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

Deregulatory? Libertarian approach? Non dictatorial? Some humor is necessary

Jim Lehrer parody…

Lehrer has defended his approach today. Of course, the debate format incentivizes particular behaviors for both men and their teams. Eyewitnesses tell their stories all over the web.  What is yours?

What? Romney’s Forgotten the Message That Wisconsin Voters Demand More Teacher Layoffs? So Soon?

Presumptive Republican presidential nominee Mitt Romney on Friday said that President Barack Obama’s call to hire more police, firefighters and teachers proved that he didn’t “get the message” from Republican wins in the recent Wisconsin recall elections.

During a press conference earlier on Friday, Obama had called on Congress to pass a jobs proposal that would prevent layoffs and rehire public workers like police, firefighters and teachers.

But that was then.  This is a full four months later, and Romney apparently has forgotten he message of Wisconsin.  He now wants to … hire teachers!

Four months from now, though, if he wins, he’ll probably remember that message from Wisconsin.  

Conflation and non sequiturs, thy name is Mitt Romney

Here’s an exchange between Tim Worstall and me in the comments to my post below titled “Spain. Please,Mr. Obama, talk about Spain. Please.”:

WORSTALL: If you’re going to comment on the Spanish economy might help if you knew something about it.

The big three banks, the equivalent of the Wall Street ones? They’re just fine. 

Know which part of he banking system screwed up? The Main Street one. The one that was run not for profit (the cajas were not for profits, usually owned by a charitable foundation). Run by the local politicians in fact. The community organisers you might say.

That’s the part of the Spanish banking system that is hopelessly bust. Not a single piece of deregulation in sight. No CDOs, no CDS, no nothing except too many loans out to people who cannot repay.

This may be many things but a rerun of Wall Street in the 90s and 00s it ain’t.

ME:  Hmm, Tim.  Did you say in your comment that the percentage of the Spanish economy that is spent on government has even the slightest thing at all to do with the economic situation in Spain?  Was that in code language somewhere in what you said?  If so, I didn’t pick it up.

And, if there was no a single piece of deregulation in sight—No CDOs, no CDS, no nothing except too many loans out to people who cannot repay—then maybe it’s that there wasn’t enough regulation of the banking system, to begin with?  And I’m sorta wondering what the difference in outcome was between a bank controlled by pols who screwed up (in Spain) and pols controlled by a banking system (here)?  And, y’know, what all it has to do with the percentage of the economy that is spent on government—which is what Romney claims.

Conflation and non sequiturs, thy name is Mitt Romney.  Remove the incessant conflations and non sequiturs, and what do you have, Tim?  Do tell.

Do tell. 

Spain. Please, Mr. Obama, talk about Spain. Please.

ROMNEY: Look, the revenue I get is by more people working, getting higher pay, paying more taxes. That’s how we get growth and how we balance the budget. But the idea of taxing people more, putting more people out of work, you’ll never get there. You’ll never balance the budget by raising taxes.

Spain — Spain spends 42 percent of their total economy on government. We’re now spending 42 percent of our economy on government. I don’t want to go down the path to Spain. I want to go down the path of growth that puts Americans to work with more money coming in because they’re working.

LEHRER: But — but Mr. President, you’re saying in order to — to get the job done, it’s got to be balanced. You’ve got to have…


Romney doesn’t want to go down the path to Spain?  Oh?  Well, since, actually, the percent of Spain’s total economy that they spend on government has nothing at all to do with Spain’s situation now, and instead has everythingto do with the fact that they had a huge, huge housing bubble, worse even than ours, and since their housing bubble is—like ours—the main cause of their economic problems, and since Romney wants to repeal the Dodd-Frank Wall Street and Mortgage-lending regulations and replace them with regulations that favor Wall Street … then, yes, Romney does want to go down the path of Spain. 

Or at least down the path we took during our deregulation juggernaut.

OK, here’s the thing: Romney and his campaign aides recognized that that debate forum would present a perfect opportunity for him to just rattle off statements without any challenge.  Just a steady stream of nonsense, without any real risk of being confronted with actual challenges to any of it.  They knew, as I did, that Lehrer—I still remember his nauseating role in the first Bush/Gore debate in 2000—does nothing but ask the candidates to state their positions on whatever.  Open-ended questions in which each one is supposed to state his policy proposal on, say, taxes, or “jobs.” There’s no actual questioning about the proposal.  None.  None.

