ProfessorBainbridge.com

Rabinowitz on the 9/11 Widows

The WSJ's Dorothy Rabinowitz has a longstanding track record of speaking uncomfortable and unpopular truths. If you haven't read her piece on the 9/11 widows, available free on Opinion Journal, you should.

The 9/11 Commission

Watching Ben Veniste in action left me with very little confidence in the 9/11 Commission. Jamie Gorelick's refusal to resign - or at least recuse herself - after the disclosure that she drafted one of the policies preventing intelligence agencies from communicating with one another leaves me with zero confidence in them. After all, as even left-liberalism's paper of record admits, Gorelick "has been especially aggressive in questioning Bush administration witnesses." One can but conclude that the Democrats on the commission are now using the process solely for partisan advantage and without regard for basic moral scruples. Or, as the New York Post put it:

The national 9/11 commission has been hijacked by political shills -- men and women eager to subordinate truth to partisan advantage; who hold a transitory victory on Election Day more dear than American victory in the war on terror.

Shrill? Yes. Breathless? Yes. Lacking nuance? Yes. True? I'm afraid I believe so. As Steven Taylor put it in more measured terms:

This memo is very much about the rules that bound the actions of those institutions and the culture of both pre-911. To pretend that the memo is just the Bush administration playing politics and therefore to ignore the significance of its contents, is to say that one really doesn't want to understand why 911 happened, and how to prevent such attacks in the future, but rather one simply hopes that the commission damages the Bush administration.

Journalists

From the Boston Globe:

Although most journalists believe quality and values are vital elements of their work and see themselves as providing an important civic function, the reading and viewing public seems to think of journalism as a bottom-line-driven enterprise populated by the ethically challenged.

It's not just that journalism is populated by too many ethically challenged folks, it's that journalism is populated by too many idiots. See, e.g., Bush's most recent news conference. Another case in point: I got called by a reporter today who wanted to ask about a recent corporate law development. When I said I wouldn't be available until 3 PM Pacific time, she protested that that would be too late because it would be 8 PM in New York!

Reparations Column

I've got an op-ed opposing corporate reparations over at TCS.

He said it....

Few libertarians believe in God, presumably because they think the universe was created by the market in a moment of perfect efficiency.

Heh. He also said:

I think I finally understand why the Times hates Scalia so much. Scalia is a Catholic, which means he believes there is a God, and that God is not the New York Times. But the New York Times thinks It is God. Therefore, Scalia is a heretic.

Double heh.

Who Pays the Income Tax?

New report from the Joint Economic Committee:

A small segment of the population — the top 20% of households by earnings — shoulders the largest burden of government cost, while many lower-income households pay little in income taxes and often receive money through the income tax system in the form of refundable credits.

Bush's News Conference: Media Morons

If I was underwhelmed by Bush's performance tonight, I was really unimpressed with the media. Virtually all of the questions amounted to: "Mr. President, will you now finally acknowledge that you're a feckless idiot?" The exceptions mainly amounted to: "Mr. President, will you now admit that you are the Anti-Christ?" What a bunch of nattering nabobs of negativity, to coin a phrase.

Bush's Speech on Iraq: Immediate Reaction

Before the Iraq war began, I was skeptical of Bush's policy, but once the decision was made to invade, I concluded that we simply could not be perceived as cutting and running. As I wrote back on December 14th of last year:

When I was in law school, we cut and ran from Lebanon. When I was still a relatively new law teacher, we cut and ran from Somalia. I have no doubt that this pattern of cutting and running emboldened al Qaeda. We simply cannot afford to cut and run from Iraq, lest our foes be emboldened to new and even more devestating attacks. Even if attacking Iraq was imprudent, once we went in I concluded we had to stay the course. There could be nothing - nada, zilch - less prudent than cutting and running. Having gone ahead with the war, our permanent interests now require that we win the peace.

So I wanted Bush's speech to make the case Larry Miller made in the Weekly Standard this week:

Say that the world is a very bad place and has been for a long time, and that we're going to stop it in its tracks and make it better because we have to, and because, as Tony Blair said when he spoke to Congress, "It's your destiny." ... And then win. Win in Iraq, and then look around for other threats like a silverback gorilla after slapping the head off of an upstart.

