January 2012

AIG Lies; Bonuses for Fannie & Freddie; Fed Explodes Money Supply, Risks Stagflation

by Hans Bader on March 19, 2009 · 2 comments

in Bailout Watch, Economy, Labor, Politics as Usual, Precaution & Risk, Sanctimony, Stimulus to Nowhere

It’s not just AIG, being bailed out for $170 billion, that’s using taxpayer money to give fat bonuses to its employees. The same thing is happening at Fannie Mae and Freddie Mac, the fraud-ridden “Government-Sponsored Enterprises” that helped spawn the mortgage crisis, and now are being bailed out at a cost of over $200 billion.

Before publicly blasting million-dollar bonuses at AIG, the Obama administration privately signed off on those very bonuses, and included language in the economy-shrinking “stimulus” bill to protect those bonuses. (AIG gave over $100,000 to Obama, and $280,000 to Chris Dodd (D-CT) the head of the Senate Banking Committee, who inserted the language into the bill, and then lied about it). Yet the Administration is trying to deceive the public about when it first became aware of the AIG bonuses, claiming it first learned about them less than a week before they became public. The Washington Times has a story today entitled “White House Cleared Way for AIG Bonuses.”

Yesterday, liberal lawmakers hypocritically blasted the bonuses in front of TV cameras, on the same day that they voted behind closed doors to protect those bonuses. Today, however, lawmakers want to levy a 90 percent tax on bonuses, without limiting them to the AIG bonuses — apparently extending them to healthy banks that took TARP money under federal pressure so that unhealthy banks that sought and received bailout money would not be stigmatized by doing so. Taxing away bonuses at healthy banks would be an economically-destructive mistake.

The Washington Times notes that “The Obama administration and one of its key allies in Congress belatedly acknowledged Wednesday that they were responsible more than a month ago for clearing the way for large bonuses to be paid inside taxpayer-supported companies like AIG, undercutting the White House’s attempts to distance itself from a growing political embarrassment.”

The Federal Reserve is now going to print money to buy up more than a trillion dollars worth of U.S. government debt (which is exploding) and risky mortgage-backed securities (in order to artificially depress mortgage interest rates and bail out irresponsible borrowers). In response, the dollar fell, raising worries about inflation and a return to the “stagflation” of the 1970s.

Meanwhile, the Obama Administration is wasting its time on ideological causes like trying to disarm the nation’s airline pilots, even though Congress, by a broad bipartisan majority, voted in favor of arming pilots to prevent another 9/11.

Show Your Work!

by Iain Murray on March 19, 2009

in Economy, Employment, Environment, Global Warming, International, Sanctimony

Fiona Harvey of the FT is one of the better journalists covering the environmental beat, but I’m afraid that is a bit like saying that someone is one of the better members of Congress. In this blog entry on green jobs she commendably raises some objections to the idea that “green jobs” can be a panacea, but then shows her own biases with an unsupportable assertion:

That said, the move to a low-carbon economy requires such major changes in the way the whole of the economy – from house building to vehicle manufacturing to recycling our rubbish to redesigning our cities – that it is sure to entail a large number of new jobs, which will almost certainly far outweigh the effects of any job losses.

Really? The Heritage Foundation’s analysis of green employment resulting from the weak CO2 restrictions proposed in last year’s Lieberman-Warner bill found a net reduction in American employment of some 900,000 jobs. A German government study found that green technology would only be a positive for employment as long as the country remained a net exporter of the technology, something bound to change as other countries usurped their comparative advantage. A Spanish study by the Instituto Juan de Mariana found that for each green job created in Spain, at least 2.2 “regular” jobs were lost (and also that thanks to the temporary nature of many green jobs, 40,000 such jobs will be lost this year).

Fiona’s assertion reminds me of this statement by Catherine Bennett in The Guardian, 2004:

In short, if we can rise to the challenge, the permanent abolition of the wheel would have the marvelously synergistic effect of creating thousands of new jobs – as blacksmiths, farriers, grooms and so on – at the same time as it conserved energy and saved the planet from otherwise inevitable devastation

The only difference is, Ms. Bennett was clearly joking.

Barack Obama v. Warren Buffett on the Economy

by Richard Morrison on March 18, 2009

in Video, Zeitgeist

[youtube:http://www.youtube.com/watch?v=kc21pz5lpzE 285 234]

Ron Kirk confirmed as USTR — vowed trade “enforcement”

by Fran Smith on March 18, 2009

in International, Trade

The U.S. has a new U.S. Trade Representative — former Dallas mayor Ron Kirk.  Kirk was confirmed by the Senate today in a 92-5 vote.  Although Kirk is from the top exporting state in the country and should know the economic value of open trade, in his confirmation hearings he vowed to “enforce” existing trade agreements and to push for more enforceable labor and environmental provisions is pending and future trade deals.

