My Free Speech Political Quotations and Commentaries Directory and Log
Be brave enough to start a conversation that
We must be willing to get rid of the life we've
planned, so as to have the life that is waiting for us.
If everyone is thinking alike, then somebody isn't
George S. Patton
It's better to walk alone than in a crowd going in
the wrong direction.
Some out-of-town protesters went to Ferguson not so much to protest but with
intent to be arrested so they could enter the legal lottery. In other words, for
them it's a scam to get rich along with their lawyers. Isn't there a moral
hazard here for those that hope to be arrested and abused just so they can sue
for millions of dollars? Maybe I should rush to the next good street riot with
my attorney in tow. The cause of the riot really does not matter!
Destroying ISIS should be 'No. 1 priority '
Elizabeth Warren, Democratic Senator
and Possible Presidential Candidate (someday)
Democracy is Wrong for the World and Belgium is a Test Case ---
Here Are 10 Things That Are Right With America ---
When Keynesian Theory Morphed Into the Theories of Milton Friedman
"How 'Keynes' Became a Dirty Word," by Noah Smith, Bloomberg View,
September 11, 2014 ---
If you use the word "Keynesian" as a synonym for
"socialist," "progressive," or "liberal," well my friend, you’re doing it
If you’ve been involved in Internet arguments about
economics, then you must have heard the term "Keynesian" being applied this
way. And it seems to make sense. After all, many of the bloggers and writers
who describe themselves as "Keynesian" are also of a liberal bent. And more
importantly, John Maynard Keynes himself was in favor of some amount of
wealth redistribution and government intervention in the economy. So why am
I saying it doesn’t make sense to use the word "Keynesian" in this way?
One reason is because this isn’t how academic
economists use it. In academia, there is a class of models called "New
Keynesian" models that try to describe how monetary policy might affect the
economy. But the thing is, despite the name, these models aren’t actually
very close to anything Keynes ever conceived. In fact, they’re very
close to the ideas of Milton Friedman, who was a
rhetorical and political opponent of Keynes. My doctoral adviser, Miles
Kimball, actually tried to change the name of the models to "Neomonetarist,"
to be more faithful to Friedman’s legacy, but no one
went along with it, and the "New Keynesian" label stuck.
In fact, many of the people who invented New
Keynesian economics were politically conservative, and deeply opposed to
wealth redistribution and to government intervention. The New Keynesians
included Greg Mankiw and John Taylor, who are among the most prominent
conservative economists writing in the popular media today.
OK, so why should you care about the arcane jargon
of academia? Well, because there’s a good reason Taylor and Mankiw chose to
name their theory after Keynes.
New Keynesian economics says that monetary policy
-- and even fiscal policy -- is all about stabilization. It’s about
smoothing out the fluctuations in the economy, reducing risk for everyone
concerned. When the economy is doing well, raise interest rates to slow
things down; when it’s doing badly, lower interest rates to give it a boost.
And that’s it. No wealth redistribution, no
regulation, no command economy. Stabilization theory says that you can
smooth out the wrinkles of the business cycle without messing with the deep
structure of how the economy works. The expectation is that if the
government does just that -- just that one small, minor intervention -- then
recessions won’t be a big problem, and angry unemployed people won’t demand
more lasting government interventions.
In other words, stabilization policy is supposed to
guard against socialism. This, in fact, is what Keynes intended.
Keynes lived during a time when communism and socialism were considered
real, viable alternatives to capitalism. He devised his theories as an
socialism -- a way to save capitalism with the smallest possible
Now, it is true that stabilization policies do
inevitably involve some redistribution. Boosting inflation to fight
recessions will benefit those who are in debt -- companies, for example,
that borrow to invest, or people with mortgages -- while hurting people
living on a fixed income. But the expectation is that this redistribution
will be reversed in the good times, when the Federal Reserve hikes interest
rates to put on the brakes. Fiscal stimulus is a bit of a different story,
since the unemployed reap the benefits while taxpayers pick up the bill. But
the point here is that Keynesian policies are fundamentally not about
redistribution -- they’re about economic stability.
So why do people think Keynesianism is socialism-lite?
It might be the fault of Keynes’s main intellectual opponent, Friedrich
Friedrich Hayek tried to argue against Keynes’
theories, but for whatever reason, he lost the debate among economists in
the 1930s. But Hayek would have the last laugh, because in his book, "The
Road to Serfdom," he attacked Keynes from a very different angle. Instead of
saying Keynes’ theories were wrong, Hayek prophesied that Keynesian
stabilization policies would lead down the slippery slope to
Hayek’s warning was dead
wrong. Most rich countries tried some form of
Keynes’s policies in the 1950s, '60s, and '70s, and while they didn’t always
work as advertised, they most definitely did not lead to
totalitarianism. Yet somehow Hayek’s meme entered our collective
consciousness. On blogs and in the financial media, where politics and
economics mix freely, self-described "Austrians" kept using the word
"Keynesian" as a political epithet, the way National Review writers or Fox
News anchors use the word "liberal."
Continued in article
"Venezuela’s President Lashes Out at Harvard Economist," by Andy
Thomason, Chronicle of Higher Education, September 15, 2014 ---
It might be interesting for students to analyze piling on debt ala Paul
Krugman's Keynesian theories has been such a disaster in Venezuela. Also analyze
why these theories have not worked well in reducing unemployment in such nations
as Greece and Spain even though there appears to be toilet paper available for
sale in Greece and Spain but not Venezuela.
Tax Foundation: When Canada lowered its corporate income tax rate
revenues increased ---
Laffer Curve ---
"Where Are All the Law School Applicants?" by Paul Caron, TaxProf
Blog, September 13, 2014 ---
. . .
What is the reason for this dramatic reversal?
Conventional wisdom credits two principal factors. First, the legal job
market suffered a combined cyclical and structural downturn in 2008. ... The
second factor weighing against law school applications is the growing
recognition of the burden of student debt. ...
Is this drop in law school enrollment a good or bad
thing? One part is arguably good: many young people applied to law school
because they had good grades and board scores and wanted to keep their
options open, rather than truly thinking through that a legal career was
right for them. Now, in contrast, anyone applying to law school has likely
given serious thought to the decision.
But the decline is also unfortunate. Unfortunate
for the young people who choose not to go to law school, because they are
missing what can be incredibly rewarding career. Apart from the studies
about the return on investment in a law degree, the career can bring
satisfaction and opportunities for growth and career changes that few other
Continued in article
Bob Jensen's threads on law schools ---
Mapping the Spread of Drought Across the USA ---
California’s Exceptional Drought Just Keeps Getting
Tom Randall , Bloomberg News,
July 31, 2014
Although the current drought in California is really bad, it is not the worst
in history for California
"California hasn't had a drought this bad since at least 1895," by Brand
Plummer, Vox, August 15, 2014 ---
"National Geographic’s Warming Warning – 10 Years Later," by
Anthony Watts, Watts Up With That, August 31, 2014 ---
"Setting the Record Straight on Climate Change on Kilimanjaro," by Tim
Ward, Huffington Post, June 20, 2014 ---
If you are trying to figure out whether or not the
iconic "snows of Kilimanjaro" are disappearing due to Climate Change (as Al
Gore famously claimed in An Inconvenient Truth), don't expect to
find an easy answer from the media. I searched "climate change Kilimanjaro"
in early June. Page one of the results included these media articles:
Why so many conflicting headlines? There are two
main reasons. First, the mainstream media tends to follows whatever seems
controversial and catastrophic. So the facts often come much lower down in
the story than the dramatic headline. If you actually read the articles, the
climate scientists quoted inevitably mention the 99.9% consensus among
experts: that human caused climate change is occurring. Some scientists are
concerned that environmental advocates oversimplify the issue. They claim
more that hard science can prove, and that ends up playing into the hands of
climate deniers (who are more often than not paid pundits, rather than
climate scientists). But when scientists attempt to explain the nuances of
the mountain, the media too often gets it wrong and misreports.
For example, Philip Mote. the University of
Washington scientist quoted in the Seattle Times article above,
"Kilimanjaro not a victim of climate change," is so concerned about the
reality of climate change he travels the Northwest to warn of global
warming's regional impacts. He just thinks Kilimanjaro is a problematic
The second reason is the actual complexity of what
is happening on Kilimanjaro. There are many forces driving the climate of
East Africa all at once. The media likes to draw a straight arrow between
cause and effect. Scientists, on the other hand, spend their time seeking
ways to disprove a causal link, and they are very reluctant to make any
claims of causality that have not been thoroughly tested. The big problem
with measuring Kilimanjaro's climate is the lack of high-altitude data in
East Africa. There's no baseline against which to measure changes of
temperature and dryness. This makes it hard to establish historical trends.
Ironically, Kilimanjaro's glaciers are now the
source of historical climate data. Research teams have drilled ice cores
which can be read like tree rings. Bubbles of air trapped in the layers of
frozen ice reveal a wealth of data about the climate of Kilimanjaro over the
past 11,700 years -- the age of the bottom layers of ice. It's like
discovering the geological equivalent of the Dead Sea Scrolls. Sadly, this
record is on its way to being erased as the glaciers disappear. In fact, in
some places the top layers have begun to melt -- literally wiping the data
from the most recent parts of the record.
So, what do we really know about Kilimanjaro's
disappearing glaciers? The most recent research from scientists working on
the mountain can be found in a
2009 article in the science journal Nature.
Here's what I extracted from that article that is the most reliable and
unbiased summary of what is happening on the mountain top.
- Kilimanjaro's glaciers are at least 11,700
years old. Over 150 years ago, when the first European visitors
documented Kilimanjaro's appearance, the volcano's cone was covered with
a thick crust of ice. About 90% of this ice has since vanished. This
loss of ice predates the start of human-caused climate change by several
- The rate of glacier shrinkage has doubled
since the 1970s -- when human caused climate change kicked in. All over
the world tropical glaciers are receding, as indeed most are in all
latitudes. The fact that these 11,700 glaciers are on their way to
completely vanishing within 20 years marks a significant change in East
- Technically, the glaciers are not melting.
