Relevant and even prescient commentary on news, politics and the economy.

Cutting Taxes on a Fraction of $20

Via Avedon Carol, here is Greg Palast:

In his State of the Union, the President asked Congress for $300 million for poor kids in the inner city. As there are, officially, 15 million children in America living in poverty, how much is that per child? Correct! $20.

Here’s your second question. The President also demanded that Congress extend his tax cuts. The cost: $4.3 trillion over ten years. The big recipients are millionaires. And the number of millionaires happens, not coincidentally, to equal the number of poor kids, roughly 15 million of them. OK class: what is the cost of the tax cut per millionaire? That’s right, Richie, $287,000 apiece.

Mr. Bush said, “In neighborhoods across our country, there are boys and girls with dreams. And a decent education is their only hope of achieving them.”

So how much educational dreaming will $20 buy?

This guy Palast seems pretty dim. Doesn’t he know its not the $20 a head that’s going to be helping the boys and girls achieve their dreams, but rather the tax cuts that will allow them keep more of whatever portion of that $20 trickles their way?

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A new look for AB

Hi folks.

I have the basic shell and template set up for AB, including our colors. I have the beginning link categories, a link in each, and the start of putting in more widgets.

The corners will be fixed at the end of the process.

There are “mistakes” in that I was inserting data to make it show up so was not as careful as I will be for finishing.

Please send feedback on titles for the categories of links as I add them, eventually other site links we do not have (wait for now, I have a long list), and possible widgets etc. Remeber it is rough but the hard part is done. Posters can let me know preference for stage name (capitalized etc.) It is a working site which I can change and perhaps have my own minor blog when done.

Thanks. The construction is at Angry Bear 22 until converted to AB.

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The Reagan Legacy and McCain’s Mendacity

Kevin Drum has turned his blog over to the very capable hands of Steve Benen for a couple of days. Steve caught another McCain lie that I missed in something called MCCAIN’S MENDACIOUS MEMORY. Steve’s main point was the McCain did vote against the Bush tax cuts, which we did note. The line I missed was as follows:

I was there with Jack Kemp and Phil Graham and Warren Rudman and all these other first that wanted to change a terrible economic situation in America with 10 percent unemployment and 20 percent interest rates.

First of all – the only interest rate to reach 20% was the artificial prime rate which was very noisy from 1980 to 1982. The 3-month Treasury bill rate was 15% when Reagan took office as of January 1981 and was still at 15.5% as of August 1981. But then we got a very deep recession that pushed unemployment to 10.8% by December 1982. But let’s take a look at the unemployment rate during Carter’s term of office and Reagan’s first term. During the first 2.5 years of the Carter Administration, the unemployment rate fell from 7.5% to 5.7%. During the summer of 1979, economists debated whether we were below full employment or beyond full employment. The Volcker FED decided that we needed some serious monetary restraint and we did have a recession towards the end of Carter’s term, which basically gave Reagan the 1980 recession. But from mid-1980 to mid-1981, we did have a short recovery as the FED backed off its tight monetary policies for a while.

What McCain and the other incredibly dishonest Reagan worshipers fail to tell their audiences is the reason for the second round of Volcker monetary restraint. The Fed viewed the 1981 tax cut (sine serious spending cuts) as excessive fiscal stimulus so it slammed on the monetary brakes big time. And yes, real interest rates shot up lowering both investment and net exports. The second and much larger spike in our graph should be viewed as the Reagan-Volcker recession even if dishonest hacks like John McCain want to pin this tail on President Carter. Then again – those 1984 “Morning in America” ads ran by a very dishonest Republican Party back then suggested that Reagan’s fiscal fiasco actually saved us from another Great Depression leading to a great employment situation even though the unemployment rate in late 1984 was about as high as the one Reagan inherited from Carter.

