Bush Tax Cuts Don't Trickle Down: Who Said That?

The following indictment of trickle-down economics comes from someone of a little higher pay grade your favorite liberal South Dakota blogger:

"The rich are always going to say that, you know, 'Just give us more money, and we'll go out and spend more, and then it will all trickle down to the rest of you.' But that has not worked the last 10 years, and I hope the American public is catching on."

Who said that in a discussion of the need to extend the Bush tax cuts to save boost business and coddle capitalism?

Dennis Kucinich? Well, he has said things like that since the beginning of the Bush tax cuts, but the above quote isn't his.

The Socialist Party of America? No, the quote isn't from them—they have somewhat larger visions of economic reform.

Ariana Huffington? Well, her website republished the quote, and she'd agree, but the words above aren't hers.

Who says trickle-down economics doesn't work? A man in a position to do a lot of trickling: Warren Buffett.

Buffett must be having too many secret meetings with George Soros to plot the downfall of America, right?

Rich More Likely to Walk Away from Mortgages

Ah, the rich. Paragons of capitalist virtue. Models of personal responsibility.

And mortgage deadbeats:

[The New York] Times analyzed data from CoreLogic. That's a firm that analyzes real estate trends. The data shows that more than one in seven homeowners with loans over a million dollars has missed at least three payments in a row. They're seriously delinquent. Only about one in 12 homeowners who owe less than a million dollars is seriously delinquent. That's basically the rest of us [Stacy Vanek-Smith, "Rich More Likely to Walk Away from Homes," Marketplace Morning Report, 2010.07.09].

See the NYT article Vanek-Smith cites for these valuable quotes:

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

...the rich do not seem to have concerns about the civic good uppermost in their mind, especially when it comes to investment and second homes [David Streitfeld, "Biggest Defaulters on Mortgages Are the Rich," New York Times, 2010.07.08].

And I'm supposed to trust the rich with more tax breaks? I don't think so....

South Dakota Picks Profit over People on Health Coverage

South Dakota is suing to nullify the federal health insurance law passed this year. However, as Bob Mercer points out, South Dakota is still willing to participate in this supposed unconstitutional monstrosity by administering the high-risk pool.

Check this line from Mercer:

South Dakota already operates a risk-pool program for people who had insurance but lost it through no fault of their own. Rounds, who runs an insurance business, started the state risk pool to reduce financial responsibility of insurance companies which were pulling out of the health-coverage market in South Dakota [Bob Mercer, "State Picks and Choose on Federal Health Coverage Law," Pure Pierre Politics, 2010.07.01].

Mercer doesn't reach this conclusion, but I do: Governor Rounds and fellow defenders of the free market don't want the free market to handle all of health coverage... only the really profitable portions. They thus are happy to saddle the government with the elderly, the poor, and the sick folks who need health insurance the most. The insurance companies thus limit themselves to the young, rich, and healthy whose minimal use of health services guarantee that the house always wins in the private insurance casino.

The high-risk pool is really a safety valve for private profit. Until the ban on exclusions for pre-existing conditions kicks in in 2014, private insurers can continue to kick sick people off their plans without any prick to their conscience: "Those people won't suffer. They can just join the government high-risk pool! Besides, we're here to serve our shareholders, not the common good."

I wonder how long we'll watch this patchwork system hobble along, bankrupting and killing Americans all for the sake of protecting profit and a failing worldview, before we realize it would be a whole lot simpler for us to create one big risk pool.

Derivatives: Less Theory, More Facts... and More Capitalism, Please!

In response to my Monday post on derivatives reform, Troy Jones appears to assert that unregulated derivatives are good for the economy, providing "lubrication to the system's liquidity."

Lubrication, heating oil...

Sean Cota runs a family-owned heating oil business in Vermont. He says using derivatives purely to speculate on the price of oil has hurt his business and consumers' wallets.

SEAN COTA: We calculate that this unregulated market has encouraged speculative fervor that costs about a $1 per gallon.

[Brett Neely, "Businesses Differ on Derivatives Reform," Marketplace, 2010.04.20]

Neely's report pokes some other holes in the theoretical capitalist defense of unregulated derivatives, which seems about all the GOP can muster as it fights this latest really good idea from Democrats. Neely notes that derivatives were "boring and safe" for centuries. Deregulation happened only in 2000. Hmm... credit was plenty liquid in the twentieth century, wasn't it?

Neely also notes that, under deregulation, derivatives have operated in a distinctly uncapitalist fashion. Outside of exchanges, banks set prices, keep them private, and prevent buyers from getting information about the risk involved. Capitalism requires a free flow of information right alongside capital. But the big five banks that control most of the derivatives don't want us to get information and compare prices:

Because there's not efficient pricing [in the current system], these big five derivatives dealers can really charge through the roof for these derivatives products and that's one big reason why they've been so profitable [David Min, quoted in Neely, 2010].

Neely finds a good capitalist from the Chamber of Commerce to defend unregulated derivatives:

The whole point of the exercise is to transfer that risk somewhere else so that you can be in the business of producing beer or making widgets or whatever it is you do [David Hirschmann, quoted in Neely, 2010].

Hold on: transfer the risk?! I thought risk was an inherent and necessary part of being in business. You don't get to make beer or widgets without risk. If I choose to produce art or make speeches for a living, I don't get to transfer my risk to someone else. I assume the risk that people just won't buy enough of what I'm selling to keep me in paint and shiny shoes... right?