So, Romney gets to state, free and clear, a completely false inference of fact about the cause of Spain’s economic problems.  And he gets to say, free and clear:

Look, the revenue I get is by more people working, getting higher pay, paying more taxes. That’s how we get growth and how we balance the budget. But the idea of taxing people more, putting more people out of work, you’ll never get there. You’ll never balance the budget by raising taxes.

Really?  You’ll never balance the budget by raising taxes?  Oh? Didn’t we do exactly that during the Clinton administration?

And, the revenue he gets is by more people working, getting higher pay, paying more taxes?  Oh? Through the same policies as George W. Bush did?  Really?

And so forth. 

Like, that Romney is going to cut tax rates across the board by 20%.  But he’s not going to lower tax revenue from the wealthy at all.  And so forth.

What Obama needs to do—really, really needs to do—is put up a series of ads juxtaposing Romney’s earlier statements with his gibberish from last night. (I strongly urge using a clip from Romney’s speech to the Detroit Economic Club in February, and a similar speech that same week in Arizona; Michigan and Arizona had their primaries on the same Tuesday.)  But rather than just suggesting that Romney is a slippery liar who’s trying to trick voters into putting into office a team that would put in place drastic, basic changes that he knows a substantial majority of the public doesn’t want, Obama should pretend that Romney just doesn’t know the facts and can’t do simple math.  He is, in other words, not very smart, or at least not very well-informed. 

The public, of course, will recognize that Romney’s a sleaze bucket. But Obama can just say, for example, that if Romney doesn’t know that during the Clinton years, we had a balanced budget, he’s too ill-informed to be president.

And, about that Spain thing: The final debate will be about foreign policy.  Which, Obama should point out, requires some knowledge of such things as what actuallycaused Spain’s economy to crash. And then he should educate the public about it.  He can do that in two or three sentences of medium length.  If he wants to see how it’s done, he can read any one of several Paul Krugman columns in which Krugman did exactly that.  It’s not rocket science.  It’s not even economic science.  It’s simple, established fact.  Of exactly the sort that not long ago Romney’s pollster said the Romney campaign wouldn’t trouble itself about, and that it would instead continue to make up its own facts.

Speaking of good way for the Obama campaign to get a message across in an ad ….

The bottom line: Obama can easily turn Romney’s performance last night into a plus. 

Easily.  Really.

Typo-corrected 10/5.

Romney Tax Plan as Budget Busting as Ever

by Kenneth Thomas

Romney Tax Plan as Budget Busting as Ever

Seriously, I could just re-post my February 27th post word for word tonight and it would be just as true as it was then. The Romney tax plan blows a $5 trillion hole in the budget via tax reductions and he still hasn’t told us anything about the tax breaks he would get rid of to pay for it, which he has to do because he calls it revenue neutral, as he did again in tonight’s debate.
Amazingly, Romney kept denying that his tax reductions reduce revenue by $5 trillion over 10 years when considered by themselves, even accusing the President of lying about it! He kept insisting that his plan was revenue neutral and that he would not adopt a plan that would reduce the share of taxes paid by the rich. Trust him. We have his word on it.* (Apparently, that is how CNN does fact-checking.).

Given his insistence on his proposal’s revenue neutrality, let me repeat my 5-step plan, “How to Read a Republican Tax Proposal.”
Step 1: Assume revenue neutrality.

Step 2: Look at what income is no longer taxed.

In the Romney plan, according to conservative economist Josh Barro, there is a $1 trillion reduction in corporate income tax, $3 trillion from the 20% reduction in tax rates (again, not 20 percentage points: the top rate falls from 35% to 28%), and $1 trillion from miscellaneous tax reductions, notably abolishing the Alternative Minimum Tax.
Step 3: Determine how much of that income you have.
Step 4: Ask what taxes have to be raised to get to revenue neutrality.
Step 5: Look in the mirror to see who pays them.
That would be the end of the story, except that the Romney budget is also raising military spending by $2 trillion, as the President pointed out in the debate. So that has to be offset, too.
Again, the bottom line is that if we cut taxes for the wealthy and corporations, it will impact the budget elsewhere, in some combination of tax increases on the middle class, program cuts, and deficit increases. Regardless of the spin surrounding it, if a proposal reduces some taxes but doesn’t reduce your taxes, you will lose out via these three methods of compensating for the lost revenue.
* If you aren’t old enough to remember, this is a reference to a great series of Isuzu car and truck ads featuring “Joe Isuzu,” whose signature line was “You have my word on it.”

cross posted with Middle Class Political Economist

Richard Milhous Romney Gets Specific, Says He’ll Cut Out All Programs That Aren’t Worth Borrowing From China For

Yup. All those farmers in Iowa and Nebraska who’ve been waiting for the Farm Bill to pass are as nervous tonight as Richard Nixo … er … Mitt Romney was this evening during the debate, but their problem is different than his was.  Instead of babbling incoherently while wearing a frozen, glassy-eyed smile, the farmers are spending the night tossing and turning while trying to figure out whether the program that they rely on so much is much is worth borrowing from China for. 

