Monthly Archives: December 2011

A Couple of Odds and Ends

Posted on by
Reply

Today President Obama showed up (finally) for the tax holiday debate, and he demanded that Republicans stop being obstructionist and accede to his payroll tax holiday extension—to be paid for, of course, by raising taxes elsewhere.  But Obama proceeds in his argument in his usual way, with a presentation of a false dichotomy: agree to the tax cut, in this case, and the countervailing tax increase; or you’re in favor of the rich at the expense of the working stiff.  Of course there is bipartisanship on this question—both parties refuse to consider an income tax cut of the same size, instead.  In addition to which, there is another alternative: pay for the tax cut—wherever it might appear—with spending cuts somewhere else.  After all, the government already has enough money, and it’s already spending far too much.  But that’s Progressive bipartisanship: gimme those tax raises.  Period.  Tax increases are non-negotiable.  And it is, of course, a matter of rich vs. working stiff.  They couldn’t possibly both be Americans.

And there’s this concerning the Middle East and the our disengagement from it.  In Turkey on one of his whistle stops on his tour of the Middle East, Vice President Biden insisted that sanctions have “isolated” Iran and reduced its influence, even though with Chinese and Russian obstruction and German and Japanese continued business ties to the regime, the sanctions don’t have much bite.  The sanctions have, though, “at a minimum, apparently, caused significant discussion internally.”  He’s apparently quite sure about that.  We’re showing those Iranians.  We’ve given them something for their small talk.  For sure.

Finally,  there’s this on diversity in our institutions of higher learning.  The Obama administration has thrown out an Evil Bush interpretation of a Supreme Court ruling concerning affirmative action during admission processes.  Whereas the Bush requirement recognized that quotas are not allowed, the Obama version, in its own GUIDANCE ON THE VOLUNTARY USE OF RACE TO ACHIEVE DIVERSITY AND AVOID RACIAL ISOLATION IN ELEMENTARY AND SECONDARY SCHOOLS, weasel-words quotas back into play.  And never mind merit—that comes second.  This illustrates the change:

Bush guidelines: “Before using race, there must be a serious good faith consideration of workable race-neutral alternatives.”

Obama guidelines: “Institutions are not required to implement race-neutral approaches if, in their judgment, the approaches would be unworkable.”

On the other hand, bipartisanship, stern sanctions, and merit from Progressives—maybe these aren’t so disparate….

Will HARP 2.0 Accomplish Anything?

Posted on by
Reply

The administration has come out with an updated Home Affordable Refinance Program, what The Wall Street Journal‘s  Smart Money calls HARP 2.0.  With this improvement, underwater homeowners can refinance their mortgages at a lower rate if they have Freddie Mac- or Fannie Mae-backed mortgages, they’re current on their existing mortgages, and they’ve not missed a mortgage payment in the last six months and not more than one payment in the last twelve.

There are a number of items to consider, though.  Why would anyone want to take the lender’s side of such a (refinanced) loan?  The collateral offered has less value than the collateral that was offered for the original loan: it’s the same house, now devalued, often very significantly.  This means that a lender that retains the loan in its portfolio is giving up one income stream for a smaller income stream on a lower-valued home. This decrement often can be worth it, given the reduced loan to collateral value ratio associated with an increase in home value, but in this market…?  Additionally, the lender that sells the loan to a packager or another loan servicer is going to get a smaller sales price for the refinanced loan, since both the collateral and the income stream are smaller.

On the other side of such loans, the borrowers still will be underwater.  To be sure, this isn’t a problem for lenders whose borrowers in good standing or for borrowers who aren’t trying to sell, but is a problem for borrowers looking to relocate—to a different job in a different city, or to a job at all in a different city.  But these borrowers aren’t trying to refinance.

There are mechanical problems with HARP 2.0, also.  Even though the Luddites who underwrite loans manually can begin using the program now, the government’s IT whiz kids won’t have the software in place to support the new rules until early February for Freddie Mac-backed mortgages or March for Fannie Mae-backed mortgages.  This shouldn’t be surprising, though: this performance is of a kind with the government’s IT performance with the IRS’ “upgrade” of their computer systems and of OPM’s government jobs Web site.  Still, I remain amazed that, given as long as the government has known about this HARP variation, the software requirements weren’t able to be satisfied already, much less won’t be for another three+ months.

