To Accompany the October 11, 2012 edition of Tidbits
Bob Jensen at Trinity University
"Who is Telling the Truth? The Fact Wars" as written on the Cover of Time Magazine
Both U.S. presidential candidates are spending tends of millions of dollars to spread lies and deceptions.
Both are alleged Christian gentlemen, a faith where big lies are sins jeopardizing the immortal soul.
The race boils down to the sad fact that the biggest Christian liar will win the race for the presidency in November 2012.
"Who is Telling the Truth? The Fact Wars: ," as written on
the Cover of Time Magazine
"Blue Truth-Red Truth: Both candidates say White House hopefuls should talk straight with voters. Here's why neither man is ready to take his own advice ,"
by Michael Scherer (and Alex Altma), Time Magazine Cover Story, October 15, 2012, pp. 24-30 ---
Bob Jensen's threads on Rotten to the Core ---
Meanwhile Congress passed a law against its members profiting from insider trading. However, the law is a joke since each member's family can still profit legally from insider trading
The Wonk (Professor) Who Slays Washington
Insider trading is an asymmetry of information between a buyer and a seller where one party can exploit relevant information that is withheld from the other party to the trade. It typically refers to a situation where only one party has access to secret information while the other party has access to only information released to the public. Financial markets and real estate markets are usually very efficient in that public information is impounded pricing the instant information is made public. Markets are highly inefficient if traders are allowed to trade on private information, which is why the SEC and Justice Department track corporate insider trades very closely in an attempt to punish those that violate the law. For example, the former wife of a partner in the auditing firm Deloitte & Touche was recently sentenced to 11 months exploiting inside information extracted from him about her husband's clients. He apparently did was not aware she was using this inside information illegally. In another recent case, hedge fund manager Raj Rajaratnam was sentenced to 11 years for insider trading.
Even more commonly traders who are damaged by insiders typically win enormous
lawsuits later on for themselves and their attorneys, including enormous
punitive damages. You can read more about insider trading at
Corporate executives like Bill Gates often announce future buying and selling of shares of their companies years in advance to avoid even a hint of scandal about exploiting current insider information that arises in the meantime. More resources of the SEC are spent in tracking possible insider information trades than any other activity of the SEC. Efforts are made to track trades of executive family and friends and whistle blowing is generously rewarded.
Trading on insider information is against U.S. law for every segment of society except for one privileged segment that legally exploits investors for personal gains by trading on insider information. What is that privileged segment of U.S. society legally trades on inside information for personal gains?
Congress is our only native criminal class.
Mark Twain --- http://en.wikipedia.org/wiki/Mark_Twain
We hang the petty thieves and appoint the great ones to public office.
Attributed to Aesop
Answer (Please share this with your students):
Over the years I've been a loyal viewer of the top news show on television --- CBS Sixty Minutes
On November 13, 2011 the show entitled "Insider" is the most depressing segment I've ever watched on television ---
Also see http://financeprofessorblog.blogspot.com/2011/11/congress-trading-stock-on-inside.html
Watch the "Insider" Video Now While
It's Still Free ---
"They have legislated themselves as untouchable as a
political class . . . "
"The Wonk (Professor) Who Slays Washington," by Peter J. Boyer, Newsweek Magazine, November 21, 2011, pp. 32-37 ---
David M. Walker --- http://en.wikipedia.org/wiki/David_M._Walker_%28U.S._Comptroller_General%29
Career as Comptroller General
Walker served as Comptroller General of the United States and head of the Government Accountability Office (GAO) from 1998 to 2008. Appointed by President Bill Clinton, his tenure as the federal government's chief auditor spanned both Democratic and Republican administrations. While at the GAO, Walker embarked on a Fiscal Wake-up Tour, partnering with the Brookings Institution, the Concord Coalition, and the Heritage Foundation to alert Americans to wasteful government spending. Walker left the GAO to head the Peterson Foundation on March 12, 2008. Labor-management relations became fractious during Walker's nine-year tenure as comptroller general. On September 19, 2007, GAO analysts voted by a margin of two to one (897–445), in a 75% turnout, to establish the first union in GAO's 86-year history.
Peter G. Peterson Foundation
In 2008, Walker was personally recruited by Peter G. Peterson, co-founder of the Blackstone Group, and former Secretary of Commerce under Richard Nixon, to lead his new foundation. The Foundation distributed the documentary film, I.O.U.S.A. which follows Walker and Robert Bixby, director of the Concord Coalition, around the nation, as they engage Americans in town-hall style meetings, along with luminaries such as Warren Buffett, Alan Greenspan, Paul Volcker and Robert Rubin.
Peterson was cited by the New York Times as one of the foremost "philanthropists whose foundations are spending increasing amounts and raising their voices to influence public policy." In philanthropy, Walker has advocated a more action-based approach to the traditional foundation: “I do believe, however, that foundations have been very cautious and somewhat conservative about whether and to what extent they want to get involved in advocacy.” David Walker stepped down as President and CEO of the Peter G. Peterson Foundation on October 15, 2010 to establish his own venture, the Comeback America Initiative
Campaign for fiscal responsibility
Walker has compared the present-day United States to the Roman Empire in its decline, saying the U.S. government is on a "burning platform" of unsustainable policies and practices with fiscal deficits, expensive overcommitments to government provided health care, swelling Medicare and Social Security costs, the enormous expense of a prospective universal health care system, and overseas military commitments threatening a crisis if action is not taken soon]
Walker has also taken the position that there will be no technological change that will mitigate health care and social security problems into 2050 despite ongoing discoveries.
In the national press, Walker has been a vocal critic of profligate spending at the federal level. In Fortune magazine, he recently warned that "from Washington, we'll need leadership rather than laggardship." in another op-ed in the Financial Times, he argued that the credit crunch could portend a far greater fiscal crisis; and on CNN, he said that the United States is "underwater to the tune of $50 trillion" in long-term obligations.
He favorably compares the thrift of Revolutionary-era Americans, who, if excessively in debt, would "merit time in debtors' prison", with modern times, where "we now have something closer to debtors' pardons, and that's not good."
Prior to his appointment to the GAO, Walker served as a partner and global managing director of Arthur Andersen LLP and in several government leadership positions, including as a Public Trustee for Social Security and Medicare from 1990 to 1995 and as Assistant Secretary of Labor for Pension and Welfare Benefit Programs during the Reagan administration. Before his time at Arthur Andersen, Walker worked for Source Finance, a personnel agency, and before that was in Human Resources at accounting firm Coopers & Lybrand.
Continued in article
In 2010 David Walker was admitted to the Accounting Hall of Fame ---
"Former comptroller general urges fiscally responsible reforms," by
Ken Tysiac, Journal of Accountancy, October 6, 2012 ---
The giant red digits on the “U.S. Burden Barometer” outside the auditorium where David Walker spoke Friday provided the numbers behind this prominent CPA’s message: The United States urgently needs significant government financial reform.