Maybe tomorrow they can put in a call about that to Ohio senator and Romney “surrogate” Rob Portman, and ask him.  Portman, according to a very serious-faced CBS reporter Jan Crawford (of Clarence-Thomas-is-an-intellectual-leader book fame), told her immediately after the debate ended that Romney we’ll be “repeating” the “specifics” of his economic plan throughout the next five weeks.  Just as he did tonight!  Oh, and be just as confident in his manner as he was tonight!

As a Democrat, I surely hope so.  And once those farmers find out, specifically, whether the Farm Bill subsidies are worth our borrowing from China for them, the can call Portman back and verify that massive tax cuts for the wealthy are worth borrowing from China for. 

Seriously … do these folks really think that if they call this stuff “specifics,” people will think that Romney’s incoherent gibberish included specifics and they (the viewers) just sorta missed them?

And seriously … at least Richard Nixon was coherent.  I’ve seen the black-and-white clips of parts of that first 1960 debate.  Yes, he was obviously nervous.  But he was coherent.  And specific.  As the dictionary defines that word, not as Sen. Portman defines it. 

Mitt Romney’s Unintentionally Hilarious Tax Return FAQ

by Kenneth Thomas

Mitt Romney’s Unintentionally Hilarious Tax Return FAQ

Unless you’ve been in a coma, you have certainly heard about Mitt Romney’s release of his 2011 tax returns last Friday. You no doubt know that he and his wife did not claim all the charitable tax deductions they were due, so their tax rate would not go below 13% of adjusted gross income. If you read Bloomberg or a newspaper that picked up the Bloomberg story, you know that Rafalca, the Romneys’ dressage horse, has disappeared from their 2011 tax deductions. This, of course, raises the question of whether it was a legitimate deduction in 2010 (or earlier?). After all, being in the Olympics probably raised the mare’s value, making the profit motive necessary for an allowable business deduction more plausible. So why would Rafalca not be eligible to deduct in 2011 if she were eligible in 2010 and probably gained value?

But have you read the Frequently Asked Questions page the Romney campaign put up about the 2011 returns and the PricewaterhouseCoopers (PwC) summary of the Romneys’ 1990-2009 taxes? You should, for the humor value, if nothing else.

In question 9, we learn how PwC calculated the average effective tax rate: they added the tax rate for each year, then divided by 20. This tells us almost nothing, as many observers (here’s one, h/t Think Progress) have pointed out: $50 million taxed at 10% (though the campaign claims it was never less than 13.7%) and $5 million taxed at 30% would yield an average tax rate of 20%, using the PwC method, when the true tax rate would be 11.8% ($6.5/$55) in this example.

In the very next question, however, we learn that for the total of federal taxes, state taxes, and charitable contributions (38.49%), PwC used the proper averaging methodology! In other words, adding up all the payment dollars and dividing by the total adjusted gross income (though we don’t know what tricks he used before adjusted gross income). Why didn’t they do that for tax alone?

In 2011, the Romneys’ charitable contributions came to just over twice their federal income tax ($4 million vs. $1.9 million). If that ratio applied for the entire 1990-2009 period, that would make the federal tax portion less than 13% (even lower because I have ignored state taxes). Of course, we have no way of knowing the real rate for federal or state taxes, or charitable deductions, without seeing the actual tax returns.
But wait, there’s more! Don’t forget all the offshore accounts! To do this question and answer justice, I’ll have to quote it in full:

12. There are some investments that seem to be established in offshore accounts, like the Cayman Islands and Bermuda. Are these investments evading taxes?
Note the misdirection in the question, “evading” rather than “avoiding” taxes, which describe illegal and legal maneuvers respectively. Few people think Romney has broken the law, though Nicholas Shaxson considers it to be a possibility.

No, the investments by the blind trusts in funds established in the Cayman Islands or other jurisdictions are taxed in the very same way they would be if the shares were held in the US rather than through a Cayman fund. No taxes are evaded or reduced. These funds are all registered with the IRS and report all income to investors and the IRS, just like domestic funds. Whether in Bermuda or Boston or elsewhere, there is no difference in how they are taxed.

