The Warren Buffett Trap

Following his op-ed on Monday in the New York Times, which called for taxing the rich at an undisclosed higher rate than what we currently have, Warren Buffett was held out as a great hero - a rare American who actually believed we should tax rich people, especially when he's one of them. While I agree with Buffett that we should tax the rich, there are a couple of large and fundamental problems for liberals elevating Buffett's arguments.

First, as I highlighted on Monday, Buffett is completely non-specific about what the higher tax rate for the wealthy should be. He suggests that there be tax brackets for people making over $1 million and another for people making over $10 million, but doesn't say what those should be.

Specifics matter because a small hike won't really do much at all. Instead, the hike should seek to achieve a particular social end. In this case, that goal should be reducing the political clout wealthy elites have through their wealth. If you question this, just ask yourself if you think the Koch Brothers or Rupert Murdoch should have less power in American politics. If you're reading this blog, I'll presume that your answer is yes and move along.

Second, and more importantly, in his op-ed, Buffett came out in favor not only of the austerity measures pushed by both Republicans and the White House, but called for the Super Congress to go beyond $1.5 trillion in spending cuts. This has been almost entirely ignored by people elevating Buffett's op-ed. He wrote:

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.

Coincidentally, the AP reported this week that President Obama "will challenge the new "supercommittee" of Congress to go beyond its goal of $1.5 trillion in deficit reduction." Apparently Buffett and Obama are working from the same playbook on this issue. Anyone following the austerity debate knows that spending cuts of this magnitude require major cuts to Social Security, Medicare and Medicaid to reach that mark.

Third, Buffett frames his call to tax the rich around the idea of shared sacrifice. At first blush, this sounds like a pretty good idea, and again, it's one that we've seen from President Obama in recent months. The problem with this is that tax rates which keep millionaires millionaires, and multi-millionaires multi-millionaires, don't in any reasonable sense constitute sacrifice on the part of the rich. On the other hand, cutting Social Security dramatically reduces the amount of money tens of millions of Americans have to live on, mostly while they're living on a fixed income. Cutting Medicaid and Medicare likewise require massive cost increases for seniors in nursing homes, again, many of whom can't afford more cuts. And cutting unemployment benefits or aid to homeowners... well, you get the picture.

The zeitgeist should properly be defined by how much pain and suffering poor, working and middle class families have felt following Wall Street crashing the economy. People who've lost their homes, their jobs, their health insurance, and their basic economic security have already sacrificed. They've sacrificed far more than they could afford to sacrifice. And what about those lucky poor, working and middle class Americans who have not yet lost their homes, their jobs and their health insurance? Clearly now is not the time to take away their safety net.

Elites pushing for austerity are saying these people should give up even more, because suddenly the deficit is an existential threat to America. And Warren Buffett chimes in, "Well, me and my pals could kick an extra few bucks to the kiddie and it won't hurt us." Thanks, pal.

Here's what would make sense: recognize that poor, working, and middle class Americans have already suffered enough. Recognize that wealthy elites not only caused the calamity everyone else is suffering under, but have yet to be asked to pay to clean it up. Then tax millionaires and multi-millionaires at, say, Reagan-era rates (which in 1986, for the top bracket, were 50%). Then don't cut any more social spending, let alone the Big Three programs. I don't know if that would produce equity, but frankly, shared sacrifice is not particularly appealing, especially when it's a vehicle for destroying our social safety net.

Naturally what I'm describing is not politically possible. The Obama administration, the Republican Party, and many Democrats in Congress believe that the poor, working, and middle classes of America should make more sacrifices in the form of cutting government spending and cutting the social safety net. There is near-unanimity on this across the aisle, which again is what makes Buffett's shared sacrifice rhetoric so troubling. During the deficit debate, the Republicans wanted all spending cuts and no tax increases, while the Obama administration wanted about as many dollars of spending cut, while also having small revenue increases through things like taxes on corporate jets. This was a fig leaf. The differences were purely optical and remain so. The shared sacrifice rhetoric of Buffett, as with Obama, is simply a way to achieve austerity with some minor taxation of the rich. The rich may oppose this taxation, but as Buffett ably points out, it won't change any of their behaviors, let alone their rich lifestyle. Read the rest of this post...

Interview with Matt Taibbi on the SEC scandal

Matt Browner Hamlin reported on Matt Taibbi's stunning Rolling Stone piece here.

The revelations — that the SEC has been destroying evidence of potential crimes if no investigation was contemporaneously undertaken — are shocking. As Taibbi implies, No Cold Case Files for you, Mr. & Ms. Wall Street.