The speech and the Q&A; had moments in which Bush made such a case, but I must confess to be a bit disappointed. I wanted steely Churchillian resolve, but got resolve mixed with an awful lot of nation-building side issues. Again, I quote Larry Miller:

Yes, yes, Iraqi girls can be very empowered by seeing a female colonel running an outreach program, and we can all chip in for the posters that say "Take Your Daughters To Mosque Day," but in the meantime, would you please win.

I suspect Bush has the requisite resolve, but because we live in a democracy he has to make the case for resolve to the American people. He desperately needs a Churchillian or at least Reaganesque ability to communicate with the American people, and I just don't think this speech did it. One did not come away with the dominant impression being one of fire and brimstone, that we're going to kick butt and take names, that messing with America is a fatal mistake.

Larry Miller on Iraq

The world is in a very strange place when a humorist from LA is making more geopolitical sense than anybody in the Bush administration or the Democratic opposition:

I support the president in all of this, but what he should have done then, in my opinion, is what he can still do now. What I've been waiting for. What the whole country needs, for, against, and in between.

A speech. A big one. A grave one. Say that the world is a very bad place and has been for a long time, and that we're going to stop it in its tracks and make it better because we have to, and because, as Tony Blair said when he spoke to Congress, "It's your destiny."

Stand next to a map of Iraq, and another one of the world, and point out what's good and what's bad, what's been done and what's left. Say, "You may disagree, but here's where we are, and here's where we're going." ...

And then win. Win in Iraq, and then look around for other threats like a silverback gorilla after slapping the head off of an upstart. ...

Win. Stopping building schools. Win. There's plenty of time and need for hospitals, but first . . . Win. Yes, yes, Iraqi girls can be very empowered by seeing a female colonel running an outreach program, and we can all chip in for the posters that say "Take Your Daughters To Mosque Day," but in the meantime, would you please win.

Yep. As the say, go read the whole thing.

Eisner: What will it take?

The box office receipts confirm that "The Alamo" is the latest big-budget Disney epic to flop on Michael Eisner's watch. It finished fourth for last weekend, coming in behind a movie I hadn;t even heard of: "Fox Searchlight's "Johnson Family Vacation," which collected $9.4 million in about half as many theaters as "Alamo" commanded." Ouch.

Might this be the straw that finally breaks the camel's back and induces Disney's board to fire Eisner? If this doesn't, what would? Coming so soon after the shareholder revolt at the last annual meeting, you'd have to think that the board will take another long look at finding a replacement for Eisner.

On the other hand, I don't understand the buzz in the investor community that the Alamo's flop will revive the Comcast bid for Disney. Granted, the post-flop drop in Disney's stock price makes the Comcast bid marginally more attractive, but it doesn't change any of the fundamentals of the business case. It still looks like a lousy deal for both Disney and Comcast shareholders. (In fact, Comcast stock was trending up mainly because investors thought the Disney deal was dead.)

CalPers to Withhold Votes from Buffet

Just a few days after ISS recommended that institutional investors withhold authority to vote their shares for Warren Buffett's reelection as a director of Coca-Cola, CalPers - the big California public pension fund - announced that it will be withholding authority to vote its shares for Buffett and a slew of other director candidates at Coke and a number of other companies. (For an explanation of why they can't just vote against Buffett, see this post.) The WSJ ($) reports:

The California Public Employees' Retirement System, taking a strict view on independence of directors and outside auditors, said that it will withhold support for the re-election of more than half of Coca-Cola Co.'s board, including Warren Buffett, and that it also will withhold support from Citigroup Inc.'s Chairman Sanford Weill and Chief Executive Charles Prince as directors of that company.

Just how strict is CalPers policy? Buffett got bounced solely because he voted to authorized Coke's auditor, Ernst & Young, to perform nonaudit services:

"Director independence has been a guiding principle of our governance activities for some time," said Calpers spokesman Edd Fong. He said audit committees allowing auditors to do nonaudit work was an "automatic red flag." "The auditors might be inclined to be less than fully candid with negative audit findings if they believe it could jeopardize other lucrative business with the company," Mr. Fong said.

