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

Cute procedural tautology of Roberts Court

by Beverly Mann
lifted from an e-mail, used with permission of the author of the blog The Annarborist

This article in the New York Times on this one page court order by the Supreme Court elicited the following response from Beverly Mann:

“Eric M. Freedman, a law professor at Hofstra University, said that the lesson of the Supreme Court’s ruling in the Landrigan case was ‘crime pays.’

“He explained: ‘The state flatly stonewalled the lower courts by defying orders to produce information, and then was rewarded at the Supreme Court by winning its case on the basis that the defendant had not put forward enough evidence. That is an outcome which turns simple justice upside-down and a victory that the state should be ashamed to have obtained.’”

This is part of a Roberts Court trend that is, in my opinion, so very John Roberts: The erection of a cute procedural tautology that eliminates access to federal court because the specific evidence that the person trying to gain access (the “plaintiff”; the “petitioner”) will need to prove the claim is solely in the possession of the corporation or government entity that the claim is against.

Last year, in a case called Ashcroft v. Iqbal, the 5-4 crowd held it appropriate and in fact obligatory that trial-level federal judges dismiss civil lawsuits, willy-nilly, if the judge declares that the formal complaint (the document filed with the court that initiates the lawsuit) lacks evidentiary specificity sufficient to prove the case. This defies a longstanding federal statute known as Federal Rule of Civil Procedure 8(a), which explicitly bars dismissals of lawsuits in such grounds.

But no matter; the originalist/textualist/non-judicial-activist justices effectively rewrote that statute—eliminating the plaintiff’s or petitioner’s right to require the corporation or government entity to disclose the evidentiary specifics, e.g., internal memos; product test results; police audiotapes; (in the Landgrigan case) documents showing where the drug was manufactured and what it contains.

What’s most stunning about the order in Landrigan is the 5-4’s bald, deliberate conflation of the standard of proof for barring the execution using this drug and the standard for staying the execution until the state provided the evidence sought. These are—or at least were—two separate standards. And logic requires that they remain so.

This new rule of law that you have to present evidence that your opponent is keeping from you before you’re entitled to access to federal court is a dream come true for perpetrators of corporate and government malfeasance. And its quasi-legislative authors on the Supreme Court are frightening diabolical in quietly promulgating that rule of law.

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Deleterious Doodling About The Deficit

by Barkley Rosser
lifted from Econospeak

Deleterious Doodling About The Deficit: What Else Is New? Department

In today’s Washington Post business section, Lori Montgomery has a big article on “A renewed focus on spending,” starting with how the GOP is making noises about cutting spending to cut the deficit without raising taxes, while not mentioning anything too serious, although Boehner supposedly might be open to cutting some loopholes in the tax code, thereby de facto raising taxes, if Grover Norquist will let him (assuming as most think that the GOP will take control of the House after next week’s election), and if anybody thinks elimination of the tax deduction for mortgage interest is remotely on the table in a period with a terrible housing market, there is a bridge in Brooklyn for sale to them. Then most of the article lugubriously goes on about all the efforts at supposed bipartisanship on the Deficit Commission.

Yet again, we read about all this agreement to “stabilize social security finances” by raising future retirement ages, because “The current Social Security program will not survive based on upon current rules.” Well, beating a drum beaten often here, this latter is so much baloney. However, the rest of it is even worse. We get scare stories about the deficit of the last two years, when about half of this is due to the recession and the rapidly disappearing stimulus package, while the other half is due to the Bush tax cuts and increased defense spending due to wars in Iraq and Afghanistan, which will hopefully wind down in the not too distant future.

Raising future retirement ages does a great big doodley-squat nothing about any near term deficit, although Lori Montgomery and other reporters somehow fail to point this out in their so-called reporting. So, we suffer from an ongoing deterioration of discourse on this subject as the same old groups and politicians push the same old nonsense formuli for solving a problem that will hopefully mostly take care of itself, with almost no offsetting commentary, although undoing the tax cut part of the deficit is not going to happen if the GOP takes over the House.

