That is, why it isn’t the solution it is touted to be. Jeffrey Sachs of the Financial Times:
The Geithner-Summers plan, officially called the public/private investment programme, is a thinly veiled attempt to transfer up to hundreds of billions of dollars of US taxpayer funds to the commercial banks, by buying toxic assets from the banks at far above their market value. It is dressed up as a market transaction but that is a fig-leaf, since the government will put in 90 per cent or more of the funds and the “price discovery” process is not genuine. It is no surprise that stock market capitalisation of the banks has risen about 50 per cent from the lows of two weeks ago. Taxpayers are the losers, even as they stand on the sidelines cheering the rise of the stock market. It is their money fuelling the rally, yet the banks are the beneficiaries.
If you’ve been wondering why the stock market had a short rally upon its announcement, there’s your explanation. You need to read the whole thing as Sachs uses a simple example to explain his point. He concludes with:
Tim Geithner, Treasury secretary, and Lawrence Summers, director of the White House national economic council, suspect that they cannot go back to Congress to fund their plan and so are raiding the Federal Reserve, the Federal Deposit Insurance Corporation and the remaining Tarp funds, hoping that there will be little public understanding and little or no congressional scrutiny. This is an inappropriate institutional use of the Fed, the FDIC and the Tarp. Mr Geithner and Mr Summers should at the very least explain the true risks of large losses by the government under their plan. Then, a properly informed Congress and public could decide whether to adopt this plan or some better alternative.
But, of course, we’re just in too big of a hurry and the situation is too dire to actually discuss and debate the situation or do it properly through Congressional action. Instead we’ve been sold a bill of goods which, disguised as a way out, is simply a rip off of the taxpayer – again. As Jennifer Rubin notes:
So to avoid the overwhelming popular objection to perpetual bailouts and expenditures, the Obama administration will do this all “off budget” and with no hearings, Congressional debates, or votes. Not very transparent and quite imperious, when you get right down to it.
Yeah, not very “hopey changey” is it?
I’m warming more and more to my suggestion that government officials be compensated the same way they think CEOs should be compensated. If this ends up being a big loss to the taxpayer, Geithner and Summers should receive zero compensation for the outcome. And that would also go for anyone else in the administration or Congress who had a hand in implementing this plan.
Doug Heye points out something of which I’m sure few people are aware:
The Democratic Senatorial Campaign Committee (DSCC) has apparently decided to keep $100K in contributions from Bernie Madoff, who faces up to 150 years in prison for swindling billions from the likes of Steven Spielberg, Elie Wiesel, Kevin Bacon and Kyra Sedgwick in a massive Ponzi scheme.
In campaigns, one side often calls on the other to return money for one reason or another. Sometimes it’s valid, sometimes not. Regardless, it’s Campaign 101. But when the contributor in question is the single biggest financial criminal in history, there can be no question that those illicit funds should not remain in campaign coffers.
Given the economic uncertainty our nation faces and that Madoff not only fleeced the rich and famous but major corporations such as HSBC — in other words, Madoff swindled all of us — the DSCC’s decision is shockingly tone-deaf.
No kidding. People all over have been fleeced by this guy, they’re looking all over for assets with which to recover some of the funds and pay back the investors and the DSCC is keeping the funds he sent them. Shocking.
What isn’t shocking, however, is what Heye notes next:
However, what’s almost equally surprising is the virtual silence from the media. During the Enron scandal, returning campaign money was a daily drumbeat, as were the news stories discussing Enron’s purported ties to President Bush. Now, when the Democratic Senate campaign vehicle makes the conscious decision to keep $100K in Madoff money, stolen just as if it came from a bank holdup, there’s little to no outrage.
Heye seems surprised and asks “why” this is receiving no coverage.
Most of the rest of us are just shaking our heads knowingly and are not at all surprised by that fact.
UPDATE: Commenter Linda Morgan provides a link from the Washington Times, apparently the only MSM outlet which carried the story, with some positive results:
One day after The Washington Times reported that a key Democratic fundraising group was holding onto $100,000 from disgraced financier Bernard Madoff, the Democratic Senatorial Campaign Committee decided to donate the money to his victims.
“We’re reviewing this internally, and decided to give the money to the trustee for distribution to the victims,” DSCC spokesman Eric Schultz told Roll Call on Thursday.
Given the fact the Madoff scandal is old enough that he’s been to trial, plead guilty and is awaiting sentencing, you have to wonder why it has taken this long for the DSCC to “review this internally”.
