Thursday, April 30, 2009

The Road to Serfdom

If you have never read F.A. Hayek's The Road to Serfdom, or even if you have, watch this



The site

Tuesday, April 28, 2009

GM won't go into bankruptcy

From one of my favorite publications The Economist this afternoon Two passages of interest:

IN DECEMBER, when GM secured a large slice of government bail-out funds to keep it alive, the giant car company was jokingly dubbed Government Motors. The company’s latest—and most sweeping—restructuring plan, announced on Monday April 27th, could make the joke a grim reality. GM had until the end of May to present proposals to persuade America’s government to release billions more of taxpayers' dollars to keep it from the bankruptcy court. GM believes it has done the job already with a plan that gives the government a 50% stake in the firm. Now the important deadline is May 26th, by when the company’s creditors are supposed to agree to a deal which treats them far less generously.

This my friends is why Rick Wagoner had to go. No CEO worth his golden parachute would have devised a plan such as this; this makes GM a ward of the state and essentially launders taxpayer dollars to be paid out to the UAW through dividends and the continuing support of taxpayer dollars.

Despite protestations from the White House that the government had no desire to own or run a big car company, the politicians may have little choice but to get involved, if the deal goes through in its present form. The alternative might be to cede control to the UAW, the second-biggest shareholder, which is hardly blameless for GM’s current parlous state. Rumours also abound that a similar deal to avoid bankruptcy at Chrysler would see the UAW take a 55% stake in America’s third-largest homegrown car company. If so, it is unclear whether further concession from unions, if they are needed at the two carmakers, would be easier or harder to extract.

Standing in the way of restructuring outside of the bankruptcy courts are GM’s aggrieved bondholders. GM wants holders of just over $27 billion in unsecured debt to swap it for a mere 10% of shares in the company. If debts cannot be cut by 90% then GM will file for Chapter 11 bankruptcy protection. Bondholders smell an unsavoury deal cooked up between the UAW and Barack Obama, who had the union's support in last year’s election. Early signs suggest that the bondholders may conclude that they will do better to hope for a bigger pay-out in bankruptcy rather than agree to a deal on these terms.

It may be that by announcing the proposals early GM has left time for renegotiation with the bondholders. But the ferocity of their initial disapproval suggests that small sweeteners will not persuade creditors to change their minds. Bondholders face the prospect of a small stake in a clapped out car company run by a union-friendly government with a zeal for green cars that may not have much of a market. With that as an alternative, a gamble in a bankruptcy court may seem quite appealing.


If I were a bondholder in GM, I would hold off and allow them to go into bankruptcy court. Of course, with the way that we saw the FEDS handle the transaction of Merrill Lynch to BofA, the question becomes will the FEDS hold the bondholders feet to the fire in their quest for a "green" car company.

Read the article here.

I believe that this video covers it all.



Video H/T to Iowahawk

Thursday, April 23, 2009

The Daily Twain

Always do right. This will gratify some people and astonish the rest.

Wednesday, April 22, 2009

More people staying put than before.

An interesting piece from the NY Times this afternoon. Two excerpts that I would like to comment on:

The Census Bureau reported that the annual rate at which people moved dipped last year to 11.9 percent, compared with 13.2 percent in 2007 and a recent high of 20.2 percent in 1984-85. It was the lowest rate since the bureau began measuring mobility six decades ago.

The declines appeared to be directly related to the housing slump and the recession.

“It represents a perfect storm halting migration at all levels, since it involves deterrents in local housing-related moves and longer distance employment-related moves,” said William H. Frey, a demographer with the Brookings Institution.


The decline in housing prices, as well as the home ownership rate being higher than ever before, makes it less likely that people will strike out like the Joads looking for their fortune elsewhere. These individuals who currently own homes and are "underwater" would, if they were just renters, strike out to another area of the country. This isn't the case. There is a dis-incentive for these individuals who are upwardly mobile to want to take the hit that walking away from a mortgage would do to their credit score, fiscal situation, etc. It's simple cost benefit analysis. If you rent, breaking the lease is simply monetary. As a homeowner your responsibility is not just the bank, who is the de-facto landlord. It is also to the municipality which collects taxes and other assorted fees from the homeowner for the general upkeep of the neighborhood. In the situation as a homeowner, those who choose to walk away from the home come out in the negative, even if they move to a lower tax and more economically viable neighborhood. Even with the loss of money in the current home owning situation the benefit is in staying in the current situation. Essentially they are trapped.

In 2008, the bureau said, 35.2 million people changed residences, compared with 38.7 million the year before.

People who moved were more likely to be unemployed, renters, poor and black. Those surveyed listed their reasons for moving as housing, family and job, in that order.

In all, 2.2 million people moved to the suburbs last year, while the major cities lost 2 million people.

The South recorded the largest net gain of people moving in, including a large influx of blacks. While the South also drew more children than any other region, it also lost more.

The Northeast lost the most residents of any region, as it has for years, but the West also registered a decline.


Two pieces of this snippet I want to comment on here. First, the south recorded the largest percentage of people moving into the region, while we saw a decline in the Northeast as well as the west. In regards to the Northeast. Here we have a high tax, high regulation block of states which has put the stranglehold on housing(rent control, public housing, subsidized housing, thus driving up the actual cost of housing across the board)as well as business; Also the state budgets grew larger through legacy costs as well as increased welfare payments. Now, the people who are supposedly benefiting from this welfare state are, as Friedman would say, voting with their feet. Also, we see high-income earners moving from high tax states like NY and Massachusetts to lower tax states. These two classes are in essence "going Galt." The social utopia that the do-gooders have created in these states is driving those at the extremes of the income scale out of the states and putting the burden for this ever-growing government on the middle class, who are the real drivers and creators of economic growth. It will be interesting to see how all of this shakes out.

The beginning of Corporate Capitalism

From National Review Online: My man Larry Kudlow

An old friend e-mailed me this week about how to characterize Obama’s economic interventions into the banking and auto sectors (with health care next on the list). He says it’s not really socialism. Nor is it fascism. He suggests it’s state capitalism. But I think of it more as corporate capitalism. Or even crony capitalism, as Cato’s Dan Mitchell puts it.

It’s not socialism because the government won’t actually own the means of production. It’s not fascism because America is a democracy, not a dictatorship, and Obama’s program doesn’t reach way down through all the sectors, but merely seeks to control certain troubled areas. And in the Obama model, it would appear there’s virtually no room for business failure. So the state props up distressed segments of the economy in some sort of 21st-century copy-cat version of Western Europe’s old social-market economy.

So call it corporate capitalism or state capitalism or government-directed capitalism. But it still represents a huge change from the American economic tradition. It’s a far cry from the free-market principles that governed the three-decade-long Reagan expansion, which now seems in jeopardy. And with cap-and-trade looming, this corporate capitalism will only grow more intense.


As always, Larry Kudlow makes some fine points and doesn't break down into mass hysteria or ridiculous populism. Although I would make one point. With the EPA designating carbon dioxide as a green house gas and impending cap-and-trade(which more than likely will not pass in it's current incarnation; I hope)the government will have a dictatorial hand in the day-to-day operations of business. Now, of course this is not a dictatorship in the everyday vernacular; however, what we are seeing is a "market" created and administered by the FEDS which will be oppressive to economic growth. There must be risk that comes with whatever "reward" our new titans of industry in Washington D.C deem is ok. Government should be equalizing the market by setting rules for business to work within that will not stymie growth. That doesn't appear to be the case.

