Tuesday, October 28, 2008

Arizona's Jeff Farias

Wednesday, October 22, 2008

Apologies from the GOP

Glenn Greenwald talks about something strange going on with the GOP and notes, in contrast:

In the last eight years, George Bush has apologized a grand total of twice for things he did (for Abu Grahib and when he demanded that a blind reporter remove his sunglasses -- and he only acknowledged personal responsibility in the latter case) and Dick Cheney once (when he joked about inbreeding in West Virginia).

Fiscal Conservative

Friday, October 17, 2008

Can We End the American Entrepreneur Myth Yet?

From Bloomberg:


Almost 95 percent of 21.5 million owners of small businesses who file as sole proprietors had receipts under $100,000 in 2007.

Thursday, October 16, 2008

Joe is not a plumber, and he made up his story

According to the Bureau of Labor Statistics, the mean annual wage for plumbers, pipefitters and steamfitters in the United States in 2007 was $47,350.

Biden says:

“You notice John [McCain] continues to cling to the notion of this guy Joe the plumber,” Biden said on NBC’s Today show. “I don't have any Joe the plumbers in my neighborhood that make $250,000 a year that are worried.”

“The Joe the plumbers in my neighborhood, the Joe the cops in my neighborhood, the Joe the grocery store owners in my neighborhood — they make, like 98 percent of the small businesses, less than $250,000 a year,” said the Democratic VP nominee. “And they’re going to do very well under us, and they’re going to be in real tough shape under John McCain.”


Biden is smart, because it turns out Joe is NOT, in fact, a plumber.

It also turns out Joe is one of those 75% of Americans that doesn't make more than 95% of Americans but thinks that one day he will. Some call it optimism, but mathematicians call it delusional.


COURIC: Well, he supposedly will raise taxes only on people who make over $250,000 a year. Would you be in that category?
WURZELBACHER: Not right now at presently, but, you know, question, so he's going to do that now for people who make $250,000 a year. When's he going to decide that $100,000 is too much, you know?


According to divorce records, Joe made about $40,000 a year as of 2006.

Oh, and it turns out Joe doesn't really worry too much about taxes, becase Joe doesn't pay his taxes. A true liberatarian hero.

Update:
This Joe the Plumber story is just falling all to pieces for McCain. It turns out Joe The Not-Really A Plumber is the possible grandson of Charles Keating, and actually lived on (no joke) Keating Drive, in Mesa, Arizona.

As I Suspected, Joe the Rich Plumber is an Anarchist

Joe, I don't want to live on your island. I can fix my own damn plumbing, thank you.

Should taxpayers help Joe buy a plumbing business that someone else owns?

Let's see, Joseph wants to buy a business that makes in profits $250,000 - $280,000 a year. So, the cost of purchasing must be, let me do that math:

Annual return on investment would have to be in the 5 to 15% range, let's say 10%. So, Joe can afford to shell out:
$2,500,000 - 2,800,000 dollars
He's a effing millionaire.

And he's concerned about paying 3% additional tax on the amount of profit he'll make over $250,000, anywhere between $0 and, OH MY GOD, $900!!!

UPDATE:
He is not a millionaire, but a bit confused about the difference between income and expense, or a deceptive liar:

He acknowledged that he wants to buy a plumbing company for $250,000 to $280,000. That wouldn't be how much profit he would make from the firm.

He would make much less, he said.

Yeah, like only $30,000 !!!

AHHHGGG!! Thanks McCain for bringing up this total diversion. I guess we can count on that from you.

Transcript of Obama's Talk with Joe the Rich Plumber

From Spread the Wealth?


Outside Toledo, Ohio, on Sunday, Sen. Barack Obama, D-Ill., was approached by plumber Joe Wurzelbacher, a big, bald man with a goatee who asked Obama if he believes in the American dream.