And yes, it’s another Republican:
Sen. Orrin Hatch, R-Utah, may be a skinny guy with a high voice. But he’s angrily setting out to tackle the biggest powers in college football, vowing to pound them until they reform the Bowl Championship Series.
He called them out Wednesday, as he and Sen. Herb Kohl, D-Wisc. — respectively the top Republican and Democrat on a Judiciary subcommittee on antitrust — released a list of topics that panel plans to consider this year.
A bit buried on Page 4 of an eight-page list, amid somewhat sleep-inducing reading on oil and railroad antitrust, is a nifty paragraph about the BCS.
“The BCS system leaves nearly half of all the teams in college football at a competitive disadvantage when it comes to qualifying for the millions of dollars paid out every year,” their joint statement says.
Then it drops its first unexpected bomb: “The subcommittee will hold hearings to investigate these issues.”
That is followed by a second: “Sen. Hatch will introduce legislation to rectify this situation.”
Hatch’s office did not comment about exactly what may be in the yet-to-be-written bill — including whether it might attempt to mandate a playoff system similar to that in college basketball, or simply mandate that all colleges be given a fair shot to play their way into a national championship.
no one is particularly happy with the BCS and how they rank colleges or the method of “playoff” they’ve come up with. However let me be very clear here. This is none of Congress’s business. None. Nada. Zip. Zero.
Sorry if BSU was 13-0 and wasn’t crowned national champs. But that’s life and the system that’s in place. Get over it and worry about the things which are important – like shrinking government instead of making it more intrusive.
I’m coming to the conclusion we should hold Congress to the same standard as concerns their pay as we held AIG about the bonuses.
If we did that, most of these yahoos would be flat broke or owning the Treasury money at the end of the year. That’s certainly one way to cut spending.
[HT: Liberty Papers]
This is such a basic lesson I’m surprised it has to be repeated so often.
Under pressure to narrow projected deficits, President Barack Obama’s 2010 budget proposal calls for raising more than $31 billion over the next decade by eliminating the oil and gas industry’s eligibility for various tax breaks.
When you’re thowing around 3.6 trillion dollar figures for budgets, someone is going to ask, “how are you going to pay for it?” A 3.6 trillion dollar budget certainly doesn’t answer, “by cutting spending” does it? So new sources of revenue have to be found. But in a consumer society who is the ultimate source of all revenue? If you answered, “the consumer” you get a gold star.
So revenue is the purported reason for the focus on oil companies. Additionally, they’re easy to demonize which makes for easy political pickings. That seems to be the modus operandi of this administration.
The plan would slap companies with a new excise tax on production in the Gulf of Mexico worth $5.3 billion between 2010 and 2019, and repeal the industry’s eligibility for a manufacturing tax credit worth $13.3 billion in that period.
In an era in which the word “trillions” is uttered with abandonment, billions suddenly don’t seem like much do they? Unless of course you’re a middle or lower income family. Then trillions and billions are meaningless. It’s how far can you stretch the thousands of dollars you earn each year?
Well that $13 a week tax cut you’re contemplating will quickly disappear at the gas pump if Congress and the adminstration get their way. Fuel prices will rise at the pump and may rise rather dramatically. That’s because that approximately 20 billion you see above will most likely morph into about 400 billion cost to the oil companies during that period:
The industry says the final cost of Mr. Obama’s proposals on petroleum production could top $400 billion, once his plan to put a price on greenhouse-gas emissions is factored in.
The Obama administration has generally justified its proposals by arguing that taxpayers deserve a better deal.
Yeah, I know, “lie” is a strong word. I’ve always considered it to be the knowing telling of a falsehood. And that’s precisely what this “justification” is. The “taxpayer” being talked about isn’t you in this scenario. It’s the government. You will be paying the passed through tax at the pump which the oil companies will then send to DC.
For the seeming millionth time, corporations don’t pay taxes, they collect them and pass them on. Individuals pay taxes.
Last but not least – Raising taxes in recessionary times (not matter how indirect) is a recipe for economic disaster. Additionally such taxes in recessionary times may have the effect of driving jobs offshore where taxes and restrictions are less onerous and seeing oil companies produce less oil and natural gas domestically in a time when there is a growing and increasingly worrisome energy gap.
Not a very bright policy.