Perhaps I misunderstand capitalism. But the more I listen to conservative arguments against regulating derivatives, the more I hear a vague theoretical declarations that ignore the facts of what unregulated derivatives have wrought. In practice, unregulated derivatives look like an inherently anti-capitalist financial product, one that withholds the information buyers need to make good choices, removes the risk the market needs to check unwise actions, and threatens the stability of the free market economy.

"Boring and safe"—that's what derivatives regulation gets you. And after the excitement of seeing your mutual funds wiped out in the recession, couldn't you use some boring and safe?

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Update 17:02 CDT: Senator Grassley from Iowa joined 12 Dems on the Senate Ag committee in approving derivatives regulation today. Grassley is no Olympia Snowe; his vote may be a sign that Republicans see it's time to stop saying no to ideas that will be good for the economy.

Sell Stuff! Skip School!

WARNING: The Blogger General Has Determined That Capitalism, Not President Obama, Is Dangerous to Your Children's Moral Health

Some professed patriots would bar the President of the United States from speaking directly to our children and encouraging them to stay in school. But many of those same critics remain silent when big corporations coerce captive kids into working as marketers with promises to let them skip school.

Las Vegas sixth-grade teacher Betty Buehler highlights the hypocrisy she sees in her own school:

Private employee to captive students: "Who's ready for more prizes?!"

President of the United States to students, many of whom are not allowed to listen:

"I'm here today because I have something important to discuss with you. I'm here because I want to talk with you about your education and what's expected of all of you...."

Private employee: "How many of you would like to get out of school for a show?" (The motivator describes a BMX show that will come to the school for certain sales numbers.) "The top 25 sellers of the school will sit in a special VIP section and get autographs."

President: "But at the end of the day, we can have the most dedicated teachers, the most supportive parents, and the best schools in the world – and none of it will matter unless all of you fulfill your responsibilities."

Private employee: "Who wants to get out of school ... and ride in a limo?! YAY!" The kids scream madly. (Top-selling kids get a lunchtime limo ride to a pizza place.)

President: "[S]how up to those schools; pay attention to those teachers; listen to your parents, grandparents, and other adults; and put in the hard work it takes to succeed." [Betty Buehler, "Schools Shun Obama Yet Let Sales Firms Prey on Students," Christian Science Monitor, 2009.10.30]

The "values" of unrestrained capitalism are much more destructive to the moral health of our youth than anything our President wants them to learn.

White House Undermines Capitalism by Choosing Socialist Open-Source Software?

Expect the wingnuts to start spinning conspiracy theories about how the swine flu "national emergency" declaration is the first step toward suspension of the Constitution and hauling Bob Ellis to the death camps. Bob Ellis is taking a blog break—code to his followers to buy up ammo and retreat to the mountain militia hideaways. My cousin Aaron is already fretting on Facebook about HHS Secretary Sebelius getting extraordinary powers. [Funny: we descend into tyranny under similar emergency declarations to respond to Hurricane Katrina (2005), Hurricanes Ike and Gustav (2008), and North Dakota flooding (2009).]

If you wingnuts want real evidence that the White House is building Marxist tyranny, check out (hat tip to Deane at Gadgetopia!) the White House's latest software decision: the Obama Administration is abandoning proprietary content management software in favor of Drupal. Drupal is open-source software: it is built not by a single corporation or entrepreneur but by thousands of people around the world, collaborating online, working not for any direct monetary gain but for the general good of society. Individuals and teams of programmers build and improve the software and post their code online, where anyone can download it, use it, tinker with it, and make it better.

Cooperation, no profit, social good, open to everyone... aaahhh! Socialism!!!

Actually, open-source software can be viewed through a safely capitalist lens. The White House is working with plenty of for-profit firms to make this software switch. They can use this open-source software to provide better service for a cheaper price (every capitalist I know likes that formula).

The White House's move to open-source software is also a perfectly logical outgrowth of the Web philosophy and political philosophy the Obama campaign made manifest last year. Adopting Drupal for WhiteHoue.gov embodies in tech the same participatory values embodied in President Obama's approach to government:

...[B]y being open source, the White House is opening itself up to all the bright ideas, powerful plug-ins, and innovative tools that the considerable community of Drupal aficionados come up with. It's a community that the White House says it is eager to tap into. "Open source is a great form of civic participation," the White House's Phillips told me this afternoon. "We're looking forward to getting the benefit of their energy and innovation" [Nancy Scola, “WhiteHouse.gov Goes Drupal,” Personal Democracy Forum, 2009.10.24].

Drupal creator Dries Buytaert (whose company Acquia has helped the White House jump to Drupal) naturally says similar things about the civic sense and business case for Drupal in government:

First of all, I think Drupal is a perfect match for President Barack Obama's push for an open and transparent government -- Drupal provides a great mix of traditional web content management features and social features that enable open communication and participation. This combination is what we refer to as social publishing and is why so many people use Drupal. Furthermore, I think Drupal is a great fit in terms of President Barack Obama's desire to reduce cost and to act quickly. Drupal's flexibility and modularity enables organizations to build sites quickly at lower cost than most other systems. In other words, Drupal is a great match for the U.S. government.

Second, this is a clear sign that governments realize that Open Source does not pose additional risks compared to proprietary software, and furthermore, that by moving away from proprietary software, they are not being locked into a particular technology, and that they can benefit from the innovation that is the result of thousands of developers collaborating on Drupal. It takes time to understand these things and to bring this change, so I congratulate the Obama administration for taking such an important leadership role in considering Open Source solutions [Dries Buytaert, "WhiteHouse.gov Using Drupal," personal blog, 2009.10.25].

p.s.: I dig Drupal. I use it for RealMadison.org, the Lake Herman Sanitary District, and my online dissertation. If I like, it must be socialist, right?