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Credit: A Vicious Spiral

How 720 became the new 680? article in the Washington Post drew the following reaction from Tom:

Credit: A Vicious Spiral
by Tom aka Rusty Rustbelt

Somehow over the years I became known as a bit of an expert in personal financial planning, I suppose the tax background plus getting dragged into senior financial planning (via my involvement in nursing homes and eldercare) and business client planning. I was also pretty good at assembling professional teams and keeping the right focus.

While I do not really practice any personal financial planning (except at the coffee shop pro bono) I do keep informed and I do troll my network for updates, and lecture now and again.

The Great Recession is hammering credit scores, for all of the obvious reasons. At the same time lenders, have been whipped for lending too easily, are raising standards and looking for higher credit scores.

So we get into a spiral of lower credit scores, higher credit standards, less lending, more credit problems, lower credit scores, etc. etc.

And if the economy does not come around soon, we may require a generation to get totally out of the cycle.

There will likely be more subprime credit available, at higher rates. Some retailers (such as auto makers) will use their own credit subsidiaries to lower rates and keep traffic coming. All in all, it is going to prolong the mess and prolong the misery.

The big reset, the “new normal” is upon us.

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Fire Tim Geithner. Then Be a One-Term President.

I doubt even the Internet’s self-appointed Chief Geithner Apologist will be foolish enough to stand by him after this piece of shite:

Some people just don’t like movies with happy endings. How else to explain this week’s report by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP)? Rather than focusing on the growing evidence we’ve seen in recent months that TARP will be far less costly than anyone expected, SIGTARP instead sought to generate a false controversy over AIG to try and grab a few, cheap headlines.

There are no “facts” in that paragraph, and there is no excuse for this coming from Treasury. Ignore that Treasury is deliberately including selling off its expected future value as part of its “break-even” calculation. Ignore that Treasury’s practice has been to count “TARP” (the first effort) as the only Government Subsidy to those institutions that have “paid back” their loans by ramping up debt and refusing to be “financial intermediaries” [Link updated] which was the half-assed justification for giving them that money in the first place. Ignore the billions of dollars of asset guarantees from the Fed that are still the only reason people pretend The Big C is solvent.

What we have is the Department of the Treasury impugning the purpose and the office of the Special Inspector General for TARP, that is the office charged with

the responsibility, among other things, to conduct, supervise and coordinate audits and investigations of the purchase, management and sale of assets under the Troubled Asset Relief Program (“TARP”). SIGTARP’s goal is to promote economic stability by assiduously protecting the interests of those who fund the TARP programs – i.e., the American taxpayers. This is achieved by facilitating transparency in TARP programs, providing effective oversight in coordination with other relevant oversight bodies, and through robust criminal and civil enforcement against those, whether inside or outside of Government, who waste, steal or abuse TARP funds. [emphasis mine]

If Tim Geithner wants to whine that someone doesn’t believe his lies, he’s welcome to do so—as a private citizen, reaping the fruits of his last few years fellating Goldman Sachs by accepting the Senior Management position that surely awaits him.

And he should do so sooner, not later.

And, by the way, Barry: you should request and then accept his resignation. Because only the thought of Joe Biden (Sen-MBNA/BofA) as President keeps me from pointing out that such releases are your responsibility, sent out as part of Enjoy your next two years, and the Palin/Huckabee Presidency you will have wrought.

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UBS and other ? offshore bank accounts

by Linda Beale

UBS and other ? offshore bank accounts
crossposted with Ataxingmatter

The government’s dismissal of a criminal information against UBS filed in Florida– United States v. UBS AG, No. 09-600333-CR-COHN, Dismissal of Information, Oct 22, 2010– leaves the tax cognoscienti wondering what the next step in its fight against secret offshore bank accounts will be.  Bryan Skarlatos of Kostelanetz & Fink says that “the UBS case was the beginning of the end of Swiss bank secrecy.  We don’t know whether it’s the beginning of the end of IRS activity, or only the beginning.” BNA Daily Tax RealTime, (Oct. 25, 2010).

