Via djw at LG&M and Echidne, the original sentence:

Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of ‘capitalist democracy’ into an oxymoron.

The it's-not-the-stupidity-it's-the-coverup "explanation" from the editor:

[Thiel] writes only that women have tended to favor policies and candidates he opposes, and which he thinks are bad for the country. This seems — to my mind at least — regrettable, but also generally true.

We can leave the question of whether Jason Kuznicki actually uses his mind as an open one. For now, I just plan to assume he never wants any woman with half a brain to work at CATO. He continues:

Thiel might have chosen his words more carefully, but it’s still quite a logical leap from what he actually wrote to demanding the end of women’s suffrage. Of course women should be able to vote. It’s ridiculous to suggest otherwise. We libertarians just need to do a better job of convincing them that voting in favor of individual liberty and free markets are the best choices they can make. [emphasis mine]

All right, let's assume—contra the evidence—that Thiel is not demanding an end to women's suffrage. Since he has equated giving women the vote with the death of the "notion of 'capitalist democracy,'" we are left with three choices

1. Take Thiel at his word that giving women the vote destroyed the glorious CATOist "capitalist democracy,"
   
2. Take Kuznicki at his word that women are just too dumb to understand the glories of "individual liberty" and "free markets," but that Institutes like CATO are around to help them overcome their inferiority in that respect, or
   
3. Conclude that Kuznicki believes that people who read CATO Unbound are illiterate, or at least stupid enough to believe that Thiel's decision to make an attack on women's suffrage part of the subject of his sentence referred to a subordinate clause, not the predicate.

I used to expect better from CATO. It's sad to see them resort to "Who are you going to believe, me or the text I published?"

by Bruce Webb

I just went on a web cruise through the bigger venues of the left blogosphere and I don't think even some of the big guys get it. The prevailing sentiment seems to be that 60 is not a particularly important number because it only takes one Blue Dog to defect to sustain a filibuster. But this I think is to miss the actual dynamics that were in play and how Specter's move changed the game.

(This ran long so I stuck most of it under the fold.)


First Republicans rarely had to sustain a filibuster through an actual cloture vote, and when they did had the numbers to do it on their own. When Bush was in office they used the filibuster as a stand-in for the veto threat, on the reasonable enough argument that if Democrats couldn't muster 60 votes for cloture, they sure as hell wouldn't get 67 to override a veto. So if the ultimate result was going to be a veto then a compromise why not save everyone time and grief and compromise now. In doing so they were able to present themselves as the voice of reason while asserting that everything the Democrats did was simply political posturing in the face of the inevitable. And once compromise was agreed to the Blue Dogs could spring to action without every being openly disloyal to the party. Given that at least some of their votes would be needed to pass any legislation they held a key gatekeeping role.

But the key is that the Republicans took all of what heat there was in this scenario, which is okay for them, there was realistically not much the Democrats could do to them beyond trying to punish them at the ballot box, something they would be doing anyway. Meanwhile the Blue Dogs could but on the White Hat of Compromise.

Things tightened up after the election of Obama, the implicit veto threat now being off the table and so removing the Republican defense that they were only facilitating the ultimate compromise. Now they truly had to be the Party of No in order to be effective, but as long as they could keep a united front they could still prevail. And just as importantly their Blue Dog allies could keep their hands clean.

Well that dynamic changed yesterday. Specter's move in party may not have much effect on his vote on final legislation but though he denies that this means he will be a reliable 60th vote on cloture in practice that will be impossible. He simply can't afford to be the constant last vote to block the Leadership agenda, their promise to clean the primary field as much as possible will become null and void if he constantly sides with the Republicans on filibuster threats. And the same goes for the current Blue Dogs. Up to now they have been able to keep their hands clean and while they could hint that they were not certain votes for cloture in practice they had to go along. Which is why Democrats had no defectors on the Obama budget, the Dogs had too much to lose.

Why is why some of the projections on the Left that Bayh or Nelson will jump over to the Republicans are more than overstated. Thinking back over the history of Senatorial defections I can't think of one since Strom Thrumond went from Dep to Rep in 1964 where someone consciously chose to move into the minority on principle alone.

There may be some key votes where a Blue Dog will simply decide he can spit in the faces of Obama and the Leadership and get away with lining up with Republicans to sustain a filibuster but there will be a price to pay, (as Specter found out when his leadership tacitly endorsed him being primaried by Toomey). So while we can expect them to do their best to block the progressive agenda I don't think the filibuster will be a viable option, and certainly not if with Bayh you have Presidential ambitions.

So yesterday was a big day. The ideology of the Senate may not have shifted an iota, but the dynamics shifted a lot. Rather than being passive enablers of Republican obstruction the Blue Dogs would have to move into open opposition to Obama. This might work in relation to something like EFCA but if they try to get too blatantly in the way of Health Care reform they will be steamrolled. Something I suspect they know full well.

(In Googling I see that Ben Nelson serves on four powerhouse committees: Appropriations, Armed Services, Agriculture, and Rules and is up for election in 2010. I don't think he would like to be shifted from one or all of those over to the Indian Affairs or Aging Committees or the Special Committee on Printing in 2008.)

By Spencer,

Is there any truth to the reports that Rush Limbaugh and Newt Gingrich are proposing that we need to cut tax rates on dividends and capital gains to deal with the swine flu?

Putting a human face on the need for public goods and services.

Perhaps Rick Perry will take the next step from asking for help and realise that being a country means more than just not paying taxes.

by cactus

What's the Scam?

Over the years my wife has known her, a friend of hers has developed a, shall we say, checkered past. That includes a felony (for drunk driving), at least one bankruptcy, as well as a number of questionable deals in which she was engaged in partnership with her husband. (She recently began divorce proceedings against him.) For example, my understanding is that the couple sold a vehicle about a year ago, and, ahem, activities related to the sale resulted in grand larceny charges plus against her husband and a no contest plea from him. I recall hearing about a number of other interesting misadventures the couple had had over the years.


I'm swamped, so I'm going to cut to the chase. My wife's friend was in a bar one night, and met another felon who hired her to sell health insurance to small companies. (There was a small matter of obtaining a license, but that was achieved in short order.) I hear things third hand, mind you, but my understanding is that the ratio of felons to non-felons in the office is surprisingly high considering that social security numbers and financial information are provided to the agent by clients. I understand the concept of rehabilitation, but like I said, that ratio is high enough that it isn't happening by accident.


And then there's another thing. My understanding is that my wife's friend is now making upwards of $4,000 a week. That is a not-insubstantial amount of money, especially considering that a) she has only been at this three months, b) she had zero experience or knowledge of health insurance before this point, and c) she doesn't have any particular skillsets that relate to health insurance or health insurance sales. Another factoid: it seems she gets a 28% commission. That's her take-home, not the office or her boss or any of the other fixed costs. Also, I looked up the insurance company which has most of the policies she sells, and that company, at least, is definitely legitimate.


So I'm wondering what's going on here. Any ideas?
_______________________________
by cactus

By Spencer,

Given all the attention the press is giving the 100 days results I though people might find this chart of interest.


There is a wide spread convention to use the election day as a base for the stock market because of the belief that the market is a way of discounting future results.

Of course I will not point out that the policies Larry Kudlow wants to repeat produced the second worse stock market results of any US President.

rdan

A regular reader claimed the torture debate at Angry Bear was simply an opportunity to libel. Let that not ever be repeated. These are only some posts on the issue here, from different points of view. Such an important issue deserves careful thought, and no invective. If all you have is swearing, either side, you have lost the argument.

Stay away from fox news on torture says army 2004

Joe Lieberman 2004

Cheney and torture 2005

On the geneva conventions 2006

waterboarding 2007

McCain and Giuliani 2007

Torture legalities 2007

Battlefield ethics 2007

Ticking time bombs 2007

Canada and human rights

David Rose 2008

McCain and torture 2008

Andrew Sullivan and McCain on torture

There are more if you have a real interest and not a passing political excitement.

by Divorced one like Bush

The Yahoo Financial page has had this headline from the AP up for a while today:
Top Stories
Investors are cautious as swine flu cases increase- AP
This is the first line:

The swine flu gave Wall Street a reason to turn cautious. The Dow Jones industrial average gave up a midday recovery and retreated about 0.6 percent Monday as the swine flu's death count in Mexico grew to about 150 people from 100.

