How True

Millionaires Go Missing

Maryland's fleeced taxpayers fight back.

Here's a two-minute drill in soak-the-rich economics:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions. For evidence, consult California, New York and New Jersey (see here).

The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."

All of this means that the burden of paying for bloated government in Annapolis will fall on the middle class. Thanks to the futility of soaking the rich, these working families will now pay Mr. O'Malley's "fair share."

Phoenix Light Rail Fail

From: Coyote Blog

May 20, 2009, 8:31 pm

When Phoenix was building its light rail system, I made the following two-part bet:

1. I could take all the money spent on construction and easily buy a Prius for every single daily rider, with money to spare
2. I could take the operating deficits for light rail and buy everyone gas to run their Prius 10,000 miles per year and still have money left over.

This bet has been tested in a number of cities, including LA and Albuquerque, and I have not lost yet. Now the numbers are in for Phoenix initial ridership, and I am winning the first half of my bet in a landslide.

The other day, Phoenix trumpeted that its daily ridership had reached 37,000 boardings per weekday. Since most of those people have two boardings per day (one each direction) we can think of this as 18,500 people making a round trip each day.

Well, if we bought each of these folks a brand new Prius III for $23,000 it would cost us just over $425 million. This is WAY less than the $1.4 billion we pay to move them by rail instead. We could have bought every regular rider a Prius and still have a billion dollars left over! And, having a Prius, they would be able to commute and get good gas mileage anywhere they wanted to go in Phoenix, rather than just a maximum of 20 miles on just one line. Sure, I suppose one could argue that light rail is still relatively new and will grow, but even if ridership triples, I still win the fist half of my bet. And as the system expands, my bet just looks better, as every single expansion proposal has been at a cost of $100 million a mile or more, more expensive than the first 20 miles.

So now, all we have to do is wait to see the operating results to settle the second half of my bet. If common practice is followed from other metro areas, this will be extremely difficult to prove because the authority will do everything it can to hide the huge operating dollar hole light rail is creating.

But Coyote, what about congestion?

I am glad you asked. Folks will argue that rail reduces congestion. Normally, I would agree but argue that it reduces congestion at way too high of a price. But for Phoenix light rail, it may even be that rail makes congestion worse.

Here is why: In building Phoenix light rail, the city along most of the line had to remove two lanes of traffic (one each way) to build the line. So here is the comparison:

• Light rail carries 37,000 trips per day or about 2,000 per hour (1,000 each way) through its 18-hour operating day, though certainly there are peaks and valleys around this average
• A typical lane of road has a capacity of 2000 cars per hour, so light rail removed 4,000 cars per hour of road capacity (2,000 each way). Its unclear how many riders this equates to, but the average car in the city has 1.5 passengers, so we will call this a road capacity of 6,000 trips per hour (3,000 each way).

So, we have replaced roads that can carry 6,000 trips per hour with train tracks carrying 2,000 trips per hour. Sure, the train carries more than 2,000 in some peak periods, but probably not more than the road it replaced was capable of carrying. Further, I can attest from personal experience that the complexity of trains on the road and passing through intersections screws up the timing of lights and results in lost capacity on the roads in the area that remain.

Child’s Ability to Delay Gratification is a Predictor of Future Success, Higher SAT Scores By 200 Points

Child’s Ability to Delay Gratification is a Predictor of Future Success, Higher SAT Scores By 200 Points

In the late 1960s, Stanford University conducted an experiment on young childrens' self-control and ability to delay gratification. Researchers would give young children a choice: the child could either eat one marshmallow right away or, if he or she was willing to wait while the researcher stepped out of the room for a few minutes, the child could have two marshmallows when the researcher returned. If the children rang a bell on the desk the researcher would come running back, and the child could eat one marshmallow but would forfeit the second.

Most of the children struggled to resist the treat and held out for an average of less than three minutes. About 30% of the children successfully delayed gratification until the researcher returned, some fifteen minutes later. These kids wrestled with temptation but found a way to resist.

An analysis of the results showed that the children who rang the bell quickly, seemed more likely to have behavioral problems, both in school and at home. They got lower S.A.T. scores. They struggled in stressful situations, often had trouble paying attention, and found it difficult to maintain friendships. The child who could wait fifteen minutes had an S.A.T. score that was, on average, 210 points higher than that of the kid who could wait only thirty seconds.

~The New Yorker

Soak the Rich, Lose the Rich

Americans know how to use the moving van to escape high taxes.

By ARTHUR LAFFER and STEPHEN MOORE

With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit.