"I'm getting ready to buy a company that makes 250 to 280 thousand dollars a year," Wurzelbacher said. "Your new tax plan is going to tax me more, isn't it?"

Obama said, "First off, you would get a 50% tax credit so you'd get a tax cut for your healthcare costs….. if your revenue is above 250 – then from 250 down, your taxes are going to stay the same. It is true that from 250 up – from 250 – 300 or so, so for that additional amount, you’d go from 36 to 39%, which is what it was under Bill Clinton. And the reason why we’re doing that is because 95% of small businesses make less than 250. So what I want to do is give them a tax cut. I want to give all these folks who are bus drivers, teachers, auto workers who make less, I want to give them a tax cut. And so what we’re doing is, we are saying that folks who make more than 250 that that marginal amount above 250 – they’re gonna be taxed at a 39 instead of a 36% rate.”

Responded Wurzelbacher, "the reason I ask you about the American dream, I mean I've worked hard. I'm a plumber. I work 10-12 hours a day and I'm buying this company and I'm going to continue working that way. I'm getting taxed more and more while fulfilling the American dream."

"Well," said Obama, "here's a way of thinking about it. How long have been a plumber?"

Wurzelbacher said 15 years.

Obama says, “Over the last 15 years, when you weren’t making 250, you would have been given a tax cut from me, so you’d actually have more money, which means you would have saved more, which means you would have gotten to the point where you could build your small business quicker than under the current tax code. So there are two ways of looking at it – I mean one way of looking at it is, now that you’ve become more successful through hard work – you don’t want to be taxed as much.”

“Exactly," Wurzelbacher said.

Obama continued, “But another way of looking at it is 95% of folks who are making less than 250, they may be working hard too, but they’re being taxed at a higher rate than they would be under mine. So what I’m doing is, put yourself back 10 years ago when you were only making whatever, 60 or 70. Under my tax plan you would be keeping more of your paycheck, you’d be paying lower taxes, which means you would have saved…Now look, nobody likes high taxes."

"No," said Wurzelbacher.

"Of course not," said Obama. "But what’s happened is that we end up – we’ve cut taxes a lot for folks like me who make a lot more than 250. We haven’t given a break to folks who make less, and as a consequence, the average wage and income for ordinary folks, the vast majority of Americans, has actually gone down over the last eight years. So all I want to do is – I’ve got a tax cut. The only thing that changes, is I’m gonna cut taxes a little bit more for the folks who are most in need and for the 5% of the folks who are doing very well - even though they’ve been working hard and I appreciate that – I just want to make sure they’re paying a little bit more in order to pay for those other tax cuts. Now, I respect the disagreement. I just want you to be clear – it’s not that I want to punish your success – I just want to make sure that everybody who is behind you – that they’ve got a chance at success too.”

Wurzelbacher said it seemed as though Obama might support a flat tax.

Obama says, “you know, I would be open to it except here’s the problem with a flat tax is that if you actually put a flat tax together, in order for it to work and replace all the revenue that we’ve got, you’d probably end up having to make it like about a 40% sales tax. I mean that’s the value added, making it up. Now some people say 23 or 25, but in truth when you add up all the revenue that would need to be raised, you’d have to slap on a whole bunch of sales taxes on. And I do believe for folks like me who have worked hard, but frankly also been lucky, I don’t mind paying just a little bit more than the waitress that I just met over there who’s things are slow and she can barely make the rent."

Obama said, "My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. If you’ve got a plumbing business, you’re gonna be better off if you’re gonna be better off if you’ve got a whole bunch of customers who can afford to hire you, and right now everybody’s so pinched that business is bad for everybody and I think when you spread the wealth around, it’s good for everybody."

That's the key moment McCain is jumping out…"when you spread the wealth around it's good for everybody."

"But listen," Obama said, shaking Wurzelbacher's hand, "I respect what you do and I respect your question, and even if I don’t get your vote, I’m still gonna be working hard on your behalf, because small businesses are what creates jobs in this country and I want to encourage it.”

