lead in a state the Democrats have carried in the past six presidential elections, and where his 2008 margin of victory was 13 points. What's more, Politico reports that "Obama campaign manager Jim Messina listed Wisconsin as a toss-up in a video message to supporters this week." Maddow and Kos need to set him straight.
Another Politico report quotes a memo from Reince Priebus, chairman of the Republican National Committee (and past chairman of the Wisconsin GOP), who is, unsurprisingly, bullish on Romney's chances. "In the memo--shared early with POLITICO--Priebus writes that the struggle in Wisconsin allowed Republicans to prime a first-rate operation in the state for the November election."
Priebus's Democratic counterpart, the unwieldily named Debbie Wasserman Schultz, tweeted: "Despite the disappointing outcome, #WIrecall effort sent Scott Walker a message that his brand of divisive politics is offensive & wrong." Either this is a complete non sequitur or Wasserman Schultz has an IQ of about 400 and is capable of making a logical argument far beyond the ability of ordinary geniuses to comprehend.
The New York Times's Michael Shear, in a blog post yesterday morning, tried a different tack to dismiss a Walker victory: "The recall in Wisconsin was born of a very specific local issue: union rights. And while that issue is not unique to the Badger State, it's certainly not among the top concerns of voters in the presidential campaign." Priebus's response, in Politico's words, is that "the results added up to a vote of confidence in the GOP's 2012 message on spending restraint and the size of government."
The AFL-CIO sent out a victory email, and not on behalf of Obama. "Last night, Wisconsin took back its Senate," declared the email, signed by the labor federation's president, Richard Trumka. What he means is that the Democrats took back a majority in the Wisconsin Senate, and that actually looks to be true: Although the vote was close and a recount is possible, the donks are leading in one Senate recall race, enough to give them a 17-16 majority.
But this silver lining is a mere sliver. As we noted yesterday, the Senate doesn't meet until next year unless Gov. Walker calls a special session. By that time, 16 senators--10 Democrats and 6 Republicans--will have faced the voters, and in districts redrawn by a GOP legislature. Oh well, maybe the Dems can hold the Senate on Obama's theoretical coattails.
One left-wing complaint we'll hear a lot is that Walker's victory proves free speech is evil. The Washington Post's Greg Sargent calls the result "a major wake-up call for the left, Democrats, and unions about the true nature of the new, post-Citizens United political landscape."
First of all, Sargent placed this "wake-up call" at 11:30 at night. Second, Citizens United, which overturned federal laws censoring political speech, did not change Wisconsin's laws. The ruling did affirm that the speech Wisconsin would have permitted anyway was protected by the First Amendment, but that applies to unions as well as individuals and corporations. Anyway, it's telling that the left is convinced it can't win elections without censorship.
Walter Shapiro of Yahoo! News tries to argue that Walker's victory is a Pyrrhic one:
Walker's unquestioned triumph Tuesday in beating back the unions and the Democrats may vault him onto Mitt Romney's vice-presidential list. But in truth, there is little honor for Walker in being only the third governor [to] face a recall election--and the first to survive one--since the Progressives came up with this drastic remedy for bad governance more than a century ago. For all Walker's glib talk about leadership, a politician is doing things wrong when he becomes so polarizing a figure that he has to spend nearly $50 million to avoid being booted out of office after just 19 months.
Walker's hubristic overreach brings to mind Rahm Emanuel's assertion, during the 2008 transition period after President Barack Obama's election, "No crisis should go to waste."
Shapiro goes on to liken Walker's "hubristic overreach" to ObamaCare. But there's a crucial difference: The recall's failure has erased any doubt that Wisconsin voters support Walker's reform. By contrast, voters have rejected ObamaCare in a variety of ways, including symbolic statewide referendums and the 2010 election that swept Walker and scores of other Republicans into power two years after some had pronounced a permanent Democratic majority.
There's no provision for recalling a president, of course, but Obama will face the voters five months from today. He'll need more than a "theoretical victory."
On the other hand, there is one undisputed bit of good news for the Democrats in all this: Nobody is talking about Elizabeth Warren.
Anything You Can Do, I Can Do Better?
