Saturday, October 16, 2010

Let them have their tax cut if...

If your income declined from 2001 to 2010 or if your child is a member of the U.S. armed forces, then you should get the Bush tax cut, even if you're wealthy.  But if you benefited from the Bush bubble economy and haven't been personally contributing to our national defense - then its time to pay the piper that played your tune.

The middle class didn't make any progress in the last decade - the median wage didn't keep pace with inflation. More than half of American incomes were stagnant or declined as jobs were outsourced (and while companies were given tax brakes to cover the cost of outsourcing). All this despite the growing economy that benefited the already rich. For the small fraction of the elite and upper middle class who actually got stuck in the same trap as the middle of the middle class, we're willing to give you a break - that is, if you're in $250,000+ tax bracket and can show your income in 2010 is less than your income in 2001, then you get the Bush rates.

But for the rest of the wealthy -  well, do you remember your "trickle down" argument?  You told us you would invest your tax cuts to "grow the economy" so that the "rising tide would lift all boats." You didn't keep your end of the bargain: your boats floated while ours sank. This was happening to us before the recession - we were sinking during your "boom."

Now, we understand upper class families have it tough; we've listened to your crocodile tears about how hard it is to live on only five or more times the median household income - you're not rich - really - we believe you. We know you've earned your money, as you spend long hours hunched over your computer and talking on your phone in your air-conditioned office. How can our jobs compare? We re-roof houses in the blazing sun at minimum wage, work two jobs to get by, and deal with a classrooms full of rowdy kids with absentee parents and Republican government mandates to "teach the test." Obviously, the rest of us just don't know what hard work is; we deserve our stagnant wages. We also know how our vilification and "class warfare" is causing psychological scars to your delicate psyche.

Yes, higher taxes may make you work fewer hours. But somehow, I think we'll take that risk.

You of the upper middle class and privileged wealth have been sponging off the rest of the country - benefiting from economic and government systems that protect and increase your income while undercutting the vast majority of Americans. We want you to start paying your fair share of the government that advances your interests. It's time for those who really benefited from the George Bush version of capitalism and "fiscal conservatism" to step up and pay the bill.

Of course, not everyone wealthy is a sponge - many actually support our nation beyond the economic policies that benefit their class. So we're also willing to extend the Bush tax cuts to the wealthy who, either themselves or through their sons and daughters, put lives on the line for our country in the armed services.  I doubt that this would cost the treasury much - and it would certainly be a small price to pay for those who have served.

By the time an average middle class family pays for sales taxes, social security taxes, real estate taxes, medicare taxes and income taxes they are already sending more than their fair share of their wages to the government.  It's time for the upper middle class and the wealthy to stop whining.


Do you really think that increasing your tax rate from 36% to 39% on only the income you earn over $250,000 is class warfare? 

The middle class is withering - be wary of its demise as we may find out what class warfare really means.   


Saturday, September 25, 2010

Deficits matter... to whom?

We keep hearing from the right that deficits matter.  But they matter to whom?

I think the answer provides both insight and explanation into behavior of the GOP.

Long-term deficits matter to the poor and middle class - not the uber-wealthy. Long-term deficits will, at some point, drop us into an era of high interest rates and high inflation - destroying the life savings and crippling the wage-driven economy for the middle-class and poor.

GOP presidents have been in charge for 80% of the deficits. GOP presidents had veto power over all that spending.  Did they just forget themselves? I can see it through a glass, darkly: the GOP wakes up one morning with a head slap and says "Damn, I forgot to stop the deficit spending."

Why should deficits matter to the uber-wealthy?  They can easily move money offshore into investments that are inflation protected.  They can even move themselves offshore if the peasants become a problem. It's really rather simple logic. If deficits mattered to the uber-wealthy, the Bush administration would not have run up massive deficits. People don't spend 8 years doing what they really oppose.

If you claim "deficits matter" while simultaneously creating deficits through both good and bad economic times, then you are either stupid or a hypocrite. As proven by behavior, as long as deficits are created by lowering taxes and providing services to the wealthy, the GOP is quite content to let the red ink run up. Indeed, the GOP doesn't mind deficits created for middle class spending as long as it also helps corporate interests and doesn't shift power out of their hands (for example, the GOP drug benefit in Medicare).  But any Democratic spending that might please the middle class and shift power out of GOP hands brings out the clarion: "deficits matter."  Notice how quickly the argument disappears when you say - "OK, let's tax the people who have the money to solve the deficit problem." 

If deficits matter to the wealthy, why didn't they wield their political clout in the Bush administration to maintain the Clinton surplus or (at least) keep deficits small? The answer, of course, is that you can't balance the federal budget except by 1) taxing the wealthy - as Clinton did, or 2) cutting services to the middle class - including social security and medicare - which the GOP threatens but has never done. Of course, during the Bush years the first option was unacceptable to the wealthy GOP base (who are needed for campaign contributions), and the second option would have lost votes of the independents and elderly the GOP needed to get Bush re-elected. It follows that the only way the GOP could maintain their position in the Bush years was to pretend that deficits matter while doing nothing about them.  Today, nothing has changed.

The GOP's historical behavior in simultaneously promoting deficit spending and tax cuts is unworkable. 

The only question is how badly will they wreck the country before the voters stop them.

P.S.  To the extent I understand economics - I'm a Keynesian and support deficit spending during bad economic times, along with increased taxation and spending cuts during good economic times.

Monday, September 20, 2010

Bush spent your tax cut.

It's time for Americans to grow up and admit it.  Between 2001 and 2008, we took our kids' credit cards (including the cards of the unborn) and maxed them out.  Nothing but IOU's left in the rainy day fund for when the crash came. 

Oh, we had our reasons - we needed that new Hummer, had to buy a 4800 square foot house with 12 foot ceilings, simply had to invade a couple countries to make sure that a handful of terrorists couldn't attack us.  You know the excuses.

Of course, we could have paid for it all at the time, but we believed in Santa Claus who told us that "tax cuts will stimulate the economy and will bring in more revenue in the long run."  Well, the long run is now, when the tax cuts are expiring.  How did that all work out for you?  Did you see the deficit disappear as the tax cuts worked their magic?

The Easter Bunny also assured us that once the rich got their tax cuts and invested it in America, the wealth would rain down on the middle class.  I'm not sure where the rich were investing, but we had the only decade since the Great Depression with stagnating wages in the middle class.  Looks like the Easter Bunny played us for fools.

Time to grow up.

The middle class sent their sons and daughters to fight and die in Iraq and Afghanistan - what did the wealthy do for their nation?  Well, they moved company headquarters to a PO Box in the Cayman Islands for tax breaks on foreign income and outsourced jobs to India to profit from lower wages.  The middle class held their families together the best they could despite stagnating wages and skyrocketing costs for education and health care.  The rich, they got richer.

It's time the wealthy pay for the wars that protected them and the capitalist system that allows them to take an ever-increasing share of this nation's wealth.

Why tax the wealthy?  Because that's where the money is.

Once we pay for the wars and the other deficit spending of the Bush administration, then I'll be glad to talk about how we need to change government spending to bring a better balance between the private and public parts of the economy.  Until then, its time to clean up the mess you've made.

Bush spent your tax cut.

Tuesday, August 31, 2010

History? What history?

