Tidbits Quotations
To Accompany the January 20, 2011 edition of Tidbits
http://www.trinity.edu/rjensen/tidbits/2011/tidbits012011.htm         
Bob Jensen at Trinity University

Archive of Tidbits Quotations --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm

The difference between reading and studying is like the difference between drifting in a boat and rowing toward a destination.
Oscar Feucht as forwarded by my minister, Ned Wilson
Jensen Comment
I might point out that rowing requires a lot more sweat.

Video:  Why Ronald Regan Changed Political Parties --- http://www.jointheteaparty.us/videos/videoRR.html

Having already downed a few power drinks, she turns around, faces him, looks him straight in the eye and says, "Listen here good looking, I screw anybody, anytime, anywhere, your place, my place, in the car, front door, back door, on the ground, standing up, sitting down, naked or with clothes on… it doesn't matter to me. I just love it."

Eyes now wide with interest, he responds, "No kidding. I'm in Congress too. What state do you represent?"
Forwarded by Dr. Wolff

Them dang founders wasn't as smart as they thought they wuz! Shore, they had all that fancy book-larnin', but they didn't have no Facebook-larnin'. What good was they?
James Taranto referring to the founders of the U.S. Constitution
"Listen Up Perfesser Bohner ," http://online.wsj.com/article/SB10001424052748704739504576068021193144298.html?mod=djemBestOfTheWeb_h

I haven't left my house in days. I watch the news channels incessantly. All the news stories are about the election; all the commercials are for Viagra and Cialis. Election, erection, election, erection -- either way we're getting screwed!
Bette Midler

Blessed are the young, for they shall inherit the national debt.
Herbert Hoover --- http://www.brainyquote.com/quotes/quotes/h/herberthoo110353.html

Fathom the odd hypocrisy that the administration wants every citizen to prove they are insured, but people don't have to prove they are citizens.
Ben Stein

I think political correctness can lead to some kind of paralysis where you don't address reality.
Juan William before he was fired after a distinguished career on NPR.
http://townhall.com/columnists/GuyBenson/2010/10/21/npr_finally_finds_an_excuse_to_fire_juan_williams

Whether or not you love or hate the scholarship and media presentations of the University of Chicago's Milton Friedman, I think you have to appreciate his articulate response on this historic Phil Donohue Show episode. Many of the current dire warnings about entitlements were predicted by him as one of the cornerstones in his 1970's PBS Series on "Free to Choose." We just didn't listen as we poured on unbooked national debt ($60 trillion and not counting) for future generations to deal with rather than pay as we went so to speak! . And yes Paul and Zafer, I know there may be better alternatives than capitalism as a basis for optimization of economies in theory. But all economic systems must deal with inherent greed in practice.
The Grand Old Scholar/Researcher on the subject of greed in economics
Video:  Milton Friedman answers Phil Donohue's questions about capitalism.--- http://www.cs.trinity.edu/~rjensen/temp/MiltonFriedmanGreed.wmv  

Landesman wasn't being asked specifically about negative feelings over the Loveland Museum Gallery in Loveland, Colo., a taxpayer-funded art space that recently featured a controversial painting with Jesus Christ receiving oral sex from a man. He's certainly not used to critical questions about just how this blasphemy-by-numbers seems like a tiresome rerun -- Jesus in urine, Jesus in chocolate, Jesus in (homo)sexual ecstasy.
Brent Boswell, Shock and Awful Art, Townhall, October 22, 2010 ---
http://townhall.com/columnists/BrentBozell/2010/10/22/shock_and_awful_art
Rocco Landesman is the chairman of the National Endowment for the Arts
Landesman does not have the guts to display a similar offensive picture of Allah

In the U.K. everything is permitted unless it’s prohibited. In Germany, it’s the other way around; everything is prohibited unless it’s permitted. In Netherlands, everything’s prohibited even if it is permitted. And in France, of course, everything is permitted especially if it’s prohibited.
Sir David Tweedie, Former Director of the International Accounting Standards Board

Watch the CNN Video
"Make certain when you sign those papers that you didn't rely on accountants."
Rep. Charlie Rangel, Recently censured member the U.S. House of Representatives
http://goingconcern.com/2010/12/from-now-on-charlie-rangel-wont-be-relying-on-accountants/

Watch the Video
"Make certain that you rely on Turbo Tax, because then you have something non-human to blame for underpayment of your taxes."
Timothy Geithner, Secretary of the U.S. Treasury
http://www.youtube.com/watch?v=eKVxGlkPRlo

The unemployed, unlike the rich whom this president has just bowed to, are, in fact, the job creators.
Keith Olbermann on MSNBC
Jensen Question
Does this mean that we can create 100 million new jobs by laying off 10 million people? Say what Keith?

Keith Olbermann warned in his Special Comment last night that Obama would not survive a primary challenge if he persists, because Democrats and progressives are wedded to principles, not personalities.
Hot Air, December 8, 2010 --- http://hotair.com/archives/2010/12/08/olby-obama-wont-get-renominated-if-tax-deal-goes-through/

Fox News Makes You Stupid? (Duped by a Joke)
Brent Bozell --- http://townhall.com/columnists/BrentBozell/2010/12/29/fox_news_makes_you_stupid

At her final press conference as House Speaker, Nancy Pelosi (D-CA) said, "Deficit reduction has been a high priority for us. It is our mantra, pay-as-you-go." The numbers tell a different story. When the Pelosi Democrats took control of Congress on January 4, 2007, the national debt stood at $8,670,596,242,973.04. The last day of the 111th Congress and Pelosi's Speakership on December 22, 2010 the national debt was $13,858,529,371,601.09 - a roughly $5.2 trillion increase in just four years. Furthermore, the year over year federal deficit has roughly quadrupled during Pelosi's four years as speaker, from $342 billion in fiscal year 2007 to an estimated $1.6 trillion at the end of fiscal year 2010.
Fox Nation, "Speaker Pelosi Leaves With a Whopper," January 4, 2011 ---
http://nation.foxnews.com/nancy-pelosi/2011/01/04/speaker-pelosi-leaves-whopper

I had no idea that there were this many states trying to block Obamacare

Half of All States Now Suing to Stop Obamacare --- http://blog.heritage.org/2011/01/12/half-of-all-states-now-suing-to-stop-obamacare/

David Albrecht reminded us that Canada quietly reduced its top corporate tax rate ---
http://21stcenturytaxation.blogspot.com/2011/01/canada-further-drops-its-top-corporate.html

 I generally admire John Stossel's columns, but sometimes he's a loose cannon ---
http://townhall.com/columnists/JohnStossel/2011/01/05/prohibitionists_leave_us_alone!

This is actually quite good and written in Adrienne's usual entertaining style
"The Second Annual Jr Deputy Accountant Fed Year In Review," Jr. Deputy Accountant Blog, December 31, 2010 ---
http://www.jrdeputyaccountant.com/2010/12/second-annual-jr-deputy-accountant-fed.html

"Solar Panel Maker Moves Work to China," by Keith Bradsher, The New York Times, January 14, 2011 ---
http://www.nytimes.com/2011/01/15/business/energy-environment/15solar.html?hpw 

Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States. Green

But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

The factory closing in Devens, Mass., which Evergreen announced earlier this week, has set off political recriminations and finger-pointing in Massachusetts. And it comes just as President Hu Jintao of China is scheduled for a state visit next week to Washington, where the agenda is likely to include tensions between the United States and China over trade and energy policy.

The Obama administration has been investigating whether China has violated the free trade rules of the World Trade Organization with its extensive subsidies to the manufacturers of solar panels and other clean energy products.

While a few types of government subsidies are permitted under international trade agreements, they are not supposed to give special advantages to exports — something that China’s critics accuse it of doing. The Chinese government has strongly denied that any of its clean energy policies have violated W.T.O. rules.

Although solar energy still accounts for only a tiny fraction of American power production, declining prices and concerns about global warming give solar power a prominent place in United States plans for a clean energy future — even if critics say the federal government is still not doing enough to foster its adoption.

Beyond the issues of trade and jobs, solar power experts see broader implications. They say that after many years of relying on unstable governments in the Middle East for oil, the United States now looks likely to rely on China to tap energy from the sun.

Evergreen, in announcing its move to China, was unusually candid about its motives. Michael El-Hillow, the chief executive, said in a statement that his company had decided to close the Massachusetts factory in response to plunging prices for solar panels. World prices have fallen as much as two-thirds in the last three years — including a drop of 10 percent during last year’s fourth quarter alone.

Continued in article

"Solar Power Eclipse:  A case study in the failure of green energy subsidies," The Wall Street Journal, January 18, 2011 ---
http://online.wsj.com/article/SB10001424052748703959104576081991727353356.html#mod=djemEditorialPage_t

Not long ago, Massachusetts Governor Deval Patrick was calling Evergreen Solar a "symbol" of his state's economic future. Symbolism would appear to be overrated.

Evergreen announced last week that it is shutting its Massachusetts plant and will lay off 800 workers. That's the same plant Mr. Patrick had state taxpayers fund in 2007 to the tune of $58 million in grants, loans and land and tax incentives—one of the largest investments in a private company in Bay State history. Remind us not to let the Governor pick our stock portfolio.

The solar company started in 1994 and advertises a "string ribbon" technology that reduces the amount of silicon used in solar panels. Evergreen rode the green energy political bubble through a 2000 IPO, and through news in 2007 that it would build, with state aid, a flagship plant in Devens, Massachusetts.

A look at the company's finances shows it has lost a cumulative $685 million. The majority of this red ink was on the books prior to Mr. Patrick promising state aid. The company has produced little good news since, including warnings from Nasdaq that it could be delisted, an unproductive debt restructuring, and a string of money-losing quarters. None of this fazed Mr. Patrick, who touted Evergreen as a cornerstone of his strategy to turn Massachusetts into a hub of green energy innovation.

Evergreen blames its plant closing on competition from subsidized Chinese manufacturers. "Solar manufacturers in China have received considerable government and financial support, and together with their low manufacturing costs, have become price leaders within the industry," says Evergreen President Michael El-Hillow.

But Evergreen has also been subsidized in the multiple ways that federal and state governments favor solar power. Maybe the problem is Evergreen's business model, or perhaps its decision to locate a plant in a high-cost, union-labor state. Evergreen has long been aware of China's solar manufacturing advantage, waiting until it received the $58 million from Massachusetts to announce it would outsource jobs to a plant it continues to operate in China.

Bay State taxpayers are now stuck with the losses. Mr. Patrick says he intends to claw back some of that $58 million, but Evergreen says it doesn't owe more than $4 million. Taxpayers will also be thrilled to know the state is so worried about getting a new tenant for the manufacturing site that it may let Evergreen keep its sweetheart $1-a-year lease—allowing the company to sublet it at a profit.

All of this adds up to one more case study in the perils of politically allocated capital. Like President Obama, Mr. Patrick has advertised the illusion that governments can nurture new companies, even whole new industries, with targeted taxpayer "investments." This is the entire premise of the "clean energy" industry, most of which wouldn't exist without subsidies because it can't compete on a market basis.

Politicians always seem to show up for the green energy ribbon-cuttings but somehow they manage to miss the plant closings. Evergreen Solar is indeed a "symbol"—of the folly of taxpayer green subsidies.

"Same as the Old Boss? Don't count on the GOP to shrink the size of government," by John Stossel, Reason Magazine, January 13, 2011 ---
http://reason.com/archives/2011/01/13/same-as-the-old-boss

Last year, I reported that the United States fell from sixth to eighth place—behind Canada—in the Heritage Foundation/Wall Street Journal's 2010 Index of Economic Freedom. Now, we've fallen further. In the just-released 2011 Index, the United States is in ninth place. That's behind Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Ireland, and Denmark.

The biggest reason for the continued slide? Spending as a percentage of gross domestic product. (State and local spending is not counted.)

The debt picture is dismal, too. We are heading into Greece's territory.

Are we doomed? Not necessarily. Economist David R. Henderson points out that our neighbors to the north faced a similar crisis. In 1994, the debt that Canada owed to investors was 67 percent of GDP. Today, it's less than 30 percent.

What did Canada do? It cut spending from 17.5 percent of GDP to 11.3 percent.

This wasn't merely a cut in the growth of spending, a favorite trick of congressional committees. These were actual reductions in absolute spending.

"If a cabinet minister wanted a smaller cut in one program, he had to come up with a bigger cut in another program," writes Henderson in "Canada's Budget Triumph," published by the Mercatus Center. All but one of Canada's 22 federal departments experienced real cuts in spending. While Canada raised taxes slightly, spending was cut six to seven times more.

These supposedly painful cuts didn't cause terrible pain. In fact, there was much more gain than pain. Unemployment dropped, the economy boomed, and the Canadian dollar—then worth about 71 cents U.S.—today is about equal to the American dollar.

If Canada can do it, we can, too. But the signs aren't good. New Speaker John Boehner, leader of the Republicans who now control the House, says he wants to cut spending. When he was sworn in last week, he declared: "Our spending has caught up with us. ... No longer can we kick the can down the road."

But when NBC anchorman Brian Williams asked him to name a program "we could do without," he said, "I don't think I have one off the top of my head."

Give me a break! You mean to tell me the Republican leader in the House doesn't already know what he wants to cut? I don't know which is worse—that he doesn't have a list or that he won't talk about it in public.

