Sunday, October 20, 2013

Who exactly is winning in 2014?

The NY Times actually published a semi-reasonable article on the political battles shaping for the 2014 election:
Fiscal Crisis Sounds the Charge in G.O.P.'s 'Civil War'
I'd rate it a C+. It does shed some significant insight, but only on one side of the fence. I mean, the Democrats are not as united as their fiscal "victory" suggests. There are still plenty of Democrats who will face the same challenges in their own primaries and elections. I mean, will Progressive Liberals really "sit down and shut up" and settle for moderate, mainstream Democrats who are in fact willing to compromise on even reasonable matters (e.g., tax reform), or will they too begin clamoring for a more activist Democratic party. Sure, there was at least some semblance of unity in the latest fiscal battle, but that was dirt-simple since the Republicans were only asking for something that they absolutely did not have the votes for in the Senate. But what will happen to that unity when the debate shifts to the severe compromise needed for tax reform, immigration reform, etc.?
Maybe the real bottom line of the article was the mention of how the Republicans are beginning to do a much better job of preemptively vetting populist candidates to assure that they can win a general election before they garner too much momentum at the primary level. Sure, that may make the Tea Party members of Congress a little less extreme, but hardly make them amenable to the interests of your average Progressive Liberal.
In short, the article does indeed suggest that there will be battles within the GOP, but does nothing to assure that Democrats will have any better luck winning back the House. Let alone the fact that even if the Democrats won a House Majority, that the new guys would be "true", Progressive Liberal Democrats, as opposed to the kind of semi-right moderates who only barely passed Obamacare in the Senate and are hardly amenable to tolerating non-centric Progressive causes.
Sure, Obamacare is (relatively) safe, some form of immigration reform will eventually pass (but how watered down), and maybe even some tax reform (but how palatable will it be to Progressive Liberals). So, yes, the future does look a bit brighter, but would your average Progressive Liberal agree?
IOW, there will be additional victories for the Democrats, but how pyrrhic will they be?
And, for sure, the "old" GOP is on its way out, but will the "new" GOP be that much more sympathetic, especially in the Senate, where a vocal minority can cause more than a little mayhem?

-- Jack Krupansky

Tax reform? Really?

I find it amusing for anybody to suggest that a majority of Democrats and a majority of Republicans would find common ground on the subject of tax reform. A quote by Republican Senator Lindsey Graham: "people like me would agree to bring in revenue... Not by raising taxes, by flattening out the tax code and bring in some repatriated corporate earnings at a lower rate." Really, would flatter taxes (lowering taxes on the "rich" and raising them for lower and middle class) be palatable to your average Progressive Liberal? Similarly, how many progressive liberals are willing to give Big Business a tax break on foreign earnings?
I mean, last I heard, Progressive Liberals were: a) opposed to a flat or flatter tax, and b) clamoring to raise the tax rate on "The Rich" even higher. Have they suddenly changed their stripes? After Obama's "victory" in the fiscal crisis battle?
Everybody seems to hate the sequester, but it seems like it is the only thing that seems to be working, so I think this is yet another one of those things in Washington where "public pronouncements should not be confused with private intentions".
Meanwhile, growing the economy to close the budget deficit seems to be at least somewhat working as well.
All of that said, a lower tax rate of say 20% on repatriated earnings could indeed inspire a lot of companies to repatriate foreign earnings. But, is there any chance that your average Progressive Liberal would concede the 35% corporate tax rate? In truth, I think this is one of the few aspects of tax reform that has a ghost of a chance.

-- Jack Krupansky

Friday, October 18, 2013

Success with the NY state Obamacare exchange

Wow, I finally succeeded in getting a New York state Obamacare account and application set up so that I am finally able to see plans and prices. The full price range is $307 to $1,121. Bronze plans range from $307 to $407 with a $3,000 deductible. Platinum plans range from $443 to $1,121 with no deductible. Excluding United HealthCare plans, the highest platinum premium is $649 per month.
Until today I had an account that I could log into, but was unable to finish the application process. I had called customer service last week, described the problem, they put me on hold, and reasonably quickly came back and told me that they were aware of the problem, were working on it, but I would just have to try "later".
The problem was that I would log in and if I tried to view plans, the system would simply insist that my application was not complete, give me a button to continue where I left off, but clicking that button simply took me to the last page of the application process where all I could do is initial the application, check the fine print, and then click on the "Finish" button. I would do all of that, but the system would unceremoniously dump me out to the main "Individual" screen and not let me view or select any plans. Rinse and repeat, but no change.
The good news is that the long delays of the first week were resolved. IOW, I could quickly do nothing.
Also, even in the first week, I did not experience any long hold times with customer service.
I tried to complete my application every day, to no avail, but today I called customer service as before, described the problem, and once again they said they were still working on it. But... this time they suggested that I should create a brand new account and try again. Actually, I was going to suggest that myself since I was concerned that the many timeouts in the first few days may have left my account in some unworkable state.
So, I created a new account, which was reasonably fast and pain-free, and everything worked fine. And then I finished the application process and could see plans and prices.
Actually, there is still one glitch – it asks me if my 2014 income will be the same as in 2012 and will only prompt me for my expected 2014 income if I answer "Yes", when the answer is really "No." IOW, they have the yes and no options wired backwards, at least for my scenario.
And, meanwhile, my original "zombie" account is still out there, lifeless but not quite dead.
The real bottom line is that I will continue to be self-insured in 2014 and beyond since the penalty for not carrying insurance is still significantly less than $1,000 less than the penalty. That's the economic rule that I have decided to use.
Although, since I am 59, I'm not too many years away from Medicare.
Meanwhile, I continue to make semi-regular $25 monthly donations to the U.S. Treasury to pay down the federal debt.
BTW, I am thoroughly amused by the extent to which the White House itself has adopted the use of the term "Obamacare." For example, see:

-- Jack Krupansky

Wednesday, October 16, 2013

The Big Day

Okay, this is it... the proverbial "Eleventh Hour" is here. Most sane observers know and expect that a deal will get done. And as I like to always put it, "The fix is in", meaning that the key players already know the parameters for the deal and it's merely a matter of letting all of the political theater play out so that the "far" wings of both parties can justifiably feel that their party "fought" to the bitter end, and then some.
That was the "lesson" of the previous budget negotiations, that the far wings of both parties felt betrayed by their own parties and felt that they caved without fighting hard enough. For better or worse, the leadership of both parties took that "lesson" to heart and played it to the hilt.
In all likelihood, the deal will come together later today.
Sure, there is a faint possibility that a small number of Senators or Congressmen could gum up the works and leave Treasury in a bad position for a day or two, but that's still the unlikely scenario. For example, it may take the House two or three votes over a couple of days to finally get a majority on board (which lets Republicans say that "I voted No before I voted Yes at the end when it was too late and the cause was lost.) And besides, Wall Street is already well prepared to handle any modest, short-term disruption in the Treasury market. A delay in payment of Treasury interest and matured principal would be a mere speed bump, not a "major economic catastrophe". It would be an embarrassment for President Obama more than a problem for Wall Street.
If nothing else, I'm sure that the Fed with its ongoing quantitative easing would be more than happy to buy up any Treasuries that people want to dump. After all, the Fed simply hands over the interest on its Treasury holdings back to Treasury. If anything, the whole process saves the federal government money. And the additional quantitative easing is an additional boost to the economy.
In short, today is very likely the end of the process (other than that any agreement will likely simply kick the can down the road for another confrontation in a few weeks or months), but Wall Street (and the Fed) are ready to deal with the situation if it does take a little bit longer.

