Monday, May 19, 2008
They Were For President Bush Before They Were Against Him
I send out the columns by email to a list of people who have opted in, but this week I didn't bother creating my own email, I just forwarded the one that John Shadegg himself prepared and sent today as a fundraising appeal. Not what I would have done.
Shadegg described himself as the “voice of reform so desperately needed in Washington, D.C.” That’s even better -- and a bigger triangulation -- than “The Change You Deserve,” the official House GOP slogan (if they can resolve the trademark issues with prescription antidepressant Effexor). It's nice of Rep. Shadegg to get my column in front of people who otherwise wouldn't get to see it.
My suggested headline was above, but the editor had a different perspective. The newspaper version is available here.
GOP SLOGAN: I’M A REPUBLICAN, BUT NOT LIKE THOSE REPUBLICANS
East Valley Tribune, May 18, 2008
I eagerly await the fall campaign, when incumbent Rep. John Shadegg, R-Ariz., tries to portray himself as “a new kind of Republican.” That he represents a “Third Way,” between the old, lobbyist-dominated GOP and the slightly younger, lobbyist-dominated GOP. Too bad “incumbent Republican congressman” is a personal smear still suitable for a family newspaper.
After batting oh-fer in three special elections in GOP districts, the National Republican Congressional Committee is low on both money and ideas. The NRCC has spent about 20 percent of its cash on hand in each election, but the Democrat won the Illinois seat held by former Speaker Dennis Hastert, then a Louisiana seat held by the GOP since the 1970’s. Last Tuesday, the GOP lost another special election -- in Mississippi, of all places.
Tuesday’s 8 point Democratic win in Mississippi’s 1st District came where President Bush won in 2004 with 62 percent. The NRCC’s advice afterwards? Look out for yourself, GOP incumbents, we don’t have either money or a clue.
Political handicapper Charlie Cook has a “Partisan Voting Index” that compares partisan performance (or “lean”) in congressional districts to the national presidential vote. Mississippi’s 1st District has a PVI of +10R, meaning it votes 10 points more Republican than the country. Shadegg’s district has a PVI of +6, and Bush got 58 percent in 2004. So if MS-01 isn’t safely red, why wouldn’t AZ-03 also be “in play?”
Republicans complain that moderate-to-conservative Democrats campaign as moderates and conservatives, not recognizing that their “liberal, liberal, liberal” tactics are a tad tired. But Democrats aren’t guaranteed to run against the prototypical anti-choice, anti-gay, Social-Security-privatizing, imperialistic war-loving, health insurance denying, toady-of-the-rich Republican. After all, not every Republican candidate is Shadegg.
If Arizona starts turning against the GOP brand, we’ll just be catching up to the rest of the country. In 2006, I visited Montgomery County, Pa., in the Philadelphia suburbs. It’s a formerly staunchly Republican area which featured an expensive, contested congressional race between a long-time GOP incumbent and a Democratic challenger.
The yard signs caused me some cognitive dissonance, because the Democratic challenger’s used the slogan, “Democrat for Congress,” while the GOP incumbent’s read “Independent Voice for You” -- the opposite of what we usually see in Arizona. But watch that change, even here, if people see the GOP elephant and think, “George W. Bush.”
How does every single GOP candidate, led by presumptive presidential nominee John McCain, try to distance himself from Bush? They all can’t be “a different kind of Republican,” because it’s not much of a brand if every product is unique. And there are limits to the difference here, because every single one of these Republicans -- McCain, Shadegg, Tim Bee -- was really, really for Bush before they were against him.
The problem with all this GOP triangulation (McCain trying to distance himself from congressional Republicans, and both trying to distance themselves from Bush) is two-fold. First, these guys tied themselves so tightly to Bush over the past 7 years that the cake is already baked; it’s too late to pretend you really were a maverick all along. The other is that Bush himself pulled exactly this trick in 2000, slamming the GOP Congress and portraying himself as a different kind of Republican, a “compassionate conservative.” It should be difficult to separate from the failed presidency by using the exact same tactics as the failed president.
But tart-tongued (and gay) Rep. Barney Frank, D-Mass., probably has the better explanation. It’s not that Republicans lack the right slogans, or haven’t been insufficiently lobbyist-dominated, war-mongering, and fighting a class war on behalf of the rich. It’s the substance.
Frank was musing to a reporter the difficulty in trying to get the Bush administration and congressional Republicans to do anything about the collapse of the real estate bubble. The GOP has come around on bailing out banks and hedge funds, but is steadfastly refusing to do anything for actual homeowners.
It’s “like asking me to judge the Miss America contest,” said Frank. “If your heart’s not in it, you don’t do a very good job.”
I send out the columns by email to a list of people who have opted in, but this week I didn't bother creating my own email, I just forwarded the one that John Shadegg himself prepared and sent today as a fundraising appeal. Not what I would have done.
Shadegg described himself as the “voice of reform so desperately needed in Washington, D.C.” That’s even better -- and a bigger triangulation -- than “The Change You Deserve,” the official House GOP slogan (if they can resolve the trademark issues with prescription antidepressant Effexor). It's nice of Rep. Shadegg to get my column in front of people who otherwise wouldn't get to see it.
My suggested headline was above, but the editor had a different perspective. The newspaper version is available here.
GOP SLOGAN: I’M A REPUBLICAN, BUT NOT LIKE THOSE REPUBLICANS
East Valley Tribune, May 18, 2008
I eagerly await the fall campaign, when incumbent Rep. John Shadegg, R-Ariz., tries to portray himself as “a new kind of Republican.” That he represents a “Third Way,” between the old, lobbyist-dominated GOP and the slightly younger, lobbyist-dominated GOP. Too bad “incumbent Republican congressman” is a personal smear still suitable for a family newspaper.
After batting oh-fer in three special elections in GOP districts, the National Republican Congressional Committee is low on both money and ideas. The NRCC has spent about 20 percent of its cash on hand in each election, but the Democrat won the Illinois seat held by former Speaker Dennis Hastert, then a Louisiana seat held by the GOP since the 1970’s. Last Tuesday, the GOP lost another special election -- in Mississippi, of all places.
Tuesday’s 8 point Democratic win in Mississippi’s 1st District came where President Bush won in 2004 with 62 percent. The NRCC’s advice afterwards? Look out for yourself, GOP incumbents, we don’t have either money or a clue.