The Republicans say they'll start by cutting $100 billion, but let's put that in perspective. The budget is close to $4 trillion. So $100 billion is just 2.5 percent. That's shooting too low. Firms in the private sector make cuts like that all the time. It's considered good business—pruning away deadwood.

GOP leaders say the source of their short-run cuts will be discretionary non-security spending. They foolishly exclude entitlement spending, which Congress puts on autopilot, and all spending for national and homeland security (whether it's necessary or not). That leaves only $520 billion.

So even if the Republicans managed to cut all discretionary non-security spending (which is not what they plan), the deficit would still be $747 billion. (The deficit is now projected to be $1.267 trillion.)

This is a revolution? Republicans will have to learn that there is no budget line labeled "waste, fraud, abuse." If they are serious about cutting government, they will ax entire programs, departments and missions.

"Can We Trust the GOP? The Republicans have retaken the House, but that doesn’t mean you should expect the government to get any smaller." by Veronique de Rugy, Reason Magazine, February 2011---
http://reason.com/archives/2011/01/12/can-we-trust-the-gop

"What Congress Should Cut:  Let's scrap the Departments of Commerce and Housing and Urban Development, end farm subsidies, and end urban mass transit grants, for starters," by Dick Armey and Matt Kribbe, The Wall Street Journal, January 19, 2011 ---
http://online.wsj.com/article/SB10001424052748703779704576073750780454850.html?mod=djemEditorialPage_t

The primary economic challenge today is that our government spends too much money it doesn't have, and it is involved in too many things it cannot do well and shouldn't do at all. This burden is manifested by a $1.3 trillion annual deficit and a $14 trillion national debt. The more pernicious effects of this fiscal drag are unseen: a debased dollar, massive (and hidden) unfunded liabilities, and a crushing burden on would-be job creators.

Milton Friedman correctly argued in 1999 that the "real cost of government—the total tax burden—equals what government spends plus the cost to the public of complying with government mandates and regulations and of calculating, paying, and taking measures to avoid taxes." He added, "Anything that reduces that real cost—lower government spending, elimination of costly regulations on individuals or businesses, simplification of explicit taxes—is a tax reform."

Since 2007, Congress has been on an unprecedented spending binge. That means a first and obvious budget-cutting step would be to return discretionary spending to the baseline before things got so out of control. If Congress returned to the baseline before the supposedly "temporary" stimulus bill of 2009, $177 billion per year would be saved, according to calculations by FreedomWorks based on figures from the Office of Management and Budget and the Congressional Budget Office (CBO). If spending went back to the 2007 baseline, the beginning of the first Pelosi Congress, $374 billion would be saved. Over 10 years, that is $748 billion and $1.56 trillion in savings, respectively.

Repealing ObamaCare is another obvious source of reduced spending. The absurd claim that this government takeover of health care produces budget savings is based on budget gimmickry—such as assumed Medicare cuts that, according to estimates by the Centers for Medicare and Medicaid Services, would put 15% of our hospitals out of business, and thus will never happen. The claim also ignores the historically explosive growth in other similar programs. Medicare grew nine-fold larger than was projected during its first 25 years. In its first 10 years alone, the program experienced a 700% cost overrun.

But let's for the moment accept CBO's numbers on ObamaCare spending. They still mean that repealing the health-insurance exchanges and the premium subsidies, including the expansion of Medicaid, saves $898 billion over 10 years. Repealing the individual mandate alone—and thus reducing rather than eliminating these premium subsidies and Medicaid outlays—would cut $252 billion.

Still more savings can be realized by eliminating taxpayer-funded bailouts. We need to cut the cord between taxpayer wallets and Fannie Mae and Freddie Mac. As Alabama Rep. Spencer Bachus, the new chairman of the House Financial Services Committee, said last March of Fannie and Freddie, "Taxpayers have already contributed more than $127 billion to the bailout and they are on the hook for hundreds of billions more." The CBO estimates that the cost to taxpayers could rise to $389 billion. Others estimate it will take around $1 trillion. Fannie and Freddie need to be broken up and returned to the private sector now.

There's more, much more. Eliminating subsidies to ethanol and for unproven energy technology produces $170 billion in savings over 10 years, according to the Cato Institute's recent "A Plan to Cut Spending and Balance the Federal Budget." Scaling back the number of government employees to fiscal year 2008 will save $35 billion, according to calculations from the office of Wyoming's Rep. Cynthia Lummis.

Other 10-year Cato spending cut estimates: Scrapping the departments of Commerce and Housing and Urban Development saves $550 billion; ending farm subsidies would produce nearly $290 billion. Cutting NASA spending by 50% would save $90 billion. Repealing Davis-Bacon labor rules produces $60 billion. Ending urban mass transit grants would save $52 billion. Privatizing air traffic control, as other nations have done, saves $38 billion. Privatize Amtrak and end rail subsidies and save $31 billion. Reform federal worker retirement, $18 billion. Retire Americorps, $10 billion. Shutter the Small Business Administration, $14 billion.

Defense spending should not be exempt from scrutiny. With such dramatic increases in appropriations, it is not plausible that all resources are being spent prudently. Defense Secretary Robert Gates has proposed savings of $145 billion over five years. That's a start.

Entitlements—56% of the annual budget and growing—are the most difficult but also the most important programs to reform, because the total unfunded liability tops $100 trillion for Social Security and Medicare alone. The federal government does not put these liabilities on the books, but serious budgeting requires that we deal with this ominous long-term burden now.

The most complete work on entitlement reform comes from Wisconsin Rep. Paul Ryan, the new chairman of the House Budget Committee. Mr. Ryan's "Roadmap for America's Future" combines a gradual slowing of Social Security benefit growth with optional personal accounts that seniors would own and control. As for the Big Three health-care programs—Medicare, Medicaid and tax subsidies for employer-sponsored health benefits—he converts them into capped contributions to individuals (part of Medicaid would be block-granted to states).

This is a powerful, patient-driven approach, allowing individuals to take control of their own dollars. In total, the Ryan approach would powerfully realign incentives and would, according to the CBO's analysis of the Roadmap last January, reduce government spending by $370 billion a year in 2020.

We've identified almost $3 trillion in real spending cuts over a decade, and have only scratched the surface. New House rules enable Mr. Ryan to create the conditions for reform via enforceable spending caps on all domestic government spending if Congress fails to produce a budget. He should use this authority to halt the current spending binge.

None of this will be easy. Many will likely demagogue any reduction in the rate of growth of spending as a devastating "cut." But the politics of spending has changed, and there is an expectation among fiscally conservative voters—Republicans, independents, tea partiers and even Democrats—that the government tighten its belt, just as American families have been forced to do. Some in the Republican establishment have already started complaining that this is too politically difficult. These naysayers misread today's political climate. Should they succeed in blocking change, tea party voters will hold them just as accountable as big-spending Democrats.

"Tax Havens Devastating To National Sovereignty," Southwerk, January 13, 2011 ---
http://southwerk.wordpress.com/2011/01/13/tax-haven-devastating-to-national-economies/
Thank you Nadine Sabai for the heads up.

The blog post is a review of the book, Nicholas Shaxson’s  - Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens 

Tax havens are the ultimate source of strength for our global elites. Just as European nobles once consolidated their unaccountable powers in fortified castles, to better subjugate and extract tribute from the surrounding peasantry, so financial capital has coalesced in their modern equivalent today: the tax havens. In these fortified nodes of secret, unaccountable political and economic power, financial and criminal interests have come together to capture local political systems and turn the havens into their own private law-making factories, protected against outside interference by the world’s most powerful countries – most especially Britain. Treasure Islands will, for the first time, show the blood and guts of just how they do it.

The nations of the world are harmed by the evasion of their laws and taxes made possible by tax havens. The tax money is important but more important is the ability to threaten governments to force actions that multinational corporations such as investment banks wish done.

These escape routes transform the merely powerful into the untouchable. “Don’t tax or regulate us or we will flee offshore!” the financiers cry, and elected politicians around the world crawl on their bellies and capitulate. And so tax havens lead a global race to the bottom to offer deeper secrecy, ever laxer financial regulations, and ever more sophisticated tax loopholes. They have become the silent battering rams of financial deregulation, forcing countries to remove financial regulations, to cut taxes and restraints on the wealthy, and to shift all the risks, costs and taxes onto the backs of the rest of us. In the process democracy unravels and the offshore system pushes ever further onshore. The world’s two most important tax havens today are United States and Britain.

But the world is not without means to remedy the situation. In the late 1700′s piracy flourished because nations found it advantageous to use them against their enemies. Pirates often employed as privateers fattened the treasury of the nations hiring them and did harm to their enemies.

But over time, it became obvious that the benefits of piracy were outweighed by the faults.

So, nations by treaty and policy ran the pirates out of business.

The United States in concert with the European Union, China and other nations could by agreement make this kind of tax haven impossible to maintain or at the very least difficult.

It has been a daunting task to motivate the government of the United States to act against the interests of these larger corporations particularly the financial ones, but the future of this nation may well depend on those tax dollars and enforcing the national interest.

James Pilant

I wish to thank homophilosophicus for calling my attention to Thriven’s Blog.

"Keith Olbermann attacks Fox News, Bill O'Reilly in vulgar twitter exchanges," Examiner.com, December 30, 2010 ---
http://www.examiner.com/conservative-in-spokane/keith-olbermann-attacks-fox-news-bill-o-reilly-vulgar-twitter-exchanges

If you're Keith Olbermann, you spend the day insulting people and attacking Fox News on twitter with childish, profane messages.

Jonathon M. Seidl reports at The Blaze the outspoken, always-angry host spent Wednesday evening attacking Fox News and Bill O'Reilly when someone criticised him over his support for the far-left wing blog Daily Kos.

He started his twitter war with a message saying "Fox News is 100% bulls*" (expletive edited).

Olbermann - a man who fancies himself a modern day Edward R. Murrow - then sent a message involving manure and ended his tirade with a message attacking not only Fox News and Bill O'Reilly (a frequent target for Olbermann), but those who watch Fox News.

"I did it because his network is full of bulls* & O'Reilly is full of bulls*. & if you believe them you're full of bulls*", he tweeted. (Expletives edited)

Later, the Countdown host got into another vulgar exchange with a different twitter user over Rush Limbaugh.

Olbermann is well known for his angry commentary and air of self-importance. People he disagrees with are targeted on a segment where he picks the "Worst People in the World".

In another segment, he used the Nazi salute in an on-air attack of Bill O'Reilly, and he compared President Obama's tax rate compromise to appeasing Nazis.

One does not need a degree in psychology to see Olbermann has a serious problem. Either that, or he is the single most hate-filled liberal on the MSNBC lineup.

And that's saying something.

If MSNBC wants to be seen as anything other than the network of insane liberal hatred, it will need to put a stop to such behavior by its' hosts, even if it means firing them.

"Seeing Past the Blame Game," by Christopher J. Ferguson, Chronicle of Higher Education's Chronicle Review, January 13, 2011 ---
http://chronicle.com/article/Seeing-Past-the-Blame-Game/125942/?sid=cr&utm_source=cr&utm_medium=en

The January 8 shooting of U.S. Rep. Gabrielle Giffords and over a dozen others, including a 9-year-old girl, in Tucson is a national tragedy. We are learning more about the shooter, Jared Loughner, but the days and weeks following an event like this can be rife with misinformation. Such events are so extreme, so frightening, that they defy society's ability to be patient, to allow the official investigation to run its course. That can take months, and society wants answers today.

Who is to blame? What can we change to prevent these sorts of things from happening in the future? In the past few days, we've heard a lot of talk about the potential impact of vitriolic political speech on the perpetrator. Was he influenced by cross-hair imagery on political maps, or the "reload" type language used more and more in recent years?

I won't rehash all the arguments for and against this notion; suffice to say that without knowing much about the perpetrator, we're putting the cart before the horse. A reaction like this is normal and understandable. If someone goes snorkeling with sharks and gets eaten, sad though that certainly is, the behavior was identifiably risky to begin with. But going to the mall, or to school, or to work, places most of us think as safe, and getting killed by some (usually) man you've never met, never had a quarrel with—that's something else. Essentially a lightning bolt from the sky. People tend to be inordinately afraid of events they can't control (airplane crashes, as opposed to car crashes). Thus the reflexive search for an easy explanation, a boogeyman to hold responsible, is perfectly normal. But also unproductive.

An individual American is about as likely to be killed by an actual lightning bolt as in a mass homicide. According to the Centers for Disease Control, an average of 82 to 107 Americans die every year in lightning strikes. The criminologist James Alan Fox has estimated that about 100 Americans die annually in mass homicides. Although parceling out the specific number of deaths can be difficult, depending on how one exactly defines "mass murder," I'd agree that this is a sound estimate, so the lightning and mass-homicide figures are about on par. Society, however, doesn't get itself in an uproar over lightning deaths, given the perception that individuals have at least some control over possible victimization. The fear of mass homicide is out of proportion to the actual likelihood of victimization.

Further, mass homicides are not a uniquely American phenomenon (recent incidents have occurred in places as far-flung as Canada, Finland, Germany, China, Nepal, Switzerland, Uganda, Yemen, Iran, and France, including some countries with restrictive gun laws), and it's difficult to parcel out whether the United States has an unusually high number of such events. Perhaps yes in terms of raw numbers, but the United States also has a larger population than most other industrialized nations and may be more forthcoming in reporting them than are closed societies. Generally, the incidence of mass homicides has remained steady over the past few decades, although there can be considerable fluctuation from one year to the next. Perceptions that they are ever increasing in number may have more to do with the availability heuristic (widespread news-media coverage makes unusual events like plane crashes and mass homicides seem more common than they actually are) than with reality.

