Month: January 2010

Some Sanity in Tax Abatement Russian Roulette

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After years of offering capital improvements and tax abatements to big businesses to lure them to town, some cities are now going after those business for their taxes when the companies do not fulfill their end of the bargain:

Cash-strapped communities have a message for corporations that promised jobs in return for tax breaks: A deal’s a deal.

As the recession drags on, municipalities struggling to fix roads, fund schools and pay bills increasingly are rescinding tax abatements to companies that don’t hire enough workers, lay them off or close up shop. At the same time, they’re sharpening new incentive deals, leaving no doubt what is expected of companies and what will happen if they don’t deliver.

The example they give is a $600K tax bill in DeKalb, Il, when they did not meet the mandated job level (500) in their distribution center.

My suggestion, and it’s one that would involve lots of tax lawyers, is not that the taxes be waived in such a deal, but that the amount of the taxes be a loan, so that when a company violates the terms, you can claw back all the money, plus interest.

John Taylor Calls out Ben Bernanke

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Ben Bernanke in his younger days

He politely says that Bernanke is full of it, and that low rates caused the bubble:

John Taylor, creator of the so-called Taylor Rule for guiding monetary policy, disputed Federal Reserve Chairman Ben S. Bernanke’s argument that low interest rates didn’t cause the U.S. housing bubble.

“The evidence is overwhelming that those low interest rates were not only unusually low but they logically were a factor in the housing boom and therefore ultimately the bust,” Taylor, a Stanford University economist, said in an interview today in Atlanta.

Taylor, a former Treasury undersecretary, was responding to a speech by Bernanke two days ago, when he [Bernanke] said the Fed’s monetary policy after the 2001 recession “appears to have been reasonably appropriate” and that better regulation would have been more effective than higher rates in curbing the boom.

The Taylor rule, from the Wiki:

In economics, a Taylor rule is a monetary-policy rule that stipulates how much the central bank would or should change the nominal interest rate in response to divergences of actual inflation rates from target inflation rates and of actual Gross Domestic Product (GDP) from potential GDP. It was first proposed by the U.S. economist John B. Taylor in 1993.

I’m not sure of the value of the Taylor rule, there seem to be some “miracle occurs here” bits in the coefficients used, but it is significant that someone with his sort of academic credentials (he has a fracking rule named after him) is coming out hard against the Fed Chairman’s excuses.

Year End Auto Wrap Up

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Numbers are year over year h/t CNN

The surprising news is that in 2009, more old cars were scrapped than new cars were bought, meaning that the US auto fleet fell to 246 million from 250 million.

Note that “cash for clunkers” accounted for only about 700,000 vehicles, so the auto fleet would have contracted without the program.

This is the first time that the US fleet has shrunk since probably the end of WWII.

So the year sucked in terms of sales, though December was good for Ford and Toyota, but bad for GM and Chrysler.

Sales had to go up, as at their nadir, sales would have resulted in a fleet age of almost 30 years.

Oh, God, Not This Jerk!

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Harold Ford, of the deeply corrupt Ford political clan in Tennesee is being groomed to challenge Kristen Gillibrand in the New York State Democratic Senate primary:

Encouraged by a group of influential New York Democrats, Harold Ford Jr., the former congressman from Tennessee, is weighing a bid to unseat Senator Kirsten E. Gillibrand in this fall’s Democratic primary, according to three people who have spoken with him.

Mr. Ford, 39, who moved to New York three years ago, has told friends that he will decide whether to run in the next 45 days. The discussions between Mr. Ford and top Democratic donors reflect the dissatisfaction of some prominent party members with Ms. Gillibrand, who has yet to win over key constituencies, especially in New York City.

Let’s be clear what they mean when they say, “especially in New York City”: they mean that they think that they might have a chance because Harold Ford is black.

Since losing his race for the Senate in 2006, Ford has been a mouthpiece for the corporatist Democratic Leadership Council (DLC) what is going on here is that the powers that be in New York, well, the DINO ones, have been “disappointed” in Gillibrand, because, as she has moved from a very conservative congressional district to a rather liberal state as her constituency, her positions have changed:

Some of the donors who have urged Mr. Ford to consider a run expressed alarm as Ms. Gillibrand, who as a congresswoman represented a conservative upstate district, has abandoned some of her previous positions on issues like gun control and immigration as she prepares to run statewide. Several executives interested in a Ford candidacy said that Ms. Gillibrand’s positions echoed Mr. Schumer’s and that the state needed a second independent voice in the Senate.