It won’t be. There’s nothing “sacred” about wind and solar, certainly nothing which is going to see environmentalists back off of their opposition to anything with despoils the vision they hold of how mother earth should be:
As David Myers scans the rocky slopes of this desert canyon, looking vainly past clumps of brittlebush for bighorn sheep, he imagines an enemy advancing across the crags.
That specter is of an army of mirrors, generators and transmission towers transforming Mojave Desert vistas like this one. While Whitewater Canyon is privately owned and protected, others that Mr. Myers, as head of the Wildlands Conservancy, has fought to preserve are not.
To his chagrin, some of Mr. Myers’s fellow environmentalists are helping power companies pinpoint the best sites for solar-power technology. The goal of his former allies is to combat climate change by harnessing the desert’s solar-rich terrain, reducing the region’s reliance on carbon-emitting fuels.
Mr. Myers is indignant. “How can you say you’re going to blade off hundreds of thousands of acres of earth to preserve the Earth?” he said.
As I’ve said before, if you think that these groups are going to let anyone carpet the Mojave Desert with solar panels and endanger its eco system, you haven’t been paying attention to what has been going on here for the last 50 years.
Terry Frewin, a local Sierra Club representative, said he had tough questions for state regulators. “Deserts don’t need to be sacrificed so that people in L.A. can keep heating their swimming pools,” Mr. Frewin said.
But that’s precisely what it will take for solar to make any appreciable difference, given the technology available today. The ironic thing is the movement to plus up solar is being driven by a Democratic administration and putting it into direct conflict with one of its more loyal constituencies.
It is also causing dissent within environmental organizations as well:
“It’s not enough to say no to things anymore,” said Carl Zichella, a Sierra Club expert on renewable power. “We have to say yes to the right thing.”
We’ll see who wins in the end and what the eventual political cost will be – but you can rest assured, there’ll be nothing easy about implementing solar and wind if environmentalists have any say.
New administration, same lame approach:
U.S. Secretary of State Hillary Rodham Clinton on Wednesday pledged to stand “shoulder to shoulder” with Mexico in its violent struggle against drug cartels, and acknowledged the U.S. shares blame because of its demand for drugs and supply of weapons.
She said the United States shares responsibility with Mexico for dealing with violence now spilling across the border and promised cooperation to improve security on both sides.
And it’s your fault:
“I feel very strongly we have a co-responsibility,” Clinton told reporters, adding: “Our insatiable demand for illegal drugs fuels the drug trade. Our inability to prevent weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians.”
Of course, if we had control of our borders and drugs weren’t “illegal”, we probably wouldn’t be seeing the slaughter on the border now, would we?
Look, I know, as does everyone who reads this blog, that the sudden realization that it is the prohibition that drives all of this violence and not the demand, isn’t going to suddenly dawn on the politicians. The lessons of 1920’s prohibition have apparently been lost on them. The lawlessness, the gun violence, the flouting of the law by a majority of the population – all were essentially eliminated with the repeal of the 18th Amendment.
I’m not going to make the argument that drugs are good for you, harmless or something I’d want my grandkids to do. But I understand, despite all of that, that our approach – prohibition – is an abject failure and the war on the border is simply a manifestation of that failure.
The key to winning this war is to take the profit motive for criminals out of the equation. For most observers that seems self-evident. No profit, no war. No war, no need for guns and killing.
Yet governments seem to resist that obvious point. Instead they wage “war” on the producers, suppliers and users. But the profits, propped up by the government prohibition, are so obscene that the replacement of producers and suppliers taken out of the “business” is almost instant. And the size of the user population is such that only low single digit percentages of them are ever caught and prosecuted. It is, relatively speaking, a low risk business with very high rewards for the producers.
In reality, a criminal business is motivated by the very same things as is a legal business. It responds to the same sorts of market incentives as a legal business. The market, however, isn’t created by natural demand and regulated by competition. Instead, the market is one created by government prohibition. No prohibition, no “illegal” demand. No illegal demand, no possibility of the obscene profits enjoyed and no real appeal to a criminal enterprise or syndicate.
So calling for more of the same in terms of addressing this problem seems insane. As long as the prohibition remains in place the profit motive for the criminal gangs remains in place as well. And as long as the profits are large enough to more than offset the losses incurred in the distribution process (and the fight with governments and police), they will continue in their “business” until such a profit motive disappears. And as long as the price of drugs remains reasonably low and readily available (and the enjoyment remains high), and the population wanting them remains large, demand will remain pretty constant.