"To sum up, over the long run, a low fed funds rate must lead to consistent—but low—levels of deflation."
The above is from the President of the Federal Reserve Bank of Minneapolis, a member of the Federal Open Market Committee that sets monetary policy (link below). The statement is appalling on many levels. To me, it indicates that at least one member of the Fed has simply gone down the rabbit hole with their logic, or is letting their politics determine policy. I'm not sure which interpretation is scarier.

Remember in the early l980's when the Fed (led by Volker) raised interest rates to fight inflation? It was painful (mortgage rates above 10%) but effective. By raising interest rates the Fed choked off the perception that one could make money by betting on inflation. We now have one of the members of the Fed arguing that to fight deflation we also have to raise interest rates - how is that supposed to work? One policy does everything?

Let's look at his argument a little closer. Mr. Kocherlakota is, in effect, arguing that low interest rates lead to a perception of deflation, which then encourages more deflation. Thus, there is a need to raise interest rates in the face of deflation so that people think that the Fed expects inflation and then, obviously, people will act as if deflation is over. He thinks companies that won't borrow money and expand when interest rates are extremely low will somehow decide to borrow and expand when interest rates are raised.

Some background: recall that inflation is caused by too much money chasing too few goods, which leads to an upward pressure on consumer prices, demands for increased wages, leading to more money available to buy goods - a classic positive feedback loop. High interest rates may break this cycle by reducing the amount of money chasing the available goods. There is no doubt that increasing interest rates is a psychological shock to the business community - but it also has an understandable, rational mechanism by which it breaks the inflationary cycle. No voodoo economics required.

Conversely, deflation is caused by too little money chasing too many goods. In a deflationary economy, companies aren't selling their products, so they cut workers and pay while trying to keep a high level of productivity. The the result is the amount of money available to buy products falls faster than then number of products available - again a classic positive feedback loop. So how can high interest rates break this loop? If businesses find the cost of capital greater why are they going to hire more workers? How does raising interest rates change the problem of too little money chasing too many goods? It seems to me that Mr. Kocherlakota is arguing that rational mechanisms are unimportant and the Fed only has to fool business into expecting inflation to break a deflationary spiral. The emperor just has to make people believe and he can parade around naked.

If our banking community has become this divorced from reality and logic, we are in for a long and painful ride.

Note: the above ideas were the result of my trying to follow a fairly obscure post of Paul Krugman  that points to an economic wonk's web site

Link to the text of Mr. Kocherlakota speech:

Saturday, August 28, 2010

with an eye of newt...

Here's is Newt Gingrich's defining statement on the "ground zero" mosque:
"There should be no mosque near Ground Zero in New York so long as there are no churches or synagogues in Saudi Arabia"
Maybe he's onto something.  Why don't we follow his logic and make all our constitutional freedoms depend on other governments granting those to their citizens as well?  Let's see...
There should be no free press in America so long there is no free press in North Korea.

There should be no handguns in America so long as handguns cannot be owned in Germany and Canada.

There should be no right to vote in America so long as citizens in Myanmar are subject to a military dictatorship.
And here's where we're heading:
There should be no logical arguments in U.S. politics as long as people are listening to  hypocritical family values politicians.
Seems like "eye of newt" and "tongue of dog" are bubbling in the same cauldron.

Link to the eye of newt: 

Link to tongue of dog:

Monday, July 12, 2010

Are you a strict constructionist?

The 1st amendment to the U.S. Constitution reads...
Congress shall make no law... abridging the freedom of speech, or of the press;...
Are any of the following correct interpretations?
a) Congress cannot limit political campaign donations because some money might be used to facilitate speech
b) Congress cannot limit your freedom to express opinions on the internet, even though it is not (in correct English) "speech" or text created by a printing "press."
c) Individual States cannot limit freedom of speech or the press, even though the amendment states that "Congress shall make no law..."
If you answered "no" to all of the above (a double negative, meaning the Congress and the States can limit) then congratulations: you are a strict constructionist and read the Constitution exactly as written without interpretation. Your philosophy of government is exactly in tune with simply "reading the words" of the Constitution. However, if you answered "yes" to any of the above (that Congress or the States cannot limit) then you have interpreted the Constitution in light of present technology, culture and what you consider to be logical implications of the written word - i.e. you believe in activist interpretation of the Constitution.

Don't get me wrong - I don't believe the activist v. constructionist Boolean split is really the only way (or the even the best way) to characterize judging or understand our Constitution. However, this is the paradigm chosen by the conservatives, who typically argue their constructionist ideology is the only valid approach and deride any "interpretation" as activist ideology. So for the present purposes I will accept their Boolean logic and discuss just what it takes to be a true strict constructionist.

Is prohibiting Congress from providing campaign finance regulations a strict construction of the Constitution?

To say that Congress cannot place limits on campaign financing, one must extend the Amendment by arguing that money facilitates speech, so the law prohibiting "abridging" freedom of speech also prohibits abridging conduct that facilitates speech. The Founders were fairly intelligent men, so if they really meant that Congress couldn't limit any conduct with facilitated speech, they could have written:
Congress shall make no law... abridging the freedom of speech, or of the press, or any conduct which facilitates these freedoms;
Of course they didn't do this, so anyone who wants the Supreme Court to override the U.S. Congress' campaign finance law must interpret the Constitution as if it had this extra clause. Curiously, present interpretation of the Constitution is actually in line with the true strict constructionist viewpoint - i.e. Congress may constitutionally limit campaign contributions as money is money and speech is speech. It's interesting that many conservatives want the courts to find for their personal interpretation that money is speech (clearly a valuable interpretation if you have money). This can only be considered judicial activism and a new interpretation of the Constitution. This idea of prohibiting conduct that facilitates speech is clearly broader than what is written, so judicial overturning of campaign finance laws should be anathema to strict constructionists.

Is prohibiting Congress from legislating communication of ideas on the internet a strict construction of the Constitution?

The Constitution doesn't say that all forms of communication cannot be regulated - only "speech" and "the press." So to argue that Congress cannot interfere with communication on the internet requires an extension of the ideas of "speech" and "press" to all forms of communication. That is, you must broadly interpret the ideas of "speech" and "press" as being the only forms of communication in the 18th century, so all our 21st century forms of communication are also covered by the amendment. Presently this interpretation is supported across all political parties - but that doesn't make it a true strict construction or a simple "read the words" version of the Constitution. Without this interpretation, we would need a new amendment to the Constitution to protect electronic communications.

Is prohibiting the States from controlling speech a strict construction of the Constitution?

If you are a strict constructionist, you can't argue that an amendment saying "Congress shall make no law" actually means "the States shall make no law." Indeed, the 2nd Amendment states that "the right of the people... shall not be infringed" rather than "Congress shall make no law" so the founders understood the difference between prohibiting Congress from action and providing a right that cannot be abridged by any level of government. The Founders could have easily written an amendment that applied equally to the states as well as Congress, so the differences between the 1st and 2nd Amendment cannot be simply swept under the rug.