Really? Swine flu is the reason one should be getting out of the market. Not any of these:
Whirlpool 1Q profit drops on weakening demand - 1 hour, 4 minutes ago
- AP

Whirlpool Corp., the world's largest maker of stoves, refrigerators and other major home appliances, said Monday its first-quarter profit fell 28 percent on slumping sales, softening consumer demand and the stronger dollar.

Boeing CEO calls slump 'once-in-a-lifetime' event - AP - 1 hour, 5 minutes ago

Boeing Co. Chairman and Chief Executive Jim McNerney assured shareholders Monday that the company is in strong shape to ride out the "once-in-a-lifetime" downturn that has walloped its profits, jetliner orders and stock price.

GM to cut 21,000 US factory jobs, shed Pontiac - AP - 2 hours, 39 minutes ago

General Motors Corp. could be majority owned by the federal government under a massive restructuring plan laid out Monday that will cut 21,000 U.S. factory jobs by next year and phase out the storied Pontiac brand.

Or this from a few days ago:
Retail import volume at U.S. container ports to decline at least through summer, report says

Import cargo volume at major U.S. retail container ports fell again in March after dropping below the 1 million twenty-foot-equivalent (TEU) mark in February, the first time in seven years the total had fallen that low. And the volume declines should continue for at least a few more months, according to an IHS Global Insight-National Retail Federation (NRF) report issued Wednesday.

U.S. ports will handle an estimated 987,371 TEUs in April, which would represent a 22 percent drop compared with the same 2008 period, after handling an estimated 930,142 TEUs in March, a 19.7 percent decline compared with March 2008’s total, according to the IHS Global Insight-NRF monthly Port Tracker report.

Swine flue is what's doing it for you hey? Not that workers are being shed, profits are down, container traffic is down. I mean come-on, what could a company not making a profit or selling less stuff while shedding jobs in a down economy that was 70% consumer driven have to do with you making money off of their stock. Nothing I guess.

Nothing has changed. There are still two economies and only one of them is a concern.

by Bruce Webb

Well there is no such bill, but it would be a good title for what we would see if we put the entire economic right tax agenda together. Because what seem to be totally different arguments end up delivering the same outcome.

We can start with the corporate income tax. The argument here is that it represents 'double taxation' and/or that it just gets passed through in prices. Okay we can debate that in comments if you like.

Then we can move on to the estate tax. Along with emotional appeals to the 'death tax' you get an argument about it being unfair to small business and family farms. Another topic for debate.

Moving along we have tax on dividends and tax on capital gains. Once again we have our old friend 'double taxation' along with arguments that taxes on these simply reduce motivation for re-investment.

Well then we can step down the road to marginal tax rates. Obviously higher rates similarly reduce reinvestment.

Which brings us to the Flat Tax. Here the argument is that you can save billions in compliance costs and so have everyone paying less. This argument is a hoot, but I'll leave it for others.

What would happen if you passed all of this as a package? And all with arguments stemming from economic equity and efficiency in order to get majority support?

Billionaires would never have to pay a dime in federal taxes. There are I believe five Walton's heirs. If you eliminated corporate income tax there would be that much more to distribute as dividends, which should also serve to drive the stock price up. If you eliminate the tax on dividends than each would have just that much more money to spend or reinvest. If you further eliminate taxes on capital gains (all in the interest of the larger economy of course), any stock sales for the purposes of diversification or otherwise would not be subject to tax. And if as a final step you eliminated the estate tax the entire capital accumulation would pass tax free to the next generation.

If we choose we can have a spirited debate on all of these separately or in combination, have at it (I am going out for lunch). But if we yielded individually on each issue to these economic right proposals and all of it was wrapped up into one bill the post title becomes perfectly appropriate. Because when it comes down to their total agenda the economic right fully agrees with the famous dictum of heiress Leona Helmsley:

"We don't pay taxes. Only the little people pay taxes ..."

Why does the Queen of England have multiple palaces and huge collections of jewels and gilded carriages? Because until recent times Royals paid no taxes at all and certainly no taxes on capital. Did the British Monarchy actually deliver value in exchange for that status? Well the American Colonists certainly didn't think George III was worth it, but that is a decision for the British People. The question is whether we want to transform holders of great family wealth into our own heriditary tax-free aristocracy? Do we want to transform 'hedge fund king' from a metaphor to a reality?

If so lets get busy on the Helmsley Act.

If not always remember that the first question you should ask about such proposals is 'cui bono' and not just at the margins. Who gets how much?

By Stormy

What can I say? Bank bonuses are climbing again. All is hunky dory. Casandra-Krugman again sounds the alarm. And Geithner, boy wonder, child of the New York Fed, protégé of Rubin, is the unabashed advocate of his dining chums: Citibank mucky-mucks, Goldman and Sacks execs…on and on the list goes. Why, just as Citibank was going into a tailspin, Sanford Weill, its CEO, asked Geithner take over as Citibank's chief exec.

Joe Stiglitz puts the problem kindly when he says:

“I don’t think that Tim Geithner was motivated by anything other than concern to get the financial system working again,” Mr. Stiglitz said. “But I think that mindsets can be shaped by people you associate with, and you come to think that what’s good for Wall Street is good for America.”

There is a cancerous club mentality that reaches from the Fed to the banks, to the lobbyists, to the government, supported by a cadre of adoring economists singing praises of Summer, hoping to be called to Washington. And who fills the seats on the New York Fed? Execs from Citigroup, JPMorgan, Chase.... They are the foxes; we are the chickens.



There are those who have long decryed the Federal Reserve System as a scam with its fractional banking. You hear them occasionally railing against the system. Mainstream economists generally ignore them, treating them as wackos. Clearly, these folks will never be members of the club.

What bothers me are the incestuous relationships that pervade the Fed, the Treasury, and the banks. It is a revolving door: Exit a bank; enter the Treasury or the Fed. Exit the Treasury; enter a bank. The argument for this chummy arrangement is: A major bank CEO would be a good Fed or Treasury man. Who else has such marvelous insight into the financial workings of the U.S.?

And what about academia? Well, if you have used your skills to make money off the system, if you have entered the financial pit and made money for the big guys, then you can join the club...if you have a good sponsor. So it is with Summer. You can share a good cigar, a barbecue or two. Have the kids and wives get to know each other. Talk shop occasionally as you sip a fine martini. As your resume builds, so too do your connections...and your wealth. You get the key to the revolving door. When Geithner or Summers finally step down, you know where they will land.

Frankly, I am tired of all this. As Krugman says:

...there’s no longer any reason to believe that the wizards of Wall Street actually contribute anything positive to society, let alone enough to justify those humongous paychecks.

So why did some bankers suddenly begin making vast fortunes? It was, we were told, a reward for their creativity — for financial innovation. At this point, however, it’s hard to think of any major recent financial innovations that actually aided society, as opposed to being new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes.

Consider a recent speech by Ben Bernanke, the Federal Reserve chairman, in which he tried to defend financial innovation. His examples of “good” financial innovations were (1) credit cards — not exactly a new idea; (2) overdraft protection; and (3) subprime mortgages. (I am not making this up.) These were the things for which bankers got paid the big bucks.

I am not suggesting that they act as a collective conspiracy, although I sometimes wonder. Nonetheless, this a group of people who are always looking for more power and more wealth. Over time, they have built a system that skims more and more wealth into their pockets. Financial innovation? You got it. More bank charges and trickier credit cards? You got it.

We nibble at the edges, trying to fight back. Maybe all students should not get credit cards. Maybe they should be screened to see if they can handle the credit. Is this the best we can do?

How do you stop the revolving door? With great difficulty. Those who advise the President on Fed or Treasury appointments are those very folks who have the most to gain, the members of the club. I wish we could change the ethos of greed; I wish there were someway of stopping the revolving door. Maybe enforced retirement when you get to the Fed or Treasury level? You cannot be a CEO or financial officer of any major bank? (We have the same problem with ex-Presidents, ex-senators, and ex-congressmen--they all crowd into revolving lobby door.)

What to do. I do have a couple of suggestions, one of which has already been made elsewhere: Break up the largest banks and private institutions. Simon Johnson has made just such a suggestion. In his testimony before Congress, he states the problem:

Jobs in finance became more prestigious, people in finance became more prestigious, and the cult of finance seeped into the culture at large, through works like Liar's Poker, Barbarians at the Gate, Wall Street, and Bonfire of the Vanities. Even the convicted criminals, like Michael Milken and Ivan Boesky, became larger than life. In a country that celebrates the idea of making money, it was easy to infer that the interests of the financial sector were the same as the interests of the country as a whole - and that the winners in the financial sector knew better what was good for American than career civil servants in Washington.

