This weekend, Kim Strassel and Peggy Noonan both had thoughtful, thought-provoking editorials in the Wall Street Journal.
I absolutely loved Strassel's piece on Obama Bim Baden. She nailed him accurately as wanting to bring 'change,' without any explanation of what his changes will be. But when she went through the litany of proposals and positions he has espoused, it's hardly change. More like continuing liberalism with more muscle and less compromise.
In that regard, while unsaid in Strassel's piece, Obama is actually somewhat like Hillary. Don't compromise- just bulldoze anyone who doesn't agree with you.
Noonan, on the other hand, wrote, in my opinion, a mixed column. For some reason, she holds candles for two Democratic Senate has-beens: Chris Dodd and Joe Biden. The latter is an acknowledged plagiarist. The former merely an old, puffed-up, self-impressed windbag who so typifies why Americans inherently distrust most Senators.
But Noonan's overall list of who's reasonable and who is not was not bad. Hillary's not. Most of the leading candidates, otherwise, are. She thinks Obama is, but I'm with Kim Strassel on this one. Neither of the two frontrunners on the Democratic side is reasonable.
I do agree with Noonan on what she fails to call, but describes, as character. She believes the next President will have at least one major, unexpected crisis with which to deal, and will need to galvanize the nation's support. She doesn't believe enough Americans will trust Hillary to give her that support, and I agree.
The more I look at world events- Putin, Bhutto, Iran- the more I believe that insufficient numbers of voters will, in the end, be capable of pulling the lever for either Hillary or Obama. They'll say they will, but they won't.
Meanwhile, I'd be okay with Romney, Giuliani or Thompson. McCain's periodic self-righteousness and ignorant stubbornness on campaign finance has always alarmed me. I simply distrust his sensibilities on many issues. Not his bravery or intent, but his basic common sense and intellect.
Hickabee......God, let's hope this guy is just a flash in the pan. He's shallow, liberal, aimless and rudderless. And another Arkansan.
Well, we'll know what the Iowans think in less than a week.
Sunday, December 30, 2007
Saturday, December 29, 2007
Remembering Benizar Bhutto & Her Corrupt Rule
Without a doubt, Benizar Bhutto's murder this week was a tragedy. It has done nothing but inject more uncertainty and instability into the Pakistani government situation.
However, of all the news coverage of the past week regarding Bhutto's murder, only one mentioned her prior regime's corruption. For example, consider this webpage on Benizar Bhutto's husband's corruption.
One editorial which I read in the Wall Street Journal claimed that Bhutto 'had never been tried for corruption,' or words to that effect.
Maybe not. I think she'd been deposed and left the country ahead of the authorities on both occasions.
Even at the time of each of her two turns as prime minister, The Economist reported Benizar's husband's shady dealings. Does anybody besides me wonder what the Bhuttos used for money when not in power? How have they been able to live without obvious careers, jobs, or other means of support for so long?
Perhaps Benizar would have won the next election. Perhaps not. If she had, perhaps this time, there'd be no corruption. More than likely, it would have continued.
Maybe the Pakistanis don't care about the corruption. Perhaps, to them, whichever tribe/group is in power will take its share of spoils.
But the pundit who noted Benizar's prior corruption, and its being the cause of her ouster each time, noted that her party has other qualified candidates to run for prime minister.
It's never a good thing to have political issues settled by violence and murder. But in the aftermath of Benizar Bhutto's death, it seems that nearly everyone has been remembering an angelic, perfect female Muslim leader, rather than the real, decidedly mixed blessing Bhutto was for her country and people.
Monday, December 17, 2007
On Economic Myth #3- US Incomes Are Static
This post is the third in a short series on economic myths prevalent among liberals in the US political scene. The prior two related posts concerning middle class job creation and tax-records-based income inequality, may be found here and here.
Last month, in the November 13th edition of the Wall Street Journal, the paper's lead editorial, entitled "Movin' On Up," provided detailed analysis the mobility of Americans with respect to incomes over time. The piece begins with the passage,
"If you've been listening to Mike Huckabee or John Edwards on the Presidential trail, you may have heard that the U.S. is becoming a nation of rising inequality and shrinking opportunity. We'd refer those campaigns to a new study of income mobility by the Treasury Department that exposes those claims as so much populist hokum."
The Journal article then begins to present data from that Treasury study,
"Much as they always have, Americans on the bottom rungs of the economic ladder continue to climb into the middle and sometimes upper classes in remarkably short periods of time.
The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.
Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.
The Treasury study found that those tax filers who were in the poorest income quintile in 1996 saw a near doubling of their incomes (90.5%) over the subsequent decade. Those in the highest quintile, on the other hand, saw only modest income gains (10%). The nearby table tells the story, which is that the poorer an individual or household was in 1996 the greater the percentage income gain after 10 years.
At this point, we see that, even if there were as much static income equality as is alleged by liberals, contrary to the information provided in the Journal editorial by Alan Reynolds, the subject of the second linked post, the migration of US income earners up the scale from low to higher levels would make that a benefit, not a drawback. For, if one cannot improve one's income over time, and reach a more disparate level of income from one's prior one, where is the motivation for economic self-betterment?
And, not only does this work for those earning less, but, those earning the highest incomes actually experienced a decline in theirs,
"Only one income group experienced an absolute decline in real income -- the richest 1% in 1996. Those households lost 25.8% of their income. Moreover, more than half (57.4%) of the richest 1% in 1996 had dropped to a lower income group by 2005. Some of these people might have been "rich" merely for one year, or perhaps for several, as they hit their peak earning years or had some capital gains windfall. Others may simply have not been able to keep up with new entrepreneurs and wealth creators."
As the study notes, there is substantial dynamism among Americans with respect to their ability move up or down the ladder of relative incomes. Thus, all of the poorest Americans do not stay poor. Over half of the poorest, by incomes, had moved into a higher quintile of income distribution by the end of the ten-year period. In particular, it states,
"The key point is that the study shows that income mobility in the U.S. works down as well as up -- another sign that opportunity and merit continue to drive American success, not accidents of birth. The "rich" are not the same people over time."
On the subject of inequality of incomes and income mobility, the article notes,
"The study is also valuable because it shows that income mobility remains little changed from what similar studies found in the 1970s and 1980s. Some journalists and academics have cited selective evidence to claim that income mobility has declined in recent years.
The political left and its media echoes are promoting the inequality story as a way to justify a huge tax increase. But inequality is only a problem if it reflects stagnant opportunity and a society stratified by more or less permanent income differences. That kind of society can breed class resentments and unrest. America isn't remotely such a society, thanks in large part to the incentives that exist for risk-taking and wealth creation."
The Journal editorial notes, based upon the recent Treasury study, that not only is static analysis of alleged income inequality a red herring, but mobility of Americans up and down the incomes scale remains similar to what it has been for over twenty years.
The US is not experiencing increased stratification of incomes, nor greater income inequality over time. Rather, our country's economic system remains attractive because of its characteristic of allowing those in the lower ranks of income earners to have a realistic probability of becoming much higher earners over time.
Last month, in the November 13th edition of the Wall Street Journal, the paper's lead editorial, entitled "Movin' On Up," provided detailed analysis the mobility of Americans with respect to incomes over time. The piece begins with the passage,
"If you've been listening to Mike Huckabee or John Edwards on the Presidential trail, you may have heard that the U.S. is becoming a nation of rising inequality and shrinking opportunity. We'd refer those campaigns to a new study of income mobility by the Treasury Department that exposes those claims as so much populist hokum."
The Journal article then begins to present data from that Treasury study,
"Much as they always have, Americans on the bottom rungs of the economic ladder continue to climb into the middle and sometimes upper classes in remarkably short periods of time.
The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.
Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.
The Treasury study found that those tax filers who were in the poorest income quintile in 1996 saw a near doubling of their incomes (90.5%) over the subsequent decade. Those in the highest quintile, on the other hand, saw only modest income gains (10%). The nearby table tells the story, which is that the poorer an individual or household was in 1996 the greater the percentage income gain after 10 years.
At this point, we see that, even if there were as much static income equality as is alleged by liberals, contrary to the information provided in the Journal editorial by Alan Reynolds, the subject of the second linked post, the migration of US income earners up the scale from low to higher levels would make that a benefit, not a drawback. For, if one cannot improve one's income over time, and reach a more disparate level of income from one's prior one, where is the motivation for economic self-betterment?
And, not only does this work for those earning less, but, those earning the highest incomes actually experienced a decline in theirs,
"Only one income group experienced an absolute decline in real income -- the richest 1% in 1996. Those households lost 25.8% of their income. Moreover, more than half (57.4%) of the richest 1% in 1996 had dropped to a lower income group by 2005. Some of these people might have been "rich" merely for one year, or perhaps for several, as they hit their peak earning years or had some capital gains windfall. Others may simply have not been able to keep up with new entrepreneurs and wealth creators."
As the study notes, there is substantial dynamism among Americans with respect to their ability move up or down the ladder of relative incomes. Thus, all of the poorest Americans do not stay poor. Over half of the poorest, by incomes, had moved into a higher quintile of income distribution by the end of the ten-year period. In particular, it states,
"The key point is that the study shows that income mobility in the U.S. works down as well as up -- another sign that opportunity and merit continue to drive American success, not accidents of birth. The "rich" are not the same people over time."
On the subject of inequality of incomes and income mobility, the article notes,
"The study is also valuable because it shows that income mobility remains little changed from what similar studies found in the 1970s and 1980s. Some journalists and academics have cited selective evidence to claim that income mobility has declined in recent years.
The political left and its media echoes are promoting the inequality story as a way to justify a huge tax increase. But inequality is only a problem if it reflects stagnant opportunity and a society stratified by more or less permanent income differences. That kind of society can breed class resentments and unrest. America isn't remotely such a society, thanks in large part to the incentives that exist for risk-taking and wealth creation."
The Journal editorial notes, based upon the recent Treasury study, that not only is static analysis of alleged income inequality a red herring, but mobility of Americans up and down the incomes scale remains similar to what it has been for over twenty years.
The US is not experiencing increased stratification of incomes, nor greater income inequality over time. Rather, our country's economic system remains attractive because of its characteristic of allowing those in the lower ranks of income earners to have a realistic probability of becoming much higher earners over time.
Sunday, December 16, 2007
More Idiotic Overreaction to The Mortgage Mess: Jesse Jackson's 'Marshall Plan'
Compounding the months-old Congressional hand-wringing over the subprime mortgage mess is an editorial in the Wall Street Journal on 7 December by Jesse Jackson.
A failed Presidential candidate and liberal-issue gadfly, Jackson weighed in with a piece ominously entitled "A Marshal Plan for Mortgages."
His opening paragraph contains this sentence,
"But for the two million homeowners who face foreclosure over the next year because of the subprime mortgage crisis, their New Year's hopes rest not with themselves, but with policy makers in Washington and the investment community on Wall Street."
Wait. They face foreclosure "because of the subprime mortgage crisis?" I thought we had a mortgage crisis because of the behaviors of these delinquent or defaulting consenting borrowers.
Maybe I missed something. Or, more likely, Jackson simply misunderstands the concept known as 'cause and effect.' Perhaps this was not taught in Jackson's bible college?
Then Jackson gets down to his real message,
"It's time for another U.S. government-sponsored Marshall Plan. But instead of reconstructing Europe after World War II, today's Marshall Plan for mortgages would restore homeowners' and investors' confidence and dreams.
We already have a model for such a plan. It has been used successfully several times since the Great Depression, and has always worked. That model is the Reconstruction Finance Corporation. During the Depression, President Hoover used the independent government agency to provide $2 billion in aid to state and local governments, and for loans to banks, railroads and other businesses. Subsequently, President Roosevelt used it to finance the most creative aspects of his New Deal.
If we can save the S&Ls, we certainly can save homeowners with subprime mortgages. And whatever you call the revived agency, whether its middle name is Finance, Trust or even Mortgage, it is needed to rescue those Americans steered into subprime, adjustable-rate mortgages, often laced with hidden fees they never knew about."
He's not shy, is he? Nor stingy with your tax dollars. Even as he mixes metaphors. The title refers to the Marshal Plan, which reconstructed a ruined Europe after WWII, in order to prevent those still-free countries from falling under communism's hold.