Thus, to get to the idea that States cannot control speech from an Amendment that clearly deals only with Congress, you need to look at the 14th Amendment, which says
No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States;... 
Unfortunately, there still isn't anything for a strict constructionist to really dig into here without resorting to interpretation. The 14th Amendment might have been written explicitly with a clause something like...
No State shall make or enforce any law which Congress is forbidden to make under the Bill of Rights (Amendments 1 through 10 of the Constitution).
Of course it doesn't say this. So if you want to prohibit the States from abridging freedom of speech or the press, you have to "interpret" the 1st and the 14th Amendments together (which the Courts have done). That is, you have to interpret the 1st Amendment (which strictly limits the actions of Congress) as implying a "privilege" or "immunity" for speech and the press (rather than the "freedom" that is stated) and therefore the 14th Amendment bars the states from abridging these privileges or immunities.  It's not really a big reach to do this, but its clearly not a simple "read the words" interpretation of the Constitution.

Strict construction or hypocrisy?

Do we actually have any strict constructionist judges in the Federal District, Appeals, or Supreme Court?  Or are all judges actually "interpreting" the Constitution, with some hypocritically claiming that it isn't what they are doing? As I see it, claiming to be a "strict constructionist" and then interfering in a state electoral process (see Bush v. Gore, 2000, with writings by Scalia and Rehnquist) is simply an attempt at avoiding comparisons of the relative value of different interpretations. If you can say that "I'm right because I'm a strict constructionist and this is what is written," then you don't have to argue the validity and value of your interpretation. You are free to disdain and disparage the "interpretations" of others, while claiming a special ground for your "reading the words."

Most conservative judges and pundits would consider "yes" answers to all three of my examples to be correct readings of the Constitution, even while calling themselves "strict constructionist" and disdaining the interpretation implied by their "yes" answers.

I'm not saying that there aren't good arguments for conservative interpretations of the Constitution or that liberal arguments are necessarily better. But I am saying that we need to start our discussions with an honest playing field: the conservative readings are actually interpretations. These interpretations have no more inherent validity than liberal interpretations and are not necessarily closer to true strict constructionism. Judges and politicians and people of all beliefs have a right to interpret and argue about what the Constitution means in the context of our society, technology, and reasonable extension of the ideas to new conditions.


Strict constructionism isn't.

Claiming special status for your reading of a holy writ is intellectual laziness



Logic be damned...
You do need to offset the cost of increased spending, and that's what Republicans object to. But you should never have to offset the costs of a deliberate decision to reduce tax rates on Americans.
Senator John Kyl, on Fox News Sunday, July 11, 2010.
So, deficits formed by cutting taxes are OK, but other deficits aren't. Where is the logic in this? What is the argument? If I go into debt because I spend to much that is bad, but if I go into debt because I take a pay cut then that debt is somehow different?

Is this is what passes for fiscal conservatism and concern about the national deficit and debt?

Tuesday, July 6, 2010

The good old days

"They're snuffing out the America that I grew up in"
- John Boehner as quoted in the Pittsburgh Tribune-Review, June 29, 2010.

Just what does John Boehner miss from his boyhood America?

Boehner was born in November of 1949 so he turned 18 in 1967.  Here's what America was like during that interval:

1949-1967  the Good:

The economy was booming due to the economic stimulus effect of deficit spending during World War II, which pulled the country out of the Great Depression. The federal government continued to spend on infrastructure and innovation, including the the interstate highway system and a manned space program.

Federal college support for returning veterans created the most highly educated and dynamic work force that the world has ever seen. State college costs were low for non-veterans as well, because most states realized the value of an educated workforce and fully subsidized college infrastructure and operating costs.

Federal regulation of the financial industry prevented the financial crashes that occurred every 7-12 years before 1929 and restarted in 1987 as a consequence of deregulation pushed by Reagan and successors. As pointed out by one blogger(1), Boehner was 37 years old before he ever saw a financial crash.

Wealthy Americans and corporations paid higher taxes on their income, keeping the tax burden on the earned income of middle-class working Americans quite reasonable.

1949 - 1967  the Bad:

The sons of the poor and blue-collar workers were drafted to fight in Korea and Vietnam, while sons of the wealthy and white-collar stayed home (or were stationed in Europe).

Women could be legally discriminated against at work and excluded from universities and professions. It was OK to fire a woman who became pregnant or just because you wanted to give her job to a man.

Businesses dumped toxic waste into the air and into our waterways without controls or consequences. Businesses, government and individuals could destroy the habitat of any species, even leading to extinction.

For half of Boehner's childhood, "separate but equal" was a valid legal doctrine.


John Boehner wasn't clear about what he misses from his boyhood America, but I have a hard time finding things from 1949 -1967 that the Democrats have "snuffed out" that reflect something good. Perhaps this is just my bias and someone can provide some counter examples that support Boehner's idea.

But all partisan finger-pointing aside, much has changed because our population more than doubled from 1949 to 2010 - an increase almost entirely in cities. In 1950 there were 55 million rural Americans(2). By 2000 only 5 million more people had joined the rural lifestyle (a 10% increase) while urban America added 129 million people (a 132% population increase)(3). The America where 1/3 of us had rural roots is gone and isn't coming back. Life moves on.

The good old days are mostly just old


(1)  I wish I could say that I thought up with this way of looking at Boehner's comment, but I'm just not that original - I was inspired by a blogger who contrasted the Reaganesque America that he grew up in to the FDR-influenced American that Boehner grew up in.



Tuesday, June 29, 2010

Supply side economics anyone?

Despite our presently anemic economy, conservatives still want to make the Bush tax cuts for the wealthy "permanent."  The idea is that these tax cuts performed so well that they are necessary for our country's well being. A great analysis of the data that proves this idea wrong can be found at

You can go to the Bureau of Labor Statistics and download data for yourself and do your own analysis

Saturday, June 26, 2010

Is it time to become a Luddite?

Fish. Today I'm thinking about fish and becoming a Luddite.

See if you might join me...

Genetically engineered farm-raised salmon. The engineer in me says "so what?" But the scientist in me is bothered by what they have engineered, rather than the mere fact of engineering itself.

They're making the salmon grow faster by switching a gene that normally slows down a salmon's feeding rate in cold water. We know that some fraction of these fish will escape from fish farms and some fraction of that fraction will survive to mate with wild salmon. Even if they "sterilize" the salmon, there will be some small fraction where the sterilization fails (failure is a statistically predictable occurrence in any industrial process). We know it's not a matter of "if" but "when" such engineered fish will mate with wild salmon

What we don't know is the effect on wild salmon populations.

I will be the first to admit that it is likely that this mutation would not survive in the long run; otherwise evolution would not have already selected for fish with a gene that reduces growth in cold water. But the evolutionary long run is measured in thousands or tens of thousands of generations. Since a salmon lives between 1 to 8 years from birth to spawning death, we don't know what evolution will do before the long run.

Here's a possible scenario: a few fish escape and breed with wild salmon, providing a new generation of which some fraction have the switched gene. These fish grow faster than the wild salmon and outcompete the wild salmon for mating, increasing their presence in the gene pool. This continues for some time with no noticeable effect on salmon populations. Eventually, the majority of the wild population carries the new gene and grow faster. Then the next environmental crisis arises and the salmon food sources are reduced. The wild salmon with the switch gene cannot get enough food because their hunger doesn't go dormant. The wild salmon population crashes. The only salmon surviving the crisis are those with the original gene; but they are a depleted population and may take centuries to come back. Or they may simply go extinct.