Kudlow; as always a great read here.

The Daily Twain

Always acknowledge a fault. This will throw those in authority off their guard and give you an opportunity to commit more.

Monday, April 20, 2009

A Back door to Nationalization

A Headline from the NY Times, U.S. may convert bank bailouts to common stock:

In a significant shift, White House and Treasury Department officials now say they can stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, simply by converting the government’s existing loans to the nation’s 19 biggest banks into common stock.

Converting those loans to common shares would turn the federal aid into available capital for a bank — and give the government a large ownership stake in return.


Any person who is worried about undo political influencing decisions about who should and should not be extended credit should shutter at the thought, even implication of bank nationalization. The Obama administration, and the President himself have tried to stay away from any talk of nationalizing the banks as the political hit that will arise from a power grab of this magnitude would sink even his ratings. How does the government "vote" at shareholder meetings? Will congress now be the largest shareholder, pushing aside private capital? These are serious questions that need to be addressed.

Read the entire article here

The Daily Twain

A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.

Friday, April 17, 2009

Reason TV



As always, an excellent video from my friends at Reason.tv

The Daily Twain

I have never let my schooling interfere with my education.

Thursday, April 16, 2009

An Excellent Website

From the Claremont Institute

Founding.com

George Will in "Fine" form

Here is a good one from the Washington Post today:

Denim is the carefully calculated costume of people eager to communicate indifference to appearances. But the appearances that people choose to present in public are cues from which we make inferences about their maturity and respect for those to whom they are presenting themselves.

Do not blame Levi Strauss for the misuse of Levi's. When the Gold Rush began, Strauss moved to San Francisco planning to sell strong fabric for the 49ers' tents and wagon covers. Eventually, however, he made tough pants, reinforced by copper rivets, for the tough men who knelt on the muddy, stony banks of Northern California creeks, panning for gold. Today it is silly for Americans whose closest approximation of physical labor consists of loading their bags of clubs into golf carts to go around in public dressed for driving steers up the Chisholm Trail to the railhead in Abilene.


I don't know whether I'm laughing at myself or with GW for having people read this.

Read it all here

Update

For the no one who reads this blog, this will waste minutes of your life.

The Daily Twain

I have been through some terrible things in my life, some of which actually happened.

Wednesday, April 15, 2009

Note to self: Don't Fuck your cousins

From the UK Telegraph:

Inbreeding caused demise of the Spanish Habsburg dynasty, new study reveals

The study found that nine out of 11 marriages over the 200 years were between first cousins or uncles and nieces, producing a small gene pool that made rare recessive genetic illnesses more prevalent.

Only half of the babies born to the dynasty during the period studied lived to see their first birthday, compared with about 80 per cent of children in Spanish villages at the time.


Also, we have found a few pictures of the last remaining members of the Hapsburg family.


Stress Tests and the Bank Situation

A good news piece from the WSJ this morning talking about the results of the Treasury's "Stress Tests" and how to handle the findings.

The Obama administration is considering making public some results of the stress tests being conducted on the country's 19 largest banks, said people familiar with the matter, a move that could help more clearly separate healthy banks from the weaklings.

Until now, the government has tried to treat all banks equally, pouring cash into both strong and struggling institutions to prop up the financial sector. The strategy has provided cover for beleaguered banks, which received funds along with their stronger brethren.


What the government has done through TARP and the capital injections has been to treat all banks that could be considered a systemic risk as though they all have, or might get the flu. The idea being that by inoculating all the banks with extra cash they will continue to lend.

This possible move, combined with first-quarter bank earnings and the push by some financial institutions to raise new capital and repay their bailout funds, could lay the groundwork for a new phase in the financial crisis. Within weeks, the stronger banks could emerge free of government shackles and flush with new funds, with weaker ones still reliant on federal largesse. That would transform how investors and the government view the financial sector.

Since announcing the stress tests earlier this year, the government hasn't made clear what, if anything, would be disclosed about the assessments. The Treasury originally suggested it would defer to individual banks to disclose results. But some regulators worried about banks selectively leaking information, causing a possible bias against rivals.


We should look at how these findings are released to investors, as we don't want to have a run on the weaker financial institutions. The truth is that we have signed up to support the flu-ridden banks until they get better. This is the fundamental problem with the intervention by the government. Banks that would have continued lending through the crisis and not over-leveraging themselves have been almost forced to over-leverage their balance sheets as the FEDS are forcing them to extend credit as a condition of the TARP funds. This is why the banks that are strong are doing everything possible to get out of TARP.

The stress tests were designed to build confidence that the nation's largest banks could weather a severe and prolonged economic downturn. Regulators are trying to determine how much assistance banks might need to continue lending in such circumstances. Banks that need more capital will get six months to raise it from private investors or take cash infusions from the government.

Banks not under the TARP protection will have an easier time raising capital than a large bank, like Citi, for instance. Investors know that the FEDS are in the capital injection game for the long-haul and are the lender of last resort. They should just drop the six months provision. They won't get the money from the market. We are trying to cure the flu with anti-biotics.

A senior U.S. Treasury official said the government will accept repayment of rescue funds from any institution whose regulator dubs it healthy enough to operate without federal capital.

The move to stop treating banks equally is sparking concern about the effect on specific institutions seen as weaker than peers. "You can create a run on a bank pretty quickly," said Eugene Ludwig, chief executive of consulting firm Promontory Financial Group and a former Comptroller of the Currency.


Of course you can create a run on a bank, just ask Chuck Schumer. However, I was under the impression that we increased the FDIC deposit insurance amount to $250,000 to prevent runs on the bank. What the government needs to do is make the "stress test" information available to the public so that they can choose what to do with their money.

Wayne Abernathy, executive vice president of financial institutions policy and regulator affairs at the American Bankers Association, said the government needs to provide information about the results but also protect examination data.

"I don't think they can ignore the appetite they have created for this information," Mr. Abernathy said. Having the government publicize some information would allow policy makers to control the message. "It's what can we say that is meaningful while still protecting the quality of that exam data," he said.

Mr. Ludwig cautioned that any information could give rise to mischief. "Bank exams are confidential for good reason," he said. "Given the kind of confidential information they contain, there is always the possibility of misuse or misinterpretation."


I fear that we will have some bad news come out of the release of the stress test results. Of course then again, the banks are lending free money so even a moron could make money, but we will see.

The Daily Twain

I have a higher and grander standard of principle than George Washington. He could not lie; I can, but I won't.

We need to have Dolphins with Lazers on them to fight the pirates.

I thought about this



Upon reading this.



The Chinese merchant ships escorted by a China's fleet sailed on the Gulf of Aden when they met some suspected pirate ships. Thousands of dolphins suddenly leaped out of water between pirates and merchants when the pirate ships headed for the China's.

The suspected pirates ships stopped and then turned away. The pirates could only lament their littleness before the vast number of dolphins. The spectacular scene continued for a while.


What the story doesn't cover is how the laser equipped dolphins melted the medulla oblongata of the Somali pirates. Sweet.

In honor of my more conspiratorial friends

Upon reading this story in the Washington Times yesterday, I got to thinking...