Chad Crowe

Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

Martin Feldstein, Harvard economist and former president of the National Bureau of Economic Research, co-authored a famous study in 1998 called "Can State Taxes Redistribute Income?" This should be required reading for today's state legislators. It concludes: "Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust. . . . A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees."

More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit.

Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich.

This result was all the more remarkable given that these were years when the stock market boomed and Wall Street gains were in the trillions of dollars. Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect. New Jersey now has one of the largest budget deficits in the nation.

We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.

Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.

They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.

Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation -- much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.

One last point: States aren't simply competing with each other. As Texas Gov. Rick Perry recently told us, "Our state is competing with Germany, France, Japan and China for business. We'd better have a pro-growth tax system or those American jobs will be out-sourced." Gov. Perry and Texas have the jobs and prosperity model exactly right. Texas created more new jobs in 2008 than all other 49 states combined. And Texas is the only state other than Georgia and North Dakota that is cutting taxes this year.

The Texas economic model makes a whole lot more sense than the New Jersey model, and we hope the politicians in California, Delaware, Illinois, Minnesota and New York realize this before it's too late.

Mr. Laffer is president of Laffer Associates. Mr. Moore is senior economics writer for the Wall Street Journal. They are co-authors of "Rich States, Poor States" (American Legislative Exchange Council, 2009).

What goes around comes around (but they will cry about it anyway)

By: Victor Davis Hanson, National Review Online

There is an odd sense among Democrats that nemesis simply does not exist.

A once-vein-bulging Al Gore who barnstormed the country slurring President Bush by calling him a liar now seems baffled about the precedent he set of a vice president (albeit now much more politely in the case of Cheney) questioning the policy of the current president.

A Nancy Pelosi, hellbent on releasing once-classified memos for partisan advantage, and eager to begin 'Truth" hearings, suddenly believes such an inquisition will not apply to herself, despite the fact that she, like so many Democrats from Senator Schumer to Senator Rockefeller, in that dark period in 2001, spoke of the need for, or was complicit in, approving enhanced interrogation techniques.

Then the president himself, who jump-started his campaign in Iraq's crisis year by slamming the commander-in-chief on renditions, military tribunals, email and phone intercepts, Predator drone attacks, and Iraq, now suddenly wishes to explain the nuances and complexities of these policies and why he will continue the Bush protocols — apparently oblivious to the hypocrisy involved with his own prior self-interested stridency. These examples could be easily augmented.

The problem is that between 2003-2008 there was such hysterical antagonism to Bush that the combatants never worried about the often vicious means they used to achieve their supposedly lofty ends, and so now, finding themselves in a position of responsibility, are infuriated that anyone, well, would even conceive of playing hardball as they once did.

The striking thing about the sudden wounded-fawn Democratic syndrome is that Cheney is far milder than Gore was, that the CIA is not the firebrand Pelosi has been, and Bush has been silent about Obama in a way that even Clinton was not about Bush. If this softball stuff excites such outrage, what will happen if politics really get rough, say, as it was around 2007?

Krauthammer’s Take on Pelosi

From last night’s “All-Stars.”

On Nancy Pelosi’s press conference:

Well, her news conference today was an utter disaster. She was nervous. She was shifty. Her syntax was incomprehensible. And there were times when she had had to refer to her original statement because she couldn't remember what the current truth — her current truth was.

It reminds me of a line in a Graham Greene novel in which a spy says "I prefer to tell the truth. It's easier to memorize." Well, she didn't have it memorized. You had a sense that if you'd attached a lie detector to her in that news conference, it would have short circuited.

Look, her problem was this. She was internally contradictory with one point. Within 30 seconds she contradicted her own statement on what she had heard from her staff in February '03. She was contradicted by the evidence of others like Porter Goss.

Her charge of the CIA lying to her is utterly implausible. Why would it lie to her and tell all the others the truth? It makes no sense at all.

And it was refuted by the black and white Obama CIA memo, not a memo out of the prince of darkness Bush and Cheney, but the Obama CIA, which showed that in the briefing in which she says that they were told none of this simulated drowning occurred, they specifically had told her about the enhancing interrogation techniques that had been used on a prisoner, obviously a month earlier.

You take all of that together, and what she said is utterly implausible. And the charge that the CIA lied to her is an extremely serious one. She is now at war with the CIA, and it has the means, by leaking selectively, of destroying her, and I suspect it will do that.

I guess Cheney isn't the only one who isn't afraid

But where are our fearless leaders in Congress????

