Zeitgeist

Rising Voter Apathy

by Ryan Young on February 10, 2012 · 0 comments

in Politics as Usual, Zeitgeist

I don’t always agree with Peggy Noonan, but she makes a good point about why voter turnout and cable news ratings are down in this election year:

Maybe the story the political class is missing is not “They don’t like the Republican field,” or “They don’t like Obama.” Maybe the story is that people are tuning out altogether. Maybe they’re bored with politics, and most especially with politicians. Maybe they don’t think our government can’t (sic) solve anything. Maybe, even, our political class has done such a good job depicting the crisis we’re in that the American people, with their low faith in institutions, think nothing, really, can be done about it. So let’s check out. Let’s watch the game.

As Nick Gillespie and Matt Welch point out in The Declaration of Independents, businesses that treat their customers as badly as the Republican and Democratic parties treat theirs tend to go out of business. This may be exactly what we’re seeing.

$26 Billion Mortgage Settlement Rips Off Investors to Trim Banks’ Massive Costs of Bailing Out Deadbeat Borrowers

by Hans Bader on February 10, 2012 · 0 comments

in Bailout Watch, Economy, Legal, Politics as Usual, Property Rights, Zeitgeist

The $26 billion mortgage settlement announced yesterday is bad news for “bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon,” notes Bloomberg News.  He says that the settlement rips off innocent investors and pension funds in order to reduce the banks’ costs of bailing out delinquent mortgage borrowers and others.  (As we noted earlier, the Justice Department, state attorneys general, and the biggest banks reached an agreement to provide $26 billion to delinquent mortgage borrowers and others, such as left-wing housing counseling similar to ACORN — in what the New York Post calls a “deadbeat bailout”).  As Simon notes,

“They’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.”

Asset managers are frustrated with the deal because, in addition to the debt the banks own, it gives credit to the lenders for changes to loans they hold no interest in and oversee for investors. That “treats people’s 401(k)s and pensions,” which hold mortgage securities, “like perpetrators as opposed to victims,” Simon said. The deal comes after all 50 states announced a probe into foreclosures in 2010 . . . costing bondholders as liquidations of bad debt were delayed.

“Think about this, you tell your kid, ‘You did something bad, I’m going to fine you $10, but if you can steal $22 from your mom, you can pay me with that,’ ” Simon said yesterday. . .

Laurie Goodman . . . who has advocated for mortgage forgiveness in testimony to Congress, joined him in criticizing the agreement yesterday. . .“There is a difference between principal reductions and giving banks credit for spending others’ people money.”

As we noted earlier, by ripping off mortgage investors, this deal will make investing in mortgages more risky, which will in turn drive up interest rates that homebuyers have to pay in the future.  This deal only covers borrowers at certain banks, not those borrowers who mortgages are held by the government-sponsored mortgage giants Fannie Mae and Freddie Mac, which (unlike the private banks) have never repaid their bailout, and are currently still being bailed out at an ever-increasing tab of $170 billion.

This deal is not the only way that federal and state officials are messing up the housing market.  The Obama administration is forcing banks to make risky loans (in the name of “fair lending”), thus planting the seeds of a future financial crisis. The Justice Department is suing banks that refuse to do so, and forcing them both to award preferential loans based on race, and to cough up money in “settlements,” some of which goes to left-wing “community” groups.

The Obama administration recently launched a multibillion dollar bailout for speculators. Bloomberg News reported that the administration is vastly expanding aid for certain “delinquent homeowners,” paying banks up to 63 cents for every dollar in principal they write off for such homeowners.  Speculators will benefit, because bailout recipients don’t even have to live in a house to get its mortgage principal reduced at taxpayer expense.

The STOCK Act’s Muzzle and How to Fix it in Conference (Update)

by John Berlau on February 10, 2012 · 0 comments

in Features, Regulation, Sanctimony, Transparency

Post image for The STOCK Act’s Muzzle and How to Fix it in Conference (Update)

My colleagues David Bier and Ryan Radia contributed to this post.

Per the scenario in a previous post, it’s April 2012. You are a conscientious congressional staffer who still takes seriously the need to be a steward of taxpayers’ money. (Yes, I know for a fact, there are more than a few of these folks around on Capitol Hill.) You are watching closely events surrounding an “omnibus” or “minibus” spending bill deemed even by conservative Republican members as “must-pass” because it funds the military as well as other parts of government.

Suddenly, you hear about an outrageous earmark about to be slipped into the bill that would enrich a Fortune 500 company. You decide to alert a network of fiscal watchdogs you’ve met with over the years to wage an instant campaign against this piece of corporate welfare.

You have all the information in the e-mail and are about to hit “send.” But then you remember something from a briefing you attended a couple days ago. The subject was the STOCK (Stop Trading on Congressional Knowledge) Act – aimed at stopping “insider trading” by members and employees of Congress – that your boss and nearly every other member of Congress voted into law in February.