If this were true, why would the funds need to be organized in the Cayman Islands? Boston would be a lot more convenient. No, as Richard Murphy of Tax Research UK told me, these funds are set up to allow round tripping by U.S. investors to avoid U.S. taxes, though some foreigners may also take advantage of them. Moreover, if foreigners are exempt from U.S. taxes like the Unrelated Business Income Tax, what need do they have to invest through the Caymans except to avoid taxes at home? Finally, we know from the Gawker revelations that at least two Cayman funds the Romneys invested in created five blocker corporations, which are set up precisely to allow round-tripping by Americans. How can these funds be established in the Cayman Islands, etc., for any reason other than tax avoidance?

In addition, it is important to note that there are no offshore accounts. These are investments in funds that are organized outside the US.

A fund organized in a secrecy jurisdiction like the Caymans, Bermuda, or Luxembourg is offshore by definition.

Further, it is important to note that Governor Romney did not make these investments. Governor and Mrs. Romney’s assets are managed on a blind basis. They do not control the investment of these assets. The assets are under the control and overall management of an independent trustee.

We’ve known since 1994 what Romney thinks of blind trusts, calling Senator Ted Kennedy’s “a ruse.”

Finally, the trustee did not choose where the investments were located any more than a stockholder in a Fortune 500 company chooses where that company is organized. Only the sponsor of the fund decides where it is organized. That responsibility is totally outside the control of a passive investor like Gov. Romney or the trustee of his blind trust.

And a stockholder can sell his shares. Has trustee Brad Malt never heard of “divestment”? I was one of thousands of people active in the late 1970s to get our universities to sell stock in companies doing business in South Africa, the “divestment movement.” While we weren’t very successful at Princeton, students and faculty at many other universities were, and some major local government funds divested from such firms, too, leading companies like Citicorp to end their South African operations. Malt could sell if he wanted to.
The bottom line is the “same as it ever was,” one tax system for the 1% and another one for the rest of us.

cross posted with Middle Class Political Economist

Romney’s Odd Definition of ‘Not Following the Law’

I don’t pay more than are legally due and frankly if I had paid more than are legally due I don’t think I’d be qualified to become president. I’d think people would want me to follow the law and pay only what the tax code requires.

— Mitt Romney, speaking to ABC’s David Muir, July 29, 2012

Sooo … Romney sees no difference between committing a crime—tax evasion—and consciously choosing to not employ every tax dodge conceivably available in order to barely skirt the line of legally. 

And he thinks people wouldn’t want a president who chooses not to do the latter.


I keep arguing that Obama should take this guy at his word—okay, his words—that he can’t distinguish between apples, oranges and elephants, and regularly conflates two or three obviously distinct facts or concepts.  And that maybe this isn’t really guy to get the economy moving on a faster track, or the guy to make commander in chief.  

A Couple of Questions for Romney Trustee Brad Malt and Former-IRS-Commissioner-cum-Romney-Testimonial-Provider Fred Goldberg

Between 1990 and 2009, the Romneys’ average annual effective federal tax rate was 20.2 percent, according to [notarized tax return summaries by Romney trustee Brad] Malt. The lowest effective federal personal tax rate they paid in that period was 13.66 percent, he said.

Over the same 20-year period, the couple gave an average of 13.45 percent of their adjusted gross income to charity.

Fred Goldberg, a former commissioner of the Internal Revenue Service, said in a statement released by Romney’s campaign that the couple “fully satisfied their responsibilities as taxpayers.”

“These returns reflect the complexity of our tax laws and the types of investment activity that I would anticipate for persons in their circumstances,” Goldberg said in the statement. “There is no indication or suggestion of any tax-motivated or aggressive tax planning activities.”

Fred Goldberg, a former commissioner of the Internal Revenue Service, said in a statement released by Romney’s campaign that the couple fully satisfied their responsibilities as taxpayers?  That’s good to know, but the question remains: When, exactly, did they satisfy their responsibilities as taxpayers for the years preceding the 2009 IRS amnesty program for anonymous holders of Swiss (and other foreign) bank account holders?  Might it have been retroactively, like, maybe, in 2009?

And, there is no indication or suggestion of any tax-motivated or aggressive tax planning activities?  That’s good to know, too. But is Goldberg limiting his statement to what Romney revealed in summaries?  Or does Goldberg have privy to the records of the $20 million-to-$102 million IRA account held in a Cayman Islands account?  And to the mysterious fund, or bank account, or whatever, in Bermuda?

Just wondering.  

Malt, by the way, was the trustee of the UBS account that was disclosed in the tax return for 2010. The tax return indicated that Malt had closed the account in early 2010.