From "The Note"

Gingrich: Pelosi 'Lied,' 'Despicable,' 'Dishonest,' 'Vicious,' 'Trivial'

In an interview with ABC News Radio’s Marcus Wilson, Gingrich, R-Ga., said Pelosi, D-Calif., “has lied to the House” in claiming that she was never briefed by the CIA about the Bush administration’s use of waterboarding and other harsh tactics.

"I think she has lied to the House, and I think that the House has an absolute obligation to open an inquiry, and I hope there will be a resolution to investigate her. And I think this is a big deal. I don't think the Speaker of the House can lie to the country on national security matters,” Gingrich said.

He continued: "I think this is the most despicable, dishonest and vicious political effort I've seen in my lifetime."

"She is a trivial politician, viciously using partisanship for the narrowist of purposes, and she dishonors the Congress by her behavior."

"Speaker Pelosi's the big loser, because she either comes across as incompetent, or dishonest. Those are the only two defenses,” Gingrich said. “The fact is she either didn't do her job, or she did do her job and she's now afraid to tell the truth.”

At least he didn't hide in his bathtub this time

If you regularly tune in to Countdown with Keith Olbermann on MSNBC, you may remember that Olbermann was mysteriously absent from the show for three days at the end of April. But Olbermann didn't just "have the night off," as David Shuster, his fill-in, said on the air three evenings in a row. According to a source inside MSNBC, it was a bizarre temper tantrum on Olbermann's part that led him to storm off the set in protest. Even stranger: The drama was all Ben Affleck's fault.

Olbermann was not scheduled to take a vacation at the end of April. But he ended up missing three shows: Friday, April 17; Monday; April 20, and Tuesday, April 21. It's what happened on April 16, though, that prompted Olbermann to exit MSNBC's studios in such a rage.

According to a source at the network, Olbermann was livid when he learned that Rachel Maddow had booked Ben Affleck as a guest on her show. Olbermann, it turns out, had been interested in having Affleck on his show, too, and when he heard that Maddow's producers had secured the actor instead, he demanded that the interview be switched from Maddow's nine o'clock broadcast to his own an hour earlier. Maddow and her staff have been known to politely give in to Olbermann's whims in the past—it was Olbermann, after all, who helped bring Maddow to the network. This time, however, they didn't budge. (With ratings for Maddow's show a bit lackluster as of late, parting with an A-list celebrity guest isn't a decision to be made lightly.) Olbermann took the matter to senior management at MSNBC and NBC Universal and asked that they step in and "correct" the situation. That didn't happen, though, and Affleck went on Maddow's show as scheduled on Thursday, April 16. And Olbermann's three-day protest commenced the next day.

Olbermann's temper—and tendency to hold grudges—is nothing new. When Dan Abrams was the host of the 9pm broadcast, Olbermann famously refused to "toss," or introduce, Abrams on the air, as he now does with Maddow. At Olbermann's insistence, five seconds of footage of the exterior of 30 Rock appeared between the two programs instead. What did Abrams do to earn Olbermann's enmity? Nothing, really, although one popular rumor floating around MSNBC at the time was that they'd both asked out the same woman a number of years ago and she'd accepted Abrams's invite instead of Olbermann's.

But Olbermann's unpredictable behavior can even put the colleagues he doesn't have a grudge against in an uncomfortable position. On April 21—day three of the stand-off—David Shuster was asked on Twitter about Olbermann's absence. His reply speaks volumes. Shuster doesn't actually state that Olbermann has the flu. He merely points out it's "flu/allergy season," a nice little hedge in case the real story was ever revealed. He then awkwardly adds that "KO is a great guy. He will return soon, I hope," indicating that, at the time, no one really knew when Olbermann would return. (Not to mention that whether or not Olbermann is a "great guy" or not doesn't make much sense in the context of having the flu.)

The biggest question—and one no one can really answer except for Olbermann himself—is why having Ben Affleck on his show meant so much to him in the first place. The two have a past: Affleck spoofed the MSNBC host late last year, although Olbermann seemed to find the imitation flattering as you can see in this clip. It's much more likely that Affleck's role in this latest bit of drama didn't matter all that much, and this was just Olbermann attempting to once again force MSNBC to give in to his demands and satiate his ego. In which case, it was just another day at MSNBC.

We called MSNBC this morning for comment. Our call was not returned.

Update: Olbermann has issued an official statement on the matter: "That was my first opportunity to take even a long weekend to mourn my mother's death and deal with the many sad logistics subsequent to her sudden passing. The source of this story is a liar and those who spread it without seeking confirmation or reputation are beneath contempt."

