Gaming the system

So how does one get a tax break in Jersey?

If you are one of those who think that America's tax system is designed to be gamed by the large at the expense of the small, here is one more example. This one is from the State of New Jersey, where over the objections of the slovenly Governor, Chris Christie, the production company that makes the Jersey Shore was awarded a $420,000 tax credit.

Ya know for doing their part to stimulate the economy and all.

It is not like Christie is a teaching firing disaster who is part of process that redirects monies from students and schools to Snooki and the Situation.

Read more here.

A bad wobble

Is Bank of America, one of the two or three largest banks in the country, wobbling? By all accounts, we may have another too big to fail institution that needs bailing out by the federal government, lest it drag the banking system and the Western world down with it.

The bank is facing cash shortfalls of at least $50 billion related to mortgage lending disasters of recent years. The bank has petitioned regulators to give it until 2019 to straighten itself and its balance sheet out, so that it might come into compliance with new capital requirements rules. The bank is now said to be as much as $100 or $200 billion in the hole.

Bank of America's stock has fallen by 50% this year. Fresh sources of capital are drying up. The bank may have to be temporarily nationalized to survive. It took $50 billion in federal TARP loans to get Bank of America through the Lehman Brothers--AIG collapse. This looks worse.

A bad wobble indeed.

Oil rig colonies

Silicon Valley billionaire and PayPal founder, Peter Thiel, has given $1.25 million to an initiative to create oil rig emulating, floating, libertarian countries in international waters, according to a profile of the billionaire in Details magazine.

The idea is to create floating independent quasi-states beyond the reach of any one country's jurisdiction because they are in international waters. There is no information on how these colonies would cope with the growing movement toward international maritime law. This has been a hot button issue as the Empire has continued to have to combat marauding and piracy.

The prospective colonists hope to get around building codes, minimum wage laws and weapons restrictions according to Yahoo. No word on if they will be trying to circumvent tax codes, too, a racket perfected in island countries like Bermuda, the Caymans and Switzerland.¹

Stay tuned.

Read more here.

¹Also no word on how they would repel marauding bands of buccaneers should they appear over the horizon.

Duck and Cover: 08.05.11

Read Duck and Cover
at the Blue Pyramid.

Duck and Cover: 08.01.11

Read Duck and Cover
at the Blue Pyramid.

Temporary end game: Debt

What, me, worry?

The Clarion Content could not disagree more with the assertion of the New York Times editorial page this morning that President Obama should have used the 14th Amendment to make an end run around Congressional obstructionists and unilaterally raise the debt ceiling. It is a suggestion straight out of the Dick Cheney playbook. It advocates that when checked by a legitimate institutional disagreement, presidential power should be expanded so that the executive can still get his or her way. It is the methodology of Empire and dictatorship, the road to ruin.¹

We are glad President Obama did not pursue this course.

We do not think that he made a great deal on the compromise to raise the debt ceiling. We disagree with kicking the problem further on down the road, by appointing a bogus, super-committee to make the hard decisions Congress has been putting off for a generation.² President Obama already ignored the recommendations of his own deficit committee.

We are in no way impressed by President Obama's facetious claim that the Bush II tax cuts for the uber-rich will go away in 2013. Firstly, Obama would have to get re-elected, his prospects look pretty dismal right now. Secondly, he would have to keep his promise to let the tax cuts end, something he has not managed to do in his first term.

Bottomline on the debt deal, typical Washington, an ugly boiler room compromise that solves nothing and only delays the reckoning. It highlights the desperate need for a third party to break the political gridlock.

Obama was right about one thing change is coming, the only question left is the agent. If not Obama...this month has highlighted some of the more extreme alternatives.


¹President Obama has already showed his willingness to follow the Bush II-Cheney guide to concentrating power in the Executive Branch. Signing statements, extraordinary Presidential Czars, Afghan policy, etc.

²Nothing stops progress from happening like a committee.

Debt notes

The Washington Post, certainly no more of an unbiased source than most media outlets, published these notes on how the United States government debt was accumulated.

*Projected federal government surplus in 2001 $2 trillion.

*Projected federal government debt in 2011 $10 trillion.

*50% of this swing is caused by tax revenue decreases (tax cuts) of $6.3 trillion.

*Federal tax collection is at its lowest level as a percentage of the economy in 60 years.

