AMERICA’S economy is headed for a major slowdown. Whether there is a recession (two quarters of negative growth) is less important than the fact that the economy will operate well below its potential, and unemployment will grow. The country needs a stimulus, but anything we do will add to our soaring deficit, so it is important to get as much bang for the buck as possible. The optimal package would contain one fast-acting measure along with others that could lead to increased spending if and only if the economy goes into a steep downturn.
We should begin by strengthening the unemployment insurance system, because money received by the unemployed would be spent immediately.
The federal government should also provide some assistance to states and localities, which are already beginning to feel the pinch, as property values have fallen. Typically, they respond by cutting spending, and this acts as an automatic destabilizer. Federal assistance should come in the form of support for rebuilding crucial infrastructure.
More federal support for state education budgets would also strengthen the economy in the short run and promote growth in the long run, as would spending to promote energy conservation and lower emissions. It may take some time to put these kinds of well-designed expenditure programs into place, but this slowdown looks as if it will last longer than some of the other downturns in recent memory. Housing prices have a long way to fall to return to more normal levels, and if Americans start saving more than they have been, consumption could remain low for some time.
The Bush administration has long taken the view that tax cuts (especially permanent tax cuts for the rich) are the solution to every problem. This is wrong. Tax cuts in general perpetuate the excessive consumption that has marked the American economy. But middle- and lower-income Americans have been suffering for the last seven years — median family income is lower today than it was in 2000. A tax rebate aimed at lower- and middle-income households makes sense, especially since it would be fast-acting.
Something should be done about foreclosures, and appropriately designed legislation allowing those who have been victims of predatory lending to stay in their homes would stimulate the economy. But we should not spend too much on this. If we do, we’ll wind up bailing out investors, and they are not the ones who need help from taxpayers.
In 2001, the Bush administration used the impending recession as an excuse to cut taxes for upper-income Americans — the very group that had done so well over the preceding quarter-century. The cuts were not intended to stimulate the economy, and they did so only to a limited extent. To keep the economy going, the Federal Reserve was forced to lower interest rates to an unprecedented extent and then look the other way as America engaged in reckless lending. The economy was sustained on borrowed money and borrowed time.
The day of reckoning has come. This time we need a stimulus that stimulates. The question is, will the president and Congress put aside politics to get the job done?
"Suppose the General Manager of the Miami Dolphins Awarded Himself the Same Bonus as the General Manager of the New England Patriots: Last week, this story appeared buried inside the business pages of The Washington Post. Why wasn't the story on Page 1? The Post reports that the blue-blooded five, Wall Street's five top investment banking houses, awarded their management $39 billion in bonuses for 2007 -- a period when those firms combined to earn investors about $11 billion in profits. Merrill Lynch lost $8 billion in 2007, Morgan Stanley $3 billion and Bear Stearns $230 million, yet the executives of these companies were showered with billions of dollars in bonuses. Otherwise, they would refuse to do any work! Which, apparently, would be in shareholders' interest. Merrill Lynch and Morgan Stanley could have done better by their shareholders in 2007 by simply purchasing Treasury bills; a software program designed to make simple conservative investment decisions about market-following mutual funds would have performed better in 2007 than the top management of most investment banking houses. And the software program would not have paid itself billions of dollars in bonuses for screwing up! (TMQ owns no stock in any of the mentioned firms.)
It's one thing when profitable firms shower money on their CEOs and other top brass; often the amounts are indecent, but as long as shareholders come out ahead, the executives have at least some justification for their windfalls. But in the modern milieu of corporate kleptocracy, even when the company does terribly and the CEO makes decisions that blow up in the firm's face, the CEO awards himself hundreds of millions of dollars, anyway. Why is this not seen as white-collar crime?
Last week's buried Post story included this priceless quote: "'To many people, [the bonuses] will be shocking and questionable,' said Jeanne Branthover, managing director of Boyden Global Executive Search. 'People in New York in the world of investment banking will understand it. It's critical that pay is still there or you're going to lose really good people.'" Beyond that executive headhunter firms such as Boyden have a self-interest in running up CEO pay -- this can increase the search firms' headhunting commissions -- consider the reasoning: OMG, we can't lose the really good people who cost our shareholders billions of dollars with dim-witted decisions! The notion that top corporate managers must be paid fantastic amounts because they possess incredible, astonishing expertise often is used to justify CEO pay, even when the managers who claim the incredible, astonishing expertise make foolish decisions. "We'll put billions of dollars of money entrusted to our care into subprime gimmick mortgages backed by no documentation of income; my incredible, astonishing expertise tells me this is totally safe!"
