Education Department Looking to Lower Costs of College

Good Luck on That Folks

One of the things that today’s older generation, correctly called the “greediest generation” has done to earn that sobriquet is to allow the cost of higher education to rise to such a degree that students lucky enough to get a degree (and even those that just attend) leave the institution with an almost insurmountable amount of debt.  Burdening their children and their children’s children with student loans so they can have lower taxes is what today’s taxpayers are willing to accept for maintaining a low tax environment.

The Secretary of Education is concerned, as well he should be.  That’s part of the job if you are Secretary of Education in a Democratic Administration  (If you are Secretary of Education in a Republican Administration your major concern is how to channel more public dollars to private schools). 

Education Secretary Arne Duncan urged higher-education officials Tuesday to “think more creatively — and with much greater urgency” about ways to contain costs and reduce student debt.

That’s right, the Sec of Ed asked the people directly responsible for the huge increases in the cost of higher education to have greater urgency about containing costs.  Who exactly did he think he was talking to.

The problem is something like this

“Three in four Americans now say that college is too expensive for most people to afford,” Mr. Duncan said. “That belief is even stronger among young adults — three-fourths of whom believe that graduates today have more debt than they can manage.”

College seniors with loans now graduate with an average debt load of more than $25,000.With outstanding student debt nearing $1 trillion — and exceeding credit-card debt 

Mr. Duncan can be forgiven for not understanding basic economics and accounting.  See every dollar of cost for higher education is a dollar of income to the institutions of higher education, and asking them to find ways to reduce costs is like asking health care providers to find ways to reduce health care costs.  The officials don’t want to reduce costs, they want to raise them.

What about college that have lowered costs?  The old expression, you can count them on the fingers of one hand is applicable here.

Mr. Duncan lauded those colleges, universities and state programs that cut tuition — few enough that he was able to cite almost every effort — and those with programs increasing educational attainment, while lowering costs.

And as for ideas to cut costs, well there are these

Mr. Duncan sketched out three department initiatives using the same kind of financial incentives he has previously used to spur K-12 reform. He described plans to replace the expiring Perkins loan program with campus-based, low-cost student loans awarded in part on how well the campus has done in graduating Pell recipients; incentive grants rewarding states and institutions for making changes that increase completion rates and close achievement gaps; and a fund to support programs that use innovation to accelerate learning and hold down tuition.

And members of the audience were quoted as saying there were general enough and non-specific enough that they could endorse them, knowing they would never have to follow through.

As for costs themselves, with states having to cut support for higher education the prospect is for college costs to continue to go up, and if the next generation falls under the burden of debt, well too bad, at least the current greedy generation got their tax cuts.

Paul Krugman Documents Alan Greenspan’s Praise of the Financial System - New Instruments Were a Great Contribution Mr. Greenspan Said

Unfortunately They Were a Great Contribution to World Wide Financial Ruin

One of the delights in the daily reading of Paul Krugman is that he is not a modest person.  Modesty is very over-rated.  Were Mr. Krugman a more modest person he would not devote some of his writings to pointing out how he was right about most things, and other persons, those whom he calls VSP’s or Very Serious People, were utterly wrong.

Recently Mr. Krugman unearthed this comment by former Federal Reserve Chairman Alan Greenspan, once hailed as a great sage, now recognized as the great and powerful Oz, a charlatan hiding behind a curtain.  Here is Mr. Krugman’s quote from Mr. Greenspan

Deregulation and the newer information technologies have joined, in the United States and elsewhere, to advance flexibility in the financial sector. Financial stability may turn out to have been the most important contributor to the evident significant gains in economic stability over the past two decades.  .  . These increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago.

Of course, what we now know, only a few years later is that what Mr. Greenspan believed was the exact opposite of the truth, that the technology and complex financial instruments were a prime contributor to the near collapse of the financial system, and the world wide recession that went along with that near collapse.

What an idiot.  Unfortunately this idiot was the one person in a powerful enough position to have done something that could have prevented all this.  Thanks Alan, we couldn’t be where we are without you.

American Airlines Files For Bankruptcy; Will Renegotiate Labor Contracts and May Merge with U. S. Airways

How Will This Affect Passengers Today? – Look for New Fees Tomorrow

When a company files for bankruptcy one of the many advantages (what, you didn’t know that filing for bankruptcy was a positive thing for a business; where have you been?) is that it can unilaterally abrogate its labor contracts.  So the filing of bankruptcy by American Airlines will immediately initiate the end of existing labor contracts and the negotiation of contracts much more favorable to the company.

AMR sought bankruptcy court protection so that it could restructure its labor costs, airport agreements and airplane leases to bring them in line with the rest of the major carriers. United, Northwestern, U.S. Airways and Delta airlines used bankruptcy as a means to reduce their costs.

The future cannot be forecast with certainty, but the obvious conclusion of all of this is a merger between American and U. S. Airways.  Here is the result of that

U.S. Airways would be the likely suitor, eager to stay competitive with the mega airlines formed by United-Continental and Delta-Northwestern. If U.S. Airways moves to merge with American after the bankruptcy, that would leave three domestic network carriers controlling about 60 percent of the market, 

Let’s see, what would happen if three airlines controlled 60% of the market and up to 90% of the flights are any given airport?

1. A $20.00 per person fee for sitting.  That’s right, your ticket would allow you to board the plane, but you would have to pay extra to actually have a seat on the plane.

