Even AP seems to be figuring it out. Here’s an analysis by AP’s David Espo discussing the AIG debacle:
Which goes to the crux of the Democrats’ current political problem.
Gone are the days when they could merely bludgeon the Bush administration and promise to seek bipartisan solutions to the nation’s economic problems.
Now, in control of the White House and Congress, they are struggling to come up with an explanation for what no one in either party seems moved to defend.
You can’t help but snicker a bit, can you?
Jennifer Rubin at Commentary magazine’s blog rounds up the latest info on who knew what about the AIG bonuses. It’s not pretty, but, of course, we knew it wouldn’t be.
The bottom line: Dodd, after denying it, now admits he and the administration cooked up the language which afforded AIG some protection ( until the firestorm hit) to grant the bonuses.
Time magazine also reports:
Although Treasury Secretary Timothy Geithner told congressional leaders on Tuesday that he learned of AIG’s impending $160 million bonus payments to members of its troubled financial-products unit on March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned “full details” of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG. [Emphasis mine.–EDF]
It’s such a relief to have the “best and brightest” running the show, isn’t it?
I know this will come as a complete surprise, but some Democrats have been lying to you. But before we get to that, let’s review.
AIG was deemed dangerously insolvent a few months ago, so insolvent that it required the government to step in and save it. It was one of the “too big to fail” companies. It got TARP funds. Then, as a part of the “stimulus” bill, signed into law under the Obama administration, an attempt was made to add a provision to strictly limit such payments as those now causing the faux outrage:
Around the same time, Congress and Obama’s team were passing up an opportunity to put in place strict laws to revoke bonuses from recipients of the $700 billion Wall Street bailout. In February, the Senate voted to add such a proposal to the economic recovery bill that cleared Congress, but in final closed-door talks on the measure, that provision was dropped in favor of limits that affect only future payments.
“There was a lot of lobbying against it and it died,” said Sen. Ron Wyden, D-Ore., who proposed the measure with Republican Sen. Olympia J. Snowe of Maine. He said Obama’s team is sending mixed messages on what will and won’t be tolerated on bonuses, with the president coming out strongly against excessive Wall Street rewards but top officials not following through.
“The president goes out and says this is not acceptable, and then some backroom deal gets cut to let these things get paid out anyway,” Wyden said. “They need to put this to bed once and for all.”
They also need to “put to bed once and for all” this nonsense that they “didn’t know” until a couple of days ago. And, of course, had anyone actually read the bill that they claimed was too important to delay, they’d have actually caught this, one assumes. But it appears, at least initially, that reading legislation before it is signed is just not a priority for this administration or Congress.
And surprise, surprise, we’re finding what they did pass sucks.
While administration officials insisted Tuesday that neither Obama nor Geithner learned of the impending bonus payments until last week, the problem wasn’t new. AIG’s plans to pay hundreds of millions of dollars were publicized last fall, when Congress started asking questions about expensive junkets the company had sponsored.
A November SEC filing by the company details more than $469 million in “retention payments” to keep prized employees.
Back then, Rep. Elijah E. Cummings, D-Md., began pumping Liddy for information on the bonuses and pressing him to scale them back.
“There was outrage brewing already,” Cummings said. “I’m saying (to Liddy), ‘Be a good citizen. … Do something about this.’ ”
Around the same time, outside lawyers hired by the Federal Reserve started reviewing the bonuses as part of a broader look at retention and compensation plans, according to government officials who spoke on condition of anonymity. The outside attorneys examined the possibility of making changes to the company plans — scaling them back, delaying them or rescinding them. They ultimately concluded that even if AIG’s bonuses were withheld, the company would probably be sued successfully by its employees and be forced to pay them, the officials said.
In January, Reps. Joseph E. Crowley of New York and Paul E. Kanjorski of Pennsylvania wrote to the Federal Reserve and the Treasury Department pressing the administration to scrutinize AIG’s bonus plans and take steps against excessive payments.
“I at that point realized that we were going to have a backlash with regard to these bonuses,” Kanjorski said in an AP interview. In a meeting with Liddy later that month, he said he told the AIG chief that “all hell would break loose if we didn’t find a way to inform the public … and that we should take every step to put that information out there so we wouldn’t have the shock.”
And of course, Kanjorski is right. This is a “distraction”, as Rahm Emanuel is labeling it, that the administration could have avoided had the Treasury Secretary been on top of it and the President had exerted even a bit of leadership. Instead, both are in extreme cover-up mode. And as more and more info comes out, the time-line of events they issued has less and less credibility.