Political handicapper Charlie Cook has a “Partisan Voting Index” that compares partisan performance (or “lean”) in congressional districts to the national presidential vote. Mississippi’s 1st District has a PVI of +10R, meaning it votes 10 points more Republican than the country. Shadegg’s district has a PVI of +6, and Bush got 58 percent in 2004. So if MS-01 isn’t safely red, why wouldn’t AZ-03 also be “in play?”
Republicans complain that moderate-to-conservative Democrats campaign as moderates and conservatives, not recognizing that their “liberal, liberal, liberal” tactics are a tad tired. But Democrats aren’t guaranteed to run against the prototypical anti-choice, anti-gay, Social-Security-privatizing, imperialistic war-loving, health insurance denying, toady-of-the-rich Republican. After all, not every Republican candidate is Shadegg.
If Arizona starts turning against the GOP brand, we’ll just be catching up to the rest of the country. In 2006, I visited Montgomery County, Pa., in the Philadelphia suburbs. It’s a formerly staunchly Republican area which featured an expensive, contested congressional race between a long-time GOP incumbent and a Democratic challenger.
The yard signs caused me some cognitive dissonance, because the Democratic challenger’s used the slogan, “Democrat for Congress,” while the GOP incumbent’s read “Independent Voice for You” -- the opposite of what we usually see in Arizona. But watch that change, even here, if people see the GOP elephant and think, “George W. Bush.”
How does every single GOP candidate, led by presumptive presidential nominee John McCain, try to distance himself from Bush? They all can’t be “a different kind of Republican,” because it’s not much of a brand if every product is unique. And there are limits to the difference here, because every single one of these Republicans -- McCain, Shadegg, Tim Bee -- was really, really for Bush before they were against him.
The problem with all this GOP triangulation (McCain trying to distance himself from congressional Republicans, and both trying to distance themselves from Bush) is two-fold. First, these guys tied themselves so tightly to Bush over the past 7 years that the cake is already baked; it’s too late to pretend you really were a maverick all along. The other is that Bush himself pulled exactly this trick in 2000, slamming the GOP Congress and portraying himself as a different kind of Republican, a “compassionate conservative.” It should be difficult to separate from the failed presidency by using the exact same tactics as the failed president.
But tart-tongued (and gay) Rep. Barney Frank, D-Mass., probably has the better explanation. It’s not that Republicans lack the right slogans, or haven’t been insufficiently lobbyist-dominated, war-mongering, and fighting a class war on behalf of the rich. It’s the substance.
Frank was musing to a reporter the difficulty in trying to get the Bush administration and congressional Republicans to do anything about the collapse of the real estate bubble. The GOP has come around on bailing out banks and hedge funds, but is steadfastly refusing to do anything for actual homeowners.
It’s “like asking me to judge the Miss America contest,” said Frank. “If your heart’s not in it, you don’t do a very good job.”
Monday, May 12, 2008
Bill Gates Walks Into A Bar, And Suddenly The "Average" Guy Is Really Rich
The newspaper version of the column is here.
My suggested headline was above, but the editor didn’t go for it. I did see Iron Man Sunday afternoon with my son, after we finished packing his dorm room (at least the portion coming back to Phoenix), but it wasn’t until after the column came out. I’m afraid he now thinks Robert Downey, Jr. is light years cooler than his old man. I know I do.
The paragraph about people in the financial services industry is to fend off lawyer jokes from Susan and, should he ever read a column of mine, Mike. It’s a bit of a private joke, but as the paper only pays in the low two figures, I feel I should be able to put in a private joke every now and then.
SHADEGG PLAN MOST HELPFUL FOR THOSE WHO DON’T NEED IT
East Valley Tribune, May 11, 2008
I know my readers reasonably well, and I’d guess few saw Iron Man. The movie grossed over $100 million its opening weekend, the second-best performance ever for a non-sequel. That’s lots of people and money -- but you had nothing to do with it.
So it is with capital gains and pension savings. Lots of people and staggering amounts of money are involved, but unless you’re at the top, it’s got little to do with you.
This statistics lesson is part of what I hope will be my continuing debate with Rep. John Shadegg, R-Ariz., who doesn’t like my criticism of his “Homeowner Empowerment Act” -- a fight I welcome. Shadegg doesn’t want to get government involved when we can trust the financial services industry instead to help you avoid foreclosure. After all, who does a better job of keeping your interests paramount? Maybe Las Vegas casino owners, but it’s a close call.
(I’m talking about the product developers -- those financial geniuses who developed the “liar loan,” who gamed the rating-agency models so bad loans could be sold in seemingly solid packages, who passed on the risks but kept their fees, who have the huge compensation packages, and who now have the government guaranteeing their debts. My stockbroker? She’s as honest, and nearly as attractive, as a casino dealer.)
So when you read that the 2004 Survey of Consumer Finances (the 2007 data aren’t available yet) showed that 44.5 percent of households with at least one worker participated in a tax-deferred retirement plan, or that total retirement plan savings in 2007 were $17.5 trillion, remember those are Iron Man numbers. Replace “young” with “rich” to gauge your chances of being involved.
SCF data show that a majority of employed households (over 55 percent) don’t have any tax-deferred pension plan. Also, “employed households” excludes those with unemployed workers -- and who’s more at risk of foreclosure? And those savings are heavily weighted to those at the top of the heap; the SCF data report that two-thirds of households headed by a worker between 55 and 64 had less than $88,000 in retirement savings.
Capital gains are similarly concentrated. Lots of taxpayers have capital gains, but most taxpayers have very little, and most capital gains occur among those at the top. Using 2005 data, the wealthiest 10 percent got 90 percent of long-term capital gains, with the top 1 percent getting almost 70 percent. As for Americans at the 60 percentile and below -- they got 2 percent.
So you’ll hear that middle-income taxpayers have capital gains, and would benefit from a capital gains tax cut. And that’s theoretically true; in 2005, taxpayers in the middle 20 percent of the income distribution averaged $176 in long-term capital gains. A cut from 20 to 10 percent in the capital gain tax rate would save that median taxpayer $17.60. Meanwhile, taxpayers in the top 1 percent averaged $232,824 in capital gains -- so they’d save $23,282. It’s a good trade for the economic elite, tipping the median taxpayer less than $20 to corral a $23,000 tax break.