-- Jack Krupansky

Wednesday, October 02, 2013

The budget crisis end game

Despite all of the political theater and gnashing of teeth and wringing of hands, the end game for the current federal budget crisis in the House is quite simple. Boehner knows how to read the writing on the wall, what the future holds, but he also must pay allegiance to the here and now reality in front of his nose. In other words, he needs to let the rebels run until they feel like they have achieved a moral victory, and once they have exhausted all of their ideas, Boehner can then afford to stand up and say "Okay, we held our ground and put up a good fight, but we just don't have the votes in this congressional cycle, so we need to acknowledge the reality of today and work towards a better future in 2014" – or something like that.
IOW, if Boehner tries to quash his rebels too early, he loses badly, but if he lets them learn from experience that they "don't have the votes and can't get them", then he wins both by letting them have their moral victory and being a respectful leader.
I expect that the rebels will have exhausted their limited legislative quiver within one or two or three days.
The debt limit? That's a completely different saga, but I expect it to be resolved by the conservatives forcing Obama to agree to another $100 billion in expenditure cuts. IOW, yes, the debt limit must and will be raised, but Obama needs to concede that the deficit is still way out of control. And Obama doesn't have the leverage to force a tax hike.

-- Jack Krupansky

Sunday, September 09, 2012

Obama remains a shoe-in for reelection

I should have made this post months ago, like back in the spring, but better late than never. Nothing has really changed since then as far as the big picture. Although there are lots of different polls and opinions on how the presidential election will play out, after a lot of poking around I have settled on two for how I view the prospective outcome of the election.
First, the RealClearPolitics composite poll provides a more stable and (hopefully) reliable indicator than the noisy jitters of the individual polls. Obama has consistently held the lead in the RCP composite poll. It was a tie briefly in the lull between the two conventions, but Obama is back to a 1.8% lead. Obama also leads with 221 electoral votes to Romney's 191.
The second indicator is the Intrade open prediction market where people are actually bet real money on the outcome. Obama has consistently been the leader. Currently he as at 58% to 42% for Romney. Romney got a boost from Ryan and a small boost from the convention, but Obama quickly rebounded.
In short, Obama remains a slam-dunk shoe-in for reelection.
As I like to tell people, all Obama has to do is smile and keep his shoes shined, and either buff his flag pin or appear in rolled-up shirtsleeves.
Could the weak economy derail Obama? No way. A weak economy actually works in Obama's favor. He has an excellent record of being a great steward for a recovery from a very dismal financial and economic crisis, thanks to financial professionals such as Bernanke and Geithner and Summers, with a few solid Republicans in cabinet positions. When the economy is great, people want government out of the way, but when the economy is weak, people want a helping hand from government. If Obama had been completely incompetent and screwed up a robust economy then he'd be shown his way out the door by voters, but he's already done much better than that. On the other hand, the economy is too weak and with too little time for it to get a lot better before the election, so there is zero chance that the economy (e.g., unemployment) will be so much better by election day that voters would be ready to return to a you're-on-your-own free market conservative Republican form of government.
All of that said, voters aren't so sold on a purely Progressive Liberal government, so with one hand they will hand Obama his re-election, but with the other hand they will give him an ideologically divided Congress that will have zero tolerance for any major "progressive" legislation.
I'll probably update this post a few times before the election, but I am confident that the overall prospect will remain unchanged.

-- Jack Krupansky

Will the Fiscal Cliff cause a deep recession in 2013?

Nobody really knows exactly what the impact on the U.S. economy will be when the U.S. government hits the so-called "Fiscal Cliff" at the start of 2013. For sure, there will be SOME significant impact, but I do not concur with the common assumption/belief that there will necessarily be a deep recession. Even ignoring the prospect that there might be some compromise agreement to blunt the full cliff (expiration of tax cuts and automatic government spending cuts), there is simply no way to predict how the "sequester" will actually play out and exactly how government vendors will respond, and not all workers will respond in the same way as their taxes rise modestly.
We also don't know how the Federal Reserve will respond, but it is safe to say that the Fed would respond dramatically if the negative impact of the cliff is in itself too dramatic.
To put it simply, there are too many wildcards to predict the precise outcome.
I would say that there is a 50/50 chance that we will hit the full cliff without any compromise agreement. But even if we do initially hit the full cliff, I strongly suspect that there may be a follow-up partial compromise agreement if it appears that the actual impact of the cliff is too severe. So, maybe the full impact for a prolonged period might be only a 1 in 3 or 1 in 4 probability event.
I strongly suspect that the private sector will pick up a large portion of any shortfall in government services. One reason is that providing services to the federal government is very appealing and profitable business if you can get it, and in that sense a lot of government business is a diversion of productive capital away from the private sector to the public sector. So, if the potential return on capital from the public sector dwindles in any real way, private capital will tend to shift to other places where it can be deployed more productively. So, a drop in government business could result in a rise in private sector business. Or maybe not, but the prospect is still there.
The bottom line is that I personally expect that although the first three quarters of 2013 will be relatively weak, they still will NOT amount to a deep and long recession. At least two of those three quarters will be quite weak, and maybe one, two, or three of them may be negative, but the sum of all three will have only a 50/50 chance of being negative.
I predict that a year from now we will be patting ourselves on the back for "dodging the bullet." The naysayers will of course insist that "it could have been worse, much worse." Indeed, but in my book reality trumps what could have been.

-- Jack Krupansky

Sunday, May 20, 2012

Wither Greece?

There is no question that Greece is a real mess, bordering on being a "failed state", but my hunch is that things will actually work out and they will stick with the euro and the "austerity" program. Yes, people voted to "say no" to austerity, but there is no real and viable alternative. And the rise of "leftists" who really only offer even scarier prospects for the middle class will probably cause a significant majority to "say no" to abandoning the one viable path to recovery that the EU is offering Greece on a silver platter. Sure, "austerity" is causing a lot of people a lot of pain, but recent reports strongly indicate that a lot of people do accept that the unacceptable is the wiser choice.
Ultimately, the EU may soften its terms and offer more aid, but only after Greece can prove that it will remain committed to sustainable fiscal reform. The great fear of the EU bankers is so-called "moral hazard", which means they are reluctant to give aid too quickly because easy aid will tend to persuade people that hard decisions can be evaded. This "make them sweat first" process is unfortunately the only way these tough fiscal problems can be solved in a sustainable manner.
Meanwhile, all manner of "experts" and commentators will focus on worst case scenarios while refraining from acknowledging much more likely and more positive scenarios.

Saturday, May 19, 2012

Need for a four-party system

Although there is rampant disappointment with our two-party political system in almost all directions, I don't concur that the two-party system is either "doomed" or even "dysfunctional." The essence of our current system is that forward progress occurs when there is consensus and the status quo is maintained when there is not consensus. When parties are too far apart, we simply wait until conditions change and enough compromise occurs to reach a deal. That's the way America has always worked and continues to work.
The fact that some dislike or even loathe compromise is a statement about themselves and their own values rather than an indictment of our underlying political system.
The fact that we may not be moving forward on every front as fast as partisan political interests may desire is less about "dysfunction" and more about individuals contriving false expectations in their own minds, albeit often with the assistance of the media and partisan political commentators who thrill to the "fight" and excitement of partisan political squabbling than to the more mundane details of compromise.
The essential problem for many people is that they feel that their voices are not being heard when they "compromise" and toe the party line. That's why I believe that we need a four-party system. Not because the current system is "broken" (it's not), but to evolve to a system where more people feel more comfortable and satisfied with our system.
My basic proposal is to essentially split the two dominant political parties into two parts, the centrist and moderate wing, and the ideological and activist wing. The basic thesis is that the vast majority of Americans can easily and readily tolerate the moderate wing of either party, so that if we bounce back and forth between the moderate liberals and the moderate conservatives, the vast majority of average Americans will still be able to sleep well at night. Liberal and conservative activists may not be too happy about that arrangement, but my thesis is that having their own parties will leave them much more satisfied that their voices will be heard.
My thesis is that for any typical election the two moderate parties will compete for votes from the opposing moderate party and their own activist wing. Sometimes they will be able to muster enough votes from the latter, but typically the extreme ideologies of the activist wings will tend to lead the moderates to come to a compromise more often than not. In other words, sometimes the activists and moderates would come together, while sometimes the two moderate wings would come together.
At the presidential level, moderate compromise would be the norm. In extreme cases an activist wing might lead the charge, but more often "common sense compromise" would rule the day even as activists may seethe in opposition. Sometimes the moderate plus activist wing will be sufficient to carry the day, but more commonly one of the moderate wings would decide to throw its support to the opposing moderate camp in order to further marginalize the opposing ideological activists.
At the congressional level, individual districts or states could well elect a number of fringe or activist candidates, although they would tend to caucus with the moderate party closest to their ideology. Even if most ideological activists can't agree to compromise with any moderates, it is far more likely that the moderates would compromise with moderates of the other party. The upside is that even if the ideologues don't compromise, they gain the benefit of having their public voice without distorting the values of their moderate colleagues. They gain the opportunity to have greater influence, by sacrificing the privilege of membership in the moderate party.
It would basically be a win-win (or win-win-win-win) for all parties.