I need to write more about the ever-increasing insistence on director independence and the increasingly stringent definitions of independence being used by stcok exchanges and the investor community (in fact, it would make a good TCS column), but for now let me direct you to my article A Critique of the NYSE's Director Independence Listing Standards, in which I review both the theoretical argument in favor of director independence and the relevant empirical evidence. I concluded that the empirical evidence on the merits of board independence is mixed (at best). Indeed, I argued, the clearest take-home lesson to be gleaned from that evidence is that one size does not fit all. Firms have unique needs and should be free to develop unique accountability mechanisms carefully tailored for the firm’s special needs. CalPers and ISS, however, are trying to force a one-size-fits-all model onto Corporate America without regard to the unique situation of each firm. It's a bad policy that will not serve investor interests in the long run, even if it is being championed by high-profile members of the investor community at the moment.

Tax Freedom Day

According to the good folks at the Tax Foundation, today is Tax Freedom Day here in California:

Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2004, California taxpayers had to work until April 13th to pay their total tax bill, two days later than the national average (ranking the state 10th highest nationally).

And they have even more good news:

California ranks 49th in the Tax Foundation's State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Only Mississippi has a more unfriendly tax climate for business.

No wonder businesses are packing up and moving away.

A Misery Index? How 1980

John Kerry's coming out with a "misery index":

Senator John Kerry's presidential campaign has created a "middle-class misery index," which, not surprisingly, has "hit a record" under President Bush. To counter these numbers, Mr. Bush's re-election spin machine points to the original, simpler misery index, which it claims is "at a modern historic low for a president facing re-election."

That first misery index, invented by the late Arthur Okun, an economic adviser to former Presidents Kennedy and Johnson, was an easy-to-grasp gauge that combined monthly unemployment figures with the annual percent change in the consumer price index, otherwise known as inflation. It peaked at about 21 back in 1980, and in February sat at 7.29, which is down a tiny bit since President Bush took office....

Since the original "misery index" looks pretty good these days, Kerry had to mine the data by creating a new index: "they collected seven data points (median family income, college tuition, health-care costs, gas prices, bankruptcy rates, homeownership rate and private-sector job growth) to make their own index. All but one of these indicators — home ownership — have fallen over the past three years." The bogus nature of the Kerry index is revealed by the simple fact that Jimmy Carter scored better than Ronald Reagan on Kerry's new index! The absurdity of the Kerry index is further confirmed by the following good news from the Economist:

Americans, on average, spend less of their lives at work than ever before. Companies are indeed making record profits and, in recent months at least, have grabbed a bigger share of the national pie. Yet household income is growing, and American private wealth is also at a record, standing at $44 trillion, give or take. And though the chances of finding a new job are lower, the chances of losing your job in the first place are less than during the boom of the 1990s.

Of course, out here in California the business climate does stink, but that's mostly the fault of our Democrat-controlled legislature.

Tsk, tsk

I disapprove of this, of course:

Internet pranskters have set their Web sites on Sen. John Kerry. Some jokers who don't like the Democratic presidential candidate are trying to make his campaign Web site, johnkerry.com, the first answer to a search of the word "waffles" on Google, the No. 1 Internet search engine.

I'm wondering which of the following meaning of "jokers" USA Today intended: (a) One who tells or plays jokes. (b) An insolent person who seeks to make a show of cleverness. (c) A person, especially an annoying or inept one. My guess is both of the latter.

Tarnishing the Golden State's Economy

You know things are bad when even the LA Times (R) admits that California's business climate stinks:

Victor Monia is pleased that Gov. Arnold Schwarzenegger is wrapping his arms around the California workers' compensation problem. That doesn't mean the president of Visa Technologies, an electronics manufacturer in San Jose, is canceling his plans to move the 23-year-old business to Reno. "Workman's comp is a big issue, but it's just one of many items," Monia said, rattling off a list of California's comparatively high operating costs: energy, rents, labor, taxes. "Even the garbage costs are cheaper in Nevada." ... Many [businesses] have already made up their minds. In a recent survey for the California Business Roundtable, consultants reported that nearly 30% of 50 California companies interviewed had explicit policies to move jobs out of state if possible. And half said they planned to avoid adding jobs in California. Some cited high housing costs, others the widening gap between operating expenses in California and other states.