Counting upward at a feverish pace, the barometer represented an estimate of what Walker, a former U.S. comptroller general, calls the “federal financial sinkhole,” combining explicit liabilities, commitments and contingencies, and obligations to Social Security and Medicare.
Shortly before Walker began his presentation, the number stood at $70,821,389,917,073.
“It’s 70.8 trillion dollars, going up 10 million a minute, a hundred billion a week,” Walker told an audience consisting primarily of CPAs at the University of North Carolina at Chapel Hill. “So the federal financial sinkhole is much bigger than the politicians admit. It’s growing rapidly by them doing nothing, and they’ve become very adept at doing nothing. And something has got to be done.”
Walker, a political independent, headed the U.S. Government Accountability Office from 1998 to 2008. As CEO of the not-for-profit Comeback America Initiative, he is promoting fiscal responsibility and seeking solutions to federal, state, and local fiscal imbalances in the United States.
His tour, which is barnstorming 16 states in 34 days, ends Tuesday and positions Walker as one of the leading sentinels in a growing chorus of concern over the economic direction of the United States at an important time. With a presidential election closing in on its final days, one of the most persistent questions both candidates face is how they will handle the economy, taxes, and the federal deficit.
Educating the public about the deficit and the important, difficult, disciplined action that could bring it under control is Walker’s passion. He warns of the impending “fiscal cliff” the nation faces in January 2013 as the result of the scheduled expiration of various tax provisions, and says a U.S. debt crisis is possible within two years.
He comes armed on his tour with statistics that demonstrate the financial peril that government spending and deficits have brought for the United States. His PowerPoint slides show that:
- Federal spending as a percentage of GDP has grown from 2% in 1912 to 24% in 2012.
- Total government debt in the U.S. is estimated to be 137.8% of the economy, when intra-governmental holdings are included, in 2012.
- Publicly held federal debt as a percentage of GDP is projected to grow to 185% by 2035, according to one scenario in the Congressional Budget Office’s long-term outlook.
“The federal government has grown too big, promised too much, lost control of the budget, waited too long to restructure, and it needs fundamental restructuring,” Walker said during an interview before the event. “Not nip and tuck. Radical reconstructive surgery done in installments over a period of time.”
Walker showed that defense spending in the United States in 2010 exceeded the combined total spent by 15 other nations, including China, Russia, France, the U.K., Japan, Saudi Arabia, India, and Germany. And he showed that U.S. per capita health care costs ($7,960) were more than double the OECD average ($3,361) and far outpaced those of Canada ($4,363) and Germany ($4,218).
He wants to reform budgeting, Social Security, health care, Medicare and Medicaid, defense spending, and the tax code.
He envisions measures that tie debt to GDP targets as needed reforms of federal budget controls. He advocates suspending the pay of members of Congress if they fail to pass a budget. With regard to Social Security, he would raise the taxable wage base cap, gradually raise the retirement eligibility ages, and revise the benefit structure based on income.
Walker would guarantee a basic level of health coverage for all citizens, revise payment practices to be evidence based, and phase out the tax exclusion for employer-provided health insurance, which he says estimates show will cost the federal government a total of more than $650 billion from 2010 to 2014. He would impose an annual budget for Medicare and Medicaid spending, and make Medicare premium subsidies more needs based.
He would reform the military by requiring cost consideration in defense planning, “right-sizing” bases and force structure, and modernizing purchasing and compensation practices. He also would reform individual and corporate federal income taxes, increasing the effective tax paid by the wealthy and decreasing the number of citizens who pay no income tax.
At an event whose sponsors included the AICPA, the North Carolina Association of Certified Public Accountants, and the N.C. Chamber of Commerce, Walker said CPAs have an important role to play in bringing about these changes.
“I believe that CPAs have a disproportionate opportunity and an obligation to be informed and involved here,” Walker said. “They’re good with numbers. They’re respected by the public. And I think that our profession, really, ought to be leaders in this area.”
The AICPA has long been a leading advocate for comprehensive reform that would simplify tax laws without reducing the productive capacity of the economy. In addition, the AICPA works as a proponent of personal financial literacy and fiscal responsibility through efforts such as 360 Degrees of Financial Literacy and “What’s at Stake.”
Anthony Pugliese, AICPA senior vice president–Finance, Operations and Member Value, said Walker’s message was on point with the Institute’s initiatives promoting financial literacy and responsibility at the consumer, business, and government levels.
“We hope our members can make a difference. We know they can make a difference with the clients they serve and small business owners around the country and individual consumers,” Pugliese said. “We hope this message is spread, and I think we have a vital role to play in this.”
Walker said that political changes need to be made in order to bring about all these other transformations that would put the United States on a better fiscal path. He encourages development of a strategic framework for the federal government and creation of a government transformation task force. He calls for Congressional redistricting reform, integrated and open primaries, campaign finance reform, and term limits.
Continued in article
Bob Jensen's threads on the pending economic collapse of the United States
Disaster for Dodd Frank --- Lawyers are Litigating
"Courts taking up opposition to Dodd-Frank," Dina ElBoghdady, The
Washington Post, October 5, 2012 ---
After failing to scuttle the landmark legislation in Congress, critics of the Dodd-Frank Act overhauling financial regulations are trying to chisel away at it in the courts — with some initial success.
Twice, federal regulators have lost in court trying to defend the rules, which were put in place after the 2008 financial crisis. On Friday, they were back in court again, fighting for yet another regulation they say is linked to Dodd-Frank.
Each time, the challenge came from a lawyer with a prominent legal pedigree: Eugene Scalia, son of Supreme Court Justice Antonin Scalia.
The legal battles raise an urgent question that’s likely to surface again and again about how much deference the courts are willing to grant the agencies that police corporate America.
“After all the lobbying in Congress to tear down Dodd-Frank, there’s now a second stage in the war: the courts,” said Donald Langevoort, a Georgetown Law securities professor. “The judges seem more than willing to say that the rules adopted in the aftermath of the financial crisis simply can’t be enforced because of procedural defects.”
In the case Friday, a federal judge heard a challenge to a rule that requires mutual funds that invest in certain financial instruments to register with the Commodity Futures Trading Commission. Last week, the same court struck down a regulation designed to rein in speculative commodities trading. And about a year ago, an appeals court blocked a rule that would have made it easier for shareholders to oust members of corporate boards.
In each case, Scalia’s team at Gibson, Dunn & Crutcher argued that the regulators failed to justify the rules they crafted or fully consider their economic impact.