*The Iraq and Afghanistan wars have added $1.3 trillion in new debt.

*Obama's economic stimulus package added $719 billion in new debt.

*The TARP bailout program added only $16 billion in new debt.

*Overall King George the II and his follies added over $7 trillion to the government's debt.

*Obama has added $1.7 trillion to the government's debt.

They didn't note, but we read elsewhere, the debt ceiling was raised by Congress seven times during the eight year reign of Bush II.

Two rights

If two wrongs don't make a right, what to do two rights make? In a practical sense, try to imagine a world where President Obama and House Speaker John Boehner enact a compromise that both cuts entitlement spending and eliminates the Bush II tax cuts for the super rich. Heck, they could even eliminate the alternative minimum tax as part of the same compromise. At that point, all Obama would have to do would be ease off the crackdown against job seeking immigrants, and bring the troops home from Afghanistan and Iraq, and it would be 1995 all over again economically.




A dream? More than likely, knowing Washington, D.C., it is a mirage. The devil is in the details. The Clarion Content favors cuts in entitlement benefits (especially for prescription drugs), gradually raising the minimum age for Social Security benefits, reinstating the estate tax on estates worth more than $5 million, higher marginal tax rates on the highest income brackets, lowering and simplifying corporate taxes, along with a libertarian immigration policy.

In backwards order, no one in Washington D.C. has the guts or the political capital to address immigration policy. Obama would have been far better served to start there rather than with health care policy. Bush II was going to produce a benevolent immigration policy towards Latinos before 9/11. His failure to do so afterward is one of the great tragedies of his administration.

Lowering and simplifying corporate taxes, lots of folks in D.C. claim to support this one, yet somehow it never happens. This is the second biggest factor, after structural adjustment, for the current unemployment malaise. Lowering corporate taxes incentivizes job creation.

Higher marginal taxes on the richest of Richie Rich's and bringing back the estate tax for the very wealthy. Somehow the upper crust and their lobbyists always manage to turn this into a populist issue. At first amazing, the narrative of American capitalism has now absorbed this myth so completely and seen it defended so assiduously that to tax the rich is to attack the very basis of freedom.

Social Security is the 3rd rail and entitlement benefits are the next-door neighbors. Is anyone in D.C., even President Obama, brave enough to touch the 3rd rail of American politics? Has anyone heard from Representative Paul Ryan since he mentioned cutting Social Security and other entitlement benefits?

We know that no politician who falls anywhere on the political spectrum between Ron Paul and Dennis Kucinich has the guts to say that Bush II's wars of choice have been colossal wastes that have devoured American blood and treasure, but now are sunk costs. Osama is dead. No one can force Afghanistan to cohere without a totalitarian government.¹ Withdraw already.

But much like the "big" budget deal itself, that is probably just a dream that will disappear into the daily grind of realpolitik.


¹ In Iraq, America has fucked up so badly that the best play now may be to be to keep the troops there lest Iran station its tank divisions on the border of Saudi Arabia. So even though the Clarion has long advocated withdrawal from Iraq, and three, separate, new, nation-states, we may be beginning to lose faith in the viability of that option.

Challenge em

Rick Crawford (R-AR) and Paul Ryan (R-WI)

The Republican's have yet to come up with a coherent answer to the argument that they prefer tax cuts for the wealthy over medicare cuts for the elderly. Obviously, any even semi-sophisticated analysis will note that tax cuts and medicare are not a zero-sum game. They do not trade-off with each other directly.

The Clarion Content, while willing to see taxes raised for the highest earners and the biggest estates, is just as earnestly interested in seeing the defense budget cut, along with the expenditures on foreign wars and futile nation building exercises.

The Republicans are going to have to develop some kind of narrative for when their electoral opponents accuse them of being willing to bargain off Granny's health care and retirement for their fat cat friends' tax cuts.

As yet, they have been unable to produce one. Read here a transcript of how a freshman Republican Representative from Arkansas, Rick Crawford, fails to handle this question in a town hall meeting with constituents. Representative Crawford starts out with the tack that, well, Medicare is broke anyway, but is unable to stick to this line of reasoning. John Q. Public points out, if Medicare is broke, it is hardly fair to give tax cuts to the richest of the rich in such a moment.