Nonetheless, the shocking nature of mass homicides gives rise to a demand for easy answers, a target upon which the fear and anger can be focused. "If we could just get rid of X," the thinking goes, "we can prevent these sorts of things from happening again, and my children and I will be safe." Thus, with a congresswoman targeted and the nation already justifiably frustrated with political hyperbole, political speech is easy to blame. Of course, politicians' being targeted for violence is nothing new, nor is it apparently related to the tone of political debate. For example, although no political era is without rancor, the assassination attempt on President Reagan in 1981, in which four people were shot, had more to do with Jodie Foster than politics. If today's politics seem bloody, at least politicians aren't actually beating one another on the Senate floor, as Sen. Preston Brooks did to Sen. Charles Sumner in 1856.

Political speech is only the latest such scapegoat. In recent cases, the desperate search for answers has focused on radical Islam (the Fort Hood shooting), the tenure system (University of Alabama at Huntsville), video games (particularly embarrassing in 2007 when "Dr. Phil" and other pundits rushed to proclaim the Virginia Tech shooter a gamer, a hypothesis that proved false during the official investigation), or the goth subculture (Columbine High). What is striking is that these explanations involve idiosyncratic elements of individual shootings—that is, elements that are not shared among most perpetrators. In many cases, while the scapegoat may be shared between the perpetrator and many nonviolent members of society, it is not shared among the shooters.

For instance, Amy Bishop (the Huntsville shooter) shares the experience of tenure denial with faculty members who do not respond violently. Most mass killers, however, have never gone up for tenure, let alone been denied it. Some mass murderers have played violent video games, just like most young men and many young women today, but many mass murderers were not identified as gamers (Virginia Tech, Fort Hood, Huntsville, the rash of school knifings in China in 2010 committed by middle-aged men, anyone who committed a mass homicide before the 1990s). Now even the state of Arizona seems to be coming under particular scrutiny, presumably for its conservative politics (Ms. Giffords was a Democrat). The chancellor of the University of California at Berkeley, Robert J. Birgeneau, foolishly commented, "I believe that it is not a coincidence that this calamity has occurred in a state which has legislated discrimination against undocumented persons." Since when have mass homicides been confined to Arizona?

On the other hand, most analyses of mass murderers find some commonalities. Namely, most such offenders have long-term antisocial traits, suffer from mental illness, and display a tendency to feel persecuted by others. It is not politically correct to link mental illness with violence, and, of course, the vast majority of mentally ill individuals are nonviolent. In focusing on the idiosyncratic elements of individual cases, however, we distract ourselves from what they have in common. This tendency can be damaging. Witness how California has poured more than a million dollars into defending its video-game law while simultaneously cutting funds for education, mental-health services, and services for families and children at risk.

Taking on the issue of mental illness in society would be expensive and imperfect and could potentially roll back some of the libertarian and humanistic elements of the deinstitutionalization of the mentally ill that began in the mid-20th century. This poses society with difficult questions: Do we raise taxes to pay for mental-health services? Do we beef up the ability to forcibly detain (that is, institutionalize) individuals who appear at risk, knowing we will inevitably mischaracterize some who are perfectly peaceful? Should we focus on prevention during their youth (my preference, actually), a time when such efforts tend to be less intrusive, or on interventions with people who are showing at-risk behavior later in life?

It's easy to say we should help the mentally ill, but any such attempt will be messy, imperfect in reliability, and potentially prone to abuses. Frankly, society doesn't seem to have an appetite for the expense. It's no wonder society so often prefers the nostrums provided by the idiosyncratic explanations, nonsense though they might be. Boogeymen can be slain. Unfortunately, with or without them, mass homicides will continue.

Christopher J. Ferguson is an associate professor of psychology in the department of behavioral sciences and criminal justice at Texas A&M International University.

 

"The Authoritarian Media:  The New York Times has crossed a moral line," James Taranto, The Wall Street Journal, January 11, 2011 ---
http://online.wsj.com/article/SB10001424052748703791904576075660624213434.html?mod=djemEditorialPage_t

After the horrific shooting spree, the editorial board of New York Times offered a voice of reasoned circumspection: "In the aftermath of this unforgivable attack, it will be important to avoid drawing prejudicial conclusions . . .," the paper counseled.

Here's how the sentence continued: ". . . from the fact that Major Hasan is an American Muslim whose parents came from the Middle East."

The Tucson Safeway massacre prompted exactly the opposite reaction. What was once known as the paper of record egged on its readers to draw invidious conclusions that are not only prejudicial but contrary to fact. In doing so, the Times has crossed a moral line.

Here is an excerpt from yesterday's editorial:

It is facile and mistaken to attribute this particular madman's act directly to Republicans or Tea Party members. But it is legitimate to hold Republicans and particularly their most virulent supporters in the media responsible for the gale of anger that has produced the vast majority of these threats, setting the nation on edge. Many on the right have exploited the arguments of division, reaping political power by demonizing immigrants, or welfare recipients, or bureaucrats. They seem to have persuaded many Americans that the government is not just misguided, but the enemy of the people.

That whirlwind has touched down most forcefully in Arizona, which Pima County Sheriff Clarence Dupnik described after the shooting as the capital of "the anger, the hatred and the bigotry that goes on in this country." Anti-immigrant sentiment in the state, firmly opposed by Ms. Giffords, has reached the point where Latino studies programs that advocate ethnic solidarity have actually been made illegal. . . .

Now, having seen first hand the horror of political violence, Arizona should lead the nation in quieting the voices of intolerance, demanding an end to the temptations of bloodshed, and imposing sensible controls on its instruments.

To describe the Tucson massacre as an act of "political violence" is, quite simply, a lie. It is as if, two days after the Columbine massacre, a conservative newspaper of the Times's stature had described that atrocious crime as an act of "educational violence" and used it as an occasion to denounce teachers unions. Such an editorial would be shameful and indecent even if the arguments it made were meritorious.

he New York Times has seized on a madman's act of wanton violence as an excuse to instigate a witch hunt against those it regards as its domestic foes. "Instigate" is not too strong a word here: As we noted yesterday, one of the first to point an accusatory finger at the Tea Party movement and Sarah Palin was the Times's star columnist, Paul Krugman. Less than two hours after the news of the shooting broke, he opined on the Times website: "We don't have proof yet that this was political, but the odds are that it was."

This was speculative fantasy, irresponsible but perhaps forgivable had Krugman walked it back when the facts proved contrary to his prejudices. He did not. His Monday column evinced the same damn-the-facts attitude as the editorial did.

In the column, Krugman blames the massacre on "eliminationist rhetoric," which he defines as "suggestions that those on the other side of a debate must be removed from that debate by whatever means necessary." He rightly asserts that "there isn't any place" for such rhetoric. But he falsely asserts that it is "coming, overwhelmingly, from the right."

Continued in article

"Big Lies and Little Ones:  Paul Krugman's only example turns out to have been fraudulent.," by James Taranto, The Wall Street Journal, January 12, 2011 ---
http://online.wsj.com/article/SB10001424052748704803604576077892006683586.html?mod=djemEditorialPage_t

"Why the Left Lost It:  The accusation that the tea parties were linked to the Tucson murders is the product of calculation and genuine belief.." by Danel Henninger, The Wall Street Journal, January 12, 2011
http://online.wsj.com/article/SB10001424052748703791904576076373704758778.html?mod=djemEditorialPage_t

There has been a great effort this week to come to grips with the American left's reaction to the Tucson shooting. Paul Krugman of the New York Times and its editorial page, George Packer of the New Yorker, E.J. Dionne of the Washington Post, Jonathan Alter of Newsweek and others, in varying degrees, have linked the murders to the intensity of opposition to the policies and presidency of Barack Obama. As Mr. Krugman asked in his Monday commentary: "Were you, at some level, expecting something like this atrocity to happen?"

The "you" would be his audience, and the answer is yes, they thought that in these times "something like this" could happen in the United States. Other media commentators, without a microbe of conservatism in their bloodstreams, have rejected this suggestion.

So what was the point? Why attempt the gymnastic logic of asserting that the act of a deranged personality was linked to the tea parties and the American right? Two reasons: Political calculation and personal belief.

The calculation flows from the shock of the midterm elections of November 2010. That was no ordinary election. What voters did has the potential to change the content and direction of the U.S. political system, possibly for a generation.

Only 24 months after Barack Obama's own historic election and a rising Democratic tide, the country flipped. Not just control of the U.S. House, but deep in the body politic. Republicans now control more state legislative seats than any time since 1928.

What elevated this transfer of power to historic status is that it came atop the birth of a genuine reform movement, the tea parties. Most of the time, election results are the product of complex and changeable sentiments or the candidates' personalities. What both sides fear most is a genuine movement with focused goals.

The tea party itself got help from history—the arrival of a clarifying event, the sovereign debt crisis of 2010. Simultaneously in the capitals of Europe, California, New York, New Jersey, Illinois and elsewhere it was revealed that fiscal commitments made across decades, often for liberally inspired social goals, had put all these states into a condition of effective bankruptcy.

This stark reality unnerved many Americans. The tea partiers' fiscal concerns were real. Despite that, a progressive Democratic president and congressional leadership spent 2009 and 2010 passing the biggest economic entitlement since 1965 and driving U.S. spending to 25%, or $3.5 trillion, of the nation's $14 trillion GDP. A public claim of that size hasn't been seen since World War II.

They expected to take losses in November. What they got instead was Armageddon. Suddenly an authentic reform movement, linked to the Republican Party, whose goal simply is to stop the public spending curve, had come to life. This poses a mortal threat to the financial oxygen in the economic ecosystem that the public wing of the Democratic Party has inhabited all these years.

The stakes for the American left in 2012 couldn't possibly be higher. If then, and again in 2014, progressives can't pull toward their candidates some percentage of the independent voters who in November abandoned the Democratic Party, they could be looking in from the outside for as many years as some of them have left to write about politics. A wilderness is a terrible place to be.

Against that grim result, every sentence Messrs. Krugman, Packer, Alter, the Times and the rest have written about Tucson is logical and understandable. What happened in November has to be stopped, by whatever means become available. Available this week was a chance to make some independents wonder if the tea parties, Sarah Palin, Rush Limbaugh, Glenn Beck and Jared Loughner are all part of the same dark force.

Who believes this? They do.

The divide between this strain of the American left and its conservative opponents is about more than politics and policy. It goes back a long way, it is deep, and it will never be bridged. It is cultural, and it explains more than anything the "intensity" that exists now between these two competing camps. (The independent laments: "Can't we all just get along?" Answer: No.)

The Rosetta Stone that explains this tribal divide is Columbia historian Richard Hofstadter's classic 1964 essay, "The Paranoid Style in American Politics." Hofstadter's piece for Harper's may be unfamiliar to many now, but each writer at the opening of this column knows by rote what Hofstadter's essay taught generations of young, left-wing intellectuals about conservatism and the right.

After Hofstadter, the American right wasn't just wrong on policy. Its people were psychologically dangerous and undeserving of holding authority for any public purpose. By this mental geography, the John Birch Society and the tea party are cut from the same backwoods cloth.

"American politics has often been an arena for angry minds," Hofstadter wrote. "In recent years we have seen angry minds at work mainly among extreme right-wingers, who have now demonstrated in the Goldwater movement how much political leverage can be got out of the animosities and passions of a small minority."

Frank Rich, Oct 17: "Don't expect the extremism and violence in our politics to subside magically after Election Day—no matter what the results. If Tea Party candidates triumph, they'll be emboldened. If they lose, the anger and bitterness will grow."

Continued in article

"Obama's Speech Wins Over Critics," by Laura Meckler and Jonathan Weisman, The Wall Street Journal, January 14, 2011 ---
http://online.wsj.com/article/SB10001424052748704307404576080391479851536.html?mod=ITP_pageone_1

President Barack Obama's speech at a service for the Arizona shooting victims came amid an effort to recast himself as a unifying figure, after two years of partisan fights.

Soon after he left the podium, it was clear he had taken another step in that direction.

On Thursday, the speech won praise from a vast swath of the political spectrum, including Democrats who have criticized Mr. Obama as insufficiently liberal and possible Republican challengers in 2012, among them former House Speaker Newt Gingrich and former Minnesota Gov. Tim Pawlenty.

Some commentators who have spent two years criticizing the president were lavish with their praise. Conservative columnist Charles Krauthammer said he "wouldn't underestimate how this is going to affect the perception of the president."

Mr. Obama's speech, televised across the major networks, combined vignettes of the victims and heroes of Saturday's shooting rampage with a call for Americans to practice a gentler style of political debate.

"The president hit exactly the right tone," said Ed Rollins, a Republican political consultant. "This was above partisanship, which is a good place for a president to be."

The effect may soon fade—as it has for other presidents after other national tragedies. But for now, Mr. Obama may be in a better position to capitalize on an uptick in his popularity during upcoming clashes with Congress over policy.

After a Republican rout of his party in midterm elections in November, Mr. Obama had committed to work across party lines to improve the economy and take on other challenges. Last month, he helped engineer a sweeping tax-cut deal that marked the first major bipartisan legislation of his presidency.