With all that talk about enforcement in his and President Obama’s trade agenda, sounds like free trade is being viewed more like extending U.S. government regulation to trading partners rather than the exchange of goods and services to countries’ mutual benefit.  Watch non-tariff trade barriers gain even more traction if he carries through on the agenda.

Tit-for-tat: Tariffs and trucks

by Fran Smith on March 18, 2009 · 1 comment

in International, Trade

It’s no empty threat — Mexico will be slapping high tariffs on almost one hundred U.S. products beginning tomorrow, according to its economy minister.  That’s in retaliation for the U.S. reneging on its NAFTA agreement through defunding a pilot program that lets Mexican trucks bring goods into the U.S.

And it’s not just small potatoes (although those are included).  The affected products include a wide variety of U.S. goods — from juices and wine to sunglasses and toilet paper.  Although tariffs on most of the goods will be 10 to 20 percent, a steep duty of 45 percent will be assessed on some fresh products.  The tariffs will apply to $2.4 billion of goods.

Mexican officials said they want to pressure the U.S. Congress to reinstate the trucking program that was discontinued in the spending bill President Obama signed last week.

As protectionism heats up both here and abroad, expect to see more tit-for-tat trade disputes.

Carbon mitigation schemes are inherently protectionist

by Marlo Lewis on March 18, 2009 · 1 comment

in Energy, Global Warming

Thanks, Fran, for blogging on the carbon tariff threat to the peace and prosperity of the world.

We should all remember that carbon tariffs are no mere quirk of this or that administration, political party, or government agency. Protectionism is an inherent feature of carbon suppression policies, for three reasons:

(1) Companies and labor unions in carbon-constrained countries will demand carbon tariffs to “level the playing field” vis-a-vis firms in non-carbon constrained countries. Absent carbon tariffs, domestic industry and labor will not support cap-and-trade or carbon taxes.

(2) Carbon suppression programs all exhibit the classic collective action problem. However much it might be in the collective interest of every nation to “save the planet,” it is in the separate interest of each nation to free-ride on the sacrifices of others. The environmental harm any individual country incurs because it cheats on its emission reduction obligations is likely to be immeasurably small (even if we assume that global warming is an unfolding catastrophe), whereas the gains from cheating are likely to be both measurable and substantial. Unless credibly deterred and punished, cheating will be widespread and the system will collapse. Absent the threat or use of military force, trade sanctions (carbon tariffs) are the only way to prevent cheating.

(3) The EU-IPCC-Al Gore goal of achieving a 50% reduction in global emissions by mid-century is impossible absent deep emission cuts in developing countries. As this U.S. Chamber of Commerce presentation shows, the vast majority of the growth in global emissions is projected to occur in developing countries. Thus, even if industrialized countries go cold turkey and cut their net emissions to zero by 2050, developing countries would have to cut their CO2 emissions 62% below baseline projections to achieve a 50% reduction in global emissions. Whether trade sanctions would be enough to bully China and India into cutting their emissions is doubtful. One thing is certain: Preaching Gorethodoxy is not going to make them stop building coal plants and buying automobiles.

Postmodern Union-on-Union Fight

by Ivan Osorio on March 18, 2009 · 1 comment

in Economy, Labor, Regulation, Sanctimony, Zeitgeist

The Service Employees International Union (SEIU) is being denounced by a group of its own employees for doing, well, nothing wrong or illegal, but something that SEIU wants to keep businesses it unionizes from doing: laying off staff and contracting out some operations. Reports The Washington Post:

The Service Employees International Union, considered the most influential union in the nation, has notified the union that represents about 220 of its national field staff and organizers that 75 of them are being laid off. In return, the workers’ union, which goes by the somewhat postmodern name of the Union of Union Representatives, has filed unfair labor practices charges against SEIU with the National Labor Relations Board. The staff union’s leaders say that SEIU is engaging in the same kind of practices that some businesses use — laying off workers without proper notice, contracting out work to temp firms, banning union activities and reclassifying workers to reduce union numbers.

“It’s completely hypocritical,” said staff union President Malcolm Harris. “This is the union that’s been at the forefront of progressive issues, around ensuring that working people and working families are taken care of, but when it comes to the people that work for SEIU, they haven’t set the same standards.”

In the same story, Post reporter Alec MacGillis describes SEIU, correctly, as “the country’s fastest-growing union,” so it seems odd for a union that is growing to lay off the staff it needs to push that growth — but not when considering where SEIU has been spending the money it gets from member dues.

[SEIU President Andy Stern] is also engaged in a costly power struggle with the former elected leaders of one of SEIU’s largest chapters, in Northern California, who were ousted by SEIU two months ago and are now vying with it for the loyalty of the chapter’s members.

Harris said his union’s understanding is that the layoffs are the result of budget troubles faced by SEIU, which, on top of the California dispute, spent $80 million during the 2008 election and is planning to spend tens of millions more to advocate on behalf of Obama’s health-care plan and card check.

