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

Trying to Short Joe Biden

So the good news yesterday (h/t Felix) is that, even as he was voting to eviscerate the Fourth Amendment, Barack Obama urged a change to bankruptcy law. The devil is in the details (the “median cost” of a home in NY State won’t keep anyone living in their house in Westchester or even Rockland County, let alone PGLville), but it’s a nice start, as Elizabeth Warren notes:

Obama has history. He voted against the bankruptcy bill. He voted in favor of the amendments that would have eased the effects of the amendments. But his real history is deeper. He was a community organizer who saw first-hand the effects of aggressive lending. He was a state legislator who felt the impact of federal pre-emption on his ability to protect the citizens he represented.

…McCain also has a history. McCain has voted in favor of financial institutions since he first went to Washington. He voted over and over for the bankruptcy bill, and he voted against the amendments to give medical bankrupts a means test exemption, against a uniform minimim homestead for older Americans, against limiting recovery for lenders who violate Truth-in-Lending laws. After Katrina, McCain opposed an amendment to make procedures easier for victims of natual disasters. The list is long….

The deteriorating economy make bankruptcy a more urgent national issues. Bankruptcy and consumer finance are issues where the money and power is all on one side and the middle class families are on the other. It is also an area where both candidates have an on-the-record history. Senator Obama has now thrust bankruptcy issue into the national spotlight.

Now, my immediate reaction was to attempt to go short the possibility that Obsidian Wings-favorite Vice Presidential candidate, Joe Biden (D-BofA [nee MBNA]) would be chosen.* But I can’t find the contract on intrade, and the CNN “political market” just notes a drop of “the field” and HRC** with most of the support going to John Edwards (and some to Bill Richardson).***

So there probably isn’t a way to directly profit on the Good News from ObamaNation yesterday, but eliminating Joe Biden from the list of possible VP nominees is certainly a Public Good.

*If that does happen, after yesterday’s speech, I’m voting for McCain, since it will then be truly impossible to take anything Obama says seriously.

*Must be her FISA vote.

***The positive interpretation is that something like 5.5% of those in the CNN political market really believed that Biden would or should be the VP nominee. The negative interpretation would be that around 5.5% of those registered believed that Joe Biden would be a good VP choice in the first place.

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Senator Obama chooses Jason Furman econ advisor

By: Divorced one like Bush

From this story at Common Dreams comes the news that Senator Obama has chosen Jason Furman as an economic advisor. The story notes Mr. Furman’s fame for his defending of the Walmart model. The one that states Walmart is helping the less fortunate. I don’t buy it in the big picture scheme of viewing. In fact, we at AB have had this discussion and I even posted a link to a report from the EPI which noted not everything related to ones financial well being can be bought at Walmart. Frankly, there are some very big items that are not on Walmart’s shelves that take up a large portion of ones budget.

He has held a good position at the Brookings. Note that bit about director of economic policy for the Kerry/Edwards campaign. Not to keen on the Hamilton Project though:

The offices belong to the Hamilton Project, a small think tank created by Robert E. Rubin, Bill Clinton’s Treasury secretary and key economic adviser, and former Treasury deputy secretary Roger C. Altman, who would be a front-runner for the same job in a new Clinton administration.

Is this the concession the Clinton/Blue Dog group was looking for? The DLC still keeps control of the money issues? This article suggests some recent Hamilton Project influencing.Do we really need Chicago School lite? Are we that timid that we couldn’t try another school of thought? Now that would be “change”.

Then I read this in the Common Dreams article:

One economist who has disputed some of Mr. Furman’s findings on Wal-Mart said the disagreement shouldn’t disqualify him. “That’s small potatoes. Jason’s economic agenda goes way beyond that,” Jared Bernstein of the Economic Policy Institute said. “That’s not anything close to a deal breaker.”

