Ron Amundson’s Political Blog

So how critical is this? apparently its not very critical if exec compensation is on the line.

from yahoo news.

Treasury Secretary Henry Paulson stressed that time was critical to get the proposal passed and that changes to the administration’s measure, which was sent to lawmakers on Saturday, could delay that approval, further unsettling global financial markets, which have already seen a number of stomach-churning days as the result of the biggest upheaval on Wall Street since the Great Depression.

I agree with John McCain on this one…

“I notice at Lehman … some $2.5 billion in compensation,” McCain said. “If they’re bankrupt, where did they get that? But the major point is that no CEO of any corporation or business that is bailed out by us, that is rescued by American tax dollars, should receive any more than the highest paid person in the federal government.”

Paulson’s response….

“If we design it so it’s punitive and institutions aren’t going to participate, this won’t work the way we need it to work,”

Granted, $400,000 is a paltry sum when it comes to executive compensation, and even more so, when the numbers are this large. However, for the most part, these are the guys who ran things into the ground. They can either choose to take a huge paycut, be replaced…. or maybe govt intervention is not really that important to their firm.

Now, some would say, putting a low bid exec in charge is not so good… on the other hand, the high dollar execs have failed in a huge way. I think such restrictions on compensation are a reasonable risk to take, but apart from that. If indeed a govt bailout is needed, the execs compensation in this case is not so much the salary, but the ability to salvage what remains or even grow their investment. Congress should hold fast to this one… its not unlike playing Chicken. If this is the right move, and it is the right time, and it needs to be done quickly, then it will happen. If not, the markets will decide… and if it ends up it is really super time critical, the markets will decide likely way before legislation is ready to roll anyhow.

I’d also gather there is some level of patriotism on Wall Street…. some execs will step forward irrespective of the pay issue, and thats to say nothing of the intangibles and networking for the future that occurs. Its not unlike when a high school buddy who after graduating Harvard clerked for the supreme court, rather than jumping into the big bucks right away. One cannot readily set a price on such, its just too valuable.

ts interesting to note the differences of opinion over FAA user fees. From MPR: News Cut: Blaine setting for Palin speech highlights a difference with McCain

Senator McCain…. “I wanted to get at, which we should get at, the wealthiest people in America who are flying corporate jets around this country and not paying an extra penny for doing so, while average citizens, average middle income, lower income American citizens are paying, again, an increase in their cost of air tickets, while your fat cat friends pay nothing. ”

McCain stressed that user fees would only apply to business aircraft. The general aviation interests insist that a user fee-funding system would only expand.

Gov. Sarah Palin…..signed a resolution in Alaska in 2007 that opposed “the enactment of the provisions in the Next Generation Air Transportation System Financing Reform Act of 2007 that impose user fees, increase aviation fuel and aviation gas taxes, reduce airport funding, and reduce Congressional oversight of the Federal Aviation Administration.”

“Aopa… says the surplus in the Aviation Trust Fund, paid for by taxes on general aviation fuel, airline passenger tickets, and cargo, should be used instead, and argues that the skies will be less safe because pilots won’t use air traffic control and other services designed to keep flying a relatively safe exercise.”

Indeed, I think this is a safety issue. GA pilots are cheap, and will do pretty much anything to save a buck, esp when they figure it cant happen to me. 25 years ago when I worked on GA airplanes, man the stories I could tell. As a flight instructor for nearly 20 years, my mechanic experience was continually reinforced. If pilots start having to pay for services, its likely the vast majority will choose to not use them, and safety will be affected. Its not unlike the reluctance of pilots to declare an emergency… with the end result being a crash and potential loss of life, and thats over the paper work burden. Imagine if they had to spend $25 to do so…. Declaring early brings a wealth of resources, waiting until the end, it can be too late, and or the number of remaining options end up being severely limited.

Now, some might say, pilots need to take responsibility…. ie if you go cheap, and something happens, its your problem. The issue is, things dont operate in isolation and the public is affected. A runway closure due to a crash can put an airport out of service for hours, if not days of reduced capacity. A search and rescue effort costs tons more than a weather briefing. A midair is a lot more expensive than a years worth of flight following/radar services. to say nothing of loss of life.

The other issue is FAA services for the most part are a fixed cost. Ie, once weather services, air traffic control, and airports are in place… they are fixed costs pretty much with the exception of usage. The exception being peak hours at busy airports and terminal areas where additional technology and staffing are needed. Yet for the vast majority of airspace, and airports the costs are pretty much fixed. Since the largest user base contributing to the peak times are the airlines, it only makes sense they should cover a majority of the costs. Now, whether the 97% figure is the appropriate number, that’s another story entirely.