“The agencies gave reasons that didn’t add up, contradicted themselves or failed to respond to significant criticisms raised by the public,” Scalia said in an interview. “Any one of those things is going to result in a rule getting thrown out by any court at any time.”
In the case argued Friday, the CFTC said that the financial overhaul bill gave it authority to set the new rules for mutual funds. But the plaintiffs said the rule is unrelated to the Dodd-Frank law, and that the agency is using that law “to change the subject” because the regulation is neither necessary nor justified by economic analysis.
Similar arguments prevailed in the two cases decided by the courts so far.
In the commodities trading decision last week, U.S. District Judge Robert L. Wilkins told the CFTC to justify the need for a regulation that would limit how many contracts a trader can obtain for the future delivery of 28 commodities, including natural gas and oil. The rule also would have applied to certain financial instruments known as swaps, a form of derivative.
The agency said it was acting under a Dodd-Frank mandate designed to reduce excessive speculation in the commodities market so that no one trader could control such a large percentage of the market that it skews prices.
Continued in article
Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm
"A Modest Proposal," by Walter Williams, Townhall, October 10,
California was once the land of opportunity, but it is going down the tubes. Several of California's prominent cities have declared bankruptcy, such as Vallejo, Stockton, Mammoth Lakes and San Bernardino. Others are on the precipice, and that includes Los Angeles, California's largest city. California's 2012 budget deficit is expected to top $28 billion, and its state debt is $618 billion. That's more than twice the size of New York's state debt, which itself is the second-highest in the nation.
Democrats control California's Legislature, and its governor, Jerry Brown, is a Democrat. California is home to some of America's richest people and companies. It would then appear that the liberals' solution to deficit and debt would be easy. They need only to raise taxes on California's rich to balance the budget and pay down the debt -- or, as President Barack Obama would say, make the rich pay their fair share.
The downside to such a tax strategy is the fact that people are already leaving California in great numbers. According to a Manhattan Institute study, "The Great California Exodus: A Closer Look," by Thomas Gray and Robert Scardamalia (October 2012), roughly 225,000 residents leave California each year -- and have done so for the past 10 years. They take their money with them. Using census and Internal Revenue Service data, Gray and Scardamalia estimate that California's out-migration results in large shares of income going to other states, mostly to Nevada ($5.67 billion), Arizona ($4.96 billion), Texas ($4.07 billion) and Oregon ($3.85 billion). That's the problem. California politicians can fleece people in 2012, but there's no guarantee that they can do the same in 2013 and later years; people can leave. Also, keep in mind that rich people didn't become rich by being stupid. They have ingenious ways to hide their money.
California has one-eighth of the nation's population but one-third of its welfare recipients. According to Businessweek, "it is one of the few states that continue to provide welfare checks for children once their parents are no longer eligible." There's nothing new about the handout strategy. As far back as 140 B.C., Roman politicians found that the way to win votes is to give out cheap food and entertainment, what came to be known as "bread and circuses."
Continued in article
Perhaps a better solution for Eurozone nations that have no disciplined spending and taxation (Greece cannot enforce its own tax laws) is to leave the Eurozone and then inflate themselves out of fiscal crises.
Similarly states like California that have no disciplined spending and taxation (California gives tax credits to multi-millionaires to make movies in Hollywood and have a legislature in the grips of labor unions), perhaps a better solution is for states like California and Illinois to leave the dollar zone. That way they can inflate themselves out of fiscal crises.
Nations (like Zimbabwe and the United States) that have their own currency printing presses are free to inflate themselves out of fiscal crises. The Federal Reserve has been printing currency since 2008 to avoid higher taxes and more interest payments on the National Debt. The U.S. Congress loves the printing press solution that is denied nations like Greece and states within nations like the 50 states of the United States. Why don't these nations and states simply print their own currencies (script) for government spending?
A Slide Show from the Tax Foundation (Click the arrows on the right side of
"Putting a Face on America's Tax Returns: A Chartbook September 24, 2012," by Scott A. Hodge William McBride, Tax Foundation, September 24, 2012
Thank you Caleb Newquist for the heads up.
You can get the above content in PDF format at
This slide show focuses heavily on inequality.
Case Studies in Gaming the Income Tax Laws ---
"As Iran’s Currency Keeps Tumbling, Anxiety Is Rising," by Thomas
Erdbrink, The New York Times, October 4, 2012 ---
TEHRAN — For months, since the imposition of harsh, American-led sanctions over Iran’s nuclear program, the country’s leaders have sworn they would never succumb to Western pressures, and they scoffed at the idea that the measures were having any serious impact. But after a week in which the Iranian currency, the rial, fell by a shocking 40 percent and protests began to rumble through the capital, no one is making light of the mounting costs of confrontation.
In the Iranian capital, all anyone can talk about is the rial, and how lives have been turned upside down in one terrible week. Every elevator ride, office visit or quick run to the supermarket brings new gossip about the currency’s drop and a swirl of speculation about who is to blame.
“Better buy now,” one rice seller advised Abbas Sharabi, a retired factory guard, who had decided to buy 900 pounds of Iran’s most basic staple in order to feed his extended family for a year.
“As I was gathering my money, the man received a phone call,” said Mr. Sharabi, smoking cigarette after cigarette on Thursday while waiting for a bus. “When he hung up he told me prices had just gone up by 10 percent. Of course I paid. God knows how much it will cost tomorrow.”
While only a few people actually need to exchange the rial for foreign currency, its value is one of the few clear indicators of the state of the economy, and its fall has sharply raised the prices of most staples.
In Tehran, many residents spend their days calling on money changers and visiting banks, deliberating whether to sell their rials now or wait for a miracle that would restore the rates to old levels, or for even a modest rally from the panic-driven lows of the last week.
“The fluctuations are so large that nobody knows whether it is better to wait or to change now,” said Ahmad, 65, as he shared a taxi to the west Tehran neighborhood of Sadeghiyeh. “I am so fed up,” said Ahmad, a garment seller, who like others here did not want to be identified by his full name for fear of retribution from the authorities. “I want to have a normal life, but from breakfast, to lunch to dinner, everybody only nervously talks of hard currency.”
Like many residents of the capital, Ahmad had tuned in to President Mahmoud Ahmadinejad’s news conference on Tuesday, hoping that he would offer some sort of solution.
Instead, Mr. Ahmadinejad attributed most of the rial’s weakness to currency speculators and the sanctions, saying that it is only natural that the currency should suffer when it is possible to sell oil only in small quantities and when it is hard to make international bank transfers. His opponents say he is trying to avoid blame for his own mismanagement of the economy. He even went so far as to threaten to quit.
Continued in article
From The Economist Magazine, October 6-12, Page 11
Iran's currency, the rial, lost more than 25% of its value against the dollar on October 1st and 2nd. The government blamed the fall on Western sanctions imposed on Iran because of its nuclear plans, but the government's own economic and financial mismanagement is to blame.