Our Response: We were saddened to hear of Olbermann's loss and found his tribute to his mother deeply moving. But if that was the reason Olbermann took time off two weeks later, we can't imagine why Olbermann wouldn't have simply said as much. Furthermore, we find it hard to believe one of his colleagues at MSNBC—a respected journalist, no less—would have attributed his absence to the "flu/allergy season" if Olbermann had made the perfectly understandable decision take a few days to mourn his mother's passing.

Baltic Dry Index: A Leading Economic Indicator

"People don't book freighters unless they have cargo to move."
The Baltic Dry Index closed up higher today by 100 points, reaching a 7-month high of 2,432 (see chart above).




What is the Baltic Dry Index and why do economists and stock markets follow it?

Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets.

The supply of cargo ships is generally both tight and inelastic — it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in the California desert. So marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. So the index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, crude oil, metallic ores, and grains.

Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.

Because it provides "an assessment of the price of moving the major raw materials by sea," according to The Baltic, "... it provides both a rare window into the highly opaque and diffuse shipping market and an accurate barometer of the volume of global trade -- devoid of political and other agenda concerns."

Other leading economic indicators — which serve as the foundation of important political and economic decisions - are often massaged to serve narrow interests, and subjected to adjustments or revisions. Payroll or employment numbers are often estimates; consumer confidence appears to measure nothing more than sentiment, often with no link to actual consumer behavior; gross national product figures are consistently revised, and so forth. Unlike stock and bond markets, the BDI "is totally devoid of speculative content," says Howard Simons, an economist and columnist at TheStreet.com. "People don't book freighters unless they have cargo to move."

Wolverines are going down!

Delaware State Forfeits Conference Game So They Can Beat Michigan Instead

By Dashiell Bennett, 2:50 PM on Thu May 14 2009, 349 views (Edit post, Set to draft, Slurp)

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A scheduling conflict has forced Delaware State to choose between a home against North Carolina A&T or a road game at Michigan. Guess how that turned out.

It seems the Wolverines needed another I-AA (sorry, I refuse to yield) patsy to round out their non-conference schedule, so they called the Hornets and slid them into the October 17 slot in Ann Arbor. The only problem is that the Mid-Eastern Athletic Conference already had Delaware State playing NC A&T that weekend and that game could not be moved. Quite a dilemma. Then DSU remembered that Michigan Stadium holds 105,000 and they would make more money from one road game than they probably could in a 12-game season of home games, so they will forfeit a home conference game in order to take on Rich Rod and Company. 2009 record: 0-1. Geez, I hope this doesn't hurt their BCS chances.

There is also the possibility that the Hornets were enticed by the opportunity to knock off a Big Ten team in their own building—a dream scenario made tantalizingly real by these very Wolverines. After all, they play the Delaware Blue Hens every season so the Hornets won't be scared/confused by the winged helmets the way so many Michigan opponents are. Those things are good for what ... two ... three wins a year?

Obama 'Too Competent' to Joke About

By Brent Baker
May 10, 2009

The proudest moment in his career, Late Show writer Bill Scheft boasted at a Friday comedy writer panel held at Washington, DC's Newseum, was when he got David Letterman to try to undermine guest John McCain's Bill Ayers talking point by raising McCain's relationship with G. Gordon Liddy -- as if a political dirty trickster were the equivalent of a terrorist involved with bombings which killed people, could have killed hundreds more if his attempts worked and remains unrepentant. At the event, organized by the Writers Guild of America, East, and shown Saturday night on C-SPAN, Scheft declared of his effort to discredit an anti-Obama point: “I'm more proud of that than any single joke that I've written.” That earned applause from the audience.

Later, to a chorus of “yeah” from other writers on the stage representing The Daily Show, The Colbert Report, Late Night, as well as another Late Show writer (Tom Ruprecht, who is in front of Scheft in the screen shot, the best I could get), Scheft insisted the only reason the comedy shows don't make fun of President Barack Obama is because he's “a little too damn competent and we ain't used to that.”

Excellent Column by George Will

"The administration's central activity -- the political allocation of wealth and opportunity -- is not merely susceptible to corruption, it is corruption."


Tincture of Lawlessness
Obama's Overreaching Economic Policies

By George F. Will
Thursday, May 14, 2009

Anyone, said T.S. Eliot, could carve a goose, were it not for the bones. And anyone could govern as boldly as his whims decreed, were it not for the skeletal structure that keeps civil society civil -- the rule of law. The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.