Well ok? If the EPI can say there is more to this young man than Walmart, I need to go looking. I found this from Mr. Furman’s article on corporate taxes:

“We should consider tax reform in the classic 1986 mode: lower tax rates and broaden the tax base by limiting special exemptions. Both halves of this classic equation have the potential for helping the economy by eliminating the perverse incentives to invest in tax-favored activities rather than in more economically productive activities. “

Alrighty, there is more to his thinking. He relates our health care problems to the tax code also:

Not only do we spend more than any other country on health care, nearly 50 percent more per capita than the second-highest-spending nation, but citizens in 28 other countries have a higher life expectancy and 33 other nations have lower infant mortality rates.

If this were a government-run health care system, the voting public and policymakers would be up in arms. Yet, perhaps because health care is largely perceived as a private-sector concern, there is relative quiet: while voters tell pollsters that it is a top priority, there appears not to be comparable political pressure for serious reform or any fundamental change in the government’s involvement, either in the provision or funding of health care. This is in part because much of the federal government’s involvement with the health care system is through the hidden backdoor of the tax code. An importantprinciple for modern progressives is that when the government has to intervene in the marketplace, it should not prop up failure. Yet the federal government is, in fact, deeply involved in perpetuating the current “private” health care system and all its flaws, spending approximately $200 billion annually in subsidizing employer-provided insurance. It is the single biggest subsidy in our tax system, more than twice as costly as the mortgage interest deduction. The only government programs that cost more are Social Security, national defense, and Medicare.

Interesting perspective…yes? But, I’m not so sure he is correct with the solution, though I can now see why Senator Obama has put him at the table:

In fact, if we turned our irrational health tax subsidies right-side up–by curbing subsidies for higher-income workers and those with more generous health insurance plans–we could raise tens of billions of dollars annually, money that could go toward increasing access to health insurance. Taking it a step further, we could scrap the current deduction altogether and replace it with progressive tax credits that, together with other changes, would ensure that every American has affordable health insurance.

Not exactly a Mrs. Edward solution if I have read her correctly.

This person, Mr. Furman seems to fit well with Senator Obama’s other econ advisor, Mr. Austan Goolsbee. I think we can now start making some educated guess on what to expect for proposed solutions to the shift of income share to the top 1%. You know: It’s the economy stupid, Show me the money, declining real wages, consumer economy with little to spend, (add your’s here…). We’re going to try a new version of trickle down which has some form of tax code tightening, but no direct social policy influencing. Social influencing, like say, we use the tax code to make it more profitable for the company to pay the help as oppose to paying the very top management and shareholders.

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Taxing the Upper-Middle Class: Is That A Small Violin I Hear Playing?

by Tom Bozzo

In BusinessWeek, Jane Sasseen’s “Taxing the ‘Not-So-Rich’ Rich” tries to make me feel, uh, well, here’s the lede:

By any measure, Dr. Howard Hammer and his wife, Hope, have a comfortable life. Hammer, 40, has built a thriving practice as an ear, nose, and throat specialist, while Hope, 39, has switched to part-time work as a real estate lawyer after years at a big firm in order to spend more time with [the kids]. Home is a four-bedroom house in the Philadelphia suburbs, and between them, they bring in over $300,000 a year. “We can’t complain,” he says. “We’re certainly not struggling.”

But are they wealthy? That’s far more debatable…

Granted, income is a flow and wealth is a stock. There’s nothing much beyond self-control that would prevent a family with a 97th-percentile income a la the Hammers from spending drunken sailors under the table (if perhaps in ways the drunken sailors would find dull), seeing as the modern economy’s undeniable talent is providing an array of goods and services capable of relieving anyone of their money for arbitrary values of “their money.”

Still, a regularity of the income-and-wealth data is that households with $300,000/year incomes also tend to be in high percentiles of the wealth distribution. In the Fed’s 2004 Survey of Consumer Finances, for example, households in the 75th-90th percentile range for the wealth distribution had a median income of $77,000 (in 2004 dollars) and a mean income of $87,800. So there’s some skew to the income distribution for people in that wealth fractile, but you can conclude that there aren’t too many people making $300,000/year who aren’t also in the top 10% of the wealth distribution. At least, they’re for the most part rapidly on the way there.