As has been demonstrated for decades, governmental efforts to stem both supply and demand through prohibition has been a pitiful failure. Yet here we are, getting ready to double down on this horribly failed policy.
In reality, this is again a manifestation of the nanny state. It is a determination by government that something it has decided is detrimental to individuals should be denied them. Instead of approaching the issue as it did with alcohol, our government has eschewed the lessons learned and the success of that effort in favor of the approach it is now taking.
To most rational people such an approach seems absurdly irrational. Yet there is no serious debate within government circles about the failure of the present approach or discussion of alternatives. And that’s in the face of evidence that drugs are now being used to finance terror organizations.
Something has got to change. And it needs to change quickly, or what you see on the border now will only grow worse. We’ve talked about how governments can distort markets. What you see now is a classic example of the results of such a distortion.
UPDATE: New York is trying something different in terms of combatting drugs. Although still not signed into law, the Governor and legislature have agreed to legislation which would dismantle much of the ’70s era “mandatory sentencing” laws and put more of an emphasis on treatment:
The deal would repeal many of the mandatory minimum prison sentences now in place for lower-level drug felons, giving judges the authority to send first-time nonviolent offenders to treatment instead of prison.
The plan would also expand drug treatment programs and widen the reach of drug courts at a cost of at least $50 million.
New York’s drug sentencing laws, imposed during a heroin epidemic that was devastating urban areas nearly four decades ago, helped spur a nationwide trend toward mandatory sentences in drug crimes. But as many other states moved to roll back the mandatory minimum sentences in recent years, New York kept its laws on the books, leaving prosecutors with the sole discretion of whether offenders could be sent to treatment.
“We’re putting judges in the position to determine sentences based on the facts of a case, and not on mandatory minimum sentences,” said Jeffrion L. Aubry, an assemblyman from Queens who has led the effort for repeal.
“To me, that is the restoration of justice.”
To me, it’s a start.
Time to turn the funding faucet off for this bunch of hypocrites. It is the quickest way to get them to shape up or shut up:
Animal lovers worldwide now have access to more than a decade’s worth of proof that People for the Ethical Treatment of Animals (PETA) kills thousands of defenseless pets at its Norfolk, Virginia headquarters. Since 1998, PETA has opted to “put down” 21,339 adoptable dogs, cats, puppies, and kittens instead of finding homes for them.
PETA’s “Animal Record” report for 2008, filed with the Virginia Department of Agriculture and Consumer Services, shows that the animal rights group killed 95 percent of the dogs and cats in its care last year. During all of 2008, PETA found adoptive homes for just seven pets.
Just seven animals — out of the 2,216 it took in.
PETA has a budget of 35 million. Most of it is used to advertise their claim that people who eat or kill animals are “unethical”. Rather than cutting the ad budget to provide for the animals in its own care, it kills them.
Anyone – how expensive would an animal adoption program be to set up and run for a group that supposedly believes that killing animals is “unethical?” And how big of a priority would you think that should be?
It wouldn’t cost that much, and yeah, it should be a top priority, shouldn’t it?
If you give this group one red dime in the future, you’ll simply be contributing to a 95% animal kill ratio for animals in their care while they pompously tell you that eating “sea kittens” is murder.
[HT: Center for Consumer Freedom]
Believe it or not, it was AP which undertook this job. And although superficial, it was interesting to see the agency actually attempt some objectivity. That said, the one that really stands out as almost laugh outloud funny was where Obama did a little chiding of the Republicans:
First of all, I suspect that some of those Republican critics have a short memory, because, as I recall, I’m inheriting a $1.3 trillion deficit, annual deficit, from them.
Well, first of all, only Congress can appropriate money and for the last two years, when that 1.3 trillion was pile up, it was appropriated by a Democratic Congress.
Yes, Paulson rolled them and they ran around like a bunch of chickens with their heads cut off – and that includes Republicans – but trying to lay this deficit solely at the feet of the Republicans is simply laughable.
Laughable point two came when Obama claimed “In this budget, we have made the tough choices necessary to cut our deficit in half by the end of my first term even under the most pessimistic estimates.”
Well, that’s just not true. The “most pessimistic estimates” (in this case the CBO) essentially disagree with his point.
The Congressional Budget Office forecasts that Obama’s spending plan would leave a deficit of $672 billion by the end of 2013. Explaining the differences between his projections and CBO’s, Obama said his administration projects a higher growth rate.