They are evaporating -- turning directly from ice to vapor through a
process known as sublimation. The air is below freezing at the summit,
but the sun excites water molecules in a way similar to how dry ice
evaporates at room temperature.
- Increased dryness may be the key driver of
glacier shrinkage. East Africa has been getting less and less moisture,
so new snow is not replenishing the glacial ice lost to sublimation. A
few seasons of new snow can in fact build back some of the ice, as the
Turbo News article reported in 2011). If the drying trend lasts
(together with the increased sunlight), the glaciers are still doomed.
- Increasing dryness in East Africa
(the cause of droughts and famines in Kenya, Ethiopia, and Sudan), may
in fact be speeding up due to global climate change, especially by
altering air patterns over the Indian Oceans. (This is the hypothesis
most the knowledgeable people I have spoken with or read think is the
likely cause of Kilimanjaro's dwindling glaciers).
Here is the article of the
original findings the Kilimanjaro research team
published in the Proceedings of the National Academy of Sciences,
CNN report on the same research.
There is a second driver of local climate change on
Kilimanjaro -- deforestation. But
according to the most recent research this is only affecting lower
elevations. While this is deadly serious -- over a million people depend on
the rainfall and rich vegetation on Kilimanjaro's
green slopes -- scientists who are studying this effect have not found any
evidence this is affecting the glaciers. The glaciers are at an altitude
high above the cloud forests where these local changes are being seen and
studied. More on that in a future blog post.
Continued in article
MIT's Free Courseware
Global Warming Science
"Voters do the maths A big win for pension reform in Rhode Island—and a
lesson for other states?" The Economist, September 13, 2014 ---
ON HER last evening of campaigning, Gina Raimondo
visited retirement homes in Providence. It was apt. Her opponents portray
her as the worst enemy of Rhode Island’s pensioners, a chainsaw-wielding
agent of Wall Street who will leave the elderly destitute. Her fans praise
her for having tried to restore the state’s public-worker pension funds to
something resembling solvency. On September 9th voters gave her the benefit
of the doubt.
Ms Raimondo (pictured) won the Democratic primary
for governor of Rhode Island by a hefty 13 points, with 42% of the vote in a
three-way race. She will face Allan Fung, the Republican mayor of the town
of Cranston, in the general election in November; the polls (albeit scanty
ones) suggest she will win.
Rhode Island is tiny, but this campaign could have
national ripples. For those who fret about the holes in state and local
pension funds, which are one of America’s worst fiscal problems (see
charts), Ms Raimondo has shown that a politician can back painful reform and
As state treasurer, Ms Raimondo pushed a law in
2011 that raised the retirement age for some public-sector workers,
suspended cost-of-living adjustments and cut benefits. This reform is being
contested in court, but if upheld could save taxpayers $4 billion over two
decades—and avert financial calamity.
Public-sector unions hate it. But they split their
support between two candidates, and so failed to defeat Ms Raimondo. Many
members of private-sector unions, whose taxes foot some of the bill for
generous public-sector pensions, supported Ms Raimondo. At 5am on election
day, burly builders got up and delivered fliers for her. Scott Duhamel of
the painters’ union voices little sympathy for public-sector protests. “We
had to make cuts, too,” he says.
Primaries in other states saw voters pick realists
and moderates, too. In a Democratic primary in Massachusetts, for instance,
Seth Moulton, a charismatic military veteran, ousted John Tierney, a
scandal-plagued member of the House of Representatives. Mr Moulton rebuked
his opponent for passing only one bill in 18 years. Voters want leaders to
"The unlucky continent: How Africa’s riches have brought it mainly
misery," The Economist, September 4, 2014 ---
The Fortunes of Africa: A 5,000-Year History of Wealth, Greed,
and Endeavour. By Martin Meredith. Public Affairs; 784
pages; $35. Simon & Schuster; £25. Buy from
“DO NOT talk to me of gold…[it] brings more
dissension, misfortune and unexpected plagues in its trails than benefits.”
So said Paul Kruger, president of the small Boer republic of the Transvaal
in 1885 when he was told that gold had been found on the country’s eastern
border. Kruger went on: “Every ounce…taken from the bowels of our soil will
yet have to be weighed up with rivers of tears.” His prescience was
remarkable. Within scarcely a decade his country’s independence had been
snuffed out by Britain, which lusted to control the world’s richest gold
This anecdote finds many echoes across the ages and
from country to country in a sweeping new history of Africa by Martin
Meredith, a historian with an acute eye for detail and a firm grip on the
forces that swept the continent. Africa’s profusion of natural
wealth—whether gold, ivory or the very bodies of its inhabitants—served not
to enrich its peoples but to impoverish and enslave them. Going back to the
time of Egypt’s pharaohs, he notes, Africa’s riches have been coveted.
This is a familiar tale for Mr Meredith, a former
journalist and a biographer with a deep affinity for Africa. For readers of
his earlier book, “The State of Africa”, some bits may feel a touch too
familiar, as he revisits old themes. Yet that is a minor quibble to take
with a book that addresses one of the main criticisms of his previous work:
that it limited itself to telling the story only of Africa’s half-century
since independence. Liberated in time, Mr Meredith’s new book explores the
horrors suffered by Africans at the hands of its early rulers and traces the
forays of Arabs and Europeans into its interior in search of treasure.
Of wealth there was no shortage. In 1324, when King
Mansa Musa of Mali stopped in Cairo while making the pilgrimage to Mecca, he
distributed so much gold that he destroyed the value of money for at least a
decade. His wealth, Mr Meredith contends, was so vast that he was the
richest man the world had ever seen. Others made fortunes too, from the
great caravans of ivory that snaked their way out of jungles or the
boatloads of wild rubber harvested in the Congo, often carried by slaves who
were then themselves sold.
Of misery there was more. In 1882 a British mariner
watched a huge caravan of slaves toting ivory pass on its way to Zanzibar.
Speaking with the headmen in charge, he asked what happened to mothers who
became too weak to carry both their children on their backs and the tusks of
ivory on their heads. “We spear the child and make her burden lighter,” was
the reply. “Ivory first, child afterwards!”
Mr Meredith artfully weaves together exploration,
trade and geography in a narrative that is both detailed and arresting. Yet
important questions about the economics of the trade are answered only
tangentially: for instance, why a pound of ivory was worth 200 times more in
Zanzibar than in the inland areas around Lake Tanganyika, where it was
gathered. The book’s last chapters race breathlessly through important
events of the past few years, including China’s huge investment in Africa
and the theft and corruption in Nigeria, without pausing to analyse, explain
or conclude. In the end Mr Meredith leaves the reader bursting with a wealth
of facts, but hungering for a richer explanation.
"Surprise: IRS 'Loses' Emails of Five More Employees Connected to
Targeting Investigation," by Guy Benson, Townhall, September 8, 2014
This admission dropped
late Friday in a classic news dump -- the purpose
of which is to bury a damaging story over the course of a weekend. There
was zero chance we'd allow this update to the IRS scandal to slip our minds,
however. The preposterous and insulting cover-up continues apace, reports
the Associated Press:
The IRS says it has lost emails from five
more workers who are part of congressional investigations into the
treatment of conservative groups that applied for tax exempt status.
The tax agency said in June that it could not locate an untold
number of emails to and from Lois Lerner, who headed the IRS division
that processes applications for tax-exempt status. The revelation set
off a new round of investigations and congressional hearings. On Friday,
the IRS said it has also lost emails from five other employees related
to the probe, including two agents who worked in a Cincinnati office
processing applications for tax-exempt status.
The agency blamed computer crashes for the lost
emails. In a statement, the IRS said it found no evidence that anyone
deliberately destroyed evidence.
Continued in article
A Big Oops! When Brian Fallen Dials the Wrong Number: The
Department of Justice is Politically Motivated to Protect the Wrongdoers
"Is Eric Holder Trying to Protect the IRS?" by Seth Mandel, Commentary
Magazine, September 10, 2014 ---
A remarkable conversation about the IRS’s illegal
targeting of conservative groups took place on Friday in Washington.
According to Rep. Darrell Issa’s office, at 5:01 Friday Brian Fallon, a
former aide to Chuck Schumer and currently a communications aide to Attorney
General Eric Holder, called Issa’s office. By mistake. And it’s quite a
The purpose of the call, according to a letter Issa
wrote to Holder, was to work with the intended recipient of the call to
strategically leak damaging information to selected, friendly reporters and
to coordinate a damage-control plan. The intended recipient of the call was
apparently Rep. Elijah Cummings, the ranking Democrat on the House Oversight
Committee who has gotten quite visibly nervous over the extent of the
investigation into the IRS abuse–despite his attempts to protect the
Here’s Jonathan Strong at Breitbart:
The aide, Brian Fallon, is a former senior aide to
Sen. Chuck Schumer (D-NY) and a well-known personality on Capitol Hill. The
letter describes Fallon as “audibly shaken” when he realizes his request to
leak documents to help get ahead of news stories about them was mistakenly
made to the very office he was seeking to undermine. Issa believes the call
was intended to be made to Democratic Rep. Elijah Cumming’s staff, the
ranking member on the oversight panel, the letter said.
According to the letter, Fallon – who is not named
in the letter but confirmed he made the call – asked if the aides could
release the IRS scandal documents to “selected reporters” to give Fallon an
“opportunity to comment publicly on it.”
Fallon explained to Issa aides that the Justice
Department’s Office of Legislative Affairs had not permitted him to release
the documents to the public and he wanted to get ahead of the story “before
the Majority” – meaning Issa – could share it, according to the letter.
Issa aides – who had placed the call on
speakerphone – were “caught off guard by the unusual nature of the call and
the odd request” and asked Fallon to “e-mail the material for evaluation.”
“At this point,” Fallon “abruptly placed the call
on hold for approximately three minutes.” When Fallon returned to the call,
“he was audibly shaken. He immediately stated that there was a ‘change in
plans’ and that there would be no effort” by DOJ to release the material
In other words, it looks like Holder’s Department
of Justice is seeking to help the IRS and the Democrats protecting the IRS.