The people at greatest risk of foreclosure aren’t those with excess assets in their retirement plans. They may not even have retirement plans at all; the SRC data show that 50.6 percent of heads of families in the lowest 20 percent of incomes didn’t participate in employer-based pension plans, while in the top 10 percent of incomes, only 5 percent declined to participate. Who’s more likely to need help, the two-thirds of households with less than $88,000 in pension savings, or the top tier of households that hold the vast majority of that $17.5 trillion?
So allowing people to withdraw money temporarily from a 401(k) or IRA to pay a mortgage is like offering sick people a tax break for not getting medical treatment. (Which is exactly John McCain’s health care plan; notice the trend here?) It’s a “cure” that those suffering the disease just can’t use.
And that’s why Shadegg’s proposal is unhelpful, impractical, and regressive. Just look at the numbers, whether or not you ever see Iron Man.
The newspaper version of the column is here.
My suggested headline was above, but the editor didn’t go for it. I did see Iron Man Sunday afternoon with my son, after we finished packing his dorm room (at least the portion coming back to Phoenix), but it wasn’t until after the column came out. I’m afraid he now thinks Robert Downey, Jr. is light years cooler than his old man. I know I do.
The paragraph about people in the financial services industry is to fend off lawyer jokes from Susan and, should he ever read a column of mine, Mike. It’s a bit of a private joke, but as the paper only pays in the low two figures, I feel I should be able to put in a private joke every now and then.
SHADEGG PLAN MOST HELPFUL FOR THOSE WHO DON’T NEED IT
East Valley Tribune, May 11, 2008
I know my readers reasonably well, and I’d guess few saw Iron Man. The movie grossed over $100 million its opening weekend, the second-best performance ever for a non-sequel. That’s lots of people and money -- but you had nothing to do with it.
So it is with capital gains and pension savings. Lots of people and staggering amounts of money are involved, but unless you’re at the top, it’s got little to do with you.
This statistics lesson is part of what I hope will be my continuing debate with Rep. John Shadegg, R-Ariz., who doesn’t like my criticism of his “Homeowner Empowerment Act” -- a fight I welcome. Shadegg doesn’t want to get government involved when we can trust the financial services industry instead to help you avoid foreclosure. After all, who does a better job of keeping your interests paramount? Maybe Las Vegas casino owners, but it’s a close call.
(I’m talking about the product developers -- those financial geniuses who developed the “liar loan,” who gamed the rating-agency models so bad loans could be sold in seemingly solid packages, who passed on the risks but kept their fees, who have the huge compensation packages, and who now have the government guaranteeing their debts. My stockbroker? She’s as honest, and nearly as attractive, as a casino dealer.)
So when you read that the 2004 Survey of Consumer Finances (the 2007 data aren’t available yet) showed that 44.5 percent of households with at least one worker participated in a tax-deferred retirement plan, or that total retirement plan savings in 2007 were $17.5 trillion, remember those are Iron Man numbers. Replace “young” with “rich” to gauge your chances of being involved.
SCF data show that a majority of employed households (over 55 percent) don’t have any tax-deferred pension plan. Also, “employed households” excludes those with unemployed workers -- and who’s more at risk of foreclosure? And those savings are heavily weighted to those at the top of the heap; the SCF data report that two-thirds of households headed by a worker between 55 and 64 had less than $88,000 in retirement savings.
Capital gains are similarly concentrated. Lots of taxpayers have capital gains, but most taxpayers have very little, and most capital gains occur among those at the top. Using 2005 data, the wealthiest 10 percent got 90 percent of long-term capital gains, with the top 1 percent getting almost 70 percent. As for Americans at the 60 percentile and below -- they got 2 percent.
So you’ll hear that middle-income taxpayers have capital gains, and would benefit from a capital gains tax cut. And that’s theoretically true; in 2005, taxpayers in the middle 20 percent of the income distribution averaged $176 in long-term capital gains. A cut from 20 to 10 percent in the capital gain tax rate would save that median taxpayer $17.60. Meanwhile, taxpayers in the top 1 percent averaged $232,824 in capital gains -- so they’d save $23,282. It’s a good trade for the economic elite, tipping the median taxpayer less than $20 to corral a $23,000 tax break.
The people at greatest risk of foreclosure aren’t those with excess assets in their retirement plans. They may not even have retirement plans at all; the SRC data show that 50.6 percent of heads of families in the lowest 20 percent of incomes didn’t participate in employer-based pension plans, while in the top 10 percent of incomes, only 5 percent declined to participate. Who’s more likely to need help, the two-thirds of households with less than $88,000 in pension savings, or the top tier of households that hold the vast majority of that $17.5 trillion?
So allowing people to withdraw money temporarily from a 401(k) or IRA to pay a mortgage is like offering sick people a tax break for not getting medical treatment. (Which is exactly John McCain’s health care plan; notice the trend here?) It’s a “cure” that those suffering the disease just can’t use.
And that’s why Shadegg’s proposal is unhelpful, impractical, and regressive. Just look at the numbers, whether or not you ever see Iron Man.
Tuesday, May 06, 2008
Actually Want Roads Built? Don't Drink The Kool-Aid
In other column news, I think I’ll be getting into a longer debate with Rep. Shadegg over whether you should take your retirement savings and put them into your mortgage. Here's his response. That’s a battle I’m looking forward to joining. After all, who does a better job of keeping your interests paramount than the financial services industry? Maybe Las Vegas casino owners, but it’s got to be a close call.
Online version of this week’s column is here.
WHERE IDEOLOGICAL RUBBER HITS THE ROAD
East Valley Tribune, May 4, 2008
On Friday, a group filed a petition for a statewide sales tax to raise money for state transportation needs. It seems that as Arizona grows, we need more transportation infrastructure -- and gas taxes aren't keeping up.
It's a total and absolute surprise, of course. Who could have predicted that after we build a new highway, we then have to spend more money to maintain it? Law enforcement, picking up litter, cleaning up after accidents, replacing sun-baked signage, and resurfacing all cost money after you build. I mean, who could have seen that coming?
Gas taxes -- which are fixed amounts, not percentages, and thus don't increase with inflation and require separate, tedious, and supermajority votes to raise -- haven't kept pace with the state's needs. According to the head of the Arizona Department of Transportation, without a new funding source, soon all state gas taxes will be committed to maintaining existing roads; there won't be any money for new ones.