I wish they'd stick to genetically engineering cows, pigs and chickens. We've been genetically engineering these through selective breeding for the last 7000 or 8000 years, so all we're doing is switching our engineering tools. There's not much worry about cows, pigs and chickens escaping and causing problems in wild populations. And if they screw up cows, pigs and chickens, we can simply choose not to eat them.

This whole effort is another case of privatization of profit and socialization of loss. Do you think that the salmon farms will carry enough insurance to compensate the fisherman if the wild population crashes? It will be another, "Oops, sorry about that. I'm sure you don't mind picking up the tab Mr. and Ms. Taxpayer."

Friday, June 25, 2010

The 1078 little pigs

Once upon a time, two little pigs each won $10,000 in a lottery. The first little pig said "I'm going to do the safe thing and buy gold." He put the gold in a safety deposit box in the piggy bank and would occasionally go look at its brightness and enjoy its smooth cool weight. The second little pig said "I'm going to do the safe thing and put the money in a long-term certificate of deposit at the piggy bank."

The gold was indeed safe. It sat safely and quietly in the safety deposit box. No one knew it was there except the first little pig.

The second little pig's money in the piggy bank stayed there for a month, then a third little pig, the piggy bank manager, loaned $8000 to a fourth little pig to buy a brick house. He was a very careful manager and would not approve a mortgage on a straw house (unlike some pigs). It took another month for the loan to close, after which $6000 went to piggy bank #2 that had the old mortgage on the house, which was controlled by a fifth little pig. The remaining $2000 went to a sixth little pig who had sold the house.

The sixth little pig let his money sit in his checking account at the piggy bank for a month, and then decided buy stock in a piggy company. He bought stock from a seventh little pig through a broker (pig #8). A month later, the seventh little pig used the $1980 from the stock sale as downpayment on a new car from the piggy auto dealer (pig #9). The broker who arranged the stock sale (pig #8) used his $20 commission to buy beer from the piggy bar (pig #10). Piggy auto dealer paid his employees (piggies #11, through #15) and the auto manufacturer and his employees (piggies #16 through #1015)

Meanwhile, piggy #5 (the manager of piggy bank #2 that got the $6000 when the house sale closed) used $4500 of that money to help finance a little piggy #1016 who was starting a new company. This entrepreneur piggy used the money to pay piggies #1017 through #1029 who were building piggy widgets to sell. These piggies used their pay to buy groceries, drink beer, and go to football games - contributing to the paycheck of piggies #1030 through #1054.

And then the economy started to look bad. The second little pig decided that his $10,000 wasn't safe in the bank, so he paid the penalty for early withdrawal and bought gold, just like the first little pig. The sixth pig sold his stock at a loss and also put the remaining money into gold (broker piggy again went to the bar with his $20 commission). Piggy #3, who managed the piggy bank, was worried about declining deposits and the collapsing stock market so he decided to cut back on loans.

Entrepreneur piggy's company was hit hard by the downturn, and he needed a bridge loan to keep needed money to buy materials for his company, but the piggy bank turned him down. Entrepreneur piggy had to fire his workers (piggies #1017 through #1029) and close the company.

Piggy #7 defaulted on his car loan and piggy #9 repossessed the car. Because of losses on the repossessed car and reduced car sales, piggy #9 laid off piggies #14 and #15. The auto manufacturer put piggies #20 through #1015 on reduced hours (but made sure that executive piggies #16 through #19 still got their year-end bonus).

Then little piggy #1055 (an economist) said, "Since banks aren't loaning money and companies are laying off workers, the government should stimulate the economy. We need to get the economy moving so that piggies sitting on gold are comfortable investing, piggy workers are working, and piggy companies are hiring. This will bring more useful money into the economy in the long run." This sounded like a good idea to the piggies who were out of work.

Then piggy #1 (who owned gold) said,"But if the government borrows money to stimulate the economy, we'll have to pay it back someday out of higher taxes." This sounded like sage wisdom to the other piggies that owned gold (piggies #2 and #1056 through #1078).

Economist piggy #1055 tried to explain how the money supply works and how the speed of money as it moves through the hands of many piggies has more economic power than the same money locked up as gold in a bank safety deposit box. He had charts and tables, powerpoint graphs, and elegant mathematical models. He very carefully explained that when a dollar passes through the hands of 10 or 12 piggies in a year, then the piggy government gets more in taxes than if the dollar is gold in a vault. He warned that if everyone stops loaning and spending money the economy contracts, which becomes even more reason to stop loaning and spending money in a viscous feedback cycle. He argued that "You have to spend money to make money" is also sage wisdom.

The golden piggies were unconvinced. They were bored by economist piggy's wonkish talk and his mathematical models of the economy. They were sure that government finances work exactly like a piggy's personal budget - just because that is the way it should be and it made sense to them. If a piggy has to tighten his belt, then so should all piggy companies, piggy banks, and the piggy government. The golden piggies could not explain how the economy recovers from a depression cycle, but they were absolutely sure they were right. They knew there couldn't be anything in the world that was more complicated than their budgeting wisdom. Indeed, they were so sure that they were willing to bet the future of all the unemployed piggies.

Wednesday, June 23, 2010

Who judges the judges?

Here's a link to the financial disclosure form of U.S. District Court Judge Martin Feldman, who made the recent decision on the offshore oil and gas drilling moratorium

The form was filed in 2009 for the the calendar year 2008.  As yet, his 2009 disclosures don't appear to be posted online.

Perusing the list, I noted there are 141 line-items of transactions and holdings reported for about 120 companies/instruments (depending on how you count multiple investments in GNMA etc.).  Of the reported investments, there are 21 energy companies (all oil and gas except for a single coal company) accounting for 31 transactions.  The disclosure doesn't allow you to find out what fraction of his total wealth is in energy, but it is clear that somewhere between 15-17% of his investment transactions have involved companies involved in the energy sector.

At what point should a judge recuse himself from a case?

Extracted Data
Numbers are the line-items in the disclosure form

Energy stocks held by Judge Feldman at the end of 2008 

16. Ocean Energy Notes (offshore oil/gas exploration)
19. Transocean (offshore drilling)
55. Peabody Energy (coal)
92.  Atlas Energy (gas production)
106. EV energy partners (oil/gas operating company)
117. BPZ resources (oil/gas exploration & production)
118 El Paso Corp (natural gas)

Energy stocks bought by Judge Feldman prior to 2008 and sold during 2008

35. Quicksilver Resources (oil/gas exploration and production)
50, 54.  Prospect Energy (financing for energy industry)
53. Provident Energy (oil/gas holding)
70.  Haliburton (oil/gas services)
84.  RPC Inc.  (oil/gas services)
80.  Pengrowth energy trust (Canadian energy producer)

Energy stocks bought/sold by Judge Feldman in 2008

86,87. Hercules Offshore (offshore drill rig operator in Gulf of Mexico) - bought/sold
95,96.  Parker Drilling Company (contract drilling and services) - bought/sold
102,103,104. TXCO Resources (oil/gas exploration and production) - bought/sold
113, 114. Rowan Companies (Drilling Services) - bought/sold
124 El Paso Pipeline Partners LP (natural gas pipeline) - sold
129, 130. KBR (energy engineering) - bought/sold
131, 132, 133. Chesapeake Energy (natural gas) - bought/sold
134, 135 ATP Oil & Gas - bought/sold

Sunday, June 20, 2010

Will a real Libertarian please stand up?