However, in Jackson's text, he actually wants the RFC resurrected. Which is it, Jesse? Can't you get your request straight in even a relatively brief editorial?
I won't even touch the 'most creative aspects' of FDR's New Deal, other than to muse that maybe these were the unconstitutional parts subsequently struck down by an unpacked Supreme Court?
But, to Jackson's points. First, we aren't in the Great Depression. We haven't had anything near the equivalent of the original Black Friday of 1929. And the S&L's weren't saved, so much as forced into taking actions that altered their sector forever. Many went out of business, Jesse, because they lent long and borrowed short.
The moral there, and again, now, is that businesses and consumers must be made to pay the consequences for their economic decisions. That's the American Way. You have the freedom to succeed, or fail, Jesse. We can't just start handing out absolution, willy-nilly. Lessons learned by unwise, imprudent investors, lenders and borrows won't be soon forgotten.
Near the end of his plea for governmental intervention, Jackson writes,
"We must move immediately to adopt this Marshall Plan for mortgages or face the prospect of entire neighborhoods and communities becoming depressed and potentially abandoned. Unless we act, the crisis will continue to snowball. On Jan. 1, the interest rates on hundreds of thousands of home loans are scheduled to balloon, triggering an avalanche of foreclosures. Finding a permanent answer to this crisis should be a priority that unites all Americans, regardless of political party, ethnic background or income level. Financial institutions, politicians and local communities must work together to restructure mortgage loans and stem the rising numbers of foreclosures."
Jackson doesn't cite any facts or data in his closing call to arms. And, knowing he's not an economist, I'm not inclined to simply believe his hyperbole. It reads to me like a Jackson homily/diatribe- use the right phrasing and emphasis, and you can skip the facts.
And, by the way, a recent Journal editorial noted that recent analysis is showing that a surprising number of now-troubled mortgages were, in fact, instances of borrower fraud perpetrated on lenders and investors! Painting the entire situation with a broad brush is sure to have a host of negative consequences- rewarding imprudent adult borrowers, as well as fraudsters.
Better to just skip this idea of Jackson's. But if he thinks it's this serious, I'd welcome seeing Jesse donate most of his net worth to the cause and wear sackcloth instead of his usual expensive suits.
A failed Presidential candidate and liberal-issue gadfly, Jackson weighed in with a piece ominously entitled "A Marshal Plan for Mortgages."
His opening paragraph contains this sentence,
"But for the two million homeowners who face foreclosure over the next year because of the subprime mortgage crisis, their New Year's hopes rest not with themselves, but with policy makers in Washington and the investment community on Wall Street."
Wait. They face foreclosure "because of the subprime mortgage crisis?" I thought we had a mortgage crisis because of the behaviors of these delinquent or defaulting consenting borrowers.
Maybe I missed something. Or, more likely, Jackson simply misunderstands the concept known as 'cause and effect.' Perhaps this was not taught in Jackson's bible college?
Then Jackson gets down to his real message,
"It's time for another U.S. government-sponsored Marshall Plan. But instead of reconstructing Europe after World War II, today's Marshall Plan for mortgages would restore homeowners' and investors' confidence and dreams.
We already have a model for such a plan. It has been used successfully several times since the Great Depression, and has always worked. That model is the Reconstruction Finance Corporation. During the Depression, President Hoover used the independent government agency to provide $2 billion in aid to state and local governments, and for loans to banks, railroads and other businesses. Subsequently, President Roosevelt used it to finance the most creative aspects of his New Deal.
If we can save the S&Ls, we certainly can save homeowners with subprime mortgages. And whatever you call the revived agency, whether its middle name is Finance, Trust or even Mortgage, it is needed to rescue those Americans steered into subprime, adjustable-rate mortgages, often laced with hidden fees they never knew about."
He's not shy, is he? Nor stingy with your tax dollars. Even as he mixes metaphors. The title refers to the Marshal Plan, which reconstructed a ruined Europe after WWII, in order to prevent those still-free countries from falling under communism's hold.
However, in Jackson's text, he actually wants the RFC resurrected. Which is it, Jesse? Can't you get your request straight in even a relatively brief editorial?
I won't even touch the 'most creative aspects' of FDR's New Deal, other than to muse that maybe these were the unconstitutional parts subsequently struck down by an unpacked Supreme Court?
But, to Jackson's points. First, we aren't in the Great Depression. We haven't had anything near the equivalent of the original Black Friday of 1929. And the S&L's weren't saved, so much as forced into taking actions that altered their sector forever. Many went out of business, Jesse, because they lent long and borrowed short.
The moral there, and again, now, is that businesses and consumers must be made to pay the consequences for their economic decisions. That's the American Way. You have the freedom to succeed, or fail, Jesse. We can't just start handing out absolution, willy-nilly. Lessons learned by unwise, imprudent investors, lenders and borrows won't be soon forgotten.
Near the end of his plea for governmental intervention, Jackson writes,
"We must move immediately to adopt this Marshall Plan for mortgages or face the prospect of entire neighborhoods and communities becoming depressed and potentially abandoned. Unless we act, the crisis will continue to snowball. On Jan. 1, the interest rates on hundreds of thousands of home loans are scheduled to balloon, triggering an avalanche of foreclosures. Finding a permanent answer to this crisis should be a priority that unites all Americans, regardless of political party, ethnic background or income level. Financial institutions, politicians and local communities must work together to restructure mortgage loans and stem the rising numbers of foreclosures."
Jackson doesn't cite any facts or data in his closing call to arms. And, knowing he's not an economist, I'm not inclined to simply believe his hyperbole. It reads to me like a Jackson homily/diatribe- use the right phrasing and emphasis, and you can skip the facts.
And, by the way, a recent Journal editorial noted that recent analysis is showing that a surprising number of now-troubled mortgages were, in fact, instances of borrower fraud perpetrated on lenders and investors! Painting the entire situation with a broad brush is sure to have a host of negative consequences- rewarding imprudent adult borrowers, as well as fraudsters.
Better to just skip this idea of Jackson's. But if he thinks it's this serious, I'd welcome seeing Jesse donate most of his net worth to the cause and wear sackcloth instead of his usual expensive suits.
Tuesday, December 11, 2007
Unwarranted Halo Effects: Warren Buffett On Politics
In my companion blog, I have provided evidence that, at least for the past five years, Warren Buffett hardly deserves the title "The Oracle of Omaha." In these posts, here and here, I have noted that Buffett has made at least his share of big investment mistakes, if not moreso.
Why is the business media so ga-ga over this guy? This morning, CNBC featured an interview with him in San Francisco, where Becky Quick, a network anchor and reporter, accompanied him. Buffett is holding a series of fundraisers for Hillary Clinton.
At the end of Quick's interview with Buffett, she asked him why he backs both Hillary and Obama. Buffett's reply was simply, stunningly unbelievable. I suppose the video is available today on the CNBC website, but I won't provide a link, because I believe it will be non-functional by tomorrow.
Buffett's reply was that he believes both candidates 'understand our economic system,' or words to that effect, and that 'neither one wants to kill the goose that laid the golden egg.'
Boy, he couldn't be more wrong, could he? Hillary wants to tax and tax some more, to fund her many programs. Programs, she was quoted as saying are too many to mention. That's when she's not busy arguing for governmentally mandated alteration of contracts which CDO investors have with the obligors of the instruments which they have bought.
Obama is no better. He, too, argues for redistributional programs and taxes to essentially take from the so-called rich, and then make the poor even more dependent upon governmental handouts.
Buffett went on to claim that both candidates share his concern that incomes in America become less disparate. Too bad, as I commented here on Alan Reynolds' recent WSJ editorial, that all three are wrong about this trend.
It's truly disturbing when someone who many feel represents free-market capitalism openly supports socialist candidates who will happily dismantle the system which has allowed him to engage in his business as he has for so many years.
I'm not entirely sure which mistake bothers me more. The one identifying Buffett as a consistently superior institutional investor, or his in backing Presidential candidates so liberal that they may as well simply call themselves socialists.
Why is the business media so ga-ga over this guy? This morning, CNBC featured an interview with him in San Francisco, where Becky Quick, a network anchor and reporter, accompanied him. Buffett is holding a series of fundraisers for Hillary Clinton.
At the end of Quick's interview with Buffett, she asked him why he backs both Hillary and Obama. Buffett's reply was simply, stunningly unbelievable. I suppose the video is available today on the CNBC website, but I won't provide a link, because I believe it will be non-functional by tomorrow.
Buffett's reply was that he believes both candidates 'understand our economic system,' or words to that effect, and that 'neither one wants to kill the goose that laid the golden egg.'
Boy, he couldn't be more wrong, could he? Hillary wants to tax and tax some more, to fund her many programs. Programs, she was quoted as saying are too many to mention. That's when she's not busy arguing for governmentally mandated alteration of contracts which CDO investors have with the obligors of the instruments which they have bought.
Obama is no better. He, too, argues for redistributional programs and taxes to essentially take from the so-called rich, and then make the poor even more dependent upon governmental handouts.
Buffett went on to claim that both candidates share his concern that incomes in America become less disparate. Too bad, as I commented here on Alan Reynolds' recent WSJ editorial, that all three are wrong about this trend.
It's truly disturbing when someone who many feel represents free-market capitalism openly supports socialist candidates who will happily dismantle the system which has allowed him to engage in his business as he has for so many years.
I'm not entirely sure which mistake bothers me more. The one identifying Buffett as a consistently superior institutional investor, or his in backing Presidential candidates so liberal that they may as well simply call themselves socialists.
Sunday, December 9, 2007
Beware The Faux-Conservative: Mike Hickabee
Kim Strassel wrote a wonderful, informative piece about former Arkansas Governor Mike Huckabee in a recent edition of the Wall Street Journal. It's not the first of its ilk in the Journal, but it is somewhat more current, given Hick-abee's recent rise in polls in Iowa.
As in an earlier Journal piece, by which author I do not recall, Strassel provides details which demonstrate Hick-abee's lie, when he casts himself as a conservative.
He has a nearly-impossible plan to totally revise taxation in America, grandiosely calling for the abolition of the IRS.
As if.
He speaks of support for headline-type conservative positions, such as "lower taxes," a "strong America," and "health care reform." But his detailed, practical plans for such are missing.
Essentially, as another Arkansas Governor before him, Hick-abee is long on style, charisma and jocularity, but short on specifics.
Why should one run for President? To provide solutions not readily available. Why do candidates often run? Because they simply would like the job.
Of the Republicans, I think only Romney and Giuliani genuinely offer specifics on what they would do to handle various issues and problems which our nation currently faces.
I like Thompson but, truth be told, to back him is to back a style and attitude, more than positions and a record. As with the McCain, the maniacal Ron Paul, or Tancredo.
It's the same, I fear, with the latest hick from the South, Mike Hick-abee.
As in an earlier Journal piece, by which author I do not recall, Strassel provides details which demonstrate Hick-abee's lie, when he casts himself as a conservative.
He has a nearly-impossible plan to totally revise taxation in America, grandiosely calling for the abolition of the IRS.
As if.
He speaks of support for headline-type conservative positions, such as "lower taxes," a "strong America," and "health care reform." But his detailed, practical plans for such are missing.
Essentially, as another Arkansas Governor before him, Hick-abee is long on style, charisma and jocularity, but short on specifics.
Why should one run for President? To provide solutions not readily available. Why do candidates often run? Because they simply would like the job.
Of the Republicans, I think only Romney and Giuliani genuinely offer specifics on what they would do to handle various issues and problems which our nation currently faces.
I like Thompson but, truth be told, to back him is to back a style and attitude, more than positions and a record. As with the McCain, the maniacal Ron Paul, or Tancredo.
It's the same, I fear, with the latest hick from the South, Mike Hick-abee.
Saturday, December 8, 2007
Hillary Shows Her True Socialist Colors
Hillary is finally dropping the pretense of being any sort of economic moderate. With her call for government-mandated measures concerning housing markets, as noted in the Wall Street Journal's piece on the front page of its December 4 edition this past week, she has unveiled her true socialist colors.
Calling for
"a 90-day moratorium on foreclosures and a five-year freeze on adjustable mortgage rates,"
according to the Journal piece, Hillary leaves no doubt that she's willing to ride roughshod over market dynamics.