His solution?

the advice from those with experience in severe banking crises would be just as simple: break the oligarchy.

In the U.S., this means breaking up the oversized institutions that have a disproportionate influence on public policy. And it means splitting a single interest group into competing sub-groups with different interests.

Another additional way is to draw a real line between government and those entities it oversees.

In this case, draw the line between the financial sector and the Treasury and the Fed. Treasury and Fed cannot comprise individuals from the very sector they oversee. Nor can Treasury or Fed officials take a job in any institution that the Fed or Treasury oversee.

Create two distinct job lines, two professional castes, each with its own ethos and responsibility.

The line between government and private enterprise has become too blurred, too easily subject to abuse. Entering one should mean being forever disbarred from the other. When your life's work in either is done, you retire--permanently. Bill Clinton should be on the golf course, not lobbying for foreign powers or private companies...or joining this or that corporation as many of the high officials in his and other administrations have done. Retire. Or do philanthropic work.

The disease that has brought the financial sector to its knees now protects it. That very disease has destroyed our health care system...and threatens other sectors of the economy as well.

Breaking up those institutions that have grown too large to fail is certainly one step forward. But we need to do major surgery on the real cancer: Cronyism gone amuck.

Dear Brad,

Do you want to reconsider the title of this post in the context of this article?

An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.

His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.

To take a phrase more prominent in our middle-school days, he would qualify as an "unindicted co-conspirator."

rdan

John Dugan speaks:

TESTIMONY OF
JOHN C. DUGAN
COMPTROLLER OF THE CURRENCY
before the
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
March 19, 2009

It would not have the benefits of onsite examination and supervision and the very real leverage that bank supervisors have over the banks they regulate. That means, we believe, that compliance is likely to be less effective. Nor would this approach draw on the practical expertise that examiners develop from continually assessing the real-world impact of particular consumer protection rules – an asset that is especially important for developing and adjusting such rules over time. More troubling, the ingredients of this approach – registration, licensing and reliance on enforcement actions to achieve compliance with standards – is the very model that has proved inadequate to protect consumers doing business withn state regulatedn mortgage lenders and brokers.

Finally, I do not agree that the banking agencies have failed to give adequate
attention to the consumer protection laws that they have been charged with
implementing. For example, predatory lending failed to gain a foothold in the banking
industry precisely because of the close supervision commercial banks, both state and
national, received. But if Congress believes that the consumer protection regime needs to be strengthened, the best answer is not to create a new agency that would have none of the benefits of a prudential supervisor. Instead, the better approach is a crisp Congressional mandate to already-responsible agencies to toughen the applicable standards and close any gaps in regulatory coverage. The OCC and the other prudential bank supervisors will rigorously apply them.

But I remember him thusly:

OCC ruling and federal pre-emption of state regulatory rules, in addition to national banks chartering myriad state based subsideriaries.

Who validates the financial models 1

Who validates the innovations 2

Occ links

rdan

Update: The thread devolved into rants on the part of some instead of making a point. Such writing dimishes whatever your position happened to be.

Post from The Bell hat tip run75441

"Joshia's Example"

We Elected a Reformer, Not an Avenger.

Then Josiah the king sent and gathered together all the elders of Judah and Jerusalem. Josiah went up into the house of the Lord . . . and he read in their ears all the words of the Book of the Law that was found in the house of the Lord. Josiah stood in his place and made a covenant before the Lord to walk after the Law and to keep its commandments and its testimonies and its statutes with all his heart and with all his soul . . . and he caused all that were present in Jerusalem and Judah to [do the same].

~ Chronicles II, 34:30-33.

Last week, President Obama released several previously classified CIA memos issued during the former Bush Administration, justifying and sanctioning the use of “interrogation with enhanced techniques” (i.e. torture).

The memos proved what many had suspected all along – the brutal treatment of detainees at Guantanamo Bay, Abu Ghraib prison in Iraq, and elsewhere was widespread and systematic. Rather than the acts of “a few bad apples,” as former Deputy Secretary of Defense Paul Wolfowitz once insisted, torture was the product of orders issued from individuals like Wolfowitz and others in the highest circles of command.


Obama has been clear he will not prosecute CIA agents and other low-level personnel who conducted interrogations, as they were simply following orders their superiors had assured them were legal. He initially expressed a similar unwillingness to indict those issuing orders, saying, “Nothing will be gained by spending our time and energy laying blame for the past.”

Pressure from anti-war members of Congress and left wing progressive groups have caused Obama to retreat from his original position. He now says he might accept a “Truth Commission” but urged Congressional Democrats to appoint an independent prosecutor or panel rather than holding hearings themselves. He has rather vapidly decreed that “most” decisions regarding legal extradition, trial, and punishment will be left to Attorney General Eric Holder. For his part, Holder has been equally equivocal. “No one is above the law. So we’ll see what happens.”

Many liberal pundits are taking Obama to task for his reservations on this topic, insisting his vacillation is undermining the moral as well as practical objections he raised against the Iraq War and war on terrorism during the 2008 campaign.

The clamor started with Howard Fineman in the current issue of Newsweek. He is joined today by Paul Krugman in the New York Times, who asserts, “The only way we can regain our moral compass, not just for the sake of our position in the world but for the sake of our own national conscience, is to investigate how [it all] happened and, if necessary, to prosecute those responsible.”

Krugman continues, “For the fact is that officials in the Bush Administration instituted torture as a policy, misled the nation into a war they wanted to fight and, probably, tortured people in the attempt to extract ‘confessions’ that would justify that war.”

The Washington Post’s Eugene Robinson swells the chorus with his voice. “Torture is not just immoral but also illegal. This means that once we learn the whole truth, the law will oblige us to act on it.”

Only Roger Cohen, writing a few days earlier in the New York Times, is inclined to sway toward mercy over justice.

“I’m wary of the clamor for retribution. Congress failed. The press failed. The judiciary failed. With almost three thousand dead, America’s checks and balances got skewed, from the Capitol to Wall Street. Scrutiny gave way to acquiescence . . . Those checks and balances are recovering now. I don’t think recovery would be served by prosecutions . . . The right balance between retribution and reconciliation is always hard to find in the aftermath of national trauma . . . There’s work to do. Obama’s right – America should look ahead, not back.”

There are probably many reasons why Obama does not wish pursue those who authorized torture, despite the seriousness of the charges. It is certainly clear why he favors an independent commission over Congressional hearings. Even Obama is beyond counting on lessened GOP opposition as a reward for his largesse. However, he cannot afford for his supporters to be distracted from pursuing his aggressive agenda as they chase after their conservative counterparts.

What is more, a thorough investigation is liable to implicate far too many Democrats along with the usual gang of Republican suspects.

For example, among those briefed by the CIA in 2002 about the decision to use waterboarding and other coercive interrogation techniques were ranking Republican and Democratic members of the Senate and House Intelligence Committees.

The ranking House Democrat was Representative Nancy Pelosi of California. She remembers receiving assurances such practices were legal but not that U.S. interrogators were actually going to use them. The ranking Senate Democrat, Senator Bob Graham of Florida, denies receiving any kind of briefing.

The ranking House Republican, Representative Porter J. Goss of Florida, remembers things a little differently. “We were briefed, and we certainly understood what CIA was doing,” he said in an interview. “Not only was there no objection, there was actually concern about whether the agency was doing enough.”

Obama may also realize that as justifiably outraged as some liberals may be over torture, other Americans not only continue to defend it use but regard the termination of such practices with equally sincere outrage.

“By inviting the prosecution of Bush officials for their anti-terror legal advice, President Obama has injected a poison into our politics that he and the country will live to regret,” fumed the Wall Street Journal’s lead editorial on Wednesday. “Until now, the U.S. political system has avoided the spectacle of a new Administration prosecuting its predecessor for policy disagreements.”

Representative Pete Hoekstra of Michigan, the current ranking Republican on the House Intelligence Committee, goes so far as to question which side of this argument is truly guilty of the worst crimes. “Perhaps we need an investigation not of the enhanced interrogation program but of what the Obama Administration may be doing to endanger the security our nation has enjoyed because of interrogations and other antiterrorism measures implemented since Sept. 12, 2001.”