2. A $15.00 fee for each piece of luggage you don’t have.  Airlines are losing billions by people not checking bags, so this new fees would charge for each bag that a passenger does not have.

3. A $2.00 charge for using that white airsick bag.  And unless 50% of the passengers paid the fee, the plane would be directed to fly through turbulence until 75% of the passengers had purchased an airsick bag, or 25% had vomited on their seat mate.

4. A departure fee of $25.00 to allow a passenger to exit the plane.  This fee would be optional, and those who declined to pay the fee would have to wait until everyone else is off, clean up the cabin and then exit via the emergency chute.

So look for another advance in passenger service, coming soon to a ramp near you.

Summarizing the Current Situation in Europe – Dithering and Withering

Maybe a Few Less Meetings and a Few More Actions - Would that be Okay?

Watching Europe stumble through its current crisis is like watching the beginning of a massive train wreck in very slow motion.  It is fascinating, horrifying, and there is nothing one can do but watch and hope, and hope is just about ready to leave the room.  The news is beginning to take on the aura of farce, as this report in the New York Times illustrates.

Invoking platitudes and blabber at a level thought only attainable by U. S. politicians, Angela Merkel, Chancellor of Germany said

“The future of the euro is inseparable from European unity. The journey before us is long and will be anything but easy,” she said. “But I am convinced that we are on the right path. It is the right path to take to reach our common goal: a strong Germany in a strong European Union that will benefit the people in Germany, in Europe.”

and invoked the evolution of policy in Europe to a marathon.  She may not be aware of the fact that the first man to run a marathon in ancient Greece ran the race, delivered his news and fell dead.

And here was a not reassuring comment.

Germany, she said, did not wish to dominate Europe. “That is far-fetched,” she said.

France’s President Sarkozy is not very optimistic

The European Union needs “an overhaul,” Mr. Sarkozy said, to remain relevant and competitive, but he was vague about the details of what needs to be done.

“If Europe does not change quickly enough, global history will be written without Europe,” he said. “Europe needs more solidarity, and that means more discipline.”

while Britain decided to leave Europe to its own devices

“We need the euro zone to resolve their crisis. We need the countries of the euro to stand behind their currency,” George Osborne, Britain’s chancellor of the Exchequer, said shortly before Mr. Cameron traveled to Paris. “We do need the countries of the euro to work more closely together to sort out their problems.”

“Britain doesn’t want to be a part of that integration — we’ve got our own national interests — but it is in our economic interest that they do sort themselves out. The biggest boost that could happen to the British economy this autumn would be a resolution of the euro crisis,” Mr. Osborne said.

which when you get past the smugness (every day for 15 minutes Britains get to smirk about not joining the Euro) is British-speak for “even though Britain needs a strong European economy we’re going to focus only on ourselves, but fix it you guys because otherwise we in Britain will not do well.”  Not exactly Churchillian is it.

One thing the Europeans do well is have meetings.  Meetings after meetings. 

Mr. Cameron’s discussions in Paris came in advance of talks between Mr. Sarkozy and Mrs. Merkel on Monday to be followed by a summit of European leaders in a week’s time.

and as those of us who are refugees from the real world of both business and academia know only too well, the best but very rare outcome of a meeting is that the problem is not made worse.

And in conclusion

On Friday, Mrs. Merkel again appealed for a strengthening of fiscal cooperation across the euro zone in what she called a “union of stability” able to enforce controls on individual European economies.

which only makes one want to go back and re-read the part about how Germany doesn’t want to dominate Europe.  Really, what in the recent past history of the continent could possibly make anyone think that in the first place?

Mothers, Don’t Let Your Boys Grow Up to Be Cowboys; Let Them be Football Coaches Instead

Ohio State University Gets Its Priorities Straight – Straight Out of Wall Street

The Ohio State University is much about football.  Ask any semi-informed citizen to take a word association test and mention The Ohio State University and the response will be “football”.  Ask any semi-informed citizen about what academic programs The Ohio State University is famous for, and expect the question back “Is football an academic program?”

The Ohio State University had to fire its last football coach because some players engaged in behavior that is not allowed under the NCAA rules which government college sports.  The former football coach was a little lax in reporting the violations, and may (or may not) have been involved in trying to cover them up.  So now the school needs a new football coach, and they have one. 

The new coach has a nice compensation package. 

The contract includes $4 million in base salary, bonuses — for everything from players’ graduation rates to playing in a national championship, up to $700,000 annually — and lump payments in 2014, 2016 and 2018. The deal is worth more than three times the $1.32 million that the university’s president, E. Gordon Gee, made in 2010, according to The Chronicle of Higher Education.

Now first of all no one should feel sorry for the fact that the University President makes only $1.32 million a year (plus enough fringe benefits to fill several university provided SUV’s).  How many Big 10 titles did he win anyway.  And no one should bemoan the cost of the football program at The Ohio State University.  At a few schools, and The Ohio State University is probably one of them, football actually generates positive revenue.

No, the problem here is what the compensation package says about the priorities of American college and universities.  And what it says is this. 

The current generation of older, wealthy and well-to-do Americans have corrupted institutions of higher education so that they serve as sources of entertainment rather than as engines of education.

There, we said it.  Doesn’t feel so good though, does it?

Exposing Newt Gingrich’s Influence Peddling May Mean Serious Problems for the Romney Campaign

But It Gives the Gingrich Campaign a Big Boost

In an unusual burst of journalism the New York Times has an in depth story on the various ways that Newt Gingrich engaged in influence peddling after he left public office.  Basically what Mr. Gingrich did was to set up companies that sold its services to private corporations, those services being giving those companies access to elected officials who could authorize the spending of vast amounts of public dollars with those companies.