Granted… McCain states this would be for business aircraft only, but just as the NRA is against some seemingly reasonable restrictions as concerns gun control… its not the initial concept as presented, its the slippery slope which can lead to huge problems later on which is the issue. The last thing general aviation needs is a user fee taked onto small training aircraft, which likely would increase operational costs by 30-50%, to say nothing of the negative safety aspect. Sure, a lost flight student is going to use ATC services… but again, some ATC radio help is a ton cheaper, than the manpower, fuel, and aircraft needed in the event search and rescue is needed.

Its been 25 hours since Lehman brothers announced their bankruptcy, and the fallout is already occurring, even reaching main street. Yep, a friend lost her job at a mortgage firm yesterday, a thousand miles removed from Wall Street.

Aldon Hynes, a fellow I used to have spritely discussions with in 2004, being I was a Republican and he was a Democrat has some interesting things to say, as it hit very close to home for him too, but in a different way. His blog entry entitled My Role in the Collapse of Lehman Brothers is pretty powerful.

How many of the people that will lose their jobs at Lehman Brothers or at Merrill Lynch, will end up in similar financial difficulties? How many will need to sell their houses at a loss, adding to a further slide in housing prices? From a Wall Street perspective, how much will the debts of Lehman drag down other financial services firms?

Well, being it hit my friends employer already, its likely to have some pretty wide ranging effects. I can only imagine the headaches which are going to occur in a wide range of sectors, as lines of credit get pulled in. Everything from manufacturing to retail is likely subject to difficulty. And those effects are 2nd and 3rd order. I imagine there will be a wealth of east coast real estate taking a real header as the 28,000 employees directly affected by the bankruptcy have no place to go, to say nothing of those who will loose their jobs as a result of the Mer-BoA deal… and that assumes that AIG, WAMU, and others remain afloat which is not looking too likely. It may not be today, but it likely wont be long… and those ripples are sooner or later going to hit mainstreet.

I twittered something earlier… as concerns the average Joe, who may just be sitting back, and saying, they got whats coming to them… and in many ways, deregulated financiers did themselves in.  Otoh if Joe ends up not gettig his full paycheck, as a paycheck depository failed… its going to get real very fast. Ie FDIC guarantees $100,000… which is fine for a small employer payroll, but what about the bigger entities, or worse yet, massive payroll processors. Joe could certainly find himself in a real bind, if those entities fail. No doubt govt would step in… but its rare indeed for things to happen quickly in such domains.

The other ripple is likely to be healthcare… employees may find navigating the complexity of COBRA most disheartening, to say nothing of the real cost. I’ve been down that path before, its not a fun one, but it is an eye opener.

Yet…. what we have is determination to dig ourselves out, we have ideas, creativity, and a will to succeed, with or without the financial sector. It wont be easy for sure, and there will be damages and bruising along they way… yet, we will get through this one way or another.

On the outset, this seems a mighty fine idea… but it doesnt quite go far enough, and is open to a ton of abuse. Not at the student level per se (they are the ones being abused), but at the state and educational institution domain. The problem in a nutshell, is that educational systems often charge a price just below what the market will bear. If there is excess money in the hands of the student and/or their parents, tuition will go up. Whether the increase is due to reducing the states percentage of funding as a whole, or an intentional shift to put more of the tuition burden on the student in order to pork pet projects, it will occur. Thus. Al Franken’s as well as Obama’s smaller plan, are a very good thing, but they are only a short term fix… state govts and other institutions in short order will proceed to eat up that tax credit through tuition increases. Its a windfall deal for many states… they can simple shift funding priorities around, such that they can fund their favorite programs.

Wisconsin is a prime example of this… pretty much as the economy grew, or more student loans became available, more and more of the burden was placed on the student.

* Interesting facts from http://www.wpri.org/Reports/Volume%2020/Vol20no7/Vo20No7p1.html

UW’s share of General Purpose Revenue… decreased 39% between 1975 and 2005
State tuition support per student decreased from 75% in the seventies to 24% in 2005-2006
Corrections share of General Purpose Revenue increased 280.7% between 1975 and 2005

Thus… if Wisconsin really wanted to make tuition affordable, they could, its just a matter of priorities. Simply returning to the tuition support levels like they had in the seventies would result in greater than a 50% reduction in tuition, albeit it would be unpopular with the corrections folks and others with a vested interest in pork. I wonder how many tax payers, students, and parents are truly aware of this. (The priority shift in funding was in the Alumni newsletter some years back… I was appalled)

I fear that expansion of the tuition tax credit in and of itself, will result in state govts having a field day with their pet projects and priorities other than education. That being said… in the short term, I support the ideas 100%, as something does need to be done, and it needs to be done now. Over time though, it just has to be followed up one way or another. US federal taxpayers sure don’t need to  subsidizing the building and operations of prisons in Wisconsin, or any other state under the guise of student tax credtis. Education funds as a result of this tax credit need to go to education alone, and not be porked into other arenas.