If corporate managers who screwed up received $5.85 an hour, the federal minimum wage, for the year in which they screwed up -- that is, if their wallets were at risk when they perform poorly -- then they might fairly argue for huge bonuses when they perform well. But there is no evidence that the people who made the big investment calls on Wall Street last year (except at Goldman Sachs, which avoided the subprime mess) are any better at what they do than people chosen at random off a Brooklyn street. You bet "people in New York in the world of investment banking" will understand huge executive bonuses paid in the same year as huge losses. What's happening is basically a hustle, intended to enrich the executives while separating the investors from their cash. "People in New York in the world of investment banking" understand that, all right!"
Item #1: Who is Reaganer? All of the Republican candidates seemed to have given up talking about "issues" or even themselves, and instead have focused on who is more like their hero Ronald Reagan. The way they were talking about him in last Thursday's debate in South Carolina, you'd think Reagan was the second coming of Christ. Everything that Reagan did was brilliant and he is the ideal president that they all aspire to be. I find this to be very disappointing.
I hold the following opinions regarding our nation: 1. Government should strive to treat all of its citizens equally. 2. Government should ensure the prosperity of all of its people. 3. The president should be somewhat knowledgeable and aware of important events. 4. Only people who are not wickedly corrupt should be appointed to serve in high public office 5. The Government should make long-term plans that go beyond the current election cycle in order to safeguard the prosperity of future generations 6. The President should not be viewed and treated as incompetent by his closest advisers. 7. Government and the President should be honest with its people. 8. The Executive Branch should not try to ignore and directly disobey the Constitution (for example, by doing things expressly forbidden by Congress, like training para-military groups in Central America to overthrow democratically elected governments or selling missiles to our nation's #1 enemy)
While many people may not ascribe to these principles, ostensibly this would include all the major candidates for President in the Republican Party, if you do believe in these principles, as I do, you would have to grade Reagan to be one of the WORST, if not THE WORST, President in American history (the current administration exempted). As long as Americans continue to think that Reagan was anything more than a horrible president, future candidates will continue to use Reagan as a historical precedent for their insane policy proscriptions and in fact use Reagan to legitimize those policies.
While I'm at it, let me tackle two more myths related to Reagan: -Myth #1 Reagan won the Cold War hehe...I never get tired of this one. In 1991, after leaving the presidency two years before, Reagan finally won the Cold War by charging up a mountain killing Russia's champion warrior, Mikhail Gorbachev, and conquering the last bastion of communist resistance in the Kremlin. The way people talk about Reagan and the Cold War, you'd think this actually happened. The reality is quite different. Most idiots who claim that Reagan won the Cold War do so based on three theories: 1. Reagan was tough with the communists and they finally caved in because they couldn't take the heat. 2. The election of a fervent anti-communist like Reagan showed that the U.S. was not willing to back down. This lead to the Russians losing morale and giving up. 3. Reagan's massive military buildup could not be met by the Russians, so they folded up rather than compete.
Let's go through these shall we: First, Reagan did not do anything different with Russia than his predecessors. End of story. It could be said that Reagan used tougher rhetoric, but in reality Reagan was never any harsher with actual Russian officials than say Truman, Eisenhower, Kennedy, Johnson, Nixon, or Carter. All of his predecessors were very tough with communists. More than anything, Reagan used his rhetoric to get elected not to really push around communists, whom he negotiated with regularly. Second, according to most analysts, the election of Reagan was not seen as very important by most high-ranking communists. The only group that it seems to have affected were those in the military who called for MORE confrontation with the U.S. and demanded MORE influence within the Politburo. Taking into account that the military nearly put an end to Yeltsin's attempt to break apart the Soviet Union, it could be argued that Reagan's bellicose personality nearly entrenched communism for another generation. Third, it is true that the Soviets backed down from Reagan's ridiculous military buildup. How this lead to the fall of communism is not exactly clear. It still could be said that the buildup did lead to the end of the Cold War, but two things should be kept in mind: one, this was an unforeseen consequence (Reagan had no clue that the Russians were even capable of backing down) and two, the reason the Soviets couldn't compete with the U.S. in military expenditures was that its economy and political support was collapsing. It is somewhat ironic that conservatives that credit Reagan for ending the Cold War neglect to mention that what really ended the Cold War was the inefficiencies and contradictions within communism and a command economy.
Myth #2: Reagan= Tax Cuts, Tax Cuts, Tax Cuts, and more Tax Cuts There have been many surreal moments during this election cycle. I have two favorites. One was an exchange in a debate between Fred Thompson and Mike Huckabee that went like this (paraphrased): Thompson: I fear that Gov. Huckabee may not be willing to follow the Reagan model. He raised taxes in his state and he has endorsed liberal economic policies. Huckabee: In Arkansas we cut taxes 63 times. And trust me, there were plenty of people who were not happy about it, but I still cut taxes because I believed that our government was too big.