In February, California's Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state's fastest-growing programs, which provides care for low-income and incapacitated elderly people and which cost the state $5.42 billion last year. The Los Angeles Times reports that "loose oversight and bureaucratic inertia have allowed fraud to fester."

But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.

Such a federal ukase (the word derives from czarist Russia; how appropriate) to a state legislature is a sign of the administration's dependency agenda -- maximizing the number of people and institutions dependent on the federal government. For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is.

The SEIU says the cuts violate contracts negotiated with counties. California officials say the state required the contracts to contain clauses allowing pay to be reduced if state funding is.

Anyway, the Obama administration, judging by its cavalier disregard of contracts between Chrysler and some of the lenders it sought money from, thinks contracts are written on water. The administration proposes that Chrysler's secured creditors get 28 cents per dollar on the $7 billion owed to them but that the United Auto Workers union get 43 cents per dollar on its $11 billion in claims -- and 55 percent of the company. This, even though the secured creditors' contracts supposedly guaranteed them better standing than the union.

Among Chrysler's lenders, some servile banks that are now dependent on the administration for capital infusions tugged their forelocks and agreed. Some hedge funds among Chrysler's lenders that are not dependent were vilified by the president because they dared to resist his demand that they violate their fiduciary duties to their investors, who include individuals and institutional pension funds.

The Economist says the administration has "ridden roughshod over [creditors'] legitimate claims over the [automobile companies'] assets. . . . Bankruptcies involve dividing a shrunken pie. But not all claims are equal: some lenders provide cheaper funds to firms in return for a more secure claim over the assets should things go wrong. They rank above other stakeholders, including shareholders and employees. This principle is now being trashed." Tom Lauria, a lawyer representing hedge fund people trashed by the president as the cause of Chrysler's bankruptcy, asked that his clients' names not be published for fear of violence threatened in e-mails to them.

The Troubled Assets Relief Program, which has not yet been used for its supposed purpose (to purchase such assets from banks), has been the instrument of the administration's adventure in the automobile industry. TARP's $700 billion, like much of the supposed "stimulus" money, is a slush fund the executive branch can use as it pleases. This is as lawless as it would be for Congress to say to the IRS: We need $3.5 trillion to run the government next year, so raise it however you wish -- from whomever, at whatever rates you think suitable. Don't bother us with details.

This is not gross, unambiguous lawlessness of the Nixonian sort -- burglaries, abuse of the IRS and FBI, etc. -- but it is uncomfortably close to an abuse of power that perhaps gave Nixon ideas: When in 1962 the steel industry raised prices, President John F. Kennedy had a tantrum and his administration leaked rumors that the IRS would conduct audits of steel executives, and sent FBI agents on predawn visits to the homes of journalists who covered the steel industry, ostensibly to further a legitimate investigation.

The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration's central activity -- the political allocation of wealth and opportunity -- is not merely susceptible to corruption, it is corruption.

georgewill@washpost.com

Did We Elect Robert Mugabe?

Chrysler and the Rule of Law

The Founders put the contracts clause in the Constitution for a reason.

By TODD J. ZYWICKI

The rule of law, not of men -- an ideal tracing back to the ancient Greeks and well-known to our Founding Fathers -- is the animating principle of the American experiment. While the rest of the world in 1787 was governed by the whims of kings and dukes, the U.S. Constitution was established to circumscribe arbitrary government power. It would do so by establishing clear rules, equally applied to the powerful and the weak.

Fleecing lenders to pay off politically powerful interests, or governmental threats to reputation and business from a failure to toe a political line? We might expect this behavior from a Hugo Chávez. But it would never happen here, right?

Until Chrysler.

The close relationship between the rule of law and the enforceability of contracts, especially credit contracts, was well understood by the Framers of the U.S. Constitution. A primary reason they wanted it was the desire to escape the economic chaos spawned by debtor-friendly state laws during the period of the Articles of Confederation. Hence the Contracts Clause of Article V of the Constitution, which prohibited states from interfering with the obligation to pay debts. Hence also the Bankruptcy Clause of Article I, Section 8, which delegated to the federal government the sole authority to enact "uniform laws on the subject of bankruptcies."

The Obama administration's behavior in the Chrysler bankruptcy is a profound challenge to the rule of law. Secured creditors -- entitled to first priority payment under the "absolute priority rule" -- have been browbeaten by an American president into accepting only 30 cents on the dollar of their claims. Meanwhile, the United Auto Workers union, holding junior creditor claims, will get about 50 cents on the dollar.