Here's a great, and listenable, interview with Taibbi. Easy on the eyes, if you prefer to hear your information rather than read it.



Talk about captured government. The SEC reminds me of the Gimp in Pulp Fiction: captured, caged, and slavishly compliant.

Did you notice when Taibbi said this practice, of shredding MUIs, started? Early 1990s. Hmm, what happened in the early 90s? Oh that's right; Bill Clinton recaptured the White House after 12 years of Republican rule and installed Wall Street (in the form of Robert Rubin and acolytes) as economy-czar. Looks like someone made someone very happy after the election.

Or as Yves Smith puts it at the excellent Naked Capitalism, re Arthur Levitt, SEC chairman at the time (my emphasis):

[T]he timeline is revealing. It apparently dates to at least 1993, when Clinton appointee Arthur Levitt became chairman. This is well before most people would date Wall Street having much impact on undermining regulation (although if my memory serves me right, a significant first step was the Greenspan Fed abandoning oversight of primary dealers, which took place in 1992). Levitt was from Wall Street, he had been the chairman of the American Stock Exchange. But he has tried to wrap himself in the mantle of being the friend of the small investor and blamed the erosion of the SEC on regular threats by Congressmen like Joe Lieberman, the Senator from Hedgistan, who found this stance to be too much and threatened to cut SEC funding. It isn’t clear if the practice started under Levitt, but Levitt notably was the first SEC chairman for decades who was not an attorney. ...

This evidence of an institutionalized effort to change the playing board in favor of the financial services industry puts an entirely different coloration on Levitt’s posture. It now looks like a precursor to the Obama playbook of giving the industry virtually everything it wanted on what counts (Levitt sided with Rubin and Greenspan in opposing regulation of credit default swaps) but engaging in some “friendly to the public” gestures to hide that fact from the Democratic base. And it’s hard to believe now, but in 1993, both the rule of law and propriety carried much more weight than they do now. It’s hard to imagine that those involved were ignorant of the significance of these measures, and the fact that they continued for 20 years before anyone called them out points to a deeply corrupt culture at the SEC.

I’m not easily shocked, but this is shocking. It’s like discovering your a colleague didn’t merely have some problems with his taxes, but was money laundering on behalf of a major drug ring. I hope the Taibbi piece leads to a much broader look into dubious practices at the SEC. But given how the banks seem to own DC, I’m not holding my breath.

For fun, pair this report with the income inequality segment on PBS. It's the same story, just differently told.

GP Read the rest of this post...

Potentially significant immigration changes by Obama admin.

Here's Congressman Gutierrez's statement, and Joe has more on AMERICAblog Gay.

Gutierrez Calls DHS Deportation Announcement An Important Victory
For Sensible Immigration Policy

"I am proud of the President and Secretary Napolitano for standing up for a more rational approach to enforcing our current immigration laws," Congressman says

(Washington) – Today, Congressman Luis V. Gutierrez (D-IL) issued a statement reacting to an announcement that the Department of Homeland Security (DHS) would review deportation cases based on newly-issued guidelines establishing which cases are priories for deportation and which are not. The review of pending deportation cases and the instructions to all elements of DHS over how immigrants that meet certain criteria should be handled has come after months of sustained advocacy by Congressman Gutierrez, the Congressional Hispanic Caucus, other Democratic leaders in the House and Senate, and determined public pressure by from clergy, advocates, immigrants, and DREAM Act students nationwide. The announcement by DHS will apparently make one of Congressman Gutierrez' key demands a reality: putting a halt to the deportation of young people who were brought to the U.S. as children and who are crime free and pursuing their education; in other words, those who would qualify for the DREAM Act, which was passed by the House of Representatives in 2010 but died in the Senate when only 55 out of 100 Senators voted to move the bill forward.

The Congressman was briefed on today's DHS announcement by the Director of Immigration and Customs Enforcement (ICE) John Morton by telephone yesterday evening. The following is a statement by Rep. Luis V. Gutierrez:

I have been vocal in my criticism of the President and his Administration over the dramatic increase in deportations on his watch and have traveled the country urging him to use his power under existing law to do what he can to help. This is the Barack Obama I have been waiting for and that Latino and immigrant voters helped put in office to fight for sensible immigration policies. Focusing scarce resources on deporting serious criminals, gang bangers, and drug dealers and setting aside non-criminals with deep roots in the U.S. until Congress fixes our laws is the right thing to do and I am proud of the President and Secretary Napolitano for standing up for a more rational approach to enforcing our current immigration laws.