At the time, you didn’t think the law would affect you since the only trading you do is indirect, through your mutual funds and pension. You were surprised to learn, however, that you now have a broad “duty of confidentiality” that encompasses not just trading on “material, nonpublic information,” but disclosing information to those who might.

You sit back and think, “It is indeed possible that someone I send this to could buy stock in the company, or could short the company based on the coming outrage.” You stare at the computer screen wondering how virtually no one noticed how this law could have potentially criminalized an act of whistleblowing as abetting “insider trading.”

Such a scenario is almost certain if House and Senate versions of the STOCK Act are not modified before a final bill is sent to President Obama. The House passed the bill yesterday with a 417-2 vote after a similarly overwhelming 96-3 Senate vote last week.  Both bills must go to “conference” to produce a final identical bill to be voted on by both houses, giving members an opportunity for a fix to help make sure that whistleblowing and routine communication with outside groups from being caught in the law’s web.

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Today’s Links: February 10, 2012

by Nicole Ciandella on February 10, 2012 · 0 comments

in Odds & Ends

OPINION

DON BOUDREAUX: “The Twistocracy”
“[U.S. Senator Kirsten] Gillibrand (D-NY) said: ‘The power to decide whether or not to use contraception lies with a woman – not her boss.  What is more intrusive than trying to allow an employer to make medical decisions for someone who works for them?‘ The twisted logic underlying Ms. Gillibrand’s worldview is stunning.  First she wants to collectivize health-care funding.  Second, she then expresses indignance that express orders by the state on how private parties spend their funds are resisted by those private parties.  And third, she parades her indignance as being a defense of private spheres of actions that ought not be intruded into by outsiders!”

PETER SCHWEIZER: “Warren Buffett: Baptist and Bootlegger”
“Warren Buffett is very much a political entrepreneur; his best investments are often in political relationships. In recent years, Buffett has used taxpayer money as a vehicle to even greater profit and wealth. Indeed, the success of some of his biggest bets and the profitability of some of his largest investments rely on government largesse and “coddling” with taxpayer money.”

KATY WALDMAN: “Uncle Sam Is Not Coming For Dinner”
“America is fat, but Americans disagree about what this means. Either the country’s obesity rates—one third of all adults are obese—are a dangerous health crisis, or they show that the nation is healthier and wealthier than ever. Either the government must act immediately to curb our waistlines, or we must act to curb our bloated government. These were the questions debated in NYU’s Skirball Center last night at theSlate/Intelligence Squared live debate, in which four health and policy experts argued the motion that “Obesity is the government’s business.””

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Massive Anti-Bullying Law and Bullying Initiatives Were Based on Misleading Publicity

by Hans Bader on February 9, 2012 · 1 comment

in Legal, Personal Liberty, Politics as Usual, Sanctimony, Zeitgeist

“It launched a hundred ‘anti-bullying’ initiatives at all levels of government, but much of what you think you know about” the Tyler Clementi case “is probably wrong,” notes legal commentator Walter Olson at Overlawyered, the world’s oldest law blog. Andrew Sullivan discusses this as well, linking to Ian Parker’s article in The New Yorker.

We wrote earlier about how the current panic over bullying is leading to attacks on free speech, political debate, and free association in the schools; political pandering; dishonest stretching of existing federal laws by federal officials; and violations of basic principles of federalism.

Reason’s Jacob Sullum writes about New Jersey’s massively-long “Anti-Bullying Bill of Rights,” enacted after Clementi’s suicide at New Jersey’s Rutgers University, and how it infringes on free speech and imposes illegal unfunded mandates. When New Jersey passed this incredibly complicated anti-bullying law, which contains 18 pages of “required components,” that gave a huge boost to a burgeoning “anti-bullying” industry that seeks to define bullying as broadly as possible (to include things like “eye-rolling,” or always associating with the same group of friends) in order to create demand for its services. Hundreds of New Jersey schools “snapped up a $1,295 package put together by a consulting firm that includes a 100-page manual.”

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Good News/Bad News On Human Spaceflight Regulation

by Rand Simberg on February 9, 2012 · 2 comments

in Features, Regulation, Space

Post image for Good News/Bad News On Human Spaceflight Regulation

In a bill passed last week authorizing the Federal Aviation Administration for another year, the moratorium on regulation of the safety of spaceflight participants, in place since 2004, was extended for another three years, but not as long as proponents in industry had hoped:

Section 827 of the bill (on page 318), tucked away in the “Miscellaneous” section of the bill between sections on air passenger screening privacy and air transportation of lithium batteries, extends the current restriction on safety regulations, but only to October 1, 2015. The joint statement of managers of the conference report provides a few more details, on page 152 of the PDF document: “Nothing in this provision is intended to prohibit the FAA and industry stakeholders from entering into discussions intended to prepare the FAA for its role in appropriately regulating the commercial space flight industry when this provision expires.”