"We men just make bad decisions. We can't help it. We're men. Women, on the other hand, do almost everything better. We've known this intuitively for a long time. If you didn't, just ask your wife or your mother."--David Weidner, MarketWatch.com, June 14, 2011 "Woman Slaps Barrett for Conceding"--video title, WISN-TV website (Milwaukee), June 6, 2012
But It's All Right Now, in Fact He's Aghast "Former President Bill Clinton is 'aghast' by chatter suggesting that he's hurting President Obama's reelection efforts with at times complimentary comments about Mitt Romney," Politico reports:
"I'm trying to help the president win reelection because I think he's done a better job than most people know," Clinton added. "I think the health care bill is a step in the right direction, not the wrong direction."
Clinton said he's been surprised by the controversy his comments about Romney's business career have stirred up.
"I've been aghast by all this flutter about it," he said. "I don't think I should have to criticize Romney personally to disagree with his politics."
CNBC, meanwhile, reports that Clinton "urged Congress to extend all the tax cuts due to expire at the end of the year." Those would be the Bush tax cuts--the ones that were supposed to expire at the end of 2010, and whose extension over Obama's objections occasioned a Clinton White House press conference.
Your Tax Dollars at Work "Vice President Joe Biden said Tuesday that his wife, as well as the wife of President Barack Obama, would have had 'no chance' in life had it not been for government help," reports the Washington Free Beacon, which quotes the vice presidential pool report:
Vice President Biden met with leaders from 10 colleges this afternoon to kick off a new effort to increase transparency in financial aid packages. . . .
"I know, literally, Barack and I talk about it. Neither one of us would have had any shot," Biden said. "The same with our wives. Both wives are smarter than both of us. Literally, these very accomplished women would not have any chance without some help."
Some will find this a powerful argument against government education spending.
If a Tree Falls on CNN, Does It Make a Sound? A reader calls our attention to this exchange on "The Situation Room" yesterday between host Wolf Blitzer and guests Donna Brazile and Alice Stewart, respectively a Democratic and a Republican "strategist":
Blitzer: But there is no doubt that if you compare what's happening right now the economy where it existed at the end of 2008. It's a lot better now than it was then. The country was on the verge of a depression at that point.
Brazile: The Republicans get upset--
Stewart: And don't tell it to the 23 million Americans who are out of work.
Brazile: And don't tell it to the millions of Americans who know they're going back to the previous policy put us back in that ditch.
Don't worry, ladies, it's only CNN. Blitzer is lucky if he told it to hundreds of Americans.
Metaphor Alert "Public sector unions have reached their high water mark. Let the cleanup begin as the red ink recedes. . . . The governor's recall election victory sends a clear message that should resonate around the nation: The fiscal cancer devouring state budgets has a cure, and he has found it. The costly defeat for the entrenched union interests that tried to oust Walker in retribution for challenging their power was marked by President Obama's refusal to lend his weight to the campaign for fear of being stained by defeat."--Bill Frezza, Forbes.com, June 5
Out on a Limb
"Wisconsin Vote Underscores Challenges for Democrats"--headline, New York Times website, June 6 "Michael Bloomberg's Soda Ban Won't Solve the Obesity Problem"--headline, U.S. News & World Report website, June 5
We Blame George W. Bush "Why Do I Keep Getting Urinary Tract Infections?"--headline, Globe and Mail (Toronto), June 5
Not Smack, Though "Governor's Victory Deals Costly Blow to Organized Labor"--headline, WSJ.com, June 5
We Cooled on Obama Before Cooling on Obama Was Cool "Jackson Browne Cools on Obama"--headline, Politico.com, June 5
With DNC in Mind, City Bans Carrying Urine, Feces
"John McCain Demands Leak Investigation"--headline, Politico.com, June 5 "Democrat Leader: DNC in Charlotte Is No Accident"--headline, Charlotte Observer, June 6 "WI Union Leader: 'We're Not Going to Pull a Blanket Over Our Head and Pee in Our Pajamas""--headline, MarathonPundit.com, June 5
Everyone Poops "Us Confirm Elimination of al-Qaeda No. 2"--headline, Agenzia Giornalistica Italia, June 5
Shortest Books Ever Written "What the Ayatollah Gets Right"--headline, Commentary website, June 5
'Put Up Your Hands and Show Me' "Police in Manalapan Hunt for Car Thief With Strange MO"--headline, WCBS-TV website (New York), June 4
Continued in article
One of the real dangers of capitalism is that it is self-defeating when it evolves into oligopoly and monopoly
"Google's Monopoly and Internet Freedom When one company controls
nearly 82% of the global search market and 98% of the mobile search market, it's
time for serious changes," by Jeffrey Katz, The Wall Street Journal, June
7, 2012 ---
It's a position all business leaders would love to find themselves in—a massive IPO, dominance in the marketplace, and a blank slate from policy makers to do practically anything they please.