But beyond the bureaucrats’ lack of thought about how much this this program actually is going to accomplish, the lack of consideration for consequences or for history is…apparent.  Consider what the government holds out as selling points for this update:

  • borrowers who apply to the same lender to whom they make their monthly payments won’t have their credit scores checked, and
  • borrowers won’t be required to provide documentation proving their income.

This just repeats the mistakes that contributed to the housing bubble and burst in the first place:

Hmm….

Herman Cain and the Debate

Posted on by
Reply

Herman Cain has withdrawn from the Republican campaign, sidelined by allegations of sexual misbehavior.  Some find it hard to believe that there was nothing to those allegations, even though no substantiation ever has been offered.

Cain himself, and fellow Republicans, thought the allegations too much a distraction, and so he believed himself unable to discuss the real issues at hand.  Apparently none of these worthies have ever heard of gorilla dust.

But this surrender comes against the backdrop of other Republican candidates who’ve been called out for similar misbehaviors—that actually have occurred—and who have successfully answered those manufacturing the distractions, thereby canceling attempts to move the discussion away from the issues facing us.

No, the real problem with Cain’s retreat is that this is another instantiation of the Republicans’ inability to control the debate, their inability to keep the discussion on topic.  They routinely allow the other party to decide the terms of reference, whether it be gutting Social Security with payroll tax cuts rather than giving Americans real, income tax cuts; or ad hominem attacks to which the Republican targets respond, and respond, and respond; or class warfare, to which the Republican response is to…claim class warfare, but not to push a coherent tax reform plan of their own; or a tax and spend plan masqueraded as a jobs bill, to which the Republicans respond by saying, “No,” without offering a coherent jobs plan of their own.  The list goes on.

They don’t even talk about the budget the House passed at the start of the current session that reduces the deficit and addresses the national debt, and that sits ignored in the Democratic Party-controlled Senate.  They don’t even talk about the 15+ jobs bills the House has passed that sit languishing in that same Senate.  Because the Progressives don’t want to talk about these things, the Republicans won’t; they can only respond to Progressive initiatives.

And yet manufacturing “distractions” is exactly what the Progressives intend to do to their eventual Presidential campaign opponent in 2012.  And to all of their Congressional opponents.  Because they have no hope of arguing the issues themselves, and because they know they can get away with it.

Removing the Progressives from office in 2012 is very uncertain, regardless of any early poll suggestions.

Candidate Gingrich

Posted on by
Reply

I wrote off Newt Gingrich early on in the present Republican primary campaign.  As he’s done with so many professional pundits, he’s showing me up (how must they feel to be in my company…).

He’s made a lot of mistakes, and he carries a lot of baggage.  It’s suggested that his flip-flopping skills rival the best of others.

But he also has an aspect that few politicians have: an openness about his positions, a willingness to acknowledge his mistakes rather than to weasel-word those positions.  A willingness to address directly the premise that his positions have evolved.

A few examples will illustrate.  He did a spot with Congresswoman Nancy Pelosi supporting government responses to global warming; now he freely—and repeatedly, since television talking heads can’t get enough of it—admits to the error: “that is probably the dumbest single thing I’ve done in recent years. It is inexplicable.”  He endorsed a liberal Republican congressional candidate, Dede Scozzafava, who wound up supporting taxpayer funding of elective abortions.  He’s since acknowledged his foolishness in this endorsement.

On the beef about his flip-flopping, the argument assumes that men cannot change, that once they’ve taken a position, it’s been carved in adamantine, never to be reconsidered.  This is little more than hubris on the part of those who would exclaim this about a man.  Gingrich, for instance, once supported an individual mandate for health care programs.  What he said, later, to explain that “support,” was this: “I agree that all of us have a responsibility to help pay for health care.  I’ve said consistently, where there’s some requirement you either have health insurance or you post a bond or in some way you indicate you’re going to be held accountable.”  One can argue that this evolution of a position is a flip, but there’s clearly been no change back to the original—no flop to reverse the flip.  And the argument ignores the fact that Gingrich’s “responsibility” is a far cry from the version of individual mandate that is the heart and soul of Obamacare: buy the government-approved program or pay a fine.  Every year, pay the fine or buy the government-approved program.  There is no option to otherwise demonstrate that an individual has his health care costs covered in some way satisfactory to him and costlessly to his neighbors.