Today is a victory not just for immigrants but for the American people as a whole because it makes no sense to deport DREAM Act students and others who can make great contributions to America and pose no threat. It is not in our national interest to send away young people who were raised in the U.S. and have been educated here and want only to contribute to this country's success.

I have asked ICE Director John Morton to come to Capitol Hill and brief Members of Congress on how this will affect their constituents as soon as Congress reconvenes. My Chicago office and Congressional offices across the country have been inundated with cases of DREAM Act students, military families, and U.S. citizens whose families are being threatened with deportation or who have actually been deported. Putting the new priorities into practice so that cases can be reviewed and getting the word out to caseworkers in Congressional offices, in the legal community, and to individual immigrants facing deportation is critical and time-sensitive and we will work with ICE and DHS on that immediately.

This action does not address all of my concerns, but it is the start of a process that will save many American families and individuals who deserve to live long and productive lives in this country. There are still U.S. citizens and legal permanent residents in families with undocumented immigrants who can obtain legal status under existing law, but who do not do so because of an unfair three- and ten-year penalty barring them from the U.S. if they apply. The rapidly expanding "Secure Communities" state and local enforcement program that undermines public safety and has caught tens of thousands of non-criminals in its dragnet remains a big problem. But today's announcement shows that this President is willing to put muscle behind his words and to use his power to intervene when the lives of good people are being ruined by bad laws.

Gutierrez got arrested outside the White House last month, he tends to put his money where his mouth is on immigration issues. Read the rest of this post...

Get your "Proud Firebagger" t-shirt

Get your t-shirt from the AMERICAblog store.

You can order a "Proud Firebagger" t-shirt via the AMERICAblog Store (a significant portion of every purchase goes to AMERICAblog.)

Yesterday, I reported on President Obama's campaign director in NM having sent an email blast to their supporters in which he rudely criticized both Paul Krugman and the progressive Netroots. Specifically, he called us "Firebaggers" - which seems to be a mixture of Teabagger and FierDogLake (presumably because Jane has taken the lead in holding Dems accountable we're all FireDogLake now, or something). So, we figured why not wear our label proudly - get your "Proud Firebagger" t-shirt here. A significant portion of each sale goes to AMERICAblog, so you are helping us keep the site going by buying our shirts, and other merchandise. Thanks so much, JOHN

(You can read our earlier post about being called "Firebaggers" here.) Read the rest of this post...

Rick Perry is bi on federal aid

From Time:

In his campaign kickoff last Saturday, Texas Gov. Rick Perry burnished his conservative credentials by attacking the idea of deficit stimulus spending. "Washington's insatiable desire to spend our children's inheritance on failed stimulus plans and other misguided economic theories have given us record debt and left us with far too many unemployed," he said.

But it was not always so for Perry. Back in 2003, lobbyists under Perry's direction went to Capitol Hill to lobby the Republican Congress for more than a billion dollars in federal deficit spending on "stimulus." And they won. A 2005 report (pdf) by the Texas Office of State-Federal Relations boasted of "$1.2 billion in temporary state fiscal relief to Texas" through Medicaid that Perry's lobbying operation had secured. (Watch TIME's video "Rick Perry Is Ready to Run for President.")
And that was just the beginning.

Perry isn't what he pretends to be. It's becoming the hallmark of his run for the presidency. Read the rest of this post...

Taibbi: SEC is covering up Wall Street crime

Matt Taibbi of Rolling Stone has an explosive look at how he says the SEC has been routinely destroying evidence of financial crimes by Wall Street.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records – "including case files relating to preliminary investigations" – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or "Matters Under Inquiry" – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission's internal website. "After you have closed a MUI that has not become an investigation," the site advised staffers, "you should dispose of any documents obtained in connection with the MUI."Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The SEC hasn't just done this a handful of times, Taibbi finds that over 18,000 separate MUIs were destroyed.
The Taibbi piece also provides an in-depth look at the revolving door between the SEC and top Wall Street banks and law firms. To make matters worse, the biggest participants in the revolving door come from the SEC's Enforcement Division - the people whose day to day job is investigating Wall Street and stopping criminal behavior.

The whole story is absolutely a must-read. But here's where this gets really important for the average American:

Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm's executives were suspected of insider trading in September 2008?

Taibbi points out that the answers to these questions are essentially unknowable. But there's no doubt that the information that the SEC destroyed was important. Hell, there's no doubt that the failure of a regulatory agency to actually investigate and conduct oversight of the industry it is tasked to oversee is a huge problem. The story of the financial collapse is largely a story of the ignorance of regulators, risk management officers and bank executives. Much of this ignorance was deliberate. Refusing to investigate complaints of bad behavior is a pretty clear example of how this willful ignorance was maintained.