Then again, perhaps Obama is following the example of the Biblical king Josiah in this matter. Josiah was king of Judah from 641–604 BC. The once powerful nation of Israel had fallen from the greatness of David and Solomon, splitting into a northern and Josiah’s southern kingdom long ago.

His subject’s worship of idolatry distressed Josiah. He ordered such statues destroyed and their shrines torn down. He also raised money and ordered the great temple at Jerusalem cleaned and restored. During the restoration, a scribe found a long-forgotten writing, which some scholar hold to have been Deuteronomy, one of the Old Testament’s five core books of Mosaic Law.

When Josiah read the book, he became even more distressed and “rent his robes” when he realized how far his people had fallen from the Law. A prophet told Josiah that Jerusalem would pay for its crimes but his honesty and humility had earned him dispensation.

Josiah’s next acts are those chronicled in the quote at the top of this post. He had the lost Book of Law read aloud so everyone could hear it. Then he vowed to adhere to it and urged his subjects to follow his example. He drove out and/or killed the idolatrous priests and some of the worst “abominations” but he conducted no pogroms or purges against Jews who might have strayed.

Josiah was essentially a reformer, not an avenger. Perhaps he felt no small amount of guilt that much of the idolatry had built up in Judah over the preceding reigns of his father and grandfather. Perhaps he simply came to realize the same insight as Aldous Huxley some twenty centuries later.

“The people who make wars, the people who reduce their fellows to slavery, the people who kill and torture and tell lies in the name of their sacred causes, the really evil people in a word – these are never the publicans and the sinners. No, they’re the virtuous, respectable men, who have the finest feelings, the best brains, the noblest ideals.”

The Bush officials most responsible for the reprehensible practice of torture are no less the descendants of the Founding Fathers than ourselves. Like so many things regarding the Iraq War, they lied to us only after first lying to themselves so completely that they came to believe their lies as the truth. By selectively listening to some and eschewing critical thinking altogether, they created a worldview in which torture by the United States was legally and ethically necessary.

Obama, like Josiah, is a reformer. Releasing those CIA memos were a first step, akin to reading the Book of Law aloud in the temple. Further steps may be justified to place the full story before the public but it is a cautionary tale for all. Some high-ranking priests and those guilty of the worst abominations may well need to pay a price but this should not be our paramount concern.

As Roger Cohen observes, “A facile search for scapegoats . . . would allow too many to disregard their own small measure of responsibility.” Even Paul Krugman admits, “During the march to war, most of the political and media establishment looked the other way.”

Our nation’s deviation from the Law over the past eight years was too big and too appalling to think a few trials and convictions can fix it, no matter how much pleasure we might receive watching the likes of Cheney, Rumsfeld, Wolfowitz, Rice, and even former President Bush twisting in the wind. This crew deserves little mercy but history is already descending and judging them as too small – both as lawbreakers and as leaders – to be worth too much more of our valuable time and energy.

Instead, we should seek to clean up the mess and repair what had fallen down from neglect. Obama has begun this process as well by definitively banning torture in the future via executive order. Obama is no messiah, so let us stop moping over his lack of flaming sword. We elected a reformer, not an avenger – time to follow him and bind wounds rather than slashing new ones.
______________________________________

(I'm broadening the discussion now.)
by Divorced one like Bush

Define rich. Define rich! Define rich?

That's the come back every time the issue of raising the income tax on the rich come up. What is unsaid is: Go ahead. Define rich. I dare ya! (Triple dog dare at that.)

Fine. I'll accept the challenge. But, first understand that I accept the challenge because having a definition of “rich” is needed if we are going to fix the money from money economy. We have to ask: When is enough, enough? We have to take the responsibility of having determined what enough is, if we are going to return to the ideal of our democracy. The ideal of equality of power. This ideal was discussed in my postings (3 of them) on taxation.

I think this nation used to know when enough was enough. We used to know what rich was. It was a life; as in “pick a life, not a job”. It was an ability made capable by the amount of money managed (not flowing) through one's hands. That it was a life meant we did not fall for the rhetorical trick of: Define rich! I dare ya. The trick is that the question is asked in reference to defining levels of income at which a specified percentage of taxation will take place. It is the infamous black and white trap when we all know we live in a life that is the spectrum of color. Cross this line you pay, don't cross it, then you don't pay. As with all dares, there is a threat. The threat for the rhetorical “define rich” dare is that the moment a number is chosen, the one doing the daring will retort with a life example of the chosen number that under the life circumstances retort might not be considered rich.

Back when we knew what rich was, we had an income tax based on a spectrum of rich. In fact, something I quoted in my tax series confirms that we knew what "rich" was:

There was another agenda at play as well in the early years of the federal income tax: the desire to use progressive taxation as a way to “ stave off more radical calls for industrial democracy.” This explains why even some high-income Republican groups supported the Sixteenth Amendment. Andrew Mellon, Secretary of the Treasury in the 1920s and one of the wealthiest Americans, “ believed that keeping tax schedules graduated (albeit flatter) would mitigate radical demands for restructuring the capitalist system.”

Even the rich knew what rich was.

Let me say, for me wealth is not the rich I'm talking about. Wealth is another issue that should not be brought into the discussion of "rich" related to an income tax. It get's thrown in as another rhetorical trick, the trick being that one will think about a dollar amount of wealth and then think how much money it took to get that wealth ala income. But, wealth is accounted under the asset category, not income.

Professor Mankiw posted in 2006 about a study that defined a level of rich world wide based on wealth which I think has a presentation ripe for rhetorical trap making. He quotes:

The research finds that assets of $2,200 per adult placed a household in the top half of the world wealth distribution in the year 2000. To be among the richest 10% of adults in the world required $61,000 in assets, and more than $500,000 was needed to belong to the richest 1%, a group which — with 37 million members worldwide — is far from an exclusive club.

So, from a global perspective, if you have net worth of more than $61,000, you are rich.

Really? Thirty 37 million members world wide on a planet of 6 billion is not exclusive? $61,000 of assets should make us all feel rich? The message (and I am not interpreting that Profressor Mankiw's posting suggests any qualification) is that we should all feel equally wealthy and thus rich. Can you see how such a presentation could be used as a rhetorical trap in determining "rich". So, let's not go there. “There” is for the discussion of the estate tax. Besides, once the income has been turned into an asset, it's kind of too late to worry about taxing the income. No?

Also, we are talking the United States of America. Not Zimbabwe. (See the above issue.) I know there are children starving in Africa. We have the same here, it's just that the income needed here to not have a child starving is higher. Purchasing power parity and all that. Though, if we would be adult about the issue of “rich” and define when enough is enough, we would be able to do more for such people as there would be more left for them.

We have lost our definition of rich and I believe it was done intentionally. If you are rich, then what better camouflage is there than to undefine “rich”? And, what better way to undefine “rich” than to have an argument accepted that “rich” can not really be defined? AND, once you can't define rich, well then hey, how can you single out anyone number as a line for having to pay a higher percentage of tax on their income? Thus, we should all pay the same percentage and thus obtain our constitutional nirvana of all man is created equal. Throw in a little pity play as in the “rich are paying most of the taxes”, (funny how those complaining about how much the rich pay in taxes seem to know what “rich” is) present your candidates as the every-man or every-woman, salt of the earth, blab, blab, blab to reinforce the perception that this is all about constitutional equality and BINGO, you get to convert life from an economy that worked for society to a society that works for an economy. And as presented, once you get beyond “enough”, all you have is to have more:

Wealth confers power beyond its consumption value. This power is economic, social, and political. The economic power of the rich derives primarily from their ability to use their wealth to invest in enterprises that employ thousands of people and can dominate large sectors of the economy.

Yes, they are talking wealth. However, as I noted, this is after the rich bought their stuff to make them happy. Now they are just accumulating power.

We need to define “rich”. We need to be adult about this and take the responsibility for understanding the interplay of society and an economy within our form of democratic governance. Personally, I think we will find that defining rich for our purposes is rather easy once we stop answering the rhetorical dare of: Define rich?

For this discussion “rich” is a life classification. The classification is consumption determined, the amount of which is a function of energy expended (ie: physical labor/intellectual labor), work performed (ie: blue collar/white collar) along with energy conserved (freedom), work diverted (power). This aspect of life is not about what the individual finds satisfying. That is another rhetorical trap. We all know of those who are fine with just hitch hiking through the galaxy and would consider them self rich for the memories. The life aspect needed for determining “rich” for the purpose of taxing is the aspect determined by the structure of the society one lives in. For us, that structure is idealized in the phrase: The American Dream. That phrase is the socially understood goal and that phrase is underscored by how much money your hands manage.

