Tiny Cat Warriors

Obama's straw man arguments

I'm glad I wasn't the only one to notice Obama's incessant use of cheap straw man arguments in his speeches.  His speech to the joint session of Congress this week was the most disappointing so far in that most of the phrases that caused the joker faced Pelosi to leap out of her seat, smirking, were untrue rhetorical flourishes.  While saying "I reject as false the premise that every kindergarten class should be taught by pedophiles," has a nice ring to it and its red meat to the progressives, no one was making the argument in the first place.

In his inaugural address -- which was generally graceful toward the opposition -- Mr. Obama proclaimed, "We have chosen hope over fear, unity of purpose over conflict and discord." Which Republican ran against him on fear, conflict and discord?

Mr. Obama portrays himself as a nonideological, bipartisan voice of reason. Everyone resorts to straw men occasionally, but Mr. Obama's persistent use of the device is troubling. Continually characterizing those who disagree with you in a fundamentally dishonest way can be the sign of a person who lacks confidence in the merits of his ideas.

This is a serious time, calling for serious discussion, and accusing anyone who doesn't agree with you of utter falsehoods adds nothing to the discussion.

Dow to Obama - you suck too

Well, the market's been open 30 minutes and is already down 165 points.  If one way to look at the Dow is that it's a daily voting process, Obama's losing today.  It could be that his speech last night consisted of an hour of no details, fuzzy concepts and about one straw man argument per minute.

Obama, Geithner, and that plague spot Axelrod have had 4 months to pull something together.  It's time to quit talking and DO something.  Obama - you wanted the job; now you've got it.  If you're not going to do anything, how about resigning?

Even with tax rates at 100%, Obama can't deliver what he's promised

There's an interesting editorial in Investor's Business Daily today by J.T. Young.  He reviews the statistics of who pays taxes and how much in the US and concludes that even if Obama levies a tax of 100% on anyone who earns enough income to taxed currently at the 35% bracket, the tax collected would only provide $11,000 per capita to those whose current tax rate is 0% (i.e., the majority of US adults who pay no federal income tax).  It also leads to the utter collapse of the federal government inasmuch as, presumably, those taxpayers subject to the 100% tax won't be stupid enough to do it two years in a row, leading to zero tax revenue to federal (and state) governments the following year.

This hypothetical exercise in shifting income reveals serious policy implications. To recapture this shifted income's lost revenue, the tax system would have to broaden and flatten substantially, moving higher taxes down the income ladder.

It is a conveniently overlooked fact: The federal budget is very dependent on the "rich." Not only do the rich produce wealth that benefits the overall economy, but that wealth produces revenue in quantities other brackets currently do not. For this reason, the latest IRS data show that the top 10% of income tax filers pay 71% of all federal income taxes.

Social levelers are reminded to be careful of what they wish for. In their zeal to pluck the goose, they must be careful not to kill it. Despite the unapologetic and undisguised class warfare of many liberals, they are the most heavily dependent on the wealthy.

The absence of the wealthy would have a devastating effect on a tax structure liberals would like to see made more progressive, and on progressive social spending they would like to see increased.
The only viable path to reducing income disparity remains the same. To grow the wealth across the income spectrum, not see it vanish — or even shifted — from the top.

There's another conversation that needs to occur on this issue - what is the philosophical implication of a tax system where a majority of taxpayers have no skin in the game?  What does it say about the society that creates such a system?  Is such a system inherently politically unstable?

Is it possible that Milberg could get more sleazy?

There's an editorial on the op/ed page of the Wall Street Journal today that's worth reading, if only because, if true, the implications about the US justice system are truly appalling.

Milberg's former managing partner is currently residing prison, convicted of felonies relating to an ongoing 30 year kickback scheme involving their class-action lawsuit mill.  The firm itself settled a federal indictment as to the same charges.  Now we find out that the firm agreed to pay the founding partner, Melvyn Weiss, a portion of future earnings and also that it would pay his legal fees related to the prosecution.  Even though he's in prison.  Weiss is no longer a lawyer, having forfeited his right to practice law.

This arrangement was approved, in July 2008, by a NY state supreme court judge named Herman Cahn.  The judge approved the payments, even though law firms are prohibited from sharing fees with nonlawyers.  In fact, the claim that Milberg was sharing fees with nonlawyers (via kickbacks) was the core of the government's case against Milberg to begin with.

Now it gets interesting:

"And now for the latest news: In December, Judge Cahn retired from the bench. Last week, the renamed Milberg LLP announced it had hired a "distinguished" new attorney: Herman Cahn. In its press release, the firm listed his most notable cases, though omitting any on which he'd ruled on its behalf.

To recap: A class-action firm's name partners are nailed in a 30-year fraud. Class-action firm rewards lead perpetrator with share of future earnings. State judge sanctions the earnings deal. Class-action firm hires state judge. We'll let our readers decide what they think of this "fact pattern," as a plaintiffs lawyer might put it."