So the solution, according to the TIME Coalition, a group of Arizona business leaders, is to raise the state's current 5.6 percent transaction privilege (sales) tax by 1 percent to generate $42.6 billion over 30 years for new highways, roads and passenger rail service.
The proposal doesn't include increasing the state gas tax. User taxes haven't been enough for road construction in these parts for more than 20 years, since the first Maricopa County transportation tax election in 1985. People who care more about transportation improvements actually occurring than about maintaining their ideological purity recognize that we need broad-based tax hikes.
Which makes the McCain-Clinton proposal for a federal gas tax "holiday" even more pander-rific here in Arizona. Naturally, most of the business leadership in the TIME Coalition supports McCain's presidential bid -- at the same time they insist we raise state taxes to build and maintain more roads, buses and trains.
It's a perfect political syllogism. Arizona has a huge transportation problem, and needs resources to work on fixing it. Existing gas taxes aren't enough, so we need to convince voters to approve a new tax. Meanwhile, let's have those same voters elect a president who will reduce gas taxes because it's politically popular, thereby making Arizona's funding deficit even deeper.
Economists across the ideological spectrum acknowledge that cutting the federal gas tax actually won't save consumers anything. As I've written before (but apparently to be a full-time member of the local media, it's required that you have flunked Econ 101), the supply of gas for the summer is already fixed; there's no available refinery capacity to increase supply in the near term. The current price represents the market-clearing price. Reducing the tax will lower prices temporarily, but lower prices increases demand -- which, because of fixed supply will raise prices, until we return to the market-clearing price. Thus, no savings to consumers, but a bonanza for oil companies.
I don't know about Clinton, but McCain's answer is that the need to increase government revenues is to cut taxes. He's said, numerous times, that cutting taxes raises revenues and that raising taxes cuts revenue. "Every time in history we have raised taxes, it has cut revenues," he claims. (This is false. Maybe it's "straight talk," but it's just flat-out false. See, e.g., 1993-2000, and 1941-45.)
So if you believe McCain, the TIME Coalition proposal to raise the sales tax instead will cut revenues available for transportation. Instead, we should cut state taxes -- and dedicate the gusher of extra revenues to new roads!
I don't get it. All this talk about transportation needs and funding seems pointless, when there's the simple and painless McCain solution. Why go to all the trouble of gathering signatures, running a campaign and getting voters to approve a tax hike, when John McCain tells us that there's a simpler way to have more money to build and maintain transportation infrastructure: Eliminate earmarks and cut taxes.
Who knew that "hard truths" could be so very, very soft and comfortable?
In other column news, I think I’ll be getting into a longer debate with Rep. Shadegg over whether you should take your retirement savings and put them into your mortgage. Here's his response. That’s a battle I’m looking forward to joining. After all, who does a better job of keeping your interests paramount than the financial services industry? Maybe Las Vegas casino owners, but it’s got to be a close call.
Online version of this week’s column is here.
WHERE IDEOLOGICAL RUBBER HITS THE ROAD
East Valley Tribune, May 4, 2008
On Friday, a group filed a petition for a statewide sales tax to raise money for state transportation needs. It seems that as Arizona grows, we need more transportation infrastructure -- and gas taxes aren't keeping up.
It's a total and absolute surprise, of course. Who could have predicted that after we build a new highway, we then have to spend more money to maintain it? Law enforcement, picking up litter, cleaning up after accidents, replacing sun-baked signage, and resurfacing all cost money after you build. I mean, who could have seen that coming?
Gas taxes -- which are fixed amounts, not percentages, and thus don't increase with inflation and require separate, tedious, and supermajority votes to raise -- haven't kept pace with the state's needs. According to the head of the Arizona Department of Transportation, without a new funding source, soon all state gas taxes will be committed to maintaining existing roads; there won't be any money for new ones.
So the solution, according to the TIME Coalition, a group of Arizona business leaders, is to raise the state's current 5.6 percent transaction privilege (sales) tax by 1 percent to generate $42.6 billion over 30 years for new highways, roads and passenger rail service.
The proposal doesn't include increasing the state gas tax. User taxes haven't been enough for road construction in these parts for more than 20 years, since the first Maricopa County transportation tax election in 1985. People who care more about transportation improvements actually occurring than about maintaining their ideological purity recognize that we need broad-based tax hikes.
Which makes the McCain-Clinton proposal for a federal gas tax "holiday" even more pander-rific here in Arizona. Naturally, most of the business leadership in the TIME Coalition supports McCain's presidential bid -- at the same time they insist we raise state taxes to build and maintain more roads, buses and trains.
It's a perfect political syllogism. Arizona has a huge transportation problem, and needs resources to work on fixing it. Existing gas taxes aren't enough, so we need to convince voters to approve a new tax. Meanwhile, let's have those same voters elect a president who will reduce gas taxes because it's politically popular, thereby making Arizona's funding deficit even deeper.
Economists across the ideological spectrum acknowledge that cutting the federal gas tax actually won't save consumers anything. As I've written before (but apparently to be a full-time member of the local media, it's required that you have flunked Econ 101), the supply of gas for the summer is already fixed; there's no available refinery capacity to increase supply in the near term. The current price represents the market-clearing price. Reducing the tax will lower prices temporarily, but lower prices increases demand -- which, because of fixed supply will raise prices, until we return to the market-clearing price. Thus, no savings to consumers, but a bonanza for oil companies.
I don't know about Clinton, but McCain's answer is that the need to increase government revenues is to cut taxes. He's said, numerous times, that cutting taxes raises revenues and that raising taxes cuts revenue. "Every time in history we have raised taxes, it has cut revenues," he claims. (This is false. Maybe it's "straight talk," but it's just flat-out false. See, e.g., 1993-2000, and 1941-45.)
So if you believe McCain, the TIME Coalition proposal to raise the sales tax instead will cut revenues available for transportation. Instead, we should cut state taxes -- and dedicate the gusher of extra revenues to new roads!
I don't get it. All this talk about transportation needs and funding seems pointless, when there's the simple and painless McCain solution. Why go to all the trouble of gathering signatures, running a campaign and getting voters to approve a tax hike, when John McCain tells us that there's a simpler way to have more money to build and maintain transportation infrastructure: Eliminate earmarks and cut taxes.