Classification as in “class warfare”. Consumption as in “autonomous consumption”. American Dream as in more than autonomous consumption. All three a function of the amount of money managed by one's hands.

To be continued.

Who said:

The United States participated actively and effectively in the negotiation of the [1984 UN Convention on Torture] . It marks a significant step in the development during this century of international measures against torture and other inhuman treatment or punishment. Ratification of the Convention by the United States will clearly express United States opposition to torture, an abhorrent practice unfortunately still prevalent in the world today.

The core provisions of the Convention establish a regime for international cooperation in the criminal prosecution of torturers relying on so-called 'universal jurisdiction.' Each State Party is required either to prosecute torturers who are found in its territory or to extradite them to other countries for prosecution.

Answer here. Is he rolling over in his grave?

by Bruce Webb

(Update 2 : Deleted Update 1.)

Currently there is a lot of discussion about forming a new bipartisan Entitlements Commission modeled in part on the 'Greenspan Commission' of 1981-82 and partly on the Base ReAlignment Commission (BRAC). The idea is that you get people to agree on 'Crisis', then get a 'bipartisan' group together to present an up or down 'compromise' proposal to Congress. I put 'bipartisan' and 'compromise' in quotes because this idea is being pushed by a combination of Conservative Republicans and Blue Dog Democrats who have predetermined the outcome. A group I belong to is preparing some major push-back, and when the lead authors get the material together it certainly will be plugged here. But in the meantime I invite those interested in this to actually revisit the results of the previous Commission.

REPORT OF THE NATIONAL COMMISSION ON
SOCIAL SECURITY REFORM JANUARY 1983.

The guts of the Report are found here:
Chapter 2: FINDINGS AND RECOMMENDATIONS

While the meat is found here: Appendix K- List of Tables This is extracted from the broader Actuarial Cost Estimates for OASDI and HI and for Various Possible Changes in OASDI and Historical Data for OASDI and HI

Some selected tables and commentary below the fold.

The first Table is from Chapter 2 and shows the mix of recommendations. Note that .58% of payroll is punted to Congress, the rest of this was what they could get from a consensus vote. Even then the final vote on the Report was 12-3.


Now the result translated into numbers:
I am only showing the results for Alternative II-A which is the more optimistic of the two Intermediate Cost projections, for II-B you will have to click through. Table 7-A: Cost rates


Now the same data expressed in Trust Fund Ratios by Alternative


A close look shows that the Commission didn't really think they had fixed OAS even in the short run. And while their numbers show OAS (that is the actual retirement component) running surpluses in the medium term they still foresaw it running to Depletion in 2027.

As I have said before this would be a pretty sad and ineffective kind of 'Prefunding Boomer Retirement'. Why is combined TF Depletion now set for 2041? Because the economy actually came in somewhat better than II-A and closer to I (which is now called Low Cost). But that wasn't part of the master plan

Some additional perspective from the Commission's Executive Director can be found in this Oral History of Robert Myers. Oral History of Robert Myers

This is excellent news. One important aspect is that Saez is very reality based, that is empirical. As you have noted from time to time, the economics profession has had a very high opinion of theory in which results are rigorously derived from clearly false assumptions. Saez is, as far as I can tell from his web page, entirely focused on the data and not on theory. I think this might be the first Clark medal awarded to someone for analysing data with minimal and informal theorizing.

Oddly his often co-author Thomas Picketty was a theorists theorist when he was young (and I mean really really young like 20 or so) and shifted to totally empirical because he didn’t believe in the theory — an amazing example of intellectual integrity.

via Brad DeLong and Matt Yglesias. Check out Ken's comment at DeLong's place.


Debate from comments which I found interesting after the jump (and also in comments of course).


I am not absolutely opposed to theory. However, theory should be based on evidence. Existing economic theory is mostly based on pure imagination and then on dismissing the rejection of hypotheses based on data either because auxiliary hypotheses are always needed or because models are false by definition and false models might be useful.

Give me an example of anything useful ever accomplished in the history of humanity by an approach similar to that of economic theory in which theoretical speculation comes before not after striking empirical regularities are observed.

Anything. Ever.
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2slugbaits replies:Today, 18.59.51“Black holes? Gravitational constants? Bending of light? Aren't hese examples of natural phenomena whose existence was predicted by theory and later confirmed by empirical tests?

[skip]

I reply

Your examples ignore my qualifier "striking empirical regularities are observed". The prediction of the bending of light came from general relativity -- the striking empirical regularities were than the location of planets can be predicted given the model that they orbit in ellipses with the sun at a focus, that their angular momentum is constant, that the period of their inverse to the average distance to the sun to the 1.5. These striking empirical regularities were described by Kepler. Based on these striking empirical regularities, Newton proposed a theory of gravity which was used to, among other things, predict that there was a planet around where Neptune was found (and not by coincidence).



In developing his theory of gravity, Einstein matched the same striking empirical regularities used by Newton, plus the innumerable data which fit Newton's model. Also he fit the fact that the perihelion of mercury precesses 90 seconds of an arc per mercurian year.



The theory which fit all of those facts successfully predicted how much light was bent by gravity.



So we have very striking stylized facts based on observation. We have a theory which fits a huge amount of data. We have a prediction -- then we have confirmation.



I didn't mean to suggest that the theory simply restated the empirical regularity which was already observed. What I wrote and what I meant was that a theory which doesn't fit a whole whole lot of facts really well has not yet amounted to anything.



In physics a good shortcut to a theory which fits a whole lot of facts is one that gives the old theory as a special case under the conditions where the old theory fit an amazing number of facts. Thus the later theorist (Einstein) doesn't have to deal directly with the data fit by the old theory (locations of planets) because he knows the stylized fact that, except for the precession of the perihelion of Mercury, the old theory is consistent with the data (and that anomaly depends on the assumption that the Sun is a rigid sphere and that no forces but gravity are relevanat and that there is not another planet even closer to the Sun where it would be almost impossible to see).ù







In contrasst, the prediction that there are black holes has not been confirmed empirically. It is known that there are extremely massive and dense bodies such that *according to theory* they should be black holes. However, what is actually observed is the accreation disk outside of the event horizon. The claim that there is a black hole as opposed to an extremely massive and dense object which is not a black hole because the theory is wrong is based on pure extrapolation based on the assumption that the theory is true.



No empirical observation confirms the theoretical prediction that there should be black holes. The data show that there are objects massive and dense enough so that *if* the theory is true they are black holes.



My view is that theorizing is worth while once one has achieved something with atheoretic empiricism. A theory which fits the facts is worth investigating. Before we have such a theory, we can try to think of one, but we shouldn't claim we know things are true because they are implied by the theory until it has surprising success in fitting the facts, that is, does much much better than reduced form empirical models with the same number of free parameters.



We can also follow the approach which I think is more likely to be fruitful (because unlike the start with a theory approach it has had some success in the past) and try to develope stylized facts with a descriptive approach.



I am not criticizing Newton or Einstein. I am arguing one shouldn't try to be a Newton until there has been a Kepler. No example has yet been presented of a useful Newton without a preceding Kepler (I hope I have made clear what I mean). I do not believe that there is one.

I'm just going to "Go Thoma" on him, since I can't find anything to cut:

Barack Obama tells us we should not investigate American intelligence agents or their overlings who are responsible for torturing hundreds of suspects in their custody. We have to forget about the past, he says, to concentrate our attention on the future. That might be a convincing argument if Obama were going all out for an ambitious program to remake our economy and our relationship to the rest of the world. But the future is on hold because the number one job today is bailing out the financial system, so we can preserve the money moguls who juiced our economy in the past.

by Bruce Webb


Last month we were delivered alarming news from AEI: Slowdown Slashes Social Security Surplus illustrated with the table above in turn derived from this source SSA-Trust Fund Data. And sure enough if you followed the link and inserted Feb 2009 that is exactly what you would see. But what if you put it into series and included the months Dec to March? Well you get the following.






First thing of note. The combined surplus returned in March. While DI continued to run a deficit OAS ran more than enough surplus to cover it. It looks like February may have fell victim to the fact that it has three fewer workdays which for people who work hourly that much less in FICA taxes. On the other hand benefits are paid monthly in equal amounts. Which suggests that February will always be a poorly performing month.

Now move to January and compare it to February. Note anything different? Well the fact that revenue from taxation on benefits was only $13 Million in Feb as opposed to $6001 million in January maybe, mighta made the difference.