Here is a brief summary of what was going on.

In a variety of instances, documents and interviews show, Mr. Gingrich arranged meetings between executives and officials, and salted his presentations to lawmakers with pitches for his clients, who pay as much as $200,000 a year to belong to his Center for Health Transformation.

Now Mr. Gingrich appears not to have broken any laws (is it even possible in the U.S. to violate the toothless laws that supposedly protect the public against influence peddling by former elected officials?  Probably not.).  And we know he was not a lobbyist because he says he was not, he merely pressured legislators to adopt policies and spending favorable to his clients.

And this practice influence peddling is not restricted to one party or one philosophy, witness the phenomenal success of former Democratic Senate leader Tom Daschle. (Thankfully Mr. Daschle has had the decency not to run for President this year).  So what is the problem?

No problem for Mr. Gingrich.  Conservatives have long ago adopted the philosophy that says government spending is evil and wrong, unless there is a way to make a good buck out of it.  George W. Bush was a part owner of a baseball team and saw nothing wrong with the people of Texas subsidizing his private business.  Republicans wail against corporate welfare, but as a group they have never ever taken even small steps to eliminate it. 

So for the Republican primary electorate the fact that Mr. Gingrich became rich selling influence is not a negative, it is a positive.  Those voters will applaud him for doing so, and probably wonder why Mr. Romney did not do so also.  Mr. Romney will have to counter with showing how he made tens of millions in the private sector by loading up companies with debt so that he and his partners could withdraw millions from those companies, which may appease some voters. But that is just not as good and using your government connections to make millions, so Mr. Romney may well suffer in comparison.

Good News and Bad News on the Employment Front – More Jobless are Getting Jobs, But The Jobs Do Not Have the Same Income and Benefits as Before

A New Horror Movie is in the Works:  The Incredible Shrinking Middle Class

The news on the unemployment rate is not only welcome news, but further evidence that after a horrific summer the U. S. economy is demonstrating a sustained stronger recovery than has previously been expected.  The November unemployment rate drop to 8.5% follows stronger growth in the third quarter and raises expectations of a strong holiday shopping season and a good growth report for the 4^th quarter.

For people who have been unemployed getting a new job is fantastic, rescuing them from not only the economic ravages of unemployment but from the social and emotional turmoil as well.  It is also good news for the Obama Administration, that was beginning to run out of time for any economic recovery that can aid the re-election campaign.  Let’s hope Mr. Romney can hide his disappointment at the numbers.

But getting a new job may not be the same as regaining former status.  If a survey is correct (and there can be major flows in people’s perception of their economic condition) it appears that almost no one who is regaining employment is doing so at their previous level of compensation and benefits.

According to the study, to be released Friday by the John J. Heldrich Center for Workforce Development at Rutgers, just 7 percent of those who lost jobs after the financial crisis have returned to or exceeded their previous financial position and maintained their lifestyles.

The vast majority say they have diminished lifestyles, and about 15 percent say the reduction in their incomes has been drastic and will probably be permanent.

If this is accurate, it means there will be a tremendous drag on economic growth.  The nation thrives on demand for goods and services by consumers, who in turn use income and debt to fund that demand.  If income is not rising and debt cannot rise then increased demand will be too low to generate the 3.5% to 4.5% level of growth needed for a strong sustained jobs recovery.  It also explains why a huge number of people have left the labor force, as the reccent labor report found.

And like many trends, the increase in jobs has not been uniform.  In fact, areas where job cuts were the greatest have turned out to be areas were new hiring is the least.

The sectors that have been slowest to recover are those that endured the most acute job losses, like construction and state and local government. Construction workers are among the biggest sufferers, stung by a housing collapse that led to the loss of two million jobs. Since the recovery began, the industry has added just 47,000 jobs. . . . “This recovery is really not a fair and balanced recovery,” said Scot Melland, chief executive of Dice Holdings, an online job search service. “There are certain sectors that have done well, and others that haven’t done well at all. If you’re in one of the losing sectors, it’s very tough.”

So what should be done to further the recovery and help those most affected.  Job training programs are one, increasing construction jobs through infrastructure projects is another, tax breaks for low income and middle income people is still another.  What do Republicans want to do?  Lower taxes on the wealthy.  How will that help?  We don’t know but if we ever figure it out we’ll get back to you.

North Carolina Legislature Wants to Allow State to Get on One Side of the Abortion Rights Debate

Conservatives Idea of a Fair Argument – We Get to State Our Side; The Other Side Does Not Get to State Its Case

One of the silliest things in American political society is that ability to put political or election messages on license plates.  For some reason proponents of all arguments think that if they can just put a word or two or three on a license plate supporting their cause this will make a huge difference.

One can imagine the anti-abortion rights advocates thinking, “If we  justput “Choose Life” on license plates millions of Americans who support abortion rights will change their mind and millions of American women who undergo abortions will cease to do so.”  Exactly right, of course, almost all of us form our political and social positions on what is placed on license plates.

So in North Carolina the Republican controlled legislature voted to allow motorists in the state to buy license plates that say “Choose Life” as a way of expressing their support on not allowing abortions.  Now The Dismal Political Economist has no problem with this, if anti-abortion rights activists want to give the state of North Carolina an extra $15.00 for a license plate with an inoffensive phrase, more power to them.

