The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.
The result was a tax system that is both inequitable and unstable. It’s inequitable because older homeowners often pay far less property tax than their younger neighbors. It’s unstable because limits on property taxation have forced California to rely more heavily than other states on income taxes, which fall steeply during recessions.
Even more important, however, Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.
Tuesday, May 26, 2009
California in a hole...
Republicans vs. Colin Powell...
Right now the Republican Party seems to be controlled by the old guard, the people who grew up with and still have the fear of communism, people who can never forget Vietnam, and so on (the Tareyton ad with the slogan "would rather fight than switch" hinted at in the last line began in 1963, appeared on TV from 1966-1971, and, according to Wikipedia, the "then-fresh slogan was adopted by supporters of Barry Goldwater during the 1964 campaign for the presidency."). Their villains may have changed, but the world is still framed by the battles of the past.
Most of them are getting along in years, and their days in control are numbered by the march of time, but who will still be there to take over for them once they give up the reins of power? There is a new generation of Republicans ready to take the Party in a new direction, or at least disassociate themselves with the craziness, but they do not yet have a voice strong enough to stand up to the "Cheney-Limbaugh-Palin wing" and fight for control of the Party.
Auctions can end give-a-ways
Auctions and Politicians, by David Warsh, Economic Principals:
For all their success organizing private markets, economists still often face an uphill struggle when it comes to winning government work. The reason is simple: auctions are all about, as the old saying goes, getting the most feathers out of the goose. The geese in the government flock are all owners or would-owners of something the government used to license at nominal rates or ignore altogether – the right to broadcast on a certain frequency, to harvest timber in a national forest, to send pollutants into the air. They would have paid for the privilege in the past – a relative or two on the payroll, good seats at the baseball game, a bundle of campaign contributions.
But whatever they paid for the privileges they received probably would have borne little relation to the worth of the franchise. That’s precisely the information an auction is designed to elicit, along with the cash. No wonder companies reflexively oppose auctions; auctions cost them cash. So spend freely to avoid them.
That’s why, for example, the US Department of Transportation earlier this month canceled plans to auction landing slots for New York’s three busiest airports. The Bush administration had sought the measure, hoping to cut delays at the chronically congested airports (and, of course, raise some much-needed cash). The airline industry lined up against the proposal, so did Democratic congressmen. Incumbent airlines will continue to profit; frequent travelers will continue to suffer delays.
Similarly, the banking lobby, among the nation’s strongest interest groups, has so far successfully opposed Treasury Department attempts to put up for bid banks’ questionable (now “legacy”) assets. ...
Even when overwhelming pressures bring about some fundamental change in the regulatory apparatus, you can count on industry to oppose the auction mechanism. That’s the case with the landmark legislation to limit greenhouse gas emissions through a cap-and-trade permit system expected to be taken up by the full Congress in July. President Obama campaigned on a promise to auction the permits. But a coalition of Midwestern and Southern Democrats teamed up to alter the bill, and when its language was released last week it turned out that fully 80 percent of the permits would be given away at first ..., with the portion of permits to be sold at auction slowly rising to 100 percent by 2030. Consumers will experience higher prices only slightly less slowly, but owners of capital will have twenty years to adjust. The gradual transition is a price the president is said to be willing to pay in order to pass the bill into law. Equality of sacrifice will take a back seat to the goal of capping carbon emissions, a tradeoff noted with special force by journalist Matt Yglesias.
But the historical momentum in this case is clearly on the side of equality. Auctions, especially auctions of government property, are not a tool of the rich, especially when coupled with egalitarian principles of distribution (for instance, the proposition that every citizen should benefit equally when the radio spectrum is sold). As principles of market design become more thoroughly articulated and widely understood, the sphere of governmental discretion will shrink. More and more, politicians will be forced to play by the rules. ...
Saturday, May 23, 2009
Stocks... buy and hold (for a very long time)
When long-term investors panic
here’s the thing: the riskiness of stocks is a function of how expensive they are. The cheaper stocks get, the less risky they become, and if a 50% allocation to stocks made sense when stocks were expensive, there’s a good case to be made that your allocation should actually rise when they become cheap.
What’s more, Templin and his wife seem to have a particularly unhealthy way of looking at their retirement savings. Does Templin add up all the money that he put into his 401(k) over the years and sorrowfully compare that sum to what the account is worth now? No — that’s a calculation he never makes, and for all we know it would show him still in positive territory. Instead, he picks the single point in time when the value of his 401(k) was at its absolute maximum, and then compares its current value to that peak.