Let's consider the existing housing market. No servicer who believes they can keep a homeowner in their home is going to wantonly foreclose. It's simply too expensive to pull that trigger capriciously.
Regarding adjustable rate mortgages, since when has any governmental agency been better at estimating risk than markets? Don't you think, by now, the market is going to exact higher prices on adjustable rate loans anyway?
Not to mention, most lenders are likely to eschew them for marginal buyers.
As with other Democratic legislators, Hillary mistakenly views a small slice of subprime defaults as the same thing as a general mortgage industry crisis. It's not.
Sure, her plan will play well to the lower-income crowd which Hillary wants to elevate to victim status. But, in truth, these are adults who chose to take on mortgage debt. Nobody put a gun to their heads when these people elected to borrow beyond their means to repay debt.
If government, including the Bush administration, and all Democratic Presidential candidates, would simply let the markets do their job, whatever costs should be borne, and lessons learned, will be delivered by markets in the next 6-12 months.
However, the last thing we need is for Presidential candidates to begin architecting rules for capital markets when they don't, as in Hillary's case, even understand the functions of our market economy to begin with.
Calling for
"a 90-day moratorium on foreclosures and a five-year freeze on adjustable mortgage rates,"
according to the Journal piece, Hillary leaves no doubt that she's willing to ride roughshod over market dynamics.
Let's consider the existing housing market. No servicer who believes they can keep a homeowner in their home is going to wantonly foreclose. It's simply too expensive to pull that trigger capriciously.
Regarding adjustable rate mortgages, since when has any governmental agency been better at estimating risk than markets? Don't you think, by now, the market is going to exact higher prices on adjustable rate loans anyway?
Not to mention, most lenders are likely to eschew them for marginal buyers.
As with other Democratic legislators, Hillary mistakenly views a small slice of subprime defaults as the same thing as a general mortgage industry crisis. It's not.
Sure, her plan will play well to the lower-income crowd which Hillary wants to elevate to victim status. But, in truth, these are adults who chose to take on mortgage debt. Nobody put a gun to their heads when these people elected to borrow beyond their means to repay debt.
If government, including the Bush administration, and all Democratic Presidential candidates, would simply let the markets do their job, whatever costs should be borne, and lessons learned, will be delivered by markets in the next 6-12 months.
However, the last thing we need is for Presidential candidates to begin architecting rules for capital markets when they don't, as in Hillary's case, even understand the functions of our market economy to begin with.
Friday, December 7, 2007
Observing Pearl Harbor Day
Just a short note to observe the 66th anniversary of the Japanese attack on the US Naval and Army bases at Pearl Harbor on December 7th, 1941. This attack, coming, as it did, explicitly in advance of the Japanese declaration of war on America, galvanized public commitment to defeating Japan as nothing else probably ever could.
Whether Roosevelt conspired to facilitate so much damage and loss of life among American servicemen has never been clearly determined.
Never the less, on this day, I think it's worthwhile to consider our modern counterpart, September 11, 2001.
That day's terrorist attack on the World Trade Center towers parallels the Pearl Harbor attack. There was no explicit change in relationship status between the United States and another recognized state.
Rather, it marked the first time the shadowy forces which share extremist Islamist beliefs struck Americans on our own soil.
In the midst of the current campaigns for the November, 2008 Presidential election, it is timely to note the different reaction of the American people from that of our predecessors in World War II.
Now, Democratic candidates insist there is no terrorist threat, and that we should simply withdraw from combat in foreign lands. They fuel the public's desire to believe that sacrifice is unnecessary to protect our way of life, liberty and freedom. The mainstream media is complicit in this campaign.
Rather than see Pearl Harbor as an isolated event, I think we should take a lesson from it and rededicate ourselves to eliminating the forces which, without reason, threaten, and have attacked our country, wherever they may be found.
Remember the Arizona. Remember Pearl Harbor.
Whether Roosevelt conspired to facilitate so much damage and loss of life among American servicemen has never been clearly determined.
Never the less, on this day, I think it's worthwhile to consider our modern counterpart, September 11, 2001.
That day's terrorist attack on the World Trade Center towers parallels the Pearl Harbor attack. There was no explicit change in relationship status between the United States and another recognized state.
Rather, it marked the first time the shadowy forces which share extremist Islamist beliefs struck Americans on our own soil.
In the midst of the current campaigns for the November, 2008 Presidential election, it is timely to note the different reaction of the American people from that of our predecessors in World War II.
Now, Democratic candidates insist there is no terrorist threat, and that we should simply withdraw from combat in foreign lands. They fuel the public's desire to believe that sacrifice is unnecessary to protect our way of life, liberty and freedom. The mainstream media is complicit in this campaign.
Rather than see Pearl Harbor as an isolated event, I think we should take a lesson from it and rededicate ourselves to eliminating the forces which, without reason, threaten, and have attacked our country, wherever they may be found.
Remember the Arizona. Remember Pearl Harbor.
Tuesday, December 4, 2007
A Liberal's View Of The US Financial System
Due to a continuing interest in outdoor sports and pursuits, I subscribe to Outside Magazine. The monthly's liberal tilt is something I usually ignore, e.g., the fawning pieces on Al Gore, Robert Kennedy or Jimmy Carter.
A few days ago, I read a profile of a young female mountaineer who, in keeping with the magazine's preference for with anyone born with an infirmity, has a bloodflow-restricting condition.
According to Outside's profile, Ms. Levine,
"worked on Wall Street and as a finance director for the Governator."
OK.
She is then quoted as saying, in answer to a question regarding the relative dangers of climbing versus Wall Street,
"In one, you're in extreme environment with no control. You've got to keep your bearings in storm after storm. But in climbing you actually accomplish something."
It's one of those typical liberal generalizations- "Wall Street" means oceans of money for undeserving capitalists who create no value, while a mountaineer is next to Godliness.
Here's another perspective.
"Wall Street," or, more properly, the American financial system, provides capital which fuels the growth of countless business activities, providing jobs for millions of Americans. The provision of inexpensive, secure electronic systems has markedly affected, in a positive manner, the functioning of business activity throughout our country, and the world.
Mountain climbing seems to be among the most selfish, valueless pursuits in the outdoors. What is accomplished that benefits anyone but the climber? I'm sure there are conservatives who climb, too. But they probably don't disparage productive business effort by comparison.
Just another view of how liberal values differ markedly from those of conservatives.
A few days ago, I read a profile of a young female mountaineer who, in keeping with the magazine's preference for with anyone born with an infirmity, has a bloodflow-restricting condition.
According to Outside's profile, Ms. Levine,
"worked on Wall Street and as a finance director for the Governator."
OK.
She is then quoted as saying, in answer to a question regarding the relative dangers of climbing versus Wall Street,
"In one, you're in extreme environment with no control. You've got to keep your bearings in storm after storm. But in climbing you actually accomplish something."
It's one of those typical liberal generalizations- "Wall Street" means oceans of money for undeserving capitalists who create no value, while a mountaineer is next to Godliness.
Here's another perspective.
"Wall Street," or, more properly, the American financial system, provides capital which fuels the growth of countless business activities, providing jobs for millions of Americans. The provision of inexpensive, secure electronic systems has markedly affected, in a positive manner, the functioning of business activity throughout our country, and the world.
Mountain climbing seems to be among the most selfish, valueless pursuits in the outdoors. What is accomplished that benefits anyone but the climber? I'm sure there are conservatives who climb, too. But they probably don't disparage productive business effort by comparison.
Just another view of how liberal values differ markedly from those of conservatives.
Dick Armey On CNBC This Morning
Dick Armey, former Representative (R-TX) and House Majority Leader from 1995-2003, was guest host on CNBC's SquawkBox program this morning. His candor regarding the Presidential nomination races was quite refreshing.
On the Democratic side, Armey called Obama's candidacy "a joke." Noting the junior Illinois Senator's lack of any relevant accomplishments for the office of President of the US, Armey simply dismissed him as unelectable.
Hillary, he felt, actually has plans. Contrary to my own prior comments, Armey distinguished Hillary from her husband, erstwhile Democratic President Bill, in that Armey feels the latter had nothing aside from a simple ambition to be President.
In Armey's opinion, Hillary is different in that she espouses classic liberal Democratic, big-government programs to radically alter US society. In that sense, Armey declared that she is the Democrat's best candidate to represent their views.
On the Republican side, Armey feels that Guiliani will be nominated, and is the party's best candidate. He didn't even bother discussing Huckabee, whom CNBC co-anchor Joe Kernen dismissed as simply a temporary front-runner.
Armey didn't, to my recollection, provide details as to why he expects Guiliani to best Romney, but he did say that facing Hillary would give the former mayor of New York his, and his party's, best chance of retaining the White House.
Realizing how polarizing Hillary is, Armey feels that Giuliani will win the votes of otherwise apathetic Republicans who want to defeat Hillary, no matter which Republican does it.
On reflection, I found myself agreeing with Armey. I regret that this plain-spoken, sensible moderate conservative has left government service. Though active in two non-profit public service organizations, one dealing with national economic issues, and the other with retirement savings solutions for America, watching Armey this morning led me to feel that he is in no way devoid of value to provide for some Republican President's cabinet.
On the Democratic side, Armey called Obama's candidacy "a joke." Noting the junior Illinois Senator's lack of any relevant accomplishments for the office of President of the US, Armey simply dismissed him as unelectable.
Hillary, he felt, actually has plans. Contrary to my own prior comments, Armey distinguished Hillary from her husband, erstwhile Democratic President Bill, in that Armey feels the latter had nothing aside from a simple ambition to be President.
In Armey's opinion, Hillary is different in that she espouses classic liberal Democratic, big-government programs to radically alter US society. In that sense, Armey declared that she is the Democrat's best candidate to represent their views.
On the Republican side, Armey feels that Guiliani will be nominated, and is the party's best candidate. He didn't even bother discussing Huckabee, whom CNBC co-anchor Joe Kernen dismissed as simply a temporary front-runner.
Armey didn't, to my recollection, provide details as to why he expects Guiliani to best Romney, but he did say that facing Hillary would give the former mayor of New York his, and his party's, best chance of retaining the White House.
Realizing how polarizing Hillary is, Armey feels that Giuliani will win the votes of otherwise apathetic Republicans who want to defeat Hillary, no matter which Republican does it.
On reflection, I found myself agreeing with Armey. I regret that this plain-spoken, sensible moderate conservative has left government service. Though active in two non-profit public service organizations, one dealing with national economic issues, and the other with retirement savings solutions for America, watching Armey this morning led me to feel that he is in no way devoid of value to provide for some Republican President's cabinet.
Monday, December 3, 2007
Hillary v. Obama- Judgment vs. Experience?
Two 'management' professors, Warren Bennis and Noel Tichy, wrote an editorial column in last Thursday's Wall Street Journal entitled, "Judgment Trumps Experience."
Citing their own research, they wrote,
"Mr Obama and his handlers are putting their money on his judgment, disdaining the experience card as a stale rerun of earlier campaigns, skewering Mrs. Clinton's twisty judgments about Iraq, and subtly pushing the present over the legacy of the '60s, destiny over dynasty.
After a five-year study of leadership covering virtually all sectors of American life, we came to the inescapable conclusion that judgment regularly trumps experience. Our central finding is that judgment is the core, the nucleus of exemplary leadership. With good judgment, little else matters. Without it, nothing else matters."
There are several aspects of this piece that leave me incredulous.
First, who can point to anything Obama has done that suggests he possesses sound judgment? He hasn't even been in the windbaggy US Senate for a full term yet. Nobody has advanced aspects of his Illinois state political/legislative career to suggest extraordinary judgment on his part.
Are we to believe that simply because Obama possesses no relevant experience for the office of President of the US, he must have judgment, instead?
For that matter, Clinton has little or nor relevant experience, either. We know she lacks values and moral scruples. Why didn't Tichy and Bennis study those qualities?
If I were to cast Hillary v. Obama on qualities, it would be, simply, blind ambition v. naive desire.
But, let's move beyond Bennis' and Tichy's typification of the Democratic front-runners, and focus on the incredible feat they claim to have accomplished.
Just how does one study 'leadership covering virtually all sectors of American life?'
What was their sample size? Their research instrument? How did they test the instrument for content and predictive validity? How does one measure 'judgment,' or 'experience?' How does one measure outcomes of various levels of each quality?