Taibbi's piece discusses how Senator Chuck Grassley's office has attempted to get answers from the SEC about the destruction of MUIs. Not shockingly, the SEC has basically told him to bugger off. Hopefully a curmudgeon like Grassley will get ticked off enough about the SEC's disrespect of his office to do something. Clearly there need to be meaningful congressional investigations into the SEC's destruction of evidence in contravention to the law. In the mean time, I'd hope that Taibbi's piece opens the eyes of administration officials to the massive problems at the SEC. This behavior cannot be allowed to continue if there's any hope of rebuilding the US economy in a way that doesn't put it at the perpetual mercy of banksters deciding to break the law to line their pockets. Read the rest of this post...

"Land of the Free, Home of the Poor"

Chris in Paris covered this earlier, the PBS report on wealth inequality. But I'd like to post a video of the whole piece. It's about 10 minutes long, and well worth it.

It begins with Warren Buffet's comments on Charlie Rose, then moves to Paul Salmon's report on the wealth gap in the U.S. today.



Notice that it takes a Sweden (forced wealth redistribution) to produce the middle pie chart. In nature, money rains naturally into the pockets of the already rich and powerful. After all, what's the point of power if you can't use it to win every game you play?

Note also, by the way, that it takes media collusion to keep people this confused. Only the low-income workers knew the state of things in their own country.

Amazingly good use of graphics and animation. A much-watch, in my opinion.

GP

Read the rest of this post...

Michele Bachmann claimed she was a doctor, she’s not

That's just bizarre on many levels. Who goes around calling themselves "Doctor" when they're not an MD or a PhD? Again, it's just kind of weird. From Mother Jones:

And one more thing—lest you think she doesn't have the brains to do battle with Obama, she rattles off her degrees: "I'm not only a lawyer, I have a post-doctorate degree in federal tax law from William and Mary," she told Fox News' Chris Wallace in June. "I work in serious scholarship."

Post doc? Not quite. She got an LL.M. Which means you go for another year of school after you get your law degree, in order to specialize in some field. Big deal. It certainly doesn't permit you to call yourself a "doctor," and every lawyer knows it. But that didn't stop Bachmann.

But there was one resume item that was missing: a Ph.D. Back in the late 1990s and early 2000s, when Bachmann traveled the state as an education activist, she went by "Dr. Michele Bachmann," even though she had never obtained nor sought the advanced degree that's a prerequisite for the title.

She ran all over the state telling people she was a doctor because she had an LLM. That's seriously messed up.

Read the rest of this post...

Shorter Coburn: Obama is a welfare queen

From Tulsa World:

“But [GOP Senator Tom] Coburn also said most members of Congress are good people with good intentions. Responding to a man in Langley who asked if Obama "wants to destroy America," Coburn said the president is "very bright" and loves his country but has a political philosophy that is "goofy and wrong." Obama's "intent is not to destroy, his intent is to create dependency because it worked so well for him," he said. "As an African-American male," Coburn said, Obama received "tremendous advantage from a lot of these programs."

Okay then.
Read the rest of this post...

News of the World Hollywood reporter arrested, implications for possible US phone hacking?

The Guardian clearly suggests in their piece that the just-arrested News of the World Hollywood correspondent sure got a lot of uncannily accurate secret scoops on the stars in his time. The Guardian:

His move to the US makes his arrest, the 13th made by Operation Weeting, particularly significant. If Desborough was involved in hacking while in Britain, as police appear to believe he was, it raises the question of whether he practised those techniques in the US – and if so, whether he was the first and only News of the World journalist in the US to do so.

There's clearly no evidence that we know of pointing to any wrongdoing in the US. But it would be naive of US authorities to not consider the possibility. Read the rest of this post...

Obama simply doesn’t get the left, and Krugman responds to attack from Obama campaign official

Greg Sargent at the Washington Post weighs in what he thinks is underlying the latest brouhaha between President Obama and the left (one of his campaign staff sent an email to supporters blasting Krugman and the liberal blogs).  Here's Greg:

That said, this story does provide a window into what I think is a real problem — the nature of the Obama team’s frustration with liberal critics. The problem is that some on the Obama team don’t reckon with what it is lefty critics are actually saying. Obama advisers get angry when they think liberal critics are refusing to accept the limits placed on him by current political realities, and when lefties presume at the outset that Obama will inevitably sell out. That’s reflected in Sandoval’s angry email and in other periodic explosions of anger at the “professional left.”