The Libertarian credo is that the government should be minimized to the "essential" functions, typically listed as: national defense, local police and fire departments, immigration enforcement, judiciary, and prisons. This idea has an inherent appeal as it provides a clear framework that says "this" is good and "that" is bad.  No judgement required. No compromise allowed. No haggling. No lobbying. No earmarks. No handouts. Just good old American self-reliance and devil take the hindmost. This credo of rugged individualism provides a pedestal from which the Libertarian looks down on the squabbling parties of a democratic government and says "You're all wrong; you're arguing over things that none of you should be doing. I earned my money and property and its immoral for you to take any of it or limit my use of it."

The next time you meet a Libertarian, ask them what they would do if the guy who owns the house next door decided to bulldoze his house and build a 24-hour skateboard park with stadium lighting and loudspeakers with the latest music for entertaining his customers. If you've got a real Libertarian on your hands, he'll say "Well, I wouldn't like it, but it's his property after all, so I guess I'd have to sell my house and move." Any other answer is inconsistent with the Libertarian philosophy of property rights (if he says he'd threaten the neighbor with a gun, then he's simply an anarchist). Of course, for all of us who live in typical urban/suburban city and small town neighborhoods, this scenario is absurd. We all live with zoning ordinances that are established and enforced by our elected government. These laws specifically limit private property rights by balancing the rights of the greater community against the liberty of the individual. Zoning ordinances should be anathema to the true Libertarian.

Once Libertarians admit government interference through zoning ordinances, their logical philosophy of absolutes is broken. Pandora's box springs open and spews and infinity of arguments. If you need one kind of regulation on liberty for the good of the community, then why not others? Why should zoning ordinances be allowed and not environmental protection regulations? Why should environmental regulations be allowed and not banking regulations? Why should banking regulations be allowed and not workplace safety regulations? Why should workplace safety regulations be allowed and not worker's compensation insurance? The list goes on. The critical question is "Who gets to decide what government interference is necessary?" Reasonable people can differ on where to draw the line, but there is always an open question as to what forms of government interference are necessary and appropriate. Deciding provides the fundamental push/pull of democracy. You either stand on the pedestal and argue that all government interference in private property is bad, or you have to argue why your preferred forms of interference are good and theirs are bad. You can only stand on the absolute Libertarian pedestal if you can honestly say zoning ordinances are immoral restrictions on property rights. Logic is a tough taskmaster.

Balancing the rights of individuals against the rights of the community is not an easy task and has no provably correct answer. Individuals owning property would like to get the greatest monetary benefit, whether or not they infringe on rights of others. In a democratic society, we argue out these issues in our elections and with our government. Sometimes the side that leans more towards the individuals wins. Sometimes its the side that leans more towards the community. Recently, it has been a side (made up by members of both parties) that leans toward the needs of corporations, with individual and community rights ignored. Nevertheless if we can all agree on using the electoral/democratic processes our nation will muddle its way forwards between the extremes and find the path that works. However, when one side decides that if it doesn't get its way the system is broken and needs to be fixed at the point of a gun, then we are looking at the beginning of our decline.

Anyone who has the answer doesn't understand the question.

Thursday, June 17, 2010

From the Oracle of Omaha

"My luck was accentuated by my living in a market system that sometimes produces distorted results, though it overall serves our country well.  I've worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions.  In short, fate's distribution of long straws is wildly capricious."

- Warren Buffett,
in a letter to other billionaires as quoted in a Bloomberg News article on June 17, 2010.

Tuesday, June 15, 2010

Justice or Luck?

"Thus, when a state habeas petitioner's appeal is filed too late because of attorney error, the petitioner is out of luck." 
     - Antonin Scalia, Associate Justice(?) of the U.S. Supreme Court

There are two logical explanations for the above quote:
    1) He believes only guilty people are on death row, so that luck doesn't lead to execution of an innocent person.
    2) He believes that the justice is a game whose outcome depends on luck, and if an innocent person is executed, that's too bad but is not his problem.

The first explanation is delusional, the second is evil.

Thursday, June 10, 2010

If you don't turn the other cheek...

I'm finding myself quite fed-up with the "Christian Nation" zealots. These are the people who claim that because most of our founding fathers were Christian and believed in Christian principals, we are therefore a "Christian Nation." I've never been able to follow the logical leap required for their argument, but let us accept it as true and see how our supposedly Christian Nation was set up to follow Christ.  If we are a Christian Nation (rather than a nation founded by and of mostly Christians) then there should be some evidence that we, as a nation, follow the teachings of Christ.

Lets look at one of Christ's key teachings:
You have heard that it was said, 'An eye for an eye, and a tooth for a tooth.' But I tell you, do not resist an evil person. If someone strikes you on the right cheek, turn to him the other also. And if someone wants to sue you and take your tunic, let him have your cloak as well. If someone forces you to go one mile, go with him two miles. Give to the one who asks you, and do not turn away from the one who wants to borrow from you.
That is pretty strong stuff. And it's not just a one-liner allowing you interpretive license to say he really meant something else. Christ uses multiple examples of how his followers are supposed to behave peaceably toward aggression and give to anyone who asks - there isn't any ambiguity. If we are a "Christian Nation," then shouldn't this central idea of non-aggression be reflected in our laws? I can't find anything remotely like it. Indeed, I'm not sure that many gun-toting, lawyer-hating Americans would want to live in a country whose laws require turning the other cheek to an assailant and giving double to someone who sues you. So strike one - if we are a Christian Nation, there is no evidence in our laws.

As we are not explicitly (or legally) a Christian Nation, perhaps we are implicitly a Christian Nation because of our founders beliefs and behaviors. That is, perhaps it is "tradition" that makes us a Christian Nation. If so, then Christ's teachings should be identifiable in our nation's behavior over the last couple centuries. Let's see, we've been struck on the right cheek a number of times: Barbary pirates in the 1800s, the British invasion in 1812, Fort Sumter in 1861, Pearl Harbor in 1941, and the World Trade Center in 2001. I don't seem to recall us turning the other cheek. Indeed, there are other times where we only imagined being struck on the right cheek (most notably the Mexican-American war and the Spanish-American war) and behaved in a distinctly un-Christian manner. To get to the nub of the problem, I'm not sure how to reconcile Christ's teaching of non-aggression with our Declaration of Independence and our Revolution. Why didn't the founders turn the other cheek to the British wrongs? Wouldn't that be the Christian thing to do? I doubt there are many Christians out there that want a government actually acting on Christian principals. Indeed, the only example of unabashed governmental "Christian" behavior appears to the Bush administration's bank bailouts: "...give to the one who asks you, and do not turn away from the one who wants to borrow from you." He definitely followed Christ on that one. So strike two - as a nation, we have not consistently followed Christian principals.