Sukuk --- http://en.wikipedia.org/wiki/Sukuk
Islamic Bond Excitement in Financial Markets
"Interested in buying sukuk? by Sabine Vollmer, CGMA Magazine, October 5, 2012 ---
Following financial crises in the US and Europe, investors are increasingly attracted to raising funds for investments through Islamic bonds called “sukuk.”
Sukuk are an alternative to conventional bonds that governments and companies sell regularly to raise funds. They comply with sharia law, the moral code of conduct based on the Quran, which prohibits charging interest and trading in debt.
Ernst & Young’s Global Islamic Banking Centre of Excellence projects that global demand for sukuk is likely to triple to $900 billion in 2017. Here are a few reasons for the surge:
- The world’s Muslim population is growing at about twice the rate of the non-Muslim population, the Pew Research Center estimates, driving the growth of the Islamic banking industry.
- Banks in the Middle East are flush with cash because of high oil prices. Islamic banks, particularly those that were not hard hit by the financial crises in the US and Europe, are looking for opportunities to park their cash. Worldwide, Islamic assets held by banks account for an estimated $1.1 trillion, according to Ernst & Young’s Islamic banking report. Their share of all commercial bank assets varies from country to country. In the Middle East and North Africa, Islamic assets constitute an average 14% of banks’ assets.
- Muslim countries have increased government spending to stimulate, develop and sustain economic activity since the beginning of the Arab Spring.
- Investors worldwide are seeking safer investments following global financial crises. Sukuk are unsecured, asset-based loans. Unlike asset-backed loans, which use buildings, land or patents as collateral, sukuk must be based at least 51% on an asset that generates rent, such as a building. The sukuk issuer can make amortised payments or a bullet payment at the end to pay off the sukuk. While the majority of the payments must come from the rent, a smaller portion can come from profits that a business generated.
“Would the growth be the same if the US and the European market weren’t in crisis? Perhaps yes, but not at the rate you see now,” said Rizwan Kanji, a lawyer who specialises in sukuk transactions in the Dubai office of the law firm King & Spalding. “… The growth of sukuk will continue while the Western markets recover.”
Establishing a global standardised sukuk trading platform that is open to all financial institutions would go a long way toward spurring more supply, according to Ashar Nazim, E&Y’s MENA Islamic finance services leader.
Continued in article
CGMA Magazine seems to be getting more and more innovative ---
Bob Jensen's threads on Islamic and Social Responsibility Accounting ---
Solyndra --- http://en.wikipedia.org/wiki/Solyndra
"Washington's Knack for Picking Losers," by Michael J. Boskin, The
Wall Street Journal, February 15, 2012 ---
"Solyndra factory to be auctioned off; debt holders (including US gov.)
are not expected to recover much," Sober Look, September 27, 2012 ---
"Obama's October Non-Surprise: Why it's convenient for the White House to
scuttle a Chinese-owned Oregon wind energy project," The Wall Street
Journal, October 9, 2012 ---
. . .
All the more so because of inconvenient campaign issues that can now remain dormant. For instance, the Chinese-owned wind farms have already been approved for $3.2 million in direct handouts from the U.S. Treasury's "1603" program. That section of President Obama's 2009 stimulus law allows investors to get a check for 30% of the start-up costs of a renewable energy project.
When up and running, the wind farms would also be entitled to a lucrative tax credit of 2.2 cents per kilowatt-hour, assuming Democrats succeed in renewing the controversial provision on Dec. 31.
Voters in the Pacific Northwest might also notice they'll be expected to provide continuing subsidies via their electric bills, thanks to the green-energy mandates imposed on their local utility, PacifiCorp.
As foreign citizens too, the Chinese owners wouldn't even be eligible to repay these political favors with campaign donations.
Wind in the U.S. is not a business of figuring out what customers want and delivering it at a profit. Wind is a business of jumping over a series of hurdles, after which the government guarantees your sales and covers a big chunk of your investment costs. These hurdles also explain why wind projects often go through bewildering changes in ownership.
In the hands of its original American owner, the project's priority was securing generous Oregon state tax credits as well as a long-term sales contract with PacifiCorp. A "power purchase agreement" is the key asset of any wind-farm company.
Next the project was acquired by a Greek company, Terna Energy, with experience running wind farms, presumably to develop the engineering plans to make the scheme a reality.
Now comes Ralls Corp, owned by Dawei Duan and Jialing Wu, senior managers of a large, privately held Chinese manufacturing company called Sany.
In their filing with CFIUS, Sany's U.S. lawyers explain its hankering to own a collection of windmills in Oregon: to install turbines from Sany's own turbine division and gain the "run-time" experience required by potential U.S. turbine buyers. "The U.S. industry benchmark is said to be approximately 100 turbines operating in the U.S. at an average 95% availability in one year," states the filing.
But since Sany has neither the experience nor desire to run wind farms, the lawyers say, it has also agreed eventually to transfer ownership to a Chinese property firm, with the parties agreeing to submit the deal to CFIUS so CFIUS can approve or reject the long-term arrangement (though the Chinese property firm now appears to have gotten cold feet).
Mr. Obama's peculiar intervention would unwind the Greek firm's earlier sale of the pending project to China's Sany. Only once before has a president issued such an order: President George H.W. Bush on Feb. 1, 1990 required a Chinese firm to divest a Seattle aerospace components maker.
Notice the date: That decision didn't come just before Election Day, though, in an irony, Mr. Bush in two years would face a challenger, in Bill Clinton, who would accuse him of coddling the butchers of Beijing. Just to complete the story and give a flavor of what's probably going on here, recall what happened next: President Clinton, in office, turned on a dime, granted China most-favored-nation trading status, jawboned Chinese officials to buy Boeing aircraft, and sent Al Gore prospecting for campaign donations at a Chinese Buddhist temple in California.
Do the Oregon wind farms raise legitimate national security concerns? Who knows? The president is not obliged to explain his decision. The Navy had already persuaded Ralls to move one of its proposed installations, and the Navy even wrote to Oregon regulators urging their approval of Ralls's application for the change. And Mr. Obama's intervention was nicely timed for the pre-election hoo-hah created by a congressional report insisting that Chinese telecom giant Huawei is an espionage threat.
But perhaps this is just another case where Mr. Obama, forgetting his mike is on, would lean over, pat the Chinese investors on the wrist and explain apologetically that he will have more flexibility after the election.
"Public Sector Pensions: 'Their Accounting Makes Enron Look Good',"
Knowledge@Wharton, September 26, 2012 ---
The growing debt crisis in public sector pensions -- governments face a $757 billion shortfall in funding their retirement promises, according to one estimate -- is coming at a time when unprecedented numbers of baby boomers are reaching retirement age. About 10,000 members of that generation are turning 65 every day, according to the Pew Research Data Center.