Securitizing Life Insurance: Wall Street Death Panel in the Works

Hat tip to Ned Hodgman at Understanding Government!

If you thought Wall Street's securitization of subprime home mortgages was a bad idea, wait until you hear their latest sure bet: securitized subprime life insurance.

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money [Jenny Anderson, "Wall Street Pursues Profit in Bundles of Life Insurance," New York Times, 2009.09.05].

Hmm, let's see... a bunch of Wall Street bankers who stand to make more money if the sick and elderly die sooner... can you say death panels?

A few other disturbing lines from Anderson's report:

• "'We’re hoping to get a herd stampeding after the first offering,' said one investment banker not authorized to speak to the news media." Hmmm... investment bankers cheering herd mentality... why am I not encouraged?
• "'Predators in the life settlement market have the motive, means and, if left unchecked by legislators and regulators and by their own community, the opportunity to take advantage of seniors,' Stephan Leimberg, co-author of a book on life settlements, testified at a Senate Special Committee on Aging last April."
• "But even with a math whiz calculating every possibility, some risks may not be apparent until after the fact. How can a computer accurately predict what would happen if health reform passed, for example, and better care for a large number of Americans meant that people generally started living longer? Or if a magic-bullet cure for all types of cancer was developed?" Great: one more reason for big money interests to oppose health care reform and keep America behind the rest of the world in health care outcomes and efficiency.

Some of my conservative friends are still fighting the Cold War, seeing Communist plots around every Presidential press release. Please forgive me if I see more cause for alarm in capitalist/plutocrat plots to do crazy things like securitizing life insurance and profiting from the early death of fellow citizens.

Private Health Care Fundamentally Flawed: Socialize Medicine Now!

Your access to health care should not hinge on whether the economy is doing o.k. and you can keep your current job. You should not be stuck with thousands of dollars in medical bills because your employer turns deadbeat without telling you.

And when you go to the hospital, you should not be treated like a piece of meat on the John Morrell's slaughter line:

LARRY CHURCHILL: There are very few relationships in which we're asked to take off our clothes and be examined by people with the idea that it's going to be safe to do that and tell them about intimate parts of our history that we probably don't tell anyone else about. That makes it special. That's making oneself vulnerable and sometimes a fairly profound way. Or going under anesthesia for an operation. If someone says, "I'm going to put you to sleep and we're going to cut you open and do certain things to you and it is all going to be fine and good for you," that's a pretty big leap of faith.

MAGGIE MAHAR: Larry Churchill is a bio-ethicist and one of the heroes of his profession. A discipline that struggles with the hardest moral questions regarding medicine. He doesn't just ask his students to wrestle with end of life care or stem cell research. He takes a clear-eyed look at the most difficult ethical questions regarding how you deliver care in a profit driven system.

LARRY CHURCHILL: We're now treating medicine as if it were an industrial product. Through put. How many units of care can you deliver? The idea that you are going to see a patient on average for between 12 and 15 minutes, no matter what their condition or how many kinds of problems they have or how complicated their diagnoses or how much reassurance they might need is an idea that you can treat medicine like a production line product and you can turn out patients in the same way like we produce widgets. That's a commercialization and an industrialization of the relationship. So this is a system which is fundamentally broken in terms of the kind of conflicts it raises in the minds of physicians and, also, in the minds of the patients.

[excerpt from Money-Driven Medicine: The Real Reason Health Care Costs So Much, broadcast on Bill Moyers Journal, 2009.08.28]

The private health coverage system is inescapably, morally flawed. It's time for serious reform, complete with (yes, say it, McCarthyite Republicans and cowardly Democrats be damned) socialized medicine that guarantees coverage and treats all Americans like human beings, not widgets.

Want to Fix Health Insurance? Turn to Marx

Patience, I'll get there....

My wife Erin is reading Methland, Nick Reding's account of the destruction wrought by methamphetamine in rural America. Reding connects the increase in meth use to the consolidation wrought by Big Ag (see also commentary by Patrick Deneen).

Over buffalo burgers last night (yes, we live well), Erin explained how Reding also manages to work Karl Marx's critique of Adam Smith into the argument:

Smith's capitalism depends on lots of small actors in the market, none of whom individually can wield enough influence to skew prices... or to unduly influence the government that regulates the market. The "Invisible Hand" is invisible because it is the product of umpteen Main Streets, not one Wall Street. The Invisible Hand doesn't require much regulation, since real competition is a pretty good check on individual power.

But Marx says the market's mandate to "grow or die" means all those competing actors start cannibalizing each other. Capital consolidates, and the Invisible Hand becomes visible: we can identify a few big firms that dominate the market, unduly influence prices, and (worst of all) mingle and merge with government just when we need government more to check the power of these growing gargantua.

And then I thought about health insurance. The Invisible Hand cannot work in health insurance. Thousands of tiny firms would have thousands of tiny risk pools that couldn't cover their costs, espcially not when we're talking the high costs of modern medicine. Insurance depends on spreading the risk; the bigger your pool, the better you spread the risk. Insurers have to eat each other—grow or die. That's why health insurance now lacks competition. It doesn't require an evil plot (though you can argue that); it just requires insurers to act exactly as Marx said they would. Consolidate, get big, control the government with lobbyists.

The conservatives opposing health coverage reform by chanting "Let the market solve" assume that Adam Smith's principles still apply. But the free market can't work in health insurance. There is no Invisible Hand, only big Visible Fists like Aetna and Cigna.

