Tuesday, August 2, 2011
Eurozone coming apart at the seams
Paul Krugman says: Italy and Spain are too big for extend and pretend, and they’re also too big to save. But this is huge, and just as worrying in its own way as the US crisis of governance. Paul refers us to a Financial Times article.
Pimco's Bill Gross says U.S. could be a Banana Republic in the making
The whole world was watching, and what they saw was a dysfunctional government taking its country to the financial precipice and backing off at the very last moment. “Shades of a Banana Republic,” as former Reagan budget director David Stockman opined somewhat harshly last week. We may not be Greece just yet, but Mr. Stockman is looking in the right direction.
Treasury Secretary Tim Geithner noted last week that it would be unthinkable that the U.S. would not meet its obligations on time. Now that the timeliness has temporarily been put aside, an investor must logically ask how we will meet our obligations, and how much they really are. In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near-unfathomable $66 trillion of future liabilities at “net present cost.” As shown in the following table from a Mary Meeker “USA Inc.” study, and validated by the Department of Treasury and Congressional Budget Office (CBO) calculations, the combined present cost “payment due” from Medicaid, Medicare and Social Security is over six times our current obligations of Treasury debt. The press and most professional investors are accustomed to measuring “paper” debt as opposed to walking/living liabilities in the form of people. I call these liabilities “debt men walking” because as long as 330 million living Americans require promised entitlements – the $66 trillion that wear shoes are as much of a liability as the $10 trillion on paper.
Admittedly, as Meeker’s table (Figure 1) points out, we can address these liabilities by improving the efficiency of our healthcare system, reducing benefits, raising retirement ages, increasing tax rates or a combination of all of the above. We likely will. So reduce that $66 trillion if you care to, but the subjective remainder still hangs over financial markets like a Damocles sword. How will we meet these obligations as Secretary Geithner asked? 
Aside from the unthinkable outright default, there are numerous ways that a government – especially a AAA rated one – can employ to reduce its future liabilities. Highlighted below are the prominent tools that can significantly affect investor pocketbooks:
Treasury Secretary Tim Geithner noted last week that it would be unthinkable that the U.S. would not meet its obligations on time. Now that the timeliness has temporarily been put aside, an investor must logically ask how we will meet our obligations, and how much they really are. In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near-unfathomable $66 trillion of future liabilities at “net present cost.” As shown in the following table from a Mary Meeker “USA Inc.” study, and validated by the Department of Treasury and Congressional Budget Office (CBO) calculations, the combined present cost “payment due” from Medicaid, Medicare and Social Security is over six times our current obligations of Treasury debt. The press and most professional investors are accustomed to measuring “paper” debt as opposed to walking/living liabilities in the form of people. I call these liabilities “debt men walking” because as long as 330 million living Americans require promised entitlements – the $66 trillion that wear shoes are as much of a liability as the $10 trillion on paper.
Admittedly, as Meeker’s table (Figure 1) points out, we can address these liabilities by improving the efficiency of our healthcare system, reducing benefits, raising retirement ages, increasing tax rates or a combination of all of the above. We likely will. So reduce that $66 trillion if you care to, but the subjective remainder still hangs over financial markets like a Damocles sword. How will we meet these obligations as Secretary Geithner asked?
Aside from the unthinkable outright default, there are numerous ways that a government – especially a AAA rated one – can employ to reduce its future liabilities. Highlighted below are the prominent tools that can significantly affect investor pocketbooks:
- Balance the budget and/or grow out of it
- Unexpected inflation
- Currency depreciation
- Financial repression via low/negative real interest rates
Ballot Law: The first challenge to “Citizens United”?
Source: Westlaw Insider July 27, 2011
The Supreme Court’s 2010 decision Citizens United v. FEC left many states scrambling to amend their election laws to comply with the ruling.
According to a lawsuit brought last year, though, Minnesota didn’t do a good enough job.
The lawsuit was brought by three advocacy groups – Minnesota Citizens Concerned for Life, the Taxpayers League of Minnesota, and Coastal Travel Enterprises – seeking a declaration that Minnesota’s amended laws are unconstitutional.
How are they unconstitutional?
According to the plaintiffs, they are just as burdensome to corporations as the laws struck down in Citizens United.
Specifically, the plaintiffs contend that Minnesota still bans corporate independent expenditures (in defiance of the Citizens United ruling) by requiring corporations to establish “funds” to make such expenditures.
In addition, the plaintiffs also allege that Minnesota’s corporate disclosure requirements are burdensome enough to create an effective ban on independent expenditures.
To determine if Minnesota’s laws truly run afoul of the Citizens United ruling, we have to look at what the ruling says on the issues.
First, the Court held that the government may not force corporations to only speak through separate political action committees (PACs), mainly because they are “burdensome alternatives” to directly speaking (directly paying for public messages).
Why?
Because PACs are subject to federal regulation requiring extensive accounting, reporting, administration, and disclosure.
The plaintiffs here are claiming that Minnesota’s requirement that a corporation establish a “fund” to finance their speech is effectively as burdensome.