The absolute priority rule is a linchpin of bankruptcy law. By preserving the substantive property and contract rights of creditors, it ensures that bankruptcy is used primarily as a procedural mechanism for the efficient resolution of financial distress. Chapter 11 promotes economic efficiency by reorganizing viable but financially distressed firms, i.e., firms that are worth more alive than dead.

Violating absolute priority undermines this commitment by introducing questions of redistribution into the process. It enables the rights of senior creditors to be plundered in order to benefit the rights of junior creditors.

The U.S. government also wants to rush through what amounts to a sham sale of all of Chrysler's assets to Fiat. While speedy bankruptcy sales are not unheard of, they are usually reserved for situations involving a wasting or perishable asset (think of a truck of oranges) where delay might be fatal to the asset's, or in this case the company's, value. That's hardly the case with Chrysler. But in a Chapter 11 reorganization, creditors have the right to vote to approve or reject the plan. The Obama administration's asset-sale plan implements a de facto reorganization but denies to creditors the opportunity to vote on it.

By stepping over the bright line between the rule of law and the arbitrary behavior of men, President Obama may have created a thousand new failing businesses. That is, businesses that might have received financing before but that now will not, since lenders face the potential of future government confiscation. In other words, Mr. Obama may have helped save the jobs of thousands of union workers whose dues, in part, engineered his election. But what about the untold number of job losses in the future caused by trampling the sanctity of contracts today?

The value of the rule of law is not merely a matter of economic efficiency. It also provides a bulwark against arbitrary governmental action taken at the behest of politically influential interests at the expense of the politically unpopular. The government's threats and bare-knuckle tactics set an ominous precedent for the treatment of those considered insufficiently responsive to its desires. Certainly, holdout Chrysler creditors report that they felt little confidence that the White House would stop at informal strong-arming.

Chrysler -- or more accurately, its unionized workers -- may be helped in the short run. But we need to ask how eager lenders will be to offer new credit to General Motors knowing that the value of their investment could be diminished or destroyed by government to enrich a politically favored union. We also need to ask how eager hedge funds will be to participate in the government's Public-Private Investment Program to purchase banks' troubled assets.

And what if the next time it is a politically unpopular business -- such as a pharmaceutical company -- that's on the brink? Might the government force it to surrender a patent to get the White House's agreement to get financing for the bankruptcy plan?

Mr. Zywicki is a professor of law at George Mason University and the author of a book on consumer bankruptcy and consumer lending, forthcoming from Yale University Press.

Yes it is

Thanks to "Zoogler."

Democrats Hate Military, Intelligence Agencies (cont)

Democrats charged Tuesday that the CIA has released documents about congressional briefings on harsh interrogation techniques in order to deflect attention and blame away from itself.

“I think there is so much embarrassment in some quarters [of the CIA] that people are going to try to shift some of the responsibility to others — that’s what I think,” said Sen. Carl Levin (D-Mich.), who sat on the Senate Intelligence Committee and was briefed on interrogation techniques five times between 2006 and 2007.

Illinois Sen. Dick Durbin, the No. 2 Democrat in the Senate, said he finds it “interesting” that a document detailing congressional briefings was released just as “some of the groups that have been responsible for these interrogation techniques were taking the most criticism.”

Asked whether the CIA was seeking political cover by releasing the documents, Intelligence Committee Chairwoman Dianne Feinstein (D-Calif.) said: “Sure it is.”

The CIA has long been on the receiving end of harsh rebukes from Congress — on intelligence failures leading up to the war in Iraq, on secret prisons abroad and on the harsh interrogation techniques used on terrorism suspects. But with the release of records showing that it briefed members of Congress along the way, the CIA has effectively put lawmakers on the defensive.

Intelligence officials insist it wasn’t intentional and have not taken responsibility for publicly releasing the documents.

Asked for comment about the Democrats’ charges, CIA spokesman George Little said only that the CIA “understands the importance of a strong relationship with the Congress, which in our democracy, conducts oversight of secret intelligence activities.”

But another U.S. intelligence official went further, noting that the records of the congressional briefings were “prepared in response to a request from Congress.”

See Also

• Gibbs: Lobbying won't help
• Pelosi defense: couldn't object in '03
• Cheney backs Jeb for president

Intelligence Committee member Russ Feingold (D-Wis.) said it appears that “members of the committee or their staff were not in any way involved in [the release of the document]. It appears to come from the executive branch itself. ... I think it’s unbelievable.”

A top congressional official who has participated in the briefings added: “I think the agency wanted to get this out, quite frankly.”