Tuesday, May 01, 2012

May Day for Bloomberg?

Interesting. Today is the big May 1 "May Day" General Strike day for the Occupy movement and I see that I can't access the web site. I just get "500" errors. I wonder if hackers, possibly even "Anonymous", which is associated with the Occupy movement, are to blame. Maybe not, but it is an interesting coincidence.
Actually, I can get to various portions of the Bloomberg web site directly, including news, but it is "Quick View" that gets the 500 error. Just click on any section in the menu bar other than "Quick" and things should be fine.

Sunday, April 29, 2012

Two more days until the big Occupy May 1 General Strike

I am actually looking forward to the big May 1 General Strike that is being promoted by the Occupy movement. Not because I support them, but as a test to see how much support they can gain from average American workers. I know they can rally the diehard Occupiers, some unions, and plenty of high school and college kids, but can they finally manage to broaden there base beyond those core constituencies?
Question #1 is whether they can finally manage to marshal a crowd of 100,000 or more in NYC. That would prove that they are making inroads. Well, let me back off. A crowd of 100,000 in NYC would prove that they are not dead yet, but it would take a crowd of 250,000 or more on multiple days to prove that they are making inroads. A one-time crowd of 100,00 would not prove very much.
A crowd of 50,000 would not prove very much either, except that they aren't as representative of the 99% as they claim.
I can see them getting 15,000 people as they did in the fall at one joint rally. Who knows, maybe with all the promotion and this basically being a "do or die" moment for the movement, they could get 25,000, tops. But even 25,000 or even 35,000 would still be a mediocre turnout for a group that claims to represent 99% of Americans.
A turnout of 10,000 would be about inline with my expectations. Or maybe only 5,000.
OTOH, given that a lot of sane people might be worried that the anarchists within the movement will seek to force confrontation and conflict with the police and even revel in a riot, the turnout could be much more limited. Given current economic anxieties, a good percentage of students and union members might seek to stay away from a fracas which could do more harm than good to their near-term economic prospects. So, in that case, maybe only 1,000 to 2,500 may show up.
My best estimate is between 2,500 to 25,000.
It is likely to be "decent" as protests go, but far below what such an ambitious movement seeks to achieve. I mean, they should have been able to marshal 100,000 back in the fall, and never came close.
Their number one obstacle is not the police or even apathy, but the simple fact that the economy continues to incrementally improve and unemployment continues to incrementally decline, both of which continue to drain potential supporters from the movement.
All of that is for the protest rally portion of the so-called general strike. The real question is how many workers will walk off their jobs in sympathy with the protesters. I suspect not many. Too many people really are dependent on their jobs and unwilling to risk them for a rally of dubious real economic value.

White House Correspondents' dinner - symptomatic of what is wrong with America and Washington

For two days in a row (or has it been three?), the top news stories in Google News have been about the White House Correspondents' Dinner. To me, this obsession is symptomatic of what is most wrong with America and Washington. The media and Hollywood are the two biggest institutions that do the most to misrepresent and distort reality in America and Washington. The emphasis on celebrity, glamor, gossip, drama , innuendo, scandal, paranoia, and titillation do a great injustice to average Americans by simultaneously misrepresenting what is important as well as distracting people from what is important.
This obsession with entertainment and frivolity while the rest of the nation struggles with various forms of economic distress and six million Americans are still looking for work for several years now, is quite appalling, not to mention outright disrespectful.
You would have thought that at least they would have tried to tone it down at least a little bit, but no, they simply go over the top again, reemphasizing the "out of touch" aspect of both the media and Hollywood, not to mention the politicians and even professionals in Washington who willingly go along for the joy ride.
There actually is a lot of good in Washington, but this annual dinner manages to emphasize the worst aspects of the character of the elite in America. The good news is that it is only one evening and next week things will be back to "normal."

-- Jack Krupansky

Is money speech?

I keep hearing proponents of political finance reform complaining that the supreme court has ruled that "money is speech", when it simply isn't true. The court has not ruled that money itself is "speech", but simply that attempts to control and limit money spent on political speech is implicitly an attempt to control and limit speech. It really is that simple, but people continue to erroneously assert that the court has ruled that "money is speech."
My understanding is that the government is still able to regulate money spent on political speech, but simply is not permitted to regulate in a way that has the effect of stifling anyone's speech.
In short, money is not speech and the supreme court has not asserted that money is speech, but any otherwise protected speech that is curtailed by limitations on political spending is speech that has been infringed, and therefore the First Amendment right to freedom of speech has been violated.
Granted, proponents of political finance reform are seeking "fairness" and to "level the playing field", but however laudable those goals might be on a partisan political basis, they don't automatically trump constitutional protections.

Wednesday, April 25, 2012

Is Occupy Wall Street about to do itself in?

The Occupy Wall Street crowd has been calling for a May 1 "May Day General Strike", hoping it would really kick start (restart) this now-lame and moribund movement, but I haven't heard much chatter about even this latest effort gaining much traction. Now, I read that Occupiers, or parties unknown, are calling for a "Wildcat Strike" and an unpermitted march. This smacks of desperation to me, but it will be a great test of whether support for the Occupy movement is deepening and broadening among the general public, or continuing to fizzle and dissipate.
A "wildcat", unpermitted march will probably "feel good" to the lingering activist core of Occupy, but could also backfire and further alienate them from the general public. Illegal activity can certainly gain attention, but attention does not imply support.
No matter what, this will be a great test of the movement.
Right now, the odds are against them, but ultimately it is up to average Americans to decide whether the Occupy movement has enough appeal and relevance. A gradually recovering economy is probably the movement's worst enemy (besides apathy.)

Saturday, April 21, 2012

Romney still has no credible chance to beat Obama

Despite some polls that suggest that Romney is giving Obama a run for his money, Romney has essentially zero chance of beating Obama in November. The polls simply reflect Romney with a ghost none-of-the-above running mate that enables him to poll much better than if he had an actual (and likely conservative) running mate.
Given existing animosity and lackluster interest towards Romney from right-wing conservatives, it is very unlikely that his running mate will be as moderate as himself. A running mate even just a little less moderate and just a little more conservative than himself will instantly move a number of independents over towards Obama.
And the odds are that he will be forced to pick a reasonably conservative running mate to avoid an outright mutiny in the Republican party ranks.
The Real Clear Politics average of recent polls is showing Obama having a 3.1% lead over Romney. Intrade is showing Obama at 60.1%.
As long as the economy continues to limp along and actually make a little progress, Obama is golden. There is very little that he can do wrong at this stage. He has a solid track record of doing enough things "good enough" to maintain reasonable traction.
As I like to say, all Obama has to do is smile and keep his shoes shined, and occasionally buff up his flag pin (or take off his jacket and roll up his sleeves, which is equivalent to wearing the flag pin.)