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Tax Policy: Greg Mankiw Shows His Keynesian Side

Greg Mankiw has a brief but excellent discussion about the four goals of tax policy with a tie to the current political debate. Greg ends this discussion with:

Critics of fiscal stimulus come in two varieties. One type of critic discounts goal 4 entirely because they are skeptical of Keynesian theories that underlie this goal. A second type of critic admits that goal 4 is legitimate in principle but believes that in the current environment macroeconomic stabilization is best left to monetary policy so fiscal policy can focus on goals 1 and 2. I am in this latter category.

All I have is say is: “I wish I had written this” – although I would have included goal 3 on the list.

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Democratic Institutions in Afghanistan

In Afghanistan, a journalist was sentenced to death the other day. For blasphemy. It was a cool trial too – apparently he was brought into a room with three judges and an attorney, and of course, a death sentence that had already been written. Efficiency and all of that.

And what was his blasphemy? Apparently the accusation is that he downloaded some article which criticizes how women are treated in Islamic societies. What a fiend this guy must be! Now, some feel an aggravating circumstance is that his brother has written articles criticizing some local warlord or other (i.e., ally of ours).

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Priorities

Via Andrew Sullivan, this from Pew Research

Pretty much the only economic issue that Republicans care about is making tax cuts permanent… and it really doesn’t seem like that’s good for the economy. I tend to agree with Reps about reducing the effect of lobbyists, but it does seem kinda odd that this comes up after the K Street Project. Moral breakdown – that must be something about them uppity queers trying to marry each other, women dressing like slatterns, and people other than Republican politicians getting them some. My guess is that in 1968, it would also be a priority – but the story would focus on them uppity colored folks trying to marry white women, women dressing like slatterns, and people other than Republican politicians getting them some. Dealing with illegal immigration is easy – if Tyson Foods or Conagra or some farm keeps hiring illegal immigrants, you have to assume at some point that the folks at the top are either encouraging it or looking the other way. Apply the RICO statutes and throw a few CEOs in jail for a very long time. Until the rank and file comes out for that solution, I don’t believe they really want to do anything other than harass them some uppity messicans. Terrorism… it seems the key to this one is definition. Its been a boffo job so far – no terrorism attacks since 9/11. Nevermind anthrax, or the attacks on the soil of our friends – they’re a buncha foreigners anyway, what do we care?

Another priority… the military – again, my guess is the problem starts at the top. I imagine we really do have the finest military in the world. That its taking longer to beat some very unpopular cave dwelling fanatics in Afghanistan than it did to beat the Third Reich and the Empire of Japan is a leadership issue. You either do something about that, or you are simply calling for getting bogged down in another third world country.

Update… The original link to the Pew poll was broken. Horatio Parker sent the correct link. My apologies.

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“Economics” At the Reagan Library

The transcript of last night’s GOP debate can be found here. There were some real whoppers last night. To be fair and balanced, I’ll choose one each from McCain and from Romney. McCain was asked how to avoid a recession:

We’ve got to give them some stimulus. We’ve got to give them some tax relief. We’ve got to stop this outrageous squandering spending that causes us to have to borrow money from China, and we’ve got to get our fiscal house in order. I think we went on a spending spree that, frankly, betrayed Ronald Reagan’s principles about tax cuts and restraint of spending.

Cutting government spending is stimulus? Has anyone reminded him of the Balanced Budget Multiplier? McCain early said he voted to make the Bush tax cuts permanent on two occasions. Could someone remind him that he originally voted against those tax cuts? I guess Bill Bennett won’t be the one as he told the CNN team right after the Florida vote that McCain has had a consistent position on taxes. But the real whopper is the premise that we had spending restraint during the 1980’s.

Romney had suggested earlier yesterday that McCain wanted to impose a tax on gasoline that no one else in the world had to pay – charge he basically repeated during the debate:

But when you put in place a new cap or a mandate, and particularly if you don’t have any safety valve as to how much the cost of that cap might be, you would impose on the American people, if you do it unilaterally, without involving all the world, you’d impose on the American people a huge new effective tax: 20 percent on utilities, 50 cents a gallon for gasoline – that’s according to the energy information agency – would be imposed on us. And here’s what happens. I’ve lived in the business world. I’ve lived in the real economy for 25 years of my life. What happens if you do that? You put a big burden on energy in this country as the energy-intensive industries say, “We’re going to move our new facilities from America to China, where they don’t have those agreements.”