His approval rating in recent weeks has risen as high as 50% in Gallup's daily tracking poll, after sitting in the mid-40s for much of last year and falling even lower during the polarizing days of the health-care debate last spring.

Continued in article

Structurally Unbalanced: Cyclical and Structural Deficits in California and the Intermountain West ---  http://www.brookings.edu/papers/2011/0105_state_budgets.aspx

Japan Adopted the Worst Entitlements Practices of the United States (and the same baby boomer mistakes following WW II)

"The Italy of Asia:  Japan's entitlement dilemmas are a warning to Washington," The Wall Street Journal, January 6, 2011 ---
http://online.wsj.com/article/SB10001424052748704723104576061332542456172.html#mod=djemEditorialPage_t

Japanese politics is once again in turmoil, with the government's approval ratings around 20%. Prime Minister Naoto Kan is trying to force out his rival within the Democratic Party of Japan, Ichiro Ozawa, which might boost his own popularity but would probably cause enough defections to destroy a precarious majority. And he has chosen as his New Year initiative an increase in the consumption tax—a hugely unpopular policy that cost him the upper house election last year and would surely harm the economy.

Looks like it's almost time for another change of leader in Tokyo, which is becoming the Italy of Asia. Whoever it is, he will have to tackle Japan's problems before unpleasant outcomes are forced upon it. Without cuts to entitlements and tax cuts to promote growth, Tokyo will continue turning into Athens.

Mr. Kan's claims to fiscal rectitude are belied by the draft fiscal 2011 budget released late last month. It calls for another year of near-record addition to a national debt already approaching 200% of GDP. The budget includes $867 billion of spending, though total government revenue amounts to just $501 billion. The budget proposes trimming discretionary spending only marginally, cuts that are overwhelmed by the uncontrolled growth of entitlement programs, which make up 53% of total spending.

Japan is foundering on the promises made by past generations of politicians that are coming due in a rapidly aging society. These include unfunded pensions and medical care for the elderly. And it will only get worse—2012 is expected to be a watershed year when the biggest wave of baby boomers begins to retire.

As two lost decades since the bursting of the bubble show, Japan's consensus-based political system seizes up when it comes to allocating societal losses. In the 1990s, that meant that the government encouraged banks to sit on bad loans rather than undergo the kind of cathartic restructuring the U.S. is now undergoing, at least in some parts of the economy. That made Japan appear more stable, but without creative destruction the economy was unable to return to growth. This time the leverage is spread across generations, with the lack of growth making the promises to the old a bigger burden, which in turn makes it impossible to pursue pro-growth policies.

Payments on the national debt next year are projected at an already substantial $263 billion, but this assumes a payout of no more than 2% on 10-year bonds. Yields may remain well below this level for now, but in recent auctions signs have emerged that investors are losing their appetite for government bonds. The national debt is forecast to exceed household savings in the next year, as retirees continue to spend down savings. As long as growth remains slow, corporations will probably continue to save. But if Tokyo is forced to look abroad for funding, it will have to pay much higher rates.

That has the potential to blow out the budget in spectacular fashion. With central and local government debt now estimated at over $11 trillion, each one percentage point increase in yields will cost $110 billion. Adding in its unfunded liabilities, Japan has already reached the point at which its debt load will continue to increase regardless of how much it cuts spending or raises taxes.

In other words, Japan is about to run into the late economist Herb Stein's obvious but oft-overlooked law, which states that if something cannot continue it won't. The crunch is coming in one form or another.

Continued in article

"Japan finds there is more to life than growth," by David Pilling, Financial Times, January 5, 2010 ---
http://www.ft.com/cms/s/0/6152b9ca-1904-11e0-9c12-00144feab49a.html#axzz1AXhZ0GXk
Thank you Dan Stone for the heads up.

. . .  High suicide rates, a subdued role for women and, indeed, the answers that Japanese themselves provide to questionnaires about their happiness, do not speak of a nation entirely at ease with itself in the 21st century. It is also possible that Japan is living on borrowed time. Public debt is among the highest in the world – though, significantly, almost none of it is owed to foreigners – and a younger, poorer-paid generation will struggle to build up the fat savings on which the country is now comfortably slumbering.

If the business of a state is to project economic vigour, then Japan is failing badly. But if it is to keep its citizens employed, safe, economically comfortable and living longer lives, it is not making such a terrible hash of things.

Continued in article

Bob Jensen's threads on entitlements are at
http://www.trinity.edu/rjensen/Entitlements.htm

"The Triumph of Propaganda," by Nemo Almen, American Thinker, January 2, 2011 ---
http://www.americanthinker.com/2011/01/the_triumph_of_propaganda.html

Does anyone remember what happened on Christmas Eve last year?  In one of the most expensive Christmas presents ever, the government removed the $400 billion limit on their Fannie and Freddie guaranty.  This act increased taxpayer liabilities by six trillion dollars; however, the news was lost in the holiday cheer.  This is one instance in a broader campaign to manipulate the public perception, gradually depriving us of independent thought.

Consider another example: what news story broke on April 16, 2010?  Most of us would say the SEC's lawsuit against Goldman Sachs.  Goldman is the market leader in "ripping the client's face off," in this instance creating a worst-of-the-worst pool of securities so Paulson & Co could bet against it.  Many applauded the SEC for this action.  Never mind that singling out one vice president (the "Fabulous Fab") and one instance of fraud is like charging Al Capone with tax evasion.  The dog was wagged.

Very few caught the real news that day, namely the damning complicity of the SEC in the Stanford Ponzi scheme.  Clearly, Stanford was the bigger story, costing thousands of investors billions of dollars while Goldman later settled for half a billion.  Worse, the SEC knew about Stanford since 1997, but instead of shutting it down, people left the SEC to work for Stanford.  This story should have caused widespread outrage and reform of the SEC; instead it was buried in the back pages and lost to the public eye.

Lest we think the timing of these was mere coincidence, the Goldman lawsuit was settled on July 15, 2010, the same day the financial reform package passed.  The government threw Goldman to the wolves in order to hide its own shame.  When the government had its desired financial reforms, it let Goldman settle.  These examples demonstrate a clear pattern of manipulation.  Unfortunately, our propaganda problem runs far deeper than lawsuits and Ponzi schemes.

Here is a more important question: which companies own half of all subprime and Alt-A (liar loan) bonds?  Paul Krugman writes that these companies were "mainly out of the picture during the housing bubble's most feverish period, from 2004 to 2006.  As a result, the agencies played only a minor role in the epidemic of bad lending."[iii]  This phrase is stupefying.  How can a pair of companies comprise half of a market and yet have no major influence in it?  Subprime formed the core of the financial crisis, and Fannie and Freddie (the "agencies") formed the core of the subprime market.  They were not "out of the picture" during the subprime explosion, they were the picture.  The fact that a respectable Nobel prize-winner flatly denies this is extremely disturbing.

Amazingly, any attempt to hold the government accountable for its role in the subprime meltdown is dismissed as right-wing propaganda.  This dismissal is left-wing propaganda.  It was the government that initiated securitization as a tool to dispose of RTC assets.  Bill Clinton ducks all responsibility, ignoring how his administration imposed arbitrary quotas on any banks looking to merge as Attorney General Janet Reno "threatened legal action against lenders whose racial statistics raised her suspicions."[iv]  Greenspan fueled the rise of subprime derivatives by lowering rates,[v] lowering reserves,[vi] and beating down reasonable opposition.  And at the center of it all were Fannie and Freddie bribing officials, committing fraud, dominating private-sector competition, and expanding to a six-trillion-dollar debacle.  The fact that these facts are dismissed as propaganda shows just how divorced from reality our ‘news' has become.  Yes, half of all economists are employed by the government, but this is no reason to flout one's professional responsibility.  As a nation we need to consider all the facts, not just those that are politically expedient.

Continued in article

Nemo Almen is the author of The Last Dodo: The Great Recession and our Modern-Day Struggle for Survival.

Bob Jensen's Rotten to the Core threads are at
http://www.trinity.edu/rjensen/FraudRotten.htm

Cash Flow versus Accrual Accounting
A Secret That Will Never Be Revealed on MSNBC and Most Certainly on Keith Olbermann's Countdown Show Where Deficit Reduction is "Bulls___"!
"Cooking the Books: The 2010 Deficit Was $2.1 trillion," by Bruce Bartlett, The Fiscal Times, December 24, 2010 ---
http://www.thefiscaltimes.com/Issues/Budget-Impact/2010/12/24/Cooking-the-Books-The-2010-Deficit-Was-2trillion.aspx

When federal finances are discussed, it is almost always in terms of the difference between expenditures and revenues. Usually, the former exceed the latter and we have a deficit. The cumulative total of deficits less the occasional surpluses is what we call the national debt. When we analyze the debt in terms of its burden, it is usually by looking at it in terms of the gross domestic product. Presently, debt held by the public, the most common measure of federal debt, is $9.3 trillion, or about 60 percent of GDP.

If the federal government was a corporation and one was contemplating buying shares of its stock, however, one would certainly want to know much more about its finances. One would want to know about the government’s assets as well as its liabilities. And one would want to know whether there are any liabilities other than those included in the figures for debt held by the public, among other things.

These data are not easy to come by. For many years they appeared only in an obscure mimeographed document called the Statement of Liabilities and Other Financial Commitments of the United States that the Treasury Department produced only because it was required by a 1966 law to do so. The reason is that the financial statement showed vast government liabilities not included in the usual figures for the national debt. Since 1998, these data have been published in a document called the Financial Report of the U.S. Government. The fiscal year 2010 edition was released on Dec. 21.

The most important difference between the Financial Report and the federal budget is that the former calculates costs on an accrual basis, whereas the latter only measures cash flow. Thus if the federal government incurred a debt that would not be paid until some time in the future, that cost would not be part of the conventionally measured national debt. It would only add to the debt when cash had to be expended to cover the expense that had been incurred. It’s worth remembering that private corporations are required to use accrual accounting and corporate executives would be jailed for using the sort of accounting that the federal government routinely uses.

The difference in accounting methods is most easily grasped in terms of Social Security. It has a liability over the next 75 years of $8 trillion more than the projected revenue from payroll taxes and interest on the Social Security trust fund. In every meaningful sense of the term, this is part of the national debt, but is excluded from the official debt figures.

Another consequence of ignoring future liabilities in calculating the national debt is that programmatic changes that save money in the future are similarly ignored. Thus, according to the Financial Report, Medicare had estimated liabilities in excess of future revenues over the next 75 years of $38 trillion at the end of fiscal year 2009. However, in the meantime, Congress enacted the Affordable Care Act, which contains significant cost controls on future Medicare spending. As a consequence, Medicare’s long-term liabilities fell by $15 trillion in 2010.

 

Financial Report of the U.S. Government --- http://www.fms.treas.gov/fr/index.html

Bob Jensen's threads on the sad state of governmental accounting ---
http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting

Wind farms in Britain generated practically no electricity during the recent cold spell, raising fresh concerns about whether they could be relied upon to meet the country’s energy needs.

"Wind farms becalmed just when needed the most," by Louise Gray, The Telegraph, January 1, 2011 ---
http://www.telegraph.co.uk/earth/energy/windpower/8234616/Wind-farms-becalmed-just-when-needed-the-most.html  

Despite high demand for electricity as people shivered at home over Christmas, most of the 3,000 wind turbines around Britain stood still due to a lack of wind.

Even yesterday , when conditions were slightly breezier, wind farms generated just 1.8 per cent of the nation’s electricity — less than a third of usual levels.

The failure of wind farms to function at full tilt during December forced energy suppliers to rely on coal-fired power stations to keep the lights on — meaning more greenhouse gases were produced.

Experts feared that as the Government moved towards a target of generating 30 per cent of electricity from wind — while closing gas and coal-fired power stations — cold, still winters could cause a problem in the future.

Prof Michael Laughton, emeritus professor of engineering at Queen Mary University London, said wind turbines became still just when they were needed most, meaning that the country was reliant on imported oil or coal.

Wind farms becalmed just when needed the most Wind farms in Britain generated practically no electricity during the recent cold spell, raising fresh concerns about whether they could be relied upon to meet the country’s energy needs.

Cross-country skiers at the wind farm at Whitelee near Glasgow, which is Europe's largest, but conditions in the cold spell left turbines still Photo: CHRIS JAMESBy Louise Gray, Environment Correspondent 8:00AM GMT 01 Jan 2011 33 Comments Despite high demand for electricity as people shivered at home over Christmas, most of the 3,000 wind turbines around Britain stood still due to a lack of wind.

Even yesterday , when conditions were slightly breezier, wind farms generated just 1.8 per cent of the nation’s electricity — less than a third of usual levels.

The failure of wind farms to function at full tilt during December forced energy suppliers to rely on coal-fired power stations to keep the lights on — meaning more greenhouse gases were produced.

Experts feared that as the Government moved towards a target of generating 30 per cent of electricity from wind — while closing gas and coal-fired power stations — cold, still winters could cause a problem in the future.

Prof Michael Laughton, emeritus professor of engineering at Queen Mary University London, said wind turbines became still just when they were needed most, meaning that the country was reliant on imported oil or coal.