But Conservatives can never stop with just exercising their own rights, they have such weak arguments that they feel they must stop opponents from exercising their rights, and so in North Carolina you have this

The legislature, led by a majority of Republicans for the first time in more than a century, refused several efforts by Democratic lawmakers to authorize a license plate with the pro-abortion rights message “Respect Choice.”

The Republicans apparently feeling that a phrase like “Respect Choice” is so powerful it would cause previously anti-abortion activists to change side, and to cause both men and women, even women who were not pregnant to go out and get an abortion.  So the issue ends up in court, wasting judicial time, taxpayer money and demonstrating once and for all that Conservatives are just not serious about this democracy thing.  For them, too often voters freely choose positions and candidates that Conservatives think they shouldn’t and so they need the power of government to stop that sort of thing.

Washington Post Columnist Kathleen Parker Explains Mitt Romney’s “Sincere” Change on Abortion Rights

A Change that Luckily Coincided With His Presidential Aspirations

As noted here (ad nauseum) the Washington Post employees a number of Conservative columnists in an attempt to curry favor with the Republican party.  One of the better of these is Kathleen Parker who sometimes writes intelligent and thoughtful pieces.  But Ms. Parker is also a Mitt Romney supporter and so uses her space to promote his campaign among fellow Conservatives.

Mitt Romney has changed his position on a number of issues, but the really big one is abortion rights.  While running for Ted Kennedy’s Senate seat in the 1990’s Mr. Romney was not just for abortion rights, but very strongly, unequivocally for abortion rights.  After being elected Governor of Massachusetts and starting to eye the Presidency Mr. Romney became not just against abortion rights, but very strongly, unequivocally against abortion rights.  Now Ms. Parker explains how this was not a conversion for convenience but a principled decision of Mr. Romney’s after careful consideration.

Romney’s own change of heart evolved not from personal experience but rather from a purposeful course of study.

And how does Ms. Parker know this.  Well it seems she knows and has talked with the gentleman who caused Mr. Romney to change his mind.

I know this because I know the man who instructed him in 2005 on the basics of embryonic life during the stem-cell research debate then taking place in Massachusetts. 

And she talks about Mr. Romney’s taking the courageous, non popular position on stem cell research

The politically expedient choice was obvious, but Romney took a more thoughtful approach and sought to educate himself before staking out a position. Enter William Hurlbut, a physician and professor of biomedical ethics at Stanford University Medical School. For several hours, Hurlbut and Romney met in the governor’s office and went through the dynamics of conception, embryonic development and the repercussions of research that targets nascent human life. It was not a light lunch.

And somehow out of this conversation Mr. Romney became, magically, anti-abortion rights.

The result of that conversation and others was a pro-life Romney, who kept his campaign promise to honor the state’s democratically asserted preference for abortion choice but also began a personal path that happened to serve him well, at least theoretically, among social conservatives. Was his conversion sincere? No one can know another’s heart, but Hurlbut is convinced that it was.

Wow, here was a man who was heavily committed in one direction, a man of obvious intelligence and education who abandoned his deeply held belief after just one lunch. And in an incredible stroke of good fortune, that change just happened to allow Mr. Romney the ability to make a viable run for the Republican Presidential nomination, a run that would have been precluded had he not changed his position.

Now let’s not be naïve here.  A column like Ms. Parker’s does not just happen.  As a friend of the campaign she would certainly have been given information about how Mr. Romney changed his position and who was involved and be very deftly encouraged to write about it, not to boost Mr. Romney’s campaign of course, but as a public service, you know, getting out the correct story.

It may well be that Mr. Romney is a principled man, a man who does change his position when given new information or when he thinks intensely about the issues.  But with all of Mr. Romney’s changes, every one has been in the direction of making him more acceptable to the ultra Conservative base of the Republican party.  Mr. Romney has not had a single change of position which would demonstrate independence, or integrity in that the change would make him less acceptable to Republicans. 

If Mr. Romney truly placed principles above politics, at least one time in his political career one would find him taking an unpopular position, a position to which the base of the Republican party would object.  That he has never done so can only lead to the conclusion that Mr. Romney’s beliefs are sincere, that is sincere with respect to the idea that he will take any position to further his Presidential ambitions and that both the Republican party and the electorate as a whole are ignorant enough to let him do so.  He may well be correct on that point.

President Leads to Lower Low Income Heating Assistance This Winter

Isn't There a Democrat in the White House?

When talking about the Federal Budget, the spending numbers are so high that what seems to be large numbers to the rest of us is really not all that significant.  Conservatives for example talk about how eliminating the Estate Tax might only cost $10-$30 billion a year, compared to a $3 trillion spending budget.  Those who support the idiotic plans to send unmanned exploration rockets to Mars and to continue to support the manned space program also cite its insignificant costs of only tens of billions a year.

Although it shouldn’t be, it is always somewhat of a surprise when the budget cutters focus in on a really small target and cut expenditures of programs that have a huge impact on people’s lives.  Such is the case with the government’s program to help people pay for heating their homes.

Under Mr. Obama’s proposed budget, the overall heating aid program would get about $2.6 billion, down from $4.7 billion in 2010-11.

As the New York Times reports, the impact of these cuts are severe in places like the state of Maine, where cold winters and reliance on oil fired furnace make any cut in home heating assistance a real hardship.