How in the heck do you study qualities like 'judgment,' and believe you know good from bad, for the purposes of projecting the results to America, in its every aspect?
Could there not be some interaction effects? Perhaps some level of judgment, mixed with some level of experience, might be better than either one alone? How would you measure those?
This pieces was, on the whole, completely unconvincing to me. It suggests the sort of 'research' that emanates from the 'management' field in business schools that give the discipline such a bad name. It seems to me that 'management' degrees are to business schools what 'communications' degree is for liberal arts.
And that's not a compliment.
I found this piece to be an embarrassment in terms of calling Tichy's and Bennis' effort 'research.' It would take a far more detailed explanation of this sort of work for me to accept the methodology and conclusions. Qualitative areas such as these invite poor research to be performed and communicated, without readers of the results fully understanding how it was attempted.
If nothing else, though, the article gave me an opportunity to realize how bereft of both experience and judgment the two candidates are. And how difficult it would be to attempt to actually ascribe causality to either quality in the manner apparently done by Tichy and Bennis.
Citing their own research, they wrote,
"Mr Obama and his handlers are putting their money on his judgment, disdaining the experience card as a stale rerun of earlier campaigns, skewering Mrs. Clinton's twisty judgments about Iraq, and subtly pushing the present over the legacy of the '60s, destiny over dynasty.
After a five-year study of leadership covering virtually all sectors of American life, we came to the inescapable conclusion that judgment regularly trumps experience. Our central finding is that judgment is the core, the nucleus of exemplary leadership. With good judgment, little else matters. Without it, nothing else matters."
There are several aspects of this piece that leave me incredulous.
First, who can point to anything Obama has done that suggests he possesses sound judgment? He hasn't even been in the windbaggy US Senate for a full term yet. Nobody has advanced aspects of his Illinois state political/legislative career to suggest extraordinary judgment on his part.
Are we to believe that simply because Obama possesses no relevant experience for the office of President of the US, he must have judgment, instead?
For that matter, Clinton has little or nor relevant experience, either. We know she lacks values and moral scruples. Why didn't Tichy and Bennis study those qualities?
If I were to cast Hillary v. Obama on qualities, it would be, simply, blind ambition v. naive desire.
But, let's move beyond Bennis' and Tichy's typification of the Democratic front-runners, and focus on the incredible feat they claim to have accomplished.
Just how does one study 'leadership covering virtually all sectors of American life?'
What was their sample size? Their research instrument? How did they test the instrument for content and predictive validity? How does one measure 'judgment,' or 'experience?' How does one measure outcomes of various levels of each quality?
How in the heck do you study qualities like 'judgment,' and believe you know good from bad, for the purposes of projecting the results to America, in its every aspect?
Could there not be some interaction effects? Perhaps some level of judgment, mixed with some level of experience, might be better than either one alone? How would you measure those?
This pieces was, on the whole, completely unconvincing to me. It suggests the sort of 'research' that emanates from the 'management' field in business schools that give the discipline such a bad name. It seems to me that 'management' degrees are to business schools what 'communications' degree is for liberal arts.
And that's not a compliment.
I found this piece to be an embarrassment in terms of calling Tichy's and Bennis' effort 'research.' It would take a far more detailed explanation of this sort of work for me to accept the methodology and conclusions. Qualitative areas such as these invite poor research to be performed and communicated, without readers of the results fully understanding how it was attempted.
If nothing else, though, the article gave me an opportunity to realize how bereft of both experience and judgment the two candidates are. And how difficult it would be to attempt to actually ascribe causality to either quality in the manner apparently done by Tichy and Bennis.
Monday, November 26, 2007
On Economic Myth #2- The Top 1% of Taxpayers
Last month, The Wall Street Journal published an editorial by noted economist Alan Reynolds, entitled "The Truth About the Top 1%," the day after publishing an editorial concerning middle-class job growth, about which I wrote a post yesterday.
In his editorial, Reynolds demolishes the evolving Democratic claim that our country's income distribution is 'the most unequal that it's ever been.'
He begins with this passage,
"The argument for these proposals has nothing to do with the impact of higher tax rates on incentives and the economy. It is all about "fairness" -- defined as reducing the top 1%'s share of income.
This political exercise invariably begins by citing dubious statistics about pretax incomes among the top 1% (1.3 million tax returns) as an excuse for raising tax rates on the top 5%, among others. Echoing speeches from Sen. Clinton, Business Week recently exclaimed, "According to new Internal Revenue Service data announced last week, income inequality in the U.S. is at its worst since the 1920s (before the Great Depression). The top percentile of wealthy Americans earned 21.2% of all income in 2005, up from 19% in 2004."
These statistics are extremely misleading.
First of all, the figures do not describe the top percentile's share of "all income," but that group's share of "adjusted" gross income (AGI) reported on individual tax returns. For one thing, thousands of professionals and business owners who used to report most of their income under the corporate tax responded to lower individual income-tax rates after 1986 and 2003 by reporting more income under the individual tax as partnerships, LLCs and Sub-S corporations."
This is critically important. So much so that President Bush commented on it extensively in his speech when he visited Lancaster, Pennsylvania a few months ago. Nobody commented on this aspect of his talk, nor his command of this particularly important nuance of the tax code.
But it's a fact. I've been paying taxes on income flowed through Subchapter S or LLC entities for about a decade. For anyone planning to do any significant business outside a large corporate structure, 1040s alone no longer represent a clear picture of how incomes are earned.
Reynolds elaborated by writing,
"It is this bookkeeping shift, moving business income from the corporate to the individual tax, not CEO pay, which raised the top 1%'s share on individual tax returns. Income reported on W2 forms -- salaries, bonuses and exercised stock options -- accounted for only 57.2% of total income among the top 1% in 2005, down from 63% in 2000 and 65.7% in 1986. Real compensation among the top 1% actually fell 7% from 2000 to 2005."
Wow. Imagine that! The top taxpayers weren't all Fortune 500 CEOs!
Then there's the matter of the denominator of the "1%." On this topic, Reynolds wrote,
"Turning to the denominator of this ratio ("all income"), a huge portion of middle and lower income is no longer reported on tax returns. A larger and larger share of middle-class investment income is now accumulating outside of AGI because it is inside IRA, 401(k) and 529 savings plans.
The CBO reckons the top 1% accounted for more than 59% of all capital gains, interest, dividends and rent reported on individual tax returns by 2004. Yet estimates of the share of national wealth of the top 1% range from 21%-33%.
If the top 1% own 21%-33% of all capital, how could they be collecting 59% of the income from capital? They can't and they aren't. The top 1% is simply reporting a rising share of capital income because those with more modest incomes are keeping a rising share of their capital income unreported -- in IRA, 401(k) and 529 accounts. Millions also shrink their "adjusted" incomes by subtracting contributions to IRAs unavailable to the rich."
So the income base on which the disparities are calculated aren't even fully representative. Significant income among the middle class is 'hidden' among legal tax shelters, such as IRAs and 401(k) plans.
Gee, this is getting complicated, isn't it? Far moreso than Hillary or Edwards campaign-trail sound bite? You betcha!
But wait....there's more.
Reynolds goes on to add transfer payments as an omitted income source,
"Another huge swath of middle and lower income is excluded because AGI includes only the taxable portion of Social Security benefits and totally misses most other transfer payments such as Medicaid, food stamps and the Earned Income Credit. The Canberra Group, an international group of experts on income statistics brought together from 1996-2000 by the OECD, World Bank, U.N. and others, insisted household income must include everything that "increases the recipients' potential to consume or save." Government transfers amounted to $1.5 trillion in 2005 -- more than the total income of the top 1% in the basic Piketty and Saez estimates ($1.2 trillion).
As a result of such huge omissions, and tax avoidance, the AGI of $7.5 trillion in 2005 was $3.7 trillion smaller than pretax personal income (personal income was $10.3 trillion in 2005, after subtracting $875 billion of payroll taxes). Anyone suggesting AGI is a more accurate measure than personal income is obliged to argue that GDP in 2005 was exaggerated by 29.4%."
So there's another leak in the AGI measurement which underpins the disparity claims.
Then there's a really innocuous aspect of the claims. They are frequently based on per tax return data, being, well, tax data. But Reynolds notes how this distorts reality,
"Estimated income shares from the IRS or Messrs. Piketty and Saez are not about income per household, but income per tax return. That matters because the top fifth of households average two salaries per tax return. The Census Bureau reports that the top fifth accounted for 26.8% of all full-time works last year while the bottom fifth accounted for just 5.7%. In fact, 64.5% of the households in the bottom fifth had nobody working, not even part time for a few weeks. When labor economists discuss income inequality, they habitually switch to speculating about skill-based differences in hourly wages, totally ignoring differences in hours worked."
Then Reynolds presents evidence you won't read elsewhere about another key component of the alleged rising incomes disparity- changes in the IRS definition of AGI. He wrote,
"Third, the latest IRS figures are not comparable with those of 1986, much less with 1929, because the definition of AGI changes with changes in tax law. Such estimates differ greatly, with the IRS saying the top 1% received only 11.3% of income in 1986 (because AGI then excluded 60% of capital gains) while Messrs. Piketty and Saez put that year's figure at 13.1% and the CBO says it was 14%.
The IRS figures only go back to 1986, so the Business Week comparison with the 1920s is invalid.
If total income for 2005 was defined as it was for 1928, then the share of the top 1% would have dropped to 13.3% in 2005, compared with 19.8% in 1928. Besides, as Messrs. Piketty and Saez explained, "our long-run series are generally confined to top income and wealth shares and contain little information about bottom segments of the distribution." "
Wow! That means that, unadjusted for Reynolds' other findings of fallacious left-wing incomes analysis, if you simply compared 2005 with 1928, the top 1% share of incomes has actually dropped!
Finally, Reynolds notes how tax rates affect reported income, as distinct from actual total income, especially among, well, those top 1%,
"A fundamental problem with all tax-based income data involves "taxable income elasticity." Numerous studies, some by Mr. Saez, show that the amount of top income reported on individual tax returns is highly sensitive to changes in marginal tax rates on individual income, corporate income and capital gains. After the tax on dividends was reduced in 2003, for example, top-bracket investors held more dividend-paying stocks in taxable accounts (rather than in nontaxable accounts) and fewer tax-exempt bonds.
Even if estimates of the top 1%'s income share were not so sensitive to changes in tax rates, they would still tell us nothing about what happened to incomes among the other 99%. The top 1%'s share always falls in recessions, even aside from capital gains. But that certainly doesn't mean recessions raise everyone else's income.
"It is a disputed question," wrote Messrs. Piketty and Saez, "whether the surge in reported top incomes has been caused by the reduction in taxation at the top through behavioral responses." In fact, their data clearly suggest that higher tax rates on top incomes, dividends and capital gains would sharply reduce top incomes, dividends and capital gains reported on individual tax returns. Such behavioral responses would have little impact on actual income or wealth at the top, while nonetheless leaving middle-income taxpayers stuck with a much larger share of the tax burden."
Putting all of Reynolds' points together, it's clear that you can't say anything defensible, on the basis of tax data, about whether the US is experiencing growing income disparity between the top and bottom extremes of household incomes.
If Democratic Presidential candidates, and Republican one, as well, are going to continue to harp on this chimera, they'll have to look elsewhere for reliable data on which to base the accusation.
In his editorial, Reynolds demolishes the evolving Democratic claim that our country's income distribution is 'the most unequal that it's ever been.'
He begins with this passage,
"The argument for these proposals has nothing to do with the impact of higher tax rates on incentives and the economy. It is all about "fairness" -- defined as reducing the top 1%'s share of income.
This political exercise invariably begins by citing dubious statistics about pretax incomes among the top 1% (1.3 million tax returns) as an excuse for raising tax rates on the top 5%, among others. Echoing speeches from Sen. Clinton, Business Week recently exclaimed, "According to new Internal Revenue Service data announced last week, income inequality in the U.S. is at its worst since the 1920s (before the Great Depression). The top percentile of wealthy Americans earned 21.2% of all income in 2005, up from 19% in 2004."
These statistics are extremely misleading.