The only way you check the power of those big actors in the market is through stronger government intervention. Uncle Sam Insurance offered as an option alongside private insurance might help, but Marx's critique strengthens my belief that, in health insurance, the best solution is to carry the logic of consolidation to its inevitable conclusion: combine everyone into one nationwide risk pool, a single-payer system for all Americans.

USD Health Law Prof: Sanford-MeritCare Merger Means Monopoly, Higher Costs

Meanwhile, here in South Dakota, the free market is working to jack up health care costs. KELO's Perry Groten has the guts to post a serious economic critique of the merger planned by Sanford (one of his boss's biggest sponsors) and North Dakota's MeritCare. Groten cites USD health care law professor Michael Myers:

"I predict that this is going to be a strong system, no question about that from a seller's perspective, can't argue with that. It's just going to be bad for health care overall," Myers said.

Myers was CEO of St. Mary's Hospital in Rochester when it merged with Mayo in 1990. He says patient costs rose in the aftermath of that merger and he expects the same will happen with Sanford's merger with MeritCare.

"Take a look at their right wrist. They have well-developed right wrists from cranking-up those gol-darn prices," Myers said.

Myers says such mergers create price spikes because there's no competition to keep costs down. He adds that an expanded health system adds layers of bureaucracy and in turn boosts inefficiencies, further driving up costs.

Myers says another result of the merger will be over-treatments, where doctors perform unnecessary tests and procedures, simply as a way to generate more revenue [Perry Groten, "USD Law Professor Critical of Sanford Merger," KELOLand.com, 2009.07.17].

That's the free market at work, kids: more bureaucracy, unnecessary tests, and good old greed driving up your costs.

It's worth noting Dr. Myers's comments may not make his bosses terribly happy, either, given the revenue stream from Sanford to our southernmost campus. Kudos to Groten and Myers both, for showing some free-press and academic-freedom moxie.

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p.s.: note Sanford CEO Kelby Krabbenhoft's surprising admission that the merger is also about doubling its political buying power:

Krabbenhoft says that leverage will help access more political pull when it comes to the hot topic of health care reform.

“Instead of two Senators and one Representative in South Dakota, now add to that two Senators and one Representative in North Dakota,” Krabbenhoft said [Kelli Grant, "Sanford MeritCare & Political Pull," KELOLand.com, 2009.07.17].

Kelli, I almost can't believe you got him to say that. Looks like buying South Dakota isn't enough; the health care giant wants to rename all of Dakota Territory "Sanford Dakota."

Public Option: Give Me What Grandpa Has

Congressman Anthony Weiner from New York points out the foolishness of the conservative bush-wah over the public option in the health care reform bill:

"I hear my colleagues complain about government-sponsored health care," Weiner said. "You know what? I am half-tempted to offer an amendment to eliminate Medicare. Then what would you do? What do you think Medicare is? It’s government sponsored health care and it’s one of the most popular programs around."

"Now it’s got problems and we should fix it but all of the concern well the public option is going to crush private insurance.

Do you think consumers are not smart enough to choose the best one and if they choose the best option doesn’t that tell you something? Are your constituents only smart enough to vote for you but they’re not smart enough to pick a health care plan for themselves? I think they’re pretty smart" [Rep. Anthony Weiner (D-NY), statement before House Energy and Commerce Committee, quoted by Elizabeth Benjamin, "Weiner's 'Alice in Wonderland' Health Care Reform Moment," New York Daily News: The Daily Politics, 2009.07.17].

Hear hear. We've labored under a public option for a sizable and electorally powerful portion of our population for four decades. It hasn't put private insurers out of business. It hasn't resulted in the older quarter of our population suffering a collapse in health care quality. If it's good enough for Grandpa, it's good enough for me.

Weiner also hearkens to President Obama's inescapable logic: if a public option is inherently inferior, the market will kill it. If private insurers are offering a superior product, the public option is no threat to it.

But if you seriously believe a public health coverage option is a bad idea, then be consistent and call for an end to Medicare. Go ahead, Senator Thune. You want government out of other businesses: add an amendment to your Government Ownership Exit Plan to pull the government out of medical coverage for senior citizens as well.

Pope Benedict Calls for Socialism (Hooray!)

Pope Benedict XVI has issued a new papal encyclical, "Charity in Truth" (Caritas in Veritate—everything sounds cooler in Latin). Issued on the eve of the G8 summit, the encyclical blames greed and unbridled growth for the current global recession. It also reveals the true socialist new-world-order nature of Catholicism... something believers would do well to heed.

So what makes the Pope a socialist? Let's look at His Holiness's own words (and imagine the response the right-wing blogosphere would give if such words came from a hippie like me [all emphasis mine]):

• His Holiness says the common good must guide our economic decisions. We are to love our neighbors not just in individual charity but also by "the institutional path — we might also call it the political path — of charity, no less excellent and effective than the kind of charity which encounters the neighbour directly, outside the institutional mediation of the pólis."
• Contrary to the very definition of corporations, the Pope says business cannot be guided by profit alone: "Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty." (Seems that's what I've been saying about health insurance.)
  