At Penquis, a nonprofit agency in Bangor where people can apply for federal heating aid, more than 9,000 households have done so since August, said Melanie Hurlburt, a division manager there. The agency is booked solid into January for appointments to apply for heating assistance, she said, but this year’s average benefit of $332 will buy only 100 gallons of fuel. The Maine Energy Marketers Association, which represents the state’s heating oil dealers, estimates that an average household uses about 850 gallons a year.

So what happens when you cannot afford to buy heating oil?  Not a difficult answer, you live in a cold house.

In Bangor, the average low in January is seven degrees. Rebecca Brunton, a recently divorced mother of three, applied for heating aid at Ms. Hurlburt’s office the other day in hopes of avoiding the situation she found herself in last winter: so behind on her oil bill that she stopped getting deliveries. She ended up lugging a five-gallon can to the gas station every day and buying $20 worth of kerosene at a time.

Maine elected an ultra-Conservative governor last year.  He doesn’t look like much of a source of help.

Maine is more dependent on oil heat than any other state, and Gov. Paul R. LePage, a Republican, recently called for cutting heating oil consumption in half by 2014, partly by bringing more gas lines into the state.

but exactly how that will help in January of 2012 was not stated.  We are sure the Governor is cheered by the fact that private citizens and non-profit groups are stepping up.

For now, a patchwork of local fund-raising projects is seeking to replace some of the lost federal money. One of those projects is led by the author Stephen King, whose red Victorian home on a hill here, with a wrought-iron fence adorned with spiders and bats, is something of a local talisman.

which will allow the Governor to claim he didn’t raise taxes and didn’t allow his citizens to freeze to death, two accomplishments that surely mean re-election.

But the real villain here for reason unknown to anyone is the Obama Administration.  They are proposing cuts so deep that

The House and the Senate are considering smaller but still significant cuts, with the final amount yet to be determined.

See Mr. Obama, when the Conservatives in the House think you have gone too far, you have really, really gone too far.  But don’t worry about the people of Maine, you enjoy your nice taxpayer funded large white clad house in the city, and your taxpayer funded central heating.  And be sure and cheer if Congress approves an unmanned Mars Lander program, after all, spending that money on heating assistance would only make the recipients want to be warm next winter.

Unlike What the Movies Tell Us, In the Real World Police Rarely Fire Their Weapons

One Good Movie Can Have More Police Shootings Than An Entire Year in New York City

Dial Up (now there’s an old expression) your favorite action movie and count how many times the law enforcement folks exchange gunfire with the bad people.  Now take a look at the real data, the report on the number of times police fired their weapons in that center of criminal activity, New York City.

The 33 instances in which an officer intentionally shot at a suspect last year represented a 30 percent decrease from the year before. But it reflected a far greater drop since the department began keeping these records in 1971, a year in which the police in New York City fatally shot 93 people and injured 221 others.

Yes, all told for the entire year of 2010 there were only 33 times in which police pulled their weapons and took a shot at would be or actual criminals.

But when the police do shoot, they shoot a lot.

 In one case, four officers fired 46 times on two men at a Harlem block party; one man died, while the other lived after being struck by 23 bullets.

Unfortunately the news article does not expand on how the man with 23 bullet wounds survived.  One hopes that it was because police were trying not to kill the person, rather than just bad aim on the part of the officers. 

It also turns out that in 30 of the 33 shootings, the police faced citizens who had guns, or who had knives or other blades.  This is very good news.

The report also pointed out that the police responded to 206,874 radio calls involving reports of weapons, nearly all of which ended without the police firing a shot. In a force of 34,565 officers, only 00.15 percent intentionally fired at people last year, the report said.

 The New York City police department has had a number of horrific incidents in the past where unarmed and unthreatening people have been shot.  At least for 2010 New York City’s police appear to have learned how to do their jobs without looking like a bad action movie.

There were also incidents involving animals.

The report also considers 29 instances in which officers fired on dogs, and in one case, a raccoon.

The report apparently did not state whether or not the raccoon was armed and dangerous.  And an even greater mystery is what the heck was a raccoon doing in New York City in the first place.

Conservative British Government to Start Guaranteeing Loans for Businesses and to Make Direct Loans to Businesses

 Did They Forgot to Read the Conservative Rule Book?

One of the great financial and political disasters for the Obama Administration was a decision to use the federal government’s loan guarantee power to guarantee a $500 million loan to solar energy company Solyndra.  The company has since gone bust leaving the Obama Presidency open to vicious attacks of incompetence at best, rewarding political donors at worst.

Now the Conservative controlled government of Britain will implement a similar program.

The government will use its balance sheet to guarantee banks' lending, giving them the benefit of Britain's triple-A credit rating, this person said. The savings in interest payments banks make—which the government estimates could be around one percent on borrowing—will be passed onto companies. Firms with revenue of up to £50 million, or about $78 million, will be allowed to apply for such a loan, in a plan dubbed credit easing.

Why do such a thing?  Because it can be done without expending government funds.  In this type of program the government guarantees help a business get a loan, but there is no increase in government spending.  This brings joy to the heart of Britain Finance Minister, whose major goal is to reduce Britain’s budget deficit no matter how much harm that brings to the economy.

In fact, the prior harm to the economy from the Conservative’s austerity program is what has stimulated the current program.  But wait, there’s more

The government will also co-invest in a fund that will lend to small- and midsize companies. A number of institutional investors have already set up such funds, which will only invest in debt.