Fears over record gas bills in cold weather01 Jan 2011 Derek Pringle: a captain's wicket is loaded with symbolism and England have Ricky Ponting's number01 Jan 2011 'Bonkers' green energy risks power shortages01 Jan 2011 The cost to every household of subsidising energy generation by wind farms01 Jan 2011 The Ashes: Australian cricket is no longer a game for hard men from the outback01 Jan 2011 2010: The Year in Review01 Jan 2011 The wind turbines may even use up electricity during a calm period, as they were rotated in order to keep the mechanical parts working. There are more than 3,000 turbines in Britain and the Department of Energy and Climate Change planned to have up to 6,000 onshore and 4,000 at sea by 2020.

Charles Anglin, of Renewable UK, which represented the wind energy industry, said that over a normal year wind turbines were working about a third of the time. He said future energy plans took into account periods when wind turbines were still, just as current models had backup available for when nuclear or coal plants were down.

“There are periods, of course, when it is not windy but year on year we are seeing growth,” he said.

Britain had 2 per cent of electricity from renewables in 2002, but that figure was now almost 10 per cent, with wind providing about half.

Continued in article

"America's Financial Future: Our Choice... But Not For Long," by Ken Blackwell, Townhall, December 23, 2010 ---
http://townhall.com/columnists/KenBlackwell/2010/12/23/americas_financial_future_our_choice_but_not_for_long

In August of this year, Admiral Michael Mullens, Chairman of the Joint Chiefs of Staff, advised Congress that “The National debt is the biggest threat to our national security.” In November, voter sentiment against the debt and deficit led to an historic rebuke of Congressional incumbents. In December, the President’s Debt Commission laid out in stark terms the imminent economic impact of continued deficit spending.

Apparently rejecting these clarion calls, the President and Congress acted in the lame-duck session to cut not one dime of federal spending, while increasing the national debt by nearly $1 trillion. They are ignoring a glaring problem that, if not addressed soon, will cause a panoply of other problems.

Some insist that the problem with increasing the debt by nearly $1 trillion is that the borrowed money will be loaned to us by China. Concerning as it is that we have become the world’s largest debtor to a foreign sovereign whose interests are (to put it mildly) not always in harmony with our own, that's not the biggest problem. What ought to be of even greater, more immediate concern is the fact that China will refuse to loan us the money.

From October 2009 to October 2010, we financed $734 billion of our $1.690 trillion deficit through loans from foreign entities. And while China remains our largest creditor, China actually reduced the amount of U.S. debt it holds by $32 billion over the last year—from $938 billion to $906 billion. Through its actions, China has indicated that it will no longer fund the U.S. government's practice of perpetual deficit spending.

So if not China, then who? That's the problem.

The largest increase in U.S. debt holdings over the past year was a near five-fold increase by the U.K.—from $108 billion to $477 billion — and a near three-fold increase by Canada — from $44 billion to $125 billion.

The reality is that the U.K. and Canada do not have another half-trillion dollars to loan the U.S. in 2011. According to the World Bank, the entire economic output of the U.K. and Canada combined is only about $3.5 trillion annually.

So if China won't and the U.K. and Canada can't, who is going to loan us a trillion dollars in the next 12 months? Nobody knows.

The economic threat from China and other foreign countries loaning us trillions of dollars is like falling off the Empire State Building. It isn't the fall itself that kills you ... it's the sudden stop.

Commonwealth investors increased their U.S. holdings last year as they fled debt holdings in the Eurozone, nearly collapsing several E.U. government-bond markets derisively referred to as the PIIGS—Portugal, Italy, Ireland, Greece and Spain.

Continued in article

Jensen Comment
We're worrying about a paper tiger here. Zimbabwe has shown us the light. We simply print trillions of dollars to make up for the deficits. Ben Bernanke listed when he took a continuing education course from Robert Mugabe.

Questions
Although all 50 states are in deep financial troubles, what state is in the worst shape at the moment and is unable to pay its bills?
Hint: The state in deepest trouble is not California, although California is in dire straights!

How did accountants hide the pending disasters?

Watch the Video
This module on 60 Minutes on December 19 was one of the most worrisome episodes I've ever watched
It appears that a huge number of cities and towns and some states will default on bonds within12 months from now
"State Budgets: The Day of Reckoning Steve Kroft Reports On The Growing Financial Woes States Are Facing," CBS Sixty Minutes, December 19, 2010 ---
http://www.cbsnews.com/stories/2010/12/19/60minutes/main7166220.shtml

The problem with that, according to Wall Street analyst Meredith Whitney, is that no one really knows how deep the holes are. She and her staff spent two years and thousands of man hours trying to analyze the financial condition of the 15 largest states. She wanted to find out if they would be able to pay back the money they've borrowed and what kind of risk they pose to the $3 trillion municipal bond market, where state and local governments go to finance their schools, highways, and other projects.

"How accurate is the financial information that's public on the states? And municipalities," Kroft asked.

"The lack of transparency with the state disclosure is the worst I have ever seen," Whitney said. "Ultimately we have to use what's publicly available data and a lot of it is as old as June 2008. So that's before the financial collapse in the fall of 2008."

Whitney believes the states will find a way to honor their debts, but she's afraid some local governments which depend on their state for a third of their revenues will get squeezed as the states are forced to tighten their belts. She's convinced that some cities and counties will be unable to meet their obligations to municipal bond holders who financed their debt. Earlier this year, the state of Pennsylvania had to rescue the city of Harrisburg, its capital, from defaulting on hundreds of millions of dollars in debt for an incinerator project.

"There's not a doubt in my mind that you will see a spate of municipal bond defaults," Whitney predicted.

Asked how many is a "spate," Whitney said, "You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults."

Municipal bonds have long been considered to be among the safest investments, bought by small investors saving for retirement, and held in huge numbers by big banks. Even a few defaults could affect the entire market. Right now the big bond rating agencies like Standard & Poor's and Moody's, who got everything wrong in the housing collapse, say there's no cause for concern, but Meredith Whitney doesn't believe it.

"When individual investors look to people that are supposed to know better, they're patted on the head and told, 'It's not something you need to worry about.' It'll be something to worry about within the next 12 months," she said.

No one is talking about it now, but the big test will come this spring. That's when $160 billion in federal stimulus money, that has helped states and local governments limp through the great recession, will run out.

The states are going to need some more cash and will almost certainly ask for another bailout. Only this time there are no guarantees that Washington will ride to the rescue.

Continued in article

Also see the Becker-Posner Blog ---
http://www.becker-posner-blog.com/2010/12/the-dismal-state-of-long-term-state-and-local-government-finance-becker.html

The Government' Recipe for Off-Budget Debt
"US Government 'hiding true amount of debt'," by Gregory Bresiger, news,com ---
http://www.news.com.au/business/breaking-news/us-government-hiding-true-amount-of-debt/story-e6frfkur-1225926567256#ixzz106MjZzOz 

Bob Jensen's threads on the economic crisis ---
http://www.trinity.edu/rjensen/2008Bailout.htm

The Sad State of Government Accounting and Accountability ---
http://www.trinity.edu/rjensen/theory02.htm#GovernmentalAccounting

"A Wind Power Boonedoggle T. Boone Pickens badly misjudged the supply and price of natural gas," by Robert Bryce, The Wall Street Journal, December 22, 2010 --- http://online.wsj.com/article/SB10001424052748704368004576027310664695834.html

After 30 months, countless TV appearances, and $80 million spent on an extravagant PR campaign, T. Boone Pickens has finally admitted the obvious: The wind energy business isn't a very good one.

The Dallas-based entrepreneur, who has relentlessly promoted his "Pickens Plan" since July 4, 2008, announced earlier this month that he's abandoning the wind business to focus on natural gas.

Two years ago, natural gas prices were spiking and Mr. Pickens figured they'd stay high. He placed a $2 billion order for wind turbines with General Electric. Shortly afterward, he began selling the Pickens Plan. The United States, he claimed, is "the Saudi Arabia of wind," and wind energy is an essential part of the cure for the curse of imported oil.

Voters and politicians embraced the folksy billionaire's plan. Last year, Senate Majority Leader Harry Reid said he had joined "the Pickens church," and Al Gore said he wished that more business leaders would emulate Mr. Pickens and be willing to "throw themselves into the fight for the future of our country."

Alas, market forces ruined the Pickens Plan. Mr. Pickens should have shorted wind. Instead, he went long and now he's stuck holding a slew of turbines he can't use because low natural gas prices have made wind energy uneconomic in the U.S., despite federal subsidies that amount to $6.44 for every 1 million British thermal units (BTUs) produced by wind turbines. As the former corporate raider explained a few days ago, growth in the wind energy industry "just isn't gonna happen" if natural gas prices remain depressed.

In 2008, shortly after he launched his plan, Mr. Pickens said that for wind energy to be competitive, natural gas prices must be at least $9 per million BTUs. In March of this year, he was still hawking wind energy, but he'd lowered his price threshold, saying "The place where it works best is with natural gas at $7."

That may be true. But on the spot market natural gas now sells for about $4 per million BTUs. In other words, the free-market price for natural gas is about two-thirds of the subsidy given to wind. Yet wind energy still isn't competitive in the open market.

Despite wind's lousy economics, the lame duck Congress recently passed a one-year extension of the investment tax credit for renewable energy projects. That might save a few "green" jobs.

But at the same time that Congress was voting to continue the wind subsidies, Texas Comptroller Susan Combs reported that property tax breaks for wind projects in the Lone Star State cost nearly $1.6 million per job. That green job ripoff is happening in Texas, America's biggest natural gas producer.

Today's low natural gas prices are a direct result of the drilling industry's newfound ability to unlock methane from shale beds. These lower prices are great for consumers but terrible for the wind business. Through the first three quarters of 2010, only 1,600 megawatts of new wind capacity were installed in the U.S., a decline of 72% when compared to the same period in 2009, and the smallest number since 2006. Some wind industry analysts are predicting that new wind generation installations will fall again, by as much as 50%, in 2011.

There's more bad news on the horizon for Mr. Pickens and others who have placed big bets on wind: Low natural gas prices may persist for years. Last month, the International Energy Agency's chief economist, Fatih Birol, said that the world is oversupplied with gas and that "the gas glut will be with us 10 more years." The market for natural-gas futures is predicting that gas prices will stay below $6 until 2017.

So what is Mr. Pickens planning to do with all the wind turbines he ordered? He's hoping to foist them on ratepayers in Canada, because that country has mandates that require consumers to buy more expensive renewable electricity.

How do you say boonedoggle in French?

Mr. Bryce is a senior fellow at the Manhattan Institute. His latest book is "Power Hungry: The Myths of 'Green' Energy and the Real Fuels of the Future" (PublicAffairs, 2010).

Jensen Comment
It has long been my contention since the oil crisis in the 1970s that alternative sources of energy will most likely never compete with oil and gas until at least 2030 because the Middle East and other world suppliers of oil will simply turn up their valves and lower their prices to make oil and gas the cheapest alternative, especially when our infrastructure of pipelines and fuel stations are all geared to oil and gas.

But we should still vigorously search for alternative sources of energy. That's what will make oil and gas prices "relatively" cheap for everybody. Without these other alternatives, sheiks will simply add more gold plating to their limousines.

"Taxes and the Top Percentile Myth A 2008 OECD study of leading economies found that 'taxation is most progressively distributed in the United States.' More so than Sweden or France," by Alan Reynolds, The Wall Street Journal, December 23, 2010 ---
http://online.wsj.com/article/SB10001424052748703581204576033861522959234.html?mod=djemEditorialPage_t

When President Obama announced a two-year stay of execution for taxpayers on Dec. 7, he made it clear that he intends to spend those two years campaigning for higher marginal tax rates on dividends, capital gains and salaries for couples earning more than $250,000. "I don't see how the Republicans win that argument," said the president.

Despite the deficit commission's call for tax reform with fewer tax credits and lower marginal tax rates, the left wing of the Democratic Party remains passionate about making the U.S. tax system more and more progressive. They claim this is all about payback—that raising the highest tax rates is the fair thing to do because top income groups supposedly received huge windfalls from the Bush tax cuts. As the headline of a Robert Creamer column in the Huffington Post put it: "The Crowd that Had the Party Should Pick up the Tab."

Arguments for these retaliatory tax penalties invariably begin with estimates by economists Thomas Piketty of the Paris School of Economics and Emmanuel Saez of U.C. Berkeley that the wealthiest 1% of U.S. households now take home more than 20% of all household income

This estimate suffers two obvious and fatal flaws. The first is that the "more than 20%" figure does not refer to "take home" income at all. It refers to income before taxes (including capital gains) as a share of income before transfers. Such figures tell us nothing about whether the top percentile pays too much or too little in income taxes.

In The Journal of Economic Perspectives (Winter 2007), Messrs. Piketty and Saez estimated that "the upper 1% of the income distribution earned 19.6% of total income before tax [in 2004], and paid 41% of the individual federal income tax." No other major country is so dependent on so few taxpayers.

A 2008 study of 24 leading economies by the Organization of Economic Cooperation and Development (OECD) concludes that, "Taxation is most progressively distributed in the United States, probably reflecting the greater role played there by refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit. . . . Taxes tend to be least progressive in the Nordic countries (notably, Sweden), France and Switzerland."

The OECD study—titled "Growing Unequal?"—also found that the ratio of taxes paid to income received by the top 10% was by far the highest in the U.S., at 1.35, compared to 1.1 for France, 1.07 for Germany, 1.01 for Japan and 1.0 for Sweden (i.e., the top decile's share of Swedish taxes is the same as their share of income).