Tuesday, April 17, 2012

My effective tax rate is 23.3%

Since this seems to be all the rage (figuratively and literally!), I'll disclose that my own effective tax rate is 23.3%, for 2011. But, being self-employed, that includes full FICA, while an employee would not include the employer's share of FICA. Subtracting half of my FICA, would give an effective tax rate of 17.3%. My total income would put me roughly at the bottom of the top quintile (20% make more than me, but I make more than 80% of the households out there.) I am single and without dependents or significant charitable contributions, and a small amount of dividend income, a lot of which is tax-free in ROTH retirement accounts.

Monday, April 16, 2012

Oops, now even Reuters is lying about Buffett's secretary

The media has done a very poor job of accurately reporting the effective tax rate of the secretaries of both Obama and Buffett. The latest misstep is that even Reuters is reporting that "Buffett has said he pays a lower effective tax rate than his secretary" when Buffett didn't actually make a claim about "effective tax rate." As I blogged yesterday, Buffett is adding on FICA, both the FICA that his secretary pays and the employer-paid FICA (and presumably Medicate payroll tax as well.) This is NOT the proper calculation of "effective tax rate" – and Buffett never claimed it was. There is far too much nod-and-wink sleaziness going on over these allegations of secretary tax rates. And the media is not helping to clarify the matter.

Sunday, April 15, 2012

When the lying started about secretaries paying higher tax rates than their bosses

It was back in January that Warren Buffett claimed that his secretary was paying a higher tax rate than his secretary. His rate is claimed to be 17.4%, which I don't doubt, but he and his secretary claimed that her tax rate was 35.8%, which is flat out not mathematically possible since the highest marginal tax rate is only 35% (for income above $379,150), so her effective tax rate would be significantly below that 35% upper bound, especially for a secretary's salary. Even for Obama's secretary at $95,000 a year would have an effective tax rate of only 18.5%.
Buffett further claimed that his "survey" of the employees in his office showed showed that they were paying tax rates of 33%  to 41%. Once again, those numbers are wholly out of line with the tax rates that the IRS levies on taxpayers.
Buffett did say that these rates are for "payroll and income taxes paid to the federal government", so he must be doing something odd with the numbers here. In theory, your "payroll taxes" are for FICA or Social Security and Medicare, which are really money being set aside for the future benefit of the taxpayer and are not normally considered part of "income tax."
I think the idea that Buffett is trying to slip by people (without disclosing it) is that since his own FICA is cut off at a threshold of around $110K, his FICA percentage is a very small number when measured on his large income, while his secretary's FICA is measured as a percentage on her entire income.
In an Op-Ed piece back in August (maybe the original source of the secretary reference) he also referred to "the income tax I paid, as well as payroll taxes paid by me and on my behalf", so he may be counting DOUBLE the actual FICA that his secretary actually pays (adding the FICA contribution that he as the employer pays) when he calculates her alleged "tax rate."
In short, Mr. Buffett appears to be NOT citing "effective tax rate", the proper rate form to use for comparing taxes paid, when he is talking about his secretary paying a higher tax rate than himself.
In other words, he is in fact LYING – by deliberately misleading people, with an intent to deceive.

What is the optimal role of liberals in America?

Conservatives and liberals each like to say that the other is "destroying America." I think that is a little too simplistic and rather misleading. I think both true conservatism and true liberalism have essential roles to play in American politics and economics and social affairs.
As even most liberals will insist, conservatives primarily seek to "protect business interests." That essential fact is true, but somehow liberals see that as a bad thing, by definition, rather than a good thing, by definition.
Ignoring the extremists of both parties, and focusing on moderates of both sides, here is what I view as the optimal role of liberals, true liberals, not far-left wing extremists.
We are primarily, first, and foremost a capitalist system where the vast bulk of economic activity is in the private sector, not government. Yes, the government does play a significant role in the economy, but it is the private sector that plays the dominant role. Unfortunately, liberals take that private sector role for granted, leaving only the conservatives to defend it.
The crux of the matter is that real people need social services independent of their absolute ability to financially afford such services at any given moment of time. The private sector does attempt to fill that gap with products and services such as insurance policies and credit of various sorts, as well as encouraging households to "save for rainy days." And for many people that works out fine, for most situations, most of the time.
But, as even most conservatives will admit, the private sector cannot service all social needs for all households all of the time. This is where liberals and government-provided services come into the picture, to fill the gap.
Sure, some left-wing liberals still insist that government should be responsible for 100% of social services, but the majority and moderate liberals seem comfortable with a social safety net that is mostly the private sector with the government filling the gaps.
There is also the lingering issue that there are still plenty of little and not so little gaps in services that are still unfilled or at least not filled in a consistent manner. It is here that liberals have a legitimate role, but only to the extent that they exercise due diligence in ferreting out what the proper and sustainable respective roles of government and the private sector are on filling those gaps. Unlike what the extremists will insist, it is not an all or nothing question.
In short, there are two roles here: 1) defending the private sector – the conservatives do that, and 2) assuring that the private sector or government fill in any gaps in social services – the liberals drive that side of the equation.
My main problem with a lot of liberals and their policies is that they do a lousy job of due diligence and assuring sustainability and focus too much on the visceral, partisan, "class warfare" thrill of "sticking it to the rich and business interests." Rarely do they attempt to "work with business" to come up with sustainable, hybrid solutions.
I think if liberals were to focus even a little more attention on the sustainability of both the private and public sectors, everyone would be a lot better off – except for the elitists who really are only it it for the visceral thrill of "class warfare" and "sticking it to the rich."
In short, the optimal role of liberals in America is to provide moral support the private sector and then to do the heavy lifting to help fill the gaps where there is a shortfall on the part of the private sector. The private sector has a role there, but neither has an exclusive role.
For example, the issue should not be whether government should be involved in health care, but working with the private sector to assure that they pursue a sustainable role in health care, and then to continue to work with the private sector to achieve a non-partisan call for government to sustainably fill the gap for any shortfall of coverage.
The odd thing currently is that while conservatives call for government to stay out of the private sector, liberals do a lousy job of clearly pointing out how if the private sector can't fill a gap in services then liberals should be reaching out to clearly show how the private sector can support a sustainable role by government in filling that gap. Again, the emphasis needs to be on "sustainable."
It is truly sad that here in a capitalist economy liberals feel more at comforting fighting "business interests" than reaching out and working with them.

Saturday, April 14, 2012

The political outlook for 2013

It seems quite clear to me (and backs it up with a 60.8% probability), that Obama will win in November. But, he is unlikely to get a friendly Congress to grease the skids for a smooth second term, at least in terms of pursuing a progressive liberal agenda.
Whether the Democrats retain a veto-proof majority in the Senate is quite unclear, but the odds are not strongly in their favor (in my view.) Even if they do retain a 60% majority, they are still likely to have enough moderates that only sensible, moderate, reasonably bipartisan legislation will make it through the Senate. And the House is even less likely to become "liberal-friendly" in 2013.
The "new" president will have to be a consensus-seeking, compromise-making, patient, bipartisan-friendly, community-organizing (congressional members being the community) leader. Sure, Obama can do it, if he puts his mind to it. I'm positive me can handle it, but his agenda will have to be either very limited or very moderate and bipartisan, or some hybrid thereof.
First up will be the "twin peaks" of expiration of of the Bush tax cuts and the impending budget sequester. (Expiration of the payroll tax cuts is somewhere in there as well, but I can't recall the exact timing.) In my view, both will occur despite reservations on both sides of the aisle and in the White House. Simply standing back and letting these two events occur is the easiest and safest (and best) decision for all parties. I am sure that there will be a number of efforts to roll back at least parts of both, but such efforts will be halfhearted at best. Everybody will be blaming everybody else, but nobody will be willing to do anything different.
Republicans don't want taxes to rise, but they are not willing to give the Democrats the satisfaction and "victory" of raising taxes only on "the rich." Democrats want to raise taxes (a lot), but don't want to take the heat for doing so. And there is zero chance that the Democrats will be willing to stomach big domestic spending cuts, but once again they don't want to take the heat for "busting the budget."
The sequester will be painful to both sides, not to mention that it could force a recession in 2013, but neither side is firmly behind anything resembling a solid bipartisan consensus for an alternative that does in fact seriously address the serious budget deficit, so the painful sequester is the least painful of readily available alternatives that have a ghost of a chance of being agreed upon, or at least mutually agreed to stand aside and do nothing.