That’s right, the British Conservative government will make direct investments into businesses.  But it’s ok, they will be doing that through private funds, private profit making funds we assume. 

So maybe everything is really in line with the Conservative playbook.  British government’s policy will result in the massive firing of as many as 400,000 to 500,000 public employees while at the same time providing investment funds for businesses and profit opportunities for private investors.  That sure sounds Conservative.

Unlimited Attack Ads on Mr. Obama Funded by Unlimited Wealth Have Already Started

An Ugly 2012 Campaign Gets Its Ugly Started Early

Back when he was a principled Conservative Senator John McCain lead the way to try to limit the influence of money in a political campaign.  His efforts are largely wasted and forgotten, in part because Mr. McCain himself lost his enthusiasm for the fight but largely because the Courts have ruled that the ability of very wealthy people to use that wealth to drown out opposition to their policies is somehow protected by the free speech provisions of our Constitution.

As a result, there will be almost unlimited spending by both Democrats and Republicans in the 2012 election.  Since the wealthy tend to be Republicans though, this spending will not be balanced.  Spending by so-called independent groups attacking the President could well be into the billions of dollars and limited only by the amount of TV ad time available.  It’s not even 2012 and already

In the past six months, conservative groups like those affiliated with Karl Rove and the billionaire industrialist Koch brothers, and, increasingly, Republican candidates themselves, have spent more than $13 million on advertisements carrying a negative message about Mr. Obama,

which may sound like a lot, but it’s not.

“These dollar figures we’re talking about now are going to seem quaint in a few months,” said Kenneth M. Goldstein, president of the analysis group. “And they’ll seem really quaint in eight or nine months.”

Total television advertising spending on the 2012 election cycle could top $3 billion, up from $2.1 billion four years ago, Kantar estimates, fueled in part by the rise of independent groups that can raise and spend unlimited amounts of money on campaigns.

The ads are starting out ugly

Mr. Perry took remarks by the president about the need to do more to lure foreign investment out of context to suggest that Mr. Obama believes Americans are lazy. And Mr. Romney edited a video clip to put in Mr. Obama’s mouth a thought actually expressed by a supporter of Senator John McCain in the 2008 presidential race, misleadingly suggesting that Mr. Obama believes he cannot win if he talks about the economy.

The Democrats are fighting back,

Democrats have already run advertisements in Arizona, Iowa and South Carolina against Mr. Romney, who, if he wins the nomination, will be the subject of an intense Democratic effort to show him as an unprincipled flip-flopper.

Priorities USA Action, a pro-Obama group founded with the help of Bill Burton, a former White House spokesman, has spent almost a million dollars on television advertisements.

but they are going to be underfunded and overwhelmed.  The idea that one million can offset $13 million is ludicrous.

If democracy does fail in the United States, the beginning of its demise will be documented at the perversion of one of its greatest freedoms, freedom of speech.  Freedom of speech was meant to provide for ideas to compete openly and equally in the marketplace for ideas.  But a Supreme Court that treasures the right of wealthy Conservatives to drown out the opposition doesn’t see it that way.  And thus they serve as “useful idiots” to a small group of concentrated wealth.

Memo to Republicans: You Do Not Have to Cut Taxes for the Wealthy – They Are Perfectly Capable of Doing It Themselves

Thought the Top Tax Rate was 35%, Think Again

One of the nice things about being wealthy is that you have a lot of money.  And if you have a lot of money, you can hire a lot of experts to make sure you don’t pay a lot of taxes, so you have a lot more money to pay a lot more experts.  The New York Times reports on such an individual, Ronald Lauder heir to the Estee Lauder cosmetics empire fortune.

First of all Mr. Lauder came by his fortune the old fashioned way, he made sure he was born into the right family.



Bill Cunningham/The New York Times

THE COLLECTOR To celebrate the

 10th anniversary of his Neue Galerie,

Ronald Lauder exhibited works from

 his personal collection, including Cézannes.



As the son of a fabulously wealthy fashion icon, Mr. Lauder developed aristocratic tastes — and grand aspirations — at an early age. He summered in Vienna as a boy, developing a passion for Austrian art and medieval armor. At age 13, he bought his first Schiele with money from his bar mitzvah. 

and since then he has become very, very wealthy,  a fabulous art collector and a man about town, the town being New York City.

Mr. Lauder’s tax strategies have helped him accumulate this wealth.

His vast holdings — which include hundreds of millions in stock, one of the world’s largest private collections of medieval armor, homes in Washington, D.C., and on Park Avenue as well as oceanfront mansions in Palm Beach and the Hamptons — are organized in a labyrinth of trusts, limited liability corporations and holding companies, some of which his lawyers acknowledge are intended for tax purposes. The cable television network he built in Central Europe, CME Enterprises, maintains an official headquarters in the tax haven of Bermuda, where it does not operate any stations.

and it is beyond the scope of this Post to go into the details of his strategies (readers, say thank you to The Dismal Political Economist) but his actions illustrate this very important point.

The tax burden on the nation’s superelite has steadily declined in recent decades, according to a sliver of data released annually by the I.R.S. The effective federal income tax rate for the 400 wealthiest taxpayers, representing the top 0.000258 percent, fell from about 30 percent in 1995 to 18 percent in 2008, the most recent data available.

As for that horrible estate tax, the Lauders did not pay anywhere near the top rate.

the family’s tax planning was effective enough that after Estée Lauder died in 2004, she passed down nearly $4 billion to her heirs, according to tax experts who studied the case and estimated that the estate was taxed at an effective rate of 16 percent — about a third of the top estate tax rate at the time.