Enjoy...



Somebody's watching me

Tuesday, April 14, 2009

Kentucky Grilled Chicken... Popeye's is sounding better every day.




From the AP:

In a culinary gambit backed by buckets of big money, KFC is hoping to replicate its founder's recipe for success with the national introduction of Kentucky Grilled Chicken.




Get it, buckets of money, like chicken.


This week's rollout is KFC's most ambitious attempt to win over health-conscious customers as the chain known worldwide for fried chicken tries to reinvigorate lackluster U.S. sales.

"It's going to get people who haven't eaten KFC for a long time to come back into our restaurants," said KFC President Roger Eaton. "It's going to get people who have never eaten KFC to come into our restaurants."


I'm sure that the grilled chicken and veggie crowd are going to look forward to sharing dining space with guys named Skeeter and the average red-state voter. Hey, great idea, they could come up with a KGC "Famous Bowl" which could consist of the grilled chicken, soy gravy, tofu and alfalfa sprouts. There's a winner. I'm sure Skeeter would sign right up.

KFC's slow-grilled chicken drew strong reviews from the lunchtime crowd Monday at a KFC restaurant in Louisville, the chain's hometown. Eddie Collard proclaimed grilled better than fried.

"I think the colonel would be happy," Collard said of KFC founder Colonel Harland Sanders.

Like its predecessor, Kentucky Grilled Chicken has its own secret recipe. The original copy of the recipe — a blend of six herbs and spices — will be kept in an electronic safe at company headquarters. It will sit alongside Sanders' handwritten recipe of 11 herbs and spices coating the chain's Original Recipe fried chicken.

The difference is in the nutritional numbers.



I like the line about how the Colonel would be happy with the new recipe for the grilled chicken. Personally, I think he is rolling over in his grave, rotisserie style. IT'S CALLED KENTUCKY FRIED CHICKEN.

Mike Ash, who ate a grilled chicken lunch at the Louisville KFC, remembered the rotisserie chicken as "mushy and bland." He liked the new grilled offering, having picked it to the bone.

He said he might be more apt to pick up a bucket of chicken on his way home, though he predicted he might still "fall off the wagon every now and then" and choose the fried option.

The grilled chicken will cost the same as Original Recipe chicken. KFC will offer customers a free piece of grilled chicken on April 27.

But the push for grilled chicken doesn't mean KFC is abandoning its roots, Eaton said. The chain is testing new fried chicken products, and remains committed to its core product.

"It would be incredibly arrogant to think we could create a product that could supersede Original Recipe chicken," Eaton said. "But this product is easily good enough to sit alongside it."


Hey, KFC big-wigs, here is some market research for you. The reason that people like myself stop by KFC for a bucket of fried chicken is because frying chicken at home is a pain in the ass. Any moron can grill chicken. Hell, my son can grill chicken and he's not yet three. Even better, I think that Colonel Sanders, the dead guy, could probably grill chicken.

Anyway, I'm looking forward to this experiment falling to the way-side like the Fruit Cup offering at Wendy's and fast-food chains offering granola bars instead of fries. Follow the Hardee's example, I would eat the grilled chicken, after they fry it.

Surpise! Captain Phillips spent time at sea with Pirates discussing Pirate movies.

In a surprising news story this morning, the soon to arrive hero revealed in an interview this morning that he was able to survive his harrowing detainment by Somali Pirates through their shared love of pirate movies.



"I have to tell you," Captain Phillips shared with Skip Parsons, intrepid reporter for the Aden Times, "those Pirates really had a good taste in pirate movies." Captain Phillips went on to explain how he felt about the possibility that he may have been taken back to the Somali Pirates Lair on the mainland. "Any time that you are with new people, you need to find some common ground. We found that on our shared appreciation of the Pirates of the Caribbean Movies. The youngest pirate I gave the nickname of Will Turner, and the most effeminate of them I gave the nickname of Elizabeth Turner. Like they were married or something. Everyone got a real giggle out of that one." Upon discovering that he may be held hostage, Captain Phillips was light-hearted as usual. " The Pirates kept telling me about how they really thought the best Pirate movie of all Time was Cutthroat Island, with Geena Davis and Matthew Modine."

Captain Phillips went on to explain how he would have felt about being held hostage. " Well, the prospect of being held hostage was frightening, but I wanted to make the best of the situation if possible. Also, the girly pirate, you know the Elizabeth Swann character, was telling me that if I didn't like Cutthroat Island when I first saw it, I should watch it in Blu-Ray. He said it would blow my mind."

The press corps were interested in this, "Captain Phillips, as Somalia is a dirt-poor country, where did they think that they were going to get a Blu-Ray player with the home-theater system to truly enjoy the movie."

Captain Phillips replied, " Well, I thought the same thing myself, but the Will Turner pirate told me that they were expecting a delivery of Blu-Ray players and home-theater systems later this month."

More details to come

The Daily Twain


I don't give a damn for a man that can only spell a word one way.

Monday, April 13, 2009

Breaking News, Vince the Sham-Wow Guy used the Slap Chop to beat up hooker who bit his tongue.



In an interesting bit of news, we here at Free-Market Libertine have gotten breaking news about the case.

This bit we learned from the Smoking Gun.

Shlomi told cops he paid Harris about $1000 in cash after she "propositioned him for straight sex." Shlomi said that when he kissed Harris, she suddenly "bit his tongue and would not let go." Shlomi then punched Harris several times until she released his tongue.

What we have recently uncovered in new court documents is that Shlomi used the Slap Chop to beat up Ms. Harris and tried to clean up the bloody crime scene with the sham-wow. In a shocking revelation which is sure to affect sales for both items, Vince kept asking if Ms Harris, "liked his chopped up nuts" while rambling incoherently while in court for his arraignment.

In lighter news, apparently Phil Spector, O.J. Simpson and Robert Blake have ordered the Slap Chop and Sham-Wow shammies

Goldman posts profit, will raise $5 Billion through stock offering to pay back TARP Funds

A news alert from the NY Times:

Goldman Sachs, the first of a string of banks to announce first quarter results over the next few weeks, also said it intends to raise $5 billion in common stock from the public. The bank said that new capital would help it return the $10 billion in government aid that it received last fall. Goldman will need approval from regulators to return the taxpayer capital.

In other news, an unnamed source within Goldman Sachs stated that the company was looking forward to running as far away from the Treasury Secretary as humanly possible.

GM possibly filing for bankruptcy

An interesting news story...

The White House-appointed autos task force has given GM 60 days to come up with a restructuring plan and it is trying to determine whether the automaker can be a viable company.

Quoting sources who had been briefed on the GM plans, the Times said the goal was to prepare for a fast "surgical" bankruptcy.

The newspaper said preparations are aimed at assuring a GM bankruptcy filing is ready if the company is unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and with the United Automobile Workers union.

A plan under consideration would create a new company that would buy the "good" assets of GM after the carmaker files for bankruptcy, the Times said.

Less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years, according to the paper.


In the finest example of "new-speak," at least today, we are told that GM needs to be ready for a "surgical" bankruptcy. Or those of us who aren't morons like to call it, the bondholders getting hosed and the UAW getting a cash settlement before moving over to the "new" company.