And, sure enough, most people would probably be glad to have the financial stresses of the $300,000/year set:

Ever-rising prices for gas, health insurance, and other expenses are hitting hard, as are the $3,000-a-month mortgage and the $2,000 he still pays monthly to whittle down his $160,000 medical school debt. A six-year residency gave Hammer a delayed start saving for retirement, so he worries if he’s stashing enough in his 401(k). By the time the couple contributes to the children’s college fund, there’s little extra at the end of the month.

Yes, that’s the horror of only having a little bit to save after socking away money for two of the main savings motives. If they actually had to get to the point of curtailing their other savings, I’m quite sure that they could sharpen their pencils before their credit cards got maxed out.

Now you might recall that the upper-middle and upper classes did relatively well in that long national nightmare of peace and prosperity known as the Clinton (I) years. However, Dr. Hammer would have us know that he’s not really a Republican but, he tells BW:

“I don’t mind paying my fair share, but people act like they’re just talking about Bill Gates,” he says. “We would definitely feel a hit if our taxes went up.” Although a year ago he would not have considered voting Republican in November, now he’s not so sure: “Do you vote your heart, or do you vote your wallet?”

This looks like rather narrow pocketbook-voting insofar as Republican policies haven’t exactly helped with stuff like education, transportation, and health insurance prices and costs. In a longer view the kids might be less than thankful for the taxes deferred to the next generation. Perhaps Dr. Hammer is persuadable.

The BW piece seems to predict a major line of attack against Obama in the fall, namely that he’s planning the biggest middle-class tax increase EVER. After all, a little rebranding (“death tax”) plus relentless marketing made a popular cause of relieving the super-rich of a tax burden nearly nobody is fortunate enough to bear, and if you’re a one-trick pony…

But many also live in high-cost areas with expenses to match — and feel burned by talk of “taxing the rich” that doesn’t recognize that $250,000 stretches a lot further in the South or the Midwest than in Manhattan or Silicon Valley. “There is a huge difference between what politicians define as rich and what many Americans would call middle class,” says Patrick Anderson, CEO of the Anderson Economic Group and co-editor of The State Economic Handbook.

The soaring deficit, along with the fact that the Bush tax cuts expire at the end of 2010, provide much of the impetus for the coming fight over high-end taxes. If Washington doesn’t act, tax rates on income, capital gains, dividends, and other areas will return to the higher rates in effect before the cuts were enacted in 2001 and 2003. Senator John McCain (R-Ariz.)… has said he would extend the cuts for everyone, while Obama says he’ll maintain them for all but the wealthiest. If Obama wins, some taxes could go up as soon as 2009.

It falls to Austan Goolsbee to remind everyone that you can get “many” by multiplying small fractions and the population of the United States, and besides the far upper tail of the income distribution is the only group that’s systematically done well under Bushonomics:

Austan Goolsbee, Obama’s top economic advisor, points out that only a relatively small number of high-end earners would be tapped, while the majority of Americans would see their taxes fall or remain the same. “Income growth in that group has been extremely rapid, while it’s been stagnant for everyone else,” says Goolsbee. “It’s hard to argue they face the same struggle to get by.”

No kidding. And the sob stories may even get a little much for Ms. Sasseen, who closes thusly:

“People think the President can just extend the cuts, but he can’t,” says Stanford Group’s [Anne] Mathias. All of which explains why Mathias has been warning her clients that the next couple of years “will be a very bad time to be rich.” Whatever, precisely, that means.

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In the eye of the beholder

Came across a couple of videos. This first one is an issue of perspective on the thought of what is terroism or what is a terroist act.

This second one is just plain funny (at least to me). It spoofs on the Annie Oakley comment by Senator Obama.