In other words, 63 tax cuts was not enough. The other also involved Huckabee, but this time with Romney: Romney: Now answer me frankly, did you or did you not raise taxes in your state? Huckabee: I built roads and bridges and schools- Romney: That's political talk. Are you going to answer the question? ... Huckabee: When I first took office we did need funds for some improvements, but once those were finished I worked to cut the fat out of the state's government. I cut taxes 63 times in my ten years as governor.
This is the state of the debates between Republicans. Who can cut taxes faster, quicker, more often and craziest deserves to be president. 'What 9.2 trillion dollar debt?'
I won't bother to mention how stupid this is and that supply-side economic theory was discredited 15 years ago and that every reasonable economist thought the Bush tax cuts to be insane and that the Bush tax cuts have been a huge failure, but I will mention Reagan. Reagan raised taxes. Twice. As Governor of California, not only did Reagan raise taxes but he did little to prevent the continued growth of state government. As President, Reagan repealed his own tax cuts once it became obvious that...well.. they were insane, making the country bankrupt, and destroying the economy.
Item #2: Civil Rights Faux Paus
Recently, Hillary Clinton made the following statement: "Dr King’s dream began to be realised when President Lyndon Johnson passed the Civil Rights Act of 1964. It took a president to get it done."
There are three things to be said about this: One, I don't mind politically incorrect statements...unless they are from a politician ...from a party that I'll be voting for. Two, related to the first, why the hell did she say this? Why is this even relevant. Is she writing a book on the history of the civil rights movement? She's running for president, why do I need to know her particular interpretation of historical events. What was her point? The closest I've come to answering this question is that she's comparing MLK to Obama and pointing out that change only occurs when an experienced leader (like Johnson) is able to work with the system and get things done. All I have to say to that is...Hillary Clinton is no Lyndon Johnson. Three, she's just wrong. Her interpretation is simplistic and not entirely accurate. The Civil Rights movement was a grassroots movement who's major leaders included Martin Luther King. There would have been no Civil Rights Act without pressure from prominent figures like King and there would not have been a Martin Luther King if not for the individuals who risked their lives and livelihood to stand up for justice on a daily basis for decades. LBJ just didn't wave a magic wand and get civil rights legislation passed. The turning point came when Congress was willing to go ahead with it. This happened first with the grotesque violence that occurred on the March to Selma, which spawned the passage of the Civil Rights Act, and the killing of Civil Rights workers in Mississippi, which spawned the Voting Rights Act. In fact, LBJ was UNABLE to get civil rights legislation passed. If anyone should be credited, it should be the racist Southerners whose violence outraged the nation enough to forego their own racist inclinations and allow their representatives to pass some meaningful legislation. I will give LBJ credit for one thing he did all on his own: affirmative action. I should point out that the executive order that established affirmative action took no wrangling or expertise...it just took will to do it.
Item #3: Romney's last stand Today is the Republican Primary in Michigan. If Romney doesn't win, I will consider his candidacy over. If Romney can't win in Iowa where he spent more campaign money than anyone in that state's history and he can't win in a state that neighbors one that he was governor of and has overlapping local news and he can't win in Michigan where his father was a three time governor, where can he win?
During last night's debate, Hillary needed to rescue her campaign. Going in, there were two questions: would she go after Obama and how would she change her message. The answer to the first came with the first question of the debate. Hillary went after Obama and accused him of changing his stances on key issues. Obama, who by the way has been the most consistent on his stances, parried these attacks with some stammers along the way. But then came the surprise: Edwards came to Obama's defense! And he did so aggressively. I've watched a lot of debates and I've watched a lot of debates with these candidates, and I don't think I've ever seen a candidate defend another candidate so strongly...and effectively. Clinton was caught completely off-guard, as well she should have. Edwards campaign is basically falling apart. His post-Iowa speeches have gotten even more bitter and angry. His only hope is to emerge as the true-reform candidate. To do that he would need to deal with his biggest competitor, the even more charismatic Obama. Yet, he sided with Obama and began throwing punches at Clinton. Unless Edwards is going for another VP nomination, which I find unlikely since neither he nor whoever wins will want to bring him back after his disappointing effort in the same role 4 years ago. Honestly, I can't think of a reason why Edwards would have done this, unless he just doesn't like Clinton, which is possible.