While the fund doesn’t need to be separate from the corporation, there are some accounting and disclosure requirements that affect the fund.
However, these requirements are much more lenient than federal PAC ones, mostly consisting of financial disclosures.
While Minnesota, like federal PAC regulations, requires the fund have an appointed treasurer, the treasurer can be a corporate employee, and the responsibilities of the treasurer are minor.
Regardless, do Minnesota’s restrictions bear enough similarities to federal PAC restrictions to make them invalid?
According to the federal appeals court that denied the plaintiffs’ request for an injunction, Minnesota’s regulations are much closer to the disclosure requirements specifically upheld in Citizens United.
When the appeals court compared Minnesota’s law to those federal requirements, they appear very similar (and probably intentionally so).
A major reason the Citizens United ruling upheld the disclosure laws was because Citizens United didn’t produce any evidence to support its argument that the requirements subjected its donors to harassment and reprisal.
Is the current case any different? Actually, very possibly.
Last year, freshly empowered by the Citizens United ruling, Target Corporation made a $150,000 donation to MN Forward, a group that supported unsuccessful Minnesota gubernatorial candidate Tom Emmer.
Emmer, a Tea Party-backed Republican, was known for his openly anti-gay political positions.
The disclosure of this donation to the public lead to a massive nationwide boycott of Target stores, attacks from gay advocacy groups, and some generally negative treatment in the public light.
While those responses may simply be categorized as forms of constitutionally-protected speech, even if that isn’t the case, the Citizens United ruling still found a strong government interest in requiring disclosure, possibly counterbalancing those “reprisals.”
Even though an appeals panel ruled for Minnesota in May 2011, the ruling was recently vacated for a hearing before the full appeals court in September.
Will that ruling come out any differently?
That’s hard to say, but given how deeply unpopular Citizens United has become, it’s unlikely the appeals circuit would rule to broaden Citizens United’s scope.
Either way, the losing party is sure to petition the Supreme Court for certiorari, at which point we’ll have a definitive answer on the issue.
The Supreme Court’s 2010 decision Citizens United v. FEC left many states scrambling to amend their election laws to comply with the ruling.
According to a lawsuit brought last year, though, Minnesota didn’t do a good enough job.
The lawsuit was brought by three advocacy groups – Minnesota Citizens Concerned for Life, the Taxpayers League of Minnesota, and Coastal Travel Enterprises – seeking a declaration that Minnesota’s amended laws are unconstitutional.
How are they unconstitutional?
According to the plaintiffs, they are just as burdensome to corporations as the laws struck down in Citizens United.
Specifically, the plaintiffs contend that Minnesota still bans corporate independent expenditures (in defiance of the Citizens United ruling) by requiring corporations to establish “funds” to make such expenditures.
In addition, the plaintiffs also allege that Minnesota’s corporate disclosure requirements are burdensome enough to create an effective ban on independent expenditures.
To determine if Minnesota’s laws truly run afoul of the Citizens United ruling, we have to look at what the ruling says on the issues.
First, the Court held that the government may not force corporations to only speak through separate political action committees (PACs), mainly because they are “burdensome alternatives” to directly speaking (directly paying for public messages).
Why?
Because PACs are subject to federal regulation requiring extensive accounting, reporting, administration, and disclosure.
The plaintiffs here are claiming that Minnesota’s requirement that a corporation establish a “fund” to finance their speech is effectively as burdensome.
While the fund doesn’t need to be separate from the corporation, there are some accounting and disclosure requirements that affect the fund.
However, these requirements are much more lenient than federal PAC ones, mostly consisting of financial disclosures.
While Minnesota, like federal PAC regulations, requires the fund have an appointed treasurer, the treasurer can be a corporate employee, and the responsibilities of the treasurer are minor.
Regardless, do Minnesota’s restrictions bear enough similarities to federal PAC restrictions to make them invalid?
According to the federal appeals court that denied the plaintiffs’ request for an injunction, Minnesota’s regulations are much closer to the disclosure requirements specifically upheld in Citizens United.
When the appeals court compared Minnesota’s law to those federal requirements, they appear very similar (and probably intentionally so).
A major reason the Citizens United ruling upheld the disclosure laws was because Citizens United didn’t produce any evidence to support its argument that the requirements subjected its donors to harassment and reprisal.
Is the current case any different? Actually, very possibly.
Last year, freshly empowered by the Citizens United ruling, Target Corporation made a $150,000 donation to MN Forward, a group that supported unsuccessful Minnesota gubernatorial candidate Tom Emmer.
Emmer, a Tea Party-backed Republican, was known for his openly anti-gay political positions.
The disclosure of this donation to the public lead to a massive nationwide boycott of Target stores, attacks from gay advocacy groups, and some generally negative treatment in the public light.
While those responses may simply be categorized as forms of constitutionally-protected speech, even if that isn’t the case, the Citizens United ruling still found a strong government interest in requiring disclosure, possibly counterbalancing those “reprisals.”
Even though an appeals panel ruled for Minnesota in May 2011, the ruling was recently vacated for a hearing before the full appeals court in September.