I wish we could put this whole thing to rest. I wish we had some clear legal statement from our early days that we are not a Christian Nation. Then we could get on with being the mixed-up nation that we are and dispense with this nonsense. Oh, wait a minute, there's this treaty with the Bey of Tripoli that was ratified by the U.S. Senate on June 7, 1797, only 10 years after the U.S. Constitution was signed.  The treaty was signed into law by our second president and founding father, John Adams. Article 11 of the treaty reads
As the government of the United States of America is not in any sense founded on the Christian Religion, - as it has in itself no character of enmity against the laws, religion or tranquility of Mussulmen, - and as the said States never have entered into any war or act of hostility against any Mohametan nation, it is declared by the parties that no pretext arising from religious opinions shall ever produce an interruption of the harmony existing between the two countries.
Strike three. Now if only facts could shut up the wanna-be Christian Ayatollahs.

Religion in government is about power, not grace.

Monday, June 7, 2010

Capital Subsidies

Consider Joe Worker: born to a humble family he works at after-school jobs during high school, saves his money, takes on debt only when necessary, and works his way through college to be the first in his family to get a degree. He gets a good job and diligently works his way up in the corporate hierarchy. At age 40, he makes $130,000 per year and, after deductions, has a taxable income of $100,000. Joe is the quintessential American success story - our accepted theme that anyone can make it through hard work and thrift. Unfortunately, Joe has worked so hard that he hasn't had time to get married, so filing "single" he pays $21,709 in Federal Income Taxes. In addition, he pays social security and medicare taxes of  $8,170, for a total of $29,879 to the Federal Government.

Now consider Dylan Loafer, who never learned how to work despite the example of successful parents. Like Joe, Dylan's not married - but in Dylan's case it's not because of lack of time, it's because he's such an obvious loser. After a 20-year series of dead-end jobs where he's been paid minimum wage and paid almost nothing in taxes, at age 40 he inherits $2 million (after inheritance taxes) when his parents die of a combination of frustration and boredom in watching their child float through life. Dylan realizes that Mummy and Daddy aren't there to back him up, so he finally develops a work ethic. He studies hard and learns to manage his money. It takes a lot of attention to the markets and his investments, but he is able to make a consistent $130,000 per year in capital gains (about 6.5% return). He has the same adjustments to income as Joe, so his taxable income is $100,000. Dylan goes to pay his taxes, and finds that he owes the Federal government $15,000 - just about half of what Joe Worker has paid.

So here we have Joe Worker, a person who has spent his life building up skills, contributing to society through his work, and sacrificing to get into a position where he can send the government $30K per year. Joe pulls his own weight and takes handouts from no one. To work your way up to a job with an earned income of $130K is no small matter, and Joe is proud of his achievement and what he has contributed to our economy. But the "system" couldn't care less about what it takes to get to an earned income of $130K. No, the "system" rewards Dylan Loafer with a 50% tax reduction because he was lucky enough to be born to successful parents and figured out how to make a modest return on their capital. Dylan hasn't contributed to society in any significant way through his life, but the mere possession of capital makes him a favored person in the eyes of tax law. With his inheritance, his only future contribution to society is trying to figure out the best place to invest his money. Is it good when people pay attention to their investments? - of course it is. But is it worth a 50% tax subsidy? - I think not. We have set up a system that says the effort spent investing your own money is so important that it receives a lower tax rate than teaching children, curing disease, building bridges, roofing houses, fixing cars, or cleaning sewers.

So the next time someone tells you that the U.S. favors hard work - just say BULLSHIT. The U.S. system is skewed toward those who already have capital, giving them favorable tax treatment so that they can gain more capital. It doesn't take much math to figure out that the long term consequence is an ever-increasing divide between the rich, the middle class, and the poor. In this are the seeds of our own destruction. No society can long survive a "let them eat cake" attitude of those born lucky.  

Capitalism and free-markets are not synonymous. Indeed, capitalists routinely try to undermine free markets - not just by outright monopolies but also by lobbying for special legal treatment and making decisions based on government bailouts (i.e. the wage-earner assumes the risk through taxpayer bailouts, but the profit goes to capital). Be wary of people who try to equate capitalism and free-markets - they are usually looking to shift taxes, risks, or clean-up costs to the wage-earning public.

I believe in regulated free markets and regulated capitalism. But capital shouldn't be more valuable than the sweat, creativity, or the the indispensable everyday efforts of those who are the heroic unrecognized gears making the wheels go around on the machine.

Solution: Capital gains should not be subsidized. They should be taxed at the rate of earned income plus the Social Security and Medicare contributions of both worker and employer. If capital does not receive favored treatment the overall tax rates can be reduced, which reduces the cost of hiring American workers. Will this raise the cost of capital? - of course. But the entire economic bubble we just experienced was only possible because capital costs were unrealistically low and did not reflect the actual costs of creating the capital. When hourly wage-earners and salaried professionals are subsidizing the cost of capital, they are getting screwed.

Sunday, February 28, 2010

One of these things...

It's interesting to look at the U.S. Constitution and the Bill of Rights with a Sesame Street song stuck in your head: "one of these things is not like the others, one of these things just doesn't belong."  OK, kind of a strange thought for a legal document, but stick with me for a moment.

The Preamble provides the justification for the Constitution:
  • We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
It's pretty clear that the preamble doesn't set any particular laws or duties for the government, but instead provides a statement of why the Constitution was written and the intent of those ratifying it.

If you peruse the documents for other justifications, you'll find only one. Outside of this single exception, the Constitution and Bill of Rights below the Preamble is simply a declarative list of the duties and limitation for each branch of government.  None of the provisions have any justification, except...
  • A well regulated Militia, being necessary to the security of a free State....
What's up with this justifying phrase in the 2nd Amendment?  No where else in the Constitution or the Bill of Rights is there any reason given for any provision.  Why does this Amendment need a justification while others do not?

The 1st Amendment could have been written as...
  • Freedom of thought and communication are necessary for a free State, so Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
... but it wasn't.

The 2nd Amendment could have been written as

  • The right of the people to keep and bear Arms, shall not be infringed.

.. but it wasn't.

Didn't our founding fathers notice a justifying phrase in their otherwise pristine declarative laws? Were they just slipshod in their writing? Or is there meaning in this Amendment having a justification absent from all the others?

Friday, February 26, 2010

Don't like it? Leave!

Just a suggestion for replacing "Don't ask, don't tell," you get the same sort of catchy rhythm with "Don't like it? Leave!" As a policy, we could simply allow anyone who doesn't like serving in the military with gays to take an administrative separation - after all what's good for the gay goose...  I'll bet we'd only lose a few cranky officers and perhaps some of the more red-neck enlisted men.  I suspect the military would actually be better off.

I've never quite been able to figure out the problem that gays are supposed to cause. Is it all because guys can't handle being hit on?  In my 20's, I got hit on by gay men aboard ship, on an oil rig, and in a number of bars. Interesting thing was I just said "Sorry, I'm straight" and I was left alone. I was never harassed, or pursued, or told "try it you'll like it." How many women can say that about the guys that hit on them? Gay women have horror stories about men that won't leave them alone - men who are sure they can "convert" a gay woman if she'll only try them. Are these the same guys that can't handle being hit on by gay men?

I find it both appalling and humorous that some military men can't handle what every woman (not just those in the military) has dealt with from an early age.

Thursday, January 28, 2010

Corporate influence

Large corporations are going to have greater influence in public laws and policy from 2010 onwards.

1. The U.S. Supreme Court recently said that the government cannot prevent publicly-chartered and traded limited-liability corporations from spending shareholder money on political speech.