What I love is how when a company screws the pooch like GM has done, the government needs to step in and create a "new" company to purchase the "good" or "bad" assets of companies that fail as they pose a systemic risk to the system. This used to be handled by the market-place through what is referred to as "creative-destruction," but obviously we are not smart enough to know what is good and what is shit.

Insulting. Here's an idea. How about a "new" company not involved with the FEDS "buys" GM and proceeds to "shed dead weight" or tell the unions to "piss against an electric fence" as a "good" company makes GM "profitable." Now, I know this sounds crazy, but I think that it has worked before. Here's another crazy idea. Maybe we should hop in our way-back machine and bail-out the buggy whip industry. The market needs to work. This is not a free-market.

Jury reaches verdict in Phil Spector case... Botox industry worried it will lose it's best client



In a breaking story from Los Angeles, the jury for the Phil Spector murder trial have reached a verdict.

After hearing about a possible verdict for Spector, we contacted Sindy "Stretch" Hawkins, the national spokesperson for the Botox industry.



We aren't too terribly worried about the loss of Mr. Spector's business," Ms. Hawkins tried to say through a clenched jaw. " We are currently beginning to work closely with the embalming business to try and expand our market share. From the looks of it, Mr. Spector may already be working with an embalmer."

More to follow.

Everyone should pay Income Taxes...

So says Ari Fleischer:

Congress should start by refusing to go along with Mr. Obama's promise to cut taxes for 95% of the country. With the government running an almost $2 trillion deficit, no one should have their taxes cut -- no one. Given the size of the deficit, fiscal responsibility demands nothing less.

Republicans in Congress need to develop their own version of an Economic Growth Code, an alternative tax code that directly targets the current mess and helps us to grow our way out of it. Republicans should not doodle in the margins -- they should use their minority status to launch the next big movement in policy and politics. Nothing creates revenue like growth and that's where Republicans should make their mark.

I favor the abolition of all Social Security, Medicare and estate taxes. In their place, we should create a simple income tax system that has no deductions or credits at all. The result would be a progressive, multitiered income tax in which everyone pays. The bottom 50% won't be excused from paying the cost of government and top earners will no longer have the loopholes they're used to. The middle-class, whose wages have stagnated, will benefit from economic growth. Social Security and Medicare will be funded from income taxes, ending the myth that these programs are supported through government trust funds and payroll taxes. The tax base will broaden dramatically, allowing rates to fall and helping to foster what's most important -- economic growth.

I'd also create a mechanism so tax rates go up or down for everyone -- no more dividing the country by lowering taxes for some or raising them only for others. A revenue system whose purpose is to pay the government's bills should apply fairly to one and all. If Congress wants to raise or cut taxes, it should do so for everyone.

Another benefit is that such a system will create an environment in which spending programs receive the scrutiny they deserve. It's funny what happens when everyone pays the bills; Americans may want less spending so they can pay fewer bills.


Fleischer makes several well heeled points in his editorial. First, the idea that everyone should pay income taxes reminds me of the great Alexis De Tocqueville quote, "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." By having the tax burden fall equally upon the individuals in our Republic, it will be much harder for Congress to bribe the people as they will have to pay for whatever "goodies" that the people vote for themselves. This is a valid point in todays world as we will have all of the income taxes paid by a minority of the people of the country.

The thing that we need to remember about taxes is that it is the usury fee for general use of the government. The perverse thing is, as Fliechser points out in his piece, is that the people receiving the lion's share of government largess are the ones who pay no tax. What is the incentive for these individuals to work harder, save and invest to move up in society when the perverse incentive keeps individuals on the teat.

Again, I would call for a negative income tax to ease the transition into the tax paying base in a laissez faire economy. I can dream can't I.

Israel may lay the smackdown on Iran

Per the JPOST:

In an interview with Kol Hai Radio, Peres also said that the arrest before the weekend of a Hizbullah terror cell in Egypt was a blow to Iranian President Mahmoud Ahmadinejad's power.

"Ahmadinejad recruits forces against us, but there are also forces against him," Peres said. "What happened in Egypt created a fierce opposition and we must unify all his opponents - the Sunnis and the Europeans, as well as those afraid of nuclear weapons and terror."


Wow, you mean that Iran is not a peaceful republic which has given so much to the world. At least, they were the villains in 300. Maybe, the way to deal with them is how the Spartans did at Thermopylae.

Peres went on to say that he hoped Obama's call for dialogue with Ahmadinejad would be heeded, but warned that if such talks don't soften the Iranian president's approach "we'll strike him."

I know some bad-ass planes we can sell to the Israelis. Also, it will keep some sweet, sweet jobs in the U.S.

We need to support the Israeli's as it advances our own interests in the region. The question is will it be done, and will the U.S. provide the support that the Israeli's need.

Come on Down to Timmy Geithner's PayDay Loans

An excellent piece from the NY Times over the weekend:


Douglas Leech, the founder and chief executive of Centra Bank, a small West Virginia bank that participated in the capital assistance program but returned the money after the government imposed new conditions, said he complained strongly about the Treasury Department’s decision to demand repayment of the warrants. That effectively raised the interest rate he paid on a $15 million loan to an annual rate of about 60 percent, he said.

“What they did is wrong and fundamentally un-American,” he said. “Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal.”

Stephanie Cutter, a spokeswoman at the Treasury Department, said it did not comment about the participation of specific banks in the plan or their efforts to exit the program.


Personally, I could give a hoot in hell that these bankers don't like that the government doesn't want to provide them with a reach-around as they try to escape the government shower room where they have been receiving frequent capital injections. Hank Paulson played Vito Coreleone with these bankers last fall, telling them that they had to take capital injections to keep credit flowing. Now, the banks which have been solvent, and will continue to be solvent are forced to pay a large settlement that is equal to a 60% interest charge on the money that was forced on them to get out from under the government's "protection."

Perhaps when these banks were told that they had to do this they could have said, "no." Would that have been so difficult. Saying no to Uncle Sam and telling them that they would allow the market to sustain or destroy them. That is the problem with the bail-out culture that we see ourselves in now. Us plebians could have told anyone of these titans of industry that by getting into bed with Hammerin' Hank and his capital injections would lead to government control over their operations. These bankers should pay the penalty and take it on the chin, proverbially. Government intervention will only lead to more government intervention, as the wheels of bureaucracy can't react to the market the way that a company without political interests can. That is the rub, since these banks have received TARP money, they are political whether they want to be or not. The best outcome is that these banks pay the fine and run as far away from the FEDS as possible

The Daily Twain

I didn't attend the funeral, but I sent a nice letter saying that I approved of it.

Friday, April 10, 2009

Great name for a new Bravo TV show... Trade Wars

It could run right after the Real Housewives of Orange County.

From the WSJ:

Mr. Obama acquiesced in Congress's unilateral rewriting of Nafta earlier this year, despite warnings of potential retaliation. Well, last month Mexico responded with a 20% tariff on select U.S. products, including pears, cherries, apricots and Christmas trees. The Capital Press agriculture Web site reports that pear exports to Mexico have already "ground to a halt" as importers stop buying them because of the cost and uncertainty. That's a potential annual loss of $50 million to $60 million in U.S. pear exports alone. "If we have that 20% tariff and Argentina enters the market, it could hurt our ability to ship fruit the rest of the season," said Jeff Correa, of the Pear Bureau Northwest.