And the only reason the public knows about it is that Holder’s office
accidentally called the wrong phone. Oops.
The left’s response to the IRS targeting scandal
has morphed over time as more information has come to light. Mostly gone are
the truthers who think nothing unethical happened or that this is an aimless
witch hunt. It’s now clear to any sentient person that the IRS was indeed
engaged in this targeting scheme ahead of a presidential election.
Additionally, as I wrote last week, it’s since been revealed that the IRS
began destroying evidence once the investigation into the targeting began.
That particular destruction of evidence concerned
Lois Lerner, the former official at the center of the scandal, in order to
get rid of her email correspondence. The media yawned at the revelation of
the destruction of evidence, apparently tiring of this story. So the same
day of Fallon’s phone call to Issa’s staff, the IRS admitted it lost the
email of “five more workers who figure in the investigation into the alleged
targeting of conservative nonprofit groups,” as the Wall Street Journal
The Democratic response to the investigation has
thus gone from the eminently silly denial that anything untoward took place
to actively trying to thwart the investigation and run interference for the
IRS–which, in its targeting scheme, was only following the pronouncements of
high-level congressional Democrats, after all. And those Democrats have
gotten quite uncomfortable with the investigation. Democratic Sen. Carl
Levin has put together a report attacking the inspector general conducting
Such interference and/or stonewalling wouldn’t be
out of character for this DOJ. As the Washington Examiner reported
yesterday, according to the department’s inspector general “Department of
Justice senior officials have barred or delayed the inspector general there
from gaining access to documents crucial to high-visibility investigations.”
The “nothing to see here” brigade has lost any
semblance of credibility. In response, they’d like to make sure there’s
actually nothing to see by the time investigators come looking for it.
The IRS Scandal Day 490 ---
"IRS Worker Got $138,000 in Salary to Do "Nothing': And Union Saved
Her Job," --- by Paul Bedard, Washington Examiner, September
12, 2014 ---
Underperforming IRS workers are being protected
from firing by the National Treasury Employees Union in the tax agency that
let workers devote 500,000 hours — worth over $20 million in salary — on
labor activities last year, according to internal emails revealed Wednesday.
The House Ways and Means Committee said that emails
from former IRS executive Lois Lerner, being probed for her involvement in
the agency’s targeting of conservatives, show she vented at being blocked
from firing one worker who did “nothing,” yet still received up to $138,136
The email prompted Rep. Charles Boustany, R-La.,
the chairman of the oversight committee, to demand answers from IRS
Commissioner John Koskinen.
I don't know why the above IRS worker "did nothing" or whether she was also AWOL
from her office.
I know of a similar case in Maine where a high school teacher was AWOL on and
off for more than half an entire year but was prevented by the union from being
fired. She was eventually granted paid-leave for a second year before being
forced to resign. Purportedly parenting took priority over professional
responsibilities. Perhaps she would not have been forced to resign if she worked
for the IRS or lived in a more progressive country.
Do you know any tenured professors who do "almost nothing" year in and year
out for full-time salaries in higher education?
Parental leaves in Sweden versus the Czech Republic: Should the USA
adopt similar leave policies? ---
I wonder if there are limits for parents in those nations who have a new child
each year for upwards of ten years.
Our minister has ten children, but did not seek paid leaves?.
Pew Research: Who Makes Minimum Wages ---
Cool Senator Taxpayer Billing Tricks You Never Knew Existed --- Yeah
"O Audit, Where Art Thou?" by Matt Vespa, Townhall, September 12, 2014
Senator Landrieu is certainly not the worst expense abuser in the U.S. Senate
Sen. Mary Landrieu Ranks 25th in Taxpayer Money Spent on Travel (Shreveport
U.S. Congressional Salaries and Expenses ---
Rules That Were Made to be Broken
Baucus Resolution Sets Rules for Senators ---
Politicians: Are the only people in the world who CREATE problems
and then campaign against them ---
"How much do Canadian Senators spend on travel? Explore two years of
expenses," by Stuart A. Thompson and Bill Curry, Globe and Mail,
February 13, 2014 ---
Electric Car Owners Contribute Nothing or Almost Nothing to Road Repairs
While Gasoline and Diesel Fuel Vehicles Foot the Road Repair Bills
"Electric-Car Owners Get Taxed ($64 per year) for Not Paying Gas Taxes,"
by Alison Vekshin, Bloomberg Businessweek, June 6, 2013 ---
Tesla Model S owners now have a trillion mile warranty (of eight years) where
all those miles are a free ride to Tesla owners in terms of the road and bridge
depreciation they help cause. This is a wealth transfer that nobody seems to
talk about where poor people in old gas guzzlers are paying for the road and
bridge repairs enjoyed as a free good by rich Model S owners.
In Virginia electric car owners pay $64 per year for road repairs. Big deal.
Watch Each of the Last Four U.S. Presidents Announce That We're Bombing
New Jersey’s Credit Rating Downgraded for Eighth Time Under Christie:
Gov. Christie Calls the Rating Agencies Bums ---
"The Economic Advantages of an Independent Scotland," by Justin Fox,
Harvard Business Review Blog, September 12, 2014 ---
"Why Scotland Wants To Ditch England And Go It Alone," by Tomas Hirst,
Business Insider, September 11, 2014 ---
"Paul Krugman on Scottish independence: “The risks … are huge” The Times'
liberal columnist worries that an independent Scotland may become "Spain without
the sunshine" by Elias Isquith, Salon, September 9, 2014 ---
When teens don't fear felony arrests
Three 14 Year-Olds Tied to Vicious Purse Snatching Against Elderly Woman Have
35 Felony Arrests ---
After the 36th conviction they will defiantly commit more felonies knowing that
as teens they can get away with most anything except murder.
"The Genocide of Mideastern Christian: s Americans haven't suddenly turned
interventionist. They're moved by the Islamic State's particular evil,"
The Wall Street Journal, September 11, 2014 ---
President Obama would have been rocked the past few
months by five things. One is the building criticism from left and right
about his high need for relaxation—playing golf while the world burns.
Another is that he misread the significance and public power of the
beheadings of American journalists. Third, he has been way out of sync with
American public opinion on Islamic State, which must be all the more galling
because he thought he knew where Americans stood on the use of military
force. Fourth, with his poll numbers declining (32% approval for his
handling of foreign policy, according to The Wall Street Journal and NBC),
it has probably occurred to him that he is damaging not only his own but his
party's brand in foreign affairs. (Yes, George W. Bush did the same to his
party, but Mr. Obama was supposed to reverse, not follow, that trend.)
Fifth, he surely expects he is about to take a pounding from the antiwar
Most immediately interesting to me is the apparent
change of mind by Americans toward military action in the Mideast. The
president's long-reigning assumption is that a war-weary public has grown
more isolationist. But, again according to the WSJ/NBC poll, more than 6 in
10 back moving militarily against Islamic State. Politicians and pundits
believe that this is due to the gruesome, public and taunting murders of the
U.S. journalists—that Americans saw the pictures and freaked out, that their
backing of force is merely emotional.
I think they're missing a big aspect of this story.
A year ago the American people spontaneously rose
up and told Washington they would not back a bombing foray in Syria that
would help the insurgents opposed to Bashar Assad. That public backlash was
a surprise not only to the White House but to Republicans in Congress, who
were—and I saw them—ashen-faced after the calls flooded their offices. It
was such a shock to Washington that officials there still don't talk about
it and make believe it didn't happen.
Why was there such a wave of opposition? In part
because Americans had no confidence their leaders understood the
complications, history and realities of Syria or the Mideast. The previous
12 years had left them distrusting the American foreign-policy
establishment. Americans felt the U.S. itself needed more care and
attention. By 2013 there was a new depth of disbelief in Mr. Obama's
But there was another, powerful aspect to the
Evangelical Christians and conservative Catholics
who would normally back strong military action were relatively silent in
2013. Why? I think because they were becoming broadly aware, for the first
time, of what was happening to Christians in the Middle East. They were
being murdered, tortured, abused for their faith and run out of the region.
And for all his crimes and failings, Syria's justly maligned Assad was not
attempting to crush his country's Christians. His enemies were—the
jihadists, including those who became the Islamic State.
In the year since, the brutality against Middle
Eastern Christians, and Islamic State's ferocious anti-Christian agenda, has
left many Christians deeply alarmed. Jihadists are de-Christianizing the
Mideast, where Christianity began.
An estimated two-thirds of the Christians of Iraq
have fled that country since the 2003 U.S. invasion. They are being driven
from their villages in northern Iraq. They are terrorized, brutalized,
executed. This week an eyewitness in Mosul, which fell to Islamic State in
June, told NBC News the jihadists were committing atrocities. In Syria, too,
they have executed Christians for refusing to convert.
In roughly the past 18 months, all this has broken
through in Christian communities, largely by way of Christian media,
including Catholic news services and the Baptist press. The story has been
all over social media. Pope Francis has denounced what is happening; the
Vatican is talking about just-war theory.
Rep. Chris Smith, the New Jersey Republican who
chairs the House Foreign Affairs Subcommittee on Global Human Rights, this
week called what is happening "a genocide."
"It is a global phenomenon, but dramatically in the
Mideast," he said.
I told him I thought the journalists' beheadings
had put a public picture on a crisis of which Christians in America have now
"An emphatic yes, with exclamation points put after
it," he replied.
No one—at least not the United Nations or other
international bodies, and not the administration—seems to be keeping
official records. Mr. Smith suggested that when people don't really want you
to know the scale of a problem, they don't gather the numbers. He has
pressed both the U.S. government and the U.N. for statistics and
specifics—how many Christians have been killed, abused, sent fleeing and
from where. "It's all, 'I'll get back to you.' When they do, it's threadbare
answers that don't say a whole lot."
The anguish and indignation of American Christians
at what is being done, by Islamic State, to their brothers and sisters in
faith is surely part of the reason Americans are backing U.S. action against
the terror group.
It would surely also be a misreading of the polls
to announce the American public is suddenly "interventionist." There is no
reason to believe they have any appetite for romantic or aggressive forays
into invasions, occupations or nation-building efforts. What they want to
do—and they wanted to do it last month—is respond to a group that is
unusually evil, even by Middle Eastern standards.