"Guys I gotta get out of here and go prepare for the debate," Obama said, "but that was pretty good practice right there."

Wednesday, October 15, 2008

You Just Might Be Surprised: WSJ Defends Bill Ayers

Lots of attention today about how McCain will be bringing up the Ayers connection tonight in the debate. Well, Thomas Frank was given space on the Wall Street Journal opinion page to say "Republican campaign masterminds have sought to plunge [Obama] back into " a time and place he that predates him "in the most desperate and grotesque manner yet."

It's refreshing to hear some pride taken in Bill Ayers.


Bill's got lots of friends, and that's because he is today a dedicated servant of those less fortunate than himself; because he is unfailingly generous to people who ask for his help; and because he is kind and affable and even humble. Moral qualities which, by the way, were celebrated boisterously on day one of the GOP convention in September.

Mr. Ayers is a professor of education at the University of Illinois at Chicago (UIC), where his work is esteemed by colleagues of different political viewpoints. Herbert Walberg, an advocate of school vouchers who is a visiting fellow at the Hoover Institution, told me he remembers Mr. Ayers as "a responsible colleague, in the professional sense of the word." Bill Schubert, who served as the chairman of UIC's Department of Curriculum and Instruction for many years, thinks so highly of Mr. Ayers that, in response to the current allegations, he compiled a lengthy résumé of the man's books, journal articles, guest lectures and keynote speeches. Mr. Ayers has been involved with countless foundation efforts and has received various awards. He volunteers for everything. He may once have been wanted by the FBI, but in the intervening years the man has become such a good citizen he ought to be an honorary Eagle Scout.



And finally:

There are a lot of things to call this tactic, but "country first" isn't one of them. The nation wants its hope and confidence restored, and Republican leaders have chosen instead to wave the bloody shirt. This is their vilest hour.

Bernstein: Again With the Trickle Down!?!

Over at Huffington Post:


If your only tool is a hammer, everything looks like a nail. That's what came to mind this AM when I read that John McCain's plan to address the ailing economy includes a big cut in the capital gains tax rate, from 15% to 7.5% for the next two years.

How wrongheaded is this? Let me count the ways.

First, the McCain folks may have missed this, but asset values have been falling, big time. Remember, John?... That whole financial mess that folks have been talking about? When capital assets, like stocks or bonds, lose value, that's a capital loss, and it's already deductible from your taxes.

Further on:

If you want to provide income and job opportunities to people who are hurting, your best bet is to do so directly, through tax cuts targeted at them, and through infrastructure investment designed to create new, quality jobs. That's what Obama aims for in his recently announced package.

Finally, and this is important, does anyone really believe that this allegedly temporary cut will really sunset in two years? Like Dr. Phil says, "this ain't my first rodeo!" That's the tripwire in the Bush cuts. They end in 2011, but anyone who wants to let them do so is accused of supporting the "largest tax increase in history."


And finally

So we are yet again left with John McCain getting it wrong on economic policy. There is absolutely a need to help struggling families right now, but if this is the best he can come up with, we'd all be much better off if he put the hammer back in the tool shed and left the policy construction to others.

read the entire article

Tuesday, October 14, 2008

Who Among You Will Not Vote? The Weight of a Snowflake

The Weight of a Snowflake by Noni Mausa at AngryBear:


Vote.

I was taught, by example, how to vote. My parents got up in the
morning and dressed as though for church. The day was somehow quieter
than other days, even in a household with five kids.

We drove to the polling site and while one parent went in to vote, the
other would ride herd on us in the car, but it never took much effort
to keep us quiet. It was voting day.

Formal, sober, quietly determined, everyone in my hometown migrated to
the polls, and we kids were taught that the actual voting was both a
purely personal choice, and a secret. The secret might be shared, but
it was uncouth to ask "How did you vote?"

