“What is so great about our bloated federal government that when a libertarian threatens to become a senator, otherwise rational and mostly liberal pundits start frothing at the mouth?” the old New Left columnist Robert Scheer wrote at Truthdig. “What Rand Paul thinks about the Civil Rights Act, passed 46 years ago, hardly seems the most pressing issue of social justice before us. It’s a done deal that he clearly accepts. Yet Paul’s questioning the wisdom of a banking bailout that rewards those who shamelessly exploited the poor and vulnerable, many of them racial minorities, is right on target. So too questioning the enormous cost of wars that as he dared point out are conducted in violation of our Constitution and that, I would add, though he doesn’t, prevent us from adequately funding needed social programs.”
The dead-enders of the Beltway left, however, continued to treat Paul like a mental patient. “By nominating a lunatic,” Center for American Politics blogger Matthew Yglesias wrote after Paul’s primary victory, “Republicans have suddenly taken what should be a hopeless Senate race and turned it into something Democrats can win. At the same time, by nominating a lunatic, Republicans have suddenly raised the odds that a lunatic will represent Kentucky in the United States Senate.” Nor was this sentiment confined to the left. “Rand Paul’s victory in the Kentucky Republican primary is obviously a depressing event for those who support strong national defense and rational conservative politics,” former George W. Bush speechwriter David Frum wrote at the time. “How is it that the GOP has lost its antibodies against a candidate like Rand Paul?”
Paul parries these attacks with a bemused but direct engagement; you can see he thinks he’s going to win a long-overdue David vs. Goliath argument. A good portion of his book is spent examining and decrying how the Republican Party became “tainted by neoconservative ideology,” mistaking “national greatness” for a willingness to intervene willy-nilly into the affairs of foreign countries, while tolerating big spending projects at home. “The Tea Party,” Paul claims, “is now a threat to the old Republican guard precisely because its stated principles prevent it from being brought into the neoconservative fold.”
Category: Politics
Wikileaks Founder: Facebook is the most appalling spy machine that has ever been invented
Despite awaiting extradition to Sweden on sexual assault charges, Wikileaks founder Julian Assange is still the subject of much media interest.
Russia Today (RT) interviewed Assange, getting his viewpoint on political unrest in Egypt and Libya, particularly probing what the Wikileaks founder makes of social media’s roles in the recent revolutions in both countries. In his interview, Assange focuses particularly on Facebook calling it the “most appalling spy machine that has ever been invented”.
Oil: We’re Being Had Again
No matter how many of his Fed presidents claim they are not to blame for the high price of oil, the real problem starts with Ben Bernanke. The fact is that when you flood the market with far too much liquidity and at virtually no interest, funny things happen in commodities and equities. It was true in the 1920s, it was true in the last decade, and it’s still true today.
Richard Fisher, president of the Dallas Federal Reserve, spoke in Germany in late March. Reuters quoted him as saying, “We are seeing speculative activity that may be exacerbating price rises in commodities such as oil.” He added that he was seeing the signs of the same speculative trading that fueled the first financial meltdown reappearing.
Here Fisher is in good company. Kansas City Fed President Thomas Hoening, who has been a vocal critic of the current Fed policy of zero interest and high liquidity, has suggested that markets don’t function correctly under those circumstances. And David Stockman, Ronald Reagan’s Budget Director, recently wrote a scathing article for MarketWatch, titled “Federal Reserve’s Path of Destruction,” in which he criticizes current Fed policy even more pointedly. Stockman wrote, “This destruction is, namely, the exploitation of middle class savers; the current severe food and energy squeeze on lower income households … and the next round of bursting bubbles building up among the risk asset classes.”
The 30-Cent Tax Premium: Tax compliance employs more workers than Wal-Mart, UPS, McDonald’s, IBM and Citigroup combined.
There is a lot more to taxes than simply paying the bill. Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.
To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.
In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes. And this is not even a complete accounting of the costs of tax complexity.
Like taxes themselves, tax-compliance costs change people’s behavior. Taxpayers, whether individuals or businesses, respond to taxes and tax-compliance costs by changing the composition of their income, the location of their income, the timing of their income, and the volume of their income. So long as the cost of changing one’s income is lower than the taxes saved, the taxpayer will engage in these types of tax-avoidance activities.
The Real Housewives of Wall Street: Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?
America has two national budgets, one official, one unofficial. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we’re broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year’s retirees from the IRS, the SEC and the Department of Energy.
Why Isn’t Wall Street in Jail?
Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.
Now, following an act of Congress that has forced the Fed to open its books from the bailout era, this unofficial budget is for the first time becoming at least partially a matter of public record. Staffers in the Senate and the House, whose queries about Fed spending have been rebuffed for nearly a century, are now poring over 21,000 transactions and discovering a host of outrages and lunacies in the “other” budget. It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. “Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.”
On The US Budget Deficit & Debt
Obama adds fuel to confusion but no resolution, Mohamed El-Erian:
A friend and former colleague of mine, Paul McCulley, once made the distinction between those who were “responsibly irresponsible” and those who were “irresponsibly irresponsible”. The two notions explain why more unsatisfactory last-minute policy compromises are now likely, despite President Barack Obama’s impressive speech on how America must move forward to tackle its debt ceiling, and its wider problem of budgetary reform.