There is also no reason to infer from the polls
that Americans hold to the illusion that moving on Islamic State would
create new order and peace in the Mideast. Those illusions tend to live more
in Washington than on-the-ground America. If Islamic State is hit hard
enough, it may be killed, but nothing else will be fixed. The Mideast will
continue in brutal chaos, but Islamic State, as Islamic State, will be done
or at least damaged, and surely that is worth something. At the very least a
message will be sent.
If the president were a more instinctive man, or
rather if his natural instincts were more in line with those of your average
American clinger, he would have moved quickly, sharply and without undue
drama. He would have bombed Islamic State when it was a showy army in the
field, its fighters driving stolen armored vehicles down highways in the
sand, in their black outfits, with their black flags. They are not
terrorists hiding in holes and safe houses. They are not doing Internet
showbiz from caves, they are seizing and holding territory. They say they
are the caliphate, and they intend to expand. They are killing and abusing
many, not only Christians. They are something new and deadly.
My guess is two things are not acceptable to the
American people. One is the full-scale commitment of scores of thousands of
troops to invade and occupy a country. The other is a diffident, confused,
unfocused, unserious campaign.
The American people are not suddenly recommitted to
a decadeslong drama. They do want to see bad guys taken out. Their
timetable, I suspect, would be "Let's start last month."
Yazidi Girl Tells Of Horrific Ordeal As An ISIS Sex Slave ---
Destroying ISIS should be 'No. 1 priority '
Elizabeth Warren, Democratic Senator
and Possible Presidential Candidate (someday)
"The French Government Has Collapsed, And It's Partly Paul Krugman's
Fault," by Rob Wile, Business Insider, August 25, 2014 ---
On Monday morning, the French
collapsed. All the ministers have resigned, and President Francois Hollande
will have to appoint new ones.
deserves some of the blame.
The incident that
immediately precipitated the resignation of French Prime Minister Manuel
Valls' cabinet was
an interview given by
Arnaud Montebourg, France's
minister to LeMonde, in which he protested his government's ongoing
As evidence of
that policy's failure, Montebourg cited the former Princeton professor and
New York Times columnist.
Here's the exchange:
LeMonde: Has Europe, and
France too in the past two years, focused too much on budget contraction?
That's not my observation, that's the diagnosis of financial institutions
across the world, starting with the IMF which, whose director, Christine
Lagarde, warned European leaders about an excess of budget consolidation.
Paul Krugman, a Nobel laureate,
also wrote on Aug. 13, "The nightmare scenario in
Europe is not a hypothetical. The news that industrial production has ground
to a halt raises the prospect of a new
recession in Europe — its primary
cause, austerity." These warnings have
also been sounded by other leaders of world powers including Barack Obama.
Montebourg's comments were supported by Hollande's
education minister, as well as his culture minister. Faced with de facto
insubordination Hollande laid off his whole government.
However Despite the noise France's cabinet
reshuffle was making Monday morning, it may not amount to much. As Krugman
also pointed out, European governments can now do only so much to address
severely weak underlying
fundamentals. Europe's fate mostly now lies in the hands of ECB Chief Mario
to fully understand the stakes but also faces
vocal monetary hawks out of eurozone member countries.
That may include
France itself. By accepting his own cabinet's resignation, Hollande is
signaling that he will remain committed to
his announced budget cuts and corporate tax reductions.
Meanwhile multiple reports indicate Montebourg and education minister Benoit
Hamon, who also lashed out at Hollande, won't survive into the new
satisfaction Montebourg ultimately receives may come at the grim price of
further economic malaise.
Veterans Health Administration is "a huge policy
success story, which offers important lessons for future health reform" because,
among other things, "it's free from the perverse incentives created when doctors
and hospitals profit from expensive tests and procedures."
Former Princeton University Economics Professor and Political
Activist Paul Krugman
Paul Krugman has butchered numbers when writing
about fiscal policy in nations such as
the United Kingdom.
Daniel J. Mitchell ---
"Is Paul Krugman Leaving Princeton In Quiet Disgrace?" by Ralph Benki,
Forbes, July 14, 2014 ---
Professor Paul Krugman is
leaving Princeton. Is he leaving in disgrace?
Not long, as these things go, before his departure
was announced Krugman thoroughly was indicted and publicly eviscerated for
intellectual dishonesty by Harvard’s Niall Ferguson in a hard-hitting
three-part series in the Huffington Post, beginning
here, and with a coda in
Project Syndicate, all
summarized at Forbes.com. Ferguson, on
Where I come from … we do not fear bullies. We
despise them. And we do so because we understand that what motivates
their bullying is a deep sense of insecurity. Unfortunately for Krugtron
the Invincible, his ultimate nightmare has just become a reality. By
applying the methods of the historian – by quoting and contextualizing
his own published words – I believe I have now made him what he richly
deserves to be: a figure of fun, whose predictions (and proscriptions)
no one should ever again take seriously.
Princeton, according to
Bloomberg News, acknowledged Krugman’s
departure with an extraordinarily tepid comment by a spokesperson. “He’s
been a valued member of our faculty and we appreciate his 14 years at
Shortly after Krugman’s departure was announced
no less than the revered Paul Volcker, himself a Princeton alum, made a
comment — subject unnamed — sounding as if directed at Prof. Krugman. It
sounded like “Don’t let the saloon doors hit you on the way out. Bub.”
Daily Princetonian (later reprised by the
Wall Street Journal, Volcker
stated with refreshing bluntness:
The responsibility of any central bank is price
stability. … They ought to make sure that they are making policies that
are convincing to the public and to the markets that they’re not going
to tolerate inflation.
This was followed by a show-stopping statement:
“This kind of stuff that you’re being taught at Princeton disturbs me.”
Taught at Princeton by … whom?
Paul Krugman, perhaps? Krugman, last year, wrote
an op-ed for the New York Times entitled Not
Enough Inflation. It betrayed an
extremely louche, at best, attitude toward inflation’s insidious
dangers. Smoking gun?
Volcker’s comment, in full context:
The responsibility of the government is to have
a stable currency. This kind of stuff that you’re being taught at
Princeton disturbs me. Your teachers must be telling you that if you’ve
got expected inflation, then everybody adjusts and then it’s OK. Is that
what they’re telling you? Where did the question come from?
Is Krugman leaving in disgrace? Krugman really
is a disgrace … both to Princeton and to the principle of monetary
integrity. Eighteenth century Princeton (then called the College of New
Jersey) president John Witherspoon, wrote, in his
Essay on Money:
Let us next consider the evil that is done by
paper. This is what I would particularly request the reader to pay
attention to, as it was what this essay was chiefly intended to show,
and what the public seems but little aware of. The evil is this: All
paper introduced into circulation, and obtaining credit as gold and
silver, adds to the quantity of the medium, and thereby, as has been
shown above, increases the price of industry and its fruits.
“Increases the price of industry and its fruits?”
That’s what today is called “inflation.”
Inflation is a bad thing. Period. Most of all it
cheats working people and those on fixed incomes who Krugman pretends to
champion. Volcker comes down squarely, with Witherspoon, on the side of
monetary integrity. Krugman, cloaked in undignified sanctimony, comes down,
again and again, on the side of … monetary finagling.
Krugman consistently misrepresents his
opponents’ positions, constructs fictive
straw men, addresses marginal figures, and
ignores inconvenient truths set forward by figures of probity such as the
Bank of England and the
thoughtful work such as that by Member of
Parliament (with a Cambridge Ph.D. in economic history) Kwasi Kwarteng, and,
right here at home, respected thought leaders such as
Steve Forbes and
Lewis E. Lehrman (with whose
writer has a professional affiliation).
Continued in article
Bob Jensen's threads on professors who plagiarize or otherwise cheat (e.g.
create phony data or cherry pick data) ---
Princeton's Nobel Laureate economist and political activist Paul Krugman is
sometimes known to cherry pick data or even invent data in order to make a
political point ---
Paul Krugman ---
Professor Krugman is now moving to CUNY as an endowed professor of economics.
. . .
Krugman's columns have drawn criticism as well as
praise. A 2003 article in The Economist[ questioned Krugman's
"growing tendency to attribute all the world's ills to George Bush," citing
critics who felt that "his relentless partisanship is getting in the way of
his argument" and claiming errors of economic and political reasoning in his
columns. Daniel Okrent, a former The New York Times ombudsman, in his
farewell column, criticized Krugman for what he said was "the disturbing
habit of shaping, slicing and selectively citing numbers in a fashion that
pleases his acolytes but leaves him open to substantive assault.
"The Missing Data in Krugman’s German Austerity Narrative" Daniel J.
Mitchell, Townhall, February 25, 2014 ---
There’s an ongoing debate about
Keynesian economics, stimulus spending, and
versions of fiscal austerity,
and regular readers know I do everything possible to explain that you can
promote added prosperity by reducing the
burden of government spending.
. . .
But here’s the problem with his article. We know
from the (misleading) examples above
(not quoted here) that he’s complained about supposed
austerity in places such as the United Kingdom and France, so one would
think that the German government must have been more profligate with the
After all, Krugman wrote they haven’t “imposed a
lot of [austerity] on themselves.”
So I followed the advice in Krugman’s “public
service announcement.” I didn’t just repeat what people have said. I dug
the data to see what
happened to government spending in various nations.
And I know you’ll be shocked to see that Krugman
was wrong. The Germans have been more frugal (at least in the sense of
increasing spending at the slowest rate) than nations that supposedly are
guilty of “spending cuts.”
"The criminalisation of American business: Companies must be
punished when they do wrong, but the legal system has become an extortion racket,"
The Economist, August 30, 2014 ---
WHO runs the world’s most lucrative shakedown
operation? The Sicilian mafia? The People’s Liberation Army in China? The
kleptocracy in the Kremlin? If you are a big business, all these are less
grasping than America’s regulatory system. The formula is simple: find a
large company that may (or may not) have done something wrong; threaten its
managers with commercial ruin, preferably with criminal charges; force them
to use their shareholders’ money to pay an enormous fine to drop the charges
in a secret settlement (so nobody can check the details). Then repeat with
another large company.