Then there’s his consulting work with a GSE, for which he was paid a ton of money.  The beef here is as much about the amount he was paid as it was for the advice he actually provided.  Some of us think, though, that we should be paid for our labors at the rate we can get an employer, or a client to pay us.  It’s only a Progressive meme that it’s somehow wrong to aspire to be a part of the 1%.

As to the work itself, part of that included his touting of Freddie Mac as an exceptionally viable business model.  Frankly, I agree with him.  Any time I can start up and run a business where I can con someone else into picking up a significant fraction of my costs, I’ll go for it.  Freddie Mac succeeded in that, and Gingrich acknowledged it.

There’s also the beef that “He used the influence he had earned while he was in the political field….”  I’m not convinced that’s, of necessity, wrong.  Certainly such influence can be used abusively.  Certainly there are advantages to being a true outsider, and so devoid of such influence in one’s tool kit.  But influence strongly affects how things work, too, at all levels of government, and in the board room and the cubicle farms.  Having political influence and the skills to use it isn’t all bad.

To be sure, the heaviest baggage he carries is the way he’s comported himself in his private life: working on his third marriage while having cheated on his previous two wives.  However, as Bob Vander Plaats, President and CEO of The Family Leader, puts it, “He did not have a road to Des Moines conversion. He’s had five, six, seven years where he’s been repentant, he’s been humble, he’s been transparent….”  Certainly, once integrity has been broken, we can never be sure again.  All we can do is observe the man’s behavior since, and if that behavior warrants, make a leap of faith in trust.  This is as true with Newt Gingrich as it is with any man.

In short, Gingrich has shown himself to be an imperfect man who makes mistakes.  It might seem that he’s made a lot of them—too many, in fact—but we have to consider other factors, as well: whether he’s really made all that many more mistakes than his rivals or than politicians generally; or whether his mistakes are more visible, both because of his personal baggage and because his rivals, and politicians generally, work hard to conceal their mistakes, or explain them away with current rationale so they don’t seem like mistakes anymore.

On the other hand, Gingrich has strong attractions.  He’s not averse to pushing back against journalists who ask foolish questions, and calling them out over their foolishness.  (That’s a particularly favorable characteristic to me.)  We may disagree with him on the legitimacy of a particular question, but it’s hard to miss the fact that he’s willing to try to keep a conversation on track.  He’s also alone among the present Republican candidates who actively refuses to criticize his rivals during the debates, preferring (correctly) to argue why he’s the best candidate to beat the incumbent, rather than why the other candidates are dolts.

But more substantively, he’s not afraid to take a position because he believes it, even if it’s politically risky.   He has, for instance, proposed immigration reform that would allow illegal aliens who’ve been here for 25 years and are otherwise upstanding members of their community to stay—just not as citizens or with a right to vote.  This has drawn “illegal immigrant magnet” criticism from many conservatives.

He’s actively pushed for oil drilling off the South Carolina shore, saying this will produce 8,800 jobs and $1.3 billion for the South Carolina economy.  This has drawn the ire of environmentalists and NIMBYers alike,

He’s proposed, however clumsily in the minds of the politically correct, paying local students to take care of their school.  The kids would actually do work, they would have cash that they’ve earned, they would develop a measure of pride in their school, they’d “begin the process of rising.” (One might pay the students out of the funds saved by reducing the janitorial staff.  One might let the VoTech shops (remember those?) do some of the plumbing and carpentry maintenance.) This is a technique that works very well in Japan; although those students aren’t paid for the work—it’s viewed as part of their duty.

He’s proposed a far more active and direct strategy for dealing with Iran than anything put forward by President Obama.

He’s proposed privatizing much of Social Security, but maintaining a Federally funded floor under retirement payouts.  He’s proposed a dual track of maintaining the current Social Security system for those who don’t want the privatization.  He anticipates the current system will wither and disappear as more and more opt into the private system.

All of these ideas pose political risks, if only by their existence as targets for rivals.  But his ideas are worth articulating openly so they can be discussed openly, as few other candidates are willing to do during their campaigns.  As Gingrich said about Herman Cain and his 9-9-9 plan, at least he’s gotten serious conversation going on the matters.