First of all, the figures do not describe the top percentile's share of "all income," but that group's share of "adjusted" gross income (AGI) reported on individual tax returns. For one thing, thousands of professionals and business owners who used to report most of their income under the corporate tax responded to lower individual income-tax rates after 1986 and 2003 by reporting more income under the individual tax as partnerships, LLCs and Sub-S corporations."
This is critically important. So much so that President Bush commented on it extensively in his speech when he visited Lancaster, Pennsylvania a few months ago. Nobody commented on this aspect of his talk, nor his command of this particularly important nuance of the tax code.
But it's a fact. I've been paying taxes on income flowed through Subchapter S or LLC entities for about a decade. For anyone planning to do any significant business outside a large corporate structure, 1040s alone no longer represent a clear picture of how incomes are earned.
Reynolds elaborated by writing,
"It is this bookkeeping shift, moving business income from the corporate to the individual tax, not CEO pay, which raised the top 1%'s share on individual tax returns. Income reported on W2 forms -- salaries, bonuses and exercised stock options -- accounted for only 57.2% of total income among the top 1% in 2005, down from 63% in 2000 and 65.7% in 1986. Real compensation among the top 1% actually fell 7% from 2000 to 2005."
Wow. Imagine that! The top taxpayers weren't all Fortune 500 CEOs!
Then there's the matter of the denominator of the "1%." On this topic, Reynolds wrote,
"Turning to the denominator of this ratio ("all income"), a huge portion of middle and lower income is no longer reported on tax returns. A larger and larger share of middle-class investment income is now accumulating outside of AGI because it is inside IRA, 401(k) and 529 savings plans.
The CBO reckons the top 1% accounted for more than 59% of all capital gains, interest, dividends and rent reported on individual tax returns by 2004. Yet estimates of the share of national wealth of the top 1% range from 21%-33%.
If the top 1% own 21%-33% of all capital, how could they be collecting 59% of the income from capital? They can't and they aren't. The top 1% is simply reporting a rising share of capital income because those with more modest incomes are keeping a rising share of their capital income unreported -- in IRA, 401(k) and 529 accounts. Millions also shrink their "adjusted" incomes by subtracting contributions to IRAs unavailable to the rich."
So the income base on which the disparities are calculated aren't even fully representative. Significant income among the middle class is 'hidden' among legal tax shelters, such as IRAs and 401(k) plans.
Gee, this is getting complicated, isn't it? Far moreso than Hillary or Edwards campaign-trail sound bite? You betcha!
But wait....there's more.
Reynolds goes on to add transfer payments as an omitted income source,
"Another huge swath of middle and lower income is excluded because AGI includes only the taxable portion of Social Security benefits and totally misses most other transfer payments such as Medicaid, food stamps and the Earned Income Credit. The Canberra Group, an international group of experts on income statistics brought together from 1996-2000 by the OECD, World Bank, U.N. and others, insisted household income must include everything that "increases the recipients' potential to consume or save." Government transfers amounted to $1.5 trillion in 2005 -- more than the total income of the top 1% in the basic Piketty and Saez estimates ($1.2 trillion).
As a result of such huge omissions, and tax avoidance, the AGI of $7.5 trillion in 2005 was $3.7 trillion smaller than pretax personal income (personal income was $10.3 trillion in 2005, after subtracting $875 billion of payroll taxes). Anyone suggesting AGI is a more accurate measure than personal income is obliged to argue that GDP in 2005 was exaggerated by 29.4%."
So there's another leak in the AGI measurement which underpins the disparity claims.
Then there's a really innocuous aspect of the claims. They are frequently based on per tax return data, being, well, tax data. But Reynolds notes how this distorts reality,
"Estimated income shares from the IRS or Messrs. Piketty and Saez are not about income per household, but income per tax return. That matters because the top fifth of households average two salaries per tax return. The Census Bureau reports that the top fifth accounted for 26.8% of all full-time works last year while the bottom fifth accounted for just 5.7%. In fact, 64.5% of the households in the bottom fifth had nobody working, not even part time for a few weeks. When labor economists discuss income inequality, they habitually switch to speculating about skill-based differences in hourly wages, totally ignoring differences in hours worked."
Then Reynolds presents evidence you won't read elsewhere about another key component of the alleged rising incomes disparity- changes in the IRS definition of AGI. He wrote,
"Third, the latest IRS figures are not comparable with those of 1986, much less with 1929, because the definition of AGI changes with changes in tax law. Such estimates differ greatly, with the IRS saying the top 1% received only 11.3% of income in 1986 (because AGI then excluded 60% of capital gains) while Messrs. Piketty and Saez put that year's figure at 13.1% and the CBO says it was 14%.
The IRS figures only go back to 1986, so the Business Week comparison with the 1920s is invalid.
If total income for 2005 was defined as it was for 1928, then the share of the top 1% would have dropped to 13.3% in 2005, compared with 19.8% in 1928. Besides, as Messrs. Piketty and Saez explained, "our long-run series are generally confined to top income and wealth shares and contain little information about bottom segments of the distribution." "
Wow! That means that, unadjusted for Reynolds' other findings of fallacious left-wing incomes analysis, if you simply compared 2005 with 1928, the top 1% share of incomes has actually dropped!
Finally, Reynolds notes how tax rates affect reported income, as distinct from actual total income, especially among, well, those top 1%,
"A fundamental problem with all tax-based income data involves "taxable income elasticity." Numerous studies, some by Mr. Saez, show that the amount of top income reported on individual tax returns is highly sensitive to changes in marginal tax rates on individual income, corporate income and capital gains. After the tax on dividends was reduced in 2003, for example, top-bracket investors held more dividend-paying stocks in taxable accounts (rather than in nontaxable accounts) and fewer tax-exempt bonds.
Even if estimates of the top 1%'s income share were not so sensitive to changes in tax rates, they would still tell us nothing about what happened to incomes among the other 99%. The top 1%'s share always falls in recessions, even aside from capital gains. But that certainly doesn't mean recessions raise everyone else's income.
"It is a disputed question," wrote Messrs. Piketty and Saez, "whether the surge in reported top incomes has been caused by the reduction in taxation at the top through behavioral responses." In fact, their data clearly suggest that higher tax rates on top incomes, dividends and capital gains would sharply reduce top incomes, dividends and capital gains reported on individual tax returns. Such behavioral responses would have little impact on actual income or wealth at the top, while nonetheless leaving middle-income taxpayers stuck with a much larger share of the tax burden."
Putting all of Reynolds' points together, it's clear that you can't say anything defensible, on the basis of tax data, about whether the US is experiencing growing income disparity between the top and bottom extremes of household incomes.
If Democratic Presidential candidates, and Republican one, as well, are going to continue to harp on this chimera, they'll have to look elsewhere for reliable data on which to base the accusation.
Sunday, November 25, 2007
On Economic Myth #1- Middle Class Job Loss
Much consternation has been raised lately by Democrats who contend that US income inequality between upper and lower earners has increased.
Nevermind that they can't articulate, quantitatively, what is normatively bad about this. They simply feel it's wrong.
However, three articles have appeared in the pages of the Wall Street Journal recently which refute various pieces of this Democratic assault on economically successful Americans. One has to do specifically with middle-class job growth and loss. Another analyzes the Americans at the top of the taxpaying heap by percent of income. The third focuses on a dynamic view of US personal incomes, rather than static views of the lowest and highest incomes at points in time.
Late last month, the Wall Street Journal published an editorial by Stephen J. Rose, a senior economic fellow at the Progressive Policy Institute, entitled "The Myth of Middle-Class Job Loss."
Nevermind that they can't articulate, quantitatively, what is normatively bad about this. They simply feel it's wrong.
However, three articles have appeared in the pages of the Wall Street Journal recently which refute various pieces of this Democratic assault on economically successful Americans. One has to do specifically with middle-class job growth and loss. Another analyzes the Americans at the top of the taxpaying heap by percent of income. The third focuses on a dynamic view of US personal incomes, rather than static views of the lowest and highest incomes at points in time.
Late last month, the Wall Street Journal published an editorial by Stephen J. Rose, a senior economic fellow at the Progressive Policy Institute, entitled "The Myth of Middle-Class Job Loss."
Mr. Rose's analysis is quite in-depth, and I can't hope to capture it all in this commentary. For those who are interested, it appeared in the Wednesday, October 24, 2007 issue of the Journal, on page A21, entitled, "The Myth of Middle-Class Job Loss."
In part, Mr. Rose writes,
"The assertion that the American middle-class is disappearing along with manufacturing jobs is, put simply, based on an outdated view of how the economy operates, and is empirically wrong. Nonetheless, the view that the economy has failed the middle class is widespread. The outsourcing of jobs to low-wage countries is, of course, the latest culprit. Polemicists from all sides find it irresistible to blame expanding trade for middle-class decline. But how widespread a problem is outsourcing, exactly?
It is certainly true that many jobs in manufacturing clothing, steel, metal products and automobiles have gone overseas. Plant closures not only devastate the workers who are displaced, but they have also undermined the vitality of whole communities in North Carolina, Pennsylvania, New York, Michigan, Ohio and Wisconsin, to name just a few places. But while such communities are a clear sign of the decline in some sectors of the economy, there has been strong employment growth in many other sectors. In research just published by the Progressive Policy Institute, I show that incomes and employment have grown by substantial amounts in every state (even in the so-called Rust Belt) since the passage of the North American Free Trade Agreement in 1993.
In fact, there is no convincing, data-driven proof that trade has led to any overall job loss during the last 30 years. To the contrary, the economy has grown at a slow but steady rate (a few brief recessions notwithstanding) with trade and employment rising in tandem.
To prove that there has been substantial growth of middle-class jobs, I compare the situation that existed in 1979 with that of 2005. The base year is 1979 because it represents the last business-cycle peak before income inequality and the U.S. trade deficit began to grow quickly in the 1980s. To make the comparison fair, earnings in 1979 are increased by almost 150% to adjust for inflation.
Nevertheless, there has clearly been a sharp increase in female middle-class employment. As recently as 1979, 61% of female workers were in jobs that paid less than $25,000, and only 3% earned more than $50,000 a year. By contrast, more than 36% of new jobs that opened since 1979 for women pay more than $50,000 and only 17% pay less than $25,000.
Critics who bemoan the trajectory of the American economy over the past three decades somehow find it convenient to overlook or play down this historic improvement in the employment status and income levels of women. While women still lag in pay compared to men of similar educational attainment, the extraordinary rise in women's income since 1979 is a fact at odds with the notion of an overall decline in the American middle class.
For men, the change in employment since 1979 has not been quite as clear-cut, or as positive. There has been a tremendous growth in the number of men in high-paying jobs: In 1979, just 10% of male workers earned above $75,000, while fully 34% of new jobs since 1979 have paid this amount or more.
However, there was also growth in the share of male workers earning less than $25,000 a year, from 23% in 1979 to 36% by 2005. This rise of low-paying jobs hit less-educated men particularly hard. For those with just a high school diploma, 87% of the new jobs paid $25,000 or less.
Here's the bottom line: For three-quarters of the workforce (women and the top half of male earners), economic growth translated into earnings gains. But for male workers in the bottom half of the earnings distribution, the decline of unionized manufacturing employment has led to the drying up of some middle-class jobs for those with no post-secondary education.
Using a framework that I developed in the 1990s, I find that most of the employment gains over the last 30 years have been in business-management activities (administration, sales, finance and business services) as well as in professional services such as health care and education. While the percentage of U.S. jobs derived from manual work in agriculture, mining, timber and manufacturing has declined, the share of jobs related to low-skilled retail and personal/food services has remained steady.
The economy can expand and provide more good jobs as long as workers have the education and training required to succeed. Talk of the "disappearance of the middle class" is actually counterproductive, because it distorts the real challenge. This is to make sure that our young men and women are better prepared to enter the workforce of the 21st century."
Rose's work clearly indicates that one has to measure the US economy's middle class by earnings, not job type. Contrary to Democratic beliefs, keeping old-line manufacturing jobs is often a 'one-way ticket to Palookaville' for blue-collar workers. Rather, better education continues to be the way forward.
So, millions for education- but not a dime for old manufacturing job protection!
Next in this short series will be a piece discussing the misconceptions about America's top taxpayers.
Wednesday, November 21, 2007
The Evolving Democratic Presidential Contest
As a conservative, I freely admit that I am loving the current dust-up in the Democratic Presidential contest.