In any case, Edwards made Clinton look ridiculous and she quickly stopped that line of attack. Next came her new message: she was also the candidate of change, but she had the experience to get it done. I don't know if that message will work...I don't know if it will work in New Hampshire and I don't know if it will work with Democratic voters. All I do know is that it didn't work for me. While the idea of Clinton--that of a seasoned reformer--sounds good and I have no problem with it, unfortunately it has little relation to reality. Hillary has almost no political experience: after graduating with a legal degree, she went to Washington as an aide for the impeachment committee of Richard Nixon. She then married Bill and went to Arkansas where she worked with a children's advocacy group before joining a firm and becoming a legal consultant. During this time, she accumulated a small fortune while her husband furthered his political career, making profits from several investments and even sat on the board of directors at Wal-Mart and TCBY. She continued her triple life as legal representative-child/education advocate-wife of a successful politician until her husband was elected president in 1992, after which she devoted herself full-time to politiking and being a First-Lady. While Clinton may have been the most prominent First-Lady since Edith Galt (wife of Wilson), to pretend that everything her husband did was part of her doing is a bit of an overstatement. Undoubtedly, Hillary's counsel was valuable, but what made Clinton such a powerful politician was his natural charm. In 2000, as her husband left office, Hillary became senator of New York. It is the only political office she has ever held. While Clinton clearly has had more experience than any other candidate around the executive office, she is hardly a seasoned veteran who has successfully produced change. In fact, her most prominent post was as Chairwoman of the Task Force on National Health Care Reform, which turned out to be an unmitigated failure. Personally, I don't find Hillary's resume that much more impressive than Obama's who worked as a community organizer (among other things) from 1983-1996, was a state legislator from 1998 to 2004 and has been a senator since 2004. On top of all this, one must consider that Bill Clinton himself was unable to pass all the "change" that he wanted (even with a Democratic Congress and Senate in his first two years). In sum, I don't find the claims that Hillary is a seasoned veteran with a track-record of bringing people together to be all that convincing.
This was not originally meant to be slam on Hillary, but I guess it has somewhat become that. Honestly, I just found her so irritating in last night's debate. While I'm at it, I would also like to go through Hillary's attacks on Obama's stances. Throughout the campaign, Hillary has made two major attacks and seems to always point these out when asked to locate differences between the two candidates. She did so last night. Honestly, I find her characterization of those differences insulting...insulting to my intelligence. The first one relates to social security. To see a full discussion of why social security is in no danger, see my diatribe about it here. One of the things I mention is that the easiest way to save it would be to raise the ceiling upon which the payroll tax applies to. I don't want to repeat myself, but suffice it to say, it is a very fair way to handle the problem, and only a crooked tycoon would find it unfair. It was on this issue that Hillary accused Obama of trying to raise taxes. Just so it's clear, that was a disingenuous and dishonest attack straight out of the tactical handbook of the "vast Right-Wing conspiracy." The second item relates to Health Care. Let me take a quote from another of my diatribes on healthcare: "Because his plan is not compulsory, strictly speaking, Obama's plan is not a true universal health insurance coverage plan. This is more a technicality more than anything else. Look for all the other candidates to exploit this in debates." How perceptive and prophetic of me. There is a minuscule, completely meaningless part of Obama's plan that strictly speaking does not require everyone to get health care. In reality, if it turns out that this is a big problem, it could easily be changed. All it does is give people some flexibility in their health care choices at the cost of preventing the plan from being called a "universal" plan. To harp on this intricacy is also disingenuous. I just expect more intellectual responsibility from my candidates.
Despite not really having any good candidates, the Republican party is trying to hurt itself further through random acts of cannibalism. Vicious mudslinging has intensified in the last week and will probably heighten as the stakes become higher and candidates have less to lose.
For whatever reason, almost all the Machiavellian cynicism is centered around Mitt Romney: both as a victim and as a perpetrator. Romney has suffered from underhand tricks throughout the campaign as other candidates have tried to scare off "Evangelicals" by accenting his Mormonism. Although it's not clear if Huckabee is sending signals to his base or if he is just that stupid, but in several instances during debates and stump speeches, Huckabee has brought up Mormonism when it was completely irrelevant. Famously, he questioned if Mormons believed that Jesus was the brother of Satan, but throughout debates, with a wink and a nod, he has also focused on his religious beliefs (he is a former Baptist Pastor) with the assumption that some of the candidates beliefs (namely Romney and Giulianni) are quite different. Additionally, many religious leaders that have given their support to Huckabee and other Baptists, have given speeches that focus on the differences between Mormonism and mainstream Christianity, often referring to it as a "cult." Speaking of Giulianni, who has also been the victim of campaigns that have attacked his stance on abortion, there is some evidence that he is behind some of the more unusual underhanded tactics, such as a false Christmas Card sent to South Carolina Republicans, wishing a "Happy Holiday" (rather than a "Merry Christmas") and includes controversial passages from the Book of Mormon and reports to be supported by the "Boston Massachusetts Temple." There have also been reports of phone calls to Iowa voters on the night before the Caucus that included praise of John McCain and some disparaging remarks towards Romney and Mormonism.