Finally we can check out December. Interest on investments in Feb was $92 million, in January only $25 million, while in December it was a whopping $58 BILLION (yes with a 'B').

So what happens when you pick a month that one-has a smaller FICA stream due to fewer work days, two-doesn't get a big infusion from tax on benefits like January did, and three-did not get a huge infusion from accrued interest like December did? You get a mediocre to negative result in that month relative to other months.

Which leaves one last question. Are the guys from AEI incompetent? Or just skilled cherry pickers?

By Stormy

Michael Dorf argues that President Obama should pardon those who approved and fashioned the policy of torture as well as those who employed it. He does not really point a finger at those who sanctioned the policy: Cheney, Rumsfeld, and Bush, as well as many others.

Michael's argument is a well-traveled one:

Prosecution of political opponents threatens to raise the stakes of politics ... of democracy. Lengthy trials of Bush Administration officials for authorizing torture would inevitably be perceived as partisan, and would likely lead to a further cycle of recriminations.

In short, we cannot allow politics to become too bitter. Hence, there is a tacit agreement between the political parties--like tacit agreements between two groups of mobsters. Occasionally, someone will be killed (prosecuted), but the killings (prosecutions) must not get out of control. We would see nothing but flurries of prosecutions as soon as one party gained power.

The most direct counter to Michael's argument is that more than just Bush appointees are to blame. We have Congressional Intelligence Committees--comprising both Democrats and Republicans, to say nothing of military commanders. If an elected Senator or Congressman knew and had the responsibility for oversight, are not they, too, culpable?

Michael focuses on the careers of the lawyers involved:

Still, much of the publicity itself has been harmful to the careers of some of the Bush lawyers. Alberto Gonzales has had difficulty finding a job, a truly remarkable predicament for a former U.S. Attorney General, even in a severe recession. John Yoo finds himself a virtual pariah in legal academia. Judge Jay Bybee hears repeated calls for his impeachment. And none of the Bush officials involved in detainee abuse is likely to use his passport again.

Will Rumsfeld use his passport? Passports? Careers? Michael is a lawyer, one I respect highly. But he sees the issue in terms of his profession, of his class. Those who are already doing or have done time for torture--or those tortured--have suffered far more than the loss of a passport or a career.

I find Michael's argument a bit meandering, focusing more on the lawyers involved than on those in the chain of command, from Bush down through senators and congressmen.

The crux of his argument is below:

By pardoning, rather than merely not prosecuting, the architects of and participants in the Bush policy of detainee abuse, the Obama Administration could send a signal that offenses were, in fact, committed. Of course, pardons will not satisfy those who believe--with considerable justification--that prosecutions would be the better course. But pardons would formalize what appears to be the best explanation for the potential Obama policy of simultaneously repudiating the conduct and seeking to reconcile the country.

He does not really say if prosecutions should precede the pardons; nor does he address the chain of command that was involved in the policy. At the very least, I would like to see prosecutions precede pardons. If Obama is to pardon those culpable, then he should also make a public apology, on behalf of the nation, to all those who were tortured. Whether they were guilty or not is irrelevant. He should pardon also those now in jail for torture.

Michael does not address the problem of those still in jail serving lengthy jail sentences for detainee abuse, sexual, physical, and psychological--or those like Lynndie England, for example, who served a lengthy jail sentence. . If she and others like her are not pardoned, then we know there is one law for those in power; another law for those who are powerless.

Setting all this aside...and setting aside the culpability of Bush lawyers, Bush, Cheney, Rumsfeld, et al, I would like to return to that other group of participants: Those that had oversight and knew, i.e., the Senate and Congressional Intelligence Committee members, both Republican and Democratic. How do we shame them? How do we tell everyone--not just the little people like Lynndie--that there is a price to pay for not following the law, not enforcing it, not standing up in its defense if you are responsible for its defense?

If you are responsible for upholding law, are you, too, not culpable if the law is not upheld? Must we look the other way if you are too big or too important to punish?

Why has no one stood up, taken responsibility? How I would like to hear someone in that vast chain of command, stand willingly, and take responsibility. How I would admire such a person who said without being asked, "I failed my country and my office; I did not hold true to what it means to be an American." Would Pelosi do this? Would Shelby? or any of the others? Are all, all bereft of honor?

Imagine how we would now respect any Committee member if he or she had openly rejected the policy when it was brought before the Committee, told us about it, and accepted the punishment that other senators or congressman would then have heaped upon them for being "treasonous," for revealing important national security secrets. He or she would have then been disgraced, but disgraced with honor.

We seem to live in a country where systems are the only things that are flawed. Meanwhile Lynndie England served her time, punished by a system that is deeply flawed and profoundly biased. At some point, everyone--in any political party--has to understand that adherence to the law is primary.

Every senator congressman swears they he or she will defend the Constitution. That oath has to mean something.

To those who say that we have more important business to do, I reply, "Yes, we do have an economy in shambles. But self-serving power has run amuck for too long. Rarely is it ever brought before the bar. The torture scandal is simply another lock of the hydra."

We watch, for example, the revolving lobby door spin ever faster. Even Bill Clinton has stepped into that door, an ex-president, husband of the Secretary of State. Where does it end?

We see greed take ever-deeper bites, passing laws like the Financial Modernization Act of 1999, the act that made possible many of the problems we now have. Those who were party to its passing still comfortably walk the halls of power. Which one of them has stood and taken responsibility? It is not a question of Democrat or Republican. That law was passed during the Clinton years.

Most citizens can understand torture; few have any idea of the FMA. But there is a link between the two. Citizens will complain about the lobby gravy chain; but few understand just how deeply it hurts us all, how profoundly it compromises the writing and passage of legislation. Citizens were shocked when bonuses where paid where TARP money landed; citizens do not understand how that money was passed among the recipients in order to clear credit default swaps.

As I pointed out in an earlier piece, there is a line connecting those who were tortured and we who were fleeced. Their fate, however, is far worse: They lost their sanity; we lost our wealth.

Dumb Private Lynndie England, who enjoyed romping through the sadistic ethos her superiors had fashioned, paid a heavy price. In going to Iraq, she was not only being patriotic but also trying to escape the poverty of her upbringing.

And what do we do now with those who were tortured beyond reason? What country would take them, trust them to act responsibly? Their rage must be beyond belief.

Meanwhile, Bush appointees cannot use their passports.

Greenwald on Harman. Read the whole thing.

Sample:

when the U.S. Government eavesdropped for years on American citizens with no warrants and in violation of the law, that was "both legal and necessary" as well as "essential to U.S. national security," and it was the "despicable" whistle-blowers (such as Thomas Tamm) who disclosed that crime and the newspapers which reported it who should have been criminally investigated, but not the lawbreaking government officials. But when the U.S. Government legally and with warrants eavesdrops on Jane Harman, that is an outrageous invasion of privacy and a violent assault on her rights as an American citizen, and full-scale investigations must be commenced immediately to get to the bottom of this abuse of power. [links in original omitted; emphasis his]

rdan

Snapshot can be disabled in your browser by clicking disable button top right of the snap shot of a site.

rdan

rdan

Lots has been said about costs and this study. Please notice the cost includes insulating the house as well.

Here is a Letter to Nation Republican Congressional Committee regarding cap and trade costs to households. About $340 per household in the MIT study versus about $3000 claimed by the Republicans? And so easily checked...yet quoted and linked as if fact from the study.

It has come to my attention that an analysis we conducted examining proposals to reduce greenhouse gas emissions, Report No., 146, Assessment of U.S. Cap-and-Trade Proposals, has been misrepresented in recent press releases distributed by the National Republican Congressional Committee. The press release claims our report estimates an average cost per family of a carbon cap and trade program that would meet targets now being discussed in Congress to be over $3,000, but that is nearly 10 times the correct estimate which is approximately $340. Since the issue of legislation to control greenhouse gases is now under consideration, I wanted to take an opportunity to clear up any misunderstanding created by this press release and to avoid further confusion.