Hillary is finally getting slapped around for her obfuscations, waffling, and inexperience.
So, for that matter, is Obama.
It's thrilling to see these two, and Edwards, begin to tear at each other for real weaknesses and character flaws which matter in our President.
It's also wonderful to see that this is an Equal Opportunity melee. Obama's picking on Hillary because she has problems with the truth- much like her husband- and with others criticizing her. Not because she's a woman. But because she has no Presidential experience. Only a term plus a few years as a Senatorial windbag.
Same with Hillary, on Obama. She's beating on him for having virtually no experience with anything near to the Presidency. Not because of his race.
He's a pup, and we all know it. His experience, and I use the term loosely, largely falls into having been an aide to a seriously disconnected-from-reality, bow-tie wearing clown from Illinois, the late Senator Paul Simon, plus a few terms in the amateur hour Illinois Congress.
God help us if we trust Obama with our foreign policy. I'm not sure the other G8 leaders will allow him in the room, other than for milk and cookie time.
Hillary's not much more experienced, but she's more clever and has been around, thanks to her husband's two terms as President and Governor of Arkansas. And her own, long-ago machinations on the Democratic side of the Watergate Committee.
Our Republic is incredibly well-served for having these two finally rip into each other's inexperience bases and shifting, or idiotic, as the case may be, stands on various issues.
And, yes, I welcome it on the Republican side, as well. Although I think Huckabee is a joke. Plus, we really can't be serious about electing the second Governor from Arkansas within a decade, can we?
Anymore than to extend the run to 24 years in which the Republic will have been presided over by people from only two families- the Bushes or the Clintons- can we?
But in the meantime, the everlasting campaign is finally making these ambitious pretenders to our throne really have to run the gauntlet.
I love it.
Hillary is finally getting slapped around for her obfuscations, waffling, and inexperience.
So, for that matter, is Obama.
It's thrilling to see these two, and Edwards, begin to tear at each other for real weaknesses and character flaws which matter in our President.
It's also wonderful to see that this is an Equal Opportunity melee. Obama's picking on Hillary because she has problems with the truth- much like her husband- and with others criticizing her. Not because she's a woman. But because she has no Presidential experience. Only a term plus a few years as a Senatorial windbag.
Same with Hillary, on Obama. She's beating on him for having virtually no experience with anything near to the Presidency. Not because of his race.
He's a pup, and we all know it. His experience, and I use the term loosely, largely falls into having been an aide to a seriously disconnected-from-reality, bow-tie wearing clown from Illinois, the late Senator Paul Simon, plus a few terms in the amateur hour Illinois Congress.
God help us if we trust Obama with our foreign policy. I'm not sure the other G8 leaders will allow him in the room, other than for milk and cookie time.
Hillary's not much more experienced, but she's more clever and has been around, thanks to her husband's two terms as President and Governor of Arkansas. And her own, long-ago machinations on the Democratic side of the Watergate Committee.
Our Republic is incredibly well-served for having these two finally rip into each other's inexperience bases and shifting, or idiotic, as the case may be, stands on various issues.
And, yes, I welcome it on the Republican side, as well. Although I think Huckabee is a joke. Plus, we really can't be serious about electing the second Governor from Arkansas within a decade, can we?
Anymore than to extend the run to 24 years in which the Republic will have been presided over by people from only two families- the Bushes or the Clintons- can we?
But in the meantime, the everlasting campaign is finally making these ambitious pretenders to our throne really have to run the gauntlet.
I love it.
Sunday, November 18, 2007
Hillary & The Democratic Presidential Candidates' Latest Debate
These past few weeks have seen the campaign for the Democratic party's Presidential nomination become much more turbulent than most pundits would apparently have guessed.
As this YouTube clipped demonstrates, Hillary has now defined any criticism of her stands and actions, coming from her rivals in her own party, as "mudslinging."
Whether or not, as the clip's final message contends, it's a Republican tactic, which, by the way, at least this election season, it isn't, is true, is another issue.
What is illuminating is how many voters and this YouTube poster feel Hillary is running for cover behind her gender and, now, the retort of 'mudslinging' when her fellow Presidential candidates legitimately question her shifting positions on a variety of issues.
I suspect that Hillary's lead may weaken. Even if it does not, what will get her by an inexperienced Obama and a populist Edwards won't beat Giuliani or Romney.
As this YouTube clipped demonstrates, Hillary has now defined any criticism of her stands and actions, coming from her rivals in her own party, as "mudslinging."
Whether or not, as the clip's final message contends, it's a Republican tactic, which, by the way, at least this election season, it isn't, is true, is another issue.
What is illuminating is how many voters and this YouTube poster feel Hillary is running for cover behind her gender and, now, the retort of 'mudslinging' when her fellow Presidential candidates legitimately question her shifting positions on a variety of issues.
I suspect that Hillary's lead may weaken. Even if it does not, what will get her by an inexperienced Obama and a populist Edwards won't beat Giuliani or Romney.
Monday, November 12, 2007
Electing Minorities in America
In all the hoopla of this past week's Democratic Presidential campaign trail, something seems to have been forgotten.
Most people don't vote single issues, even when the issue is being a minority.
The Wall Street Journal had a long, glowing piece about Obama this weekend. It cited how many white voters believe he is beyond the race issues of the 1960s, and showed a bar graph demonstrating that Americans are now 'ready' for a black President.
Then we have Hillary, playing the gender card, after being roughed up in last weekend's debate. Her husband accused the other candidates of taking advantage of her gender, and 'Swift boating' her.
Peggy Noonan got this one right, in her weekend column in the Wall Street Journal. Contrasting Hillary with Margaret Thatcher, she pointed out that lots of people, men and women, simply don't trust Hillary's blind ambition.
Personally, I don't have any problem with the idea of a woman, or any particular ethnic group member becoming President. So long as they meet the requirements and have a genuine interest in America's long term welfare, their specific group membership is irrelevant.
What is surprising is how the media continues to behave as if gender or race is the only reason people wouldn't vote for Hillary or Obama.
I won't vote for Hillary because she's a largely inexperienced, power-hungry socialist. She's met few, if any, large, expensive governmental programs she doesn't like, and will tax anyone, except her wealthy contributors, to pay for them.
It has nothing to do with her gender. That merely clouds things, in my opinion. To not vote for Hillary is not to reject women candidates for President. Merely that woman candidate.
The same is true for Obama. He has nothing remotely resembling the experience one would like to see in a President. Again, the Journal article made it seem as if a vote against, or not for, Obama, is a racist vote.
But that's not true. It totally overlooks Obama's nearly-total absence of any legitimate experience which would prepare him to lead this country. He's had only two years in the Senate- which is composed of largely do-nothing legislators. Prior to that, he served in the Illinois state legislature.
You wonder if Obama knows how to do anything- anything at all.
As with Hillary, I'm not against Obama because he's black. I don't think he's qualified a qualified person, no conditionality, to be President.
To reject Obama is not to reject minority candidates. Only that minority candidate. Jesse Jackson wasn't elected, either. And not because he is black. He was totally ill prepared to be President- and still is.
What really bothers me is how easily the media turns these two candidates' campaigns into litmus tests on gender and race, thus obscuring their relative inexperience and lack of qualifications for the high office they seek.
This is the sort of coverage that results in false impressions that America isn't ready for a woman or minority President.
Of course we are. We just need to see some women or minorities who are actually capable of executing the office of the President effectively.
Most people don't vote single issues, even when the issue is being a minority.
The Wall Street Journal had a long, glowing piece about Obama this weekend. It cited how many white voters believe he is beyond the race issues of the 1960s, and showed a bar graph demonstrating that Americans are now 'ready' for a black President.
Then we have Hillary, playing the gender card, after being roughed up in last weekend's debate. Her husband accused the other candidates of taking advantage of her gender, and 'Swift boating' her.
Peggy Noonan got this one right, in her weekend column in the Wall Street Journal. Contrasting Hillary with Margaret Thatcher, she pointed out that lots of people, men and women, simply don't trust Hillary's blind ambition.
Personally, I don't have any problem with the idea of a woman, or any particular ethnic group member becoming President. So long as they meet the requirements and have a genuine interest in America's long term welfare, their specific group membership is irrelevant.
What is surprising is how the media continues to behave as if gender or race is the only reason people wouldn't vote for Hillary or Obama.
I won't vote for Hillary because she's a largely inexperienced, power-hungry socialist. She's met few, if any, large, expensive governmental programs she doesn't like, and will tax anyone, except her wealthy contributors, to pay for them.
It has nothing to do with her gender. That merely clouds things, in my opinion. To not vote for Hillary is not to reject women candidates for President. Merely that woman candidate.
The same is true for Obama. He has nothing remotely resembling the experience one would like to see in a President. Again, the Journal article made it seem as if a vote against, or not for, Obama, is a racist vote.
But that's not true. It totally overlooks Obama's nearly-total absence of any legitimate experience which would prepare him to lead this country. He's had only two years in the Senate- which is composed of largely do-nothing legislators. Prior to that, he served in the Illinois state legislature.
You wonder if Obama knows how to do anything- anything at all.
As with Hillary, I'm not against Obama because he's black. I don't think he's qualified a qualified person, no conditionality, to be President.
To reject Obama is not to reject minority candidates. Only that minority candidate. Jesse Jackson wasn't elected, either. And not because he is black. He was totally ill prepared to be President- and still is.
What really bothers me is how easily the media turns these two candidates' campaigns into litmus tests on gender and race, thus obscuring their relative inexperience and lack of qualifications for the high office they seek.
This is the sort of coverage that results in false impressions that America isn't ready for a woman or minority President.
Of course we are. We just need to see some women or minorities who are actually capable of executing the office of the President effectively.
Perspectives on America- From Pakistan
The other day, I received a timely reminder of what is unique about America.
One of my friends, with whom I have played squash, is a Pakistani-born medical doctor living in the US. He still has family in Pakistan, and travels there periodically with his family.
I saw him Saturday morning, and asked but his feelings regarding the recent events in his homeland. Did it bother him? With whom were is allegiances? Does he have any family members now in prison?
He said, simply,
'The ruler there is like Castro. The people don't like him. But the lawyers being thrown in jail are paid by another politician, not Bhutto.'
That's why I'm here.'
His remarks made me think, after a week of seeing the dollar fall further in relative value among other currencies. And here some Chinese official remark that they will diversify out of dollars soon.
For all America's faults, someone like my friend, the Pakistani medical doctor, will choose to live here, rather than in his own country. He doesn't trust the political climate of the land where he was born.
For all we hear about Chinese coming here for education, then returning to China to compete against us, how many stay here, for our political freedoms?
It doesn't take much to see how China is viewed in the world. They manipulated Yahoo in order to identify and imprison a Chinese journalist. Who has forgotten Tienemman Square?
When people around the world look for one economic and moral haven, it's always the US. Our freedom of speech, despite Robert Redford's increasingly cantankerous and addled mumblings, remain second to none. In a crisis, our economy provides more safety and capacity for investment than any other one.
People from other countries battle to come here. Investors from other countries bid to buy our government's securities.
Things in America are not as bad as they might occasionally seem.
You could be living in Pakistan- or China.
One of my friends, with whom I have played squash, is a Pakistani-born medical doctor living in the US. He still has family in Pakistan, and travels there periodically with his family.
I saw him Saturday morning, and asked but his feelings regarding the recent events in his homeland. Did it bother him? With whom were is allegiances? Does he have any family members now in prison?
He said, simply,
'The ruler there is like Castro. The people don't like him. But the lawyers being thrown in jail are paid by another politician, not Bhutto.'
That's why I'm here.'
His remarks made me think, after a week of seeing the dollar fall further in relative value among other currencies. And here some Chinese official remark that they will diversify out of dollars soon.
For all America's faults, someone like my friend, the Pakistani medical doctor, will choose to live here, rather than in his own country. He doesn't trust the political climate of the land where he was born.
For all we hear about Chinese coming here for education, then returning to China to compete against us, how many stay here, for our political freedoms?
It doesn't take much to see how China is viewed in the world. They manipulated Yahoo in order to identify and imprison a Chinese journalist. Who has forgotten Tienemman Square?
When people around the world look for one economic and moral haven, it's always the US. Our freedom of speech, despite Robert Redford's increasingly cantankerous and addled mumblings, remain second to none. In a crisis, our economy provides more safety and capacity for investment than any other one.