On the economy side of things using my GFP (gross flower production), things were not as good as last year. What started off as a year with a bang, is now looking to be equal to last years numbers. We were up 21% end of March. End of April we were up 4.7%. As of Mother’s Day, 2.6% on the year. Interestingly, looking at credit card use for the holiday months Valentines was up 23%, Easter was up 13% and now Mother’s Day is down 27%. This is the shift I saw starting last August. But, cash sales are up for May 33%. They were up for January and February, but cash sales were down both March and April.

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Dave Johnson at Seeing the Forest Gives the Lie to the "Hillary is destroying the party" meme

He’s more of an optimist than I am—but that isn’t difficult.

Then again, he is also well aware that, were Hillary to drop out today, it wouldn’t be all peaches and cream from now until after the nominations are in place.

People are saying that Hillary is “race-baiting” because she mentioned “blue-collar whites.” Save the racist accusations for what’s coming — because it surely IS coming….

It is the old way, and it worked for a long time, and it stopped working and the 50-state strategy is what we need now. But is isn’t racist and isn’t intended to divide us. Is going after “soccer moms” or “NASCAR dads” as a demographic voting block a sexist tactic? Yes and no, but it isn’t intended to divide. She is just saying that voting patterns show that she is bringing in more of certain groups — and confirming her unfortunate entrenchment in the old-style “big state” view.

Let’s talk about real racism. Look at what has already started from the right. We already have seen them using “boy” and “darkest Africa.” As November approaches you will be hearing about “our women.” There will be stuff about how Obama wants the While House so he can lure in white wives of important Senators, etc. There will be a lot of “us” vs “them.” And much, much worse. Believe me, much, MUCH worse. THAT is when you want to talk about people using racism as a campaign tactic. And when that happens you really don’t want the right saying “well that’s what you said about Hillary, too.” [boldface and italics his]

As I noted at Thomas Palley’s blog a few days ago, “If Obama can’t take punches from the HRC campaign, he’s got no chance of doing so against the professionals of Ari Fleis[c]her and the RNC.” And while many appear to believe that the Dems could run anyone with a personality this side of Harry Reid after eight years of Bush-league rule, it’s a long way to November. And the more Hillary-punches Obama can take, the better off he’ll be when the real goons, not just Rocky Balboa, start swinging.

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Experiment: How would you advise Sen. Clinton?

Twice now in this political session we have had the opportunity to move beyond the Carl Rove/Frank Luntz school and system of communication. The first was Sen. Obama’s speech on race. The second is this current statement discussed in PGL’s post.

I understand the current structure of our MSM and their strategy to earning viewers and thus money; stir the crap. Even Olberman had one guest ask if the public was smart enough to understand Sen Obama’s speech on race as oppose to running after the handoff of the baton of: Or, at this moment, in this election, we can come together and say, “Not this time.” This time we want to talk…

That was it. The biggest opportunity to step out from the focus on the word or words and into the focus on the message the person speaking was attempting to relay. Less emphysis on one’s interpretation of the words used and more focus on the interpretation used by the one you are communicating with for the sole purpose and desire to fully commune.

This current statement by Obama is now the second opportunity for the US to step away with no penalty of loss of honor from the inward focus on the word/words into the outward focus on the message.

I’m not really expecting the MSM to make the change. Would be nice, but it will not happen until our elected ones make the change. That Sen. Clinton did not and has not recognized these two opportunities and run with them is evidence of the lie of her political prowess. She has failed to sense that the common thread in all of the “change” dialog regarding political change evolving into policy change is the cessation of the focusing on the word/words for the sake of winning the argument. Such a focus is a selfish life approach.

Our loss of respect in the world, our feelings of distrust, our decline of a sense of comfort, even the bank issue, the war, all of it began with shift to an approach of dialog of word/words. Our dialog has been dominated for 3 decades by a style of communication that manifests out of selfishness. It is the “lazy” in the presentation of the fat American, the me generation, the welfare queen, the illegal immigrant.