Interesting interview with Nassim Taleb & Benoit Mandelbrot

Great interview here with Nassim Taleb and mathematician Benoit Mandelbrot on the current state of the economy.  The interview is from PBS in October 2008:





Taleb's book, The Black Swan (and its predecessor: Fooled by Randomness) are essential books to read to understand how badly banks, governments and hedge funds have screwed up.

Stock market to Tim Geithner: no, we really meant it - you suck

Market reacts to current administration's total indecision & lack of a plan:

Stocks broke down today, with the Dow Jones Industrial Average falling to levels last seen in 1997 and the Standard & Poor's 500 Index breaking below its Nov. 20 closing low.

The Dow closed down 251 points, or 3.4%, to 7,115, its lowest close since May 8, 1997.

The S&P 500 was off 27 points, or 3.5%, to 743. The S&P 500's close was the more bothersome of the two because it was 9 points below its Nov. 20 close of 752.44, as well as its lowest close since April 14, 1997.

The S&P 500's fall may be interpreted as a sell signal and could drive stocks lower still.

The problem is that both the Dow and S&P plunged through key support levels today on huge volume with the decline accelerating into the last half hour of trading - right now it totally looks like there's no structure to the market.  With no uptick rule in place (what happened to the Obama discussion of reinstating the uptick rule as soon as he took office?), the shorts are pretty much free to conduct bear raids on the banks and Dow components like GE, which has been absolutely hammered in the last couple of weeks.

Obama: for the love of frickin' God, can you reinstate the uptick rule?

Too big to fail?

If Obama and Timmy want to do something they'll be remembered for and of lasting benefit to the US economy, it would be to impose regulations on corporations so that we never hear the words "too big to fail" associated with any publicly traded company or financial institution.  The idea that Sandy Weill and Bob Rubin added and added and cobbled together what is now Citibank is ridiculous.  Similarly with AIG (we're told today that they're expecting to announce another $60 billion plus loss, on top of the $150 billion the feds have already invested). 

Having massive institutions (especially in the financial sector) only serves to induce huge systemic risk on top of what's already there.  Since the brainy people at AIG apparently never bothered to tote up the counterparty risk they were creating for themselves in the CDS market, not to mention never bothering to fully understand the implications, it's an appropriate role for the federal government to ensure that they don't get too big to damage the economy.

Obama and that 14 year old former Rite-Aid stock boy who's our current Treasury secretary should set about, as soon as the current crisis has passed, in dismantling and breaking up every public company whose name has been uttered in the same paragraph as the words "too big to fail".

How we got where we are

Great article here on the subprime credit problem.  Anna J. Schwartz's comments are spot on:

The federal government encouraged the housing boom by stimulating demand for houses. Congress was more than a bit player in this campaign. Beginning in 1992 Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low- and moderate-income borrowers. In 1996, the department of Housing and Urban Development, gave Fannie and Freddie an explicit target: 12 percent of their mortgage financing had to go to borrowers with incomes less than 60 percent of their area's median income. That number was increased to 20 percent in 2000 and 22 percent in 2005. The 2008 goal was to be 28 percent. Between 2000 and 2005, Freddie and Fannie met those goals every year. They funded hundreds of billions of dollars worth of loans, many of them subprime and adjustable-rate loans made to borrowers who bought houses with less than 10 percent down. Fannie and Freddie also purchased hundreds of billions of subprime securities for their own portfolios to make money and help satisfy HUD affordable- housing goals. Fannie and Freddie were important contributors to the demand for subprime securities. Congress designed Fannie and Freddie to serve both their investors and the political class. Demanding that Fannie and Freddie do more to increase home ownership allowed Congress and the White House to subsidize low-income housing outside of the budget, at least in the short run.

Unfortunately, that strategy remains at the heart of the political process, and of proposed solutions to this crisis.

Interesting

Arne Duncan, former head of the Chicago public school system for seven years, is the new Secretary of Education.  If you check around on Google, you'll see that pretty much everyone in the Senate wet themselves praising Duncan.  The reality is that while there was a marginal improvement in graduation rates in Chicago high schools while Duncan was head (from 47% to 55%), at the end of his tenure, barely more than half the kids ended up graduating from high school.  Half.  And Obama and Duncan both voted with their feet with respect to Chicago public schools - neither could seem to find a Chicago public school good enough to send their own children to.  Instead of hope and change what we've got is more snobbish elitism.  Great.

Rahm Emanuel

Speaking of Chris Dodd, the interplay between Dodd and the administration on the issue of Wall Street salary caps has been fascinating.  Dodd was,supposedly, the author of the incredibly badly drafted and stupid salary cap rules inserted into the stimulus bill at the last minute.  At the time, unnamed officials in the adminstration were quoted as saying the adminstration thought the Dodd rules were unworkable and counterproductive, but that the president would sign the bill as is since it was "while imperfect, the best bill that they were going to get".  David Axelrod commented that Geithner, among others, had complained to the president about the provision. 

Now it turns out that Rahm Emanuel either strongly enouraged or instructed Dodd to insert the provision.  The upshot is that the administration is providing itself cover on one hand while aggressively promoting government interference in private companies at every opportunity via backroom deals.