Friday, April 13, 2012

An OMG moment for the Occupy Wall Street movememt

OMG indeed! The members of the Occupy Wall Street movement have discovered that if they obey the rules, the cops leave them alone! What a revelation for these people. It only took them six months to figure it out, even with a non-stop legal team supporting them. A 2000 court ruling had decreed that protesters could sleep on the sidewalk as a form of protest, provided that they not use more than half the sidewalk or block entrances or exits. So, now a bunch of small groups are occupy small strips of sidewalk in the vicinity of Wall Street and the New York Stock Exchange. They could have been doing this six months ago,, but didn't, in large part because their numbers were much larger and also a number of their members simply couldn't stomach the thought of obeying rules.
Unfortunately, this form of passive protest is rather boring and won't get a lot of attention except for the novelty of OWS members actually obeying rules for a change.
By definition, they can't "shut down" anything with this form of protest, so it will be interesting to see how long they are willing to keep it up.
But as long as they are obeying the rules, they are welcome to try to do it indefinitely.

Somebody's lying about somebody's taxes!

Hmmm... The White House is now claiming that the president's secretary had a HIGHER effective tax rate than the president, but that doesn't fit the facts. According to ABC News, his secretary "pays a slightly higher rate." His secretary "makes $95,000", supposedly. I checked with IRS Form 1040EZ, which is the worst possible scenario (no itemized deductions, mortgage interest, or charitable contributions or any of that) and came up with an effective tax rate of 18.5%, which is certainly BELOW the president's rate of 20.5%. Somebody is LYING here!
And as I pointed out earlier, the president's rate is as low as it is precisely because he has a boatload of charitable contribution deductions. If we believe that charitable contributions are a great value to society, that should be a GOOD thing, and would justify a lower tax rate.
But the big revelation and scandal here is that WE, the taxpayers, are paying $95,000 for a SECRETARY! Oh, right, they probably got her from GSA, those guys. Hmmm... I wonder how much Buffett pays his secretary.

Obama's effective tax rate

I had actually reviewed Obama's 2010 tax return recently, so I quickly latched onto his 2011 return when it came out today. Some interesting tidbits in there.
First, his 2011 return completely takes the wind out of the sails of his claims that "we need to change our tax code so that people like me, and an awful lot of Members of Congress, pay our fair share of taxes. Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes." In 2010 he made more that $1 million, but in 2011 he only made about $800K ($844,585 total income, $789,674 adjusted gross income, and $496,376 taxable income), so his infamous "Buffett Rule" would NOT apply to him. Let's see if he adjusts his stump speeches accordingly from here on.
Second, the White House referred to his 20.5% effective tax rate, sort of implying that it was lower than a typical middle-class tax rate, which is completely false. I read recently that the median effective tax rate for the middle 20% of U.S. taxpayers is 13.3%, WELL below Obama's effective rate. More wind taken out of the sails.
Obama's effective tax rate was reduced significantly primarily due to a significant level of charitable contribution deductions ($172K). Without the "tax break" for those deductions, I calculate that his effective tax rate would have been 28.2%, still WELL above the tax rate of an average American without the high level of charitable contributions. I calculated that he saved $60K on taxes as a result of the charitable contribution deductions. Incidentally, Romney's 2010 effective rate was low in large part due to very large charitable contributions.
Every penny Obama made over $379,150 was taxed at a marginal tax rate of 35%. For a middle-class family making less than $100,000 (that's most people), their highest marginal tax rate is only 25%. No sign of any need for a "Buffett Rule" there.
This 30% number in "The Buffett Rule" seems rather arbitrary and completely unrelated to this separate issue of what a millionaire makes vs. the average middle-class worker.
For one important thing, it completely muddies the distinction between marginal rate and effective rate. "Bait and switch" is a sleazy form of rhetoric.
Even more important, the proposed rule doesn't even bother mentioning the whole point of the 15% capital gains rate: to encourage investment that will help grow the economy. That would be a terrible loss to both the economy and the government itself.
And what exactly do people think will happen to charitable contributions if the government starts telling people that if they take a tax deduction for charity their tax rate on the rest of their income will GO UP?!
That was actually a rhetorical question because there is absolutely ZERO chance that "The Buffett Rule" will get passed in Congress, so there isn't actually any need for anybody to worry about consequences.
-- Jack Krupansky

Thursday, April 12, 2012

Was George Zimmerman "depraved" when he shot Trayvon Martin?

I wasn't terribly surprised that the prosecutor decided to prosecute George Zimmerman for shooting Trayvon Martin, but the second-degree murder charge was an eye-opener. None of the "evidence" presented in the media to-date seemed to support that charge. Manslaughter or negligence maybe, but was George really "depraved"? It doesn't seem so.
I see that there are several possibilities to explain the charge:
  1. There is some secret evidence that the prosecutor has uncovered that has not yet come to light in the media. Hey, it is possible... but unlikely, especially since it would have to strongly contradict evidence already presented in the media.
  2. It was a "bone" thrown to the "enraged" African-American community. Even if the charge doesn't stick and George is acquitted, at least the family/community will have "had their day in court", which may be all they may really be after. In other words, George will ultimately walk, but the family/community can claim "justice was served" (sort of.)
  3. This is just the start, to get our attention, and the prosecution may eventually add a separate manslaughter charge (and possibly other charges) so that a jury could fall back to manslaughter or even assault or negligence if they find that the second-degree murder charge doesn't stick.
  4. This is just... "Florida Justice", as usual. Despite it's label and reputation as "The Sunshine State", much of the state is rather backwards, redneck, and rather Wild West in its "justice" system. In other words, the prosecution team will benefit from the high-profile prosecution of a greater charge, even if the case goes against them. It could be Casey Anthony all over again.
But, even if George does get off the hook with the criminal charge(s), he and the gated-community homeowner's association could well be targeted with one or more civil suits (ala OJ.)
As far as the "Stand Your Ground" law, I don't think George needs to invoke it. He is claiming self defense and that it was in the heat of a purported physical assault by Martin that he pulled the gun, so as long as the evidence doesn't contradict that claim, he will be able to claim that he had no opportunity to "retreat" after Martin (allegedly) initiated the (alleged) assault.

Is the Occupy Wall Street movement on the verge of breaking out or breaking down?