The complexity of the issue is further compounded by the fact that Mr. Lauder has donated a tremendous amount of money to charity and has made his art collection somewhat available to the public.

Ronald Lauder and his wife, Jo Carole, were honored for a variety of contributions: the work of their joint foundation supporting hospitals, rebuilding monuments and refurbishing American embassies around the world — more than a quarter of a billion dollars over the last five years, according to his spokesman.

The Ronald S. Lauder Foundation has donated tens of millions of dollars to rebuild Jewish communities devastated by the Holocaust and communist rule. Mr. Lauder has also given to a variety of Jewish and Israeli organizations, including the World Jewish Congress, where he has served as president since 2007. Richard Parsons, the former Time Warner chairman, presented the award, calling Mr. Lauder and his wife two of “the nation’s pre-eminent supporters of the arts and civic causes.”

So no, Mr. Lauder is not an evil man for using legal means to cut his taxes, and his charitable contributions (for which he gets a nice tax benefit) do ameliorate to some degree his actions to concentrate wealth in just a handful of people.  But at the end of the day Mr. Lauder is the poster child for why cutting taxes on the wealthy is not necessary and why raising taxes on the wealthy to fund government programs to support those who need support is the right and proper policy.  If Mr. Lauder has one less beautiful painting in his collection and thousands of children are raised out of poverty, that is an action a decent and humane society should take.

U. S. Federal Reserve System Needs to Help European Central Bank Do What the European Central Bank Will Not Do for Europe

A Risky Policy That Should Not Have Been Implemented Unless the ECB Changed

[Editor's note:  Every now and then economic policy is implemented that is so incredibly stupid that The Dismal Political Economist cannot help himself and he produces a semi-incoherent rant.  This is one of those times. ]

The Fed has just entered into an almost unprecedented policy coordination with the European Central Bank, the Bank of England and three other  Central Banks to provide liquidity to the European Banking system.  Stock markets cheered the action

Global equity markets rose sharply Wednesday in response to the show of action by central banks. The Dow Jones Industrial Average rose 490.05 points, or 4.2%, to 12045.68. The Stoxx Europe 600 rose 3.6%, while the German DAX surged 5% and France's CAC-40 increased 4.2%. Gold and oil prices rose, and the dollar weakened against the euro.

proving once again, as if more proof was needed that the people who manage large portfolios that invest in stocks have no idea what is really going on, and only have a herd mentality.  Investors moved into stocks because they thought other investors were moving into stocks.

What’s wrong with the Fed’s policy?  It doesn’t address the problem.  It’s like taking out a person’s appendix because he suffers from heart disease.  At best it won’t do any harm.

The coordinated action doesn't directly address Europe's government-debt and budget woes. Instead, it is aimed at alleviating the impact of those troubles on global markets.

The policy addresses liquidity problems in European banks.  Since the Fed cannot directly lend to European banks (and it shouldn’t for too many reasons to count) it took this action.

Under the program, the Fed loans dollars to other central banks, which in turn make the dollars available to banks under their jurisdiction. The action Wednesday made these emergency Fed loans cheaper, lowering their cost by half a percentage point.

which does help the problem of bank liquidity.  But that is not the core problem.  The core problem is that private investors will no longer lend to many European countries at interest rates those countries can afford. There is real concern that Greece, Italy, Spain and Portugal will default.  The debt of Greece, Italy, Spain and Portugal is toxic and banks that are holding zillions of Euros of that debt are becoming toxic.

The only real solution is for the European Central Bank to support government debt of those countries, in return for immediate reform of those countries’ economies, including freeing up the labor markets by removing impediments to hiring.  But the ECB will not do this because in effect this monetizes the debt of those countries, increasing the supply of Euro’s, weakening the Euro and possibly producing inflation. 

Germany in particular will not allow this.  The Germans want the other countries of Europe to suffer for their fiscal sins.  They also do not want inflation of any kind, yet inflation in this case would be a positive not negative result.  Germany thinks it is the moral leader of European economics.  It is not, it is imposing its will on a continent with the wrong economic policy at the wrong time.

So the Fed is an enabling agent here.  It is enabling the ECB and Germany to avoid doing what they have to do, what they must do, and what in all probably they will do once the crisis reaches a point that forces them to act.  By that time the damage will be severe, much greater than it had to be if responsible policy had been enacted, say, six months ago.

The one phrase that will be used to describe the history of this period will be this, “If the Fed and the ECB (and let’s be honest, they are who are calling the shots here, not the other four central banks in the group)  can do the wrong thing, they will do the wrong thing.”  But none of the elite central bankers will suffer, it will only be the millions of unemployed, underemployed and part time employed citizens of Europe.  And they won’t have to worry about inflation, because they will not have any income with which to purchase anything.

This action and lack of action comes at the worst possible time for the U. S.  The U. S. economy was starting to recover in the winter and early spring of 2011.  But in April the growth in employment sputtered to a halt, in part because of the growing perception that the paralysis of the Federal government would precipitate a crisis on the debt ceiling and other policy considerations.  Now the U. S. economy is showing more signs of a faster recovery.  Employment is growing, jobless benefit claims are down, consumers are enthralled with electronic gadgets and getting more confident, holiday shopping is up and it looks like the tax cuts that expire at the end of the year will be renewed. 