• Pope Benedict calls for world government! At least that's what I'd expect Bob and Sibby to say about his call for strengthening the United Nations: "To manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration: for all this, there is urgent need of a true world political authority...."
• The Pope says rich nations are hoarding natural resources that should be shared to allow poor countries to develop.
• He declares there is a "covenant between human beings and the environment" (does that sound like pagan-Greenie Gaia-worship to you?)
• He essentially endorses cap-and-trade: "It is likewise incumbent upon the competent authorities to make every effort to ensure that the economic and social costs of using up shared environmental resources are recognized with transparency and fully borne by those who incur them, not by other peoples or future generations..." (in other words, tax those externalities!).
• The Pope makes a clearly hippie call for lifestyles "in which the quest for truth, beauty, goodness and communion with others for the sake of common growth are the factors which determine consumer choices, savings and investments."
• The Pope establishes the intersection of Catholic and Lakota beliefs with this blatant socialist declaration: "[The Church] must defend not only earth, water and air as gifts of creation that belong to everyone."
• He criticizes government restrictions on labor union activity based purely on economic utility. "...[T]he promotion of workers' associations that can defend their rights must therefore be honoured today even more than in the past...." (In other words, look for the union label on the mitre.)

I know, I'm proof-texting. There's plenty in Caritas in Veritate that supports other values. Pope Benedict XVI acknowledges the great good capitalism and globalization can do. (He even slips in some anti-abortion language.) But the above statements make it pretty clear that the Catholic Church rejects the sort of laissez-faire capitalism to which some conservatives still pretend. Pope Benedict XVI is calling on us to check the abuses of capitalism and consumerism with exactly the sort of communitarian and environmental principles and actions that our far-Right doom criers brand "Socialism!"

Thune Divestiture Bill: Ideology over Pragmatism

...which is how the GOP lost in 2008...

Senator John Thune's federal corporate ownership exit strategy continues to be heaped with continuing laudatory praise... or at least that's the impression you'd get from reading his campaign blog or its paid subsidiary, Dakota War College, which has taken to slavish repetition and amplification of every dribble posted by the "Friends of John Thune." (Thune does have a track record of paying bloggers.)

So let me join Powers in flogging the issue his advertisers are paying him for (something Doug Wiken says the FTC is going to start monitoring). I would like to buy into Senator Thune's Government Ownership Exit Plan Act (S. 1242). It sets a deadline of July 1, 2010, for the federal government to sell off its ownership interest in all of the businesses that have gotten bailouts. I am worried that this arbitrary deadline might lead to a fire-sale divestiture: it wouldn't take a financial whiz to figure out that the remnants of GM or AIG could be had for a song by simply waiting until next June 30 and submitting a lowball bid to a federal government bound by law to sell. Thune's bill does include a provision for extensions: it looks like the Secretary of the Treasury can request a six-month extension and one renewal if we taxpayers stand to get screwed by low bidders.

So if I'm reading this right, all the bailout companies that we taxpayers currently own would get two years max to turn themselves back into lean mean money-making machines so we can sell them off at a decent price and pay down the federal debt (sorry, no dividend checks: Thune's bill sends any divestiture proceeds straight to paying down the public debt... which is as good a place for the money as anywhere else). I assume Thune's subpremise to his business friends is, "Look, if you need more than two years of government ownership to get your act together, you don't deserve to survive."

S. 1242 also bans members of the Executive Branch from influencing any "significant management decisions" of federal bailout money. Here our corporate welfare queens seem to be getting a break that regular welfare recipients and publicly held corporations never do. The government gets to impose all sorts of influence on the "significant management decisions" of indivudals receiving government support. The federal government has used its welfare dollars to require recipients to take jobs and get training and even to influence them to get married. Stockholders get to communicate and vote at stockholder meetings to influence the corporations they own all the time. When our President reviews the books at GM and Chrysler and makes recommendations for fixing their broken business practices, is that really undue influence that should be criminalized, or is that simply our President acting as a good steward of our public investment?

The final question we should ask about this legislation is whether we even need it. Heaven knows Republicans hate to clutter up the books with unnecessary laws. On the GM bailout, President Obama has described us as "reluctant shareholders" who intend "to get out quickly." And as for that influence Thune seeks to ban, Obama sounds like he's already on the same page, at least 90% of the way:

"GM will be run by a private board of directors and management team," Obama said. "They — and not the government — will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions" [Tom Raum, "Obama: Nationalization of GM to Be Short-Term," AP via Yahoo News, 2009.06.01].

If you buy the propaganda that Obama and the rest of us Dems are socialists, then sure, Thune's law sounds like a vital protection of the free market. Actually, if you're a real free-marketeer, Thune's law doesn't go far enough: you should demand an amendment requiring the immediate divestiture of all government holdings in private businesses, with no extensions allowed at all.

But if you turn off Rush and look at what's actually going on, you see a government (under Bush and Obama alike) that executed these bailouts not as a re-enactment of Marxist revolution but as a last-resort alternative to economic free-fall.

Thune's bill may be a honest defense of capitalist ideals... but that may be its fatal flaw. The Government Ownership Exit Plan appears to be motivated entirely by ideology and not by any cogent analysis of actual economic conditions. It's a lot easier to just shout "Socialism!" than it is to come up with actual plans to solve problems. If Senator Thune and the GOP continue to pursue the easy route, they will find themselves increasingly irrelevant to the vast center of the elctorate that wants solutions, not slogans.

No Arguing with a Vulcan: Obama Explains Public Option

The only thing we have to fear is illogical capitalists.
[Image from Salon.com]

President Obama is thinking the same thing I said in March: if the government can't do anything right, why are you defenders of the status quo so afraid private insurers won't be able to compete with a public option for health care coverage? In this morning's press conference, the commander-in-chief tells us exactly what the public plan will do, then lays down the Vulcan strong hand and explains why public-option opponents are illogical:

MR. OBAMA: Now, the public plan, I think, is an important tool to discipline insurance companies. What we've said is, under our proposal, let's have a system, the same way that federal employees do, same way that members of Congress do, where we call it an exchange, but you can call it a marketplace, where, essentially, you've got a whole bunch of different plans.