As the Times points out, not all of the blame can be laid on the state's politicians, but they are responsible for an awful lot of it. The Democrat-controlled legislature has piled new taxes and regulations onto business for years with no regard for the cumulative impact on marginal costs:

Nevada recently launched a print ad campaign with the slogan "You can't hang on." The campaign focuses heavily on workers' comp, reminding businesses that California's rates are double the national average and Nevada's rates have fallen 12.3% this year. If workers' comp is overhauled, Nevada will just change the message to concentrate on something else, said Somer Hollingsworth, president of the Nevada Development Authority.

"You've still got the problem of the cost of power. You've still got the family leave program…. You still have the health insurance mandate, which will cost a bundle," he said. (The California law requiring employers with 50 or more workers to provide health insurance by 2006 could be overturned in a referendum vote in November; California's paid family leave program, which gives many workers up to six weeks' paid leave per year to care for a new child or a seriously ill family member, begins July 1.) ...

This week, negotiations continue in Sacramento on a proposed measure to revamp the workers' comp system and, the theory goes, reduce employers' premiums. Beyond that, regulations employers complain about include one mandating paid family leave and the requirement that employers pay overtime to workers putting in more than eight hours in a day, as opposed to more than 40 hours a week, which is common in other states.

Will the last businessperson to leave please turn off the lights on your way out the door?

More Health Cop News and the Cause of Liberty

From William Sjostrom's Atlantic Blog:

I don't drink coffee. I don't really like the stuff (although I really like coffee flavored ice cream), the acid rips my stomach apart, and the caffeine makes me jumpy. One cup in the morning will give me a miserable day and a sleepless night. The New York Times offers details here (link courtesy of Tom Smith at The Right Coast), and a researcher at the National University of Ireland, Galway says "Lifelong use could account for 10 to 20 per cent of cardiovascular mortality."

But note this. The researcher, Jack James, is coordinator of the EU-funded Caffeine and Health in Europe project. Did you think it would stop at tobacco and booze and fast food? Hah.

The Unholy Alliance of plaintiffs' lawyers, health fanatics, bureaucrats, and modern day secular puritans, kill-joys, and spoilsports is coming for us all. If you love liberty, take up smoking and drinking, buy coffee from places that sell it too hot, eat red meat daily, wear fur, and support tort reform.

James Flanigan on Corporate Tax Dodges

I find James Flanigan's business columns unimpressive, even by the lax standards of the LA Times (R). Today's illustrates why. Flanigan objects that corporations aren't paying enough in taxes:

A fuse was lighted under the old tax reform bonfire last week when the Government Accounting Office reported that 60% of U.S. corporations didn't pay a penny in taxes on their income from 1996 to 2000. That wasn't exactly a bolt out of the blue for most Americans. Maybe it was a surprise to some that the corporations didn't commit any crimes, but just engaged in some complicated and counterproductive — to the Treasury, at least — sheltering transactions.

Bombshell or no, the GAO report renewed interest in the tax escapes that, particularly as April 15 approaches, have rankled all the working people who share big chunks of what they earn every year with Uncle Sam. ... Both parties on Capitol Hill and tax experts from conservative and liberal think tanks in Washington are complaining that corporate tax abuses have been growing and that it's again time to plug some of the leaks. Dozens of shameful sheltering plots abound....

U.S. taxpayers would only be surprised if corporations these days lived up to their obligations.

Even setting aside the longstanding and perfectly legitimate debate over whether corporations should even be taxpaying entities, Flanigan's moral outrage is misplaced for three reasons.

1. Corporations are not moral actors. Edward, First Baron Thurlow, put it best: "Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and nobody to be kicked?" The corporation is simply a nexus of contracts between factors of production. As such, there is no basis for assigning moral blameworthiness to the corporate entity. Instead, the relevant moral actors are the directors and managers who make decisions for the legal fiction we call a corporation.