The Occupy Wall Street movement here in America (NYC in particular) was an offshoot of the previous anti-globalization movement(s) as well as various other environmental and social justice movements as well as the so-called Arab Spring. It was also heavily influenced by the various anti-capitalism social movements in Europe such as the Indignados in Spain. Although these various movements have a lot of common roots, themes, and even personalities, the Occupy movement in the U.S. is really in a whole separate category by itself. The U.S. government isn't even in the same ballpark as the various "Arab" governments. The labor situation in the U.S., including for new graduates, isn't even in the same ballpark as Europe. Sure, the U.S. government and Wall Street and the job market could be improved, but that is a very far cry from comparing them to Tunisia or Egypt or Spain or Italy or Greece. The Occupy movement doesn't seem to "get it." They do wonder why they are not seeing tens of thousands or 100,000 or more people regularly show up for protests, but they are too clueless to grasp the essential differences between the situation in the U.S. and elsewhere in the world. The simple truth is that the situation is not as desperate for the average American as it may be at other places around the globe. The simple truth is that if it was that bad then people really would be out in the streets in much greater numbers, but they're not.
The Occupy guys are struggling mightily to "raise an army" for a big "General Strike" and protest on "May Day", May 1, 2012. If things were as bad as they are claiming, such a strike/protest would be a slam-dunk no-brainer, but that apparently doesn't seem to be the case.
As I have said before, the Occupy movement could continue indefinitely as a relatively minor "protest movement", but there is essentially no evidence of the movement doing any serious growth. In my estimate, the Occupy Movement (at least in NYC) peaked in the middle of October (the one-month point) and then began a slow fizzle down. Occasionally they pop up, briefly, but then fizzle away again.
Ultimately, the future of the Occupy movement is not in the hands of its "leaders" and main activists, but in the hands of the American people. As long as the economy keeps stumbling along and employment doesn't slide a lot further, the average American will be too busy keeping up with work and family to divert much attention to a major commitment to the Occupy movement. This could change, but there is no significant evidence of such a change as of today.
In short, "May Day" may in fact be the make or break moment for the Occupy movement, at least in America and in NYC in particular. Interesting... I just realized that "May Day" is the traditional form for a distress call, so "May Day" is an appropriate name for this potentially Waterloo moment for the Occupy movement.

Monday, April 09, 2012

Mike Wallace and 60 Minutes

I used to love watching Mike Wallace on Biography when I was a kid. And he definitely raised the bar with his many early years with 60 Minutes. But, alas, later in its life 60 Minutes began to exemplify the steady decline in the quality of journalism in America. These days, I would not watch 60 minutes for any reason. It is now basically the epitome of "trash journalism." Wallace had a talent for picking his targets carefully and crafting his questions just as carefully. He was always laser-focused and dead-on. Both the questions and the answer had great value. These days, none of that is the case. Maybe 60 Minutes is actually the cause of its own diminished stature in that maybe most people in power know enough to stay away for fear that something, anything that might be even remotely embarrassing might pop up in an interview and that even the phrasing of questions or a moment of hesitation will be misread. Mike Wallace knew how to do it right, but those who have followed him simply don't have a clue. Yes, Mike's results were frequently sensational, but mostly because of the quality of his work, but these days the goal seems to be sensationalism at any cost and with as little attention as possibly to the quality of the work other than an obsession with slickness and edginess that hides and distorts the truth more than uncovers it.
In any case, here's to the good old days, the days of Mike Wallace in Biography and his early years in 60 Minutes.

Wednesday, April 04, 2012

The Occupy Movement: Rising Anarchy

Here's an interesting piece by security consultant Ian Oxnevad entitled "The Occupy Movement: Rising Anarchy" on the risks related to the so-called "Black Bloc" factions that are embedded within the Occupy movement. The bottom line is that while many or most of the participants in the Occupy movement, and Occupy Wall Street in particular, are peaceful and nonviolent and have plausibly reasonable agendas, there are darker elements involved that pose serious risks for society.

Sunday, April 01, 2012

April Fool's Day is a perfect fit for the Occupy Movement

Usually I cringe at the silliness of April Fool's Day, but I see that it is a perfect and natural fit for the Occupy Movement, where they tweet about the way things "should" be but "sadly" aren't. Actually, that sounds a lot like what they do most of the time anyway.
  • Bankers arrested! (NOT)
  • Brookfield properties renames Zuccotti Park to Liberty Square and gives Occupy Wall Street control (NOT)
  • Ray Kelly resigns as NYPD commissioner (NOT)
  • Walmart open to unionization (NOT)
  • Monsanto phases out GMOs (NOT)
  • Rush Limbaugh supports Planned Parenthood (NOT)
  • Moratorium on old-growth forest logging (NOT)
  • GOP supportive of women's reproductive rights (NOT)
  • Shell pledges money for oil spill cleanup (NOT)
  • TransCanada scraps plane for Keystone pipeline (NOT)
Hmmm... most of these items have nothing to do with Wall Street per se. That illustrates perfectly how un-focused the whole Occupy Wall Street movement has been.

Saturday, March 31, 2012

Will the May 1st Occupy General Strike be very effective?

The Occupy Wall Street crowd is making a big deal about their call for a General Strike on May 1st, but as far as I can see, they are unlikely to muster much more than their usual cast of characters and their allies, some union members, and some students. Sure, it will be a decent-sized protest as these things go, but nothing so dramatic as to cause more than mild amusement or annoyance over relatively minor disruption on the streets. Maybe 1,500 to 5,000 people here in Manhattan, or a maximum of 15,000 to 20,000 if they manage to attract a lot of union members and a lot of students.
In short, this call for a General Strike will only be effective at one this: proving that the Occupy movement has marginalized itself and made itself fairly irrelevant.
The biggest obstacle to growth for the Occupy movement right now is a gradually improving economy.
The Mega Millions lottery mania even further disproved the underlying foundation of the Occupy movement. Far too many people still have grand aspirations of "making it big" and don't believe as the Occupiers do that they are permanently stuck at the bottom of the pyramid.
Oh, and if you think you are helping the movement by donating money, guess again, since they will simply spend the money, which will provide only further stimulus to economic growth. That is a virtuous cycle for the economy and Wall Street, but a vicious cycle for the Occupy movement.

My position on the unrest in Syria

The unrest in Syria certainly gets a lot of media attention, but what is it really all about? I would like to be able to take a "position" on Syria and to support the U.S. taking a "position" on Syria, but I have to admit that despite all the media reports, I have zero confidence that I have any clue what is really going on, on the ground, so to speak. If this were simply about "peaceful" protesters pursuing an "Arab Spring", that would be one thing, but armed rebellion is not an indication that this is primarily about peaceful protestors being unfairly suppressed. My hunch is that the protesters are merely being used as the "front" or "human shield" by the hard-core "rebels." I also have a hunch that Israel is secretly "behind" a significant portion of both the "protest" and the "rebellion." I would not doubt that the U.S. may also be secretly aiding both, possibly indirectly through Israel, but the bottom line is that without much greater access to real facts, we simply can't know.
Personally, I do believe that "revolution" is an inherent natural right of all people. It is not a legal, constitutionally protected right, but it is still a legitimate, albeit extra-legal, natural right. That said, it is a right that must be used only very sparingly and with great deliberation and great care. In fact, the vast majority or people will never have a reason to ever even consider it in their entire lives. The American Revolution was one such occurrence. The American Civil War was another. Thankfully, none of us have had reason to consider it since.
My view is that it is up the the people themselves of a country as to whether it is appropriate for them to even contemplate revolution. It is certainly not up to outsiders, foreign leaders, media commentators, or even NGOs and so-called "activists" to decide if a people will "revolt" and seek the overthrow of the nominal authorities.
The people of Syria, and they alone, collectively must decide for themselves whether armed rebellion and revolution are the path they need to take. If they do choose or have in fact chosen that path, so be it, but they are on their own. It is not for us to either second guess or aid or handicap such a decision at this time. Their revolution, if that is what they have chosen, is theirs and theirs alone to pursue.
That said, and using our own American Revolution as a model, at some stage it will become clear whether their revolution is gaining traction and if at some stage they appear to have a reasonable chance of success. Only then can and should other countries consider "taking sides" and aiding the "rebels." Sure, we can consider a modest level of secret aid if we suspect that the rebels have a ghost of a chance of getting their act together, as the French did for us in the middle of our revolution, but it is only when rebels have proven that they have the widespread support of the people and have gotten their act together and are "unified" and are actually making real progress that outsiders can and should publically support the rebels. Alas, to date, the rebels in Syria have shown no sense of the kind of "unity" and popular support that is required for foreign backing. The media is very clear on that lack of unity. The degree of popular support for the rebels is quite unclear. Aiding the dis-united rebels today would simply result in chaos, not progress.
So, sad to say, we need to sit back and wait and watch. The sad fact is that most rebellions can and should be "put down." It takes a lot of domestic support and political unity to create a new nation and new national leadership, and despite the loud-mouthed protests of the so-called Arab Spring protesters, neither is firmly in place.
So, my conclusion at this stage is "wait and see", but I do also accept the right and obligation of our government to secretly aid rebels anywhere and anytime if we feel that "it is only a matter of time" before the rebels prevail. America must bet on progress, not maintaining an unsustainable status quo. The problem with Syria though is that it is not at all clear whether the rebels are on a path to sustainable progress, even if we were to give them a modest level of aid. But, to be clear, I would definitely not support more than a modest level of aid. A moderate or heavy level of aid must be absolutely out of the question, at this time.