It is questionable whether the UBS case and Swiss changes to information releases are sufficient to call it the “beginning of the end of Swiss bank secrecy.”    But it is likely that the government isn’t finished with the topic, and that the information received through the reporting process will be tapped to target other banks and jurisdictions on the issue.  As Skarlatos noted, “the real question is whether another shoe is going to drop” or whether there will be “different strategies” going forward.  BNA Daily Tax RealTime, Oct. 25, 2010.

Switzerland and the UK have agreed to negotiated a new tax agreement requiring withholding on behalf of the UK on assets of UK nationals in Swiss banks and supposedly also a better provision for cooperation in tax evasion cases.   It will be interesting to see where this is five years from now–will wealthy Americans still be able to hide their assets in Swiss banks because the IRS can’t get the information unless it already has enough information?  My colleage Mike McIntyre has written about the inadequacies of information exchange provisions when the government doesn’t already know considerable particular information about tax evasion in progress.  See McIntyre, How to End the Charade of Information Exchange, Tax Notes (Nov. 9, 2009) (noting that banking secrecy is “not over yet”).

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Public and private jobs

Lifted from comments at Economix on the distorted comparisons of public versus private wages:

These BLS data have been frequently cited to support the claim that public sector workers are paid more than private sector workers. However, as described at a February 2009 conference sponsored by the Federal Reserve Bank of Chicago, the wage differentials shown above do not adjust for differences in the types of jobs in private and public sectors. According to an analysis of the 2008 BLS data presented at the Fed conference, the main reason for the wage discrepancy is that private sector jobs are generally lower-skilled and thus lower-paid retail jobs, while public sector jobs are generally higher-skilled and higher-paid professional positions, although lower-skilled positions pay more in the public than in the private sector due to higher levels of public sector unionization. Representatives of the BLS pointed out that “..roughly two thirds of public sector jobs are professional and administrative, while 51% of private sector jobs are; and retail sales and food service jobs, relatively low-paid and often part-time positions, represent 20% of private sector jobs, but only 2% of public sector jobs.”

According to the conference summary, “in low-skill jobs, public sector wages exceed private sector wages, but in high-skill jobs, public sector wages significantly lag private sector wages (benefits are not in this analysis). This is what some academics call the ‘double imbalance’…the public sector is overpaying low-skill workers while underpaying high-skill workers.” He also showed that when gender, race, education, union membership, age, occupation, and state of residence are *not* controlled for, “public sector employees appear to receive an 18.6% wage premium over private sector employees…” But in controlling for those factors, “public sector workers have a 4.5% wage discount as compared with private sector workers.”

The benefits gap between the public and private sectors shown in the data is due not so much to an increase in public sector benefits, but to an erosion of benefits in the private sector over the past 20 years, although public sector benefits are sure to follow.

As anyone who has worked in a skilled professional position in both the public and private sectors can attest, most private sector professional jobs at similar skill levels pay significantly more, which is why the public sector is continuously losing highly-skilled employees to the private sector. (I should know, I’m an economist who quit a public sector job for a higher-paying private sector one.)

The link to the Federal Reserve conference summary is here.

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A little perspective on the impact that a weaker USD will have on overall economic activity

The Japanese yen, the Eurozone euro, and the British pound have appreciated 16%, 14%, and 9%, against the USD, respectively, since their 2010 lows. Some say that the “US wins” since the Fed’s quantitative easing (QE2) will drive export growth via a weaker dollar. (Note that the Fed has not actually announced QE2, this is all just speculation.)

I’m not suggesting that the stated Fed policy will be to drive down the dollar. What I do know, however, is that the United States production model is not structurally positioned to enjoy the economic panacea that is a persistent debasement of the dollar, neither in the near- nor medium- term.

The bottom chart illustrates the export share in overall economic GDP, as forecasted by the European Commission (you can download this data at the Eurostat website). Notice that the US share of exports, expected to be just 12.3% in 2010, is minuscule compared to the export markets in Europe. So what I gather from a chart like this is that the weak dollar will hurt Europe much more than it will “help” the United States.

We need domestic policy to support full employment and the expansion of our export sector that will eventually arise. See Marshall Auerback’s post this week at Credit Writedowns for a discussion on austerity, currency wars, and exchange rates.

Rebecca Wilder

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