It’s easier to focus on the word. Every word has an emotional response and every emotional response has a physical response. It is physiology. Thus it is simple to generate a belief in one’s self that you are what I say you are and to feel good and confident in your righteousness. It is the style of dialog one becomes engaged in when holding a conversation with another who is drunk or stoned, or high or manic, or schizophrenic or panicked or shocked. It is the irony of the framing of Bush as being capable of relating because you could sit and have a beer with him. You can. You just won’t be able to communicate to any point of resolution. With no ability to truly comprehend the message of the one you’re talking to, you have no ability to trust that person. Consequently you have no ability to commune with that person. In terms of economics, no ability to trade.

Sen. Clinton has shown twice now that she either: 1. does not understand this most basic of lessons of communication or 2. does understand, but for selfish intent will use it against those she professes a desire to serve or 3. does understand, but has little faith or trust in those she professes a desire to serve.

With that, how would you advice Sen. Clinton to respond to Sen. Obama’s statements knowing that he put the following out there: Or, at this moment, in this election, we can come together and say, “Not this time.” This time we want to talk…
END

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Austan Goolsbee, Obama’s Econ Man

T-bone got me thinking in his response to my comment about Obama. Well, as a good AB’er, that meant I had to go a hunting. In this case, specifically for Obama’s econ advisor: Austan Goolsbee.

This lead me to an article by Austan Goolsbee, It’s Not About the Money. Wow, a man thinking like me. This lead me to a book: Does Atlas Shrug? The Economic Consequences of Taxing the Rich. Edited by Joel B. Slemrod which is a collection of papers presented at an October, 1997 conference in Michigan of which Mr Goolsbee was a participant.
(scroll down to mid page.) This lead me to a review of the book which I will post on later. (Yes, I’m still playing with the income data stuff.)

As a sample of Mr. Goosbee’s thinking I pulled this from his paper’s introduction:

One of the liveliest areas of debate of the last twenty years in public economics has been the argument over the behavioral effects of marginal tax rate changes.

The methodological approach in what I term the New Tax Responsiveness (NTR)literature is to control for the unobserved determinants of taxable income by using “natural experiments,”….The influence of the NTR literature such as Lindsey (1987) and Feldstein (1995a) is undeniable and, if correct, has profound implications for tax policy and revenue estimation. The backbone of the NTR approach, however, is this assumption that lower income people are a valid control group for higher income people—that the change in income of the two groups would have been identical if there were no change in taxes. If this assumption is false, existing estimates may have significant biases.

And his conclusion:

After ten years of finding large elasticities of taxable income with respect to the net of tax share by using tax changes as natural experiments, the NTR literature has had a large impact on the conventional wisdom regarding progressivity and the efficiency loss of high marginal tax rates. I argue, however, that the results from these papers are based on the faulty assumption that the very rich differ from other income groups only because they have different tax rates. Independent data on several thousand high-income executives as well as on other prominent rich people show that even the moderately rich are not a valid control group.

So what’s the up shot? Well, I’m still not sold on Obama, but then I’ve never not had him on the list. I like his econ advisor from the little I read. He likes comedy! (See Other interests)
He is dedicated to his profession. He knows how to speak:

…a prestigious New England preparatory school, Goolsbee became one of the most decorated competitive speakers in the country. In 1987, Goolsbee won the National Forensics League national title in extemporaneous speaking and finished second in original oratory with a speech on the SAT entitled “Right of Passage”

Think he may be Obama’s secret to his oratory ability?

He thinks deficits matter. He thinks companies have a morality problem:

The evidence shows that companies are particularly likely to raise prices when the government is footing the bill… It’s not your grandpa’s moral hazard anymore.

Also here he tackles the 529 savings plans problems.

He seems to be hangin’ with a crowd that thinks there is a problem with just focusing on tax rates as policy for moving an economy. Although he also seems to focus a lot on the internet and taxes. This appears to be his “thing”? In doing a quick look at some of his work, Obama’s current econ plan appears to be totally Mr. Goolsbee’s ideas. I have no problem with this. It suggests that with Obama, we would actually get people who’s qualifications actually match the job assigned. Though I feel confident with the top 3 dems we would see properly fitted personnel.

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