Analysis of Press Coverage of the People's Administration

MRC Study: TV Networks Cheer for Barack Obama's Revolution

By NB Staff (Bio | Archive)
May 11, 2009 - 15:04 ET

During his first 100 days as President, Barack Obama has pushed an audaciously liberal agenda which, if enacted, would have radical consequences for America for decades. With Democrats enjoying monopoly control of the House and Senate, the news media have a professional duty to scrutinize those policies, and give audiences both sides of the story — not just the perspective of a powerful Chief Executive.

Unfortunately, a Media Research Center analysis of ABC, CBS and NBC evening news coverage of President Obama’s first 100 days in office shows network reporters have failed as watchdogs. The networks have raised few doubts about Obama’s left-wing agenda and showered each of Obama’s major policy initiatives with positive press.

MRC analysts looked at all 982 broadcast evening news stories about Obama and his administration from Inauguration Day (January 20) through April 29. Key findings:

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• Obama’s first 100 days were defined by massive spending, aggressive intervention in the private sector and proposals for a huge expansion of the federal government. Yet none of the networks aired a single story on whether Obama’s policies were pushing the U.S. toward socialism, and no reporter used the term “socialist” to describe Obama.
  
• Not only that, network reporters never used the word “liberal” to describe either Barack Obama or his agenda during the first 100 days.
  
• The networks lavished good press on every major initiative of the early Obama administration, including the massive stimulus package, all of the various bailouts, health care, stem cells, the environment and foreign policy.
  
• In the days before the President unveiled his unprecedented $3.5 trillion budget — with a record-shattering $1.75 trillion deficit — four out of five statements on the evening newscasts parroted the White House spin that Obama was a deficit fighter.
  
• Reporters treated Obama’s hugely expensive $787 billion stimulus bill to mainly positive coverage (58 percent positive, 42 percent negative).
  
• The networks applauded Obama’s decision to use taxpayer money to fund embryo-destroying stem cell research (82% positive coverage).
  
• Network coverage of Obama’s mortgage bailout was also positive — 59% of statements supported the bailout or wanted even more intervention, compared to 41% who opposed the bailout as unfair to responsible homeowners.
  
• Reporters heavily skewed their coverage in favor of the President’s actions on global warming (78% positive).
  
• President Obama’s decision to send thousands of additional troops to Afghanistan was greeted by nearly unanimous (91%) positive coverage — a far cry from the highly negative coverage of President Bush’s successful troop surge in Iraq two years ago.

• Like Obama and the Democrats, the networks went on a feeding frenzy against big corporate bonuses. The networks aired six times more statements forwarding the “infuriated” reaction to business (104) than criticized politicians’ grandstanding (16).

• The networks spent days decrying AIG’s $165 million bonuses, but hardly mentioned the $210 million in bonuses handed out by Fannie Mae and Freddie Mac (the bailed-out mortgage giants with strong Democratic ties). ABC and NBC completely ignored the Fannie and Freddie bonuses, while the CBS Evening News gave it 27 seconds.

Such highly promotional coverage is not part of the normal “honeymoon” that exists between journalists and new Presidents. Rather, it seems to be a symptom of how few network reporters evidently see their professional role as operating on the public’s behalf as a check on whoever is in the White House.

The longstanding liberalism of network reporters made them aggressive adversaries of the Bush White House over the past eight years. The evidence from Barack Obama’s first 100 days is that that same liberal mindset has crippled reporters’ ability to be effective watchdogs on behalf of the public.

The once-fierce media watchdogs have become Barack Obama’s drooling, tail-wagging lapdogs.

Another Hard Left Appointment

Senate Panel Passes Koh [Mark Krikorian]

The Senate Foreign Relations Committee approved Harold Koh's nomination as State Department Legal Advisor on a 12-5 vote Tuesday, with Dick Lugar being his only Republican vote. (Ed Whelan and John Fonte have written on Koh for NRO.) I'm past being surprised by Lugar, but this case really is different. Koh's not just another lefty Obama nominee that conservatives disagree with — as Frank Gaffney has pointed out, Koh's rejection of the legal primacy of the Constitution means he will take the oath of office with his fingers crossed behind his back. Koh goes beyond the post-American temperament that's widespread in elite circles (and not just on the Left) to embrace a formal post-Americanism, an institutionalized post-Americanism, that is the antithesis of constitutional government. I'm sure the full Senate will end up confirming him, but any senator who votes for him will be violating his own oath to "support and defend the Constitution of the United States."

