Tag: obama

Consumer Financial Product Commission Distracts from Real Reform

Today the Obama Administration released a 152-page draft bill to create a new Consumer Financial Product Commission. While intended to protect against consumer confusion and reduce the likelihood of future financial crises, the proposed agency will at best have little impact and at worst contribute to the next financial crisis, with the added effect of decreased homeownership and increased litigation.

The president promises that “those ridiculous contracts with pages of fine print that no one can figure out – those things will be a thing of the past,” The president ignores that those “ridiculous contracts” and “fine print” are the result of previous rounds of so-called consumer protections. The disclosures one receives with a mortgage or a credit card are those mandated by some level of government. They don’t call those credit card disclosures a “Schumer Box” because they were invented by a baron of industry. In addition to the government-mandated disclosures that have failed, are the endless amount of fine print added to protect companies from frivolous litigation. The Obama approach to that problem is to increase the amount of litigation.

If the president were serious about avoiding the next housing bubble and financial crisis, he would propose eliminating some of the various federal policies that contributed to the housing bubble. For instance, how about requiring real down payments when the taxpayer is on the hook – as with Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). Talk about bad incentives; under FHA, a borrower can put almost nothing down and if the loan goes bad, the government covers the lender for 100 percent of their losses.  No wonder we had a housing bubble. In addition, the proposed agency does nothing to address the underlying causes of any type of credit default: unemployment, unexpected health care costs or divorce.

Once again, when given the opportunity to address the real flaws in our financial system, the administration chooses to appease the special interests and provide a distraction from the underlying causes of our current financial crisis.

Attention GM Shareholders (That Means You!)

As my colleague Doug Bandow pointed out this morning, today’s Washington Post has an analysis about the uncertain prospects of GM ever making taxpayers whole again. It is a very similar analysis to the one I gave in this L.A. Times Dust-Up installment four weeks ago, although I find prospects unlikely, rather than just uncertain.

If GM emerges from bankruptcy next month in accordance with the pre-packaged Obama plan (as expected), taxpayers will be on the hook for $50 billion. That $50 billion will buy taxpayers a 60 percent stake in the company, which according to the laws of mathematics means that GM has to be worth $83.33 billion for the taxpayers to get their equity back without making a dime in capital gains or interest.  In the L.A. Times, I asked:

How and when will that ever happen? At its peak in 2000, GM’s value (based on its market capitalization) stood at $60 billion. Thus, the minimum benchmark for “success” will require a 38% increase in GM’s value from where it was in the heady days of 2000, when Americans were purchasing 16 million vehicles per year. U.S. demand projections for the next few years come in at around 10 million vehicles. Taxpayer ownership of GM is something we should all get used to, and the “investment” is only going to grow larger. Think Amtrak.

Obama’s Back-Door Tax Hike on American Workers

A column in the Washington Post makes an excellent general observation about how taxes on business are actually paid by people. The piece also cites a couple of examples, including an explanation of why the Administration’s big tax hike on American multinational firms will backfire - which is the same argument I made in this video. The moral of the story, of course, is that a bigger burden of government is good for politicians, but bad for regular people.

Geoff Colvin explains:

The average citizen had to conclude that most big U.S. companies are tax cheats. Only a dedicated student of accounting would figure out that the term “tax haven” as defined by the Treasury Department means any country with a lower corporate tax rate than America’s, which is all countries except Japan.

The reality is that the administration is lashing out against perfectly legal behavior. A U.S. company that makes money in Country X pays Country X’s taxes on that money. If the company ever brings the money back to the United States, it must also pay the tax that would be due under America’s higher rate. The administration argues that because the United States has almost the world’s highest corporate tax rate (and even Japan’s is only a fraction of a point higher), current rules create incentives for U.S. companies to operate anywhere but here, at the cost of U.S. jobs. The White House therefore proposes charging all American companies full freight – the whole difference between their overseas taxes and the U.S. corporate rate – on all their profits as soon as they’re earned, no matter where. This measure, in their minds, would bring jobs home.

If the logic eludes you, you’re not alone. The bottom-line effect of the change would be a steep tax hike – more money vacuumed out of corporate coffers. Would that make U.S. companies competing in a global economy more inclined to hire additional workers in the highly expensive United States? The answer is clear. It’s why Microsoft chief executive Steve Ballmer said recently that if the change is enacted, “we’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

…Tax-wise, a company is just a bunch of incorporation papers; all taxes are paid by people – customers, shareholders and employees. And guess who would bear most of the burden of these tax increases? It’s the U.S. employees of the companies being taxed.

Research has shown that when business taxes are raised by a dollar, 70 to 92 cents comes out of employees’ pay. When workers wake up to that fact, they may decide this is one time they don’t want the White House beating up on business.

The Ricci Ruling: A Victory for Merit over Racial Politics

Ricci is a victory for merit over racial politics—which is appropriate given that the ruling overturns a lower court panel that included Sonia Sotomayor.

In the blockbuster decision we’d been awaiting all term, the Court reached the correct result: The government can’t make employment decisions based on race. While the city’s desire to get more blacks into leadership positions at the fire department is commendable, it cannot pursue this goal by denying promotions simply because those who earned them happen to have an inconvenient skin color.

This ruling is the latest in a series of steps the Court has taken to strike down race-conscious actions that violate individual rights—and thus is a blow both to the Obama administration (which sided with the city in Ricci) and to the nomination of Judge Sotomayor. Those who bring cases before the courts deserve much more than empathy or even “sympathy”—the word Justice Ginsburg uses in her dissent—they deserve equal treatment under the law.

Question Regarding Obama’s Signals Toward Latin America

How come President Obama can find time to call and congratulate Ecuadorian President Rafael Correa on his reelection (someone who has said that he prefers “a thousand times” to be a friend of Fidel Castro and Hugo Chávez than to be an ally of the United States) but can’t find time to meet with, or at least issue a statement supporting, Cuban dissidents at the White House as his predecessors did?

I Have to Admit, I Was Wrong

I’ve just discovered that my calculation of DC education spending per pupil was wrong, and I have to publish a correction.

I wrote back in March that total DC k-12 spending, excluding charter schools, was $1,291,815,886 during the 2008-09 school year. That still appears to be correct. But to get the per-pupil number I divided total spending by the then-official enrollment count: 48,646. It now turns out that that number was rubbish. PRI’s Vicki Murray just pointed me to this recent DCPS press release that identifies a new audited enrollment number for the same school year:  44,681 students.

If that number excludes the 2,400 special education students that the District has placed in private schools, then DC’s correct total per pupil spending is $27,400.

If the new audited enrollment number does include the students placed in private schools, then DC’s correct total per pupil spending is $28,900.

Hmm. Let me think. What was that average tuition figure at the private schools serving DC voucher students….? Oh yes:  $6,600, according to the federal Department of Education.

In case you don’t know, that’s the program in which, after three years, voucher-receiving kids are reading two grade levels ahead of their public school peers — also according to the Dep’t. of Education (see the linked study, above).

It is also the program that President Obama has doomed to die, because of the, uh…, because, um…, why did he do that again?!?!