This wasn’t something that just emerged as a problem last Tuesday as Geithner is attempting to claim. This has been known and waved off for months. And that includes the provision that was going to be inserted in the “stimulus” package but died due to apparent Democratic lobbying.
Up is down. In is out. Billions in earmarks are no big deal, but millions in “bonuses” merit extreme outrage. And now, per Speaker Nancy Pelosi, illegal aliens represent the height of patriotism, but enforcing American laws is “un-American”:
House Speaker Nancy Pelosi recently told a group of both legal and illegal immigrants and their families that enforcement of existing immigration laws, as currently practiced, is “un-American.”
The speaker, condemning raids by Immigration and Customs Enforcement agents, referred to the immigrants she was addressing as “very, very patriotic.”
“Who in this country would not want to change a policy of kicking in doors in the middle of the night and sending a parent away from their families?” Pelosi told a mostly Hispanic gathering at St. Anthony’s Church in San Francisco.
As some might say, that’s muy estúpido. But the Speaker wasn’t done:
Referring to work site enforcement actions by ICE agents, Pelosi said, “We have to have a change in policy and practice and again … I can’t say enough, the raids must end. The raids must end.
“You are special people. You’re here on a Saturday night to take responsibility for our country’s future. That makes you very, very patriotic.”
Our country? Perhaps Pelosi is unclear on the concept of illegal immigrants? Do you think she realizes that they are not part of our country?
And the idea that enforcing our immigration laws is somehow “un-American” is beyond ludicrous. Although, when you consider this is coming from the party that seems to think paying taxes is a only a patriotic duty if you aren’t working for the Democrats, then I suppose it makes sense.
In the spirit of Pelosi’s newspeak, may I just say that the Madam Speaker is clearly a thoughtful and intelligent lawmaker who is doing a fine job at her post.
[HT: HotAir HL]
Mark Sanford, the governor of South Carolina, said this the other day about the possible effects of all of the spending the Obama administration was doing and planning:
“What you’re doing is buying into the notion that if we just print some more money that we don’t have, send it to different states — we’ll create jobs,” Sanford said. “If that’s the case, why isn’t Zimbabwe a rich place?… Why isn’t Zimbabwe just an incredibly prosperous place. ‘Cause they’re printing money they don’t have and sending it around to their different — I don’t know the towns in Zimbabwe but that same logic is being applied there with little effect.”
A little oversimplistic, but this is “sound bite nation” so you have to condense. In effect his point is true to the extent it goes, and the example is a good and valid one, since Zimbabwe is printing money as fast as it can add zeroes to its demonimations. By now, the hyper-inflation it is undergoing from doing so should be well known to people versed in current affairs.
Unless, of course, you want to make a racial thing out of it. Rep. James Clyburn, Democratic Majority Whip, reacts to Sanford’s lesson and example of Zimbabwe:
“For him to compare the president of this country to Mugabe. … It’s just beyond the pale,” said Clyburn, who has sparred with Sanford over the Republican’s refusal to accept all the state’s stimulus funding.
“I’m sure he would not say that, but how did he get to Zimbabwe? What took the man to Zimbabwe? Someone should ask him if that’s really the best comparison. … How can he compare this country’s situation to Zimbabwe?”
Of course the “how” is fairly simple – if what is being touted as a solution here and was touted as a solution there, then Zimbabwe should be in great economic shape right now. But Clyburn would rather make a racial thing out of it. Obviously Sanford could have used Wiemar Germany of the ’30s, but it isn’t as relevant today as the case of Zimbabwe. And, he could have also used Venezuela. But Venezuela isn’t quite the basket case Zimbabwe is. Nope, in terms of a current example of what might happen, in terms of hyper-inflation from artificially pumping up he money supply, Zimbabwe is as good as it gets.
“Rep. Clyburn always plays the race card,” shot back Sanford spokesman Joel Sawyer, who said his boss has also compared the stimulus to failed government policies in Germany and Argentina. “This policy will result in hyper-infaltion. … [Clyburn] is ripping off the people he purports to represent.”
Round 2 to follow.
Today, Rep. Mike Pence and Rep. Cathy McMorris Rodgers, the Chair and Vice Chair of the House Republican Conference, led a blogger conference call. The representatives stayed on point throughout the call:
- On the economy generally and on the Democrats’ budget proposal specifically, they repeatedly said the Democrats are spending, borrowing and taxing too much.