Why is this amount so different? As far as I can tell the $3,000+ is based on the potential auction revenue the government could collect by auctioning the allowances over the period through 2050 where a simple average over all years from 2015 to 2050 was computed. The tax revenue collected through such an auction, the costs of reducing greenhouse gas emissions, and the average impact on a household are very different concepts. Thus, there are several things wrong with this calculation. First, the auction revenue is determined by the CO2 price and how many allowances are issued—allowances tell us how many tons of CO2 (or more broadly greenhouse gases) will continue to be emitted. The cost of reducing emissions depends on how much emissions are reduced not on how much continues to be emitted. Second, the CO2 price reflects the cost of the last ton of emissions reduced but there are many options that cost much less than avoiding the last ton and so using the CO2 price multiplied by the number of tons (either reduced or emitted) is also wrong. Third, the average cost to a household depends on how allowances or the allowance revenues are distributed. Fourth, the costs are borne over time and it is wrong to produce a simple average of such costs as that does not take account of the time value of money.
We assumed in the analysis we did that the revenue is returned to households. From data in the report we can calculate the economic cost in each year (percentage loss times the base welfare level in each year), and divide this by the US population, and then multiply this amount by four to estimate the cost for a representative family of four. We further apply an economic discount rate of 4% to get the Net Present Value (NPV) cost in each year in the future. Doing this we find that the NPV cost per family of four starts at about $75 in 2015, rises to nearly $510 by 2025, and then falls to $205 by 2050. We can calculate the average annual NPV cost per family by summing over all years and dividing by the number of years, and this shows the average annual net present value cost to be about $340 - only a part of which would be actual energy bill increases. This $340 includes the direct effects of higher energy prices, the cost of measures to reduce energy use such as adding insulation to homes, the higher price of goods that are produced
using energy, and impacts on wages and returns on capital. The cost per household will vary from our hypothetical average family of four depending on the household’s circumstances. Those households with large heating and cooling bills because of the climate in which they live or who drive more than average will face higher costs. Those with smaller homes who live in benign climates will have lower costs. The higher energy prices encourage reductions in energy use by increasing the payback on improvements in energy efficiency, and through such investments households can avoid paying more for energy. Jobs and wages in fossil fuel industries are likely to decline but job opportunities will increase in industries that produce alternative energy sources or that provide ways to save energy.
While the $340 average annual cost we estimate for a family is just one tenth of the $3000+ cited in the misleading press release, Congress should address the costs of this transition for middle and lower income families while developing Cap-and-Trade legislation. In another paper (Report 160, Analysis of U.S. Greenhouse Gas Tax Proposals) we make some calculations on the burdens of a GHG tax on families at different income levels. Our Report 160 shows that the costs on lower and middle income households can be completely offset by returning allowance revenue to these households.
Climate change poses severe risks for the US and the world. It will take efforts in the US and abroad to reduce emissions substantially to avoid the most serious risks of climate change. One of the perplexing aspects of the problem is that the solution involves using cleaner energy sources that are more costly then conventional fossil fuels. And the higher energy prices needed to cover the higher costs will fall disproportionately on the poorer members of society in the US and in the world. However, the less wealthy members of our economy also stand to suffer most from climate change—whether it is through the risks of increased food prices if climate change disrupts crops, the lack of access to air conditioning under extreme heat, or vulnerability to other extreme weather and storm events such as hurricanes which may increase with climate change. Many of the proposals currently being considered by Congress and as proposed by the Administration have been designed to offset the energy cost impacts on middle and lower income households and so it is simplistic and misleading to only look at the impact on energy prices of these proposals as a measure of their impact on the average household. Concern about the cost impacts on middle and low income families needs to be focused on making sure allowance or tax revenue is used to offset cost impacts on these households rather than as an excuse for not proceeding with measures that would help avert dangerous climate change.
Sincerely,


The full reports cited above are available on our WEB site.

rdan

Armed Services Committee report of November 20, 2008 was released April 21, 2009. Lots to review.

rdan

Special Inspector General Barofsky and his team make particular note of the lack of oversight in TARP, and also worry that hedge funds are even more opaque in other trillion dollar programs.

The SIGTARP team did its own survey and received reasonable, but uneven, reporting by banks eventhough Treasury said it would be too cumbersome.

Will Treasury and Congress respond in a positive manner?

Many aspects of PPIP could make it inherently vulnerable to fraud, waste, and abuse. First, PPIP deals with assets that have recently been illiquid, making valuation difficult, therefore raising the danger that the Government will overpay for the assets. Second, many of the participants in these markets, such as hedge funds, are substantially unregulated and the internal oversight and compliance capability at those institutions vary widely. Next, the interrelationships between the market participants can be extremely complex and difficult to anticipate: the same entity might buy and sell toxic assets for its own benefit and manage portfolios of toxic assets for others, all while holding or managing equity or debt securities of the banks and other institutions that have large positions in the same toxic assets. Finally, the sheer size of the program — up to a trillion dollars for the PPIFs and up to another trillion dollars for the expansion of TALF — is so large and the leverage being provided to the private equity participants so beneficial, that the taxpayer risk is many times that of the private parties, thereby potentially skewing the economic incentives.

After receiving initial briefi ngs from Treasury on PPIP and discussing the issue with law enforcement partners, SIGTARP has identifi ed three of the most significant areas of potential vulnerability to fraud and abuse applicable across the program. Because SIGTARP has not been provided with many of the specifi c details of the mechanics of the various programs, SIGTARP’s observations and recommendations are necessarily at a high level.

Conflicts of Interest

The first area of vulnerability is that the private parties managing the PPIFs might have a powerful incentive to make investment decisions that benefi t themselves at the expense of the taxpayer. By their nature and design, including the availability of significant leverage, the PPIF transactions in these frozen markets will have a significant impact on how any particular asset is priced in the market. As a result, the increase in the price of such an asset will greatly benefi t anyone who owns or manages the same asset, including the PPIF manager who is making the investment decisions.

As an extremely simplified example from the Legacy Securities Program, assume that the fund manager of the PPIF owns 1 million bonds of MBS X in its own account. MBS X is currently valued on the fund manager’s books at 20% of its original value, or $20 per bond, for a total of $20 million. The fund manager does an estimate and believes that, in a fully functioning market, MBS X is actually worth 30% of face value, or $30 per bond.

In the absence of a conflict of interest, the fund manager, using PPIF funds, might be willing to pay up to $30 per bond in the market. However, the fund manager realizes that it can make more money for itself if it drives the price even higher. It thus uses the funds it controls in the PPIF to buy 1 million MBS X bonds from someone else at $40 per bond, or $40 million. This transaction has the potential, in the current illiquid market, of setting the market price for that MBS X at $40, even though that price is far above what the MBS is actually worth.

As a result, the fund manager could sell the MBS on its own books and recognize a profit of $20 million. Over time, however, the price of MBS X declines to its actual value, $30 per bond, and results in a $10 million loss to the PPIF fund. This loss has no negative impact to the fund manager, however, because it did not have any of its own money invested in the fund. Indeed, the fund manager has made money on the PPIF, because it has received fees from both Treasury and the private investors based only on the total size of the PPIF. In other words, the confl ict results in an enormous profit for the fund manager at the expense of the taxpayer.

rdan

24/7 Wallstreet suggests AIG might pay back much of the money lent to it by Uncle Sam (#11). Is this notion really in the cards for the taxpayer??

AIG (AIG) may be the only large company in America that both the management and federal government want torn apart. If AIG succeeds in selling most of its divisions it will be able to repay more than $100 billion in government loans and investments. The figure may be closer to $150 billion depending on how the federal money is accounted for. Uncle Sam also owns 80% of AIG’s shares.

There are two reasons that the AIG brand, once the premier insurance brand in the world, will disappear. The first is that most of the companies owned by AIG do not bear its name. AIG owns ten general insurance companies with names such as New Hampshire Insurance Company and The Hartford Steam Boiler Inspection and Insurance Company. Several of AIG’s life insurance companies do not have AIG in their titles. AIG’s most valuable financial services company is probably the aircraft leasing operation, International Lease Finance Corporation. AIG is now a “toxic” brand. Its operating groups will do their best to distance themselves from the company even while they are owned by AIG. Once they become independent or part of other companies, these operations will end whatever attachment they have had with AIG even if it means changing their names. AIG may be the one large brand in America which almost everyone would like to see disappear.

By Stormy

Last night, April 21, 2009, Colbert brilliant summarized the issue of responsibility for torture. In three sentences and with impeccable logic, Colbert said it all.

To paraphrase:

1. We cannot hold those who did the torture because they were simply following orders.
2. We cannot hold those who allowed and directed the policy because did not know what they were doing.
3. The only people who will be made to suffer for those horrendous acts are those who did the screaming.

President Obama has covered the first point.

The second point is now being established in an article in today’s New York Times.