That's how trade wars work. A tariff imposed to please a powerful domestic constituency leads to retaliation that whacks innocent bystanders who lack the ear of the White House or Speaker of the House. In this case, a payoff to the Teamsters stuffed in a spending bill has now become a hardship for the farm growers and workers of Oregon. We elect Presidents to stop this kind of economic damage, not to promote it.



Amateurs running the show.

The Daily Twain


Honesty is the best policy - when there is money in it.

Because it's Friday



Morris Day and the Time

Thursday, April 9, 2009

SURPISE! Banks lending nearly free money from the FED turn a profit

You mean by responsibly charging more for a commodity than you paid for it means you can turn a profit.

Investors have been grasping at any sign of improvement in the crippled banking industry, and Wells Fargo's report Thursday that it expects first-quarter earnings of $3 billion provided an encouraging sign that a deep freeze in borrowing activity may finally be thawing. Wells Fargo said it benefited from its January acquisition of Wachovia and an increase in mortgage applications.

What is most laughable is that even though these moron's are getting at least a 5% return on the loans they are making, the investor's still are afraid that they can't "unfreeze" the credit system. The system is frozen for those of us who were irresponsible and need a fresh infusion of credit to right the ship. This smells like profit-taking to me.

It could be worse...

This is depressing...

Only 53% of American adults believe capitalism is better than socialism.



Just a little over half of the population if the UNITED STATES OF AMERICA believe capitalism is better than socialism. As WFB used to say, the problem with capitalism is the capitalist and the problem with socialism are the socialists. Although do not fret...



Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided. Thirty-somethings are a bit more supportive of the free-enterprise approach with 49% for capitalism and 26% for socialism. Adults over 40 strongly favor capitalism, and just 13% of those older Americans believe socialism is better.

Investors by a 5-to-1 margin choose capitalism. As for those who do not invest, 40% say capitalism is better while 25% prefer socialism.

There is a partisan gap as well. Republicans - by an 11-to-1 margin - favor capitalism. Democrats are much more closely divided: Just 39% say capitalism is better while 30% prefer socialism. As for those not affiliated with either major political party, 48% say capitalism is best, and 21% opt for socialism.


At least the free-enterprise system is still more popular. Also in a more generic poll 70% of respondents prefer free-enterprise. Maybe they mistook socialism and free-enterprise by the modifier "free."

I'm going to have a beer...

The Daily Twain

Habit is habit and not to be flung out of the window by any man, but coaxed downstairs a step at a time.

Kim Jong-Il

Ain't elections grand. Kim Jong-Il just broke the record for highest percentage of the popular vote by unanimously being re-elected to a third term as Supreme Leader of North Korea.

What is most impressive is that the Dear Leader actually received a larger percentage of the poplar vote than good old Saddam did in the hey-day of the Iraqi dictatorship. Is it just me or can you not wait for these goons to croak.

Stop Spending our Future

Excellent



The Website

Wednesday, April 8, 2009

The Daily Twain

Grief can take care of itself, but to get the full value of a joy you must have somebody to divide it with.

Tuesday, April 7, 2009

Nukes in the neighborhood

An excellent, as usual, lead editorial from the Wall Street Journal today about the fantasy that is the President's "nuke free world."


"And I had an excellent meeting with President Medvedev of Russia to get started that process of reducing our nuclear stockpiles, which will then give us a greater moral authority to say to Iran, don't develop a nuclear weapon; to say to North Korea, don't proliferate nuclear weapons," Mr. Obama said, implying that previous American Presidents had lacked such "authority."

The President went even further in Prague, noting that "as a nuclear power -- as the only nuclear power to have used a nuclear weapon -- the United States has a moral responsibility to act." That barely concealed apology for Hiroshima is an insult to the memory of Harry Truman, who saved a million lives by ending World War II without a bloody invasion of Japan. As for the persuasive power of "moral authority," we should have learned long ago that the concept has no meaning in Pyongyang or Tehran, much less in the rocky hideouts of al Qaeda.

The truth is that Mr. Obama's nuclear vision has reality exactly backward. To the extent that the U.S. has maintained a large and credible nuclear arsenal, it has prevented war, defeated the Soviet Union, shored up our alliances and created an umbrella that persuaded other nations that they don't need a bomb to defend themselves.


I love the idea that by reducing our nuclear stockpile, which has prevented war as well as massive proliferation, will give us the moral authority to tell Tehran to not continue with their weapons program. This makes about as much sense as the crazy old man in your neighborhood getting rid of his rottweiler and shotgun from his front porch and expecting the kids to not play on his lawn. I can imagine just how shocked he would be when, surprise, they proceed to go rooting in his front yard and upturning his petunias.



The moral authority of the United States doesn't come from agreeing to get rid of our stockpile of nukes, but from our saving the world from itself on numerous occasions within the 20th century. Also, we did invent the snuggie, along with a host of other items which have made the world a better place, up to and including the Slap-Chop, the Sham-Wow as well the Big City Slider Station. Should we agree to rid the world of our consumer durables? I think we would have more authority by agreeing to send Billy Mays and Vince the Sham-Wow guy to Gitmo than we would by apologizing for our use of an atomic bomb and destroying our deterrent which has, cost benefit wise, saved more lives than any conventional weapon in modern history.

What the current administration doesn't understand, or probably won't admit, is that the world is a dangerous place. The kids that want to play in our front yard don't care about upturning our petunias as much as destroying the moral order of our garden. The rottweiler and shotgun of our yard are nuclear weapons and a missile shield. I hope my President begins to understand this point.

Barack Bucks!

Form the USA Today, er, today;

Communities print their own currency to keep cash flowing

"We wanted to make new options available," says Jackie Smith of South Bend, Ind., who is working to launch a local currency. "It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace."



So the plan is to use these Barack Bucks to help local business' weather the recession. Why not cure two birds with one stone. How about you can use the Barack Bucks to purchase an automobile.
Hold on, South Bend is pretty close to Chicago... I think I know someone who may need a job in this current recession.

I got what this is really about; you can use the Barack Bucks down at Crazy Uncle Jeremiah's Auto Show-Place...



"With all of the savings of Barack Bucks, all my customers are coming home to ROOST!"

The Daily Twain

Get your facts first, and then you can distort them as much as you please.

Monday, April 6, 2009

The Great Mustache Speaks



Is there any better expert on Foreign Policy matters than John Bolton?



What the Security Council will ultimately produce is of course uncertain -- but resolutions almost never get tougher as the drafting and negotiations proceed. Even worse than a weak resolution would be a "presidential statement," a toothless gesture of the Council's opinion. Either way, North Korea has again defied the Security Council, gotten away with its launch with the support of Russia and China, and now will likely confront only pleas by Mr. Obama and others to return to the six-party talks.

Those talks are exactly where North Korea wants to be. From them ever greater material and political benefits will flow to Pyongyang, in exchange for ever more hollow promises to dismantle its nuclear program.

So far, therefore, the missile launch is an unambiguous win for North Korea. (Although not orbiting a satellite, all three rocket stages apparently fired, achieving Pyongyang's longest missile flight yet.) But the negative repercussions will extend far beyond Northeast Asia.