I’m no expert on Chinese energy policy but I’m sure Europeans would laugh at the premise that they pay less in gasoline taxes they we would under what McCain and others propose to do. I guess Romney failed to join Greg Mankiw in that Pigou Club.

Update: One of the sad things that has happened to the comment section of this blog is that it has become infested with trolls who deem to think they have the right to call some of us liars. Case in point is someone who thinks all that Mitt Romney said on gasoline taxes yesterday can be found in the transcript of the debate. I invited this pest to check out the morning CNN transcripts but I guess he is too lazy to do so. So here is what Romney said to John Roberts yesterday morning:

And then McCain-Kennedy, the final version in which was a massive amnesty program for illegals and then McCain-Lieberman which places a huge gasoline burden, 50 cents a gallon on American auto buyers compared to people who use cars around the world.

Around the world includes more than China so I wonder what lame excuse this troll will come up with next. The more intelligent and honest AB readers have asked me why I don’t just ban trolls like these. Well, I am not the administrator of this blog so I guess I have to just endure his serial insults – as dishonest as they may be.

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Repatriation Provision: Bush Administration Got One Right

Aviva Aron-Dine criticizes a tax cut proposal from Senator Ensign:

When the Senate Finance Committee considers stimulus legislation today, Senator John Ensign is expected to offer an amendment dealing with repatriated foreign earnings. Modeled on a provision included in the 2004 American Jobs Creation Act, Senator Ensign’s amendment would create a tax holiday during which repatriated earnings would be taxed at a rate of just 5 percent, rather than at the normal corporate income tax rate of 35 percent. That is, for a specified period, controlled foreign corporations could pay dividends to their U.S. parent corporations, and the parent corporations would pay tax on these dividends at an extremely low rate. Senator Ensign’s proposed repatriation measure suffers from the same basic problem that plagues most other business tax breaks offered as stimulus measures: it would infuse cash into large, profitable corporations unlikely to spend it quickly, and so would have little effect in stimulating the economy in the near term. Evidence from the 2004 repatriation tax holiday confirms that such a provision is more likely to provide a windfall to shareholders than to promote substantial new U.S. investment. In addition, the Ensign Amendment would not only be ineffective as stimulus, but would also create significant new problems for the economy and the tax system. A repeat of the 2004 tax holiday will lead firms to expect more tax holidays, with the unfortunate result that they will be more inclined to invest in tax havens and less inclined to reinvest earnings in the United States.

No argument here as it is true that the law firms and accounting firms just loved this 2004 provision. They pushed all sorts of ways to exploit this provision in order to lower the tax bite for their multinational clients. What amazes me came next in her discussion:

The Bush Administration opposed the repatriation provision enacted in 2004, arguing that it was weak stimulus and bad tax policy.

This White House pushed the right arguments against this proposal back in 2004 and yet the GOP dominated Congress passed it anyway. Go figure!

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OldVet: Scheming Your Way from Rags to Riches

This one is by OldVet…

”Scheming your way from riches to rags”

This seems an opportune time for Angrybears to gird up their loins financially. For those who have not already succumbed to the lures of the “greater fool” theory of housing markets, please be aware that in declining economies the clever may turn to other schemes to part you from your cash. Ponzi operators such as hedge funds, private equity funds, Nigerian con artists with “special opportunites” and other wickedly complex characters will importune you to “invest” for quick returns. Pyramid scheme operators will urge you to “invest in yourself and your future” with the promise of riches and income streams in perpetuity by recruiting friends and neighbors to buy and sell inventories of overpriced crap.