Time for a better answer, time to come up with it soon, or the Republicans will face Congressional trouncing in November of 2012, regardless of what happens at the top of the ticket.

Postmodern globalism run amok

The world market emphasizes the delights and upsides of being able to sell anything and everything from anywhere. This range is supposed to virtuous in and of itself. The presumption is that more choice is always better. Despite recent studies debunking that idea, it has proved a hard meme to dislodge.

While as our friends over at the MEP Report are fond of reminding us, the plural of anecdote is not data, sometimes the solid illustrative anecdote can serve as a beacon to shine a light on the reams of transactions taking place below the surface knowledge of the Empire's paperpushers.

To wit, the story of a seventeen year-old Chinese kid who decided to sell one of his kidneys over the internet to finance the purchase of new electronics gear; a laptop and iPad 2 amongst the haul. The Clarion Content has long hooted about the flourishing grey market for organs in China. The teen thought he had gotten away with it, having handled the transaction on his own without his parents knowledge. But his mother, not surprisingly, noticed the new computer equipment and then found her son's deep red scar. The BBC and a local Chinese TV report indicate the authorities are concerned.

What the heck?

Regular unleaded gas for the car costs $4.00 a gallon!!! This is the single biggest factor for Obama's re-election prospects. Gas over $3.50/gallon, there is no way Obama wins again.

But, how about this for a crazy factoid? Jet fuel, the kind they fly commercial airliners on, averaged $3.03/gallon last month (May 2011).

Say what?

Jet fuel is cheaper than gasoline? Somebody needs to tell the oil cartel, they are f*cking us over...

Confidence declining

From the America is going to H-E-double hockey sticks in a handbasket files, as seen in the USA Today: the percentage of middle-income American families that think it is possible to save for a secure retirement 37% in 2007, only 28% in 2011. Only 28% of American families think it is even possible to save for a secure retirement? The tiderbox is primed.

Avoiding the worst

Yahoo Finance had an interesting article this week about some of the metropolitan areas that have suffered less in the Great Recession. The Clarion Content has read about the low unemployment in parts of the depopulated Great Plains, the Dakotas and Nebraska, but this is less about regional commonality and more demographic commonality.

Yahoo says that university centered towns and cities have been more recession proof. There are still 112 metro areas in the United States with 10% unemployment or greater. It is not the places with big universities. Among the cities Yahoo cites, Austin, Texas, Boulder, Colorado and Madison, Wisconsin---all have unemployment rates well below the national average. Of course, double winner, big university town, in a depopulated natural resource heavy state, Lincoln, Nebraska, checks in with a miniscule unemployment rate of 4.1%.

Another factor not noted by the Yahoo folks, but likely just as important as the universities in shielding these areas from recession, all saw significant population growth in the last ten years.

Austin, TX Population change 2000-10: 20.4%

Madison, WI Population change 2000-10: 11.6%

Boulder, CO Population change 2000-10: 5.8%

Lincoln, NE Population change 2000-10: 14.5%

If one buys into the Simon-Steinmann Economic Growth Model, that may simply be that. Simon would seem to be especially likely to be relevant in metro areas with big universities because his assumptions about population growth and economic growth moving in concert are underpinned/fueled by technological developments and advances.

Fixed, Part II

Wait a minute! There were insiders who made billions off of gaming the system before the financial house of cards collapsed?

Preet Bharara, the U.S. attorney for Manhattan, is fighting systemic corruption.

The New York Times reports hedge fund manager Raj Rajaratnam, who's Galleon Group hedge fund managed more than $7 billion in assets, was found guilty on yesterday of fourteen counts of fraud and conspiracy by a federal jury in Manhattan. Evidence showed that Mr. Rajaratnam allegedly used a corrupt network of tipsters to personally make over $63 million from insider trading trading in stocks. Apparently, that was merely the tip of the iceberg.

Rajaratnam and his firm paid out roughly $300 million in trading commissions annually to brokerage firms. As one of the prosecutors noted, "Cheating became part of his business model." Rajaratnam was taped saying, among many other incriminating statements, "I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share," in advance of the bank’s earnings announcement.

Unfortunately, the uber-wealthy Rajaratnam's lawyers will appeal the verdict and will likely keep him out of jail long enough to flee the country. He will probably be sipping cocktails and proffering advice at Davos next year.