With little debate and less understanding,

top U.S. officials involved in the adoption of brutal interrogation methods did not investigate the origins of the techniques they approved…

In short, they were stupid, uninformed. No one, apparently, either in the administration or in the Senate and House Intelligence Committees had any inkling of the origins of the program upon which we were embarking.

This extraordinary consensus was possible, an examination by The New York Times shows, largely because no one involved — not the top two C.I.A. officials who were pushing the program, not the senior aides to President George W. Bush not the leaders of the Senate and House Intelligence Committees — investigated the gruesome origins of the techniques they were approving with little debate.

Well, you might reply, did they have to know the history of torture to act responsibly?

I, too, found this kind approach a bit strange. The logic seems to be that if they were not historically up to snuff, then clearly they are innocent. With their busy schedules, they never had the opportunity to visit the Pol Pot museum in Cambodia where waterboarding was on display.

Closer to home, they did not realize that waterboarding had been prosecuted by the United States after World War II.

The process was “a perfect storm of ignorance and enthusiasm,” a former C.I.A. official said.

Such innocence--such eager babes in the woods. And, of course, they were totally misled by evil psychiatrists, particularly one James E. Mitchell.

Dr. Mitchell, who declined to comment for this article, became a persuasive player in high-level agency discussions about the best way to interrogate Qaeda prisoners. Eventually, along with another former SERE psychologist, Bruce Jessen, Dr. Mitchell helped persuade C.I.A. officials that Qaeda members were fundamentally different from the myriad personalities the agency routinely dealt with.

Ah, yes, we now have personalities fundamentally different, personalities that demand new, harsher techniques, like those Pol Pot used, or those the Spanish Inquisition used, or those the Nazi's used. We now cozily nested in a grand historic tradition.
And how does this remarkable argument conclude?

Ms. Divoll, who now teaches government at the United States Naval Academy, said the interrogation issue revealed the perils of such restricted briefings.
“The very programs that are among the most risky and controversial, and that therefore should get the greatest congressional oversight,” she said, “in fact get the least.”

So there you have it; problem solved: No oversight. Ignorance and cruelty find their last refuge: No oversight, no one responsible.

Move on folks, not much more to talk about.

Of course there is the banking problem. Oops, no oversight there either. You and I are the ones do the screaming on this one.

I wonder if this argument is running out of string?

rdan
(response to cactus, lifted from comments, by juan. Slightly edited for readability))

'Favoritism' seems too kind while also continuing to assume legal-political institutions ['the state'] to be dominant rather than dominated, which is then to avoid the question of which class or class segment dominates through the mediation of 'the state'.

Willem Buiter put it rather nicely in a recent FT article:

The banking establishment and the financial establishment representing the beneficial owners of the institutions exposed to the banks as unsecured creditors - pension funds, insurance companies, other banks, foreign investors including sovereign wealth funds - have captured the key governments, their central banks, their regulators, supervisors and accounting standard setters to a degree never seen before.

I used to believe this state capture took the form of cognitive capture, rather than financial capture. I still believe this to be the case for many, perhaps even most of the policy makers and officials involved, but it is becoming increasingly hard to deny the possibility that the extraordinary reluctance of our governments to force the unsecured creditors (and any remaining non-government shareholders) of the zombie banks to absorb the losses made by these banks, may be due to rather more primal forms of state capture.

How about President Obama, what did he have to say while still a lowly Senator back in September, 2007:

Turning a blind eye to the cronyism in our midst can put us all in jeopardy... We will not tolerate a market that is rigged by lobbyists who don't represent the interests of real Americans or most businesses...we are going to have to adapt our institutions to a new world..."

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by juan

rdan

Consider the Evidence and Crooked Timber April 16-18, 2009 post a series by Lane Kenworthy on income inequality. Our own Robert Waldmann has thoughts of his own as well.

How to pay for inequality reduction: follow-up
April 20, 2009

One way to make some progress in reducing income inequality is to significantly increase redistributive transfers and public services. I’ve suggested that it will be difficult to fund that solely by heightening taxes on those at the top of the income distribution. Robert Waldmann asks, quite reasonably: Where’s the math?

Here’s an answer. I’ll use numbers for 2006, since that’s the most recent year for which we have good income and tax data from the Congressional Budget Office.

He is worth the visit.

rdan
(hat tip ronin 8317...A very good paper by John Geanakoplos on the leverage cycle..)

John Geanakoplos on the leverage cycle

At least since the time of Irving Fisher, economists, as well as the general public, have regarded the interest rate as themost important variable in the economy. But in times of crisis, collateral rates (equivalently margins or leverage) are far more important.

Despite the cries of newspapers to lower the interest rates, the Fed would sometimes do much better to attend to the economy-wide leverage and leave the interest rate alone. The Fed ought to rethink its priorities.

When a homeowner (or hedge fund or a big investment bank) takes out a loan using say a house as collateral, he must negotiate not just the interest rate, but how much he can borrow. If the house costs $100 and he borrows $80 and pays $20 in cash, we say that the margin or haircut is 20%, and the loan to value is $80/$100 = 80%. The leverage is the reciprocal of the margin, namely the ratio of the asset value to the cash needed to purchase it, or $100/$20 = 5. In standard economic theory, the equilibrium of supply and demand determines the interest rate on loans. It would seem impossible that one equation could determine two variables, the interest rate and the margin. But in my theory, supply and demand do determine both the equilibrium leverage (or margin) and the interest rate.

It is apparent from everyday life that the laws of supply and demand can determine both the interest rate and leverage of a loan: the more impatient borrowers are, the higher the interest rate; the more nervous the lenders become, the higher the collateral they demand. But standard economic theory fails to properly capture these effects, struggling to see how a single supply-equals-demand equation for a loan could determine two variables: the interest rate and the leverage. The theory typically ignores the possibility of default (and thus the need for collateral), or else fixes the leverage as a constant, allowing the equation to predict the interest rate.

by cactus

Forbes and the "Self-Made" Label

I'm kinda busy these days, but this topic is small pet peeve of mine: what the heck is up with Forbes and the "self-made" label? On occasion, I've gone through the Forbes 400 list of richest Americans and marveled at who Forbes manages to decide qualifies as self-made.

Case in point. Take Aubrey McClendon, head of Chesapeake Energy, the largest independent gas producer in the US. His great-uncle was a governor and a three-time senator, and also co-founded a large oil company. His father worked for the company for 35 years, and one imagines he wasn't a janitor or nightwatchman.

McClenond himself will tell you:

I had some early financial advantages in life that probably let me take a chance or two that I wouldn't have been able to

But to Forbes, McClendon is a self-made man.

A few spots up from McClendon is another self-made dude (according to Forbes), Paul Tudor Jones II. The "II" is not an automatic marker of wealth, but it should have been a tip-off to Forbes that perhaps it was worth visiting "teh google", which would have been kind enough to guide them toward this interview:

I already had an appreciation for trading because my uncle, Billy Dunavant, was a very successful cotton trader. In 1976, after I finished college, I went to my uncle and asked him if he could help me get started as a trader. he sent me to Eli Tullis, a famous cotton trader, who lived in New Orleans. Eli is the best trader I know, he told me. I went down to see Eli and he offered me a job on the floor of the New York Cotton Exchange.

And the name "Dunavant" should have rung a bell to Forbes - after all, Forbes ranks Dunavant Enerprises as one of the 400 largest private firms in the US. Another thirty seconds of "research" would have told the folks at Forbes this:

His paternal grandfather, Colonel William P. Dunavant, was in the railroad business and created one of the main cotton transporting railroads of the time, a railroad that grew into the southern leg of the famous Frisco Railroad. Billy’s father, William Dunavant, began working for T. J. White and Company at the age of twenty-one. After White retired, the company was passed to William Dunavant; however, because of the untimely death of his father in 1961, Billy Dunavant took over the company at the age of twenty-nine.

I'll concede that a stream of events where all this is true and Tudor Jones was none-the-less a penniless guy who pulled himself up by his bootstraps in a way that the rest of us were just too lazy to accomplish. It does seem unlikely, though. A more reasonable description of events is that this is another example (I've had a post or two on this in the past) that Forbes simply has a tendency label some very unlikely individuals as being self-made. And from what I can tell, this is a Forbes thing; most of the folks Forbes gives this label to that the rest of us might not don't go around insisting they're self-made. (I believe I recall one counter-example.) So what's up with Forbes and the use of this label?
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by cactus