People from other countries battle to come here. Investors from other countries bid to buy our government's securities.
Things in America are not as bad as they might occasionally seem.
You could be living in Pakistan- or China.
Monday, November 5, 2007
Peggy Noonan On Hillary's Revelations
Peggy Noonan redeemed herself with a great article in the Weekend Wall Street Journal concerning Hillary's behavior in the recent Democratic candidates' debate. She articulated clearly something I've felt about Hillary all along.
Noonan writes,
"The story is not that Mrs. Clinton signaled, in attitude and demeanor, who she believes is her most dangerous foe, the great impediment between her and an easy glide to the nomination. Yes, that would be Tim Russert.
The story is that she talked about policy. Not talking points, but policy. In talking about it she seemed, for the first time, to be revealing what's inside.
It was startling. It's 1993 in there. The year before her fall, and rise.
But the larger point is that her policy approach revealed all the impulses not of the New Centrism but the Old Leftism. Her statements were redolent of the 1990s phrase "command and control." They reflect a bias toward the old tax-raising on people who aren't rich, who aren't protected, the old "my friends and I know best, and we'll fill you dullards in on the details later."
The problem for Mrs. Clinton is not that people sense she will raise taxes. It's that they don't think she'll raise them on the real and truly rich. The rich are her friends. They contribute to her, dine with her, have access to her. They have an army of accountants. They're protected even from her.
But she can stick it to others, and in the way of modern liberalism for roughly half a century now, one suspects she'll define affluence down. That she would hike taxes on people who make $150,000 a year.
But those "rich" -- people who make $200,000 and have two kids and a mortgage and pay local and state taxes in, say, New Jersey -- they don't see themselves as rich. Because they're not. They're already carrying too much of the freight.
It seemed to me she made it quite possible to assume you know who she'll be making war on. And this -- much more than the latest scandal, the Chinatown funny money and the bundling -- could, and I think would, engender real opposition down the road. The big chink in her armor is not stylistic, it is about policy. It is about the great baseline question in all political life: Whose ox is being gored?"
It pleases me to see someone else also finally feel that Hillary's basic tax-the-middle-class-and-spend policy is the problem. It's such a throwback to the old, losing ways of her party that you wonder how she can believe she'll win with that message.
This is where I think that content can trump form. As I wrote here recently, of an acquaintance who reminded me of Howard Dean's fall from front-running grace four years ago, money and momentum in no way assure victory- either for the nomination, nor for the Presidency itself.
In their own self-interest, Hillary's largely-hapless or worn-out competitors are at last beginning to chip away at her Teflon coating. The inconsistencies are showing through, as are the megalomaniac projects and dreams of vast new Federal programs, paid for with vast new tax revenues from ever-less-wealthy Americans.
Call me naive, or too simple, but I think that Americans instinctively protect their wallets when threatened with such a free-taxing and -spending politician.
I think that reality is at last beginning to catch up to Hillary's campaign. And money won't protect her when it does.
Noonan writes,
"The story is not that Mrs. Clinton signaled, in attitude and demeanor, who she believes is her most dangerous foe, the great impediment between her and an easy glide to the nomination. Yes, that would be Tim Russert.
The story is that she talked about policy. Not talking points, but policy. In talking about it she seemed, for the first time, to be revealing what's inside.
It was startling. It's 1993 in there. The year before her fall, and rise.
But the larger point is that her policy approach revealed all the impulses not of the New Centrism but the Old Leftism. Her statements were redolent of the 1990s phrase "command and control." They reflect a bias toward the old tax-raising on people who aren't rich, who aren't protected, the old "my friends and I know best, and we'll fill you dullards in on the details later."
The problem for Mrs. Clinton is not that people sense she will raise taxes. It's that they don't think she'll raise them on the real and truly rich. The rich are her friends. They contribute to her, dine with her, have access to her. They have an army of accountants. They're protected even from her.
But she can stick it to others, and in the way of modern liberalism for roughly half a century now, one suspects she'll define affluence down. That she would hike taxes on people who make $150,000 a year.
But those "rich" -- people who make $200,000 and have two kids and a mortgage and pay local and state taxes in, say, New Jersey -- they don't see themselves as rich. Because they're not. They're already carrying too much of the freight.
It seemed to me she made it quite possible to assume you know who she'll be making war on. And this -- much more than the latest scandal, the Chinatown funny money and the bundling -- could, and I think would, engender real opposition down the road. The big chink in her armor is not stylistic, it is about policy. It is about the great baseline question in all political life: Whose ox is being gored?"
It pleases me to see someone else also finally feel that Hillary's basic tax-the-middle-class-and-spend policy is the problem. It's such a throwback to the old, losing ways of her party that you wonder how she can believe she'll win with that message.
This is where I think that content can trump form. As I wrote here recently, of an acquaintance who reminded me of Howard Dean's fall from front-running grace four years ago, money and momentum in no way assure victory- either for the nomination, nor for the Presidency itself.
In their own self-interest, Hillary's largely-hapless or worn-out competitors are at last beginning to chip away at her Teflon coating. The inconsistencies are showing through, as are the megalomaniac projects and dreams of vast new Federal programs, paid for with vast new tax revenues from ever-less-wealthy Americans.
Call me naive, or too simple, but I think that Americans instinctively protect their wallets when threatened with such a free-taxing and -spending politician.
I think that reality is at last beginning to catch up to Hillary's campaign. And money won't protect her when it does.
Thursday, November 1, 2007
Hillary On The Defensive
The Wall Street Journal's recent piece on the Democratic Presidential candidates' "debate" on the Drexel University campus in Philadelphia, portrayed Hillary Clinton as beginning to exhibit the behaviors which I personally believe will ultimately deny her the White House.
For example, the Journal piece read, in part,
"Indeed, each of her rivals condemned Mrs. Clinton's vote on the Iran resolution as unnecessary saber rattling. Sen. Christopher Dodd of Connecticut and Sen. Joseph Biden of Delaware voted against the measure; Mr. Obama missed the voted. Several of the Democrats said the nonbinding resolution harked back chillingly to the march to war in Iraq. Mrs. Clinton said she considered the vote -- essentially for economic sanctions against Iran's elite military -- to be a part of diplomacy, not a prelude to battle.
Instead of pushing back, though, Mrs. Clinton turned her criticism on President Bush, condemning his administration on nearly every level as one that needed to be junked. She noted that if she were on board with the Republicans, "I don't think [they] got the message that I'm voting and sounding like them." A few minutes later, she referred to "the Republicans and their constant obsession with me."
Mr. Edwards couldn't let this last bit of rhetoric pass by. "Maybe they want to run against you," he said."
Two things seem apparent to me from this recounting of the Hillary's conduct during the debate.
One is that she is already becoming what I would call "brittle." It's a characteristic I have been expecting to come out sooner or later. Guess it's sooner, after all.
Hillary combines her desire to be and continue to be front-runner, with a sort of presumption that this means she is unassailable. It's almost as if thinking and acting it, will make it so.
The second thing is that she reacts to criticism and challenges from her fellow candidates by attacking our current President, for whom she has obvious hatred.
But she isn't running against him. Initially, she's running against Obama and Edwards. Next, perhaps, she'll run against Giuliani, Romney, McCain, or Thompson.
In this regard, I have to believe George Bush is having a laugh even now. After all, only 16 people have won two terms as President of our Republic. He has no need to prove himself again.
I cannot help but believe Hillary is running against the wrong adversary. In a sense, it's as if she wants to run against a defenseless candidate. And this retiring two-term President is defenseless, in the sense that he secure in his philosophy and accomplishments.
Could Hillary be making a major mistake by doing this? I think so. Even Democratic voters must realize that the next election doesn't feature Bush. And railing against him is not at all the same as advancing a positive vision of the future.
So many of Hillary's positions are taken in opposition to the current administration's actions and doctrines. Will that sell when she has live, active opponents challenging her for the nomination of her own party for President?
Her cavalier attitude regarding the release of documents informing us about her role in her husband's administration was captured by this Journal passage,
"Mrs. Clinton dismissed criticism of a ban, which her husband sought, that would keep the National Archives from releasing Clinton administration papers until 2012. Asked by the moderator if she would lift the ban, she replied, "That's not my decision to make." But Mr. Obama called the Clinton ban "a problem," saying Democrats need to open government after "one of the most secretive administration's in our history," Mr. Bush's."
Both by her dismissal of her opponents in favor of President Bush as her adversary, and her rather haughty, dismissive attitude regarding most criticisms of the few detailed plans she has put forth, Hillary seems to be assiduously cultivating an image of arrogance.
As if she naturally will win the Democratic nomination, and, of course, the Democrats have to win, because Bush is so...well....un-Democratic.
In the past few days, and especially after reading this account of the recent debate, I've come to believe that Hillary has caught that most dangerous of Presidential candidate diseases.
I call it the "I've waited long enough, it's my turn, dammit!" disease, and I wrote about it here, in March of this year.
Bob Dole had the disease. I think John McCain contracted it, as well. Now, it looks like it's infected Hillary.
Is it merely coincidence that all are or were US Senators? I think not.
And for this reason, as well as my belief that an accomplished executive- governor, mayor, CEO, etc.,- will beat a non-VP or incumbent former- or sitting Senator, I don't believe Hillary will win the White House in 2008.
Monday, October 29, 2007
More Inconvenient Truth About Ethanol
Holman Jenkins' Wednesday Wall Street Journal article about the far left castigating Toyota for its stand on CAFE standards. Standing with other auto manufacturers who rely on large, less fuel-efficient, profitable cars that people actually want, to fund the sale of the "profitless Prius," Toyota is catching flack from the same greenies who buy its hybrid car.
To provide us with a better understanding of the issue, Holman distills it thusly,
"As car companies do, it sold Prius customers a car that met their needs and/or flattered their vanity. For other customers whose hot buttons lie elsewhere, Toyota has the Tundra, its giant, fuel-consuming pickup. Auto companies only achieve efficient scale by appealing to different consumer appetites. The profitless Prius wouldn't exist if not for the non-hybrids that keep Toyota in business. Indeed, Toyota supports the House bill over the Senate bill only because it would let auto makers continue to make big vehicles that happen to be the ones Americans, with their dollars, show they actually want.
But the 32-year-old CAFE rules have become a fetish of environmental groups, a talisman of their clout, a ticket to a seat at a table in Washington. The policy itself has no value: It doesn't reduce oil imports. It doesn't meaningfully curb fossil-fuel use.
In the nature of things, auto buyers amortize their forced investment in fuel economy by driving more miles, burning more gas. The impressive reliability gains of the auto makers over the past 30 years are in part a reflection of this consumer demand for more miles. Ditto the conspicuous increase in vehicle size and comfort, partly a function of the increased time motorists spend in their cars."
To illustrate an as-yet unrealized hypocrisy, Jenkins notes, further down in the piece, this tasty little morsel concerning what converting to ethanol will do for total greenhouse gas emissions,
"A recently passed Senate bill would require motorists to buy 36 billion gallons a year by 2022, up from 7.5 billion gallons under current law.
At least this would benefit the atmosphere, right? Think again. A research team featuring Paul Crutzen, who won a Nobel Prize for his work on ozone depletion, recently showed that the intensive cultivation of biofuels in the U.S. and Europe produces up to 70% more greenhouse effect than the fossil fuels they displace (nitrous oxide, a byproduct of the fertilizers used, has nearly 300 times the heat-trapping properties of carbon dioxide).
Passenger cars can burn fuel consisting of 10% ethanol. If our goal were really to displace conventional gasoline, we'd open our coastal markets to sugar-cane ethanol from Brazil and other Southern Hemisphere countries, produced by less intensive methods that result -- irony alert -- in a genuine reduction in greenhouse emissions.
But Washington blocks imported ethanol with a 54-cents-a-gallon tariff to protect domestic ethanol profits. So let's sum up the ways you're paying to prop up an industry that's bad for energy security and bad for climate worries: higher taxes, higher gas prices and higher food prices. Did we mention the 3% mileage penalty that comes from burning gasoline with a 10% ethanol content, thanks to ethanol's inferior BTU value compared to gasoline?"
I have to admit, I love the naive hypocrisy of the populist environmentalists.