The current moratorium, which was due to expire at the end of this calendar year, was put in place by the 2004 Commercial Space Launch Amendments Act, which prohibited the FAA from regulating passenger safety for a period of eight years (its ability to license launches for the protection of uninvolved third parties was not affected). The idea was that the technology was insufficiently well understood by anyone, including the putative regulators, to put in place regulations that wouldn’t stifle industry development and innovation, given all the different approaches (vertical takeoff and landing, horizontal takeoff and landing, air launch, hybrid rockets, liquid rockets, etc.). The model proposed instead was on the basis of informed consent, in which participants would be given all information available on the design and operations of the vehicle, and make their own assessment of the risk, and whether or not it was worth it.

The problem was that everyone had envisioned more rapid progress, but in the seven years since, not a single commercial passenger flight has occurred, due to development problems with Scaled Composites’ SpaceShipTwo propulsion, and the financial crisis starving some of the other fledgling companies of funds needed for development. Accordingly, the industry had been pushing for Congress to extend the moratorium for another eight years to gather more needed experience to intelligently inform regulations, except this time the clock wouldn’t start when the bill passed, but rather when the first commercial passenger spaceflight occurred, to prevent the problem that arose from the first bill.

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Even Liberal Reporters Sour on Stimulus-Funded California Rail Boondoggle

by Hans Bader on February 8, 2012 · 1 comment

in Economy, Mobility, Politics as Usual, Stimulus to Nowhere, Zeitgeist

Even reporters at the famously-liberal Los Angeles Times have soured on California’s $100 billion-plus rail boondoggle, whose cost will far outstrip whatever the state will get from the $800 billion stimulus package to build it.  But the paper’s editorial board, which supported the stimulus package, continues to back the project, which has ballooned in cost from $33 billion to over $100 billion.  (Managing to see the bright side of even the most pernicious government waste, the paper’s board cited other boondoggles with approval, like Boston’s disastrous Big Dig project, which resulted in motorist fatalities. It praised that infamous project for replacing “what used to be an expressway” with “a downtown park”, despite the fact that it caused “severe delays” for motorists and had a skyrocketing price tag of more than $15 billion.)

But as its own reporter, Steve Lopez, recently noted, there is no telling how much the project will ultimately cost, or when it will actually be completed:

The projected completion date has gone from 2020 to 2033. The anticipated cost has ballooned to as high as $117 billion, and no one seems to have a clue where the bulk of the money would come from. The state auditor and the state Legislative Analyst’s Office have raised serious concerns, and the rail authority’s own peer review group said the project represents “an immense financial risk” to the state. And two weeks ago, the railroad authority’s top executive resigned.To top it off, a poll last fall said nearly two-thirds of registered voters would run this train off the rails if they had a chance to vote again.

The rail project won’t even be useful or economically viable once it’s finished, since travelers will be able to travel more cheaply by road or air than by taking the train.  As syndicated columnist Amy Alkon notes, “this is a totally unnecessary train (and I say that as a train lover). It’s $59 from LA to SF on Southwest if you book in advance,” less than a train ticket will likely cost.  And although the project is misleadingly called a “high-speed” rail project, it turns out that “the train couldn’t really run high speed” after all.

As Tim Cavanaugh noted in Reason, the Los Angeles Times reporter, Steve Lopez, had

the good fortune to answer to the newsroom rather the opinion section, where bullet-train belief still reigns as supremely as it does in Gov. Jerry Brown’s rumpus room. The important thing is that one more prominent Golden State blowhard is sealing the case against the vacant and bankrupt high-speed rail project. . . . In a piece I missed earlier this month entitled “Keeping faith with California’s bullet train,” the ed board praised the High-Speed Rail project because it is similar to Boston’s notorious Big Dig and the building of the pyramids by slaves.

The Obama Administration still supports this boondoggle even though it has been criticized by other liberal newspapers like the Washington Post.  That paper, which has not endorsed a Republican for President since 1952, criticized the project in an editorial entitled “California’s High-Speed Rail System Is Going Nowhere Fast.”

As we noted earlier, the small fraction of the stimulus package that was earmarked for transportation was devoted disproportionately to laying the groundwork for wasteful “high-speed” rail boondoggles that are not actually “high” in speed. These multibillion dollar rail boondoogles would provide work at inflated wages for politically-powerful unions. But these projects are expensive white elephants that would be used by very few travelers at an enormous cost per mile, and not enable trains to go anywhere near as fast as they do in Europe, Japan, or China. (Other union-backed provisions in the stimulus package wiped out jobs in America’s export sector.)