In better-funded pension plans, the slew of retirements is a blip on the radar, a demographic shift that was foreseen decades earlier and properly funded. But in shakier systems, the retirements are being met with cuts to benefits across the board -- for new employees, current workers and retirees alike -- benefits that were once considered cast in stone. A generation of workers is now wondering if their pensions will still be able to pump out the funds they need to pay the bills in retirement.
"That's a very common worry, and it's wholly justified," says Olivia Mitchell, a professor of business economics and public policy, and executive director of Wharton's Pension Research Council. "I think the whole prospect of retirement has grown much riskier than for those in previous generations. Employer-provided retiree medical plans are being cut; Medicare as we know it is facing insolvency. People hoped to retire on their little bit of savings that now is paying no interest, and Social Security is in bad shape. Homes aren't worth what people thought they would be, so nest eggs are a lot tinier.... It's not a very pretty picture for a lot of people."
Distributing the Pain
In defined benefit pension plans, retirees are paid a fixed monthly amount every month until they die. Often the payments are subject to cost-of-living raises, and most plans include a survivor's benefit if the employee's spouse outlives him or her.
A defined contribution plan, like a 401(k), shifts the retirement risk to the employee. Employers allow workers to contribute a percentage of their salaries to the plan, and often match the contributions up to a certain threshold. The plans are more portable than pensions, allowing workers to move their investments as they switch jobs, but it is up to the workers to save, manage their investments and then make sure their nest eggs are sufficient for their retirement years.
Defined benefit pensions are generally confined to the government sector now, as most private sector employers long ago abandoned them for defined contribution plans. But many state governments are currently facing pension funding obligations that are forcing lawmakers to consider making changes. The rule -- sometimes unwritten and at other times constitutionally codified -- had been that pension plan changes are limited to those who have not been hired yet, or to employees who are early in their public sector tenures.
"You don't like to change the rules of the game for those who don't really have the ability to adjust. It's particularly painful to make changes to people who are in retirement already or approaching retirement," says Alicia Munnell, professor of management sciences at Boston College's Carroll School of Management and director of the school's Center for Retirement Research. "It is a worrisome thing to do."
But that's exactly what happened in Rhode Island. In 2011, the state created a defined contribution system similar to a 401(k) plan and forced all its current employees to enter into a system that blended the two plans together. Cost-of-living raises for retirees were also suspended for five years.
In other states, retiree costs are being managed by creating new, cheaper pension plans for new employees. In some cases, premiums are being driven up for retiree health care, which is generally not given the same protection as pensions.
But the Rhode Island reforms -- which are being challenged in court -- are seen as a template for other cash-strapped states to model, giving rise to more fears that pension systems may not be as unshakable as once thought. "Any change will hurt," Munnell says. "If you were counting on your pension and the value is reduced, it can be a painful adjustment."
Munnell also notes that the math in Rhode Island allowed for few options. By Pew Center estimates, the state had only 49 cents on hand for every dollar owed to its retirees in 2010. In some cities, the shortfall was even deeper. "The funding situation was so serious that if something wasn't done with pensions, all the money would go there," Munnell notes. "You wouldn't be able to have things like libraries or buses. When it gets that dire, you have to distribute the pain broadly. It's not fair in some sense to take away existing benefits, but when you're really suffering, you have to do things you wouldn't normally."
Worse than Enron?
The decisions that led to today's crossroads began decades ago.
For most plans, a secure funding model with relatively low risk was never adopted, according to Kent Smetters, professor of business economics and public policy at Wharton. Instead, politicians allowed the funds to broaden their investment policies beyond government-backed bonds and at first dabble, then fully immerse themselves in, the stock market and progressively riskier investment vehicles.
That allowed the plans to expand their retirement benefits while, at least on paper, requiring no more funding from the governments whose workers they served.
Smetters argues that the most grievous pension funding error over the years has been assuming an unrealistically high discount rate, or the rate at which funds can discount their future liabilities. Also referred to as a fund's annual rate of return on its investments, most funds assume a 7.5% return on the low end and 8.5% on the high end. Many economists argue the fund liabilities should be discounted at a rate closer to 3% or 4%.
Those assumptions open the funds up to higher levels of investment risk and dramatically understate the liabilities owed. According to the Center for Retirement Research at Boston College, public pension plans have on hand about 76 cents for every dollar they owe retirees. Under more conservative accounting standards proposed by the Government Accounting Standards Board -- an independent, seven-member nonprofit board that sets generally accepted accounting principles for the public sector -- that figure could drop to 57 cents on the dollar.
"State and local pensions are not covered under any reasonable accounting standards," Smetters says. "Their accounting makes Enron look pretty good."
Continued in article
Bob Jensen's threads on pension accounting ---
The Sad State of Government (Governmental) Accounting and Accountability
I might note that consider a corrupted oligopoly banking on a national or global scale to be anti-capitalist. This oligopoly is more like corrupt socialism than my vision of capitalism.
Joseph E. Stiglitz --- http://www.josephstiglitz.com/
It might surprise you that I agree with Professor Stiglitz in many issues
including how the QE policies of the Fed are more destructive than helpful ---
"Why Easier Money Won't Work: The Fed risks fueling a destructive bond market bubble, while any gains from a weaker dollar will come at the expense of those to whom we hope to export," by Joseph E. Stiglitz, The Wall Street Journal, October 23, 2010 ---
. . .
Such policies may come with a price, but the price may be less than the alternative: the bankruptcies and unemployment that would follow from disruptive currency appreciation as the U.S. lets forth a flood of liquidity. That money is supposed to reignite the American economy but instead goes around the world looking for economies that actually seem to be functioning well and wreaking havoc there.
The upside of QE is limited. The money simply won't go to where it's needed, and the wealth effects are too small. The downside is a risk of global volatility, a currency war, and a global financial market that is increasingly fragmented and distorted. If the U.S. wins the battle of competitive devaluation, it may prove to be a pyrrhic victory, as our gains come at the expense of others—including those to whom we hope to export.
But Bernanke does not listen to Signitz and has greatly expanded the useless QE inflationary program.
I agree that debt harms the American dream.
"Debt Buries the Amerian Dream," by Joseph E. Stiglitz, USA Today, July 3, 2012 ---
. . .
The student loan crisis needs to be tackled head-on. Part of the answer is to make student debt more manageable, including by making it dischargeable under the appropriate circumstances. For-profit schools, which have proved themselves to be better at exploitation than at delivering a valuable education, need to be effectively and forcefully regulated. Even more important will be increasing government investment in higher education to bring tuition costs down. Such investments would have high economic returns, and would even help bring our country closer to our ideals.