Who knew that "hard truths" could be so very, very soft and comfortable?
Monday, April 28, 2008
Really Bad Financial Advice from Your Congressman
My suggested headline was "Fed Bails Out Bear Stearns -- And John Shadegg Wants You To Help!" but the editor went in a slightly less-assumed knowledge direction. And what does it mean that George Will -- George Will! -- is to the left of the Democrats on the Bear Stearn bailout, with his proposal that any investment bank that wants to get loans from, or guaranteed by, the Fed should limit its executives to the maximum salary for federal civil servants, about $125K per year. Want to pay your people more? Then don't borrow for the government, or you have to pay salaries like the government.
The online newspaper version is here. I recommended adding to my usual author identification at the bottom of the column the additional disclosure that “Of course he’s contributed to Bob Lord, running against Rep. Shadegg. What else would you expect?” But the editor played that straight as well.
WHO NEEDS RETIREMENT SAVINGS WHEN YOU CAN BAIL OUT LENDERS?
East Valley Tribune, Apr. 27, 2008
Rep. John Shadegg, R-Ariz., has a fascinating plan (H.R. 5776, the “Homeowner Empowerment Act”) which he claims will help homeowners facing foreclosure. Fascinating not because it might help homeowners (of course not), but for what it says about Shadegg’s priorities.
Under the proposal, homeowners could use IRAs or pensions to pay mortgages. Taxpayers must repay the money within 10 or 15 years or pay taxes on the withdrawal, but without penalties. Shadegg calls it a “free market” response to the foreclosure crisis.
If by “free market” you mean “unhelpful, impractical, and regressive,” then yes it is. Maybe some homeowners facing foreclosure have plenty in their pensions, but how many? I’ll bet unicorns are more common.
For those with an upside-down mortgage and a well-funded IRA, Shadegg’s bill is bad investment advice. My annual 401(k) statement came with a big warning to diversify my savings, but Shadegg wants people to bet their retirement in not just one asset class, but one specific asset -- their house -- while house prices, he acknowledges, may drop another 15 percent in 2008 and 10 percent in 2009. Enron employees got similar advice to keep their pensions invested in Enron stock, and that worked out just swell.
The bill also would allow the rich to play games. Because of past abuses, people can’t invest pensions in their art collections or personal real estate. Shadegg would change that, allowing people to shift untaxed earnings between their pensions and house. The IRS or pension trustee couldn’t tell whether a person really needed, or just wanted, money for the mortgage. Instead of for retirement, an IRA could be used as an “investment” in one’s “lifestyle.”
Finally, taking money from a pension plan to pay a home mortgage is a bad move for the financially stretched. Retirement plan interests can’t be seized by creditors other than the IRS. Also, Arizona homeowners are protected by our “anti-deficiency” statute, which prohibits a lender from collecting any outstanding balance on the loan after foreclosure. The law is supposed to keep real estate bubbles from forming, because lenders have a stake in reasonable valuations -- but one state statute can do only so much when lenders shed risk by securitizing and selling “stated income” loans (or, more colloquially, “liar loans”).
So Shadegg wants you to use protected assets to pay a non-recourse debt that the lender couldn’t otherwise collect. While a terrible move for the borrower, it’s great for financial services companies. And according to the Center for Responsive Politics, that industry is the single largest source of Shadegg’s campaign contributions. Who could have guessed?
Shadegg calls his plan an alternative to the bipartisan Senate bill, and he’s right that the Senate bill is bad -- but not for his reasons. The Senate bill includes billions in giveaways, like a huge special tax-loss carryback for homebuilders and a tax credit for purchasing foreclosed properties, giving lenders an incentive to foreclose rather than working out loans. Shadegg has no problem with those provisions, only with those (block grants to local communities, raising the FHA loan limit, and funding for counseling for at-risk homeowners) that might actually help homeowners and not corporations.
Shadegg says he doesn’t want to reward “irresponsible” borrowers or lenders, but his response is to oppose anything that helps homeowners -- while showering corporations with tax credits. According to a Google search, he’s had nothing to say about the Federal Reserve bailout of Bear Stearns; apparently “moral hazard” means no help for homeowners, but for big business, gains are private but losses get socialized.
And that’s the point of Shadegg’s “plan.” It’s not supposed to work, or make sense. It’s strictly a vehicle for sound bites, whose sole purpose is to mask yet more GOP “reverse Robin Hood” business as usual -- in this case, “empowering” homeowners to give money to the financial services industry.
That’s Shadegg’s “Homeowner Empowerment Act.” Why let the Fed bail out Bear Stearns alone, when you can use your IRA to help?
My suggested headline was "Fed Bails Out Bear Stearns -- And John Shadegg Wants You To Help!" but the editor went in a slightly less-assumed knowledge direction. And what does it mean that George Will -- George Will! -- is to the left of the Democrats on the Bear Stearn bailout, with his proposal that any investment bank that wants to get loans from, or guaranteed by, the Fed should limit its executives to the maximum salary for federal civil servants, about $125K per year. Want to pay your people more? Then don't borrow for the government, or you have to pay salaries like the government.
The online newspaper version is here. I recommended adding to my usual author identification at the bottom of the column the additional disclosure that “Of course he’s contributed to Bob Lord, running against Rep. Shadegg. What else would you expect?” But the editor played that straight as well.
WHO NEEDS RETIREMENT SAVINGS WHEN YOU CAN BAIL OUT LENDERS?
East Valley Tribune, Apr. 27, 2008
Rep. John Shadegg, R-Ariz., has a fascinating plan (H.R. 5776, the “Homeowner Empowerment Act”) which he claims will help homeowners facing foreclosure. Fascinating not because it might help homeowners (of course not), but for what it says about Shadegg’s priorities.
Under the proposal, homeowners could use IRAs or pensions to pay mortgages. Taxpayers must repay the money within 10 or 15 years or pay taxes on the withdrawal, but without penalties. Shadegg calls it a “free market” response to the foreclosure crisis.
If by “free market” you mean “unhelpful, impractical, and regressive,” then yes it is. Maybe some homeowners facing foreclosure have plenty in their pensions, but how many? I’ll bet unicorns are more common.