It is also important to understand that “cutting the deficit in half” is a mask for the fact that it means he’ll still be running up a record deficit of over 600 billion a year. That is not progress in deficit reduction or “fiscally responsible” government. But it sounds good when thrown out there in a sound bite. Here, maybe this will help make the point:
As you can see, both the most “pessimistic” and his own projections see huge deficits projected well into the future – and, as many economists have said, unsustainable deficits.
So let’s get a few facts straight concerning spending and deficits then and now:
-President Bush expanded the federal budget by a historic $700 billion through 2008. President Obama would add another $1 trillion.
-President Bush began a string of expensive financial bailouts. President Obama is accelerating that course.
-President Bush created a Medicare drug entitlement that will cost an estimated $800 billion in its first decade. President Obama has proposed a $634 billion down payment on a new govern ment health care fund.
-President Bush increased federal education spending 58 percent faster than inflation. President Obama would double it.
-President Bush became the first President to spend 3 percent of GDP on federal antipoverty programs. President Obama has already in creased this spending by 20 percent.
-President Bush tilted the income tax burden more toward upper-income taxpayers. President Obama would continue that trend.
-President Bush presided over a $2.5 trillion increase in the public debt through 2008. Setting aside 2009 (for which Presidents Bush and Obama share responsibility for an additional $2.6 trillion in public debt), President Obama’s budget would add $4.9 trillion in public debt from the beginning of 2010 through 2016.
Yes, Bush did contribute to an expanded deficit. But Obama’s plans expand it beyond anything Bush did and it continues the spending well into the future. Obama’s budget is the blueprint for a huge and unsustainable expansion of government over the next decade. What you see going on now is all Obama.
And don’t let him get away with pretending otherwise.
Don’t buy or own any property in Mississippi, at least not while Republican Governor Haley Barbour is in the Governor’s mansion:
Mississippi Gov. Haley Barbour says he’s vetoing a bill that would limit the use of eminent domain because it would hurt the state’s ability to lure economic development projects.
The bill would’ve prevented the government from taking land for private projects. Barbour said Monday eminent domain was needed to lure projects such as the Nissan vehicle plant in Canton and the Toyota plant in north Mississippi.
And who is on the side of private property?
The bill was filed by Rep. Ed Blackmon, a Democrat from Canton. An attempt to override veto would have to start in the House, where Blackmon is head of the Judiciary A Committee.
Sen. Eric Powell, a Democrat from Corinth, said he voted for the bill and he doesn’t intend to change his vote.
Amazing. What in the hell happened to individual rights and small and less intrusive government among Republicans? And, at least in Mississippi, why are they ceding the fight to Democrats?
Is it any wonder the GOP is losing support at a dizzying rate? With “Republicans” like Barbour, the GOP doesn’t need any enemies.
I saw the following two quotes in a Patrick J. Buchanan piece. Now I’m not much of a Buchanan person by any stretch, but the quotes resonated with me and I found myself agreeing with much of what Buchanan said.
“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” –Ernest Hemingway
Hemingway wasn’t an economist, but there are plenty out there consider John Maynard Keynes a fairly good one, even now. And he said much the same thing about the economic side of the Hemingway quote:
“The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
Right now, in lieu of dollars, our Federal Reserve is in the midst of printing trillions of “Bernanke Bucks”. I hesitate to call them dollars, even though they’re similar in their look and feel. But in essence they are worth little more than the paper they’re printed on. And although you can’t tell them from the dollars circulating out there, their presence makes the those dollars worth less. The more BB’s there are out there, the less the remaining dollars are worth.
It is called “monetizing the debt”.
Or to pick up on Keyne’s point, we’re right in the middle of debauching our currency.
Now, there are several reasons for doing what is being done, and you may or may not agree with them. But it really doesn’t matter. Whether you agree or disagree, printing money for the right reasons or the wrong reasons still has the same effect.
If you think taxation is theft, inflation is no less than that. And in this case it is a calculated theft. Those printing the “Bernanke Bucks” know precisely what the effect on your net worth will be.
Buchanan concludes his piece pointing out what we’ve talked about here for months – this is all about the belief we can avoid the pain:
Yet one senses that we are doing again exactly what we have done before in this generation. Rather than endure the pain and accept the sacrifices to cure us of our addiction, we are going back to the heroin. And this time, with Dr. Bernanke handling the needle, we may just overdose.
The road to hyper-inflation is paved with good, but seriously misguided intentions.