But, Romney is no innocent victim. In Iowa, Romney flooded the airwaves with political ads, most of which were negative and most of which were directed towards Huckabee. He is repeating his failed strategy in New Hampshire with John McCain. In South Carolina, Romney has employed the support of nefarious political consultant, Warren Tompkins. Tompkins, a former trickmeister for another dirty trick artist, Lee Atwater (the famous campaign organizer for George H.W. Bush who created the Willie Horton campaign, one of the most egregious examples of race-baiting in the last 25 years), was linked to shenanigans in South Carolina in 2000 where anonymous phone calls were made to Republican voters that claimed that McCain had an illegitimate black child (McCain had adopted a son from Bangledash). Tompkins was caught red-handed in September for setting up a ridiculous anti-Thompson blog called Phony Fred that featured the candidate in different costumes. As the race heads towards the South expect more dirty maneuvering.
Remember, for every dirty trick discovered, there's probably 10 more vicious ones that will never be known publicly. I'm sort of glad that Republicans have to resort to such dirty tactics...they're desperate.
I think recent events deserve some diatribing...let's go through some:
Item #1: The Obama Surge Only 3 months ago, Hillary Clinton had pretty much wrapped up the Democratic nomination. So, what just happened? Clinton essentially had four things going against her: 1. Too far ahead too early 2. Trying to wrap up the primaries by exposure as a national candidate 3. An overrated self-sense of charisma 4. Peculiarities of the Iowa caucuses
Quite frankly, Hillary peaked too early. It's the same mistake that Dean made 4 years ago. By becoming THE candidate in October, Clinton left herself open to constant attacks for 3 months. These eventually brought her down and made her look vulnerable.
Hillary expected that her high poll numbers across the country would give her the automatic support from those essential early states, like Iowa. This was a serious blunder, because recent elections and the crunch of this primary schedule meant that early momentum was essential, especially in Iowa. Kerry and Edwards made their campaigns in Iowa 4 years ago. This year, Edwards and Obama focuses almost all of their resources in Iowa. Clinton did not meet the challenge and the tactical error could cost her the election.
Hillary, by most accounts, was exceptional in the like 300 debates the Democrats had leading up to yesterday. She, the media, and her campaign staff assumed that these skills would translate to stumping. Unfortunately, they all forgot that she has almost no grassroots political experience beyond campaigning alongside her husband. Iowa is a door-to-door type campaign. Hillary simply did not appear likeable and personable in Iowa's diners, cafes, and fairs.
The Iowa caucus is very unusual (more on that later), but one of its peculiarities is that to get votes within a caucus a candidate must get around 15% of the voters. If they do not, those voters disperse and head to other candidates. Since people voting for candidates other than Hillary were already choosing an anti-Hillary/frontrunner candidate, they were more likely to join the Edwards and Obama groups. Perhaps if a straight vote were given Hillary might have won or at least come in second as there would be more splitting of the vote. As it was, Biden, Kucinich, and Dodd had a combined one caucus vote for them (basically 0%.) If those voters were not allowed to move to other candidates, each of these candidates would probably have gotten 2-3%. On all these issues, Obama had the advantage. He became the consensus alternative choice, he focused his energy in Iowa since he began campaigning (he only opened a California branch a couple months ago, for goodness sake), he was more likeable on a personal basis where he was given more than 30 seconds to explain his positions, and he benefited from the Iowa caucus system.
Item #2: Iowa? To the outsider it may seem odd that Iowa, a state with a population of 3 million (1/30th of California) that is 95% white, has garnered so much attention. Those in the know will recognize that Iowa is only important because it is first. The next question is why does Iowa deserve to be first? The quick answer is that it doesn't. Iowa by almost any measure is not representative of the nation at large. It unfairly benefits from millions of dollars being spent in the state every 4 years by politicians and media outlets. And it gives a small minority (despite everything only about 1/10 of eligible voters in Iowa actually showed up to caucus) incredible power. It also has a voting system that is as quaint as it is ridiculous: voters go to someone's house at exactly 7:00, get into groups, argue around a dinner table, and finally the entire caucus chooses one candidate. There is no anonymity, voters are encouraged to switch sides by their neighbors who just made them that delicious fruitcake for Christmas, and the chief activity of each candidate's campaign staff on this day is baking cookies. Yet, I think it is fantastic. I just love the Iowa caucuses. Iowa forces the candidates to meet real people. Aside from the mega-weekend leading up to New Hamphire begun this morning, this will be the only time that candidates will be going to door to door, shaking hands at Denny's, or holding rallies in a family room. And I must say, Iowans, or at least those that vote, take it very seriously. It may sound incredible, but it is not uncommon or really difficult for a voter to meet EVERY candidate. Iowans do for America what realistically cannot be done after New Hampshire: they figure out if candidates are 'real.' They have real conservations with them. They get to see them outside of the glamor of tv commercials and they force the candidates to remember who they are serving and how politicians are supposed to get people's vote.