If you like your plan and you like your doctor, you won't have to do a thing. You keep your plan; you keep your doctor. If your employer's providing you good health insurance, terrific. We're not going to mess with it.

But, if you're a small-business person; if the insurance that's being offered is something you can't afford; if you want to shop for a better price, then you can go to this exchange, this marketplace, and you can -- look, OK, this is how much this plan costs; this is how much that plan costs; this is what the coverage is like; this is what fits for my family.

As one of those options, for us to be able to say, here's a public option that's not profit-driven, that can keep down administrative costs, and that provides you good, quality care for a reasonable price as one of the options for you to choose, I think that makes sense.

QUESTION: Wouldn't that drive private insurance out of business?

MR. OBAMA: Why would it drive private insurance out of business? If -- if private -- if private insurers say that the marketplace provides the best quality health care; if they tell us that they're offering a good deal, then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business? That's not logical [President Barack Hussein Obama, transcript, White House press conference, 2009.06.23].

Dang. Vulcans really do belong in the big chair.

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Update 16:55 CDT: "The Gloves Come Off..." says Forbes.com's Brian Wingfield of the above presidential comment. And Nobel laureate Paul Krugman, who has roughed up the president on past occasions, says that here, Obama is making sense. (Krugman, along with Matthew Yglesias, also digs the Obama-Spock groove.)

Update 2009.06.24 08:30 CDT: The President may have the pulse of the electorate: this NYT/CBS poll has some complex results, but 72% of Americans support a public option. Even half of Republicans say they'll go for a public option.

South Dakota GM Dealers Seek Nanny State Protection

I'm still trying to sort out the lawsuit two South Dakota General Motors dealers have filed to fend off GM's effort to shut them down. The dealers, Springs Auto in beautiful (I mean that!) downtown Wessington Springs and Yankton Motor Company (I'd link, but they have a really annoying low-quality autoplay jingle on their website) in Yankton, claim that South Dakota law prevents GM from shutting them down without a hearing. (Feel free to page through South Dakota's vehicle dealers regulations, particularly SDCL 32-6B-45 and 32-6B-46.)

So just checking: is this an example of good Republican businessmen hiding behind the skirts of the nanny state? Do we have capitalists begging the government to prevent their business partners from acting like capitalists and making free-market decisions that are in the best interest of the corporate bottom line?

Sibby says no, this is businessmen hiding behind the skirts of the South Dakota nanny state to protect themselves from the Obama nanny state. Sibby reminds us that Obama (and the rest of us) own GM now, so really, the suing dealers are asking the courts to protect them from... themselves. Ourselves. Aaaagghh! This is as bad as "I'm My Own Grandpa"!

Whichever way the legal cookie crumbles on this one, it is interesting to note the apparently unique role South Dakota government plays in setting the terms of the car sales business in our fair state:

"South Dakota has a statute that says you can't end a franchise with a dealer before having a hearing," said Michael Dady, the attorney representing the two dealers.

"We'd like you to revoke the letters, schedule a hearing and you can tell the hearing examiner why you have the right to do it and we can tell them why you don't," he said of the notice sent to GM.

Dady said he's negotiating with GM's attorney in hopes a hearing can be scheduled.

GM's in-house lawyer handling the issue could not immediately be reached for comment.

Dady said South Dakota is one of a few states -- or maybe the only one -- with such a requirement.

"It's not typical," he said [Carson Walker, "2 South Dakota Auto Dealers Sue GM to Stay Open," AP via Chicago Tribune, 2009.06.09].

South Dakota car dealers must have a lot of pull around here.

According to Walker, the dealers argue that GM is violating South Dakota's unusual dealership franchise laws in four ways:

1. GM "didn't notify the state." (I didn't know capitalists had to inform the state of their business decisions.)
   
2. GM "hasn't given a good reason to close the franchises." (I didn't know capitalists had to give the state a reason for their business decisions.)
   
3. GM failed to show that the needs of the communities will be served without them. (Serve the community? Isn't that socialism?)
4. Dealers have a right to a new contract if they fulfilled their obligations. (Right to a new contract? Boy, if only South Dakota's workers had that sort of legal protection.)
   

Our car dealers may donate and vote Republican, but this lawsuit and the legal protections they've gotten written into state law show that they are as socialist as anyone else.

New Federal Credit Card Rules Won't Kill Jobs, Will Restore Fairness

So Bill Janklow, a Harvard prof, and the Madville Times walk into a bar....

The Credit Cardholders Bill of Rights, which is headed for the President's desk, may be a bigger deal than I thought. No, not because it will kill thousands of South Dakota usury jobs, but because it will restore fundamental fairness to the credit industry, and maybe even help the free market.

Former Governor Bill Janklow, the man who brought South Dakota the credit card boom, doesn't see any job losses coming. He apparently disagrees with current Governor Rounds's assertion that Premier BankCard et al. won't be able to compete without their current preadatory lending practices:

"I don't think the people in this state are going to have any trouble. Citibank is an honorable credit card company this mothership they have in Sioux Falls is the best in the world. The same thing is true with First Premier and First National in Yankton," Janklow said.

The former South Dakota Governor says this bill levels the playing field for all the companies across the country.