But the lefty critique goes considerably further than this. It’s an argument with Obama’s team about tactics and strategy, about what might be attainable if he handled these negotiations differently. The case from these critics is if Obama approached negotiations with a harder line, it would be better politics because it would juice up the base and show indys he’s a fighter. They also advocate for this course because the current dynamic is hopelessly broken — and they think a more aggressive approach has at least a chance of broadening the field of what’s substantively possible. (There’s a segment on the left that also thinks Obama wants what’s in the deals he keeps securing, but the points above are broadly what many lefties agree on.)

Whether you agree with this critique or not — people make persuasive cases in both directions — Sandoval’s email shows a broader failure to reckon with what it is that has lefty critics so ticked off. That’s the real problem here — and it’s one of the key causes of the tension between the left and the White House.

Ezra Klein notes one silver lining to all of this. At least we got inside their heads (or as I'd put it, got their goat). And the goal isn't to get their goat, it's to get their attention. And if you're able to get the attention of the White House, worse things could be said about you than that.

Paul Krugman, NYT columnist and Nobel economist, weighs in as well:

Well, at least they’re paying attention.

I would say this: on one side you have the GOP, which responds to completely crazed Tea Party demands by doing all it can to assure the hard right that it’s on its side. On the other, you have the Democratic establishment or at least part thereof, which responds to complaints from its own base that it’s going too easy on the crazies by lashing out at the base, with a bit of bearded-professor bashing on the side.

Way to strengthen your bargaining position, guys.

Read the rest of this post...

Justice Dept. finally investigating S&P; mortgage ratings

To be fair to the Justice Department, the crash only occurred in 2008 and they've been busy prosecuting the bankers who caused the crash. Oh wait. NY Times:

The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.

The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.

In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.

If they do manage to move these cases forward and prosecute it suggests that once again, those at the low end of the market will take the beating. The credit rating agencies deserve punishment for their dodgy business but what everyone wants is to see the banks brought to justice. Read the rest of this post...

UK unemployment numbers jump

Raise your hand if you think strict austerity works for a struggling economy. Anyone? It's hard to understand why anyone thinks this works because it hasn't and it won't. Much like the "tax cuts generate private industry jobs" lie that has failed miserable after a ten year run, many on the right (including our own president) still behave as though it's a valid policy position. It's voodoo economics all over again.

The government has repeatedly pointed to job creation by the private sector as reassuring news in the face of the slowdown in economic growth over the past nine months. But the Office for National Statistics revealed that unemployment jumped by 38,000 to 2.49 million in the three months to June on the government's preferred measure which includes all those out of work and actively looking for a job. The increase would cancel out the 30,000 jobs George Osborne hopes to create with his new enterprise zones, 11 more of which have been were announced. The unemployment rate rose to 7.9%, from 7.8% in the previous quarter.

On the more timely claimant count measure, unemployment was up by 37,100 on a month earlier – the biggest increase since February 2009, when the economy was deep in recession.

The figures showed that youth unemployment has risen again, after dropping in recent months, and there was fresh evidence that high unemployment could have been a contributing factor to last week's wave of rioting. Analysis by the TUC showed that several of the hotspots were among the 10 areas of the country where the largest number of claimants are chasing each job vacancy.

Read the rest of this post...

Syrian military operations halted ahead of UN meeting

Unfortunately this is probably more of a breather for Assad's troops rather than a complete stop. Al Jazeera:

Military and police operations against protesters in Syria have stopped, Syrian President Bashar al-Assad told United Nations Secretary-General Ban Ki-moon, the world body said in a statement.

The announcement comes ahead of a UN Security Council meeting on Thursday at which the UN's human rights chief, Navi Pillay, could call for Syria's crackdown on protesters to be referred to the International Criminal Court, according to diplomats.

In a phone call with Assad on Wednesday, Ban "expressed alarm at the latest reports of continued widespread violations of human rights and excessive use of force by Syrian security forces against civilians across Syria, including in the Al Ramel district of Lattakia, home to several thousands of Palestinian refugees," the United Nations said in a statement.

Read the rest of this post...

If Rick Perry does for the US what he’s done for Texas...

From Politifact:

U.S. Rep. Lloyd Doggett told ABC News on Aug. 11, 2011, that Gov. Rick Perry’s rosy depictions of employment conditions in Texas aren’t entirely accurate.

"Twenty-five states have lower unemployment than Texas does today," the Austin Democrat said, adding that "we're tied with Mississippi for more minimum-wage jobs than anywhere in the United States."

Is Texas middling in unemployment and tied with the Magnolia State for minimum-wage jobs?

Yes and yup.

Maybe he can hold a prayer day and see if that raises the minimum wage. Read the rest of this post...