Wikipedia’s definition of a Ponzi scheme and a pyramid scheme distinguish them from financial “bubbles” thusly:

– A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a disbelief in financial reality, including the hope of an extremely high rate of return. However, several characteristics distinguish pyramid schemes from Ponzi schemes:

– In a Ponzi scheme, the schemer acts as a “hub” for the victims, interacting with all of them directly. In a pyramid scheme, those who recruit additional participants benefit directly (in fact, failure to recruit typically means no investment return).

– A Ponzi scheme claims to rely on some esoteric investment approach, insider connections, etc., and often attracts well-to-do investors; pyramid schemes explicitly claim that new money will be the source of payout for the initial investments.

– A pyramid scheme is bound to collapse a lot faster, simply because of the demand for exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by getting most participants to “reinvest” their money, with a relatively small number of new participants.

– A bubble. A bubble relies on suspension of belief and an expectation of large profits, but it is not the same as a Ponzi scheme. A bubble involves ever-rising (and unsustainable) prices in an open market (be that shares of a stock, housing prices, the price of tulip bulbs, or anything else). As long as buyers are willing to pay ever-increasing prices, sellers can get out with a profit. And there doesn’t need to be a schemer behind a bubble. (In fact, a bubble can arise without any fraud at all – for example, housing prices in a local market that rise sharply but eventually drop sharply because of overbuilding.) Bubbles are often said to be based on “greater fool” theory.

Armed with this knowledge and alert to these potential pitfalls, I would only add that the operators of such schemes have identifiable personality characteristics. From investigator Bill Branscum we learn:

His system makes it possible for him to pay incredible rates of return. The elaborate office, exquisitely tailored suits, involvement with the church, and generosity toward charitable organizations are all classic window dressing. . . Ponzi or Pyramid – either way, the con artists who perpetrate these scams are swindlers with sociopathic personalities who view everyone around them as bit part players in their own personal play. These people are devious beyond comprehension. Uninhibited by anything akin to conscience or remorse, they have no mercy and feel nobody’s pain. Charm and charisma can conceal a lot. It is hard to imagine that one of the most likeable people you ever met in your life, totally trusted by those you respect and admire, would destroy everything you worked your entire life to build while looking you in the eye and smiling in your face all the while.

Oh my!! Is there any way to protect yourself from these smooth operators? Yes. Become a psychopath. That’s your best shot, according to a study.

Wanted: psychopaths to play the stock market. The US team found that people with certain brain injuries which suppress their emotions could make the best stock market traders. They took a selection of 41 people of normal IQ, 15 of whom had suffered lesions on the areas of the brain that affect emotions, and made them play a simple investment game. Those with brain damage significantly out performed those without, the researchers from Stanford Graduate School of Business, Carnegie Mellon University and the University of Iowa found.

Good luck, suckers. ☺ OldVet (and with advance apologies to the eponymously named fellow Angrybear, ECP, Jr.)

This one was by OldVet.

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Real GDP Growth Over the Past Seven Years

Cactus lets us know that the BEA is saying real GDP growth for the past year has been anemic. But what about the last seven years as a whole? Sheryl Gay Stolberg recently played Steno Sue with this GOP spin:

Mr. Bush has spent years presiding over an economic climate of growth that would be the envy of most presidents. Yet much to the consternation of his political advisers, he has had trouble getting credit for it, in large part because Americans were consumed by the war in Iraq.

Let’s see – real GDP as of 2007QIV was only 18.1% more than it was as of 2000QIV, which translates into an average annual growth rate of only 2.4%. As Dean Baker notes:

Here the ranking of the presidential terms since 1960 by average annual GDP growth:

Kennedy-Johnson — 5.2%
Clinton — 3.6%
Reagan — 3.4%
Carter — 3.4%
Nixon-Ford — 2.7%
Bush II –2.6%
Bush I –1.9%

President Bush’s growth record is better than his father’s, but it is worse than the record of every other president in the last half century. It’s not clear why they would be envious. It is also not clear what his political advisers have to complain about.

While the cheerleaders of Bush II often tout his record as one of tremendous economic growth, the facts indicate otherwise. And when presented with such facts, the cheerleaders usually find some way to blame Clinton.

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