It was never said outright, I think, but we were shown that the vote
was sacred: "set apart for a special purpose". My parents treasured
their vote, it was at once a right, and a privilege, and an
obligation.

To add one voice to the larger voice of the nation, and together say
in some mystical way what path the nation will take, is in its own way
a religious action, full of faith and determination and patience in
the face of a flurry of mere arithmetic.

To choose not to vote is an act of negligence or even despair – both
of them equally undermine our shared nation.

I vote for meat on my neighbour's plate, not mine. For the health of
my neighbour's children, the peace of our streets, the knowledge in
our libraries and the significance and beauty of our images and songs.
I vote for the strength of the whole, not the benefit of one walled
garden at the cost of a wilderness outside.

Arithmetic is the enemy of the vote. The vote is more than a grain of
sand on a scale, it is an action in which citizens make themselves
manifest as a part of the whole. To neglect it is to become a
political ghost, moving voiceless through the world.

An old woman who told stories, who was prisoner of the Nazis, who left
her Dutch home for a new home and language and land, told this story:

"Tell me the weight of a snowflake," a mouse asked a wild dove.

"Nothing more than nothing," the dove answered.

"In that case I must tell you a marvelous story," the mouse said.
"I sat on the branch of a fir, close to its trunk, when it began to
snow. Not heavily, not a raging blizzard, no -- just like in a dream
without any violence the snow silently fell.

Since I had time, I counted the snowflakes setting on the twigs
and needles of my branch. Their number was exactly 3,741,952 when the
next snowflake dropped onto the branch - "nothing more than nothing"
as you say - the branch broke off."

Having said that the mouse went away.

Vote.

John Cleese on Sarah Palin

Monday, October 13, 2008

The Last of the Couric Interviews

I love Katie Couric's response to the claim it was Gotchya Journalism!

Paul Krugman Wins Nobel Prize!

Today's news, that Paul Krugman won the Nobel Prize in Economics is going to send shockwaves through the Economics profession.

I have been following Paul Krugman for 15 years now, and this is just amazing news. I have great admiration and respect for him.

Friday, October 10, 2008

Has Anyone Seen My Dog? - McCain

I. CANT. STOP. LAUGHING.

I Know How to Win Wars

Please help me out. When Grampy McNuggets keeps saying "I know how to win wars", what the @#$!&@ is he talking about? Have I missed a war? Was he involved in the planning of Desert Storm and we just didn't know?

Republican Rage: McCain = Paul von Hindenburg

From CNN:


...
One member of the Palin audience in Jacksonville, Florida, Tuesday shouted out "treason." And at another rally in the state Monday, Palin's mention of the Obama-Ayers tie caused one member to yell out: "kill him" -- though it was unclear if it was targeted at Obama or Ayers.

At several recent rallies, Palin has stirred up crowds by mentioning the "liberal media." Routinely, there are boos at every mention of The New York Times and the "mainstream media," both of which are staples of Palin's stump speech.

Some audience members are openly hostile to members of the traveling press covering Palin; one crowd member hurled a racial epithet at an African-American member of the press in Clearwater, Florida, on Monday.

And at a McCain rally in New Mexico on Monday, one supporter yelled out "terrorist" when McCain asked, "Who is the real Barack Obama?" McCain didn't respond.

So far, neither Palin nor McCain have explicitly called on their supporters to tamper down the attacks.


...

Also, the McCains said months ago they didn't wanted their son Jimmy -- a Marine serving in Iraq -- dragged into the campaign.

But on Thursday, Cindy McCain brought up her son.

She criticized the Illinois senator for voting against a bill to fund troops in Iraq, a regular line of attack from her husband's campaign.

"The day that Sen. Obama cast a vote not to fund my son when he was serving sent a cold chill through my body, let me tell you," she told a Pennsylvania crowd before introducing her husband and his No. 2.