For those with an upside-down mortgage and a well-funded IRA, Shadegg’s bill is bad investment advice. My annual 401(k) statement came with a big warning to diversify my savings, but Shadegg wants people to bet their retirement in not just one asset class, but one specific asset -- their house -- while house prices, he acknowledges, may drop another 15 percent in 2008 and 10 percent in 2009. Enron employees got similar advice to keep their pensions invested in Enron stock, and that worked out just swell.
The bill also would allow the rich to play games. Because of past abuses, people can’t invest pensions in their art collections or personal real estate. Shadegg would change that, allowing people to shift untaxed earnings between their pensions and house. The IRS or pension trustee couldn’t tell whether a person really needed, or just wanted, money for the mortgage. Instead of for retirement, an IRA could be used as an “investment” in one’s “lifestyle.”
Finally, taking money from a pension plan to pay a home mortgage is a bad move for the financially stretched. Retirement plan interests can’t be seized by creditors other than the IRS. Also, Arizona homeowners are protected by our “anti-deficiency” statute, which prohibits a lender from collecting any outstanding balance on the loan after foreclosure. The law is supposed to keep real estate bubbles from forming, because lenders have a stake in reasonable valuations -- but one state statute can do only so much when lenders shed risk by securitizing and selling “stated income” loans (or, more colloquially, “liar loans”).
So Shadegg wants you to use protected assets to pay a non-recourse debt that the lender couldn’t otherwise collect. While a terrible move for the borrower, it’s great for financial services companies. And according to the Center for Responsive Politics, that industry is the single largest source of Shadegg’s campaign contributions. Who could have guessed?
Shadegg calls his plan an alternative to the bipartisan Senate bill, and he’s right that the Senate bill is bad -- but not for his reasons. The Senate bill includes billions in giveaways, like a huge special tax-loss carryback for homebuilders and a tax credit for purchasing foreclosed properties, giving lenders an incentive to foreclose rather than working out loans. Shadegg has no problem with those provisions, only with those (block grants to local communities, raising the FHA loan limit, and funding for counseling for at-risk homeowners) that might actually help homeowners and not corporations.
Shadegg says he doesn’t want to reward “irresponsible” borrowers or lenders, but his response is to oppose anything that helps homeowners -- while showering corporations with tax credits. According to a Google search, he’s had nothing to say about the Federal Reserve bailout of Bear Stearns; apparently “moral hazard” means no help for homeowners, but for big business, gains are private but losses get socialized.
And that’s the point of Shadegg’s “plan.” It’s not supposed to work, or make sense. It’s strictly a vehicle for sound bites, whose sole purpose is to mask yet more GOP “reverse Robin Hood” business as usual -- in this case, “empowering” homeowners to give money to the financial services industry.
That’s Shadegg’s “Homeowner Empowerment Act.” Why let the Fed bail out Bear Stearns alone, when you can use your IRA to help?
Tuesday, April 22, 2008
I Got Your Red-Hot Earmarks Right Here!
More budget nonsense. McCain makes just about as much sense as Ken Cheuvront! Besides US aid to Israel, the other high-visibility earmark is for military housing. Newspaper link for the column is here.
TO McCAIN, ALL, ER, MOST EARMARKS BAD
East Valley Tribune, Apr. 20, 2008
Today's lesson in fiscal responsibility is, when evaluating candidates, budgets, and fiscal rhetoric, remember: A slogan is not a plan.
The latest example comes from John McCain's campaign. He gave a big speech on economic issues last week, and the reaction, even from his pals in the media, was lukewarm
The Washington Post noted that despite the talk of helping working-class Americans in their hour of need, McCain's actual proposals instead threw buckets of tax code goodies to "corporate special pleaders": cutting corporate tax rates, equipment purchase deductions, banning Internet and cellphone taxes, and a research and development tax credit. Only 4 million taxpayers would qualify for his so-called "middle-class tax cut," and 93 percent of them earn more than $200,000 -- which means McCain's proposal would benefit only the top 3.4 percent of taxpayers.
As for the other 96 percent of American taxpayers? They get the rhetoric, while those at the top get the cash. Hope you like the rhetoric, because money is for those who already have it.
There's the problem that all these special deductions and credits make the tax code more complicated, too. Once again, they say they want to make it simpler, but what they really want is to make it more complicated -- in favor of those at the top.
Then there's McCain's proposal for a gas tax "holiday" this summer. I thought McCain would avoid campaigning as the cranky old guy, but here he is recycling one of Bob Dole's less-sensible proposals from the 1996 campaign.
It's also a classic pass-the-buck GOP idea; McCain wants to cut taxes for a couple months this summer, then have the tax rate resume its original course, all well before he could possibly take office. He wants the credit; somebody else can do the work. (I suppose McCain might get somebody in the U.S. Senate to introduce his proposal and work hard to see it enacted; as blogger Ted Prezelski wondered, might McCain know anybody in that position?)
And it's a truly counterproductive idea. Dean Baker of the Center for Economic and Budget Research points out that the oil industry says that they have no spare refinery capacity; they're already producing as much gas as possible. So price is determined on the demand side; unless the oil companies are lying, there's just no way to increase supply anytime during the duration of the "holiday."
With a fixed supply, the magic of the market determines what price matches demand to that supply. Cut gas taxes, all that happens is that consumer demand keeps the price at the clearing price. There's billions less to build new roads and fix old ones; McCain's plan simply transfers money from the highway trust fund directly to the oil companies, without the need for messy campaign contributions and legislation.
Even the Arizona Republic, the house organ of the McCain campaign, called the idea a "clunker" that uses "tax policy to play with the heads of consumers."
But the best example of McCain's rhetoric colliding with reality is his claim that he could pay for his expensive menu of tax cuts by cutting wasteful spending and eliminating earmarks. McCain says he'll veto "every bill with earmarks, until the Congress stops sending bills with earmarks." Boo earmarks! Hooray cutting wasteful spending!
There's much confusion over how much earmarking is going on. McCain's campaign claims the amount is over $60 billion, but to get to that number, you have to include most foreign aid spending, which includes $2.9 billion annual U.S. aid to Israel.
So when McCain said he'd veto all earmarks, and somebody noticed that aid to Israel was an earmark, McCain's campaign quickly amended his statement to note that he certainly wouldn't veto that earmark. No sir, no way. That's a good earmark!