2. Directors and managers owe duties to shareholders rather than society. As the Michigan supreme court’s famouslyexplained in Dodge v. Ford Motor Co.: "A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end." Or, as Milton Friedman even more famously put it, "the social responsibility of business is to increase its profits." Directors and officers who maximize corporate returns by minimizing corporate tax payments thus are performing the precise function society assigns them. (See generally my articles Catholic Social Thought and the Corporation and In Defense of the Shareholder Wealth Maximization Norm, which discuss the board's duty to maximize shareholder wealth.)

3. Directors and officers are obliged to maximize shareholder wealth within the law. When Congress creates a Byzantine tax code full of complexities, inconsistencies, and gaps, it ill-behooves Congress to complain if business avails itself of the loopholes thereby created. None of the dodges of which Flanigan complains are illegal; to the contrary, all are the creatures of the tax code. Flanigan's complaint is properly directed at Congress rather than business. Typically, however, the LA Times' chief business columnist much prefers the interests pf regulators to those of business.

Congrats to Tung Yin

... on the birth of Nicholas. A future Bruin if I ever saw one!

I Don't Know How This One Got By the Times' Censors

The LA Times (R) actually ran an op-ed today favorable towards the role President Bush's faith plays in his decisionmaking:

In many respects, questions about the role of faith in Bush's presidency are a replay of those raised during Ronald Reagan's administration, when the former president called the Soviet Union an "evil empire" and talked about a spiritual battle against communism. Critics then predicted a possible nuclear Armageddon caused by a president bent on fulfilling prophecy. In reality, what Reagan's faith brought him was a deeper understanding of the Cold War, that it was less about missiles and geopolitics than about core principles. His faith morally clarified the superpower conflict, and according to some dissidents behind the Iron Curtain, encouraged them to further resist the Soviet system.

Faith has played an equally important role in Bush's administration, morally clarifying for him the war on terrorism and encouraging patience in the light of tremendous pressure. But Bush's critics have it backward: It's not so much that Bush thinks God is on his side; rather, he wants to be on God's side and make the correct moral choices. He doesn't think God has given him a blank check; rather, to make the correct decisions, he believes he must study and embrace Judeo-Christian principles. ...

His friend Doug Wead, a former aide to George H.W. Bush, recounted for us a discussion he had with the current president a few years ago on the story of the good Samaritan. Wead was reminding Bush of the story about our moral obligation to help strangers in distress when the president, in typically blunt fashion, asked: What if we got there 20 minutes earlier, when the traveler to Jericho was being attacked. Don't we have an obligation to help him then too? Such thinking not only influenced his decision to liberate Iraq but also fueled his commitment to combat AIDS in Africa. ...

Bush read [Oswald] Chambers devotionals throughout 2003, and Chambers is hardly what you would call a hawk. "War is the most damnably bad thing," Chambers wrote. "Because God overrules a thing and brings good out of it does not mean that the thing itself is a good thing." Far from making Bush gung-ho, his Bible readings create an unusual cocktail of courage and patience. ...

Even those who don't share Bush's religious convictions should see them as a good thing. His faith compels him to wrestle with ethical questions that less religious men might simply ignore. And his strong faith offers us visible guideposts by which we can evaluate his performance as president. Find me a commander in chief who lacks core convictions rooted in something greater than himself, and you'll have a leader who lacks an identifiable moral compass and will, accordingly, be prone to drift off course.

Somebody clearly was asleep at the switch at the Times. I'm glad, however, as it restored a lot of my faith in Bush. I urge you to go read the whole thing, even at the cost of complying with the Times' intrusive registration requirements.

LA Times on the PDB

The Times' (R) reporting on the infamous PDB shows the usual Times bias. In a story whose main gist is that the PDB should have been viewed as a warning, and as damaging Rice's and Bush's credibility, complete with bullet points explaining why, we find this factual nugget buried deep within the story (after the turn):

Yet less than one-fifth of those polled by Newsweek said the Bush administration should be blamed for the attacks; almost one-fourth said the Clinton administration bore the responsibility, and the largest group — nearly 40% — said both were equally culpable.