The vote Cindy McCain is referencing came in May 2007, when Obama was one of 14 senators who voted against a war-spending plan that would have provided emergency funds for American troops overseas.

A CNN fact check deemed the charge that Obama voted against troop funding "misleading."


Update:

McCain Faces Backlash Over Rabid Crowds frighteningly demonstrates that McCain is unable to contain the crowds that Palin has unleashed. Let me be the first to compare Palin to Hitler in 1932. McCain = Paul von Hindenburg.

Update 2:
I'm not the only one who sees this:

Is John McCain our Paul von Hindenburg?

McCain is a weak figure, the Hindenberg to Palin's Hitler.

Update 3:
WSJ comment:

People are conflicted about what they want. They want activist liberal government but they also want muscular American foreign policy and a dynamic capitalist system. So, logically, the only way to go forward is National Socialism.

Vote McCain/Palin, our version of Hindenburg/Hitler ticket, an aging war hero and a revolutionary who “speaks” to women and the great middle….

You know the next step of the pirouette… the war hero dies and there is a new terror attack resulting in a new Enabling Act….

Some things never change.

Comment by Only way to go forward now! - September 12, 2008 at 1:07 pm


This YouTube video has been out since Palin was announced as McCain's running mate, but it kind of fits in here:

Officially Worse Than 1929

In October of 1929 the Dow fell from about 350 to 200. By the end of today you'll probably be able to say it fell from 14,000 to 7,000.

Dow at 7,882

Wall Street Crash of 1929

TAX and spend on infrastructure, or CUT TAXES and spend on military: Responsible versus Irresponsible Budget Management

The National Debt now exceeds 10 Trillion Dollars.

You might be surprised to see the following, so please click to enlarge:

US NATIONAL DEBT BY PRESIDENT

Thursday, October 9, 2008

Tom Brokaw Stinks

The future of Social Security is not agreed upon by economists. NYT Columnist and Princeton Economist Paul Krugman thinks its fine, and all the whoopla in the 90's scaring college students into thinking it won't be there for them was a Republican scare tactic to usher in an era of privatizing it. So it was pretty bizarre to see Brokaw state in his question that Social Security is in jeopardy.

Not much has been made about this, at least from the Democratic side and with good reason at this point ("I've never seen anyone who thought they won the baseball game walk off the field complaining about the last call by the umpire," Howard Kurtz quotes an Obama spokesman). But I do want to express my own annoyance with Brokaw. To do so, I'll share these quotes from the Wash Post blog, with which I agree:



National Review's Byron York reports the anti-Brokaw sentiment from the GOP side:

" 'This was the worst-moderated debate in the history of presidential debates,' one McCain campaign insider told me just moments after John McCain and Barack Obama left the stage at Belmont University in Nashville. 'The audience and the American people should feel robbed -- that the one opportunity they had to ask questions of the presidential candidates was taken from them by Tom Brokaw.' . . .

"For much of the night Brokaw seemed to ask a question of his own for every question that came from the audience or from the Internet. If McCain's advisers were hoping for a genuine New Hampshire voter-interaction town hall experience, they didn't get it. Of course, neither did Obama, but after the debate Camp Obama didn't seem nearly as unhappy. They didn't see the debate as a true town hall -- the kind of event Obama has declined to participate in with McCain -- but they weren't particularly bothered."

At Power Line, Paul Mirengoff also tut-tuts Tom:

"Brokaw was a dreadful moderator. Instead of inviting the candidates to debate the answers their opponent gave in response to the audience questions, Brokaw interposed his own (often lame) questions. This was an impediment to real debate as well as an unwarranted intrusion by Brokaw into the 'townhall.'

"Naturally, the candidates at times brushed aside Brokaw's question and did what they were there to do -- debate each other in response to audience questions. This was one reason why the candidates kept exceeding the time limit. Brokaw should have (1) realized what was going on and stopped asking his own questions and/or (2) enforced the time limit. He did neither."