And so it goes, as with much so-called straight talk: Overblown statement of principle founders on the specific rocks of reality. Government spending generally: Bad, bad, bad. Government spending on a particular program: Not so fast, buddy.
More budget nonsense. McCain makes just about as much sense as Ken Cheuvront! Besides US aid to Israel, the other high-visibility earmark is for military housing. Newspaper link for the column is here.
TO McCAIN, ALL, ER, MOST EARMARKS BAD
East Valley Tribune, Apr. 20, 2008
Today's lesson in fiscal responsibility is, when evaluating candidates, budgets, and fiscal rhetoric, remember: A slogan is not a plan.
The latest example comes from John McCain's campaign. He gave a big speech on economic issues last week, and the reaction, even from his pals in the media, was lukewarm
The Washington Post noted that despite the talk of helping working-class Americans in their hour of need, McCain's actual proposals instead threw buckets of tax code goodies to "corporate special pleaders": cutting corporate tax rates, equipment purchase deductions, banning Internet and cellphone taxes, and a research and development tax credit. Only 4 million taxpayers would qualify for his so-called "middle-class tax cut," and 93 percent of them earn more than $200,000 -- which means McCain's proposal would benefit only the top 3.4 percent of taxpayers.
As for the other 96 percent of American taxpayers? They get the rhetoric, while those at the top get the cash. Hope you like the rhetoric, because money is for those who already have it.
There's the problem that all these special deductions and credits make the tax code more complicated, too. Once again, they say they want to make it simpler, but what they really want is to make it more complicated -- in favor of those at the top.
Then there's McCain's proposal for a gas tax "holiday" this summer. I thought McCain would avoid campaigning as the cranky old guy, but here he is recycling one of Bob Dole's less-sensible proposals from the 1996 campaign.
It's also a classic pass-the-buck GOP idea; McCain wants to cut taxes for a couple months this summer, then have the tax rate resume its original course, all well before he could possibly take office. He wants the credit; somebody else can do the work. (I suppose McCain might get somebody in the U.S. Senate to introduce his proposal and work hard to see it enacted; as blogger Ted Prezelski wondered, might McCain know anybody in that position?)
And it's a truly counterproductive idea. Dean Baker of the Center for Economic and Budget Research points out that the oil industry says that they have no spare refinery capacity; they're already producing as much gas as possible. So price is determined on the demand side; unless the oil companies are lying, there's just no way to increase supply anytime during the duration of the "holiday."
With a fixed supply, the magic of the market determines what price matches demand to that supply. Cut gas taxes, all that happens is that consumer demand keeps the price at the clearing price. There's billions less to build new roads and fix old ones; McCain's plan simply transfers money from the highway trust fund directly to the oil companies, without the need for messy campaign contributions and legislation.
Even the Arizona Republic, the house organ of the McCain campaign, called the idea a "clunker" that uses "tax policy to play with the heads of consumers."
But the best example of McCain's rhetoric colliding with reality is his claim that he could pay for his expensive menu of tax cuts by cutting wasteful spending and eliminating earmarks. McCain says he'll veto "every bill with earmarks, until the Congress stops sending bills with earmarks." Boo earmarks! Hooray cutting wasteful spending!
There's much confusion over how much earmarking is going on. McCain's campaign claims the amount is over $60 billion, but to get to that number, you have to include most foreign aid spending, which includes $2.9 billion annual U.S. aid to Israel.
So when McCain said he'd veto all earmarks, and somebody noticed that aid to Israel was an earmark, McCain's campaign quickly amended his statement to note that he certainly wouldn't veto that earmark. No sir, no way. That's a good earmark!
And so it goes, as with much so-called straight talk: Overblown statement of principle founders on the specific rocks of reality. Government spending generally: Bad, bad, bad. Government spending on a particular program: Not so fast, buddy.
Tuesday, April 15, 2008
Wine Bar Senator Serves Up Tax-Cut Kool-Aid
I'm posting a day late because I just got back this morning from talking politics and public service last night to students at Pomona College as a guest of the Pomona Student Union. Prof. David Menefee-Libey and I did an undergraduate political version of “Inside the Actor’s Studio” but the informal title among certain undergraduates (translation: my son and his buddies) was “The Beard and The Moustache Talk Politics”: http://www.politics.pomona.edu/dml/. I only hope the students enjoyed it half as much as I did.
For the column, my suggested headline is above but the editor gave me more room, and top-of-the-page placement, too. Now that I don’t have Dick Mahoney to kick around anymore, it’s time for a new target. Newspaper version is available here. Insider comments show that I’m not the only person finding Sen. Cheuvront’s act less amusing these days.
TAX-CUT VOTE SHOWS DEM IS DRINKING GOP KOOL-AID
East Valley Tribune, Apr. 13, 2008
Whenever I see state Sen. Ken Cheuvront, D-Phoenix, he insistently asks me why I don’t dine at his wine bar more often. Now I have a good reason.
What’s the GOP’s favorite cure for anything, whether recession or boom, war or peace, heartburn or halitosis? Why, tax cuts, of course. Cut taxes when government revenues go up. Cut taxes when government revenues go down. Cut taxes to keep the economy going strong. Cut taxes if the economy’s weak. The question is irrelevant; the answer is always tax cuts!
This year, with the state facing a $1.2 billion deficit for the current fiscal year (ending in a scant 11 weeks) and a $1.8 billion deficit for the fiscal year starting July 1, what’s the GOP’s top state legislative priority? Making permanent a temporary $250 million annual property tax break.
It’s a perfect GOP tax cut, for several reasons. First, dropping the state equalization property tax benefits big landowners, particularly utilities. Don’t want to risk putting money in the hands of ordinary consumers who might help spend us out of the recession. Second, it’s a distraction from the current fiscal crisis. Why bother with such dreary, eat-your-spinach work as the pending budget, when you can eat a huge tax-cut dessert instead?
Third, it’s a tax cut for future years. Today’s legislators take the credit, leaving future legislators and governors to find additional school funding. (The equalization tax is dedicated to education, and 3-year hiatus required that schools get the lost revenues from the now-stressed General Fund.)
Finally, it’s breaking a promise. The temporary cut was passed during the real estate boom, when state revenues exceeded projections and the General Fund could carry the extra load. The temporary nature was a feature, if future fiscal years got leaner and general fund revenues went south -- which has happened. And with Arizona’s two-thirds requirement for tax increases (but no similar supermajority requirement for tax cuts), it’s mathematically and politically far harder to raise taxes than to cut them.