My only complaint with Iowa is that every serious candidate must endorse ethanol, despite the fact that it uses more petroleum than it saves simply because the state is the leading producer of corn in the nation.
Item #3: Hucka-who?
I've long thought that a social conservative with an economically populist message would have their way paved to the Whitehouse...if he/she were a Democrat. Unfortunately, Huckabee is in the wrong party. He's also, in my estimation, not a serious candidate. Don't get me wrong, what Huckabee did in Iowa was astonishing: the least funded Republican in the field just dominated the primary despite promising to make Steve Colbert his VP (not seriously, I assume), planning to throw out the tax system with the bath water, defending creationism, comparing Rowe vs. Wade to the holocaust, being a member of a rock band called "Capitol Offense," asking Mitt Romney in a debate if Mormons believed Jesus was the brother of Satan, and a hare-brained immigration reform scheme wherein immigrants would be required to return to the country they originated from for one day. Even Huckabee must realize that he has little hope of competing nationally. Huckabee's economic policies will alienate the libertarian wing of the party that is already uncomfortable with his social conservatism. Huckabee won Iowa because of the support of evangelicals. This support will carry him through the South and parts of the Midwest, but without attracting swing voters that Republicans are going to need in droves, most will give up on him as they realize he has too much baggage.
Item #4: The Fair Tax I'm amazed that the media hasn't talked about this more, but Huckabee has a clear plan to reform the tax system. It is not a new idea, but certainly is a radical one. Quite honestly, I don't know how I feel about it yet. All I can say is that it has long been the dream system for economists who specialize in the tax system. For a more thorough description of the plan, I would recommend viewing this surprisingly good summary from wikipedia. Basically, the plan would eliminate income taxes (and with it the IRS), and just have people pay sales taxes (of about 25%). To make the tax progressive (since poorer people spend a higher percentage of their income on necessity consumption), a tax rebate would be given to poor families based on family size. I don't know if this is a good idea, but it is a different idea. It would encourage saving and investment, get rid of all the expenditures associated with the IRS, and bring in offshore accounts (which some estimates say are as high as $11 trillion.)
The New York Times finally opened up its editorial section (the only section that matters) to their free internet website. Translation: You'll see a lot more articles from Paul Krugman on this blog.
Here's his latest about the housing crash debacle. As Krugman points out, Greenspan, who oversaw unregulated lending and then cashed in by writing one of the most inane books in history, was (and is) a super-ultra-crazy-wacko libertarian conservative in the mold of his messiah, an equally insane writer by the name of Ayn Rand. Greenspan was lucky to oversee the late 90s economic boom, but unfortunately he will not be remembered for legitimating Bush's crippling tax cuts, allowing--and ENCOURAGING--the debt to explode, and setting up the conditions for a housing collapse...enjoy
When announcing Japan’s surrender in 1945, Emperor Hirohito famously explained his decision as follows: “The war situation has developed not necessarily to Japan’s advantage.”
There was a definite Hirohito feel to the explanation Ben Bernanke, the Federal Reserve chairman, gave this week for the Fed’s locking-the-barn-door-after-the-horse-is-gone decision to modestly strengthen regulation of the mortgage industry: “Market discipline has in some cases broken down, and the incentives to follow prudent lending procedures have, at times, eroded.”
That’s quite an understatement. In fact, the explosion of “innovative” home lending that took place in the middle years of this decade was an unmitigated disaster.
But maybe Mr. Bernanke was afraid to be blunt about just how badly things went wrong. After all, straight talk would have amounted to a direct rebuke of his predecessor, Alan Greenspan, who ignored pleas to lock the barn door while the horse was still inside — that is, to regulate lending while it was booming, rather than after it had already collapsed.
I use the words “unmitigated disaster” advisedly.
Apologists for the mortgage industry claim, as Mr. Greenspan does in his new book, that “the benefits of broadened home ownership” justified the risks of unregulated lending.
But homeownership didn’t broaden. The great bulk of dubious subprime lending took place from 2004 to 2006 — yet homeownership rates are already back down to mid-2003 levels. With millions more foreclosures likely, it’s a good bet that homeownership will be lower at the Bush administration’s end than it was at the start.
Meanwhile, during the bubble years, the mortgage industry lured millions of people into borrowing more than they could afford, and simultaneously duped investors into investing vast sums in risky assets wrongly labeled AAA. Reasonable estimates suggest that more than 10 million American families will end up owing more than their homes are worth, and investors will suffer $400 billion or more in losses.
So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.
“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”
In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”
It’s no wonder, then, that he brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan’s world, predatory lending — like attempts to sell consumers poison toys and tainted seafood — just doesn’t happen.
But Mr. Greenspan wasn’t the only top official who put ideology above public protection. Consider the press conference held on June 3, 2003 — just about the time subprime lending was starting to go wild — to announce a new initiative aimed at reducing the regulatory burden on banks. Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw.