Iran has carefully scrutinized the Obama administration's every action, and Tehran's only conclusion can be: It is past time to torque up the pressure on this new crowd in Washington. Not only is Iran's back now covered by its friends Russia, China and others on the U.N. Security Council, but it sees an American president so ready to bend his knee for public favor in Europe that the mullahs' wish list for U.S. concessions will grow by the minute.

Israel must also be carefully considering how the U.S. watched North Korea rip through "the international community." The most important lesson the new government headed by Prime Minister Benjamin Netanyahu should draw is: Look out for No. 1. If Israel isn't prepared to protect itself, including using military force, against Iran's nuclear weapons program, it certainly shouldn't be holding its breath for Mr. Obama to do anything.

Russia and China must also be relishing this outcome. They will have faced down Mr. Obama in his first real crisis, having provided Security Council cover for a criminal regime, and emerged unscathed. They will conclude that achieving their large agendas with the new administration can't be too hard. That conclusion may be unfair to the new American president; but it will surely color how Moscow and Beijing structure their policies and their diplomacy until proven otherwise. That alone is bad news for Washington and its allies.


Joe Biden the test has come sooner than expected.

Education in the Age of Obama

From the Wall Street Journal; this is Education in the Age Of Obama...

Voucher recipients were tested last spring. The scores were analyzed in the late summer and early fall, and in November preliminary results were presented to a team of advisers who work with the Education Department to produce the annual evaluation. Since Education officials are intimately involved in this process, they had to know what was in this evaluation even as Democrats passed (and Mr. Obama signed) language that ends the program after next year.

Opponents of school choice for poor children have long claimed they'd support vouchers if there was evidence that they work. While running for President last year, Mr. Obama told the Milwaukee Journal-Sentinel that if he saw more proof that they were successful, he would "not allow my predisposition to stand in the way of making sure that our kids can learn . . . You do what works for the kids." Except, apparently, when what works is opposed by unions.

Mr. Duncan's office spurned our repeated calls and emails asking what and when he and his aides knew about these results. We do know the Administration prohibited anyone involved with the evaluation from discussing it publicly. You'd think we were talking about nuclear secrets, not about a taxpayer-funded pilot program. A reasonable conclusion is that Mr. Duncan's department didn't want proof of voucher success to interfere with Senator Dick Durbin's campaign to kill vouchers at the behest of the teachers unions.

The decision to let 1,700 poor kids get tossed from private schools is a moral disgrace. It also exposes the ugly politics that lies beneath union and liberal efforts across the country to undermine mayoral control, charter schools, vouchers or any reform that threatens their monopoly over public education dollars and jobs. The Sheldon Silver-Dick Durbin Democrats aren't worried that school choice doesn't work. They're worried that it does, and if Messrs. Obama and Duncan want to succeed as reformers they need to say so consistently.


This is what we get when the teacher's unions get in bed with democratic politicians. For the Obama administration, which prides itself on "data, not ideology" this is a shameless sop to the teacher's union's and unfortunately is probably a harbinger of what is to come with the Federal Governments involvement with GM and the UAW.

We have empirical proof of the success of school vouchers in providing opportunities for low-income students to escape the hell that is the public-school system which costs the taxpayer LESS than it does to put them in a failing public school, $7000 in vouchers vs. $14000 in a public school. This isn't change I can believe we can believe in, it's the same footsie game with the teachers unions that has been played for the last thirty years.

Also an excellent piece in the American by Jay Matthews is recommended to help stoke the fires of ire about this killing of a successful pilot program to please the unions.

Bernanke's "Green Shoots"

From Bloomberg this morning.

The Labor Department’s April 3 report that the economy shed an additional 663,000 jobs last month, while the unemployment rate rose to 8.5 percent, will be followed by months more of bad-news headlines, economists say. The recession, now in its 17th month, has already cost 5.1 million Americans their jobs, the worst drop in the postwar era; unemployment may hit 9.4 percent this year, according to the median estimate in a Bloomberg News survey, and may top out above 10 percent in 2010.

The risk is that the jobs picture turns even more bleak than forecast or the drumbeat of bad news still to come causes consumers, whose spending has firmed up in recent months, to hunker down again.

“If something happens to spook consumers and they crawl back into their tortoise shells, that would be terrible news,” says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University.

Consumer spending, which accounts for more than 70 percent of the economy, rose 0.2 percent in February after climbing 1 percent in January, breaking a six-month string of declines.

“Whether the little wisps of improvement in spending are sustained needs watching,” says Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut.

Interest Rates

Declining interest rates on mortgages and business loans led Bernanke, 55, to tell CBS Corp.’s “60 Minutes” on March 15 that he sees “green shoots” in some financial markets, and that the pace of economic decline “will begin to moderate.”

Fueled by optimism that the economy may finally be stabilizing, the Standard & Poor’s 500 Index last month gained 8.5 percent, the most in seven years. Still, “I would be careful about chasing this rally,” Jason Trennert, chief investment strategist at Strategas Research Partners in New York, said in a March 27 interview.

With the Obama administration borrowing to finance record budget deficits, U.S. debt sales will almost triple this year to a record $2.5 trillion, according to estimates from Goldman Sachs Group Inc.

The borrowings may send 10-year yields as high as 6 percent by the end of 2010 from 2.9 percent on April 4, Trennert says, adding that it’s “hard to get optimistic” about stock prices “if you’re in a situation where it’s reasonable to expect long- term interest rates to be higher.”

Stock-Price Plunge

Another plunge in stock prices is just one of the things economists say might derail any recovery. Others include the disorderly collapse of General Motors Corp., Chrysler LLC or a major financial firm; or the failure of the Obama administration’s bank-rescue plan.

A one-month jump in the jobless rate of more than 0.6 percentage point would be a severe blow to confidence, says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University. So would monthly job losses that continue to top 600,000 into the second half of the year, says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.

Payrolls have been shrinking by more than that every month since December. Losses need to come down below 500,000 in the next few months and drop close to 100,000 by year-end to confirm that the worst of the recession is over, Zandi says.

“If we continue to lose 600,000-plus jobs a month, that will burn out those green shoots pretty quickly,” he says. “If you lose jobs like that, it continues to undermine consumer spending and confidence.”


I think that Big Ben has this right. We are seeing lots of "green shoots" or "mustard seeds" that will lead to a long term economic recovery. We have a crash in energy prices, as well as retailers that are offering the barn to try and stoke retail sales upward again. Also, the low, low interest rates lead to an upturned yield curve for banks that are borrowing to responsible lenders so bank balance sheets are becoming less leveraged. Also, we want to remember that unemployment is a lagging indicator so going forward we shouldn't look at the last quarters numbers as much as at the leading indicators. Also, with bargains abounding in the stock market the bear hopefully will go into hibernation within the next few quarters.

All of the indicators are pointing to recovery in the financials, but we are still struck down by a bout of fear.I think that this is capital's fear of the impending tax hike as well as fear of hyper-inflation. The President should retreat from his call for tax hikes until the economy has recovered, as we can not afford to lose any capital investment that would come our way.

The Daily Twain

Fiction is obliged to stick to possibilities. Truth isn't.

Wouldn't a world without mean people be nice too...

From the Wall Street Journal this morning.

Speaking at Prague's Castle Square, Mr. Obama told the audience his administration was committed "to seek the peace and security of a world without nuclear weapons."