A second fatal flaw is that the large share of income reported by the upper 1% is largely a consequence of lower tax rates. In a 2010 paper on top incomes co-authored with Anthony Atkinson of Nuffield College, Messrs. Piketty and Saez note that "higher top marginal tax rates can reduce top reported earnings." They say "all studies" agree that higher "top marginal tax rates do seem to negatively affect top income shares."

What appears to be an increase in top incomes reported on individual tax returns is often just a predictable taxpayer reaction to lower tax rates. That should be readily apparent from the nearby table, which uses data from Messrs. Piketty and Saez to break down the real incomes of the top 1% by source (excluding interest income and rent).

The first column ("salaries") shows average labor income among the top 1% reported on W2 forms—from salaries, bonuses and exercised stock options. A Dec. 13 New York Times article, citing Messrs. Piketty and Saez, claims, "A big reason for the huge gains at the top is the outsize pay of executives, bankers and traders." On the contrary, the table shows that average real pay among the top 1% was no higher at the 2007 peak than it had been in 1999.

In a January 2008 New York Times article, Austan Goolsbee (now chairman of the President's Council of Economic Advisers) claimed that "average real salaries (subtracting inflation) for the top 1% of earners . . . have been growing rapidly regardless of what happened to tax rates." On the contrary, the top 1% did report higher salaries after the mid-2003 reduction in top tax rates, but not by enough to offset losses of the previous three years. By examining the sources of income Mr. Goolsbee chose to ignore—dividends, capital gains and business income—a powerful taxpayer response to changing tax rates becomes quite clear.

Continued in article

"Uncle Sam Will Help Buy You an Alpaca:  How the government produces negative unintended consequences," by John Stossel, Reason Magazine, December 23, 2010 --- http://reason.com/archives/2010/12/23/uncle-sam-will-help-buy-you-an

I often bash government. I say it can't do anything better than people in a free market.

But the government is unequalled in producing one thing: negative unintended consequences. Show me a government activity, and I will show you bad results that even the program's advocates probably don't like. Here's one example.

Congressmen say our government should "support and strengthen family-based agriculture."

Abstractly, supporting family-based agriculture sounds good. Government policies often harm small farms by favoring corporate agribusinesses. Government could help family farms by ending the subsidies that mostly go to the big guys. But that doesn't interest the politicians. They prefer to do things like creating tax breaks to encourage livestock breeding.

The tax breaks have led to a boom in alpaca breeding. Twenty-five years ago, there were 150 alpacas in America. Now, there are 150,000.

One website even advertises: "Have Uncle Sam Help You Buy Your Alpacas."

Rose Mogerman raises alpacas in New Jersey, the most densely populated state. "I fell in love with them," she said.

But she fell in love with the tax break first.

"Yes. I have to be honest," she said. "I might have had two. I wouldn't have had 100. ... I was looking for a tax shelter."

The Alpaca Breeders Association asked its members, on a scale of 1 to 10, what motivated them to get into alpaca breeding. More than half rated "tax benefits" a 10.

Yes, alpacas are cute. They are also valued for the fiber made from their fleece. But selling the fleece doesn't explain the growth in alpaca raising. At auctions, prices have gotten absurdly high. Half-ownership of one male alpaca sold for $750,000.

This is not necessarily a good thing. Economists at the University of California, Davis warn that the industry is in a speculative bubble. "Alpacas sold today as breeding stock have values wildly in excess of even the most optimistic scenarios based upon current fiber prices and production costs," Tina L. Saitone and Richard J. Sexton write.

"(C)urrent prices are not supportable by economic fundamentals and, thus, are not sustainable," the UC Davis economists write. Their paper was originally published in the Review of Agricultural Economics in 2007 with the great title "Alpaca Lies? Speculative Bubbles in Agriculture."

In other words, people have over-invested, bid up input prices, and produced too many animals given expected future demand for their fleece. As a result, I bet lots of people will lose money. Tax policy is surely a big reason for the over-investment, and an unintended consequence will be bankruptcy for some alpaca breeders.

I'm using "bubble" in a nontechnical sense because, strictly speaking, a bubble is an unsustainable inflation of asset prices inconsistent with economic reality. However, even a wrongheaded tax preference is real and sustainable. So if the tax break is the reason for the alpaca boom, there's really no bubble.

The Alpaca Owners and Breeders Association says the UC Davis study is "seriously flawed (and) full of misinformation," but offered no evidence for that bald assertion. The authors stand by their study, saying that no conflicting studies have been published and that their research is confirmed by a recent price decline.

Government is good at inflating bubbles. The housing bubble was fueled by low interest rates, tax breaks, and subsidies.

Last year, I reported how Congress' ridiculous tax credits stimulated demand for electric golf-carts. Electric vehicles are touted these days as "green" technology and so were given special tax treatment. Unfortunately, the plug-in carts are ultimately connected to coal-fired plants. The National Research Council says electric cars may be worse for the environment than gas-powered cars. That didn't matter to the policy-makers.

Continued in article

"Census: Fast Growth in States With No Income Tax," by Michael Barone, Townhall, December 23, 2010 ---
http://townhall.com/columnists/MichaelBarone/2010/12/23/census_fast_growth_in_states_with_no_income_tax

For those of us who are demographic buffs, Christmas came four days early when Census Bureau Director Robert Groves announced yesterday the first results of the 2010 Census and the reapportionment of House seats (and therefore electoral votes) among the states. The resident population of the United States, he told us in a webcast, was 308,745,538. That's an increase of 9.7 percent from the 281,421,906 in the 2000 Census -- the smallest proportional increase than in any decade other than the Depression 1930s but a pretty robust increase for an advanced nation. It's hard to get a grasp on such large numbers. So let me share a few observations on what they mean.

First, the great engine of growth in America is not the Northeast Megalopolis, which was growing faster than average in the mid-20th century, or California, which grew lustily in the succeeding half-century. It is Texas.

Its population grew 21 percent in the last decade, from nearly 21 million to more than 25 million. That was more rapid growth than in any states except for four much smaller ones (Nevada, Arizona, Utah and Idaho).

Texas' diversified economy, business-friendly regulations and low taxes have attracted not only immigrants but substantial inflow from the other 49 states. As a result, the 2010 reapportionment gives Texas four additional House seats. In contrast, California gets no new House seats, for the first time since it was admitted to the Union in 1850.

There's a similar lesson in the fact that Florida gains two seats in the reapportionment and New York loses two.

This leads to a second point, which is that growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.

Altogether, 35 percent of the nation's total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.

My third observation is that immigration is slowing down and may be reversed. Immigration accelerated during the 1990s, and the 2000 Census showed more immigrants than the Census Bureau had estimated.

In contrast, immigration has clearly slowed down since the housing bubble burst and the construction industry went bust in 2007. And the 2010 Census showed fewer residents in several high-immigration states than the Census Bureau had estimated were there in 2009.

"PolitiFiction True 'lies' about ObamaCare," The Wall Street Journal, December 23, 2010 ---
http://online.wsj.com/article/SB10001424052748703886904576031630593433102.html?mod=djemEditorialPage_t

So the watchdog news outfit called PolitiFact has decided that its "lie of the year" is the phrase "a government takeover of health care." Ordinarily, lies need verbs and we'd leave the media criticism to others, but the White House has decided that PolitiFact's writ should be heard across the land and those words forever banished to describe ObamaCare.

"We have concluded it is inaccurate to call the plan a government takeover," the editors of PolitiFact announce portentously. "'Government takeover' conjures a European approach where the government owns the hospitals and the doctors are public employees," whereas ObamaCare "is, at its heart, a system that relies on private companies and the free market." PolitiFact makes it sound as if ObamaCare were drawn up by President Friedrich Hayek, with amendments from House Speaker Ayn Rand.

This purported debunking persuaded Stephanie Cutter, a special assistant to the President. If "opponents of reform haven't been shy about making claims that are at odds with the facts," she wrote on the White House blog, "one piece of misinformation always stood out: the bogus claim . . ." We'll spare you the rest.

PolitiFact's decree is part of a larger journalistic trend that seeks to recast all political debates as matters of lies, misinformation and "facts," rather than differences of world view or principles. PolitiFact wants to define for everyone else what qualifies as a "fact," though in political debates the facts are often legitimately in dispute.

For instance, everyone can probably agree that Medicare's 75-year unfunded liability is somewhere around $30.8 trillion. But that's different from a qualitative judgment, such as the wisdom of a new health-care entitlement that was sold politically as a way to reduce entitlement spending. But anyway, let's try to parse PolitiFact's ObamaCare reasoning.

Evidently, it doesn't count as a government takeover unless the means of production are confiscated. "The government will not seize control of hospitals or nationalize doctors," the editors write, and while "it's true that the law does significantly increase government regulation of health insurers," they'll still be nominally private too.

In fact—if we may use that term without PolitiFact's seal of approval—at the heart of ObamaCare is a vast expansion of federal control over how U.S. health care is financed, and thus delivered. The regulations that PolitiFact waves off are designed to convert insurers into government contractors in the business of fulfilling political demands, with enormous implications for the future of U.S. medicine. All citizens will be required to pay into this system, regardless of their individual needs or preferences. Sounds like a government takeover to us.

PolitiFact is run by the St. Petersburg Times and has marketed itself to other news organizations on the pretense of impartiality. Like other "fact checking" enterprises, its animating conceit is that opinions are what ideologues have, when in reality PolitiFact's curators also have political views and values that influence their judgments about facts and who is right in any debate.

In this case, they even claim that the government takeover slogan "played an important role in shaping public opinion about the health-care plan and was a significant factor in the Democrats' shellacking in the November elections." In other words, voters turned so strongly against Democrats because Republicans "lied," and not because of, oh, anything the Democrats did while they were running Congress. Is that a "fact" or a political judgment? Just asking.

As long as the press corps is nominating "lies of the year," ours goes to the formal legislative title of ObamaCare, the Patient Protection and Affordable Care Act. For a bill that in reality will raise health costs and reduce patient choice, the name recalls Mary McCarthy's famous line about every word being a lie, including "the" and "and."

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Darn! I could've become rich 50 years ago suing over the "prize" inside a box of Cracker Jacks!
If I'd only been smart enough to move to California and hire a lawyer.

Now the prize in each box of Cracker Jacks must be taped to the business card of a law firm.

And alongside the nutrition chart in each California fast food restaurant must be a bulletin board for law firm business cards.

Just think of how much easier it would be for Attorney General Cuomo if Lehman had offered an Elmo toy with the purchase of each Ropo 105 and a Barbie Doll with each Repo 108! The jingle could've been "A Barbie date with every 108."

"A Lawyer's Paradise:  Atop all its other woes, California adds litigation madness," The Wall Street Journal, December 24, 2010 ---
http://online.wsj.com/article/SB10001424052748703581204576033781635883412.html#mod=djemEditorialPage_t .

With an unemployment rate at the national outer limits of 12.4%, a state budget deficit of $28 billion, and rains that would have challenged Noah, Californians are in a glum mood this week. But that's no reason to take it out on the kids who may be the only happy citizens left in California. Tell that to the Center for Science in the Public Interest, which is suing McDonald's in California in the hopes of obtaining a court injunction banning Happy Meals. Only in California could such mindlessness float alongside a state crisis.

The Center for Science in the Public Interest is representing the mother of a six-year-old girl in a class-action lawsuit on behalf of all California children under the age of eight who have been exposed to McDonald's "inherently deceptive and unfair" marketing in the last three years. The suit claims that McDonald's has "engaged in a highly sophisticated scheme to use the bait of toys to exploit children's developmental immaturity and subvert parental authority" and that arguments over Happy Meals have caused "needless and unwarranted dissension in their parent-child relationship." Who can doubt that tableside Happy Meals arguments will be at the center of these kids' sessions with their shrinks in another 10 years?

The suit arrived too late for this year's report by the American Tort Reform Association of the nation's top "Judicial Hellholes," in which California placed second, behind top-ranked Philadelphia. (And for aficionados of the tort follies, remember that lawsuit filed in Long Island, New York, by one doctor who sued his doc partner for not yelling "Fore!" before an errant ball hit him in the eye? The state court of appeals ruled this week that failure to yell "fore" isn't "reckless conduct.")

The tort reform group's report lists some other notable examples of frivolous class-action suits in California, including one against more than a dozen olive-oil companies for fraud and deception. Allegedly, their extra-virgin olive oil wasn't extra virgin enough to meet USDA standards. Where were these attorneys when Madonna was singing about similar virginal nuances?

Another suit alleged that Apple misled customers with the claim that "reading on the iPad is just like reading a book." Au contraire. Unlike a real book which can be left outside on a hot day, the iPad automatically shuts down after reaching a critical temperature in order to allow its system to cool down.

More serious was a class-action suit brought against one of the nation's largest nursing-care providers Skilled Healthcare Group. It alleged that some of the company's facilities sometimes didn't provide the 3.2 nursing hours per patient per day as required by California's health code. A Humboldt County jury demanded that the company pay $677 million in damages. The financially strapped company settled for $62.8 million, but not until after its stock plunged 75%. The plaintiffs bar ended up with roughly $20 million of the haul and the patients with $26 million.