Harris said SEIU leaders have made clear that the laid-off employees will not be guaranteed jobs at local chapters. In the case of organizers who are rehired by local chapters, he said the SEIU national office would still subsidize their salaries and help supervise them, but by classifying them as working for local chapters, they would no longer be covered by Harris’s union. Fewer than half of workers at SEIU chapters are unionized, and Harris’s union’s contract with SEIU forbids it from trying to help organize SEIU employees in local chapters.

SEIU’s national office has been contracting out more and more work to a staffing agency, Harris said, including advocacy for card check.

SEIU, like any organization, has the right to hire people and contract with vendors on whatever terms it deems appropriate, and which the other party is willing to accept. Unfortunately, SEIU and other unions seek to keep businesses from having that same flexibility.

Staff union head Malcolm Harris, in addition to accusing the SEIU leadership of  hypocrisy, says, “”I would want to give them the benefit of the doubt, but the direction they seem to be moving in is union-busting” — to which SEIU’s response gives some amusingly unintentional credibility.

SEIU spokeswoman Michelle Ringuette denied that work is being contracted out and that SEIU is trying to undermine the staff union. “That would be the cynical way of looking at it,” she said.

In Washington, another word for “cynical” is “smart.” (Thanks to Eli Lehrer for the Post link.)

For more on SEIU, see here.

More on carbon tariffs

by Fran Smith on March 18, 2009 · 1 comment

in Energy, Environment, Global Warming, International, Trade

For more on the insanity of carbon tariffs, there’s an excellent 2008 article by the National Post’s Terence Corcoran appropriately titled “Blowing up the WTO.”  Here’s what he says:

This is a legal and practical quagmire. To figure out the appropriate tax level would require a mind-blowingly elaborate carbon-measurement scheme, created on a global scale. It would have to be able to determine how much carbon emissions are embedded in the power drill that is nominally made in China, but is actually assembled from parts made in a dozen other countries. Some of those countries may or may not have carbon control programs in place.

Corcoran concludes:

. . . all this is a recipe for global trade wars. It would mean, in effect, blowing up the WTO trade system to create a parallel Carbon Trade System that would be based on the opposite principles. The objective would be to restrict trade, not increase it; to control trade, not liberate it; to increase trade conflict, not reduce it; to weaken the economy, not strengthen it.

And these ideas are coming from economists?

Carbon tariffs quid pro quo?

by Fran Smith on March 18, 2009

in Energy, Environment, Global Warming, International, Trade

Just as the World Bank put out a report on increased trade protectionism in the world, U.S. Energy Secretary Steven Chu came out in favor of using carbon tariffs as a “weapon” against countries that aren’t taking steps to reduce their carbon emissions and as a way to protect U.S. manufacturers.

He seemed not to notice that the day before China’s top climate change official Li Gao had warned that carbon tariffs imposed on developing countries would be a “disaster” and perhaps start a trade war.

Li had suggested too that maybe those rich countries that import goods from China might themselves pay for offsetting the emissions in their production.

We are at the low end of the production line for the global economy. We produce products and these products are consumed by other countries, especially the developed countries. This share of emissions should be taken by the consumers but not the producers.

Chu also doesn’t seem to remember that the European Union likes the idea of carbon tariffs against such countries as – gasp – the U.S.

Smoot and Hawley ain’t seen nothing yet if carbon tariffs play out.

Hypocritical Posturing By Obama Over AIG Bonuses

by Hans Bader on March 17, 2009 · 2 comments

in Bailout Watch, Economy, Employment, Labor, Odds & Ends, Politics as Usual, Sanctimony, Stimulus to Nowhere

In response to public outrage, Obama is belatedly criticizing the millions of dollars in bonuses that AIG, which is being bailed by taxpayers at a cost of $170 billion, is paying to its executives. But his criticism is hypocritical and dishonest, both because his administration had known about the bonuses long before they became public, and because the stimulus package he himself signed contains language specifically designed to shield those bonuses.

Who put that provision there? Senator Chris Dodd (D-CT), who received $280,000 in campaign donations from AIG. (Obama himself received $103,000 from AIG). Since 2003, AIG has made most of its vast campaign contributions to liberal lawmakers — including 68 percent of its contributions in 2008. (Dodd, the Chairman of the Senate Banking Committee, is under an ethical cloud after having received a sweetheart deal from the ailing sub-prime mortgage lender Countrywide).

While executives at AIG get bonuses courtesy of the taxpayer, unions will be receiving billions in inflated and wasteful contracts courtesy of restrictions on state projects contained in the stimulus package.

Liberal lawmakers have also taken steps to insure that illegal aliens and people who lied on their loan applications will benefit from the bailouts.

Obama claimed an economic catastrophe would happen if Congress didn’t pass the bloated $800 billion stimulus package, which guts welfare reform. But now the Congressional Budget Office admits that the “stimulus” will actually make the economy smaller “in the long run.”

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