Warren Buffett should pay a lower tax rate than his secretary

President Obama has renewed his call for the so-called Buffett Rule, under which a person earning more than $1 million in income would have to pay a minimum 30% tax rate, suggesting that this somehow about "fairness" and that persons with high incomes are not paying "their fair share." There are a couple of problems with this claim.
First, although the "marginal rate" may be lower for people with an income mix such as Mr. Buffett's (or Mr. Romney's), their "total" tax payment are significantly higher, and it is "total" tax, not "marginal rate" which really matters.
Second, for the first portion of Mr. Buffett's income that matches his secretary's income he pays exactly the SAME tax rate. That sounds awfully fair to me.
Third, if someone has income over $1 million that is strictly or mostly salary/wage income they will in fact be paying a significantly higher marginal tax rate than his secretary for every dollar of that non-investment income, once again due to progressive tax rates. Again, nobody talks about this. That hardly seems "fair" for him, but nobody says anything about that and if he doesn't want to complain, that's that. But, to put it simply and bluntly, there is zero truth to the claim that people with non-investment income greater than Mr. Buffett's secretary are paying a lower rate for that non-investment income. Zero truth. The story should be about the relative value of salary and wage income vs. investment income, but oddly that important distinction has been lost in the noise of all the political theater.
Fourth, our tax system deliberately places a higher value on investment income since capital and investment is the very lifeblood of our economy. Without ongoing investment, the economy would quickly grind to a halt. For this reason, we intentionally and mindfully assign a significantly lower tax rate to "investment income." This is the incentive for people to invest money rather than to merely spend money. And, to be fair, we do in fact offer that same identical lower tax rate to both Mr. Buffett and his secretary for their investment income.
Fifth, my apologies to his secretary but Mr. Buffett deliver far greater economic value to society than she does. I am sure he compensates her "fairly." I am also sure that if she had a ROTH retirement account or some modest investments from savings that she would in fact pay a much lower tax rate than she pays on her salary and wage income, which is how it should be. If she wants to go back to school or teach herself investment skills and go out and raise capital to be an investment manager comparable to Mr. Buffett or Mr. Romney, all power to her, and then she will deserve a lower marginal tax rate for her investment income.
It may not seem fair to some, but working "smarter" is and should be more highly values than merely working "harder." Yes, hard work is needed, but it is only smart work that grows the economy in a leveraged manner.
So, in short, President Obama is completely misguided in his call for higher tax rates for investment income. If someone has more than $1 million in non-investment income they will already be paying a much higher tax rate (for that non-investment portion of their income) than Warren Buffett's secretary, so no change is needed on that front to achieve so-called "fairness" for taxation of entertainers, star athletes, et al whose income in primarily from their own labor as opposed to investment income.
It may not seem "fair" that capital has higher "value" than labor, but capital is more like a fuel and labor is more like water. Both have great value, but fuel is more scarce and has greater leveraged economic value and must be protected and promoted with much greater vigilance, especially since it can be so easily squandered if used in a misguided manner.

-- Jack Krupansky

Wednesday, March 28, 2012

Are Supreme Court justices allowed to lie about the law with impunity?

Wow, are Supreme Court justices really allowed to lie through their teeth about the law with impunity? Is nothing sacred?
According to a CNN article, Justice Scalia said something that I know is factually "incorrect" about the law:
"You want us to go through 2,700 pages" of the law, asked Justice Antonin Scalia. "Is this not totally unrealistic ... to go through one by one and decide each one?"
I just happened to download the official version of the law from the Government Printing Office (GPO) and it clocks in at only 906 pages. I suspect that his confusion was that the drafts of the bill were printed in larger type and double-spaced for purposes of "markup" and at least one was purported to be 2,400 pages.
Hmmm... but I wonder if this means that he hasn't actually seen the final law whose fate he is deciding. After all, with two branches and a conference committee, looking at any draft before the president signs the bill is risky.
Incidentally, the bill/law does not use the term "mandate." It does refer to "individual responsibility", "Requirement to maintain minimum essential coverage", and "Individual responsibility requirement." And, significantly, section 1501, which defines this "individual responsibility requirement" clearly lays out its constitutional basis in terms of interstate commerce from an economic and legal perspective, even to the point of citing a 1944 court case where "the Supreme Court of the United States ruled that insurance is interstate commerce subject to Federal regulation." So, clearly, Congress carefully crafted the "individual responsibility requirement" in a way that was specifically designed to be able to pass constitutional muster before the Supreme Court.

Did the Supreme Court questions indicate that the individual mandate will be overturned?

A number of media reports strongly suggested or implied that the individual mandate of the health care law would likely be overturned based on the questions by the five non-liberal justices that did not indicate any support for the individual mandate. Sorry, but it is not so simple. I spent a lot of time in Washington back in 1998 to 2003 and one of the consistent messages I heard from insiders was that questions from a judge or justice are not a reliable indicator of how they will ultimately decide. Sometimes they simply want to get information, sometimes they simple challenge an assertion to get a deeper response from counsel, and sometimes they simply play devil's advocate to see how well counsel has thought through their arguments.
Sure, the media and commentators desperately want to "read the tea leaves" and report the news before it even happens, to handicap the horse race, but sensible citizens are best advised to ignore all of that and simply wait for the official judgment and then analyze what the justices actually say in their formal decision.
That said, Chief Justice Roberts probably does hold the deciding vote. I'm not going to predict that he will uphold the individual mandate, but if he doesn't, I predict that he will rule narrowly and on technical issues. I predict that he won't rule that no individual health insurance can ever prevail, but simply this one, the way it was formulated, stretches just a little too far. In other words, that if Congress were to reformulate the individual mandate it could pass constitutional muster. That might be enough to kill the individual mandate until the day that liberals have a stronger majority in Congress, but at least the door would be open to "Health Care Reform II", which I have always advocated – the current law is simply a steppingstone to more comprehensive and sustainable health care form.
But all of that said, I do believe that there is at least a 50/50 chance that Roberts will uphold the individual mandate, but only in the narrowest of terms.
Personally, I think the reason the mandate might stand is that it actually doesn't "force" people to buy health insurance. It does not criminalize the failure to purchase health insurance. It gives us a "choice." The "penalty" is a mere "tax", and a fairly modest tax at that. In fact, the penalty is quite modest in the initial years and only grows to a modest level in the out years. If the individual mandate had in fact criminalized non-compliance or imposed "excessive" or "onerous" penalties, that would be a different story, but the simple fact it that it does not. And, almost as importantly, because our health care system does in fact convey a "right", the right for anybody to walk into the emergency room of a hospital and get care on demand anywhere and anytime, it is rather hard to argue that the "penalty" is somehow an unfair levy needed to sustain a system that is already in place, even before the health reform law was enacted.
I personally am one of the people square in the crosshairs of the individual mandate – I neither have health insurance nor do I want it. I do not favor the concept that I should be subsidizing the health care of people who make bad lifestyle decisions, such as smokers, the obese, the skateboarders, the snowboarders, et al. Nor do I have extreme health care such as organ transplants, extremely expensive experimental treatments, or extreme and expensive "end of life" care which effectively bankrupts the system simply to give a person a few more months or a year or two of life when everyone can clearly see that "your time has come." My intentions are to pay the penalty instead, and I am okay with that. Besides, who knows, maybe a few years from now I may even decide to purchase some minimal health insurance to handle catastrophic health issues. Or, maybe mass non-compliance will finally force the health insurance companies to offer fair and reasonable policies that actually do appeal to people like me.
For now, I believe that Congress did a great job of crafting an individual mandate in such a way that "strongly encourages" people to purchase health insurance without excessively penalizing or criminalizing them for non-compliance.
For now, let us give Chief Justice Roberts the benefit of the doubt and look forward to him making a wise decision.