Google has enjoyed this unrivaled position for nearly a decade. It is the most popular search engine in the world, controlling nearly 82% of the global search market and 98% of the mobile search market. Its annual revenue is larger than the economies of the world's 28 poorest countries combined. And its closest competitor, Bing, is so far behind in both market share and revenue that Google has become, effectively, a monopoly.
The company has used its position to bend the rules to help maintain its online supremacy, including the use of sophisticated algorithms weighted in favor of its own products and services at the expense of search results that are truly most relevant.
Google is so powerful that the European Union recently announced that the company must alter its business practices or face charges for violating antitrust law.
At my company, Nextag, a comparison shopping site for products and services, we regularly analyze the level of search traffic we get from Google. It's easy to see when Google makes changes to its algorithms that effectively punish its competitors, including us. Our data, which we shared with the Senate Judiciary Committee on Sept. 21, 2011, shows without a doubt that Google has stacked the deck. And as a result, it has shifted from a true search site into a commerce site—a commerce site whose search algorithm favors products and services from Google and those from companies able to spend the most on advertising.
Most people believe that when they type "convection microwave oven" or "biking shorts" into Google, they will receive a list of the most relevant sites. Not true. That's how Google used to work. Now, when someone searches for these items, the most prominent results are displayed because companies paid Google for that privilege. In addition, Google often uses its prime real estate to promote its own (often less relevant and inferior) products and services, prohibiting companies from buying its best advertisements.
As a result, by controlling which companies, organizations and causes get exposure, Google has become a brand killer. If Google pushes a merchant or company to page three of its search results—let alone page 40—it is life altering. This "cloak of invisibility" for less-favored brands flies in the face of Google's original mission to "organize the world's information"—or at least organize it in a manner that is in the best interest of consumers, rather than of Google.
As the CEO of a price-comparison company that benefits from Google's search results, I openly admit that we—along with everyone else in the industry—have been impacted by these changes to Google's search platform. In the past, we have benefited precisely because we've provided one of the best shopping sites on the Web—and Web traffic from Google used to follow accordingly. Google highlighted our services in search results over their own, because our services were better—and they still are. But Google's latest changes are clearly no longer about helping users.
We're at a pivotal moment. Google has spent years trying to monopolize every avenue through which a company can reach users online—whether it is through search, advertising, email, mobile devices or browsers. But now that European Competition Commissioner Joaquín Almunia has given Google a July 2 deadline to respond to the EU's antitrust concerns, let's hope the company's directors wake up and take corrective action for the sake of Internet freedom.
If I were Mr. Almunia, here's what I'd be pushing for:
First, Google needs to be transparent about how its search engine operates. Today Google hides behind forked-tongued gobbledygook that is meant to obfuscate. Google should disclose, clearly and in plain English, when advertisers receive better placement in search results and when a result is a Google-owned property. And when a competitor's service is the best response for the user, Google should highlight it instead of its own service.
Second, Google should provide consumers with access to the unbiased search results it was once known for—regardless of which company or organization owns the service. It should also allow users to reduce the number of ads shown or incorporate a user's preferred services in search results.
And third, Google should grant all companies equal access to advertising opportunities regardless of whether they are considered a competitor. Given its market share and public commitment to providing users with the most relevant, helpful information, Google has an obligation to provide a level playing field.