What we need is to restore the American dream, to make the country once again a land of opportunity and to enable us — as we did in the decades after World War II— to have shared prosperity. The question is, do we have the political will to do it?
"Fallacies of Romney's logic," by Joseph E. Stiglitz, USA Today,
September 12, 2012 ---
. . .
Fourth, many of those at the bottom — who have become so dependent on government — are there partly because government has failed in one way or the other. It has failed to provide them with skills that would make them productive, so they could earn an adequate living. It has failed to stop banks from taking advantage of them through predatory lending and abusive credit card practices. It has failed to stop for-profit schools from taking advantage of their aspirations to move up in the world through education.
But I also fault Professor Stiglitz for ducking some of the hardest issues.
For example, for many of those "at the bottom" there's still a very destructive American Dream in the underworld economy of narcotics and other crime. Too many young people on the street would ignore totally free training and education opportunities in favor of quick fixes and quick money in crime. Too many of the people supposedly at the "at the bottom" are doing too well in the underground non-crime economy to take advantage of the blood, sweat, and tears of putting their hopes in education ---
Massive fraud in lifetime disability Social Security and Medicare benefits also demonstrate the preference for crime over work in growing numbers of the populace.
Professor Stiglitz has a Keynesian answer to almost all the economic ills of the world. Governments should deficit finance like there's no tomorrow on the questionable assumption that most any government spending pays off more in economic growth than it costs with inflation. But he overlooks some of the stark realities of his favored government WPA-styled job creations. Firstly, WPA-styled jobs are short term with high school dropouts and laid off workers manning shovels and traffic flags rather than building successful careers. Unless the U.S. shifts to socialist takeover of the private sector, the only hope for creating millions of "new" careers lies in stimulus for the private sector rather than public sector.
Professor Stiglitz is more socialist than capitalist and overlooks the disciplines of economies willing to endlessly deficit finance. Perhaps he realizes this without delving into specifics. For example, I believe he thinks that if Spain merely throws deficit spending at its economy that unlimited spending will be the road to Spain's prosperity. Perhaps he's correct in the case of Spain since Spain's main problem seems to have been a real estate spending bubble. But these days he talks less and less about Greece. Perhaps this is because Greece's economic woes are more deeply rooted in an ineffective government that has almost no hope of having a taxation discipline comparable to other nations in the Eurozone.
Professor Stiglitz ignores ignores other sticky economic issues like immigration and illegal immigration reforms. The immigrant population is growing five times faster than the domestic population and relatively large share of the new jobs created are going to the incoming foreign population. Can the U.S. open its borders to the poor of the world without destroying itself in the process?
Lastly, Professor Stiglitz is a dreamer about government effectiveness and efficiency. He ignores the fact that probably the major reason for the failure of global capitalism is government corruption in the world, Capitalism cannot prosper amidst governmental corruption and neither can socialism except in nations that have massive exports of natural resources per capita --- nations like Russia and Kuwait and Saudi Arabia.
Do we really want the public sector to take over the private sector by the
most corrupt nations of the world?
We may have less of an American Dream these days, but we certainly have more of a dream for the 99% than the red nations in the picture of corruption below.
I disagree with Stiglitz that the answer is to deficit finance without market and other spending disciplines. Some nations like Greece must endure pain and austerity to a point that government finally answers the call for economic discipline. I think states like California must endure pain and austerity to a point that government and labor unions finally answer the call for economic discipline.
Giving money printing presses to undisciplined governments is not the answer to economic ills. Giving money printing presses to undisciplined governments are not the answer to economic ills. Zimbabwe proved this years ago.
"Defining the State: The role of government intervention in the
economy is perhaps the starkest difference between the candidates," The
Economist Magazine, October 6-12, pp. 8-9 ---
THIS year’s election carries big implications for economic policy well beyond the budget and taxes. Barack Obama and Mitt Romney have very different ideas about regulation, monetary policy, international trade and labour markets, although their rhetoric sometimes exaggerates the distance between their positions.
In his first term Mr Obama presided over a big increase in the number of major new regulations (as measured by their economic impact), from air-cargo screening to fuel efficiency in trucks. On top of those come thousands of pages of new rules implementing his financial-regulation and health-care reforms (see article). The White House claims that the benefits of the new regulations easily exceed the costs, although some economists contest the way the benefits are measured.
Mr Obama has become a little more sensitive to business since then. He has delayed a number of the most contentious rules, such as one on a new ozone standard, and is approving new rules more slowly. In 2011 he enacted a “lookback” policy that requires agencies to re-examine existing rules and recommend repeal of those whose benefits no longer justify their costs. Few have been repealed yet, but the initiative could be significant if pursued more vigorously. Business leaders worry, though, that regulatory activity may surge anew if Mr Obama is re-elected.
Mr Romney has promised a much less interventionist hand. On his first day in office he would direct all agencies to eliminate burdensome Obama-era regulations and cap the increase in regulatory costs each year at zero: meaning that if a new rule created $1m in new costs, existing rules imposing $1m in costs would be repealed. That sounds appealing, but would be a strange way to conduct regulatory policy: repealing a rule’s $1m in costs might lose the $100m it brings in benefits. Mr Romney would presumably also appoint business-friendly individuals to run the Environmental Protection Agency and other key regulatory agencies.
One of Mr Obama’s achievements is the 2,300 page Dodd-Frank act. It created a new regime whereby financial companies other than banks could be taken over and wound down by the government without resort to bail-outs or bankruptcy; it set up a new consumer-protection bureau to write and enforce rules on financial products from credit cards to mortgages; it required many derivatives to move from dealing rooms to exchanges; and it altered the way banks and other financial companies run their business to reduce risky activity.
The financial industry has railed both against the law’s hideous complexity and its individual bits, in particular its “Volcker Rule” prohibiting proprietary trading by banks, which has made banking more complicated but arguably no safer. As with health care, Mr Romney has promised to repeal and replace Dodd-Frank, but has not said with what. He and his running-mate, Paul Ryan, object most strenuously to the powers given to the Federal Reserve to designate some firms as “systemically important”, which they consider tantamount to “too big to fail”. They also object to the resolution regime replacing bankruptcy. But if those provisions were repealed, systemically important firms would no longer be subject to the law’s enhanced scrutiny and capital requirements. Without the resolution regime, regulators might face the same unappetising choices they had in 2008: allow the firm to go bankrupt (like Lehman Brothers) or bail it out (like AIG). Mr Romney has backed higher capital requirements, so banks would get little relief from one of their main complaints.