What they are saying here is that they don’t want a real Democrat here, they want a corporate whore, and that is what Harold Ford is.

Most of the opposition to Gillibrand in the New York Democratic party comes from people who think that she is too conservative for the party and for the state, but the people mentioned here, like “Financier Steven Rattner,” who ran the auto bailout until an influence buying scandal forced him out.

I’m not a fan of Gillibrand, but Harold Ford? What they hell are they thinking?

Economics Update

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H/t Calculated Risk

Well, the ADP private employment survey is saying that the private sector lost 84,000 jobs in December, and the Institute for Supply Management’s non manufacturing index rose to 50.1, up from 48.7 in November, and not as good as forecast, but still showing a smidgen of growth.

Real estate was rather grim though, with mortgage applications hitting (seasonally adjusted) a 6 month low, and mortgage purchase applications (top pic) hitting a 12 year low.

Basically this means that people are not buying homes, they are just refinancing, though, with interest rates inching up, they aren’t doing that as much either.

Additionally, a feature of suburban blight, the strip mall, is taking a hit with vacancies hitting 10.6%, an 18 year high.

I keep saying it, but no one listens: we need some inflation here.

In energy, the cold weather drove both crude oil and natural gas higher, while in currency, the dollar fell slightly vs. the Euro, as traders make up their minds about whether to be optimists of pessimists.

Icelandic President Vetoes Bailout to British Investors

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The Icelandic people literally came out with torches

After receiving a petition containing signatures from almost ¼ of the registered voters in Iceland, Iceland’s President Ólafur Ragnar Grímsson vetoed the bailout bill. It appears that the original version, which would saddle every man, woman, and child in Iceland with a debt of €12,000, about $17,000.

The original bill which passed contained a provision allowing for renegotiation on any unpaid amount after 2024, but the British and Dutch threw a fit over that, so, like the debt slaves that they are on the way to becoming, the government promptly caved, and the Althingi passed a bill without any real prospect of ever getting the bankers’ boots off of their necks.

It has the effect of requiring the bill to be passed by referendum, which is an uphill road, when you consider the fact that 62,000 people out of a population of about 320,000 just signed a petition asking for a veto.

The President notes in his official statement, (PDF) that he believes that it is the right of the people to make such a decision:

It is the cornerstone of the constitutional structure of the Republic of Iceland that the people are the supreme judge of the validity of the law. Under the Constitution, which was passed on the foundation of the Republic in 1944, and which over 90% of the nation approved in a referendum, the power which formerly rested with the Althingi and the King was transferred to the people. It is then the responsibility of the President of the Republic to ensure that the nation can exercise this right.

In the comments of Calculated Risk.s post on the matter, a commenter nailed the absurdity of the deal for the Icelandic people:

They lose their IMF bailout money I think.

Am I right that the proposed IMF bailout is about $6 billion? And the bill from Britain is apparently for 3.4 billion pounds, or about $5.5 billion?

Funny coincidence, that.

Yes, funny that: Because a bunch of people invested in the Internet branches of a local bank, accounts that had were never guaranteed by the Icelandic government, because of the high amount of interest paid, the Icelandic people are supposed to take a loan from the IMF to pay off the people who made risky investments to get high returns.

High returns=high risk. This is not even investing 101, it’s investing, “remedial classes, because you spent high school stoned.”

The investors knew what they were getting into.

Basically, this is the US paying AIG counterparties, but in an amount that comes to ½ of GDP.

Basically, the deal with Iceland was as follows: put your population in debt slavery, and in return, you get, an IMF loan to pay the morons who invested in a dodgy bank.

Then, the IMF will demand that Iceland:

  • Dismantle its social safety net
  • Sell off its fishing rights, which is the major productive industry in Iceland, to foreigners who will rape the fisheries.
  • Fire public employees.
  • Privatize energy, water, and other utilities, so that foreigners can buy it and rape the citizenry.

In return, Iceland’s debt might not get downgraded to junk status.