Obama relied on exaggerated claims to push through the stimulus package, claiming it was needed to prevent an “irreversible decline” in the economy,  even though the Congressional Budget Office admitted that the stimulus package would shrink the economy “in the long run.” Even an old-fashioned Keynesian stimulus might have been something that America could not afford at a time of record deficits. The Congressional Budget Office, ignoring various flaws in the stimulus package, argued that it would boost the economy in “the short run.” But even the CBO conceded that the stimulus would shrink economic output in “the long run” by increasing the national debt and thus crowding out private investment.

Today’s Links: February 8, 2012

by Nicole Ciandella on February 8, 2012 · 0 comments

in Odds & Ends

OPINION

MARK BUCHANAN: “A Bar May Be The Place to Understand Markets”
“Economists have wondered for decades why markets have ‘excess volatility’ — that is, why prices move up and down more than they should by any sensible reckoning of assets’ fundamental value. [...] Imagine a college bar with music and cheap drinks every Thursday night. Naturally, lots of students want to go. Trouble is, it’s a tiny place, and they will enjoy it only if 60 percent or fewer of them go. Otherwise, they will suffer miserably in the cramped heat. Hence, each week, every student faces a tricky decision: How to do what most other people will not do.”

FARHAD MANJOO: “The Thermostat Wars”
“Late last year Tony Fadell, the guy who created the iPod at Apple, launched Nest, a new company that aims to reinvent household devices. Nest’s first product is a beautiful, easy-to-use, $249 ‘learning thermostat.’ It launched to rave reviews, and sold out instantly. [...] Honeywell filed a wide-ranging patent infringement suit against Nest, alleging that the startup used seven different Honeywell inventions. [...] The Honeywell v. Nest lawsuit is being justifiably criticized as another black mark on our broken patent system. If Honeywell invented all these cool features, why didn’t it make something of them?”

MARK CALABRIA: “Bernanke’s Anti-Stimulus”
“One of the direct results of the Federal Reserve’s zero interest rate policies has been a massive reduction in interest income going to households. Since 2008, household interest income has fallen by about $400 billion annually. That’s $400 billion each year that families have not had to spend.”

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Today’s Links: February 7, 2012

by Nicole Ciandella on February 7, 2012 · 0 comments

in Odds & Ends

OPINION

SEN. ROB PORTMAN and SEN. MARK PRYOR: “A Push for Smart Regulations”
“The Regulatory Accountability Act, which we introduced along with Sen. Susan Collins (R-Maine), would set the stage for lower-cost rules, greater transparency and a more stable regulatory environment for job creation and investment. First, drawing on executive orders by presidents of both parties over three decades, our legislation requires agencies to evaluate the costs and benefits of proposed regulations; consider the potential effect on jobs and the economy and choose the least burdensome approach that accomplishes the intended policy goals.”

BEN BAJARIN: “Why Technology and Innovation Are Critical to America’s Future”
“While much technological innovation has taken place in the past 30 years, I believe that we’re just now at the beginning stages of one of the most technologically innovative time periods in our world’s history. It’s important that we ensure the new technological advancements, technology companies and innovations come from the United States.”

NEW YORK POST EDITORIAL: “Curb the Pensions!”
“The unions may be dead set against it, but New Yorkers overwhelmingly support a new pension system for future government employees. [...] Cuomo’s proposal is simple: Let new state and local hires pick between a traditional, but slightly less generous, pension and a 401(k)-style savings plan. Most private-sector workers don’t even get such a choice — but the unions were quick to denounce it as ‘an assault on the middle class.’”

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Liberal Tax Fantasies Punctured

by Hans Bader on February 6, 2012 · 0 comments

in International, Politics as Usual, Zeitgeist

Some liberals have the unrealistic fantasy that by increasing taxes on the top one percent of the population, the government can finance a radically expanded welfare state for the bottom 99 percent. (Never mind that even if we confiscated the entire annual income of the top one percent, it wouldn’t begin to cover the record, trillion-dollar federal budget deficit.) They assume that somewhere in Europe, there is a country that does just that, without harming its economy. Alas, there is no such country, anymore than unicorns exist.

As Veronique de Rugy of the Mercatus Center recently noted, the U.S. already has a more progressive tax code than most European countries:

The richest 10 percent of U.S. households (those making $112,124 or more) contribute a greater share of taxes (45.1 percent of all income taxes) than their counterparts in any other industrialized nation.

Meanwhile, the average tax burden for the top 10 percent of households in OECD countries is 31.6 percent of the revenue collected, well below the percentage in America.

Interestingly, in France, a notorious welfare-state government, only 28 percent of revenue comes from the top 10 percent of income earners. As for the top 1 percent of Americans, their share of federal taxes paid is roughly 30 percent.

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