But rather than let the temporary pause end, the GOP now says we need to make permanent what they promised (and voted for) would be temporary -- or it’s a tax hike, and Republicans can’t do that on a day ending in “Y.”
It’s all part of the Republican mythology, that cutting taxes increases revenues (no, it doesn’t), or that state tax rates are the sole determinant of a state’s attraction to businesses (no, forget about things like quality of life, wage rates, infrastructure, school quality, labor quality, proximity to markets -- a study shows that where the CEO owns a house matters more), or that state tax decisions determine how the state economy does (no, how can anyone paying attention to the real estate boom-and-bust think that anything the state Legislature does matters as much as how the national economy is performing?)
So that’s the GOP orthodoxy, impervious to reality (and if you doubt that, where are all the economic studies -- not sound bites, actual studies -- showing that cutting taxes works as promised?) But while Republicans have to believe this stuff, we Democrats don’t; we’re supposed to be reality-based.
Except Cheuvront, who decided to give the Republicans the final vote they needed for their eat-more-chocolate-to-lose-weight fiscal folly. Some say he was upset that House Democrats defeated his bid to eliminate a municipal tax break used to spur downtown development, which makes no sense. He claimed that small businesses needed this tax break, which doesn’t make sense, and that business valuations for tax purposes were somehow exceeding market valuations, which would be illegal -- and which also makes no sense.
He also left Sens. Tom O’Halleran, R-Sedona, and Carolyn Allen, R-Scottsdale, who bucked their party to vote against permanency, hung out to dry when he switched his vote after promising the Senate Democratic caucus the day before he would vote “no.” And that doesn’t make sense, either.
So as for patronizing Cheuvront’s Wine Bar? Now that the proprietor is serving up the same old GOP tax-cut Kool-Aid, I think I’ll pass.
I'm posting a day late because I just got back this morning from talking politics and public service last night to students at Pomona College as a guest of the Pomona Student Union. Prof. David Menefee-Libey and I did an undergraduate political version of “Inside the Actor’s Studio” but the informal title among certain undergraduates (translation: my son and his buddies) was “The Beard and The Moustache Talk Politics”: http://www.politics.pomona.edu/dml/. I only hope the students enjoyed it half as much as I did.
For the column, my suggested headline is above but the editor gave me more room, and top-of-the-page placement, too. Now that I don’t have Dick Mahoney to kick around anymore, it’s time for a new target. Newspaper version is available here. Insider comments show that I’m not the only person finding Sen. Cheuvront’s act less amusing these days.
TAX-CUT VOTE SHOWS DEM IS DRINKING GOP KOOL-AID
East Valley Tribune, Apr. 13, 2008
Whenever I see state Sen. Ken Cheuvront, D-Phoenix, he insistently asks me why I don’t dine at his wine bar more often. Now I have a good reason.
What’s the GOP’s favorite cure for anything, whether recession or boom, war or peace, heartburn or halitosis? Why, tax cuts, of course. Cut taxes when government revenues go up. Cut taxes when government revenues go down. Cut taxes to keep the economy going strong. Cut taxes if the economy’s weak. The question is irrelevant; the answer is always tax cuts!
This year, with the state facing a $1.2 billion deficit for the current fiscal year (ending in a scant 11 weeks) and a $1.8 billion deficit for the fiscal year starting July 1, what’s the GOP’s top state legislative priority? Making permanent a temporary $250 million annual property tax break.
It’s a perfect GOP tax cut, for several reasons. First, dropping the state equalization property tax benefits big landowners, particularly utilities. Don’t want to risk putting money in the hands of ordinary consumers who might help spend us out of the recession. Second, it’s a distraction from the current fiscal crisis. Why bother with such dreary, eat-your-spinach work as the pending budget, when you can eat a huge tax-cut dessert instead?
Third, it’s a tax cut for future years. Today’s legislators take the credit, leaving future legislators and governors to find additional school funding. (The equalization tax is dedicated to education, and 3-year hiatus required that schools get the lost revenues from the now-stressed General Fund.)
Finally, it’s breaking a promise. The temporary cut was passed during the real estate boom, when state revenues exceeded projections and the General Fund could carry the extra load. The temporary nature was a feature, if future fiscal years got leaner and general fund revenues went south -- which has happened. And with Arizona’s two-thirds requirement for tax increases (but no similar supermajority requirement for tax cuts), it’s mathematically and politically far harder to raise taxes than to cut them.
But rather than let the temporary pause end, the GOP now says we need to make permanent what they promised (and voted for) would be temporary -- or it’s a tax hike, and Republicans can’t do that on a day ending in “Y.”
It’s all part of the Republican mythology, that cutting taxes increases revenues (no, it doesn’t), or that state tax rates are the sole determinant of a state’s attraction to businesses (no, forget about things like quality of life, wage rates, infrastructure, school quality, labor quality, proximity to markets -- a study shows that where the CEO owns a house matters more), or that state tax decisions determine how the state economy does (no, how can anyone paying attention to the real estate boom-and-bust think that anything the state Legislature does matters as much as how the national economy is performing?)
So that’s the GOP orthodoxy, impervious to reality (and if you doubt that, where are all the economic studies -- not sound bites, actual studies -- showing that cutting taxes works as promised?) But while Republicans have to believe this stuff, we Democrats don’t; we’re supposed to be reality-based.
Except Cheuvront, who decided to give the Republicans the final vote they needed for their eat-more-chocolate-to-lose-weight fiscal folly. Some say he was upset that House Democrats defeated his bid to eliminate a municipal tax break used to spur downtown development, which makes no sense. He claimed that small businesses needed this tax break, which doesn’t make sense, and that business valuations for tax purposes were somehow exceeding market valuations, which would be illegal -- and which also makes no sense.
He also left Sens. Tom O’Halleran, R-Sedona, and Carolyn Allen, R-Scottsdale, who bucked their party to vote against permanency, hung out to dry when he switched his vote after promising the Senate Democratic caucus the day before he would vote “no.” And that doesn’t make sense, either.
So as for patronizing Cheuvront’s Wine Bar? Now that the proprietor is serving up the same old GOP tax-cut Kool-Aid, I think I’ll pass.