Wednesday, October 8, 2008

Note to McCain: Overhead projector != Planetarium projector

During last night's presidential debate, McCain took Obama to task for approving funding for an "overhead projector." Howard Covitz, who used to work at Chicago's Adler Planetarium, prepared this helpful graphic for McCain to show the difference between a simple overhead projector and a Zeis Mark IX planetarium projector.

read more | digg story

McCain Hates Science Education And Is an Idiot: OVERHEAD PROJECTOR? NOT!

Based on what McCain said in last night's debate, he thinks this is an OVERHEAD PROJECTOR (like the kind your teacher had in your classroom):


Planetarium Projector



What an asshole.

UPDATE:
Adler Responds

From my former boss there from 15 years ago:

Adler president to McCain: Sky machine not an overhead projector

October 8, 2008

BY ANDREW HERRMANN Staff reporter/aherrmann@suntimes.com
The president of the Adler Planetarium lifted a black cloth off a familiar schoolroom device Wednesday and declared, "That’s an overhead projector.’’

Behind Paul H. Knappenberger Jr. was an automobile-sized machine. That, he said, is a "planetarium projection system.’’

The overhead, "you can probably get for $10 or so on eBay,’’ said Knappenberger.

But to replace the Adler’s sky machine, which creates stars on a domed ceiling, would cost $3 million to $5 million.

Knappenberger felt obligated to distinguish the two after Sen. John McCain, during Tuesday night’s presidential candidate debate, criticized Obama for trying to win federal support for a new star device, calling it a "$3 million overhead projector" and dismissing it as a "pork barrel earmark.’’

Knappenberger said the mention put the Adler "in front of the American public as having been frivolous or foolish in asking for $3 million for an overhead projector.’’

"I just wanted to clarify that is not the case," he said.

Obama’s efforts to secure the $3 million have been unsuccessful. But Knappenberger said the Adler would try again.

The current star system — a Mark VI Zeiss Projector — was installed in 1967. The manufacturer no longer makes replacement parts, and the inside is disintegrating, so errant, escaping light projects onto the dome.

"New stars are appearing in our sky almost daily, [and] not where they belong,’’ said Knappenberger.

Some 80,000 school children, mostly from the Chicago area but also from all 50 states, visited the Adler in 2007, officials said.

"The national surveys have shown that U.S. students are falling further behind each year in math and science compared to other countries around the world,’’ said Knappenberger. "It’s not comforting to hear somebody who’s running for the presidency not support efforts to improve math and science."

McCain supporters charge that the planetarium earmark was a way for Obama to reward ComEd executive Frank Clark, who serves as the Adler board chairman and is also a major fund-raiser for Obama.

Knappenberger said the planetarium started asking local congressmen for federal help in 2005, before Obama declared his candidacy for president.



UPDATE 2:
And from the Wall Street Journal:


Paul Knappenberger was watching the presidential debate Tuesday night when the planetarium he runs was suddenly turned into a political football. “My phone started ringing,” he says. “My computer went berserk.”




Paul Knappenberger with an ordinary projector and a star projector at Chicago’s

Alder Planetarium. (WSJ Photo/Joe Barrett)

The transformation of the Adler Planetarium, a 78-year-old cultural landmark on the shore of Lake Michigan, occurred when GOP presidential hopeful John McCain was making a dig at Democratic rival Barack Obama’s spending habits. “While we were working to eliminate pork-barrel earmark projects, he voted for nearly $1 billion in pork-barrel earmarks, including $3 million for an overhead projector at a planetarium in Chicago, Ill.,” the Arizona senator said. “My friends, do we need to spend that kind of money?”

Wednesday morning, Knappenberger called a news conference under the domed roof of the facility’s Sky Theater to argue that that kind of money is indeed worth spending. The planetarium has offered millions of students a chance to see something they normally can’t in Chicago—a dark, night sky—“an inspiring opportunity to get students interested in science, interested in math, he said.