Newt Gingrich is a flawed man, but who among his rivals, who among the Progressives, who among any of us, is not?  Gingrich also is a man who’s entirely willing to say what must be said, regardless of the risks to him.  That counts for something, too.

Government Controls: A European Example

Posted on by
Reply

I’ve been posting about the European debacle for some time; here’s another.  I stay on this subject because there are lessons here for us, lessons that are especially urgent given that our political class sees Europe as a valuable model for governance.

Here are the current moves, just completed or in progress.  Six central banks have gotten together to make acquisition of dollars for Europe, paid for with euros, a whole lot easier.  This move just buys some time, maybe, but it doesn’t address the underlying problem of too much government spending and too much unserviceable sovereign debt.  And it ignores the risks to us should sovereign default in the euro zone become widespread.

The move in progress is an attempt to more tightly integrate the euro zone nations’ budgets—to put them more under the control of the EU central “government” in Brussels, and less under the control of the sovereign nations responsible for them.  Indeed, as proposed by French President Nicolas Sarkozy, this is a three-part move: morphing the Treaty of Maastricht (which created the EU and the euro) into a new treaty incorporating greatly increased budget discipline imposed from Brussels; creating a European Monetary Fund, nominally to support “countries in difficulty;” and euro zone moves made by majority vote rather than requiring unanimity.

The arguments made for tighter integration, singling out Sarkozy (he’s by no means the only one making these arguments; he’s just the loudest and most articulate) include the following.  “All economies became totally under the mechanism of finance, the speculative logic. We’ve seen how it’s affected industry. Also how it’s degraded the value of work.”  And “There can be no common currency without economic convergence without which the euro will be too strong for some, too weak for others, and the euro zone will break up.”

Taking the three steps to tighter integration in turn, here are some problems.  The various sovereign governments [sic] have, with their central planning to their varying degrees, already been over-managing their national economies, and the result is too much spending and too much borrowing, and so we have the present economic strait.  It’s illogical to expect that even more centralized control will improve on the track record—correcting the failure of central control by increasing the degree of central control makes no sense.

Second, a European Monetary Fund “support” facility will only be used to bail out those nations that find themselves in economic trouble.  Nations will have no incentive to apply discipline, or to do more than pay lip service to budgetary diktats from Brussels.  Knowing—or merely believing—that a bailout will be in the offing completely undoes any hope of greater national responsibility.  Feeding this is the fact that now the nations involved can blame their troubles on Brussels’ requirements and so demand that Brussels fix them.  Through the EMF.

Third, the majority vote capacity just means that the profligate many can demand that the responsible—and so sound—few make up the shortfalls of the many’s failures.  This means that Germany will reduced to the euro zone’s piggy bank.  Some argue, though, that this is only just.  It’s what reparations are for.

But at bottom, the argument for tighter integration—no matter the mechanism—ignores some fundamental problems that must be solved before the euro zone’s sovereign debt problems (note that: the problems are those of the individual sovereign nations, not of the euro zone as a whole) can be solved.  For instance, to take a narrow case for illustration, “the mechanism of finance” is not what has cheapened labor.  Things like 35-hour work weeks; labor laws that functionally guarantee a job for life, regardless of the performance of the employee; and retirement in middle age have done that.

But more importantly, tighter integration is doomed to fail when the polities involved don’t agree on the relationship between citizen and government, the role of government, or the purpose of money.  It is this too-great heterogeneity of social philosophy that drives the single euro to be too strong for some and too weak for others.

The parallels with our own situation are apparent.  We have an increasingly intrusive central government that seeks to increase its control over our own economy in order to correct the failures of its prior controls.  We have an increasingly profligate central government that spends too much by ever-increasing margins, and so that borrows ever increasing amounts.  We have a central government that insists on bailing out every one and every thing, thereby attempting to ban failure from our own market place.  And the Fed has been turned into the national piggy bank.

The answer for us, as it is for the EU, is less central control and greatly shrunk governments and reduced government roles.  And greater respect for the intelligence and the wisdom of the sovereign citizens, and so greater trust in us to take care of ourselves and of our neighbors without government diktats, without government taking our property to redistribute to others, without government “protecting” us from ourselves and the consequences of our actions—which “protection” also protects us from the consequences of our successes.