2.  The Supreme Court decision also applies to union spending of members' dues on political speech.

3.  The limitation on corporate use of shareholder money on political speech has been in place since 1907, so there is no way to be sure how corporations will use their new power with modern media.  Nor can we be sure how legislators will react to the use or threatened use of this power.

Conventional Wisdom:
1.  Negative campaigning is perceived/feared as a useful tool by politicians.  Empirical evidence: the routine use of negative attack ads every election.

2.  "Blow-back" from negative campaigning may sometimes occur when a candidate uses negative advertisements against an opponent.  However, there typically is no downside for interest groups or individuals who have run negative ads.  Empirical evidence: Bob Perry's "Swift Boat Veterans for Truth" attack against John Kerry.  The ads were disavowed by Bush did not substantially affect his popularity. Such disavowal doesn't help the target of the negative attacks, it just minimizes blow-back.  There is also no evidence that placing the ads hurt Perry's construction business.

My Analysis:
1.  There is relatively little downside for unions to "play nice" in the political arena - they are already vilified by the right and disliked by most moderates.

2.  Negative ads have a potential downside for any corporation that must sell directly to a consumer/voter, so companies such as McDonalds, Walmart, or Johnson & Johnson are unlikely to overtly fund negative ads, although they may find channels for political influence by broadly funding multiple political interest groups that will run ads.  If the money is stretched in a wide enough net, it is relatively easy to disavow any single group that "crosses the line" and gets bad press for its negative ads.

3.  Corporations that generally do not sell directly to a consumer (for example Alcoa,  Boeing, Cisco, Jacobs Engineering, Dresser-Rand) have less of a downside when funding negative ads.  They are more likely to run ads that have some risk of blow-back or direct connection to their firm.

4.  Corporations will not have to fund a lot of negative campaign ads to gain influence. The mere threat of such ads will be enough to gain them improved access to legislators.

My Predictions:
1.  Unions will fund extensive political campaigns that will be fairly negative and directed towards igniting populist resentment of "fat cats".  Because of the wide contempt for unions, it seems unlikely that these will have much effect on the elections.  Exceptions may be in a few states or districts where unions have a strong voice and can focus populist anger effectively.

2.  Corporations will use their new power more carefully.  They will contribute at arms-length to interest groups that will "officially" be the creator and funding source for negative ads.  When the "Committee to Oppose _____" is organized, their ads won't say "funded by Alcoa, GE, United Technologies and various other corporate behemoths."  Instead, you will have to dig into the finances (disclosed perhaps quarterly) to find out who is contributing.  We may not know who is funding an interest group until after the election when ads are run in the last couple months before an election.

3.  Some corporations will focus efforts to defeat a few senators/congressmen who are seen as vulnerable (perhaps Evan Bayh of Indiana).  They won't go after those who vehemently disagree with them (e.g. Barney Frank), but will go after moderates that they can help defeat and use as examples of their power.

4.  The corporations will be sure to tell our legislators how the corporate contributions helped defeat candidates.  The threats will not be explicit and will have plausible deniability, but they will be understood.

5.  The legislators who are elected in 2010 will pay much closer attention to the needs and the desires of large corporations.

6.  The end result of this "freedom of speech" for corporate and union executives (using shareholders/union members money rather than their own) will be more influence of special interest groups, and less influence of the general public.  It doesn't take much imagination to see that any legislative measures calling for executives to be more accountable to shareholders are doomed to failure.

7.  The overall change in our governance will be slow and subtle.  You will not see anything that you can easily say "there's the corrupt corporate influence!"  But it will appear in a greater corporate slant in legislation that passes.  Expect to see things such as  "corporate income tax holidays" that allow companies to bring overseas profits back into the US without paying taxes.   Special tax breaks and subsidies for large industries are likely to be more common and more entrenched.  Expect the tax burden to further shift from corporations and investors to middle class wage-earners.

Why I think the U.S. Supreme Court decision is a bad:
There is no doubt that money is speech and influence - the Court is correct on this.  Indeed, I believe that anyone should be able to use their own money to facilitate their own speech and influence politics toward their own goals - and the government does not have the right to limit that spending.  However, no one should be allowed to use someone else's money to pay for political speech without explicit agreement.  I do not believe there is any logical reason that buying shares in a company, or buying shares in a mutual fund that buys shares in a company, should be a constitutionally-protected de facto agreement to allow the corporate executives to speak using shareholders' money.

Corporate executives are supposed to be custodians of shareholder money for business purposes, but they have an inherent conflict of interest regarding laws for corporate governance, transparency in executive compensation, recall of  Directors, prohibition on interlocking directorships, etc.  Corporate executives do not always speak for shareholders - they may speak for themselves and executive interests that are at odds with shareholder interests, in particular when the average shareholder has a widely diversified portfolio.  Corporate executives should not be allowed to use shareholder money for political speech for the simple reason that they are not the owners of the company or the owners of the assets - they are the hired hands.  The owners of the company, the shareholders, are free to use their own money (including dividends from the corporation or profits from sale of stock) for whatever political speech they desire.  There are no Constitutional limits on a persons' ability to use the money generated from business to fund their own speech.  However, a shareholder should not have to worry about their hired employees using their money and diluting their earnings by engaging in political speech without their explicit consent.  But with the recent ruling, the executives are able to use shareholders' money to help elect politicians that will agree to further insulate them from accountability to the shareholders.

Where I believe the Supreme Court went wrong was that they failed to give due weight to the fact that a publicly-traded corporation is entirely a creation of legal statutes; and therefore the corporation logically should not have any rights beyond what is granted by statute.  Considering the fundamental thesis of liberty in our Declaration of Independence, I'm left wondering how a corporation has "inalienable rights" that are anything other than what their "creator" (the government) originally granted in setting up corporate charters.  Indeed, there is no requirement in the Constitution for recognizing publicly-traded, limited-liability corporations, so arguably we could ban them outright.  The Supreme Court has effectively decided that the rights of the corporation owners - the shareholders - to pay for their own political speech with their own money is automatically transferred to the corporation, and the ability to choose the content of that political speech is transferred from the owners to their employees (the corporate executives).  And yet, there is no provision in the Constitution for transference of rights from owners to their employees.  Indeed, the framers of our Constitution would be shocked at the power we've endowed corporate managers. I've discussed this previously in context of Adam Smith's The Wealth of Nations, which was the economic Bible of our founders.

The transference of political speech rights from a diffuse group of shareholders into the hands of corporate managers simply does not have any rational backing or basis in the Constitution.  Those who do not like the statutes for publicly-traded corporations are free to hold their corporations privately, without trading on the public stock markets.  Corporate executives are free to use their own money to buy political speech the same as any other person - they just shouldn't be able to use someone else's money without that other person's agreement.

As a corollary to the above arguments, I do think that privately held corporations should be able to buy as much political speech as they desire.  Within a privately-held corporations, ownership is much less diffuse and the state's interest in protecting shareholders' rights is relatively limited.  The political voice of a privately-held corporation can be reasonably assumed to represent the views of the majority of the owners, so there is no public interest in regulating such speech.