He said McCain’s comment “doesn’t sit well” with someone who has dedicated his career to that pursuit.

He also pulled out an old overhead projector—the kind found in classrooms—to clarify the difference between it and the Mark VI Zeiss Projector that has been recreating a view of the stars and planets since it was installed in 1967. It is only the second projector for the planetarium, which was the first of its kind in the Western Hemisphere when it was founded in 1930.

Today, the instrument—which consists of two large blue balls that shine pinpoints of light on the ceiling–is in dire need of replacement. Parts are wearing out and replacements are no longer available. “New stars are appearing almost daily,” he joked.

Knappenberger said the cost of replacing the projector will run between $3 million and $5 million as part of a $10 million project to renovate the entire theater. Last year, the planetarium requested help from Illinois Sens. Obama and Dick Durbin and the area’s six congressman, all of whom backed the federal earmark request. At some point in the budget process, though, the funding was turned down.

The planetarium has received pledges of between $3 million and $4 million from private sources and will try again for federal help—as well as state and city funding—during the next budget cycle, Knappenberger said.

McCain pounced on the projector project again Wednesday, telling an audience in Bethlehem, Pa. that he had mentioned the projector at the debate and added: “Coincidentally, the chairman of that planetarium pledged to raise more than $200,000 for Sen. Obama’s campaign. We don’t know if they ever discussed the money for the planetarium, and no one has asked Sen. Obama. But even the appearance of this kind of insider-dealing disgusts Americans. I’m going to put a stop to that, my friends, if I’m president.”



Update 3:

University of Chicago Professor says:

The way Sen. McCain has phrased it suggests that Sen. Obama approved spending $3 million on an old-fashioned piece of office equipment (overhead projector).
...
I find it appalling that Sen. McCain would call a science education tool for public (largely children) for a historic planetarium with millions of visitors a year a wasteful earmark. The planetarium's focus, as stated on their website (http://adlerplanetarium.org) is "on inspiring young people, particularly women and minorities, to pursue careers in science." Is an investment in such public facility at the time when US competitiveness in math and sciences is a constant source of alarm a waste?

Tuesday, October 7, 2008

McCain's Health Care Plan

Good column by Paul Krugman on McCain's Health Care Plan.


Basically, McCain wants to remove the tax benefit companies get for providing health insurance to their employees, and instead have people buy it for themselves with a tax credit. On the surface this sounds enticing and modern because it removes the need to stay at a company just because of health insurance benefits, which is indeed a problem facing employees in today's loyalty-free workplace.

The removal of the tax incentive for employers will surely result in employers dropping health insurance coverage as a benefit for their employees. I remember being puzzled in college as to why employers are so depended on for health coverage. Well, I was in college during the great DOWNSIZING of corporations, so you can see why it seemed so illogical for both employees and employers...employers were the last persons you wanted to be reliant on, and what's in it for the employer? Well, once upon a time, employers strove to attract employees, who were seen as a LONG TERM INVESTMENT, and offering health insurance was a sweet benefit. But at some point it became the norm, and thereafter, the culture changed so employees became disposable and interchangeable.

(By the way, universal health coverage takes care of this problem)

But the major flaw, if not deception, in McCain's "let the free market work" plan is that insurance is not, as economists would call it, a normal good. Insurance is peculiar in that the more folks that are in a SINGLE PLAN, the more risk is diversified, and the more affordable it is overall. This, by the way, is why UNIVERSAL COVERAGE makes so much sense, because you are broadening the pool way larger than any private insurer could...to include the entire COUNTRY.

This is also why small companies cannot afford group health insurance, compared to large corporations. Large corporations have lots of employees in their plan, so it is less riskier for insurance companies...the risk is diversified.

If small businesses are paying through the roof for group health insurance, what do you think will happen when the plans are now made up of INDIVIDUALS?