The amounts are mind-boggling. So far this year,
Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs and other banks
have coughed up close to $50 billion for supposedly misleading investors in
mortgage-backed bonds. BNP Paribas is paying $9 billion over breaches of
American sanctions against Sudan and Iran. Credit Suisse, UBS, Barclays and
others have settled for billions more, over various accusations. And that is
just the financial institutions. Add BP’s $13 billion in settlements since
the Deepwater Horizon oil spill, Toyota’s $1.2 billion settlement over
alleged faults in some cars, and many more.
In many cases, the companies deserved some form of
punishment: BNP Paribas disgustingly abetted genocide, American banks
fleeced customers with toxic investments and BP despoiled the Gulf of
Mexico. But justice should not be based on extortion behind closed doors.
The increasing criminalisation of corporate behaviour in America is bad for
the rule of law and for capitalism (see article).
No soul, no body? No problem
Until just over a century ago, the idea that a
company could be a criminal was alien to American law. The prevailing
assumption was, as Edward Thurlow, an 18th-century Lord Chancellor of
England, had put it, that corporations had neither bodies to be punished nor
souls to be condemned, and thus were incapable of being “guilty”. But a case
against a railway in 1909, for disobeying price controls, established the
principle that companies were responsible for their employees’ actions, and
America now has several hundred thousand rules that carry some form of
criminal penalty. Meanwhile, ever since the 1960s, civil “class-action
suits” have taught managers the wisdom of seeking rapid, discreet
settlements to avoid long, expensive and embarrassing trials.
The drawbacks of America’s civil tort system are
well known. What is new is the way that regulators and prosecutors are in
effect conducting closed-door trials. For all the talk of
public-spiritedness, the agencies that pocket the fines have become profit
centres: Rhode Island’s bureaucrats have been on a spending spree courtesy
of a $500m payout by Google, while New York’s governor and attorney-general
have squabbled over a $613m settlement from JPMorgan. And their power far
exceeds that of trial lawyers. Not only are regulators in effect judge and
jury as well as plaintiff in the cases they bring; they can also use the
threat of the criminal law.
Financial firms rarely survive being indicted on
criminal charges. Few want to go the way of Drexel Burnham Lambert or E.F.
Hutton. For their managers, the threat of personal criminal charges is
career-ending ruin. Unsurprisingly, it is easier to empty their
shareholders’ wallets. To anyone who asks, “Surely these big firms wouldn’t
pay out if they knew they were innocent?”, the answer is: oddly enough, they
Perhaps the most destructive part of it all is the
secrecy and opacity. The public never finds out the full facts of the case,
nor discovers which specific people—with souls and bodies—were to blame.
Since the cases never go to court, precedent is not established, so it is
unclear what exactly is illegal. That enables future shakedowns, but hurts
the rule of law and imposes enormous costs. Nor is it clear how the
regulatory booty is being carved up. Andrew Cuomo, the governor of New York,
who is up for re-election, reportedly intervened to increase the state
coffers’ share of BNP’s settlement by $1 billion, threatening to wield his
powers to withdraw the French bank’s licence to operate on Wall Street. Why
a state government should get any share at all of a French firm’s fine for
defying the federal government’s foreign policy is not clear.
I’ll see you in court—in another life
The best thing would be for at least some of these
cases to go to proper trial: then a few of the facts would spill out. That
is hardly in the interests of the regulators or their managerial prey, but
shareholders at least should push for that. Two senators, Elizabeth Warren
and Tom Coburn, have put forward a bill to make the terms of such
settlements public, which would be a start. Prosecutors and regulators
should also be required to publish the reasons why, given the gravity of
their initial accusations, they did not take the matter all the way to
In the longer term, two changes are needed to the
legal system. The first is a much clearer division between the civil and
criminal law when it comes to companies. Most cases of corporate malfeasance
are to do with money and belong in civil courts. If in the course of those
cases it emerges that individual managers have broken the criminal law, they
can be charged.
Continued in article
"DOJ To Give Money From Bank Of America Settlement To Liberal Activist
Groups," Yahoo News, August 22, 2014 ---
The groups benefitting from the lawsuit, according
to Investor’s Business Daily, are the National Council of La Raza, Operation
Hope, National Community Reinvestment Coalition, and Neighborhood Assistance
Corporation of America. The money also went to “delinquent borrowers” in
Chicago, Oakland, Detroit, Philadelphia, and other major “Democrat
“This is a wealth redistribution scheme disguised
as a lawsuit,” Tom Fitton, president of Judicial Watch, told The Daily
Caller. “And who benefits from the distribution? Interest groups the
administration relies on, outside interest groups, allies and politicians in
communities trying to benefit as well.”
Fitton noted that these liberal groups are
basically what’s left of the Association of Community Organization for
Reform Now (ACORN) network, and that President Barack Obama has ties to
“You have La Raza that’s getting money, their
former head is at the White House in a top position whose funding from the
Census has gone up immensely under the Obama administration,” Fitton said.
La Raza, Operation Hope, National Community
Reinvestment Coalition, and Neighborhood Assistance Corporation of America
have all intimidated banks to give loans to minorities, even if they can’t
afford to pay them back.
This is part of an ongoing scheme in which the DOJ
puts the money it has gotten from bank settlementsin a slush fund and then
funneled the money to liberal groups. Judicial Watch points out that liberal
groups — many of which are the same ones benefiting from this lawsuit — also
received money from multi-billion settlements from JP Morgan Chase and
Citibank, as well as a $335 million settlement from Countrywide Financial
“What we need is an honest Justice Department run
by people who make a commitment to the rule of law rather using their power
to extort and benefit more government and their political allies.” Fitton
said. “This is no better than Tammany Hall.”
It's hard to feel sorry for the bailed out banks, but in fairness BofA did
not need to be bailed out until the government forced it to acquire
Countrywide and Merrill Lynch. Most of the other big banks, however, needed
bailing out with almost a trillion in government loans.
It cost Bank of America $17 billion to do a favor for 2007
Treasury Secretary Hank Paulson who was stuck with the
dastardly Countrywide Financial and all its poisoned
mortgages. Until then BofA had no poisoned mortgages and
really did not want to acquire Countrywide's mess.
According to Ken Lewis Secretary Paulson committed extortion by
threatening the job of Ken Lewis who was then CEO of BofA. All
the criminal activity was done at Countrywide before it was
acquired by BofA. The same can be said of Merrill Lynch that was
also forced on BofA with arm twisting, although Merrill Lynch
was more involved in the poisoned CDO rackets.
Then the government's DOJ in 2014 turned around and sued BoA for
Countrywide's misdeeds so the DOJ could support its liberal causes
in the name of "justice." It
cost BofA $17 billion to do a favor for the ungrateful government
And the beat goes on so to speak.
"Welcome to the
new capitalism," by Star Parker, Townhall, May 4, 2009 ---
Frank recently praised Bank of America chairman
(now ex-chairman) Ken Lewis for acting in "the public interest" for
caving in to bribes and threats from former Treasury Secretary Hank
Paulson and Federal Reserve chairman Ben Bernanke regarding B of A's
takeover of Merrill Lynch.
Lewis wanted to back out the deal last year
when he discovered the massive scope of Merrill's losses. But Paulson
and Bernanke decided that Merrill shouldn't fail, so they bribed Lewis
with $20 billion of taxpayer funds, instructed him to conceal the
agreement from his shareholders, and told him his job would be on the
line if he didn't play ball -- which he did.
These sordid details have come to light in an
investigation being conducted by New York State Attorney General Andrew
So if such behavior is what Barney Frank calls
economic patriotism, what might constitute subversive behavior?
When Congress moved last year to politically
engineer changes in terms of existing mortgages in the name of bailing
out distressed homeowners, Bill Frey, who manages a fund that holds
mortgage-backed securities, protested.
Frey told the New York Times, "Any investor in
mortgage-backed securities has a right to insist that their contract be
Contracts? Private property? That's the old
Frank fired off a letter to Frey saying he was
"outraged...that you are actively opposing our efforts to achieve
diminution in foreclosures by voluntary efforts." Frank then clarified
his idea of "voluntary" by summoning Frey to testify in Washington,
noting that "if this cannot be arranged on a voluntary basis, then we
will pursue further steps."
The House has passed legislation, which is now
in the Senate, containing Frank's idea of "diminution in foreclosures by
voluntary efforts." It amounts to -- what a surprise -- taxpayer funded
bribes to abrogate existing mortgage contracts and provisions for legal
protection for doing so.
Frey and others managing funds for investors
holding billions in mortgage-backed securities are fighting back. We're
not talking Bernie Madoff here. We're talking about funds that have
invested in these securities on behalf of pension funds and 401Ks.
Financial institutions -- banks like B of A and
Wells Fargo -- originate mortgages and then sell them off to be sliced
and diced up into bonds that individual investors can purchase. This
financial innovation has been a boon for providing capital and liquidity
to our mortgage markets.
The originating bank, however, stays in the
picture to service the loan, collecting and processing the payments.
Contractual agreements exist between the bank and the bondholders that
this will be done in good faith, according to the terms of the original
For a host of reasons, mostly massive
government meddling and social engineering, the mortgage market exploded
and thus, we've got homeowners who can't make payments.
The House passed bill proposes to bail these
folks out by paying banks servicing the mortgages $1000 for each one
they re-finance, cutting interest rates and payments. Those who actually
own the loans -- the bondholders -- are left out to pasture. And, the
bill protects servicing banks from lawsuits to which they would normally
be exposed for breaking their contracts.
So taxpayers will subsidize banks to refinance
the bad loans they originated but no longer own, homeowners who borrowed
beyond their means get bailed out, and investors -- the bondholders --
are left to bear the costs. On top of this, many of these same banks
originated second mortgages on these same homes. The second mortgages,
which the banks still own, bear even higher interest rates because they
are allegedly more risky. Yet, they will be left secure and undisturbed.