In previous decades, presidents largely left monetary policy to the Federal Reserve. No longer. The Fed’s efforts to save the financial system by injecting loans into it, and to boost the economy through quantitative easing (QE: buying bonds with newly created money) have drawn it into political territory, triggering a Republican backlash. Ben Bernanke’s term as chairman ends in January 2014. Whoever is president will have to decide whether he stays or who succeeds him—thus shaping not just fiscal, but monetary, policy.
Mr Obama reappointed Mr Bernanke, a Republican, in 2010, and his other Fed appointees have backed Mr Bernanke’s policies. If he chooses to replace him, the likely candidates—Janet Yellen, the current vice-chairman, Christina Romer, former chairman of the Council of Economic Advisers, and Larry Summers, who headed Mr Obama’s National Economic Council—would probably pursue a similar policy to his. Mr Romney, by contrast, has vigorously attacked QE and pledged to replace Mr Bernanke. Possible candidates include his close advisers Glenn Hubbard and Greg Mankiw, and John Taylor, a Stanford University economist who has fiercely criticised both monetary and fiscal stimulus.
The housing market has begun a long, slow process of recovery, but it remains hobbled by the many people who owe more than their homes are worth, by toughened underwriting standards, and by a reluctance among private lenders to extend credit without a federal guarantee. Fannie Mae and Freddie Mac (formerly privately owned, but now controlled by their regulator) and the Federal Housing Administration now back some 90% of new mortgages. To reduce foreclosures, Mr Obama’s administration has subsidised modifications of troubled mortgages by private lenders. In the long run Mr Obama would wind Fannie and Freddie down, and has suggested replacements including a federal guarantee to be activated during crises or federal reinsurance sold as a backstop to private insurers. He has not endorsed any of them yet. Mr Romney has criticised Mr Obama’s efforts to “hold off the foreclosure process”, but has offered nothing specific in its place.
The traditional division of labour under which Republicans espouse free trade and Democrats seek protection from it has been scrambled a bit this year. Mr Obama has not exactly embraced free trade, but he has shed much of his scepticism, signing bilateral trade agreements with Korea, Colombia and Panama that George Bush negotiated (after some revision) and agreeing to Russia’s accession to the World Trade Organisation. While the Doha round of international trade talks has languished, Mr Obama’s administration has shifted its focus to the Trans-Pacific Partnership, which would bring down trade and investment barriers between nine Pacific Rim economies (11 once Mexico and Canada join).
Presidents often talk tough on China as candidates but relent once in office. Mr Obama has brought various trade complaints against China, including charges of subsidising tyres, solar panels and, in September, car parts, but has declined to take the provocative step of designating China a currency manipulator for holding down the value of the yuan.
Mr Romney has promised to pursue new trade agreements and talks of “Reagan Economic Zones”, in effect free-trade areas run according to American rules. But he has been unusually truculent towards China, even for a presidential candidate. He vows to label it a currency manipulator on his first day in office and to impose compensating tariffs. Although Mr Romney sees this as a negotiating tactic to wring concessions from China, it could easily backfire. Stephen Roach, a former chairman of Morgan Stanley Asia, imagines Mr Romney’s action triggering tit-for-tat tariffs and eventually all-out economic war.
Cynical observers (including the Chinese) expect Mr Romney will wriggle out of his commitment, perhaps by seeking some sort of concession, however vague, from China between the election and his inauguration. But that would be a breathtaking about-face, and the world would be wise not to bet on it.
Meanwhile, unemployment is above 8%, and 40% of the jobless have been unemployed for at least six months. Worse, a growing number of workers, in particular working-age men, have left the workforce. The main problem is a lack of demand for workers. But as the skills and habits of the unemployed atrophy, they may become unemployable, and America could end up with structural unemployment similar to Europe’s in the 1980s and 1990s. America is poorly equipped to respond; it spends far less than other countries on active measures to help the unemployed retrain and find new work.
Continued in article
Too Perplexing to Talk About
Candidates Ignored Some Big Economic Issues in Debate ---
The first presidential debate had more discussion about Big Bird than the euro zone.
If you listen to last night’s debate, the U.S. economic challenges don’t include housing or the spillover impacts from the euro zone’s debt crisis. Scant attention was paid to the fiscal cliff.
Agence France-Presse/Getty Images Big Bird was name checked more than the euro zone.
The inattention highlights the fact that no matter who wins the White House, policy changes won’t come soon enough to alter the short-run trajectory of the U.S. economy. Real gross domestic product is likely to grow at an annualized rate centered around 2% — and that’s if the fiscal cliff is avoided.
Consumer demand will be constrained by so-so job growth and stagnant wages. In addition, workers will see a drop in take-home pay if — more likely, when — the cut in Social Security withholding expires at the start of 2013.
Both candidates said they want to promote manufacturing and good-paying factory jobs. That goal will be difficult without the benefits of a healthy export sector, yet U.S. manufacturers are losing customers around the world. On Thursday, S&P said the global recovery remains precarious and the euro zone has fallen back into recession.
The export index of the factory survey done by the Institute for Supply Management shows new demand from foreign buyers has been contracting for four months in row.
While President Barack Obama said housing is doing better, the sector isn’t the usual engine of growth in this recovery.
One reason is the difficulty in getting a mortgage even for qualified borrowers, as outlined in an article in The Wall Street Journal on Thursday.
Yet “the candidates never mentioned foreclosures, refinancing, Fannie Mae, or Freddie Mac,” lamented Jed Kolko, chief economist at housing website Trulia, in a blog post after the debate.
“Apparently, this housing crisis is over,” he wrote.
Perhaps the candidates sensed that, six years after the housing bust, U.S. voters have become inured to the sector’s ongoing problem. But imagine the public outrage if Bert and Ernie were seen standing in the unemployment line.
"Will Shale Gas Save Obama? America's energy revolution rolls on, and a
beneficiary is the president who has done so little to advance it," by
Holman W. Jenkins Jr., The Wall Street Journal, October 5, 2012 ---
In one way, the President Obama who showed up for Wednesday's debate was exactly the president who showed up in the Oval Office the last four years. He clearly lacked his opponent's single-minded focus on jobs, jobs, jobs.
Luckily for him, his performance probably won't hurt in one ex-battleground state, Pennsylvania, where Mr. Obama leads by a handy 10% or more. He can thank the shale energy revolution that many of his allies would like to stamp out.
Philadelphia, which gave 83% of its vote to Mr. Obama in 2008, is being reinvented as an energy hub to rival Houston. Three giant local refineries, closed or slated for closure, are springing back to life thanks to the Marcellus shale that underlies much of Pennsylvania.
The nearby Marcus Hook refinery, closed since February, will reopen as a processor of natural-gas liquids from the "wet" gas pouring forth thanks to Marcellus. The Sunoco refinery in South Philly will be converted to process Bakken crude from North Dakota using Marcellus gas as an energy source. In nearby Trainer, Pa., yet another refinery is being rescued by Delta Air Lines, to produce jet fuel using North Dakota crude.