- They hammered on the Democrats’ proposal as bad for families and small businesses, including family farms. They emphasized the role of small businesses in job creation.
- They said they believed in free markets, fiscal restraint and tax relief as the keys to growth.
- To that effect, they said Senate and House Republicans would be cooperating closely to promote those messages over the next several weeks and then unveil an alternative budget proposal of their own, which they promise will be a bold, clear contrast with that of the Democrats.
I expected something along these lines, and I don’t object to the sentiment or disagree with their diagnosis of the Democrats’ budget. They’ve identified what’s wrong with the Democrats’ plan, they’ve developed a strategy for responding with their own alternative, and they want to get everyone on record as either supporting the Democrats’ messy bill or the ideal Republican vision.
The first question went to Quin Hillyer over at AmSpec, who asked how unified we can expect the GOP response to be if a Republican leader like Lamar Alexander broke to vote for the omnibus spending bill. Pence acknowledged that he and Sen. Alexander had a difference of opinion on that one, but hastened to add that Sen. Alexander had voted for all the limiting amendments and had voted against the stimulus, etc.
For my part, I asked the representatives why, in light of Republicans’ so-far unsuccessful attempts to bring “clean” Republican versions of bills to the floor for debate, their alternative budget would be different.
Rep. Pence answered that Republicans would be given the opportunity on this one. The Republican House leadership is working closely with the budget committee, and specifically with Rep. Paul Ryan, the ranking Republican on that committee. There are some limitations on how quickly they can move their alternative and get a CBO estimate done on it, but they’re going to use the interim to expose problems with the Democrats’ budget before unveiling their alternative.
Rep. Morris Rodgers said that it was important that it goes to the House floor for debate, and that they wanted the difference in approach to be clear to the American people, too.
As I said earlier, this is about what I expected – when your party is some 70 seats down in the House and retains only the most meager leverage in the Senate, having lost all credibility, you need to remind people that you at least remember what a conservative is supposed to want.
I just hope that’s not all they have in their playbook. It’s much easier to present a principled image when you’re out of power and have no sway over whether a given bill will pass.
Assurances that the GOP will remain so principled when they regain a measure of power won’t carry a lot of weight without some kind of binding commitments – changing the structure and practices of the party rather than the short-term tactics. After all, misbehavior that receded smoothly when the majority last changed hands can come back just as readily. Easy come, easy go.
David Brooks had started down the road to Damascus when he was called back into the fold by Dear Leader. His Op-Ed in today’s NYT is the result.
Most of Brooks’ offering is a rather transparent attempt to shame congressional Republicans into supporting Pres. Obama’s agenda:
The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate.
The G.O.P. leaders have adopted a posture that allows the Democrats to make all the proposals while all the Republicans can say is “no.” They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.
There are myriad problems with Brooks’ line of reasoning, including many in just to two foregoing paragraphs (e.g. How much input did Republicans have into the recent legislation? By “adopted a posture” is he referring to “not having control of either the House or the Senate”?), but I wanted to focus in on a couple of points in particular.
After some platitudinous admonitions, Brooks launches into his prescription for Republicans to save capitalism:
Third, Republicans could offer the public a realistic appraisal of the health of capitalism. Global capitalism is an innovative force, they could argue, but we have been reminded of its shortcomings. When exogenous forces like the rise of China and a flood of easy money hit the global marketplace, they can throw the entire system of out of whack, leading to a cascade of imbalances: higher debt, a grossly enlarged financial sector and unsustainable bubbles.
I really don’t know what point Brooks thought he was making, but he failed miserably on any score. First of all, “exogenous forces” cannot be “weaknesses” and/or “shortcomings” with capitalism since, by definition, they come from outside that system. At best, examining such forces can be used to understand better ways of protecting capitalism from them. In the context of the entire Op-Ed piece, however, it appears that Brooks is pitching the tired line that capitalism must be reigned in so that people don’t get hurt. That’s like diagnosing the problem with house, finding termites, and then thinking of ways to protect the termites from the house.
Furthermore, Brooks cites a “flood of easy money” (which, of course, is caused by government) as an example of an exogenous force, and then lists the following “shortcomings” of capitalism: “higher debt, a grossly enlarged financial sector and unsustainable bubbles.” What do any of those things have to do with capitalism? If anything, these are once again a failure of government skewing incentives.