Aside from the costs that our society will bear
as law and contracts no longer have meaning, Frey rightly points out
that it all will just make future mortgage borrowing more expensive. Who
will take risks to lend when politicians can change contracts at the
drop of a hat?
Welcome to the new capitalism. Where
politicians rule, irresponsible behavior is rewarded, and theft is
"Busting Bank of America: A case study in how to spread systemic
financial risk," The Wall Street Journal, April 27, 2009 ---
The cavalier use of brute government force has
become routine, but the emerging story of how Hank Paulson and Ben
Bernanke forced CEO Ken Lewis to blow up Bank of America is still
shocking. It's a case study in the ways that panicky regulators have so
often botched the bailout and made the financial crisis worse.
In the name of containing "systemic risk," our
regulators spread it. In order to keep Mr. Lewis quiet, they all but
ordered him to deceive his own shareholders. And in the name of
restoring financial confidence, they have so mistreated Bank of America
that bank executives everywhere have concluded that neither Treasury nor
the Federal Reserve can be trusted.
Mr. Lewis has told investigators for New York
Attorney General Andrew Cuomo that in December Mr. Paulson threatened
him not to cancel a deal to buy Merrill Lynch. BofA had discovered
billions of dollars in undisclosed Merrill losses, and Mr. Lewis was
considering invoking his rights under a material adverse condition
clause to kill the merger. But Washington decided that America's
financial system couldn't withstand a Merrill failure, and that BofA had
to risk its own solvency to save it. So then-Treasury Secretary Paulson,
who says he was acting at the direction of Federal Reserve Chairman
Bernanke, told Mr. Lewis that the feds would fire him and his board if
they didn't complete the deal.
Mr. Paulson told Mr. Lewis that the government
would provide cash from the Troubled Asset Relief Program (TARP) to help
BofA swallow Merrill. But since the government didn't want to reveal
this new federal investment until after the merger closed, Messrs.
Paulson and Bernanke rejected Mr. Lewis's request to get their
commitment in writing.
"We do not want a disclosable event," Mr. Lewis
says Mr. Paulson told him. "We do not want a public disclosure." Imagine
what would happen to a CEO who said that.
After getting the approval of his board, Mr.
Lewis executed the Paulson-Bernanke order without informing his
shareholders of the material events taking place at Merrill. The merger
closed on January 1. But investors and taxpayers had to wait weeks to
learn that the government had invested another $20 billion plus loan
portfolio insurance in BofA, and that Merrill had lost a staggering $15
billion in the last three months of 2008.
This was the second time in three months that
Washington had forced Bank of America to take federal money. In his
testimony to the New York AG's office, Mr. Lewis noted that an earlier
TARP investment in his bank had a "dilutive effect" on existing
shareholders and was not requested by BofA. "We had not sought any
funds. We were taking 15 [billion dollars] at the request of Hank
[Paulson] and others," Mr. Lewis testified.
But it is the Merrill deal that raises the most
troubling questions. Evaluating the policy of Messrs. Bernanke and
Paulson on their own terms, this transaction fundamentally increased
systemic risk. In order to save a Wall Street brokerage, the feds spread
the risk to one of the country's largest deposit-taking banks. If they
were convinced that Merrill had to be saved, then they should have made
the public case for it. And the first obligation of due diligence is to
make sure that their Merrill "rescuer" of choice -- BofA -- had the
capacity to bear the losses. Instead they transplanted the Merrill risk
to BofA shareholders, the bank's depositors and the taxpayers who ensure
those deposits. And then they had to bail out BofA too.
Messrs. Bernanke and Paulson also undermined
the transparency that is a vital source of investor confidence.
Disclosure is not a luxury to be enjoyed only when markets are rising.
It is the foundation of the American regulatory system and a reason
investors have long sought to keep their money within U.S. borders.
Could either man have believed that their actions wouldn't eventually
come to light, with all of the repercussions for their bank rescue
Mr. Paulson told Mr. Cuomo's investigators that
he also kept former SEC Chairman Christopher Cox out of the loop while
forcing BofA to rescue Merrill. Mr. Cox wasn't the only one. Mr. Paulson
and Mr. Bernanke both sit on the Financial Stability Oversight Board,
comprised of federal regulators who oversee TARP. Two days after Mr.
Lewis told the dynamic duo that Merrill's losses were exploding and that
he was looking for a way out, Mr. Bernanke chaired and Mr. Paulson
attended a meeting of this board. Minutes of the meeting show no mention
of BofA or Merrill.
At the next meeting on January 8, a week after
the merger had closed, the minutes again make no mention of either
regulator telling their colleagues that they had committed tens of
billions of dollars. Yet the minutes helpfully note that among the
topics discussed were "coordination, transparency and oversight."
Meeting minutes suggest Messrs. Bernanke and
Paulson finally informed fellow board members at 4:30 p.m. on January
15, after news outlets had already reported a pending new taxpayer
investment in BofA. What exactly did Mr. Bernanke and Mr. Paulson tell
their colleagues about their plans for TARP prior to January 15?
Let's hope they treated their government
colleagues better than they've treated Ken Lewis, whom they hung out to
dry. After making him an offer he could hardly refuse, they've let him
endure a public flogging from shareholders and the press, lengthy
discussions with prosecutors, plus new hiring and compensation rules
that limit his bank's ability to compete.
No wonder no banker in his right mind trusts
the Fed or Treasury, and no wonder nobody but Pimco and other Treasury
favorites is eager to invest in the TALF, the PPIP, or any of the other
programs that require trusting the government as a business partner.
The political class has spent the last few
months blaming bankers for everything that has gone wrong in the
financial system, and no doubt many banks have earned public scorn. But
Washington has been complicit every step of the way, from the Fed's easy
money to the nurturing of Fannie Mae and Freddie Mac, and since last
autumn with regulatory and Congressional panic that is making financial
repair that much harder. The men who nearly ruined Bank of America have
some explaining to do.
It is interesting to compare the song Ken Lewis was singing before the
purchase of Merrill Lynch versus the song he's now singing about "his"
burdening BofA with the billions of Merrill Lynch's toxic investments. You
can watch and hear him literally brag that BofA was in stronger shape than
all the other large U.S. banks because it sold most of its sub-prime
mortgages to other buyers (like Fannie, Freddie, and Merrill Lynch) rather
than to retain BofA ownership of such poison. Note his bragging in an
interview on CBS Sixty Minutes on October 19, 2009.
I watched the show on October 19, 2008, in a CBS
Sixty Minutes TV module, when Leslie Stahl interviewed the CEO of Bank
of America, Ken Lewis. Mr. Lewis was charming and forceful when he bragged
heavily that BofA was much stronger than the other failing banks and was
only accepting some Bailout money as a “patriotic duty.” He said BofA really
had no need for Bailout cash since his truly giant international bank was in
such strong shape even after the subprime scandal first made the news.
Belatedly, Ken Lewis is claiming that the U.S. Treasury Department and
Federal Reserve teamed up against him and forced him to take on the billions
of Merrill Lynch's poison. If this was indeed the case, it would've been a
great opportunity for Mr. Lewis to make a public stand against the
near-ruination of BofA. Think of what a hero he would've become in the eyes
of BofA shareholders and if he would've drawn a line and dared Paulson to
fire him for refusing to BofA shareholders to gulp down Merrill Lynch
My guess is that Paulson would've instead sweetened the deal by having
the government dilute Merrill Lynch poison such as by making BofA liable for
15% of Merrill Lynch's subprime and CDO losses.
After the purchasing Merrill Lynch, the sour grapes cry baby Ken Lewis
does not come across as having CEO quality and guts!
Bob Jensen's threads on all this bank bailout stupidity are at
I envision a Disney cartoon with Mickey Mouse and Donald Duck tugging on
hydrogen and oxygen atoms to tear them away from their covalent bonds.
"Hydrogen production breakthrough could herald cheap green energy,"
PhysOrg, September 12, 2014 ---
"Germany and Canada Are Building Water Splitters to Store Renewable
Energy: Improving technology is making electrolysis a viable way to store
excess renewable energy," by Kevin Bullis, MIT Technology Review,
August 27, 2014 ---
Maybe the Japanese were right all along to place their bets on fuel cell
"Scientists develop a water splitter that runs on an ordinary AAA battery,"
PhysOrg, August 22, 2014 ---
In theory fuel cells may eventually replace big electric power plants and those
ugly transmission lines vulnerable to wind and ice.
Corporate Tax Inversions: The Beautiful and the Ugly
From the CFO Journal's Morning Ledger on August 27, 2015
More corporate finance divisions are looking into the
details of what an inversion would actually do for their tax bill, even if
their companies ultimately aren’t willing to take the plunge and decamp for
a foreign country,
CFOJ’s Emily Chasan reports.
A foreign domicile often will mean a lower overall tax
rate, but a thorough analysis must also factor the cost of moving some
management overseas, reorganizing the company, the sustainability of a move
and its political consequences.
And the political consequences, though at this point
mostly limited to accusations of unpatriotic behavior, could become more
serious if legislators make good on their threats. The Treasury Department
reviewing its options for limiting the tax benefits
of an inversion. And since
Burger King Worldwide Inc. announced its intention
to relocate to Canada through a merger with
Tim Hortons Inc., the iconic
burger chain has come under direct criticism from lawmakers. Sen. Dick
Durbin (D., Ill.) said, “I’m disappointed in Burger King’s decision to
renounce their American citizenship” and added that “with every new
corporate inversion, the tax burden increases on the rest of us to pay what
these corporations won’t.” The companies say the deal is not about taxes,
but about growth (more on that below).
But the Burger King deal highlights what chief
financial officers are learning in their investigations of inversion deals:
that the tax benefits are not so straightforward, and often lurk in the
details. Writing for Heard on the Street, John Carney notes that
Canada offers a generous tax break
for profits from countries with which it has a tax treaty. These get counted
as “exempt surplus,” which isn’t taxed at all by Canada. And in some of
Burger King’s fastest-growing markets, a Canadian domicile would also give
it the benefit of “tax sparing”—a system that credits companies even for
taxes that aren’t actually paid as part of a complex incentive to invest in
"Microsoft Has Nearly $93 Billion In Overseas Cash, And It's Reduced Its Tax
Bill By Almost $30 Billion," by Julie Bort, Business Insider, August 23,
Whopper Deal --- Burger King Headquarters May Move to Canada: There are
tax savings in addition to a purchase of Canada's Tim Horton's Inc.