Pipelines and port terminals, creating thousands of construction jobs, are being built to move Marcellus ethane and propane to the Gulf Coast and Europe. A new rail yard is being built along the Schuylkill River. Last year, the local Aker Philadelphia Shipyard was near closing. Then it landed a $400 million contract with Exxon Mobil to build two new tankers.
The payoff isn't only jobs. A giant stimulus check has landed in the pockets of the state's utility ratepayers, who saved an average of $3,000 per household in the last three years due to the superabundance of natural gas created by the controversial process of hydraulic fracturing, or "fracking." When was the last time a new gas utility was formed in the crusty Northeast? Leatherstocking Gas Co. will soon begin bringing service to many residents of Susquehanna County for the first time.
Five years from now, the Philadelphia politicians who today continue to denounce fracking as an assault on Mother Earth will be trumpeting the city's reinvention as a new energy capital. Count on it.
Last year, the Philadelphia City Council unanimously approved a resolution demanding a moratorium on drilling in the state, and Mayor Michael Nutter declined to show up at a local trade show of the Marcellus Shale Coalition. This year he showed up.
President Obama's "you didn't build that" argument applies in Philadelphia in ways that it might benefit Mr. Obama to notice.
Where to start? Two GOP legislators in Washington amended a Jones Act waiver bill to facilitate shipping by sea of Marcellus liquids to petrochemical plants in Texas and Louisiana. The Jones Act restricts trade between U.S. ports to ships built, flagged and manned by Americans. No existing gas-liquids tankers fit that description.
Pennsylvania's GOP Gov. Tom Corbett teamed up with the Obama White House to lean on state and federal environmental regulators to allow the Sunoco project to use a previously acquired emissions credit. That ruling is now being challenged in court by a local clean-air group.
Mr. Corbett and the GOP-dominated legislature enacted a controversial law brushing aside local zoning control of drilling. To assuage the resulting bruises they included a "well-impact fee" that was anticipated to generate $185 million this year to be spread among towns, counties and statewide environmental projects. Actual haul: $206 million.
Mr. Corbett has also been notoriously free with a tax abatement and development grant. He peeled off $55 million in state money for the Delta and Sunoco projects. He chipped in $1.7 billion in tax favors for a huge Shell petrochemical refinery going up near Pittsburgh.
Continued in article
Welfare for Hollywood: The Studios That Want Higher Taxes Also Want a
Special Tax Credit
The Wall Street Journal
October 5, 2012 --- Click Here
The Hollywood fashion "hobo chic" probably seems bizarre to most people. But perhaps celebrities are merely emulating the well-heeled production companies that have just hit up California taxpayers for another $200 million. Is this what Hollywood liberals call social justice?
Governor Jerry Brown this week signed a two-year extension of a film and television tax credit that his Republican predecessor Arnold Schwarzenegger supported in 2009. The credit is essentially a dolled-up subsidy. For every dollar that production companies spend on a project in the state, they get credited 20 to 25 cents against their state sales and income taxes. Nice deal if you can get it.
Conan the Barbarian had Hollywood friends, but what's Mr. Brown's excuse for subsidizing one of California's oldest and most prosperous industries?
Hollywood's mendicants claim the state is losing production jobs to lower cost, more charitable states. In 2002 Louisiana's Republican Governor Mike Foster started the expensive trend of using tax credits to lure production. Bobby Jindal has expanded the credit, and other GOP Governors such as Texas's Rick Perry and Virginia's Bob McDonnell have followed. By 2010, 44 states were offering such incentives.
While Mr. Brown may reckon that he's merely keeping up with the Jindals, in the last two years about a dozen states have discontinued or dialed back their subsidies including New Jersey, Kansas and Arizona. Lawmakers in those states have realized that there's only so much cash to go around, and every dollar paid to Hollywood is one fewer sent to schools. Most independent studies—those not paid for by the Motion Picture Association—also show that the subsidies provide little bang for taxpayer bucks.
The liberal Center on Budget and Policy Priorities in 2010 found that every dollar Massachusetts spends on film tax credits raises a mere 16 cents in revenue. That's a net taxpayer loss of 84 cents. California's Legislative Analyst's Office has concluded that the economic benefits of the credits are "dramatically overstated" and that the subsidies "arbitrarily favor some producers over others, and will mostly fund productions that would have been filmed in California in any case."
The California Research Bureau likewise reported last year that there is no "clear evidence that any significant damage to the state's industry or economy has resulted from efforts by other states to draw movie production away from California in the past decade." Employment in Los Angeles's film industry increased by 50% between 2000 and 2009 while growth remained flat in the rest of the country. California has plenty of runaway problems—a bullet train, spending, jobs—but movie production isn't one of them.
Speaking of jobs: Democrats and Hollywood liberals who insisted the tax credits were needed to make California more competitive are now campaigning for a tax hike. Warner Bros., Walt Disney, Sony, Comcast and Viacom have contributed money to the Governor's tax measure, which would raise the sales tax by a quarter of a cent and the top marginal income-tax rate to 13.3% from 10.3%.
While the tax hike won't directly hit the production studios, it'll wallop investors and small business, which are really at risk of running away. A recent Manhattan Institute study found that 3.4 million Californians in the last two decades have sought asylum in other, mostly lower-tax, states. We like movies as much as the next guy, but their producers shouldn't prosper at taxpayer expense.
Illinois did the same thing when it dramatically increased taxes in the face of massive deficits. But then Illinois began handing out subsidies to the largest taxpaying employers in the state to keep them from making a run for the border.
October 8, 2012 message form Professor Saeed Roohani
New healthcare standard for medical malpractice: disclosure –apology- offer helps to lower the cost of healthcare.:
It’s hard to say "I’m sorry." Especially if it could get you sued.
But physicians in Massachusetts say a new law represents a major breakthrough in how doctors and patients interact after a medical error causes harm — not to mention reforming a medical-liability system that has become onerous and expensive for doctors.
The approach is called ’disclosure, apology, and offer’ (DA&O), and is included in the healthcare cost-control bill passed by the Massachusetts Legislature and signed into law by Gov. Deval Patrick in August.
The reform language was hammered out in multi-year negotiations by representatives of the Mass. Medical Society (MMS), the Mass. Bar Assoc., and the Mass. Academy of Trial Attorneys, all of whom agree that the change will both improve patient safety and reduce the volume of unnecessary and protracted lawsuits — and perhaps lower ever-spiraling insurance costs for physicians.
XBRL and Healthcare Standardization
This does not go as far as the Texas constitutional amendment limiting punitive damages, but it's a good start for the blue, blue state of Massachusetts.
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/