"We have to insist: 'Yes, we can,'" he said, reprising a campaign theme recognizable to a crowd a continent away from his election victory.

Sunday's speech followed a meeting Wednesday between Mr. Obama and Russian President Dmitry Medvedev, where the two leaders committed to conclude a new bilateral treaty that would reduce U.S. and Russian nuclear arsenals below the 1,700 to 2,200 deployed warheads agreed to in 2002.

Mr. Obama's strategy, however, also seeks to gain the support of developing nations by recognizing their right to develop nuclear power.

The Obama administration is specifically supporting the development of an international nuclear-fuel bank that aspiring nuclear-power states could tap to feed their reactors.

Such a system, say U.S. officials, would undercut demands of countries like North Korea and Iran that they need to develop their own infrastructure to produce nuclear fuel. Such technologies can be easily shifted into producing fissile material for nuclear weapons.


The President has a limited amount of political capital that he can use in both domestic and foreign affairs. Why he would choose to go into a former soviet Bloc country to call for an end to nuclear weapons in what amounts to not much more than a campaign speech is beyond me. The intention is good, but the steps to go about strengthening our position against Russian, Iranian and North Korean hegemony is not to pray for cats and dogs to live together in peace, but to take a substantiative stance against nuclear proliferation, including everything up to a missile defense shield in Eastern Europe as well as the possible use of force against those nations who would use nuclear capacity against there perceived enemies.

One thing that I have realized about the North Koreans is that they are willing to push the envelope but not to step to over the line. (Sorry about the mixed metaphors) In that regard, I believe that the President's response was appropriate. However, Iran is the big issue here. If this is a test, by proxy, of the President by the Iranians, unfortunately he came across in Carteresque fashion.

NY TIMES gets it wrong...Again

This report from the NT Times this morning details the "failure" of the North Korean "satellite" launch over the weekend.

A disgraceful passage.


The command said that North Korea launched a Taepodong-2 missile at 11:30 a.m. Sunday local time, or 10:30 p.m. Eastern Daylight Time on Saturday, and that its first stage fell into the Sea of Japan, which analysts had expected as the point of splashdown in a successful launching.

However, “the remaining stages, along with the payload itself, landed in the Pacific Ocean,” the statement said. Analysts had expected the rocket’s second stage to land in the Pacific but its third stage and its ostensible satellite payload to fly into space.

The command emphasized that “no object entered orbit,” apparently a reference to both the rocket’s third stage as well as the supposed satellite.

North Korea’s public portrayal of the event as a complete success was similar in its celebratory tone to the happy note it struck in 1998 after having failed to loft a satellite into orbit.

News reports out of Japan also said the rocket’s second stage splashed down in the Pacific, hundreds of miles short of the danger zone that North Korea announced last month. Western analysts said that shortfall, if correct, probably indicated a failure of the missile’s second stage.




Does it occur to the "Newspaper of record" that the North Koreans weren't trying to launch a satellite. Perhaps they wanted to rattle the saber at the Japanese and President Obama, who was giving a vaunted, teleprompted speech about a world without nuclear weapons. I know that my liberal friends want to compare the President to Superman, but if he is Superman it is the Superman of the 4th shitty movie;
Superman IV: The Quest for Peace

What the situation over the weekend reminds me of is a D.A.R.E officer giving a speech on a drug-free school system while the bad kids sit on the fire escape snorting coke. "Maybe if those bad kids heard how good the speech about the drug-free world is then why would they use drugs." I think that we would be able to stop the Dear Leader's saber rattling by beaming this into the country.



Another case of the Trailer being better than the movie

Sunday, April 5, 2009

The Daily Twain

Facts are stubborn things, but statistics are more pliable.

Saturday, April 4, 2009

The Daily Twain

Education: that which reveals to the wise, and conceals from the stupid, the vast limits of their knowledge.

Thursday, April 2, 2009

G-20 gives a Trillion

The main Headline on Drudge this afternoon Super Pump: $1 Trillion to IMF, World Bank

An important bit which will not be mentioned. Boring but important:

Brown also says the 20 countries at the summit will enact common policies to crack down on tax havens, regulate hedge funds, and rebuild trust in the financial system to "prevent a crisis such as this from happening again."

He says the G-20 nations will also give emerging powers a greater say in the world economy.

Brown did not outline any new fiscal measures but says that the stimulus packages already announced by major nations have already been the biggest in history.


Obviously, to me at least, that the world leaders at the G-20 Summit never took an economics course above what they needed to sound like they know what they are talking about. (They probably learned to look what they know what they are talking about in Drama Class.) To take this blurb in parts.

1. Crack down on tax havens, regulate hedge funds, and rebuild trust in the financial system. So they want to eliminate tax havens, where capital is stored and used between expenditures. You know, saving before investing. Also, low tax states/countries are the emerging economies in the world. Ireland for instance. Capital didn't start to flee until the Irish raised tax rates. If we weren't bailing out the bets(CDS's, derivatives, etc.) that Hedge Funds have made over the last several years they would have received the haircut that the market wanted to give them, creative destruction. Driving them into the ground to be replaced by more responsible investors and capital. Trust will not be rebuilt in the financial system until new capital can be raised by the LARGEST INVESTOR CLASS, I.E. the middle Class. Raising taxes on them and shrinking economic growth with greater regulation and higher taxation will be ruinous.

2. The G-20 will not help emerging economies. It will stifle and kill their ability to grow through increased regulation and the loss of incentives that these economies should have at their disposal, lower taxes and cheap energy which would level the playing field and attract venture capital.

3. In regards to the stimulus. We have spent more money than I can even fathom to try and increase "liquidity" into the markets. I see this as being an incredibly stupid move. We will never know the true "value" of the world's toxic assets until the real underlying value of the assets can be factored and then sold or written off. Of course this would entail severely restricting our monetary policy to squeeze the real value out of the toxic assets. In simpler terms, who can "afford" those assets and who is floating on credit. This is what the market has been trying to do.

So a quick exit question. With the yield curve for banks, what they are paying to borrow the money vs what they are getting back in payment, making it easy for any banker to make money. Why do we still see a "frozen" credit system. My bet is that the market fears that investors feel that we haven't seen the worst of this big bear yet.

Art Laffer "kills" the Death Tax

In The Wall Street Journal Art Laffer, an economist for the Reagan administration and prominent supply-side economist lays out the case for repealing the death tax.

Indeed, from a societal standpoint, inheritance is an unmitigated good. Passing on to successive generations greater health, wealth and wisdom is what society in general, and America specifically, is all about. Imagine what America would look like today if our forefathers had been selfish and had left us nothing. We have all benefited greatly from a history of intergenerational American generosity. But just being an American is as much an accident of birth as being the child of wealthy parents. If you are an American, it's likely because ancestors of yours chose to become Americans and also chose to have children.

When we generally think of the death tax, it is to prevent the Paris Hilton's of the world from inheriting huge sums of money which will be blown on rhinestone encrusted thongs for an army of show dogs. However, this is not the case.

In its most basic form, it's about as silly an idea as can be imagined that America in the aggregate can increase the standards of living of future generations by taxing individual Americans for passing on higher standards of living to future generations of Americans of their choice. Clearly, taxing estates at death will induce people who wish to leave estates to future generations to leave smaller estates and to find ways to avoid estate taxes. On a conceptual level, it makes no sense to tax estates at death.