From the CFO Journal's Morning Ledger on August 25, 2015
The inversion wave that overtook the pharmaceutical
and drug retail industries continues to spread, and now one of America’s
most storied hamburger chains is looking to decamp for a lower-tax domicile
to the north.
Burger King Worldwide Inc.
in talks to buy Canadian coffee-and-doughnut chain
Tim Hortons Inc. in a tax
inversion that would shift the hamburger seller’s base to Canada. Canada’s
federal corporate tax rate was lowered to 15% in 2012.
And despite the saber-rattling from American lawmakers
who fear that such moves will drain U.S. tax coffers, Burger King is
planning to make the move without the protection of a provision that would
let it walk away from the deal even if the tax benefits are taken away
through new legislation. That may suggest that American big business
perceives the U.S. government as unwilling, or incapable, of making any
serious moves to restrain inversions.
"One Way to Fix the Corporate Tax: Repeal It," by by N. Gregory Mankiw
(Harvard), The New York Times, August 23, 2014 ---
“Some people are calling these companies ‘corporate
That is what President Obama said last month about
the recent wave of tax inversions sweeping across corporate America, and he
did not disagree with the description. But are our nation’s business leaders
really so unpatriotic?
A tax inversion occurs when an American company
merges with a foreign one and, in the process, reincorporates abroad. Such
mergers have many motives, but often one of them is to take advantage of the
more favorable tax treatment offered by some other nations.
Such tax inversions mean less money for the United
States Treasury. As a result, the rest of us end up either paying higher
taxes to support the government or enjoying fewer government services. So
the president has good reason to be concerned. Continue reading the main
story Related Coverage
Walgreen on Wednesday said it would take over the
British pharmacy retailer Alliance Boots but would not, after all, move its
headquarters overseas to save on taxes. Tax Reform: Inverting the Debate
Over Corporate InversionsAUG. 6, 2014
Yet demonizing the companies and their executives
is the wrong response. A corporate chief who arranges a merger that
increases the company’s after-tax profit is doing his or her job. To forgo
that opportunity would be failing to act as a responsible fiduciary for
Of course, we all have a responsibility to pay what
we owe in taxes. But no one has a responsibility to pay more.
The great 20th-century jurist Learned Hand — who,
by the way, has one of the best names in legal history — expressed the
principle this way: “Anyone may arrange his affairs so that his taxes shall
be as low as possible; he is not bound to choose that pattern which best
pays the treasury. There is not even a patriotic duty to increase one’s
If tax inversions are a problem, as arguably they
are, the blame lies not with business leaders who are doing their best to do
their jobs, but rather with the lawmakers who have failed to do the same.
The writers of the tax code have given us a system that is deeply flawed in
many ways, especially as it applies to businesses.
The most obvious problem is that the corporate tax
rate in the United States is about twice the average rate in Europe.
National tax systems differ along many dimensions, making international
comparisons difficult and controversial. Yet simply cutting the rate to be
more in line with norms abroad would do a lot to stop inversions.
A more subtle problem is that the United States has
a form of corporate tax that differs from that of most nations and doesn’t
make much sense in the modern global economy.
A main feature of the modern multinational
corporation is that it is, truly, multinational. It has employees, customers
and shareholders around the world. Its place of legal domicile is almost
irrelevant. A good tax system would focus more on the economic fundamentals
and less on the legal determination of a company’s headquarters.
Most nations recognize this principle by adopting a
territorial corporate tax. They tax economic activity that occurs within
their borders and exclude from taxation income earned abroad. (That
foreign-source income, however, is usually taxed by the nation where it is
earned.) Six of the Group of 7 nations have territorial tax systems.
Continued in article
Burger King's "Tax Free" Inversion
"Buffett's 'Burger Tim' Inversion Adds Tax Bonus For Shareholders," by
Robert W. Wood, Forbes, August 29, 2014 ---
You have to hand it to Warren
Buffett, the 83-year old billionaire who has
largely managed to avoid flack for doing a deal that seems to contradict his
“raise my taxes” mantra. Mr. Buffett is nothing if not savvy. Sure, Burger
King is going Canadian, an ideal way for a company
to reduce U.S. taxes on foreign income. Admittedly, there were outcries from
customers and shareholders who want the classic burger to stay here. A
Whopper on a donut bun?
But it appears that Mr. Buffett and Burger King may
have struck a unique balance that hits a kind of sweet spot. The companies
may not integrate, and besides, each investor seems to have been told ‘to
have it your way.’ As noted in whopper
reason shareholders should hate inversions,
most inversions aren’t attractive to long-term
shareholders who face a big tax hit. An inversion is a taxable swap to the
Tax bills when you don’t receive cash are
especially painful. And that’s where this deal is a kind of mashup, part
inversion, part something else. The Burger King deal is quite unusual in
bending over backwards to keep Burger King shareholders from getting the
usual inversion tax hit. But can everyone have it their way?
One of Burger King’s main owners is Brazilian
private-equity firm 3G Capital Management. Mr. Buffett seems to like working
with them, as he did when it bought H.J. Heinz Co. The Burger King deal
appears not to have been born as an inversion, but it morphed into one and
that altered the tax treatment for American shareholders including
Yet Burger King shareholders, including 3G Capital,
will not automatically owe taxes on their capital gains if they play their
cards right. In most inversions, shareholders are treated as selling their
shares so will owe U.S. taxes, even if they don’t actually cash out. Say you
bought stock for $10 that is now worth $110. You swap your old shares for
shares worth $110. Sounds OK, but not if you receive no cash and receive a
tax bill from the IRS for 23.8% on your paper gain.
But this inversion with bonus fries let’s
shareholders choose to receive either common stock in the combined company
or units in a newly formed Ontario limited partnership, or a combination of
the two. As Warren
Buffett funds global donut-burger behemoth,
it’s not clear if there are enough units to cover
It does appear that choosing partnership units
should let shareholders defer taxes on their paper gains until they sell the
units or convert them into common stock. They are supposed to be able to do
that a year after the deal closes. It also looks as though hanging on to the
units until death could eliminate the tax entirely. But if everyone wants
the partnership units, I’m not sure what happens. Still, you have to hand it
to BK for creative ways to
avoid the U.S. anti-inversion penalty.
3G Capital is presumably in the driver’s seat, and
it apparently intends to take all partnership units for its stake. That
stake is huge, worth over $7.5 billion. And since the value has more than
doubled in the last two years, those billions in gains would otherwise be
taxed. It makes you wonder whether the deal got its unusual tax structure to
benefit 3G Capital or the little guy.
Continued in article
Beware: 2013-14 AAUP Faculty Salary Survey ---
- The "salary equality" percentages are misleading for R1 research
universities in that most any given department may be paying new men and new
women hires equal salary and benefits and supplements (like summer research
stipends). One problem is that many departments such as those in science,
engineering, information technology, math, accounting, finance, etc. have
more men than women due to more men getting new doctorates in those
disciplines. If a department in a R1 university has more men and women the
probabilities are also higher that men will become research stars in those
departments (even if the probabilities of any professor becoming a star
is equal for men and women). Those that become stars are usually paid
much more (to keep them from going elsewhere) and skew the average salaries
for men to be higher than women when there are more male stars than women
stars in a given department or in a given university.
- Among R1 research universities average salaries are usually higher where
living costs are the highest, especially if housing subsidies are factored
into the compensations. For example, we expect Columbia University to pay
more on average for faculty than Cornell University because living costs are
so much higher in Manhattan than Ithaca. Similarly, it would be almost
impossible for Stanford University and NYU to compete for faculty without
generous housing allowances. Income taxes are also a consideration. There
are no income taxes at the University of Washington and the University of
Texas. Income taxes are killers in New York, California, and Illinois (e.g.
taxes for University of Chicago faculty).
- Laws of supply and demand must be recognized in disciplines where
student demand is very great and rising relative to disciplines where
student demand is steady or even declining. For example, even though more
and more students are leaning toward majoring in accounting (employment
opportunities abound) the number of new Ph.D. graduates in accounting in
North America in total will only be about 130. Starting salaries for these
new accounting Ph.D. graduates in research universities will be $150,000
plus summer stipends (usually paid from accounting firm donations) plus
research stipends ranging from $5,000 to $30,000 per year in the R1
Why are there so few new accounting Ph.D. graduates? The major constraint is
capacity in AACSB-accredited universities. Doctoral mills like the
University of Texas and the University of Illinois that used to (in the
1970s) graduate 10 or more new accounting doctoral students each year have
shrunk capacity to one or two graduates per year for a variety of reasons.
- Faculty salaries are always skewed downward by the many, many
bottom-feeding colleges that increasingly are on the margin of bankruptcy.
As more and more students opt for lower tuition at their state-supported
universities, many private colleges are finding it more and more difficult
to meet their existing payrolls. Increasingly they are just not competing
for higher paid tenure track faculty and are increasingly relying upon
lower-paid adjunct faculty. Also tenure rejects in fields like accounting
are willing to take much less just to get tenure track jobs in schools they
would not have considered when they were new Ph.D. graduates.
America's Disappearing Jobs ---
The highest rate of decline in is "fallers" who cut down trees for paper,
lumber, and energy uses. For a few days I watched lumberjacks at work cutting
down a few acres of timber across from our cottage. I don't think the
lumberjacks even owned a chain saw or an axe. They moved in about $3 million
worth of logging machinery, including the cutting machine that downs the trees
and the chipping machine that swallows up whole trees (sometimes three or four
or more trees at a time) and fills an 18-wheel truck with wood chips in about 40
minutes on average. The trees themselves are untouched by the lumberjacks
running the big machinery. The wood chips were hauled off to a power plant in
nearby Whitefield, NH.