Mr Obama proposed cutting $4,000bn from deficits over the next 12 years, reducing government outlays to Medicare and Medicaid healthcare programmes, and even considered tax increases. His speech therefore provides an important opportunity to advance this debate, but a much broader context is still needed if it is to succeed in overcoming both domestic political stalemates and growing concerns abroad.
Back in the final quarter of 2008 and the beginning of 2009, it was right for the US to behave responsibly irresponsible. At that moment every available part of the public sector balance sheet, from the Federal Reserve’s to the Federal budget, had to be used to avoid an economic depression. And it worked.
The radical right and the US state by Martin Wolf:
What does the rise of libertarianism portend for the future of the US? This is not a question of interest to Americans alone. It matters almost as much to the rest of the world. A part of the answer came with the publication of a fiscal plan, entitled “Path to Prosperity”, by Paul Ryan, Republican chairman of the house budget committee. The conclusion I draw is the opposite of its author’s: a higher tax burden is coming. But that leads to another conclusion: much conflict lies ahead, with huge implications for politics, federal finance and the US ability to play its historic role.
An analysis of the Ryan plan by the Congressional Budget Office makes the point. Its “extended-baseline scenario” assumes that current law remains unchanged. Under that assumption, revenue would rise from 15 per cent of gross domestic product to 21 per cent in 2022 and on to 26 per cent in 2050. Spending would rise substantially, too, from 23¾ per cent of GDP in 2010 to 30¼ per cent in 2050. As a result, the deficit would fall from today’s levels while debt held by the public would rise to 90 per cent of GDP in 2050.
As the CBO makes plain, this is an optimistic scenario. Current law includes, most notably, the assumption that the 2001 and 2003 tax cuts will expire, as legislated. Together with the impact of fiscal drag from economic growth and inflation, this generates the rising share of revenue in GDP. On the side of spending, the share of social security in GDP rises modestly, from 4¾ per cent of GDP in 2010 to 6 per cent in 2050. The share of all other spending (including defence), apart from that on health, is assumed to fall to close to its long-run average of 8 per cent of GDP. But health spending explodes, from 5½ per cent of GDP in 2010 to 12¼ in 2050.
White House visitor logs leave out many
A foot of snow couldn’t keep Bob Dylan, Joan Baez, Jennifer Hudson and other celebrities away from a star-studded celebration of civil-rights-era music, hosted by President Barack Obama and first lady Michelle Obama at the White House in February 2010.
Dylan’s haunting rendition of “The Times They Are a-Changin'” was a highlight of the dazzling evening. The digitally friendly White House even posted the video of his performance on its website.
But you won’t find Dylan (or Robert Zimmerman, his birth name) listed in the White House visitor logs — the official record of who comes to call at 1600 Pennsylvania Ave., which is maintained by the Secret Service.
Ditto Joan Baez.
You Call This Global Leadership?
The US government is about to be shut down in the next 24 hours over the federal budget impasse. Here are the only numbers you need:
Federal spending is approx. $3.7 trillion, the deficit this year alone is projected at $1.4 trillion – and the politicians are squabbling over spending cuts amounting to $33-40 billion; that’s 1% of spending and 2.9% of the deficit. You gotta be joking, right?
Related:
Reforming the Banks
just got back from a very interesting but hectic week in New York and Washington, followed by two days at a conference in Hangzhou. During my meetings I noticed that much of the discussion, and many of the questions I was asked by both government officials and investors, focused on debt levels and reforms in the Chinese financial system. I have written a lot about rising debt in China and am glad that analysts and policymakers seem to be spending a lot more time thinking about balance sheet issues. Every case of rapid, investment-driven growth in the past century, as far as I can make out, has at some point reached a stage in which debt levels rose to unsustainable levels and precipitated either a debt crisis or a long grinding adjustment period.
The reason debt levels always seem to grow unsustainably, I suspect, is that in the initial stages of the growth model much if not all of the investment is economically viable as it pours into building necessary infrastructure whose profits and externalities exceed the cost of the investment. The result is real growth. At some point, however, the combination of subsidies, distorted incentives (in which investment benefits accrue to those making the investment while costs are shared broadly through the banking system), and very cheap financing costs leads inexorably to wasted investment and debt rising faster than asset values. This is when the debt burden begins to rise in an unsustainable way.
Consumers have a beef with Fed over inflation
Food riots, deposed Middle Eastern despots and now this? Last week, a Texas man brandishing an assault rifle was involved in a three-hour shoot-out with police and had to be subdued with tear gas after ordering seven Beefy Crunch Burritos at a Taco Bell drive-through and being informed that their price had risen from 99 cents to $1.49.
Late night comedians and serious pundits alike had a field day with the story, opining on issues like fast-food culture, obesity (the seven burritos contain 3,600 calories, double the recommended daily intake) and gun control.
With his petty gripe, the gunman, Ricardo Jones, is no Muhammad al Bouazizi, the self-immolating Tunisian fruit seller who inspired millions across the region to throw off the yoke of tyranny, but 50 per cent is 50 per cent in San’a or San Antonio. Food inflation is a global phenomenon.