In fact, when the government does its darnedest to make the cost of borrowing money historically low, people would be really stupid not to take advantage of that. We all know that rates fluctuate, and that the cost of money will be more expensive when they go back up. Logically therefore, it only makes sense to borrow when the Fed turns the money spigot on and then to find some sort of an asset to grow that money in. That, of course, is what leads to bubbles as everyone has barrels of money but not as many clear ideas of what makes a good investment. Instead of taking the time to really investigate what opportunities are available, and which ones fit a particular person’s portfolio, the herd mentality takes over and we all tend to keep up with the Jones and Smiths whether that means buying tulip bulbs or a run-down house we intend to flip.
The bottom line, however, is that these sorts of scenarios start with government intervention into the market place. In addition to turning on the money spigot, the federal government was also encouraging lenders to make high-risk loans, and for the Freddie Mac and Fannie Mae to buy them up, securitize them and sell them into the derivatives market. Again, that’s all fine and dandy (until it it all goes to hell), but it has nothing to do with “weaknesses” and “shortcomings” of capitalism, and everything to do with government sticking its big fat honker where it doesn’t belong.
If the free market party doesn’t offer the public an honest appraisal of capitalism’s weaknesses, the public will never trust it to address them.
The “free market party”? Who does he think he’s kidding here? The Republicans haven’t acted like a free market party since … well … it’s been so long I can’t remember.
Moreover, I simply can’t fathom how Brooks thinks a “free market party” would ever be able to reconcile itself to joining hands with Obama on his completely anti-capitalist agenda.
Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.
Earth to Brooks: that’s already happened. Look who the president is for crying out loud, or take the time to read your own newspaper. Each and every day we hear about how the excesses of capitalism caused this crisis, and how the “libertarian” policies of Bush (HA!) have landed us in this awful spot. Capitalism didn’t get a trial, Mr. Brooks, it was rounded up, convicted and summarily shot as soon as the latest grand experiment in government do-goodism failed (again).
Patterico does it by producing a 2006 poll:
The difference, of course, is instead of 51% of Democrats telling a polling company they wanted Bush to fail, an influential conservative came right out and said it about Obama.
The point for the left? You can quite pretending you’re witnessing something never seen before and climb on down from the throne of self-righteousness to your usual seat on the stool of hypocrisy (dissent no longer being the “highest form of patriotism).
Barney Frank has gotten very full of himself. So full, in fact, that his memory isn’t working as well as it probably should:
House Financial Services Chairman Barney Frank (D-Mass.) is pressing state and federal authorities to seek criminal and civil penalties on financial actors that helped cause the current crisis.
“Rules don’t work if people have no fear of them,” Frank said at a press conference Thursday.
He announced a hearing March 20 with Attorney General Eric Holder, bank regulators and the Securities and Exchange Commission as witnesses to discover what their plans are to prosecute irresponsible and in some cases criminal behaviors.
I wonder if he’d include this guy:
A September report from the Business & Media Institute suggests one possible target for investigation: a senior member of the House Banking Committee. This congressman is “a recipient of more than $40,000 in campaign donations from Fannie since 1989” and “was once romantically involved with a Fannie Mae executive.” The same congressman “was and remains a stalwart defender of Fannie Mae.”
In case you’re not up to speed, that “senior member” mentioned is House Financial Services Chairman Barney Frank (D-Mass.).
Another day older and deeper in debt. Of course, that’s because you plan to spend $3.6 Trillion on budget over the next year.
WASHINGTON – President Obama laid out his first budget plan, a bold $3.6 trillion proposal that would transfer wealth from rich taxpayers to the middle class and the poor, and predicts a stunning federal deficit of $1.75 trillion this year – nearly four times last year’s record.
Obama blamed the expected federal deficit explosion on a “deep and destructive” recession and recent efforts to battle it, including the Wall Street bailout and the $787 billion stimulus plan.