-- Jack Krupansky

Tuesday, March 20, 2012

We need an Investor Bill of Rights

There is no question that investing these days is very tricky business. In fact, any dealing with Wall Street is quite treacherous these days. It is caveat emptor, let the buyer beware, every step of the way. Sure, it has always been that way, to some extent, and us diehard investors are quite used to it and have all sorts or tricks to navigate through the investment minefields, but it is plain and simply dysfunctional and  unacceptable for the average investor. What we need is an Investor Bill of Rights that makes it once and for all relatively safe for the average American to invest in anything other than a simple bank savings account or CD. Even money market funds are far more risky and tricky (and less profitable) these days than once thought.
I don't have even a preliminary draft for an Investor Bill of Rights yet, but it is something to start thinking about.
The point is not to eliminate all risk or guarantee a high rate of return, but simply to assure that average investors are protected from severe predatory behavior on the part of the denizens of Wall Street. Once it was only a bunch of hedge funds and due to their limited size they could be tolerated, but now every big bank is trying to run itself like a hedge fund, so what in the past was marginally tolerable is now definitively intolerable.
The goal will not be to eliminate all conflicts of interest, but to render them manageable, to assure that there are very clear limits to how far banks are allowed to go in acting against the interests of their customers. We need to restore the meaning and value of the term fiduciary duty.
The goal will not be to eliminate speculation and short-term trading, but simply to assure that speculators and traders cannot attack the assets of average investors. In the past, speculation and trading was simply "noise" and little concern to serious investors, but now it is the speculation and trading "tail" that is wagging the once-mighty investment "dog." Put simply, we need a solid firewall between investments and the casino betting of speculators and traders.

-- Jack Krupansky

Sunday, January 29, 2012

Is civil disobedience constitutionally protected?

At least some members of the Occupy [Wall Street] movement seem to believe as a matter of principle that civil disobedience is constitutionally protected, when it is obvious that the constitution offers no such free pass for breaking laws even if the otherwise illegal conduct is cloaked in a claim of exercising free speech. I have seen some arguments on the Web in favor of why civil disobedience should be constitutionally protected, but the courts have not taken any such position.
In short, although free speech is constitutionally protected, the mere claim of exercising free speech while otherwise breaking the law is not constitutionally protected.
One of the most defective arguments in favor of constitutionally protecting civil disobedience is the suggestion that the civil rights movement could not have happened without civil disobedience. Yes, the civil rights movement did depend on civil disobedience, but the racist laws they were violating as being clearly unconstitutional (color segregation) actually had credible arguments for being held unconstitutional, but the laws the Occupy arrestees are accused of violating have no such credible constitutional  arguments and have been for the most part issues of non-discriminatory disorderly conduct.
Occupiers certainly have a disdain for the legal requirement for a permit for rallies and protests, but the legal basis for such permit requirements have been thoroughly constitutionally vetted, provided that the permit requirements remain non-discriminatory and have a legitimate purpose in protecting the public interest.
Part of the issue for the Occupiers is that quite a few of them are avowed anarchists or sympathizers whose core belief that the concept of "the state" is invalid and as a result they simply cannot tolerate restrictions on their perceived "natural rights" by "the state."
In the end, it is quite farcical that Occupiers would seek protection from "the state" when they insist that "the state" is not legitimate.

Tuesday, January 17, 2012

Misconceptions about NDAA

There has certainly been a lot of activist clamor about the latest National Defense Authorization Act for Fiscal Year 2012 (NDAA), suggesting that it some kind of gross new infringement on the rights of American citizens, but much of the criticism of NDAA is simply factually wrong. The single criticism that is true is that the FBI is now required to turn over terrorist suspects associated with al Qaeda to the military for detention. That's it. That's the only criticism that is new and true. All of the other recent criticism is either old or factually false. In particular, the NDAA as signed by President Obama does not authorize the military to engage in "domestic policing" or to "pick up" or even to "detain" American citizens.
Part of the confusion stems from the fact that the version of the bill passed by the House was in fact a little more draconian, but the bill differed in the Senate and was further modified in the conference committee, so that criticism of the original House bill is not necessarily application to the NDAA as signed into law by President Obama.
An easily way to tell if a critic is referring to the original House bill is if they refer to "section 1031." In the final bill from the conference committee that provision was renumbered to "1021." Most of the criticisms I have heard or read referred to 1031. In fact, I haven't heard or read a single criticism that referred to 1021.
Section 1021 has some rewording to respond to a request from President Obama, specifically to assure that the measure would not affect American citizens. Most notably, he had paragraph "(e)" added: "(e) AUTHORITIES.—Nothing in this section shall be construed to affect existing law or authorities relating to the detention of United States citizens, lawful resident aliens of the United States,  or any other persons who are captured or arrested in the United States." Section 1031 of the Senate version of NDAA included that same language.
Technically, it has always been true that the President has the right to detain anybody anytime in the interests of national security, provided that he issue a "presidential finding" justifying such action, but that is not a new "authority" granted by NDAA this year.
So, paragraph (e) simply clarifies that no new authority is being granted for detention of terrorists. And the President clarified this as well in his signing statement.
Section 1021 is actually careful to limit itself to al Qaeda and the Taliban. It refers specifically only to "Covered Persons", including those involved with the 9/11 attacks, al Qaeda specifically, the Taliban specifically, and "associated forces" of those two specifically, but not to terrorist suspects overall. So, even if a person aided Hamas or Hezbollah or some other terrorist group or was a lone wolf terrorist or part of a home-grown domestic terrorist group, or a member of the Occupy movement or the Rotary Club, section 1021 does not apply to them.
Section 1022 of the final bill concerns the military custody issue. Nothing in the NDAA authorizes domestic policing by the military or authorizes the military to "pick up" American citizens. The whole "military detention" or "detain by the military" thing has been blown out of proportion. The relevant section is 1022 which is entitled "MILITARY CUSTODY FOR FOREIGN AL-QAEDA TERRORISTS" and the text makes clear that it only covers persons who are "a member of, or part of, al-Qaeda or an associated force that acts in coordination with or pursuant to the direction of al-Qaeda". Subparagraph (b)(1) specifically states that "The requirement to detain a person in military custody under this section does not extend to citizens of the United States." And, of course, the section title makes quite clear that the military custody applies only to "FOREIGN" terrorists, and only "AL-QAEDA" terrorists at that.
How much more clear could the language be that the military is not being authorized to detain American citizens?
Again, I suspect that part of the problem is that activists and critics read the original House bill and not the final signed bill.