So by all means, add tort hellhole to floods, fiscal calamity and whatever else is turning once heavenly California into something else.

Bob Jensen's threads on the Lehman/Ernst Repo 105 scandal are at
http://www.trinity.edu/rjensen/Fraud001.htm#Ernst

Hi Paul,

I didn't know I changed any rules. I thought we were debating allocating economic resources via markets versus whatever planning board sharing system preferred by Paul Williams.

The Chicago Boys experiment in Chile ---
http://en.wikipedia.org/wiki/Chicago_Boys

Rule 1
You assert that the Chicago Boys experiment was a "total disaster."
Rule 1 of scholarship is to back up such a bold out down with convincing evidence that the experiment was a "total disaster."
We're still waiting for you to follow Rule 1 with hard data backing up your claims of knowledge of the experiment and facts regarding its total disaster.
 

Rule 2
If an experiment is a disaster, Rule 2 calls for suggesting something concrete to put in its place that might've been less of a disaster.
We're still waiting for you to follow Rule 2 with something concrete for Chile since Chile has not yet reached utopian status.
Is there a non-capitalist nation that is your preferred model for lifting up the poor without capitalism?
Is there a modern utopian society that abandoned capitalism that serves as a model of success?
Were still waiting for some solid economic answers from you!
 

Rule 3
Rule 3 is to hope that an initiative to save lives and accomplish something marvelous might succeed even if it runs counter to your academic desires that it will fail.
Keith Olbermann, for example, violated Rule 3 in the Iraq war by hoping that the Surge would fail so that George Bush and Dick Cheney would be humiliated in utter defeat of the war. Olbermann hoped the Surge and that General "Betrayus" would fail.

I have a feeling that you hope the Chicago Boys experiment in Chile is a "total disaster" and that, as result of relying upon a Friedman experiment, Chile will ideally  fall deeper and deeper into the worst poverty in history so that you can then call the Chicago Boys experiment really, really, really a "total disaster."
How about a little Rule 3 hope even if it runs contrary to what you believe so deeply about Friedman experiments never succeeding.
Or do you really, really, really want the Chicago Boys experiment to fail?
Did you also hope the Surge would fail in Iraq?

Rule 4
Rule 4 is to give credit where credit is due. When Olbermann was confronted with evidence that the Surge far exceeded our expectations on the military front he shirked off the military successes and focused entirely on its failure to meet its goals perfectly on the political front.
Will you find any reason to give some credit for the Chicago Boys experiment to achieve some of its goals in Chile or will you pull an Olbermann by glossing over the successes in order to rant about where it did not perfectly achieve its goals.

Apples versus Geraniums
I would like to know who paid for Putnam's Italian streets, sewers, community centers, parks, food stamps (or "ration books" in Cuba), law enforcement, fire protection, homes, trucks, cars, water  works, schools, cathedrals, art, opera, etc? Where did the communities you admire most in Italy obtain the resources to share so wonderfully? Two solutions come to mind. One might be the profits from capitalism that in turn provided generous taxes to share among the residents. The other is that the Mafia returned home with the loot (just kidding)

When you tell us how Putman's top villages funded these things then you will be talking more about  apples than geraniums!
Can you tell us how these things were funded.

I'm a firm believer that under capitalism hope, love, and charity may have their greatest opportunities as long a robber barons don't usurp the markets essential for the success of capitalism. Friedman never denied that the poor would have to receive assistance. Jagdish is correct in that Friedman proposed a negative income tax for that purpose with internal controls to hold down frictions of fraud, deceit, and exploitation.

"Derivatives Rules on ICE:  Wasn't Dodd-Frank supposed to reduce systemic risk?" The Wall Street Journal, January 7, 2011 ---
http://online.wsj.com/article/SB10001424052748704694004576019851275439150.html#mod=djemEditorialPage_t

Two years ago we warned against concentrating all of the risks in the credit-default swap (CDS) market inside a clearinghouse called ICE Trust. Now it appears that even the managers of ICE Trust are coming around to our point of view. A few days before Christmas, this largest of CDS clearinghouses quietly withdrew its federal application to be . . . a CDS clearinghouse.

Astounding as it may seem, the frenzied rule-making ordered by the new Dodd-Frank law is sowing concern and confusion even among the law's beneficiaries. The ICE Trust example is particularly instructive. Clearinghouses operate in many financial markets and often serve a useful purpose. Specifically, they stand behind every trade so that the two parties to a transaction don't have to trust each other to make good on the deal.

A clearinghouse collects money from all participants as a cost of membership and also collects margin based on particular trades. The margin collected and the contributions from members create a pot of money available in case a member, or members, default on their obligations to the clearinghouse. On the chance that defaults are much larger than anticipated, all members also agree to provide emergency capital if the clearinghouse is in distress.

Though it must follow the guidance of a regulator, a clearinghouse must nonetheless be adept at setting appropriate margin each day. That isn't easy to do with many thinly traded CDS contracts, and it must also be very careful to admit for membership only sound firms that are unlikely to default and capable of providing assistance in times of stress.

In other words, clearing arrangements do not eliminate risks; they transfer them from the two trading parties to the clearinghouse. But the Obama Administration and the authors of Dodd-Frank claimed to believe two things that aren't true: that the structure of the derivatives market—as opposed to housing or monetary policies—was a root cause of the financial crisis, and that clearinghouses would eliminate risk from derivatives.

Truth be told, at least one of the bill's authors understood that derivatives clearinghouses would not magically eliminate risk, and that those risks might someday swamp a clearinghouse. Last May, we noted that Senator Chris Dodd had added language providing clearinghouses with emergency access to the Federal Reserve's discount window. The language stuck and the Democrats' so-called reform of Wall Street fulfilled the dream of every high-roller in the swaps market: taxpayer-backed derivatives trading.

Dodd-Frank empowered regulators to tear up the plumbing of this market while forcing much of the trading into these taxpayer-backed clearinghouses. ICE Trust, born in 2008 at the behest of Timothy Geithner's Federal Reserve Bank of New York, seemed poised to be among the biggest winners. Having already cleared more than $14 trillion in CDS trades under the old regime operated by the Fed, ICE planned to seek immediate approval from its new regulator, the Commodity Futures Trading Commission.

But two weeks ago, ICE rescinded its application to the CFTC. The company would only say that "given the significant changes proposed to the commission regulations" for derivatives-clearing organizations, it decided to wait until it is required to come under CFTC jurisdiction later this year.

An immediate seal of approval from the commission would have allowed ICE to seek many new customers, so why would this company want to leave money on the table?

Probably because ICE would have had to admit weaker members into its clearinghouse. CFTC's new rules allow clearing members to have less capital than they are required to hold under ICE's existing rules. Even with taxpayer-backing, ICE really doesn't want to fail. But wait. Wasn't the point of this whole regulatory adventure supposed to be about reducing systemic risk?

That's certainly how it was sold when Congress was debating the bill last year, flawed as the argument might have been. But now, vested with new authority to remake the market, CFTC Chairman Gary Gensler has veered into a kind of consumer-protection role, with industrial companies in the Fortune 500 among the consumers. The theory goes like this: If Mr. Gensler can elevate more financial firms into clearinghouse membership, he will break the dominance of the large Wall Street banks, and this will provide lower prices to those industrial consumers when they buy derivatives to hedge their business risks.

It's striking how few of these industrial consumers are demanding Mr. Gensler's protection, and most Americans probably assume they're capable of protecting themselves. But Americans have reason to wonder what any of this has to do with avoiding the next financial crisis.

Reducing the power of too-big-to-fail banks sounds good to us. But taking away their taxpayer backing is the way to start, rather than admitting more financial companies into the subsidy club.

Bob Jensen's timeline of derivative financial instrument scandals is at
http://www.trinity.edu/rjensen/FraudRotten.htm#DerivativesFrauds

Ketz Me If You Can
"Triumph of Banking," by J. Edward Ketz, SmartPros, January 2011 ---
http://accounting.smartpros.com/x71113.xml

My, how the year 2010 ended with a bang! First, Attorney General Andrew Cuomo initiated a fraud suit against Ernst & Young, and then the Financial Accounting Foundation named Leslie Seidman as the chair of the FASB. These events culminate a return to power and prestige for the investment banking industry, and we should salute the triumph of banking.

Banks have not been so fortunate during the previous five to ten years, when history was not so kind to them. But the industry has fought back virulently both in direct and covert ways. They employed the bully pulpit to argue the points they wished to advance, they courted members of Congress and the White House, and they issued innuendo after innuendo. And the battlefield shows their victory and the spoils they have earned.

Recent troubles were in a sense triggered by the CDO racketeering by the banking industry during the last five to ten years, though I suppose I should be more genteel and call it the collapse of the CDO business and the real estate market. More accurately, the mayhem goes back at least to the days of Enron, when the bankers had to minimize the damage caused by their enabling Lay and Skilling and their underlings to commit accounting and securities frauds. Of course, it included many other corporations, but part of the public relations battle was to focus the dysfunctions exclusively on Enron, which allowed bankers and corporate managers to claim it was just a few bad apples.

Even with Enron it was a battle, but the industry mostly kept the casualties to a few fines and court settlements. It is a minor miracle that the executives at Merrill Lynch avoided prison, especially given the fraud involving the Nigerian barges.

More recently, when bankers were at the verge of swallowing poison of their own making, they convinced members of Congress and the White House that this was a societal problem, thus it would be just and fair to rescue the banks from economic collapse because it would help the common man. Amazingly the populace accepted such drivel and Washington assisted them with massive bailouts. Such wealth transfers from the middle class to the rich are unparalleled in history.

It is instructive that the banking industry was able to convince many that the difficulties were actually systemic problems. The beauty of this positioning is that it absolved the banks from most of the blame for the catastrophe. Further, it is important to notice that the bankers were able to push most of the flotsam and jetsam onto Lehman Brothers alone, similar to their interpretation of the events of 2001-2002. By focusing exclusively on Lehman Brothers, the spokesmen for the banks could assert that the industry’s contribution to the 2008 downfall was limited to a few bad apples at this one institution.

But, the bankers really showed their agility when public opinion opposed the granting of colossal bonuses to top managers. The industry first got cheap loans from the government as well as the ability to unload so-called “toxic” assets as the idiots at the Fed paid top dollar for the junk. Then the industry quickly paid off its debts to the federal government, so the poor executives could enjoy the millions in bonuses.

Amid this posturing, some politicians wanted to make sure the banks were solvent and devised stress tests to evaluate the banks. The industry again displayed amazing dexterity by manipulating the regulators so that they devised feeble stress tests that Lehman Brothers could pass even after its bankruptcy. These felicitous results calmed the public by relieving any fears that the banks were weak and illiquid. Even if they were.

Bankers clamored against fair value accounting, claiming that it was behind the 2008 collapse. That this is untrue is hardly important. That the banks were gung ho in favor of fair value accounting almost a decade ago when fair value gains added substantially to the banks’ income statement seems a curiosity lost on many observers. Bankers reversed their position only when the gains turned into losses, and they have been zealously against fair value accounting ever since. The work paid off when the FASB on April 2, 2009 caved in to the demands of bankers and allowed them favorable treatments to minimize any losses on their “toxic” assets.

And in this turmoil, it is remarkable that banks have avoided any significant regulation of derivatives. The CDOs that got us into this mess have been absolved by the priests within the bank industry and their minions in Washington. Of course, it helps to have the Treasury Secretary and the Fed Chairman in your back pockets.

Continued in article

Jensen Comment
I join my friend Frank Partnoy is singing a loud chorus for more regulation of derivatives ---
http://www.trinity.edu/rjensen/FraudRotten.htm#DerivativesFrauds

Rethinking Capitalism

If Harvard University Business School faculty took a vote regarding who was their most valuable faculty member my guess without doubt would be that the winner would be economist Michael Porter. Apart from being a fine colleague and great teacher, he's probably Harvard's most popular consultant and author of books and many articles in the Harvard Business Review --- http://en.wikipedia.org/wiki/Michael_Porter

The Harvard Business Review blog is now carrying a video interview with Professor Porter:
"Rethinking Capitalism," Michael Porter, Harvard Business Review Blog, January 5, 2010 ---  Click Here
http://blogs.hbr.org/video/2011/01/rethinking-capitalism.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date

I could not help trying to think how Porter's interview might've compared with the same interview being conducted on the late Milton Friedman. In my estimation, Michael Porter cannot hold a candle in comparison with Milton Friedman whose "Free to Choose" PBS series in the 1970s is a classic that lives today as even more relevant since many of his dire predictions and warnings about entitlements are now coming true ---
http://en.wikipedia.org/wiki/Milton_Friedman

Let me give you a concrete example. My new Dell 64-bit Studio Laptop computer had a nagging hardware problem in that it would always start to warm up and then die out about 90% of the time. It would sometimes take me 30 minutes to finally get the startup to hold fast. My product consultant at Dell forwarded me to Dell's Tech Support Team in India. A technician with very precise English guided me through a series of tests that took over 30 minutes. He then took over my computer such that, while sitting in the White Mountains of New Hampshire, I could watch him move my mouse and download something.

In the end he set me up with a superb repair technician who, ten days later, arrived from Boston with a box of parts. The repair technician was very good, but it took him about two hours in my basement plus the drive time (over three hours each way) from Boston. He earns about $100 per hour so it does not take a rocket scientist to conclude that, with the cost of parts and labor, Dell really lost money on the revenue from my laptop (including the $350 price of a three-year onsite warranty for parts and labor).