Will that ruling come out any differently?
That’s hard to say, but given how deeply unpopular Citizens United has become, it’s unlikely the appeals circuit would rule to broaden Citizens United’s scope.
Either way, the losing party is sure to petition the Supreme Court for certiorari, at which point we’ll have a definitive answer on the issue.
Poll: Large majority opposes Supreme Court's decision on campaign financing
By Dan Eggen
Washington Post Staff Writer Wednesday, February 17, 2010
Americans of both parties overwhelmingly oppose a Supreme Court ruling that allows corporations and unions to spend as much as they want on political campaigns, and most favor new limits on such spending, according to a new Washington Post-ABC News poll.
Eight in 10 poll respondents say they oppose the high court's Jan. 21 decision to allow unfettered corporate political spending, with 65 percent "strongly" opposed. Nearly as many backed congressional action to curb the ruling, with 72 percent in favor of reinstating limits.
The poll reveals relatively little difference of opinion on the issue among Democrats (85 percent opposed to the ruling), Republicans (76 percent) and independents (81 percent).
Indeed, the poll shows remarkably strong agreement about the ruling across all demographic groups, and big majorities of those with household incomes above and below $50,000 alike oppose the decision. Age, race and education levels also appeared to have little relative bearing on the answers.
Monday, August 1, 2011
If everyone hates the government, America is screwed
Excerpt from Jared Bernstein article:
If too many Americans don’t believe in or understand what government does to help them, to offset recessions, to protect their security in retirement and in hard times, to maintain the infrastructure, to provide educational opportunities and health care decent enough to offset the disadvantages so many are born with…if those functions are unknown, underfunded, and/or carried out poorly, why should they care about how much this deal or the next one cuts?
Those of us who do care about the above will not defeat those who strive to get rid of it all by becoming better tacticians. We will only find success when a majority of Americans agrees with us that government is something worth fighting for.
If too many Americans don’t believe in or understand what government does to help them, to offset recessions, to protect their security in retirement and in hard times, to maintain the infrastructure, to provide educational opportunities and health care decent enough to offset the disadvantages so many are born with…if those functions are unknown, underfunded, and/or carried out poorly, why should they care about how much this deal or the next one cuts?
Those of us who do care about the above will not defeat those who strive to get rid of it all by becoming better tacticians. We will only find success when a majority of Americans agrees with us that government is something worth fighting for.
The Bush Tax Cuts Must Die
This from Ezra Klein:
But Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is...nothing.
Obama even offered Boehner a deal in which the Bush tax cuts would be extended right now, so Republicans wouldn’t have to fear a subsequent negotiation in which they lacked leverage. Boehner rejected that deal and, in doing, might have saved the safety net.
Republicans have shown, that they will block any and all tax increases, no matter what incentives they are offered in return and no matter how dire the consequences of their refusal. Next year’s deadline offers Democrats their only chance to negotiate from a superior strategic position. Republicans will still be able to refuse to raise taxes. But if they do, it won’t matter. The only way they can succeed in keeping taxes from rising is if the Obama administration and the Democrats stand shoulder-to-shoulder with them to extend the Bush tax cuts.
But Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is...nothing.
Obama even offered Boehner a deal in which the Bush tax cuts would be extended right now, so Republicans wouldn’t have to fear a subsequent negotiation in which they lacked leverage. Boehner rejected that deal and, in doing, might have saved the safety net.
Republicans have shown, that they will block any and all tax increases, no matter what incentives they are offered in return and no matter how dire the consequences of their refusal. Next year’s deadline offers Democrats their only chance to negotiate from a superior strategic position. Republicans will still be able to refuse to raise taxes. But if they do, it won’t matter. The only way they can succeed in keeping taxes from rising is if the Obama administration and the Democrats stand shoulder-to-shoulder with them to extend the Bush tax cuts.
Unemployment in some countries
| Country | Unemployment rate (%) | |
| Switzerland | 2.9 | |
| Norway | 3.4 | |
| Hong Kong | 3.5 | |
| China | 4.1 | |
| Netherlands | 4.2 | |
| Australia | 4.9 | |
| Japan | 4.9 | |
| Mexico | 5.5 | |
| Israel | 5.8 | |
| Germany | 6.0 | |
| Brazil | 6.5 | |
| New Zealand | 6.6 | |
| Belgium | 7.3 | |
| Canada | 7.4 | |
| Denmark | 7.4 | |
| Iceland | 7.6 | |
| Russia | 7.6 | |
| United Kingdom | 7.6 | |
| Peru | 7.7 | |
| Sweden | 7.7 | |
| Finland | 7.8 | |
| Italy | 8.1 | |
| Poland | 9.2 | |
| United States | 9.2 | |
| European Union | 9.3 | |
| Egypt | 9.4 | |
| India | 9.4 | |
| France | 9.5 | |
| Turkey | 9.9 | |
| Hungary | 10.0 | |
| Portugal | 12.4 | |
| Ireland | 14.0 | |
| Greece | 15.0 | |
| Spain | 20.9 | |
| South Africa | 25.3 | |
Source: Wiki
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