Also in attendance were representatives of financial industry trade associations, which had been lobbying for deregulation. As far as I can tell from press reports, there were no representatives of consumer interests on the scene.
Two months after that event the Office of the Comptroller of the Currency, one of the tree-shears-wielding agencies, moved to exempt national banks from state regulations that protect consumers against predatory lending. If, say, New York State wanted to protect its own residents — well, sorry, that wasn’t allowed.
Of course, now that it has all gone bad, people with ties to the financial industry are rethinking their belief in the perfection of free markets. Mr. Greenspan has come out in favor of, yes, a government bailout. “Cash is available,” he says — meaning taxpayer money — “and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this.”
Given the role of conservative ideology in the mortgage disaster, it’s puzzling that Democrats haven’t been more aggressive about making the disaster an issue for the 2008 election. They should be: It’s hard to imagine a more graphic demonstration of what’s wrong with their opponents’ economic beliefs.
Of course, the title is an exaggeration, but it gets the point across. Professional sports is and has been plagued for some time by a glaring structural problem that will probably not lead to its demise, but has and will taint athletics and I would argue become a major politico-economic problem that must be dealt with. What's the problem? MONEY. In particular, outrageous salaries to players. I am a lifelong fan of professional sports, some would say a near fanatic especially for football and soccer. I love to pull for my teams and follow every detail with near obsession. But for as long as I fully understood it, I have been frustrated with the ridiculous salaries that professional athletes receive for less than half a year of "work" (if you can call playing a game work). Before I get to ways to change it, let me first go through why professional athletes do deserve high salaries.When I say high, I mean at most maybe 1-2 million dollars a year. That is about 20-40 times a normal salary.
Reason#1: Athletes can really only have a "career" in professional sports for at most 15 years, but more likely about 8-10 years. I'm perfectly comfortable allowing players to live their lives in leisure after they finish their careers (I feel this way because I realize that becoming a professional sports player usually means sacrificing the development of other marketable skills, despite what college athletic programs claim. It would be unfair to ask these athletes to work menial jobs the rest of their lives, if for no other reason than they'll be hounded by every janitor they're working with to sign autographs). Since professional athletes basically retire by age 32, they'll need enough income while they're working to cover expenses for the rest of their lives. To do that, they need pretty high salaries.
Reason #2: Jobs in the public eye demand higher salaries. The difference between an amateur olympic athlete and a professional athlete is that athletes in professional sports have to deal with ongoing public pressure and exposure. Normally, such occupations demand high salaries. Of course, there are plenty of athletes that face ongoing public pressure and don't get paid at all (Collegiate athletes, for example. These athletes do get paid in another way, though: scholarships to prestigious universities. Considering how profitable college sports are, particularly men's basketball and football, these players are actually grossly underpaid. Many of them are getting very poor educations. But that's all another diatribe...) In any case, high profile occupations generally command high salaries, so it is somewhat reasonable for players to ask for huge salaries, despite the fact they're only playing a game.
Reason #3: Professional athletes are entertainers. When you put their salaries up next to other entertainers, say in music or film, their salaries are actually relatively low.
Reason #4: Sports generate tons and tons of money. Since the players are the ones playing the game, don't they deserve to reap the benefits of their efforts? Who else deserves the money? The owners? The players drive the sports and their rare skills are what make watching them entertaining.
The above are the reasons that professional athletes deserve much higher than average salaries despite only playing about half of the year in 2-3 hour spurts. Yet, they do not deserve, nor should they receive, salaries in the range of tens of millions of dollars. After all, they are just playing a game and they are just serving a fan base. They contribute nothing particularly valuable to society (except for occasionally being good role models, which, by the way, they are not paid for being) and they are an elite few who have been given talent far beyond anyone else. No matter how hard I worked, I could never become a professional athlete. By random, these professional athletes have taken advantage of their God-given talents, which admittedly took a lot of work on their part, and are receiving ridiculous salaries because of their freak athleticism. How fast a WR can run his 40 or the wingspan of a small forward will have no corresponding change in our GDP or our standard of living. Ironically, a serious cutback in salaries will have negligible impact on how interested athletes are in joining professional sports teams. Professional sports will have plenty of applicants regardless of salary (in economics we call this an inelastic labor market). Cutting back on player salaries will not change little Johnny's boyhood dream to play for the Dodgers. Raising salaries will not attract any new entries into the sport. The continued growth of these salaries is an economic injustice.