If you invest in a risky asset class like stocks, your portfolio will nearly always be worth less than it was at some point in the past. You know that, when you retire, you can ruefully pick a date and say “we should have retired back then, we would have had more money”. But you still invest in stocks because you’d much rather have a portfolio go up to $3 million and finish at $2 million than you would have a portfolio which boringly and steadily rises to a final value of $1.5 million.
Unless, of course, you’re Neal Templin, who seems to think that in the first case he would have “lost” a million dollars, and that in the second case he’d be going out at an all-time high and blissfully happy. He doesn’t seem remotely interested in the amount he has accumulated over the course of his 20 years at the WSJ: instead, he’s only interested in the difference between that amount and its mark-to-market value on a certain date chosen to make him feel as miserable as possible.
As for his wife, she seems if anything even more ignorant: she doesn’t even seem to appreciate that the less money you save, the less money you save. If she had spent more and lived it up a little, then the drop in their retirement account would have been smaller only because the retirement account itself would have been smaller. The only way to get a bigger retirement account is to save more, not less.
All of which goes to reinforce my message to Justin Fox — the idea of long-term shareholder value is simply meaningless. If anybody should have an eye on the long term, it’s people with retirement accounts which can’t and won’t be touched for decades yet. But instead they obsess so much over a single year’s drop that they radically alter their entire asset-allocation strategy at the worst possible time, and choose to sell steadily into a rising market. That’s just human nature: you might think you’re a long-term investor, but when put to the test, it turns out that, really, you’re not. And if you’re not a long-term investor, then you should never have been investing on the basis that you were.
Schelling Quotes...
"The thought of making freedom the sum and substance of philosophy has emancipated the human spirit in all its relationships, and... has given to science in all its parts a more powerful reorientation than any earlier revolution."
"Man is born to act and not to speculate.."
"The time has come to proclaim to a nobler humanity the freedom of the spirit, and no longer to have patience with men's tearful regrets for their lost chains"
"The beginning and end of all philosophy is--Freedom."
"The highest dignity of Philosophy consists precisely therein, that it stakes all on human freedom."
Epictetus for the day...
Every now and then its good to pause and read a Greek!
From The Art of Living...
When we name things correctly, we comprehend them correctly, without adding information or judgments that aren't there. Does someone bathe quickly? Don't say he bathes poorly, but quickly. Name the situation as it is, don't filter it through your judgments.
Does someone drink a lot of wine? Don't say she is a drunk but that she drinks a lot. Unless you possess a comprehensive understanding of her life, how do you know if she is a drunk?
Do not risk being beguiled by appearances and constructing theories and interpretations based on distortions through misnaming. Give your assent only to what is actually true.
Careful language... my interest in philosophy of language reinforces the importance of this, the political theorist in me knows how much confusions within language create bad policy and often keeps us from having effective debate. This is something i'm always working to improve on...
Government is about compromise and coaltions....
In a two party system you have to build a coalition of like minded people. Government is about compromise. Republicans have lost that--it was something they were good at for most of my life. At the National and State level Republican has been held hostage by the extreme right who prefer ideology to compromises that allow government to function. Ideological purity is not responsible leadership. Leave that to the Ivory Tower Political Theorists in Universities all over this country. Government should be made up of pragmatists that make government move forward in a positive direction. Its why i'm running for State House here in GA @JimN2010; Rep. Davis has put ideology before functional government and it has created Gridlock under the gold dome. We have to get GA moving in the right direction and thats why i'm running for State House!
Colin Powell is welcome to join the Democrats! I'd love to have him to help build a stronger coaltion of pragmatists that keep the extremest from holding power within the party.
Powell to Rush, Cheney: Room for me among 'emerging' Republican Party
Colin Powell issued a sharp rebuke Tuesday night to Rush Limbaugh and Dick Cheney for trying to exclude him from the backbiting Republican Party.
Before some 1,500 business leaders in Boston, as well as Patriots quarterback Tom Brady and wife Gisele Bundchen, the retired general and former secretary of state spoke openly of the dispute roiling the Grand Old Party after election setbacks and polls putting its popularity at roughly one of five Americans.