So, what will happen in McCain's plan is that private insurance companies will offer really inexpensive plans to those who are young, male and healthy. And VERY EXPENSIVE plans (or more likely, plans that disguise the fact that they don't cover much at all) for everyone else.

Sunday, October 5, 2008

On the Efficiency of Finance

From Michael Perelman:


Capitalism is the most efficient system known to mankind. Central to this efficiency is the ability of markets to channel capital where it is most effective. The current financial crisis might be expected to throw some doubts on this dogma, but I do not expect that to be the case.

For example, in 2001, in the wake of dot.com bubble, 2, the New York Times reported on one of the many excesses of the period:

"In the last two years, 100 million miles of optical fiber -- more than enough to reach the sun -- were laid around the world as companies spent $35 billion to build Internet-inspired communications networks. But after a string of corporate bankruptcies, fears are spreading that it will be many years before these grandiose systems are ever fully used."

The response was not to rethink the system, but to double down lowering interest rates to reignite the stock market. Investors, the government, and even ordinary people applauded the decision Federal Reserve Chairman Greenspan, who appeared to be the wisest man in the universe at the time.

Greenspan's manipulation of the interest rate appeared to be so beneficial, because it occurred without any direct effect on the proverbial taxpayer. Peripherally, why is it that this taxpayer ranks so much higher in our concern relative to the workers who make everything possible?

In retrospect, Greenspan's policy provided the fuel that helped to make the crisis possible, if for no other reason that falling interest rates reduce the payment on mortgages. So, for the same payments, people can afford to buy more expensive housing. Once housing prices begin to rise, housing becomes an investment as well as the source of shelter. In addition, people who suffered losses during the dot.com bust, saw housing is a safer investment than the stock market.

Just as the solution to the dot.com crisis produce the current crisis, the present bailout, if it works at all, will create the preconditions for the next one. The purpose of the bailout is to create confidence. Back in the 19th-century, the governor of Illinois gave an excellent analysis of the way confidence worked in financial markets. He said that confidence "could only exist when the bulk of the people were under a delusion. According to their views, if the banks owed five times as much as they were able to pay and yet if the whole people could be persuaded to believe this incredible falsehood that all were able to pay, this was 'confidence'."

His words may perhaps be the most succinct analysis of fictitious capital that I have read.

Derivatives

I learned about Derivatives way, way back in 1989 when I worked at the Chicago Board of Trade. Although at first I was a bit overwhelmed at their very existence and seemingly unfathomable potential for complexity, I took it that they were well understood by the mainstream business class. So, it still seems bizarre to me these days when financial reporters seem to have to instruct the audience about them. Anway, I like how Warren Buffet put it:

"The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen)."


Back in 1989, these class of investments seemed to just simply be called Derivatives (ocassionally Shorts, Forwards, etc), but perhaps nowadays the jargon has expanded. They served a useful purpose for commodities markets, protecting the farmer (I posess no objective lens on this, I was exposed to the CBOT just out of High School) from the vagaries of weather. I'm supposing now that the real problem that eventually sprung up was the application of these hedge strategies to inappropriate lengths... insuring against nature is one thing, but insuring against man-made calamities is another.

Anyway, be sure you understand Derivatives.

Your Wikipedia Reading for Today

List of Notable Business Failures

Wow, 2008 has so many they had to be included in their own separate section.

Thursday, October 2, 2008

On the Bailout, or Your Wikipedia Assignment

I still have conflicting opinions on the bailout (not, however, on the Paulson bailout plan, which is clearly reckless). I think it behooves anyone hoping to formulate an opinion to brush up on the following:

Federal Reserve

Federal Reserve Act (I think the resulting compromise legislation effectively debunks conspiracy theories propounded by Libertarians)

Shadow Banking System

Extra credit:
Commercial Paper

Money Fund

In any case, I think opinions necessarily have to fall into the Practical and the Ideal, so keep that in mind when you hear people talk about the bailout.