"So, as long as everybody in the NFL, everybody in Major League Baseball, or everybody in the credit card industry have to follow the exact same rules I don't think it makes any difference. It's when you have an un-level playing field where they give an advantage to one player, or one set of players over another, it becomes a problem" [Ben Dunsmoor, "Janklow: SD Credit Companies Will Adapt to Rules," KELOLand.com, 2009.05.20]

Speaking of a level playing field, Tony Amert rightly directs our attention to Elizabeth Warren. She's a Harvard law prof and overseer of the Troubled Assets Relief Program. She emphasized the need for a level playing field between lenders and borrowers in a Frontline interview in 2004:

[Question]: So the credit card industry says ... "We provide the credit, in many cases, for people to start businesses ... to buy more, to live a better life, to do things that they could never do any other way." So what's the problem?

[Warren]: There is no problem if they would do it on terms that are fair and if they would make their contracts transparent so that the person who's borrowing the money is borrowing it in a way that he or she understands and appreciates the risks.

I believe in free markets. I teach contract law; I believe that value is created when two people come together, and they understand a contract, and they say, "I think if I borrow this much money at this interest rate, I can do better than that; I can start a business; I can buy something I want to buy that's going to be important to me, and I can make money out of this proposition." That is a good use of credit. It's a use of credit we've had in the United States since colonial times.

What's changed is [that] when credit was deregulated in the early 1980s, the contracts began to shift. And what happens is that the big issuers, the credit card companies who have the team of lawyers, started writing contracts that effectively said, "Here are some of the terms, and the rest of the terms will be whatever we want them to be." And so they would loan to someone at 9.9 percent interest. That's what it said on the front of the envelope. But it was 9.9 percent interest ... unless you lost your job, or 9.9 percent interest unless you applied for a couple of other credit cards, or 9.9 percent interest unless you defaulted on some other obligation somewhere else that doesn't cost me a nickel. And at that moment, that 9.9 percent interest credit suddenly morphs to 24.9 percent interest, 29.9 percent interest, 36.9 percent interest. Well, you know, ... nobody signs contracts to buy things that say, "I'm going to pay you $1,200 for the big-screen TV unless you decide, in another month or two months, that it should really be $3,600 or $4,200 or $4,800." But that's precisely how credit card contracts are written today.

...But [the credit card companies] would say they're just making capital or money available to people in a convenient way.

Well, in a convenient way, and changing the price after people borrow it. You know, that's a heck of a deal. I don't know any merchant in America who can change the price after you've bought the item except a credit card company. After you have borrowed the $5,000, they can change the interest rate from 9.9 percent to 29.9 percent. I just don't know anyone else who can do that.

Contrary to the curmudgeonly (and implicitly self-righteous?) grumblings of various arch-conservatives, the new credit card rules aren't about giving handouts to irresponsible borrowers in the name of wimpy liberal "fairness." They're about making credit card companies play by the rules of the free market that we expect every other player to follow. Transparency and honest dealing—not so novel concepts.

(Tony also points to a couple of intelligent videos with Prof. Warren's insight: This 2007 lecture at UC Berkeley on "The Coming Collapse of the Middle Class," and this 2007 NightLine feature. Warren is an engaging and passionate speaker about economic topics that many folks would consider dry.)

Graduation, Aspirations, and Health Insurance

The two best things about one graduation reception I attended this weekend: ribs (now that's reception food!) and the opportunity to visit with a former student about her future.

This young woman first came to my classroom as a nervous, goofy freshman (I know, those adjectives before freshman are usually redundant). She graduates now with her bright eyes locked confidently on the future and whatever comes next. She wants to pursue modeling and acting, has already done some auditioning in Los Angeles, and now plans to work some, save up money, and try out the Chicago market. She knows college is important, but she hasn't liked what she's seen of college so far. I'm working on her on that one... but she and I both recognize that a lot of young people would be better off if they waited to go to college until they know what they want rather than just heading blindly off to freshman year as if it were Grade 13.

This young woman knows that modeling and acting are tough careers to break into. She knows she can't just walk into a room and coast on her good looks. Pretty women are everywhere. She'll have to audition and take "No" for an answer countless times, and even when she starts getting "Yes" for an answer, she'll still struggle to make a living.

In the great entrepreneurial spirit of America, this young woman is willing to take that risk. She's willing to work hard, save her money, move to a faraway city, take rejection after rejection, all to pursue a career she enjoys and will be good at. Go see the "No one's gonna stop me" fire in her eyes; you'll see she's serious.

But something could stop her: health insurance. She has endometriosis. Not fatal, treatable with birth control pills (assuming the local pharmacist will fill the prescription), but it hurts, can cause infertility, and might have some links to cancer. When she goes off her parents' health coverage at the end of this year, her pre-existing condition may make it impossible for her to find an affordable individual health insurance policy. As she looks for jobs, she won't be able to prioritize how well those jobs fit with her skills or career aspirations; she'll have to look first at whether the company offers a good health policy. And the moment she takes a job with good coverage, that health insurance policy will chain her to that workplace in a way that will stifle her artistic and entrepreneurial endeavors, as it does with many other young Americans.

We all have to pay the bills. Sometimes we have to do things we don't like to make ends meet. But America's private health coverage system puts a crimp on the free market system. In Canada and other countries with public health coverage, where the premium citizens pay and coverage they get doesn't change just because they change jobs, workers are free to pursue the best employment situations, where they can put their skills and passions to the best use. Society loses out if a young woman whose true talent is acting is stuck answering phones because she can't afford (or get) individual health coverage while she takes a year off to wait tables and audition for shows in the big city. Likewise, society loses out if a great carpenter is stuck working on an assembly line because he can't afford to quit and take COBRA while he gets his own business off the ground.