Continued in article
"Honey, I Shrunk the Entitlement: Another budget ruse
that disguises ObamaCare's real costs," The Wall Street Journal, June
8, 2012 ---
One detail revealed by Tuesday's debt forecast is that there's another budget gimmick that makes it seem as if ObamaCare costs less than it really will, and the ruse deserves more scrutiny than it's received. Who was it who said we need to pass the bill to find out what's in it?
The Congressional Budget Office explained clearly for the first time that the Affordable Care Act's subsidies aren't indexed over the long term. Indexation is the standard practice that adjusts policies so they are constant over time as the value of the dollar and the cost of living change.
Social Security payments, for example, rise automatically to preserve their purchasing power. When Congress created the Alternative Minimum Tax (AMT) in 1969 to target 21 millionaires, it didn't index its income brackets, which is why it now hits the middle class.
ObamaCare's insurance subsidies are like an AMT in reverse. People making up to 400% of the poverty line—or about $96,000 for a family of four in 2016—are eligible for refundable tax credits to offset the premiums and cost-sharing of their government-approved health plans. The system is insanely complicated, but the amounts of the tax credits vary by how much people earn and rise over time so that people never contribute more than a certain share of their paycheck to health care.
Through 2018, the subsidies are indexed to grow in tandem with incomes and health-care costs. When premiums follow their historical pattern of rising faster than income, the subsidies grow by more too so that the individual out-of-pocket percentage is constant year to year. So far, so routine.
But then in 2019, ObamaCare's drafters slip in what they euphemize as "additional indexing." According to this new technical formula, the government is never allowed to spend more than 0.504% of the economy on subsidies. If normal indexing applied, CBO expects that the subsidies would blow through the GDP cap in 2022 and keep climbing. But as a result of the additional indexing, and as more and more people flood into ObamaCare, every individual will get a smaller piece of the subsidy pie, which will offset less and less of premiums.
It sounds like great news for taxpayers—the incredible shrinking entitlement. The problem is that CBO doesn't think Congress will make the benefits less generous as scheduled, and the pity is that's probably right. Washington rarely if ever takes away entitlements (e.g., the political firedrill when seniors decide Social Security's cost-of-living increases are too small). CBO's euphemism is that the additional indexing "might be difficult to sustain over a long period."
Therefore in its alternative fiscal scenario, CBO assumes that Congress will suspend the indexing change every year, just as it passes an annual "patch" to prevent AMT bracket creep. The upshot is that billions of dollars are not counted as part of the formal budget—one more reason that, after ObamaCare, federal bookkeeping is a worthless guide to future spending.
On paper, Medicare, Medicaid, the Affordable Care Act and other government health programs will consume 9.6% of GDP in 25 years, up from 5.4% today. But then count the indexing ruse, other ObamaCare budget gimmicks like Medicare "cuts" to hospitals that CBO doesn't think will happen, and the Medicare formula that says doctor payments will plunge next year by 27%, which President Obama promised to fix but didn't. In that case government health care will hit 10.4% of GDP in 2037.
Almost 1% of the economy is a lot of money. And it's part of the epic deception that was necessary to pass this not-so-shrinking entitlement, as Americans continue to discover.
Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm
Tidbits Archives ---
Jensen's Pictures and Stories
Summary of Major Accounting Scandals --- http://en.wikipedia.org/wiki/Accounting_scandals
Bob Jensen's threads on such scandals:
Bob Jensen's threads on audit firm litigation and negligence ---
Current and past editions of my
newsletter called Fraud Updates ---
Enron --- http://www.trinity.edu/rjensen/FraudEnron.htm
Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm
American History of Fraud --- http://www.trinity.edu/rjensen/FraudAmericanHistory.htm
Bob Jensen's fraud
Bob Jensen's threads on
auditor professionalism and independence are at
Bob Jensen's threads on
corporate governance are at
Against Validity Challenges in Plato's Cave ---
· With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier
· With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams
· With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR
· With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses
Against Validity Challenges in Plato's Cave ---
By Bob Jensen
wrong in accounting/accountics research? ---
The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most
AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW:
Bob Jensen's threads on accounting theory
Tom Lehrer on Mathematical Models and Statistics
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/