I’m with Felix Salmon on standing up to bullies:

I’m quite ashamed of the bullying tactics being used here by the UK government. What happened was that an Icelandic bank, Landsbanki, started attracting UK depositors through its Icesave brand. When Landsbanki failed, the UK government bailed out those depositors in full. And now it wants that money back from the Icelandic government, which never guaranteed the Icesave deposits. If you thought the cod wars were bad, this is much worse.

(emphasis mine)

One of the flaws in the current finance system is that requirement that people be made whole when they chase high returns. It creates moral hazard, which leads to more stupidity.

Rinse, lather, repeat.

Senator Chris Dodd to Retire

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It’s a pity, he’s a good man, and he has now announced that he won’t be running for reelection.

He’s leaving because he believes that it’s an uphill fight for him to win the election:

Polling in Connecticut suggested that Mr. Dodd had been hurt both by his association with Countrywide and by criticism for his role in legislation that appeared to clear the way for bonuses to be paid to executives of American International Group, the insurance firm that received a government bailout. (Last month, Kenneth R. Feinberg, who is charged with monitoring pay at companies that received taxpayer bailout funds, imposed pay limits for A.I.G.’s top executives.)

Republicans had viewed the Countrywide loans and the A.I.G. bonuses as potentially powerful weapons in the campaign.…………”

His spending a year in Iowa to run for President, and the Countrywide loan deal, which he was personally unaware of, hurt him, but what really hurt him was the AIG bonus scandal, where the Obama and His Evil Minions™, most notably Timothy Geithner, strong armed him into including a section in the relevant bill to allow the obscene bonuses, and then refused to admit the truth for weeks, leaving Dodd twisting in the wind. (See here, here, and here…………Note that the first link has my prediction that, “Geithner will be gone by June,” so much for my powers of prediction)

[on edit]I forgot to note that Connecticut Attorney General, Richard Blumenthal (D) has announced that he will run, and is now the presumptive favorite in the heavily blue Nutmeg State.

Big Surprise

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The Conference Board’s survey of US job satisfaction hit an all time low. 45%, the lowest number since the survey began in 1987.

There is some surprise that, even as workplace safety and things like vacation days have increased, this number had trended downward:

“[That] could spell trouble for the overall engagement of U.S. employees and ultimately employee productivity,” she [Lynn Franco, director of the Consumer Research Center of The Conference Board] added.

The report notes that job satisfaction has steadily declined over the years despite big improvements in the work environment, such as a reduction of workplace hazards and an increase in vacation days.

Simply put, we are at the point where the fetishism of management for screwing with their workers may start hitting the bottom line.

This is basic primate behavior: People know that that upper management’s wages have gone up by more than 10 times, while their wages have stagnated.

The National Geographic noted this over 15 years ago:

Monkeys Show Sense Of Fairness, Study Says
Sean Markey
National Geographic News
September 17, 2003

If you expect equal pay for equal work, you’re not the only species to have a sense of fair play. Blame evolution.

Researchers studying brown capuchin monkeys (Cebus apella) have found that the highly social, cooperative species native to South America show a sense of fairness, the first time such behavior has been documented in a species other than humans.

The question of whether human aversion to unfair treatment—now shown by other primates—is an evolved behavior or the result of the cultural influence of large social institutions like religion, governments, and schools, in the case of humans, has intrigued scientists in recent years.

The new finding suggests evolution may have something to do with it. It also highlights questions about the economic and evolutionary nature of cooperation and its relationship to a species’ sense of fairness, while adding yet another chapter to our understanding of primates.

……………

Tobacco Regulations Largely Upheld By Court

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Big tobacco had a minor win, the judge said that the FDA could not the use of color and graphics in their advertisements, which is pretty much in line with the law as I understand it for “corporate free speech,” but allowed a ban on using merchandise and sponsorships to stand:

The judge struck down some modest restrictions on color and graphics in tobacco and on labels that tobacco companies said violated their free speech rights.

U.S. District Judge Joseph McKinley approved bans on sponsorships of athletic, cultural and social events and the use of tobacco imagery on such things as caps and T-shirts, rejecting the companies’ argument that the ban was too broad and failed to differentiate between adults and children.

He also upheld a requirement that warning labels cover half of the front and back of the packaging of tobacco products.

So, their package will be dominated by warning labels, and they cannot sponsor events or hand out ball caps, but they can use pictures and color on the labels.

Pretty much a win for the government.