* be aware… stats can be misleading, and there are kazillions of permutations and ways to present data. I specifically chose these facts to show an extreme case of absurdity as to what can go wrong… and yes, that is cherry picking, but they are backed up by data in the report.

Laffer Curve annotated with Presidents tax policy.

Granted, the argument the Republicans make, is the economy is still in the upper quadrant of the Laffer curve, where in decreased taxes will foster greater growth, and thus net revenue will increase. The problem with that analysis, is counterintuitive based at past history as concerns national debt as of percent of GNP.

National Debt as a % of GNP over time 1950-2010 projection

http://911review.org/Media/National_Debt.html

Certainly, the Laffer curve, as are most models of economics are drastically oversimplified, to say nothing of trying to model one thing, based upon a couple of parameters, where in a kazillion parameters actually interplay. Thus, even my graph is suspect, as it doesn’t take into account mitigating factors such as disruptive technology, new markets, world events, or other avenues of revenue or lack there of, not the least of which is foreign deferment and other avoidance strategies.

A most interesting discussion by senators as concerns energy speculation. Al Franken brought this to light when he brought up Norm Coleman’s vote against it.

GovTrack: Senate Record: STOP EXCESSIVE ENERGY SPECULATION ACT OF… (110-s20080722-17).

Its pretty clear no one wants to look at the one or more elephants in the room….

1. The idea is to game the speculation markets, such that oil prices will drop…. The differences are on how to do so. and….

2. Oil companies see this as the potential for a huge land grab, which they know is unlikely to be available after this session.

3. Likely all senators agree a coordinated plan with multiple attack paths are needed… but Republicans want to protect the speculator markets from going offshore and apart from the fact their campaign contributors would be severly hurt by such, they also would likely loose any and all future control, and once the genie is out, he is not likely to come back in. Democrats want to protect the environment and the associated economies, and see through the land grab issue, the speculator issue, and likely feel that increased capacity through leases is unlikely to have much of an impact either short or long term as to oil prices, albeit many likely do see the issue of some big businesses making a windfall at the expense of others.

Again, the goal is to up-end the speculator market, such that oil prices will drop, all the while ensuring that not too many investment banks and speculators dont loose their shirt.

Why not be brutally honest and put all the cards on the table, illuminate those elephants… other solutions might just well appear.

If the elephants I presented are true, and even partly true which is a huge guess….

1. Look into a world solution… work with China, Russia, the EU, India, and other countries. It does affect us all… easy in a blog, not so much in practice. Yet, putting speculator limits on US soil, will accomplish nothing, if the speculation market just goes off shore.

2. Put huge fear in the speculation markets, by investing in infrastructure to make oil shale recovery economically and ecologically viable. If that happens, the US reserve is huge… and it will make speculators run for cover. Its also a slow process, and likely many incremental steps will occur along the way, thus allowing only but the highest risk speculators time to jump out with safety. (it is banking on unknown technology, with a multitude of pitfalls though…. it could well end up failing)

3. Follow the Franken plan part 2 as concerns the strategic petroleum reserve. It will create a huge ripple in the markets…. and it may be possible to capture data to offer some predictability as concerns the speculator markets in the future. It may end up accomplishing very littel too… but at least knowledge would be gained to assist in future strategy.

4. Follow the Franken plan part 3 as concern conservation… its simple, and proven effective.

At that time… we can likely get through the elections, and by then be working on a longer term energy strategy which includes multiple attacks on energy which likely will include drilling in some capacity. What must happen, is something short term, or way too many folks are going to be in a world of hurt come winter, and the high costs of home heating.

Responses to Huckabee’s speech in support of McCain, Palin and some of the reasons I became a Democrat.

The fact is, my friends, most Americans don’t want more government. They want less government.

I think he is right on that… although I would add a qualifier, the govt they do have, they want to be effective, and said govt to promote somewhat of a level playing field and decency. Yet, the following has happened.

• Pensions were plundered, creditors were shafted, yet through KERPS and other bonus programs CEO’s recieved windfalls, and the average Joe worker lost his shirt.
• Baggage screeners were federalized, where as the FAA is pushing for greater privatization, resulting in aviation weather services now being run by Lockheed, and more and more air traffic control towers becoming private all the time. WHich is more critical for aviation safety… air traffic control, aviation weather, or bag screeners?
• Passport applications are now being processed by offshore firms.
• A successful self employed college student pays ~15% for FICA and medicare. A F100 CEO, typically under 1%.
• The tax avoidance strategies, where multinational corporations may pay 0%, as contrasted with totally US based successful corps paying 35%.
• Govt corp welfare, where the public takes on the risk, and private investors reap the reward. Bear-Stearns, Freddie Mac and Fannie May bailouts come to mind come to mind. GM may be next.
• Through lack of oversight, melamine spiked wheat gluten ends up in pet food, and many cats and dogs die.
• Mevacor, a prescription statin ends up in nutritional supplements in a higher dosage than what is available via prescriptions.
• Through international investment, more and more key infrastructure has moved, or is moving offshore. Do we really need out ports owned and controlled by Middle East firms?