"Rush Limbaugh says, 'Get out of the Republican Party.' Dick Cheney says, 'He's already out.' I may be out of their version of the Republican Party, but there's another version of the Republican Party waiting to emerge once again," Powell told the crowd.
UPDATE: Limbaugh hit back at Powell on his radio show today.
"The version of the party that he's waiting to emerge is not the Reagan wing of the party. Does Powell have the pulse of the Republican Party, folks? He's for more spending. He's for higher taxes. He's against raising the social issues. He's for affirmative action. He's for amnesty for illegals. He endorsed Obama.
"And now there's an agenda -- an emerging agenda -- that he's waiting for for the Republican Party? The only thing emerging here is Colin Powell's ego. Colin Powell represents the stale, the old, the worn-out GOP that never won anything. The party of Gerald Ford, Nelson Rockefeller, Bill Scranton, Arnold Schwarzenegger and those types of people. Has anybody heard Colin Powell say a single word against Obama's radicalism -- or Pelosi or Reid, for that matter? Maybe he has but his fawning media sure hasn't reported if he has said it."
Powell, the former secretary of state, split from the Bush-Cheney administration over the Iraq war after he presented to the United Nations what he had been told was ironclad evidence that Iraq was pursuing weapons of mass destruction. That, of course, turned out not to be true.
Then, just before last November's election, Powell delivered his prized endorsement to President Obama, giving him a major last-month boost.
Powell, who was talked about as a presidential candidate himself over the year, called Obama "a transformational figure" who "brings a fresh set of eyes, a fresh set of ideas" at a time the nation urgently needs them. "He has met the standard of being president," he said.
The most recent tiff started earlier this month when Powell told a group of corporate executives that “the Republican Party is in deep trouble” and blamed Limbaugh, saying he “diminishes the party” and corrupts our public life with “a kind of nastiness that we would be better to do without.”
“I don’t care what Colin Powell says,” Limbaugh responded soon after. “This kind of stuff is said about me three times a day … and Colin Powell is just another liberal.”
“What Colin Powell needs to do is close the loop and become a Democrat,” Limbaugh said.
More Health Care Links
Via HCIP:
***HEALTHCARE FOR ALL INFORMATION PROJECT***
---------------------------------------------
http://www.ourfuture.org/healthcare
1. Activists seek Justice Dept. probe of insurers- Associated Press
2. New Report by Health Care for America Now Details Need for a Public Health Insurance Plan to Combat Health Insurance Consolidation
3. Kennedy affirms support for public healthcare plan- The Hill
4. Blue Double Cross- Paul Krugman: The New York Times
5. Republicans Unveil Alternative Health Care Plan- The Wonk Room
6. Bill Moyers Talks Health Care - Tonight Friday, May 22, 2009 on PBS
Health Care Links
Via David Robinson:
A while back, I cited the memo to the Republicans from Frank Luntz, advising them on how to try and kill the Democrats' health care proposals by using his typically deceptive language. Democratic consultant Paul Begala has written something to counter it (see the following two items), but here's the link to the Luntz memo again:
http://wonkroom.thinkprogress.org/wp-content/uploads/2009/05/frank-luntz-the-language-of-healthcare-20091.pdf
Begala health memo rebuts Luntz's
http://dyn.politico.com/printstory.cfm?uuid=666B9D4B-18FE-70B2-A8E4637AC78984A4
Begala's memo (source of material for letters to the editor -- hint, hint):
"Countering Republican Orwellian Rhetoric On Health Care." By Paul Begala
http://www.politico.com/static/PPM104_090522_luntzresponse.html
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"Blue Double Cross." By Paul Krugman
http://www.nytimes.com/2009/05/22/opinion/22krugman.html
"What Would Happen if we Delayed Health Care Reform?" By Ezra Klein
http://voices.washingtonpost.com/ezra-klein/2009/05/what_would_happen_if_we_delaye.html
"House Democrats Consider Mandate for Employer Health Insurance." By Laura Litvan (Bloomberg)
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=az91JZGSJah0
"Progressive Revenue Options to Fund Health Care Reform." Citizens for Tax Justice
http://www.ctj.org/pdf/healthcarefinancing.pdf
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"Is The GOP Trying To End Medicaid?" [That's the medical costs assistance program for low-income families, cost-shared with the states.]
http://mediamattersaction.org/blog/200905200002
"Republicans To Introduce Health Reform Plan...."
http://kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=58525