They want less oil usage. They want to buy expensive hybrid technology cars cheaply, even though the cars still don't make economic sense to operate. They want fewer greenhouse emissions while also advocating ethanol.
But, as Crutzen's work demonstrates, there's a contradiction. Moe ethanol means more greenhouse gases to cultivate the biofuels, not to mention soil erosion and forest depletion, as mentioned here. In fact, I've read an article, the exact location of which escapes me just now, that more widespread use of ethanol is likely to lead to the accelerated disappearance of South American rainforests, the better to be replanted with biofuels.
Call me crazy, but isn't it nonsensical to use a lot of a major food source to replace a more efficiently-burning fossil fuel? We can't eat oil.
Between the water-intensive nature of ethanol production, its relative inefficiency for power generation, compared to petroleum-based products, and the devastation of more land to plant corn for ethanol, the green lobby and its citizen-followers are likely to wake up to an environmental mess sooner, rather than later.
Then there's the inflation in food costs that will result from this switch of a major consumable, corn, from foodstuff to auto fuel.
Hitting voters hard in their wallets is never a good way to secure their long term support for a still-unproven 'crisis,' i.e., scientifically proven, human-caused global warming.
To provide us with a better understanding of the issue, Holman distills it thusly,
"As car companies do, it sold Prius customers a car that met their needs and/or flattered their vanity. For other customers whose hot buttons lie elsewhere, Toyota has the Tundra, its giant, fuel-consuming pickup. Auto companies only achieve efficient scale by appealing to different consumer appetites. The profitless Prius wouldn't exist if not for the non-hybrids that keep Toyota in business. Indeed, Toyota supports the House bill over the Senate bill only because it would let auto makers continue to make big vehicles that happen to be the ones Americans, with their dollars, show they actually want.
But the 32-year-old CAFE rules have become a fetish of environmental groups, a talisman of their clout, a ticket to a seat at a table in Washington. The policy itself has no value: It doesn't reduce oil imports. It doesn't meaningfully curb fossil-fuel use.
In the nature of things, auto buyers amortize their forced investment in fuel economy by driving more miles, burning more gas. The impressive reliability gains of the auto makers over the past 30 years are in part a reflection of this consumer demand for more miles. Ditto the conspicuous increase in vehicle size and comfort, partly a function of the increased time motorists spend in their cars."
To illustrate an as-yet unrealized hypocrisy, Jenkins notes, further down in the piece, this tasty little morsel concerning what converting to ethanol will do for total greenhouse gas emissions,
"A recently passed Senate bill would require motorists to buy 36 billion gallons a year by 2022, up from 7.5 billion gallons under current law.
At least this would benefit the atmosphere, right? Think again. A research team featuring Paul Crutzen, who won a Nobel Prize for his work on ozone depletion, recently showed that the intensive cultivation of biofuels in the U.S. and Europe produces up to 70% more greenhouse effect than the fossil fuels they displace (nitrous oxide, a byproduct of the fertilizers used, has nearly 300 times the heat-trapping properties of carbon dioxide).
Passenger cars can burn fuel consisting of 10% ethanol. If our goal were really to displace conventional gasoline, we'd open our coastal markets to sugar-cane ethanol from Brazil and other Southern Hemisphere countries, produced by less intensive methods that result -- irony alert -- in a genuine reduction in greenhouse emissions.
But Washington blocks imported ethanol with a 54-cents-a-gallon tariff to protect domestic ethanol profits. So let's sum up the ways you're paying to prop up an industry that's bad for energy security and bad for climate worries: higher taxes, higher gas prices and higher food prices. Did we mention the 3% mileage penalty that comes from burning gasoline with a 10% ethanol content, thanks to ethanol's inferior BTU value compared to gasoline?"
I have to admit, I love the naive hypocrisy of the populist environmentalists.
They want less oil usage. They want to buy expensive hybrid technology cars cheaply, even though the cars still don't make economic sense to operate. They want fewer greenhouse emissions while also advocating ethanol.
But, as Crutzen's work demonstrates, there's a contradiction. Moe ethanol means more greenhouse gases to cultivate the biofuels, not to mention soil erosion and forest depletion, as mentioned here. In fact, I've read an article, the exact location of which escapes me just now, that more widespread use of ethanol is likely to lead to the accelerated disappearance of South American rainforests, the better to be replanted with biofuels.
Call me crazy, but isn't it nonsensical to use a lot of a major food source to replace a more efficiently-burning fossil fuel? We can't eat oil.
Between the water-intensive nature of ethanol production, its relative inefficiency for power generation, compared to petroleum-based products, and the devastation of more land to plant corn for ethanol, the green lobby and its citizen-followers are likely to wake up to an environmental mess sooner, rather than later.
Then there's the inflation in food costs that will result from this switch of a major consumable, corn, from foodstuff to auto fuel.
Hitting voters hard in their wallets is never a good way to secure their long term support for a still-unproven 'crisis,' i.e., scientifically proven, human-caused global warming.
Sunday, October 28, 2007
Observations On Hillary's Lead Among Democratic Presidential Candidates
A seasoned newsman and political reporter, now writing for other purposes, was discussing the two party's Presidential contenders with me at a dinner party last Saturday night.
We agreed that Obama Bim Baden is too green and immature to win his party's nomination. Then, again, we also agreed that Hillary is too brittle.
As I mused about how much money she has raised, my colleague noted what happened in the 2004 Democratic Presidential race.
Not being a registered Dem, I don't recall the details. He asked me to remember Howard Dean's lead in Iowa, followed by, I believe, his victory in New Hampshire? He was the guy to beat.
Then he did that roar thing on camera. And his campaign began to unravel, losing momentum. To be candid, I had quite forgotten this.
My colleague's point was, despite Dean's money and momentum, he managed to critically, mortally wound himself while in the lead, and lost the nomination to Kerry.
That's probably why, when asked about running a near-perfect campaign to date, Hillary found some wood nearby to knock on, smiling that silly, forced grin of hers.
There's still a lot of time and uncontrollable events to unfold before the last primary vote is counted.
Wouldn't it be wild if someone like Edwards or, even less likely, Richardson, actually makes a fight of the Democratic nomination?
Most Presidential races feature a few surprises, and I have this feeling that, with everyone already expecting Hillary in the Oval Office come 2009, that's just what won't occur.
We agreed that Obama Bim Baden is too green and immature to win his party's nomination. Then, again, we also agreed that Hillary is too brittle.
As I mused about how much money she has raised, my colleague noted what happened in the 2004 Democratic Presidential race.
Not being a registered Dem, I don't recall the details. He asked me to remember Howard Dean's lead in Iowa, followed by, I believe, his victory in New Hampshire? He was the guy to beat.
Then he did that roar thing on camera. And his campaign began to unravel, losing momentum. To be candid, I had quite forgotten this.
My colleague's point was, despite Dean's money and momentum, he managed to critically, mortally wound himself while in the lead, and lost the nomination to Kerry.
That's probably why, when asked about running a near-perfect campaign to date, Hillary found some wood nearby to knock on, smiling that silly, forced grin of hers.
There's still a lot of time and uncontrollable events to unfold before the last primary vote is counted.
Wouldn't it be wild if someone like Edwards or, even less likely, Richardson, actually makes a fight of the Democratic nomination?
Most Presidential races feature a few surprises, and I have this feeling that, with everyone already expecting Hillary in the Oval Office come 2009, that's just what won't occur.
Tuesday, October 23, 2007
Some Global Warming Observations
Last Wednesday, the Wall Street Journal printed an editorial entitled "Global Warming Delusions," by Daniel Botkin, a scientist with 40 years of experience working in environmental sciences, and currently president of the Center for the Study of the Environment.
In this piece, Mr. Botkin describes the delusional fixation some of his brethren have developed for causing near-hysterical concern about global warming. He writes, in part,
"And contrary to the latest news, the evidence that global warming will have serious effects on life is thin. Most evidence suggests the contrary.
Case in point: This year's United Nations report on climate change and other documents say that 20%-30% of plant and animal species will be threatened with extinction in this century due to global warming -- a truly terrifying thought. Yet, during the past 2.5 million years, a period that scientists now know experienced climatic changes as rapid and as warm as modern climatological models suggest will happen to us, almost none of the millions of species on Earth went extinct. The exceptions were about 20 species of large mammals (the famous megafauna of the last ice age -- saber-tooth tigers, hairy mammoths and the like), which went extinct about 10,000 to 5,000 years ago at the end of the last ice age, and many dominant trees and shrubs of northwestern Europe. But elsewhere, including North America, few plant species went extinct, and few mammals.
Instead, like fashions that took hold in the past and are eloquently analyzed in the classic 19th century book "Extraordinary Popular Delusions and the Madness of Crowds," the popular imagination today appears to have been captured by beliefs that have little scientific basis.
Some colleagues who share some of my doubts argue that the only way to get our society to change is to frighten people with the possibility of a catastrophe, and that therefore it is all right and even necessary for scientists to exaggerate. They tell me that my belief in open and honest assessment is naïve. "Wolves deceive their prey, don't they?" one said to me recently. Therefore, biologically, he said, we are justified in exaggerating to get society to change."
Mr. Botkin describes an article in which the author explains the melting of the snows on Mount Kilimanjaro as due to radiant heat, not air temperature. Because his conclusions did not fit the global warming views of many other scientists, Botkin writes that the scientist's paper "is scorned by the true believers in global warming."
Botkin goes on to provide examples of significant environmental changes that are not due to the earth's air temperature. He bemoans his colleagues obsession with raising consciousness on the subject at any cost,
"My concern is that we may be moving away from an irrational lack of concern about climate change to an equally irrational panic about it.
Many of my colleagues ask, "What's the problem? Hasn't it been a good thing to raise public concern?" The problem is that in this panic we are going to spend our money unwisely, we will take actions that are counterproductive, and we will fail to do many of those things that will benefit the environment and ourselves."
When someone who is both a scientist and an environmentalist holds these views, you know the global warming craze has gone too far.
In this piece, Mr. Botkin describes the delusional fixation some of his brethren have developed for causing near-hysterical concern about global warming. He writes, in part,
"And contrary to the latest news, the evidence that global warming will have serious effects on life is thin. Most evidence suggests the contrary.
Case in point: This year's United Nations report on climate change and other documents say that 20%-30% of plant and animal species will be threatened with extinction in this century due to global warming -- a truly terrifying thought. Yet, during the past 2.5 million years, a period that scientists now know experienced climatic changes as rapid and as warm as modern climatological models suggest will happen to us, almost none of the millions of species on Earth went extinct. The exceptions were about 20 species of large mammals (the famous megafauna of the last ice age -- saber-tooth tigers, hairy mammoths and the like), which went extinct about 10,000 to 5,000 years ago at the end of the last ice age, and many dominant trees and shrubs of northwestern Europe. But elsewhere, including North America, few plant species went extinct, and few mammals.
Instead, like fashions that took hold in the past and are eloquently analyzed in the classic 19th century book "Extraordinary Popular Delusions and the Madness of Crowds," the popular imagination today appears to have been captured by beliefs that have little scientific basis.
Some colleagues who share some of my doubts argue that the only way to get our society to change is to frighten people with the possibility of a catastrophe, and that therefore it is all right and even necessary for scientists to exaggerate. They tell me that my belief in open and honest assessment is naïve. "Wolves deceive their prey, don't they?" one said to me recently. Therefore, biologically, he said, we are justified in exaggerating to get society to change."
Mr. Botkin describes an article in which the author explains the melting of the snows on Mount Kilimanjaro as due to radiant heat, not air temperature. Because his conclusions did not fit the global warming views of many other scientists, Botkin writes that the scientist's paper "is scorned by the true believers in global warming."
Botkin goes on to provide examples of significant environmental changes that are not due to the earth's air temperature. He bemoans his colleagues obsession with raising consciousness on the subject at any cost,
"My concern is that we may be moving away from an irrational lack of concern about climate change to an equally irrational panic about it.
Many of my colleagues ask, "What's the problem? Hasn't it been a good thing to raise public concern?" The problem is that in this panic we are going to spend our money unwisely, we will take actions that are counterproductive, and we will fail to do many of those things that will benefit the environment and ourselves."
When someone who is both a scientist and an environmentalist holds these views, you know the global warming craze has gone too far.
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