05/13 09:14 AMShare

Alexis de Tocqueville Knew His Stuff

DID THIS GUY GET IT RIGHT OR WHAT?

By

Neal Boortz

@ May 12, 2009 9:03 AM Permalink | Comments (31) | TrackBacks (0)

George Will had another excellent column over the weekend, and a listener brought this paragraph of that column to my attention.

In "Democracy in America," Alexis de Tocqueville anticipated people being governed by "an immense, tutelary power" determined to take "sole charge of assuring their enjoyment and of watching over their fate." It would be a power "absolute, attentive to detail, regular, provident and gentle," aiming for our happiness but wanting "to be the only agent and the sole arbiter of that happiness." It would, Tocqueville said, provide people security, anticipate their needs, direct their industries and divide their inheritances. It would envelop society in "a network of petty regulations -- complicated, minute and uniform." But softly: "It does not break wills; it softens them, bends them, and directs them" until people resemble "a herd of timid and industrious animals, of which the government is the shepherd."

Read it a couple of times. When you fully understand what de Tocqueville wrote find a government-educated friend and try to explain it to them. If you REALLY want a challenge find someone who voted for Obama - and has not come to regret that vote - and see if you can explain it to them.

The Wages of Moral Equivalence

The Wages of Moral Equivalence [Victor Davis Hanson]

The Obama outreach to Syria, the video sent to Iran, the failed Freeman appointment, the $1 billion to Hamas, the anti-Israeli figures in Obama's past (cf. the Wright outbursts, Khalidi, etc.), and the Al Arabiya interview all point to an "adjustment" in U.S. policy toward Israel — made easier by the victory of the rightist Netanyahu.

We are entering a new phase in which, for the first time since Jimmy Carter, an American administration really believes that land concessions back to 1967 will ipso facto ensure new mentalities that are not like those in 1967, when the Arab world on three occasions had gone to war to destroy the Jewish state within its 1947 borders.

If the Obama plan is successful, we would see Israel back to about the 1947-sized state, public professions of eternal peace — and then triumphalism from non-democratic players in the radical Islamic world to the effect that first Sinai, then Lebanon, then Gaza, then the West Bank, capped off with Jerusalem — and, for the next generation, the final task of the end of Israel itself.

Once U.S. foreign policy is based on moral equivalence — that a Western democratic state is about the same as an undemocratic, radical authoritarian entity that embraces terrorism as a tool of state policy — then anything is possible, from calling for Israeli nuclear disarmament as part of an Iranian deal, to pretending that a Hamas ten-year truce is something other than a decade of chest-thumping before the final assault.

Given the fact that the vast majority of American Jews voted for Obama — despite clear indications that he would embrace radical changes in U.S. policy toward Israel — the politics of what is to come will be as fascinating as they will be tragic.

And given the Obama method of grandly professing the opposite of the reality that will soon follow (most ethical administration nominees in history lead to Geithner, Richardson, Daschle, Solis, etc.; no desire to interfere in the private sector means near nationalization of the banking, car, and soon health-care industries; commitment to public campaign financing equals first candidate to reject it in the general election; strong desire for fiscal sobriety translates into a $1.7 trillion annual deficit; Bush shredding the Constitution means adoption of Bush's wiretaps, email intercepts, Predator attacks, Patriot Act, Iraq plan, renditions, etc., and on and on), the tell-tale sign of the final U.S. break with Israel will be a dramatic Obama hope-and-change declaration that "our historic commitment to Israel will remain unchanged."

When we hear that, we know exactly what follows . . .

05/08 02:39 PMShare

Cheney Emerges as Defender-in-Chief for Bush Years, Says He Won't 'Roll Over' - Presidential Politics | Political News - FOXNews.com

At least one (R) has a backbone. Bush and Cheney instituted policies that prevented further attacks on the United States. 100 days into the Obama administration and the Taliban is on the cusp of acquiring nuclear weapons. Maybe the Taliban and Al Qaeda don't value the constant apologies for America as much as our Commander-in-Chief.


Cheney Emerges as Defender-in-Chief for Bush Years, Says He Won't 'Roll Over' - Presidential Politics | Political News - FOXNews.com

CARPE DIEM: The Fear Index (VIX) Falls to an 8-Month Low

There was palpable fear last fall. Even if people were not concerned about their job, they were concerned about their company. I've noticed that the fear seems to be subsiding. I had no idea that there is an index that measures fear (based on volatility in the market). More good news for those who are half-full types.

CARPE DIEM: The Fear Index (VIX) Falls to an 8-Month Low