My over-arching thesis is that because a publicly-held corporation is purely a creation of the body politic, its rights should be entirely circumscribed and controlled by statute rather than being protected by the Constitution.  I do not see how a corporate executive's Constitutional speech rights are infringed if he/she is simply being prohibited from financing their individual speech using other people's money.  No one can stop the CEO of any corporation from paying out of his/her own pocket for whatever political speech he/she desires.  Likewise, I do not see how a shareholder's rights are infringed when they can use their own money to fund their own speech.  If the shareholders all want to speak together on a particular issue, there is nothing stopping them from creating a political action committee and making themselves heard.  Thus, no one's speech in a public corporation has ever been infringed by the present laws - only the questionable "right" to use the shareholders' money to speak on behalf of management.

My problem is not with corporate speech by corporate owners per se, but with executives of public corporations using the owners' funds to finance the executives' own political speech and agenda.  There nothing in recent or ancient history that allows us to assume corporate managers will be 100% faithful to their fiduciary duty to the shareholders  - indeed, if they always acted in the shareholders' interest we wouldn't need any regulations or government oversight of public corporations.  But the ability of corporate managers to act against their shareholders interest and influence the creation of laws reducing the shareholders' control is a corrupt distortion of democracy, capitalism and free markets.

Is there another path?
We perhaps have an 11-month window to pass a bill that requires corporations and unions obtain support of the majority of their shareholders/members before they spend the shareholders' money or members dues for political purposes.  I don't think this is the ideal approach, but it is probably the only practical way to deal with the Supreme Court decision.

Monday, January 18, 2010

Eliphaz the Temanite

Does anyone else see the similarity between Pat Robertson and Eliphaz the Temanite in the Book of Job? Both claimed to speak for God and to "know" that the grim events besetting the Haitians (or Job) were God's punishment for transgressions.

Seems to me that Pat Robertson needs to spend a little time refreshing his memory of Judeo-Christian theology (or perhaps learning it in the first place). Judeo-Christian theology has long held that bad things do happen to good people, and we cannot know the mind of God. Anyone who claims otherwise needs to put forward a burnt offering of seven bullocks and seven rams.

Friday, January 15, 2010

The non-representative government

We presently have 40 Republican senators, controlling 40% of the vote in the US Senate. But they actually only represent 36% of the population.

Of course - that's just my way of thinking of things.  The GOP represents 36% of the populace, the Democrats represent 64% of the populace, which adds up nicely to 100%.

But I've been criticized for the above because, in the opinion of one friend: "each Senator represent[s] ALL the people of the state, regardless of their party."  As a practical matter, I haven't seen a single vote of either Kay Bailey Hutchinson or John Cornyn that reflects the politics of the 44% of the people of Texas that voted for Barack Obama.  I also doubt that 37% of voters in California that supported McCain feel like their views are represented by Barbara Boxer or Diane Feinstein.  Nor do I expect that Democrats of Indiana routinely sway the opinions of Richard Lugar.  Likewise, Republicans of Indiana probably don't call on Evan Bayh to push their political agenda.

But let's put such argumentation aside look at the numbers if we assume that a single senator really represents all the voters of the state:

Of course, the numbers above don't add up to 100%, because some people are getting represented by both parties using this way of thinking.  Interesting that even with this accounting the GOP doesn't represent a majority of the populace.

All data from Wikipedia 2008 estimates of US state populations (ignoring District of Columbia and populations in US territories).

Wednesday, January 13, 2010

The health insurance mandate

The proposed health insurance reform includes a "mandate" requiring people buy insurance or pay tax penalties. This incenses people from both the right and the left. On the left, it's annoying to be forced to buy insurance from a profit-making company, thereby subsidizing corporate jets, bonuses and the wimpy corporate boards that protect CEO interests above shareholder interests. However, most liberals/progressives support the mandate if there is a competitive public option health program. On the right, the opposition isn't about the type of insurance, but a more fundamental opposition to any government incursion on our independence - in this case, the idea that the government can force you to buy something you don't want or don't need.  Arguments from the right make it seem that the proposed health insurance mandate is both unprecedented and unreasonable.

Is a health insurance mandate unprecedented? Let's consider car insurance. I suspect that every state has a mandate that every licensed vehicle must carry car insurance or pay a fine. We consider driving a "privilege" rather than a "right," so the mandate seems fairly unobtrusive. The argument could be made that one doesn't have to drive, so one chooses to drive and therefore chooses to abide by the laws requiring insurance. But as a practical matter, how independent is an American that chooses not to drive? Either you must live close to your place of work and walk, risk your life on a bike, or take public transport that is subsidized by the taxpayers. For the vast majority of Americans in urban, suburban, ex-urban and rural areas, driving a car is not optional - its a necessary part of our life due to the way our infrastructure has developed.  Thus, the requirement to buy car insurance is a de facto "mandate," and is a precedent for a health insurance mandate.

Is a health insurance mandate unreasonable? The reason for the car insurance mandate is fairly obvious: through stupidity, carelessness, or simply a bit of bad luck any one of us can cause an accident that leads to another person being financially harmed. Insurance compensates those harmed by any accident we cause. On the face of it, this seems different than health insurance - after all, if I don't carry health insurance how do I harm you? Aren't I just putting myself at risk? Shouldn't I be allowed to be stupid - and wouldn't the gene pool be ultimately improved by allowing this choice? Unfortunately, my choice not to carry insurance does harm you. We have a network of public and private hospitals that receive subsidies based on providing emergency care to any and all who come through the door. If I fall into a seizure in the middle of the street, I will be picked up by emergency medical services, taken to a hospital and treated, even if I do not have any ID or insurance card on me. When I recover consciousness, if I cannot pay and don't have insurance I will still be released from the hospital - we don't have debtors prisons anymore. The cost of my choice to be uninsured doesn't fall on me, it falls on the taxpayers and on those who have insurance that will pay the higher overhead of the hospital that treats the uninsured.

Thus, the argument for the health insurance mandate is fairly simple - we do not have an "opt out" mechanism for emergency treatment, therefore a choice to be uninsured is not a choice for independence, but is a choice to rely on a socialist emergency treatment network.  As the ultimate provider of that socialist network, the citizens, must pay the costs themselves through general taxes, recoup the costs by targeted taxes on the uninsured, and/or reduce the number of uninsured by mandating insurance. Oddly enough, the consistent conservative point of view should be payment through targeted taxes and mandates, i.e. individual responsibility. The consistent progressive point of view should be payment through general taxes, i.e.  the dreaded single-payer system. However, conservatives, presently arguing against the mandate and tax penalties, are actually arguing for emergency health care that is subsidized by general taxes - while the liberals are arguing for tax penalties for those who don't take individual responsibility to get their own insurance.

There could be a compromise (warning - sarcasm follows). We could allow people to avoid the taxes for not buying health insurance if they post an undertaker's bond of $2000 and have a tattoo on their wrist that says "DO NOT TREAT".  We would then tell EMS workers just to leave such people where they lie.  Once they're dead the undertaker can pick them up and collect the bond.   The uninsured by choice could have their independence and our only inconvenience would be having to step over the dead and dying on the sidewalk.

The proposal to tax people for not having insurance is very similar to what happens with people who rent houses.  You aren't required to buy a house, but if you don't buy one you will pay higher taxes than someone who does - and yet no one talks about a "home-owning" mandate in the tax code.