First Massachusetts Senate Special Election Poll Out

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It’s Rasmussen, and they say that Democrat candidate Martha Coakley leads Republican Scott Brown by 50% to 41%.

Not particularly surprising.

Obviously special elections are rather quirky affairs, what with turnout being low, but Coakley’s turnout machine worked well in the primary, so I think that this is, absent her doing something really stupid, is in the bag.

There is an interesting point here though: If Brown were to win, the Dems would be down to 59 seats, and the Republican filibuster would hold, which might force the White House and Congress to use reconciliation, which might create a much better bill.

So, which is it, The Lady or the Tiger?

Read the Rude Pundit

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He’s a genius, as he shows in his latest, “It Shouldn’t Surprise Us that Some Ex-Gitmo Detainees Want to F%$# Us Up.” (%$# mine):

We are incapable of dealing with the notion that whether you’re the good guy or the bad guy is a matter of perception. And that sometimes the United States is the bad guy. Unless we’re willing to confront that and do something about it (like, at minimum, apologize and offer compensation), then we shouldn’t be surprised that Yemeni Mel Gibsons will seek to go all Lethal Weapon on us.

The man is a genius, if somewhat profane.

Go read.

The Religious Right Really Needs To Get Laid

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Because, they are really wound way to tight.

Case in point, their collective sh%$ fit over the appointment of Amanda Simpson as a senior technical advisor to the Commerce Department, where her portfolio will include the export of dual use technologies, because she is transgendered.

You can see excerpts of the freakout by focus on the family about this at the link, and my conclusion is that they are freaking, because no one there has gotten their porcupine properly whacked in a very long time.

As to her qualifications:

Simpson is highly qualified for the position. She has worked in the aerospace and defense industry for 30 years, most recently serving as Deputy Director in Advanced Technology Development at Raytheon Missile Systems. She holds degrees in physics, engineering and business administration, and is a certified flight instructor and test pilot with 20 years of experience.

So she’s a test pilot and a f%$#ing rocket scientist, but all that the religious right can think about is that her plumbing has been altered.

Economics Update

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If anyone thinks that real estate can lead us out of of a recession, or even that we can, as Mssrs. Obama, Geithner, Summers, etc., think that we can reinflate the bubble, you need to look no further than the National Association of Realtors (NAR) Pending Home Sales index, which fell 16% in November well under the forecast of -2%, though it is still up year over year.

They are trying to reinflate a balloon with a hole in it.

In any case, the horrible housing numbers drove treasury prices up as investors fled to safety.

It does appear, however, that foreign investors were going elsewhere, with the dollar falling against the yen, and in energy .

Olbermann Jumps the Shark

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No, I’m not talking about his bit with Richard Wolffe, where conflates bureaucratic turf wars with a group of Republican moles actively aiding terrorists, I mean his new feature, the 2 short “mini-comments”, each 1 minute long, which will air each show.

Normally, I use the phrase “Jump the Shark,” to describe some sort of gaffe which will forever tarnish the person who uttered the bon mot.

However, in this case, I am referring to the original, and rather more mild definition of, the point in a television program’s history where it’s done, and there is not much more to get out of it.

Regular twice-a-show mini “Special Comments” are an indication that the program has run out its string.

It’s not surprising: Countdown was always more driven by snark, particularly in the early days, and outrage at Bush and His Evil Minions™ and Olbermann is a (very good) sportscaster who tends to see political confrontations in the same sort zero-sum terms of a ball game.

BTW, if one of my reader(s) could rat me out to Olbermann as a “Worst Person in the World“, please do so. I could use the eyeballs.

I’m more of a policy wonk myself, and as such I prefer Rachael Maddow’s show, and I will always be grateful to Keith Olbermann for introducing me to her show.

I’ll still probably watch it streaming on my PC, in the background, which is what I do with both of their shows now, but Keith does not surprise me much any more.

Normally, I Don’t Quote Paul R. La Monica…………

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I find him rather to excessively optimistic, glib, shallow, and thoroughly conventional in his journalism.

That being said, his review of Federal Reserve Chairman Ben Bernanke’s speech at the American Economic Association meeting in Atlanta, nails it in the title, “Surprise! The Fed says don’t blame the Fed.”

That pretty much captures the substance of what Bernanke said in a nutshell.