One thing that will bring all of this to a halt is a deterioration of the situation in Europe.  China is already beginning to see a slower economy because of a weakened Europe and is moving to expansionary monetary policy.  Germany thinks it is strong enough to continue to have growth even if Europe as a whole does not;  it is wrong.  A collapse or near collapse of the Euro will have huge negative effects on confidence and on growth.  In short unless Europe gets it economy under control a world wide slowdown will happen and a world wide recession may happen.

U. S leaders had the leverage to force Europe to act.  By requiring the ECB and others to implement the correct economic policy of ECB support for European debt and by stronger requirements of economic reform in Italy, Spain, Greece and Portugal the U. S. could have set Europe on a path for avoiding disaster.  But they didn't, everyone made nice with each other.  So now the question is whether or not Europe can do what is needed on their.  They probably cannot, and when markets realize that it will not be pretty.

This whole ugly episode illustrates another saying about governments and central banks and economic policy, “If things can get worse, they will get worse”. The health of the world economy for 2012 now rests on the hope rather than the expectation that this is not true.

Former Bush Secretary of the Treasury Henry Paulson May Have Given Inside Information on Fannie Mae and Freddie Mac to Hedge Fund Managers

That’s Why They Can Make Money in the Market and You Cannot

President George W. Bush selected Goldman Sachs CEO Henry Paulson to be his Secretary of the Treasury before the financial crisis hit in 2008.  Mr. Paulson took the job in part because there was a tremendous tax advantage for him to do so.  He had huge gains in his stock in Goldman Sachs, which he had to sell to join the government.  But a provision in the law allowed him to postpone capital gains tax, possisbly forever,  if he put the proceeds in Treasury securities. 

It turns out Mr. Paulson had another reason to join the government.  Bloomberg News is reporting that Mr. Paulson met with his old buddies on Wall Street and told them that Fannie Mae and Freddie Mac, two private companies at the time, were going to be taken over by the government. 

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information -- to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

This would do the following for them.  Knowing that the equity of the two companies would go to zero, the hedge fund managers could short the stock and make a profit equal to whatever they received for the stock. 

There’s no evidence that they did so after the meeting; tracking firm-specific short stock sales isn’t possible using public documents. . . .

The fund manager who described the meeting left after coffee and called his lawyer. The attorney’s quick conclusion: Paulson’s talk was material nonpublic information, and his client should immediately stop trading the shares of Washington- based Fannie and McLean, Virginia-based Freddie.

And what was Mr. Paulson telling the public at this time?

At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals -- and the GSEs’ shares were rallying, with Fannie Mae’s nearly doubling in four days.

As for the legality of what Mr. Paulson was doing

And law professors say that Paulson himself broke no law by disclosing what amounted to inside information.

Of course not, that’s not what laws are for are they.

As for Mr. Paulson, we now find him

Paulson is now a distinguished senior fellow at the University of Chicago, where he’s starting the Paulson Institute, a think tank focused on U.S.-Chinese relations.

The University of Chicago, in case anyone is not aware, is the home of laissez-faire economics, and its economics department is the home of the strongest “government regulation is evil, the free enterprise system unencumbered by any rules is the best of all possible worlds” thinking (?) in the nation.  Any institution with basic principles would now be embarrassed to have Mr. Paulson associated with it.  The University of Chicago probably could not be prouder.

Note to Washington Post Fact Checker: When Someone Lies, You Need to Say that Someone Has Lied

 Yes That Might Offend the Liars, That's the Point

The Washington Post has a Fact Checker who awards “Pinocchio’s to public figures who misspeak the truth.  The larger number of Pinocchio’s, the greater the lie.  In some cases the speaker simply puts a positive or negative spin on things, and in some cases the speaker just out and out fibs.

Such is the case in the recent Fact Checker review of comments made by anti-government spending, anti-tax Republican and Conservative Grover Norquist.  Mr. Norquist has the position that all government spending is bad, that all taxes are bad and he has every right to have this position.  He also has corralled almost all Republican legislators and politicians into signing a pledge that they will never, ever raise taxes.

To defend his position Mr. Norquist regularly goes on television, and he exploits the fear of the main stream media against being called biased to generate far more time than he otherwise would get.  Here are his comments on the Stimulus on Meet the Press.

We just wasted $800 billion on stimulus spending that added to debt that killed jobs. There are fewer jobs than before.”

And here are his comments on the Bush tax cuts

The 2003 rate reductions you had on cap gains and others -- that gave you four years of strong economic growth that lasted until the Democrats won the House and Senate, and you knew those tax cuts were going away.”

Okay, the second quote here is spin, not in itself incorrect because the Democrats did mostly support allowing the Bush tax cuts on the wealthiest Americans to expire.   (That this did not happen somewhat refutes Mr. Norquist’s position, but not enough to make it a downright lie).

But the first quote is simply a lie.  After it took effect in late 2009 a huge number of jobs have been created by the Stimulus, a fact documented by the number of people employed and by the analysis of the CBO and others.  But here is the Fact Checker commenting on Mr. Norquist’s lie.

His comment on the stimulus bill was also highly misleading.

No Mr. Fact Checker, it was a lie, and if you cannot call a lie a lie then maybe you ought to get out of the business of fact checking and into something else.  We understand that your employer, the Washington Post, doesn’t want to offend Conservatives,  but sooner or later you just have to tell it like it is.  And that will offend Conservatives (and Liberals and Democrats too who lie all the time).  Sorry, that’s what it means to be in the Fact Checking business.