My Interview Question for Professors Friedman and Porter
"Assuming that tech support teams of identical quality and customer satisfaction (I was certainly satisfied with my Dell tech team) can be established in India or Texas, should Dell be socially responsible by creating jobs in Texas and avoid India even if the Texas tech team costs ten times as much for each minute of service rendered?"

Anticipated Answer from Professor Friedman
"By all means outsource to India under those circumstances. The responsibility of a corporation is to maximize returns to owners while operating within the law. The only condition for using the more expensive alternative would be if the law required domestic labor. But that would be counterproductive because requiring domestic labor in the technology sector under the doctrine of protectionism would lead to protectionism retaliations in foreign markets such that as many or more jobs would be lost in the U.S. agricultural and export services sectors if the economy."

Anticipated Answer from Professor Porter
I think Dell should develop green-colored computers that run on solar power and radiation from fluorescent lights. This is a new market that could create new jobs in the United States and have multiplier effects on manufacturers of the component parts as well as bringing more profits from shareholder.

Then in whisper after the interview is over: "Off the record, Dell should always seek the lowest price alternatives subject to quality control standards and standards of customer satisfaction."

"Capitalism at a Crossroads," by Umair Haque, Harvard Business Review Blog, January 10, 2011 --- Click Here
http://blogs.hbr.org/haque/2011/01/capitalism_at_a_crossroads.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date

The Dismal Labor Theories of Arthur Lewis
One of the best places to begin, in my opinion, on the dismal future prospects of jobs and wages is in the writings of Arthur Lewis --- http://en.wikipedia.org/wiki/Arthur_Lewis_(economist)  .

Even Karl Marx attributed much of the cause of unemployment to overpopulation. Arthur Lewis provides a rather clear theory that the wage rates in industrialized nations will always remain low because of the "unlimited supply" of global subsistence-level labor. Laziness has little to to with the major problem of unemployment. It has more to do with the oversupply of labor coupled in modern times with vastly improved communication and transportation systems.

World Population Growth Year Population
      1 200 million
1000 275 million
1500 450 million
1650 500 million
1750 700 million
1804 1 billion
1850 1.2 billion

1900 1.6 billion
1927 2 billion
1950 2.55 billion
1955 2.8 billion

1990 5.3 billion
1995 5.7 billion
1999 6 billion

2006 6.5 billion
2009 6.8 billion
2011 7 billion 2025 8 billion
2050 9.4 billion

In 1954, when Lewis wrote his most famous theory, there were nearly 2.8 billion people back in the wonderful 1950s (when I was literally enjoying every moment of high school). Now we're living in a world of over 7 billion where jobs are easily transported to India, Indonesia, Africa, Mexico and all other points south of the Rio Grande.

We will soon have technology capable of assembling automobiles with one worker who turns the factory switch on or off. It's analogous to the evolution of replacing 5,000 1940 telephone switchboard operators in Cleveland with automated switchboards. All this is taking place while the world population more than doubled between 1950 and 1990. There's one highly automated factory in China that now produces over a third of the foot socks sold in the world.

When I was a kid, a farm family in Iowa could make a good living on 80 acres of land. That same family probably cannot make good living on less than 240 acres of land in Iowa and even 240 acres is too small for the farming capacities of modern farming machinery designed to work 2,000 or more acres of land with one or two farmers.

Now we are witnessing the decline of the newspaper and magazine industry due to an explosion of faster and more innovative ways of communicating local and global news.

The problem becomes ever more acute as we keep producing more people faster than jobs for those people. There are a few positive signs such as the fact that the rate of growth in population is slowing even if the growth itself is still upward.

Poverty is caused by teens and adults who are too ambitious in producing children relative to the finite resources of this planet. Of course there are many ways we can support population growth by better utilizing and preserving the most crucial resources like fish in the sea.

I think Arthur Lewis was correct about the true causes of unemployment and poverty --- the problem is too many of us creating an unlimited supply of labor.

The problem of unemployment and underemployment is not a function of how economic resources are allocated (markets versus planning boards). The problem is the "unlimited supply of labor."
http://en.wikipedia.org/wiki/Arthur_Lewis_(economist)

Wasteful Pork Barrel Legislation Department (this time in the State of Georgia)

"TLP: Like Shooting Fish in a Pork Barrel," by Adrienne Gonzalez, Jr. Deputy Accountant Blog, January 18, 2011 ---
http://www.jrdeputyaccountant.com/2011/01/tlp-like-shooting-fish-in-pork-barrel.html

January 19, 2011 message from Bob Jensen

Hi Pat,

So you want me to do the search work to test your conjectures.

Ireland is in the PIGS group largely because its real estate price bubble was the highest among all developed nations 1997-2006. This was one of the contributing factors to the banking crisis rather than loss of manufacturing plants per se ---
http://www.theodora.com/wfbcurrent/ireland/ireland_economy.html
As a nation dependent upon exports, Ireland's GDP suffered in the global recession of 2009, but it recovered respectably in 2010. Like many households in the U.S., the Irish tended to extend their credit card debt as well as mortgage debt well beyond prudent levels during the boom years. They proved to have an appetite well beyond potatoes and beer.

Here's a pretty good summary of what happened in Ireland over the past two decades, much of which can be traced to tax advantages from shipping business operations to Ireland --- http://en.wikipedia.org/wiki/Economy_of_the_Republic_of_Ireland

The economy of Ireland has transformed in recent years from an agricultural focus to a modern knowledge economy, focusing on services and high-tech industries and dependent on trade, industry and investment. In terms of GDP per capita, Ireland is ranked as one of the wealthiest countries in the OECD and the EU-27 at 5th in the OECD-28 rankings as of 2008. In terms of GNP per capita, a better measure of national income, Ireland ranks below the OECD average, despite significant growth in recent years, at 10th in the OECD-28 rankings. GDP (national output) is significantly greater than GNP (national income) due to the repatriation of profits and royalty payments by multinational firms based in Ireland. A study by The Economist found Ireland to have the best quality of life in the world. The 1995 to 2000 period of high economic growth led many to call the country the Celtic Tiger. One of the keys to this economic growth was a low corporation tax, currently at 12.5% standard rate.

With high growth came high levels of inflation, particularly in Dublin, where prices are considerably higher than elsewhere in the country,[12] especially in the property market. However, property prices fell rapidly following the recent downturn in the world economy. At the end of July 2008, the annual rate of inflation was running at 4.4% (as measured by the CPI) or 3.6% (as measured by the HICP) and inflation actually dropped slightly from the previous month.

The Financial Crisis of 2008 is still affecting the Irish economy severely, compounding domestic economic problems related the collapse of the Irish property bubble. Ireland was the first country in the EU to officially enter a recession as declared by the Central Statistics Office. The ESRI recently predicted that the Irish economy will not significantly recover until 2011. Ireland now has the highest level of household debt relative to disposable income in the developed world at 190%.

. . .

The country is one of the largest exporters of pharmaceuticals and software-related goods and services in the world.

Ireland's unemployment rose in the 2009 recession largely because it is so dependent upon exports and world demand plunged in that "Great Recession." The country remains one of the largest exporters of pharmaceuticals and software-related goods.

Chances are your Mac laptop was assembled in Cork City, Ireland and if you buy a new one chances are that it will be assembled in the same factory.

Cork City is at the heart of industry in the south of Ireland. Its main area of industry is pharmaceuticals, with Pfizer Inc. and Swiss company Novartis being big employers in the region. The most famous product of the Cork pharmaceutical industry is Viagra. Cork is also the European headquarters of Apple Inc. where their high end computers are manufactured and their European call centre, R&D and AppleCare is hosted.[36] In total, they currently employ over 1,800 staff. EMC Corporation is another large IT employer with over 1,600 staff in their 52,000 sq metre (560,000 sq ft) engineering, manufacturing, and technical services facility.

It is also home to the Heineken Brewery which also brews Murphy's Irish Stout and the nearby Beamish and Crawford brewery (recently taken over by Heineken) which have been in the city for generations. And for many years, Cork was the home to Ford Motor Company, which manufactured cars in the docklands area before the plant was closed in 1984. Henry Ford's grandfather was from West Cork, which was one of the main reason for opening up the manufacturing facility in Cork.[37] But technology has replaced the old manufacturing businesses of the 1970s and 1980s, with people now working in the many I.T. centres of the city.

Cork's deep harbour allows ships of any size to enter, bringing trade and easy import/export of products. Cork Airport also allows easy access to continental Europe and Kent Station in the city centre provides good rail links for domestic trade. More recently Amazon.com, the online retailer, has set up in Cork Airport Business Park.

In 2008, developers announced a 1bn euro plan to create an Atlantic Quarter in Cork's docklands area to rival that of the International Financial Services Centre in Dublin making it one of the biggest and most ambitious plans undertaken in the history of the state

One problem in offering great tax incentives to stimulate job growth is that other nations are now playing the same game and are adding in sweeteners beyond the tax deals. Like every other developed nation, Ireland is facing stiff competition from nations like China offering great deals in skilled labor costs, vast domestic markets, and subsidies given to businesses that will relocate. The State of Massachusetts is still reeling from such deals.

"Solar Power Eclipse:  A case study in the failure of green energy subsidies," The Wall Street Journal, January 18, 2011 ---
http://online.wsj.com/article/SB10001424052748703959104576081991727353356.html#mod=djemEditorialPage_t

Not long ago, Massachusetts Governor Deval Patrick was calling Evergreen Solar a "symbol" of his state's economic future. Symbolism would appear to be overrated.

Evergreen announced last week that it is shutting its Massachusetts plant and will lay off 800 workers. That's the same plant Mr. Patrick had state taxpayers fund in 2007 to the tune of $58 million in grants, loans and land and tax incentives—one of the largest investments in a private company in Bay State history. Remind us not to let the Governor pick our stock portfolio.

The solar company started in 1994 and advertises a "string ribbon" technology that reduces the amount of silicon used in solar panels. Evergreen rode the green energy political bubble through a 2000 IPO, and through news in 2007 that it would build, with state aid, a flagship plant in Devens, Massachusetts.

A look at the company's finances shows it has lost a cumulative $685 million. The majority of this red ink was on the books prior to Mr. Patrick promising state aid. The company has produced little good news since, including warnings from Nasdaq that it could be delisted, an unproductive debt restructuring, and a string of money-losing quarters. None of this fazed Mr. Patrick, who touted Evergreen as a cornerstone of his strategy to turn Massachusetts into a hub of green energy innovation.

Evergreen blames its plant closing on competition from subsidized Chinese manufacturers. "Solar manufacturers in China have received considerable government and financial support, and together with their low manufacturing costs, have become price leaders within the industry," says Evergreen President Michael El-Hillow.

But Evergreen has also been subsidized in the multiple ways that federal and state governments favor solar power. Maybe the problem is Evergreen's business model, or perhaps its decision to locate a plant in a high-cost, union-labor state. Evergreen has long been aware of China's solar manufacturing advantage, waiting until it received the $58 million from Massachusetts to announce it would outsource jobs to a plant it continues to operate in China.

Bay State taxpayers are now stuck with the losses. Mr. Patrick says he intends to claw back some of that $58 million, but Evergreen says it doesn't owe more than $4 million. Taxpayers will also be thrilled to know the state is so worried about getting a new tenant for the manufacturing site that it may let Evergreen keep its sweetheart $1-a-year lease—allowing the company to sublet it at a profit.

All of this adds up to one more case study in the perils of politically allocated capital. Like President Obama, Mr. Patrick has advertised the illusion that governments can nurture new companies, even whole new industries, with targeted taxpayer "investments." This is the entire premise of the "clean energy" industry, most of which wouldn't exist without subsidies because it can't compete on a market basis.

Politicians always seem to show up for the green energy ribbon-cuttings but somehow they manage to miss the plant closings. Evergreen Solar is indeed a "symbol"—of the folly of taxpayer green subsidies.

The United State's on this day is being visited by the President of China and President Obama will complain about the unfair currency manipulation and trade practices of China. But not much is expected from these negotiations since the United States is so utterly dependent upon having China roll over its massive holdings of U.S. National Debt and the need to borrow trillions more from China over the next decade. It's not wise to spit in the face of your banker.

Maxine Says:

Let me get this straight . . . .

We're going to be "gifted" with a health care
plan we are forced to purchase and
fined if we don't,

Which purportedly covers at least
ten million more people,
without adding a single new doctor,
but provides for 16,000 new IRS agents,

written by a committee whose chairman 
says he doesn't understand it,

passed by a Congress that didn't read it but
exempted themselves from it,

and signed by a President who smokes,

with funding administered by a treasury chief who
didn't pay his taxes,

for which we'll be taxed for four years before any
benefits take effect,

by a government which has 
already bankrupted Social Security and Medicare,

all to be overseen by a surgeon general 
who is obese,

and financed by a country that's broke!!!!!

'What the hell could
possibly go wrong?'

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Return to the Tidbits Archives ---
http://www.trinity.edu/rjensen/tidbitsdirectory.htm 

Shielding Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm

·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1

Bob Jensen's threads on accounting theory ---
http://www.trinity.edu/rjensen/theory01.htm

Tom Lehrer on Mathematical Models and Statistics ---
http://www.youtube.com/watch?v=gfZWyUXn3So

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/