Let me make something clear tonight: I’m not a Republican because I grew up rich. I’m a Republican because I didn’t want to spend the rest of my life poor, waiting for the government to rescue me.

I’m a Democrat, as I dont want to spend the rest of my life having the govt stack the deck against me, and other fellow Americans who are trying to get a peice of the American Dream. We dont need rescuing, just look at Katrina, that doesnt work. What we dont need, is govt working against us.

John McCain doesn’t want the kind of change that allows the government to reach even deeper into your paycheck and pick your pocket, your doctor, your child’s school, or even the kind of car you drive, or tell you how much you have to inflate your tires.

This doesnt add up… only a few pockets, many of whom do not get a formal paycheck will be subject to greater tax. Ie, multinational corps using tax avoidance strategies, and those making more than $250,000 a year, and even for those folks, one can be sure there will be options to mitigate the effects of such a tax. The vast majority of people and corporations will get to keep more of their money. WIth McCain, much less so… only a few, namely the elite will benefit under McCains proposal.

Republican plans through loose regulation of the insurance industry, allows insurance buearocrats to stand between you and your doctor…. and in some cases, if you move, or change employers, you loose your doctor, unless of course you want to pay cash.

NCLB is a huge reach into schools operations… and promoting lower standard of learning is an unintended side effect. The Fed govt needs to step out of that domain, at least as concerns standardized testing driving funding. There are too many unintended consequences, not the least of which is encouraging teaching to the test, rather than higher levels of learning.

Govt can and should dictate CAFE standards… as obviously the manufacturers are incapable of doing so from a market driven perspective, even going so far as to a few years back requesting employees to write their legislatures to prevent increases in CAFE standard. Now, those manufacturers are in a world or hurt, many employees are loosing their jobs. It may be survival of the fittest… but there is an aspect of the public good and national infrastructure at stake. Do we really want to loose the big 3, as their investors pushed for quaterly returns now, and ignoring the worlds markets, to the exception of long term sustainable business practices.

Market driven tire pressures as evidence by the Ford Firestone disaster are not a good thing… There is very much a need for govt safety standards. To abrogate those would be disastrous. Just look at the case of the bus with retreads on the steering axle disaster from a couple months ago… Govt indeed has a place, but it needs to be funded at adequate levels… We dont need a DOT stating they dont need any more funding, only to have bridges collapse.

And I wish, ladies and gentlemen…I wish we would all remember that being American is not just about the freedom we have; it is about those who gave it to us.

Then how come the VA and veterans get shafted? McCain voted against funding, and programs for veterans numerous times… These folks in some cases paid the ultimate price. We must not be shafting them in their time of need. They fought for freedom, so why did we sell out freedom and the constitution for the benefit of the telephone companies? Yes, Democrats and Obama voted for that…. a sad day indeed. WHy did we exchange freedom for Calea (Joe Biden was behind that). All seem to be willing to sacrifice freedom for some feel good things in the interest of public safety. Even the Democratic party is not immune, but I think its far less intrusive than the Republicans.

From wcco…

The deal required the Republican Party’s host committee to buy insurance covering up to $10 million in damages and unlimited legal costs for law enforcement officials accused of brutality, violating civil rights and other misconduct.

And of course, that can open the door for pretty blatant civil rights violations…

The Sisyphus Journals: Good Morning America, Vietnam Era Returns.

Granted, there are some off the wall ideas held by some of those protesters, but in no way, should that abrogate their rights to free speech, unreasonable search and seizure, holding without cause, to say nothing of speedy trials, which considering many court cases from 04 have yet to be heard.

Apart from that aspect… talk about shooting holes in the future. Law enforcement is likely to ended up having their credibility shot, both by the civil rights violations, but also by not being in the right places at the right time. Average citizens were terrorized, no doubt in part by misjudgements on the part of law enforcement…. (I hate to second guess, as I’m sure the calls were done fast and furious… but they really hosed up on this). From Aaron Landry.

The most unnerving moment was on our way out. A man in a gas mask stood in front of the SUV staring at our driver to her the face, refusing to move. The ugly face of terrorism was standing in front of her vehicle. She froze, with her hands on the wheel and did not honk or try to move. It was a frightening scene. …..Meanwhile, the mob was coming up behind us.

……

Finally the guy moved and ran and we drove away. Our driver, who asked her name and occupation to be off the record told us that she was a mother, works downtown and was simply trying to go home in the eastern suburbs. She said she was appalled, disgusted incredibly shaken and said she felt like she was about to throw up.

A very sad week indeed.