You can see my photographs of this logging operation at
From the CFO Journal's Morning Ledger on August 28, 2014
Currency spat strands Venezuela fliers ---
With Venezuela holding back on releasing $3.8 billion in airline-ticket
revenue because of strict currency controls,
Delta Air Lines Inc.,
and other airlines have slashed service to Venezuela by half since January.
The flights that are left are too expensive for many Venezuelans to afford,
with economy-class tickets to New York easily topping $3,000, six times the
price of a year ago.
...Betrayal was in the news again today,
when Britain was rocked by allegations that the entire English town of
Rotherham had for years been in the grip of an “Asian” gang which raped
or kidnapped or abused some 1,400 mostly white underaged girls. The town
authorities apparently knew as did the police, but they suppressed the
facts out of the fear of being called ‘racist’ and more probably, the
physical menaces of these ‘Asians’. The ‘Asians’ were of course
Pakistani Muslims....The British public are momentarily outraged, but
the Rotherham officials, including the official in charge of child
welfare, aren’t too...
"Big Data and Chicago's Traffic-cam Scandal: The danger is
microscopic regulation that we invite via the democratic process," The Wall
Street Journal, August 29, 2014 ---
Big data techniques are new in the world. It will
take time to know how to feel about them and whether and how they should be
legally corralled. For sheer inanity, though, there's no beating a recent
White House report quivering about the alleged menace of "digital
redlining," or the use of big-data marketing tactics in ways that supposedly
disadvantage minority groups.
This alarm rests on an extravagant
misunderstanding. Redlining was a crude method banks used to avoid losses in
bad neighborhoods even at the cost of missing some profitable
transactions—exactly the inefficiency big data is meant to improve upon.
Failing to lure an eligible customer into a sale, after all, is hardly the
goal of any business.
The real danger of the new technologies lies
elsewhere, which the White House slightly touches upon in some of its
fretting about police surveillance. The danger is microscopic regulation of
our daily activities that we will invite on ourselves through the democratic
Soon it may be impossible to leave our homes
without our movements being tracked by traffic and security cameras able to
read license plates, identify faces and pull up data about any individual,
from social media postings to credit reports.
Private businesses are just starting to use these
techniques to monitor shoppers in front of shelves of goodies. Towns and
cities have already embraced such techniques as revenue grabs, encouraged by
private contractors peddling automated traffic cameras.
Witness a festering Chicago scandal. This month
came federal indictments of a former city bureaucrat, an outside consultant,
and the former CEO of Redflex Traffic Systems, the company that operated the
city's traffic cameras until last year.
When politicians are doing something inherently
sleazy, sleaze percolates in all directions. The Chicago Tribune, which did
yeoman's work exposing the bribery scandal, also found a pattern of
implausible ticket spikes at dozens of intersections, apparently caused by
the operator temporarily changing parameters for things like a rolling right
on red to boost revenues.
The new company brought in to run the cameras
further found that many yellow lights were set below the city and federal
minimum of three seconds. Now a judge says hundreds of citizens may be due
refunds. By the way, a longer yellow is the recommended solution for
accident-prone intersections. A shorter yellow rings up more tickets.
Chicago is the country's premier operator of
red-light cameras, generating $500 million in the past decade. Mayor Rahm
Emanuel's former congressional campaign manager was even hired by Redflex to
create a nonprofit to propagandize around the country for more such cameras.
It appears to be working. Well after the Chicago
program became controversial, polls in Chicago continued to find what
they've found elsewhere: a complicity of attitudes between certain voter
groups and revenue-hungry jurisdictions. Senior citizens are especially
supportive of cameras, even when understanding that local officials are
motivated by money rather than safety. "Anything to make people slow down"
is a quote repeatedly seen in local news reporting.
An aging society constantly taught by government
and media to be fearful and dependent is one likely source of political
license for more such aggressions against personal autonomy, but not the
Where is the taxpaying voter who will object when
government wants to monitor the caloric intake, smoking and exercise habits
of those on the government health-care dole?
How about a future administration that quietly
tweaks its algorithms to market abortion services to members of the
opposition party and prenatal care to its own voters? That sounds fanciful
(and is) but everything government does, it does politically.
"Nudge," a favorite Obama slogan for government
encouraging citizens to do what government thinks is best for them, becomes
"confine within strictures" in a future world where so much of our behavior
can potentially be monitored. What exactly is this "privacy" that we so
worry about if not the preservation of the possibility of anonymity in most
of what we do in order to remain truly in possession of ourselves?
Taxpayers who received health insurance from Obamacare need to file Form
1095-A with their tax returns in 2014 and every year thereafter.
Tax professionals who are unaware of the new form is called a 1095-A that
"lists who in each household has health coverage and how much the government
paid each month to subsidize their premiums. Nearly 5 million people have gotten
subsidies through HealthCare.gov" ---
. . .
Funneling subsidies through the income-tax system
was once seen as a political plus for Obama and the law's supporters. It
allowed the White House to claim that the Affordable Care Act is "the
largest tax cut for health care in American history." But it also promises
to make an already complicated tax system more difficult for many consumers.
Supporters of the law are also concerned about a
related issue: People who got too big a subsidy for health care in 2014 will
have to pay it back next year. And docking refunds will be the first way the
IRS seeks repayment.
That can happen if someone's income for 2014 ends
up being higher than estimated when he or she first applied for health
insurance. Unless such people promptly reported the change to their health
insurance marketplace, they will owe money.
"If someone wound up having more overtime than they
projected, or they received a bonus for good work, these are the kind of
changes that have an impact on subsidies," said Ron Pollack, executive
director of the advocacy group Families USA.
Since the whole system is brand-new, experts are
predicting that millions will end up having to repay money.
"The Myth of ObamaCare's Affordability: The law's perverse
incentives will have the nation working fewer hours, and working those hours
less productively," by Casey B. Mulligan, The Wall Street Journal,
September 8, 2014 ---
Whether the Affordable Care Act lives up to its
name depends on how, or whether, you consider its consequences for the wider
Millions of people pay a significant portion of
their income for health insurance so they and their families can get good
health care when they need it. The magnitude of their sacrifices
demonstrates the importance that people ascribe to health care.
The Affordable Care Act attempts to help low- and
middle-income families avoid some of the tough sacrifices that would be
necessary to purchase health insurance without assistance. But no program
can change the fundamental reality that society itself has to make
sacrifices in order to deliver health care to more people. Workers and
therefore production have to be taken away from other industries to beef up
health care, or the workforce itself has to get bigger, or somehow people
have to work more productively.
Although the ACA helps specific populations by
giving them a bigger slice of the economic pie, the law diminishes the pie
itself. It reduces the amount that Americans work, and it makes their work
less productive. This slows growth in both personal income and gross
In further expanding the frontiers of
redistribution, the ACA reduces the benefits of employment for both
employers and employees. Employers that don't provide health insurance are
either subject to large penalties based on the number and types of employees
that they have, or are threatened with enormous penalties when they get the
opportunity to expand their business. About a quarter of the nation's
employees, more than 35 million men and women, currently work for employers
that don't offer health insurance. These tend to be small and midsize
businesses with employees who already make less than the average American
worker. The result of penalizing businesses for hiring and expanding is
going to be less hiring and expanding.
Another sixth of the nation's employees—almost 25
million people—are in a full-time position that makes them ineligible for
the law's new and generous assistance with health-insurance premiums and
cost sharing. They are ineligible for subsidies simply because they are
working full time and thereby eligible for their employers' coverage.
Because the only ways for them to get the new assistance is to move to
part-time status, find an employer that doesn't offer coverage, or stop
working, we can expect millions of workers to make one or more of those
Most people wouldn't give up working merely to
qualify for a few thousand dollars in assistance. But it is a mistake to
assume that nobody is affected by subsidies, because there are people who
aren't particularly happy with working, planning to leave their job anyway,
or otherwise on the fence between working and not working. A new subsidy is
enough to push them over the edge or to get them to stop working sooner than
they would have otherwise.
The law has effects that extend well beyond the
employment rate and the average length of the workweek. People, businesses
and entire sectors will jockey to reduce their new tax burdens or enhance
their subsidies. Their adjustments to the new incentives will make our
economy less productive and stifle wage growth, even among workers who have
no direct contact with the law's penalties and subsidies.
The "29er" phenomenon is a good example of how the
law harms productivity. Because ACA's "employer mandate" requires firms with
50 or more full-time workers to offer health plans to employees who work
more than 30 hours a week, many employers and employees have adopted 29-hour
work schedules. This is not the most productive way to arrange the
workplace, but it allows employers to avoid the mandate and its penalties
and helps the employees qualify for individual assistance.
All of this, and much more, exacerbates the
societal problem that the economy cannot expand its health sector without
giving up something else of value. A complex law like the ACA has a few
provisions that encourage work, such as counting unemployment income against
eligibility for health assistance. But the bulk of the law overwhelms them.
The ACA as a whole will have the nation working fewer hours, and working
those hours less productively.
I estimate that the ACA's long-term impact will
include about 3% less weekly employment, 3% fewer aggregate work hours, 2%
less GDP and 2% less labor income. These effects will be visible and obvious
by 2017, if not before. The employment and hours estimates are based on the
combined amount of the law's new taxes and disincentives and on historical
research on the aggregate effects of each dollar of taxation. The GDP and
income estimates reflect lower amounts of labor as well as the law's effects
on the productivity of each hour of labor.
By the end of this decade, nearly 20 million
additional Americans will have health insurance as a consequence of the law.
But the ultimate economywide cost of their enrollments will be at least
double what it would have been if these people had enrolled without
government carrots and sticks; that is, if they had decided it was worth
spending their own money on health insurance. In effect, people who aren't
receiving assistance through the ACA are paying twice for the law: once as
the total economic pie gets smaller and again as they receive a smaller
The Affordable Care Act is weakening the economy.
And for the large number of families and individuals who continue to pay for
their own health care, health care is now less affordable.
Mr. Mulligan is a professor of economics at the University of Chicago
and the author of the new e-book "Side Effects: The Economic Consequences of
the Health Reform" (JMJ Economics, 2014).