The young woman I visited with isn't looking for a handout. She's doing everything we tell her to: work hard, take a chance, pursue your dreams. But our private health insurance system is telling her "Don't you dare." It's keeping her and lots of other graduates from the freedom that America promises.

Public health insurance—now there's a graduation gift from which we all could benefit.

Red Tide: Capitalism Losing Youth Vote

1950s Soviet propaganda poster claiming the glorious socialist system was building more schools while the dratted capitalists were spending more on war than education. As if anyone would ever believe such Red nonsense.

Turn me lose in the public education system for a decade and a half, and look what happens: America's youth start turning socialist. A new Rasmussen Reports survey finds that when adults under 30 are asked, "Which is better: capitalism and socialism?" capitalism wins, but barely, 37% to 33%. (The other 30% are undecided.)

That's what I get for teaching the kids at Montrose The Grapes of Wrath. Of course, I was a registered Republican until 2004, so alas, I can't claim sole credit for this new Red Tide. More likely we're just seeing a natural shift in at least surface-level reactions from a generation of youth who have grown up with no grasp of ideological warfare and rhetoric of the Cold War.

Anyone care to speculate on the correlation between capitalism and fundagelicalism losing the youth?

Back Honest Capitalism: Back Cap-and-Trade

The only blogging candidate in the South Dakota governor's race, Brookings Mayor Scott Munsterman, warns that a cap-and-trade carbon emissions program could raise our electric bills 41%.

Rather than tax* the problem (coal, natural gas, etc.), which happens to be the most affordable option for consumers today, why not focus more on developing alternative energy technologies to the point where they become economically competitive? Wind, hydroelectric, clean coal, cellulosic ethanol, nuclear, or even garbage can all be practical forms of energy if done correctly [Scott Munsterman, "Cap-and-Trade?" Let's Wake Up South Dakota, 2009.04.04].

Why not? Because that's what we did in the 1980s. We let the "affordable option for consumers," cheap oil, lull us back into gas-guzzlers and unsusainable economic practices. We forgot about the oil crises of the 1970s and let ethanol, solar, and other alternatives sit on the shelf for another generation.

Munsterman wants to wait for the invisible hand to solve everything. That's an excuse for giving this generation a free pass and leaving it to the next generation to pay the bills.

If we are real capitalists, we should accept the full costs of our polluting and unsustainable practices. The only reason coal and oil are the "most affordable" options is that their producers aren't paying for the externalities:

Just as A.I.G. sold insurance derivatives at prices that did not reflect the real costs and the real risks of massive defaults (for which we the taxpayers ended up paying the difference), oil companies, coal companies and electric utilities today are selling energy products at prices that do not reflect the real costs to the environment and real risks of disruptive climate change (so future taxpayers will end up paying the difference) [Thomas Friedman, "The Price Is Not Right," New York Times, 2009.04.01].

Indeed, let the market rule, and rule fairly. Cap-and-trade will restore that fairness.

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By the way, we've done cap-and-trade before, in the Clean Air Act of 1990. That law from the somewhat more civil Bush Administration "reduced the sulfur emissions that cause acid rain, and it met the goals at a much lower cost than industry or government predicted."

*Munsterman appears to mix up carbon taxes and cap-and-trade. See the debate between those two programs here.

Hunter Advocates... What? Anarcho-Capitalism?

Just when I thought Madison Daily Leader editor Jon Hunter was discovering his true left-wing media heart, someone turns on Glenn Beck at the office, and Hunter starts throwing all sorts of tea-party hyperbole. "Federal Appointees Shouldn't Be Running American Businesses," Hunter opines... apparently not even the businesses that the federal government is using our good money to save.

Hunter apparently disapproves of federal pay standards at AIG. Hunter makes the odd claim that "Obama administration is deciding this week which brands of cars will be produced by General Motors"—GM has actually been looking to shed underperforming brands like Hummer since last summer—then makes the blogworthy claim that it is reasonable to expect Congress to hold hearings on what color to paint cars.

To make his point, Hunter proceeds to get more wrong. He claims Kathleen Sebelius, President Obama's Health and Human Services nominee, testified yesterday that she would "possibly replace insurance companies with a government insurance plan." Maybe that line will keep Rod and Randy advertising with Jon, but Sebelius said no such thing (alas): making herself perfectly clear, the Kansas governor said, "If the question is, ‘Do I support a public option side-by-side with private insurers in a health-insurance exchange?’ yes, I do.”

"We're frightened by the government takeover of companies and industries," quivers Hunter, who apparently would prefer an uncontrolled collapse of the financial and automotive industries, or at least emergency government loans with no taxpayer oversight.

Alas, as is his wont in deep water, Hunter offers closing lines that dissolve more than resolve:

The shift from private industry to government control will continue until we as Americans do something to stop it. Members of Congress and President Obama want to fix things, and we've given them the authority to do what they want.

We hope that we as citizens won't wait too long before we discover that government appointees shouldn't run American businesses.

We've given our government authority to fix problems, but we should stop them and... do what? Hunter fails to make clear what solution he prefers, but I'll take Obama at the helm over anarcho-capitalism and economic freefall anyday.

It's nice to throw some right-wing red meat to the Chamber of Commerce subscribers, but Hunter just flat gets it wrong: the Obama Administration is not looking to take permanent control of the auto industry. The federal government is acting as the lender of last resort, making demands now to protect its (our) investment, and split the company into healthy private competitors. Perfectly sensible, and not nearly the frightening mess our local paper would have you believe.