So, how should we fix the problem. I have an easy solution. In fact it's so easy, there is no way it will ever happen. My solution calls for 2 steps: Step 1: Packerfy all Franchise sports teams. In case you weren't aware, the Green Bay Packers are the only team in American sports that is publicly owned. The Packers are not owned by a person, but rather by the city of Green Bay. Management issues are dealt with through an advisory council, which, by the way, is the way about 90% of American sports teams are run. The big difference is that some jackass named Cuban, Steinbrenner, or Modell doesn't earn a profit on the team. All "profit" is reinvested in the team. Doing this would essentially Europeanize American Sports. This has some advantages and disadvantages. The advantages are that, like I said, some jackass isn't earning a profit on your outrageously priced seats and there is no way the team could pack up and leave. The disadvantage is that there would be no flexibility in where teams are located. For example, Los Angeles, as it turns out, is a surprisingly lousy place to be a football team. If all teams were public, the Los Angeles Rams, as an example, who would have been owned by a Greater Los Angeles District would remain there forever. But, in a way that I believe offsets any negatives to making the change, by Packerfying American sports, there would no longer be the tension between awarding profits to owners vs. players. This would also eliminate price gouging as the team would be serving whom they're supposed to be serving: the fans. An alarming trend in American sports is to outprice about 85% of the population by charging ridiculous fees by building smaller, grander stadiums with absurd numbers of luxury boxes. This is the most profitable way to run a team. If an owner is not accountable to the fans, they have no reason to do otherwise. Packerfying would also eliminate ruthless bargaining by sports team owners with city officials. 'If they won't build us the stadium we want to play 8 games a year in, we'll just leave.' And they can. Economically they should. Of course, losing a sports team can cost a city tens of millions of dollars a year, not to mention public outrage. It's such an enormous incentive, that cities will actually fork over the money to build such ridiculous stadiums.
Step #2: Of course, Europeanizing will only be half of a solution. After all, European soccer players make just as much money as American football players. But, Europeanizing will allow the second step because it will no longer favor the wildcat owner over the hard-working players: A Drastic and Heavy salary cap. A salary cap that would mean that top players make at the very most 3 million dollars a year, but more like 1-2 million dollars a year for most elite players. See, the reason that salaries have gotten so high is that teams understand that winning sells tickets. Since a couple of players can be the difference between a championship and being...the 49ers, owners are willing to pay those salaries because there is competition to do so and their team can still be profitable. If a salary that severely cut a team's payroll were enforced, and the team was Packerized, that money could be saved and reinvested, or even better...invested into the community. Since playing professional sports is so wage inelastic, one could set salaries at just about any amount and still attract sufficient (probably the same number of) applicants. As I mentioned earlier, professional athletes still should get paid a lot, but not as much as they're getting.
Placing this salary cap and Packerizing American Sports would have the following effects: 1. More investment in fan services 2. cheaper tickets 3. Less gross inequalities in our society 4. more connection between sports players and fans (which would be better for the game) 5. Less idealization of sports players. As is, professional athletics is unfortunately an inner-city African-American kid's perceived best shot at improving his lot in life (Why study in school when you could be practicing your free throws?) 6. An end to that uncomfortable situation where that creepy old guy lifts the Lombardi trophy and all your favorite players and coaches hail him for doing such a great job of making millions off of them. 7. No more blackmailing of cities by owners looking for bigger stadiums 8. More investment in the community through taxes or otherwise. 9. Better run teams (Al Davis has no idea what he's doing. He would have been voted out decades ago.) 10. A stop in the Bourgeiosefication of stadiums. Luxury Boxes could be filled with real fans, not hip yuppies looking for a seasoned Warriors game to go with their Brie and Merlot.
Honestly, sports is just one area where intense economic injustices are taking place. To truly tackle this problem and others like it, we must first rethink how he distribute wealth in our society and alter it accordingly. No matter how much A-Rod makes this year, the insanity of CEO salaries is far more egregious. Perhaps some of the strategies used to fix sports could be used to fix our society at large...I'll save that for another diatribe.
Yesterday, the Central Intelligence Agency broke the world record for worst excuse ever recorded when it claimed that it had destroyed interrogation tapes in 2005 to protect them from being leaked. They claimed they feared that keeping the tapes would result in the interrogators being vulnerable to attacks from Al Quada. The record breaking performance, which suprassed then 6 year-old Billy Johnson's 1913 claim that his dog ate his homework, ignored several obvious problems with the excuse that would have been obvious to...well a 6 year old. Among them, according to local grade schooler, Krystal Smith, was that "couldn't the CIA have destroyed all but one tape and kept that one in a safe or something...I mean you're telling me that the CIA doesn't think it can hold such a basic secret?," and "It is obvious that the tapes were destroyed because the interrogators were using illegal torture methods, as has been widely reported. There is absolutely no plausible reason to legally destroy those tapes" This is all not to mention, 3 year-old Thomas Somoza's point, "doesn't Al Quada have like a million people already on its list. It's not like the one thing stopping them from killing people is video evidence."