Among the budget proposals, the plan would:
extend a $400 tax credit for most workers while letting expire former President George W. Bush’s tax cuts for couples making more than $250,000 a year. The budget contains almost $1 trillion in tax hikes over 10 years on individuals making more than $200,000 and couples earning more than $250,000;
close tax loopholes for the wealthy to raise $318 billion toward a down payment on Obama’s universal health care plan;
clamp down on the Pentagon budget, which would get a 4 percent boost next year, but would then get increases of 2 percent or less over the next several years;
make permanent the expanded $2,500 tax credit for college expenses;
spend more than $6 billion on cancer research at the National Institutes of Health next year, a 15 percent hike;
spend $3.9 billion to improve the nation’s sewage treatment plants and drinking water systems; and
raise $15 billion a year, beginning in 2012, from auctioning off carbon pollution permits to help develop clean-energy and renewable-energy technologies. The administration “will work expeditiously” to get Congress to approve an 83 percent reduction in global warming emissions by mid-century. There’s also more money at NASA for space-based monitoring of greenhouse gases.
After reviewing some of the comments from those intended to be taxed, as well as some of the criticisms of those taxpayers’ intelligence [as an aside, I think the liberals denouncing both the story and the interviewees are playing a little fast and loose with the assumptions, since the taxpayers displayed no misunderstanding of marginal rates, and voiced concerns solely based on principles], I got to thinking about how much money will this proposed tax hike really raise. This seems important, not only because of the size of proposed budget, but also since a common refrain from those in favor of letting the top rate snap back to 39.6% (from the current 35%) is that it will only cost those taxpayers 5 cents on the marginal dollar, which is very little to worry about much less enough to change behavior, or so the argument goes.
Before looking at the actual numbers, let’s get something straight first. While it is accurate to say that raising the top rate only costs these taxpayers a nickel per extra dollar earned, that is not all that is being proposed. These taxpayers will also be losing deductions and credits that they would otherwise have, as well as paying extra taxes on anything subject to cap-and-trade taxes, should that lovely piece of legislation be passed. Moreover, if you truly believe Obama when he says that those with incomes less than $250,000 per year will receive a tax cut, then it seems ludicrous to pretend that at least some, if not virtually all, of those taxpayers near the margin will change their working behavior so as to be in the benefit group rather than the extra-taxed one.
Nevertheless, for purposes of calculating the expected tax revenues generated under this plan, I’m going to assume that nobody changes their behavior in the slightest (i.e. everyone earns as much taxable income as possible), and that the number of taxpayers and the amount of taxes paid largely mirrors the 2006 numbers (which is the most recent data available).
According to IRS figures [xls], about 50% of all taxable income came from the $200,000 and above earners in 2006. By my calculations that came to $2.056 Trillion dollars in taxable income from 3,847,241 taxpayers (about 9% of all returns). This cohort paid approximately $522 Billion in taxes, or about 62.4% of the total $837 Billion in tax receipts. These are the people upon whom the new burden will be placed according to President Obama.
In order to figure out how much taxable income is above $200K (there is no breakout for $250K and above), I took all of the taxpayers in the $200K to infinity range (3,847,241) and multiplied it by 200,000 (= 769,448,200,000).
I then subtracted that number from the (rounded) total of taxable income for the same range (@ $2.056 Trillion), and got $1,286,551,800,000. If I thought about it correctly, then that should be the amount of taxable income above $200K.
I then took my above-$200K number and multiplied it by 5 cents, figuring that the increase in marginal rate of 4.6% would lead to about a nickel per taxable dollar earned in new revenues, if everything were to remain static.
From all of that I figured that approximately $64.3 Billion in new taxes would be raised by the new tax hike … to cover a $3.6 Trillion budget.
I sent my calculations to Dale, who became so engrossed in the matter that he put together an entire spreadsheet figuring the numbers in not one, not two, not three, but in six different ways. I realized later that asking Dale to check out my math was rather like standing on one foot and excitedly calling attention to my “skill” while in the midst of an acrobat convention.
After Dale played with the numbers [xls] for awhile, he arrived generally at the conclusion that the absolute most that could be raised was in the neighborhood of $85 Billion, and at worst around $55 Billion. On average, Dale calculated that approximately $65 Billion was the likely amount of new tax revenue that could be expected if all payers in the 2006 cohort behave exactly as they did then. Sticking with the metaphor, “Yes, Michael, that’s a decent one-legged stand you have there.”
In short, a complete klutz has a better chance of joining the Flying Wallendas than the bottom 95% of taxpayers do of getting a tax cut. Instead, they will all see a significant tax hike, whether in their marginal rates, in excise taxes, corporate taxes, fuel taxes, or other forms of indirect taxation. And as those taxes begin to mount up, and the national debt does it’s best imitation of the Challenger, people will work and produce less and less, and tax revenues will dry up.
That is the plan for our recovery. Read it and weep.