Jive

We have been hearing a bunch of jive from Washington, D.C. about how the recession is over. This in no way matches up with what we are observing on the ground. In fact, to our eyes the recession is deepening, consumer confidence is weakening further, soaring gas prices and food prices are trimming consumer spending, and there is no end in sight.

Of course, the fat cats in Washington, D.C. who not only never pay for gasoline, but have their own drivers that come out of the taxpayers nickel, can hardly tell. When they want to know how bad the recession is, they have a secretary/aide/staffer, bring them a report. If the lobbyists and campaign contributors aren't worried, why should the politicians care?

More of the same

We saw another signal that Osama bin Laden's apparent assassination is not going to change much of anything this morning. Both ABC's Good Morning America and NBC's Today show, neither of which we watch frequently, went directly from stories about bin Laden's death to commercials featuring the chairman of Exxon Mobil.

Aren't those two on the same side, trying to bleed America to death?

One more Shuttle snafu

It was just the other day that the Clarion Content was lamenting the money pit that is NASA Space Shuttle program in all $200 billion has been poured down the drain. As if we needed one final demonstration, one more reminder of what it means to throw good money after bad, as gas creeps over $4 a gallon and more and more American children have to go hungry, NASA scrubbed the shuttle Endeavour's launch this weekend. Cost to scrub and reschedule $500,000 minimum for fuel alone!

They should have just cancelled. (the program twenty years ago...)

The Shuttle Program

Pioneer 11 approaches Saturn

The Clarion Content has not believed in the value of the manned space program since the Cold War ended. We support space exploration and experimentation. Un(hu)manned exploration is much, much, less expensive. There is still widespread world hunger, millions lack a daily source of clean water, not mention housing and disease, or America's desperate need for infrastructure investment. The Clarion Content cannot support the expenditure of the human crewed space program.

The final launch of the Shuttle program is upon us and with it some reflection on the massive waste. 133 Space Shuttle launches, which USA Today reports, NASA originally estimated $10.4 million per launch, ended up costing a hearty $1.5 billion per launch.

Want more? Those 133 shuttle missions conducted 2,300 experiments at a cost of $192 billion for the program. The cost per experiment? $83 million, 478 thousand and 260 dollars per experiment over the history of the shuttle program...

The most widely cited of those experiments according to Thomson Reuters' science information service, is a 1996 study of "anti-shock" shorts used to measure astronaut fitness. The circularity is self-evident. Human space missions yield little to nothing over uncrewed space missions other than the effects of space on humans.

USA Today quotes economist Henry Hertzfeld of the Space Policy Institute at George Washington University, "Economically, you can't make an argument for it."

What a tragic waste. Hopefully, this is the end of an era for such foolishness.

By contrast, the robotic space probes Pioneer 10 and 11 launched in 1972-73 yielded so much data that it has still hardly been tapped and continues to produce valuable experimental knowledge for a combined cost of $100 million!

Mall vacancies

The Clarion Content warned more than a year ago of an impending secondary real estate bubble that could smack the American economy around, commercial real estate. We had read lots of analysis that said there were a ton of short term commercial real estate loans that were going to have to be refinanced, only with the new lower property valuations figured in. The slowing economy was also supposed to continue to hurt commercial occupancy rates.

This week we read that the less disastrous of these two dire predictions is indeed happening, this year malls and strip malls are supposed to see their highest vacancy rates in more than twenty years according to the Wall Street Journal. The paper reports, "Mall vacancies hit their highest level in at least 11 years in the first quarter." The expectation is that the worst is yet to come.

There is, as our sources suggested their would be, a glut of commercial real estate space. Reportedly, more than one billion square feet of retail space was built in the fifty-four largest American markets since the start of 2000. Many retailers that had been key mall and stripmall tenants, Borders, Blockbuster, Circuit City and Comp USA have nose-dived or gone out of business.

American cities already staggering under repeated economic body blows are losing lots of sales tax revenue as shoppers continue to migrate on-line. Big Box corporations are crushing mid-size competitors and specialty stores. The impact on the overall economy is very real. The base of pyramid that supports our massively indulgent and expensive lifestyles as Americans is having foundation issues. We must look at ourselves in the mirror carefully.

The difference between Socialism and Capitalism

We grabbed this brilliant bit from our friends over at the MEP Report. Always challenging, probing and inspiring. You should check them out here.