Study after study finds that the estate tax significantly reduces the size of estates and, as an added consequence, reduces the nation's capital stock and income. This common sense finding is documented ad nauseam in the 2006 U.S. Joint Economic Committee Report on the Costs and Consequences of the Federal Estate Tax. The Joint Economic Committee estimates that the estate tax has reduced the capital stock by approximately $850 billion because it reduces incentives to save and invest, has excessively high compliance costs, and results in significant economic inefficiencies.


Those crazy market oriented supply-siders, how dare they continue to document facts proving that the death tax isn't about revenue, but retribution.

Today in America you can take your after-tax income and go to Las Vegas and carouse, gamble, drink and smoke, and as far as our government is concerned that's just fine. But if you take that same after-tax income and leave it to your children and grandchildren, the government will tax that after-tax income one additional time at rates up to 55%. I especially like an oft-quoted line from Joseph Stiglitz and David L. Bevan, who wrote in the Greek Economic Review, "Of course, prohibitively high inheritance tax rates generate no revenue; they simply force the individual to consume his income during his lifetime." Hurray for Vegas.

That's it, I got it. The government wants us to spend all of our money during our lifetime as a sop to the SEIU. Of course the idea behind the death tax is to square one for the little guy. If our liberal friends cared about raising revenue, they would eliminate the death tax.

Read the editorial here. Well worth the time.

Is this the end of Capitalism?

Daniel Henninger takes a pair of pliers and a blowtorch to the anti-globalization crowd

An Excerpt:

China wants a new global currency to replace the inflatable dollar. The managing director of the International Monetary Fund, Dominique Strauss-Kahn, has said the world financial system needs an "early warning system," which one guesses the rocket scientists at the IMF would provide. France's Nicolas Sarkozy wants a global "financial regulator." On Sunday the New York Times raised its hand to announce the crisis "has led to a fundamental rethinking of the American way as a model for the rest of the world."

Here's my two cents worth: Beware of real-estate salesmen.

The housing bubble that floated into view in 2007 is turning into the blob that ate the world. Real-estate mortgages and their derivative securities are a significant problem. That discrete problem, however, has been pumped up to an historic "crisis of capitalism."

Capitalism didn't tank the U.S. economy. Overbuilt housing did. Overbuilt housing tanked the economies of the U.K. and Ireland and Spain. If little else, we've learned that artificially cheap housing sets loose limitless moral hazard.

Read the whole thing.

The Daily Twain


Don't go around saying the world owes you a living. The world owes you nothing. It was here first.

Congress doesn't like being Tea Bagged...

Although I'm sure that Larry Craig wouldn't mind...



H/T/ Drudge

Noted Douche Bag Gets it wrong again



Joe Biden proves once again that he is the smartest man in Washington D.C.

Say what you want about Dick Cheney being Darth Vader and Darth Maul wrapped into one evil package, but at least he understood how to balance a checkbook. I know everybody likes the "that's funny uncle Joe" but does this guy have a clue or have the hair plugs completely taken control of his brain, Terminator style.

Wednesday, April 1, 2009

Jack Kemp Jr.?


Paul Ryan and Eric Cantor are two of the most exciting neo-supply siders that are currently in the Republican minority. As this editorial from the Wall Street Journal states http://online.wsj.com/article/SB123854083982575457.html

- Deficits/Debt. The Republican budget achieves lower deficits than the Democratic plan in every year, and by 2019 yields half the deficit proposed by the president. By doing so, we control government debt: Under our plan, debt held by the public is $3.6 trillion less during the budget period.

- Spending. Our budget gives priority to national defense and veterans' health care. We freeze all other discretionary spending for five years, allowing it to grow modestly after that. We also place all spending under a statutory spending cap backed up by tough budget enforcement.

- Energy. Our budget lays a firm foundation to position the U.S. to meet three important strategic energy goals: reducing U.S. dependence on foreign oil, deploying more clean and renewable energy sources free of greenhouse gas, and supporting economic growth. We do these things by rejecting the president's cap-and-trade scheme, by opening exploration on our nation's oil and gas fields, and by investing the proceeds in a new clean energy trust fund, infrastructure and further deficit reduction.

- Entitlements. Our budget also takes steps toward fulfilling the mission of health and retirement security, in part by making these programs fiscally sustainable. The budget moves toward making quality health care affordable and accessible to all Americans by strengthening the relationship between patients and their doctors, not the dictates of government bureaucrats. We preserve the existing Medicare program for all those 55 or older; and then, to make the program sustainable and dependable, those 54 and younger will enter a Medicare program reformed to work like the health plan members of Congress and federal employees now enjoy. Starting in 2021, seniors would receive a premium support payment equal to 100% of the Medicare benefit on average. This would be income related, so low-income seniors receive extra support, and high-income seniors receive support relative to their incomes -- along the same lines as the president's Medicare Part D proposal.

We strengthen the Medicaid safety net by converting the federal share of Medicaid payments into an allotment tailored for each state's low-income population. This will enhance state flexibility and sensitivity to spending growth.

In one of the most valued government programs -- Social Security -- our budget begins to develop a bipartisan solution to the program's pending bankruptcy by incorporating some of the reforms advocated by the president's budget director. Specifically, we provide for a trigger that would make small adjustments in the benefits for higher-income beneficiaries if the Social Security Administration determines the Social Security Trust Fund cannot meet its obligations. This is a modest but serious proposal which would not affect those in or near retirement, but is aimed at helping develop a consensus, across party lines, toward saving this important retirement program. We also assure that benefits for lower-income recipients are large enough to keep them out of poverty.

- Tax Reform. Our budget does not raise taxes, and makes permanent the 2001 and 2003 tax laws. In fact, we cut taxes and reform the tax system. Individuals can choose to pay their federal taxes under the existing code, or move to a highly simplified system that fits on a post card, with few deductions and two rates. Specifically, couples pay 10% on their first $100,000 in income (singles on $50,000) and 25% above that. Capital gains and dividends are taxed at 15%, and the death tax is repealed. The proposal includes generous standard and personal exemptions such that a family of four earning $39,000 would not pay tax on that amount. In an effort to revive peoples' lost savings, and to create an incentive for risk-taking and investment, the budget repeals the capital gains tax through 2010 for all taxpayers.

On the business side, the budget permanently cuts the uncompetitive corporate income tax rate -- currently the second highest in the industrialized world -- to 25%. This puts American companies in a better position to lead in the global economy, promotes jobs here at home, and strengthens worker paychecks.

We hope the administration and Democratic leaders in Congress do not distort and preach fear about our Republican plan. Some may be tempted to appeal to the darker emotions of envy and insecurity that surely run high in times like these. Yet we know Americans are stronger, smarter and prouder than this ploy assumes.


This editorial could have appeared in the WSJ or National Review in 1976. What excites me the most is tax reform. Milton Friedman used to say that people(capital) vote with their feet. I can see Paul Ryan sitting around with Art Laffer and, my man, Larry Kudlow talking incentives and how to stimulate real Growth. The one thing that I think that Representative Ryan also could have proposed is a negative income tax to go along with a flat tax. http://en.wikipedia.org/wiki/Negative_income_tax

This is a debate that we can win