Quote of the Day: John Robb

Global transition points like this are so rare, it’s a great time to be alive.

John Robb

Right on. Yes. Yes.

More of this type of thinking, please.

If I could live at any time in history it would be now.

(If you are not a regular reader of Mr. Robb’s Global Guerrillas, get that way.)

(Also check out Mr. Robb’s way cool new Wiki MiiU, which is all about resilience. I eagerly await his book on resilient communities.)

(Here is an xcellent John Robb talk about open source ventures, but full disclosure, a lot of it sailed over my head.)

(And if you have not read his book, Brave New War: The Next Stage of Terrorism and the End of Globalization, go get it.)

Friends, please let me know in the comments, on a scale of 1 to 5, strongly disagree to strongly agree, how you respond to this quote. Put me down as a 5, obviously enough.

Cokie Roberts Blurts Out the Truth

I watch the Sunday talk shows, usually flipping back and forth between them. I was struck today by a comment made by Cokie Roberts on ABC’s This Week. In the discussion of the downgrade of US Treasury bonds, she was arguing with a tea party affiliated Congressman from Utah named Chaffetz and she made the following statement: (The comment begins at 8:55)

The reason why they (S&P) like France and England is because they have parliamentary government,   because the majority gets what it wants. There is no divided government where both parties have to agree.

I thought that an astonishing but revealing statement. First, Britain and France have not been exemplars of fiscal probity the past 50 years, with the exception of Margaret Thatcher’s era. She even mentioned that England now has an austerity program. Also, she didn’t mention that Obama had undivided government for two years and spending increased 24%. In fact, there has been no national budget for two years, probably because the Democrats did not want to expose their plans prior to the 2010 election.

Her second comment was also revealing:

The problem is with the US Constitution.

There, in a nutshell, is the Democrats’ complaint. The Constitution restricts the ability of one political party to spend at will without regard of the consequences. God knows we have had excessive spending since 1965 in this country under both parties and with the Constitution intact. But, for Democrats, that has not been enough. I don’t think I have seen a more revealing comment.

An Explanation for Obama’s actions

The debt ceiling debate has dragged on creating frustration and some anxiety about the economic consequences of default. President Obama has even threatened to withhold Social Security checks, claiming there would be no money for payment. Through most of this he has seemed to me to be unserious about the matter and using it chiefly to try to improve his chances for re-election. Fred Barnes has now come up with what I consider a good explanation for his behavior, including the last moment maneuvers yesterday.

First, the trade treaties:

The path to ratification by Congress was greased after President Obama renegotiated trade treaties with South Korea, Colombia, and Panama. Obama would supply Democratic votes. Republicans were already on board, President Bush having put together the treaties in the first place. It had the look of a done deal.

It wasn’t. In May, the White House suddenly insisted the treaties be accompanied by roughly $1 billion in Trade Adjustment Assistance, or TAA as it’s known in Washington. Organized labor was demanding TAA funds be set aside for workers whose jobs might be lost as a result of the treaties. Obama took up the cause.

Then there was the oil pipeline from Canada:

The Keystone XL pipeline from the oil sands in Canada to refineries on the Gulf Coast is another win-win issue for Obama, if only he’d embrace it. Canada is America’s leading foreign supplier of oil. The more Canada exports to the United States, the less we’re forced to rely on unfriendly folks in the Middle East and on Latin American countries (Mexico, Venezuela) whose oil production is declining. With the new pipeline, Canada would increase its exports by as much as 700,000 barrels a day. (The United States consumes 10-11 million barrels daily.)

A permit to build the pipeline was requested nearly three years ago by TransCanada. Because it would cross an international border, approval must be granted by the State Department. This was expected to be a snap, particularly after gasoline prices reached $4 a gallon. White House aides thought so, and Secretary of State Hillary Clinton indicated she was ready to approve it.

Then the environmental lobby, led by the Natural Resources Defense Council, began a campaign against approval, and the Environmental Protection Agency joined in. It criticized the State Department’s first environmental impact statement, which found the pipeline would have little effect on the environment. Clinton buckled, and a second impact statement was ordered. Last month, EPA said the new study was “inadequate.”

Both of these initiatives promised thousands of new jobs and would seem to be helpful to Obama in his quest for a second term. In both cases, a left wing member of his base intervened and his support collapsed.

Now, the debt ceiling:

The Speaker and the President had nearly agreed on a plan that included $800 billion in “revenue enhancements” but did not raise rates. What happened ?

House Speaker John Boehner’s (R., Ohio) office is pushing back against White House claims that the new revenue in the “framework” being discussed in the now defunct negotiations would have been generated by letting current tax rates expire. “That is simply false,” writes Boehner spokesman Michael Steel.

In reality, Steel writes, the White House offered a “ceiling” of $800 billion in new revenue over 10 years that would be achieved through comprehensive tax reform (e.g., eliminating loopholes, credits and deductions) in a way that would stimulate economic growth. This would not constitute a tax increase.

Following the release of the Gang of Six proposal, however, the White House then insisted on an additional $400 billion in actual tax increases, for a total of $1.2 trillion in revenue that would become the new “floor” for revenues. Additionally, the administration backed away from several aspects of the tax reform package they had already agreed to, including a protection against tax hikes on small businesses and a guarantee that they would only be three tiers of tax rates, the highest of which would be below 35 percent.

In regard to Social Security, the two sides had agreed on a change in the way the government calculates inflation (the so-called “chain CPI”) that would extend the program’s solvency. However, the White House reneged on a previously agreed-upon solvency target and offered a weaker target that would yield 25 percent less in savings.

What had happened was that the “Gang of Six” report was released and the revenue (tax) increases there looked better to Obama so he reneged on the pending deal with Boehner. There was also considerable discussion that Democrats were furious with him because he had not insisted on tax increases. Revenue from loophole closing was not enough.

No. I think what happened is Congressional Democrats got a whiff of a possible deal where you get entitlement cuts and tax reform, say, next year — which might increase revenue or might not — and they panicked because a) they have a religious belief in raising the taxes. If you don’t have that, you can’t have a deal, so it created a kind of a theological panic.

Obama, it seems, cannot stand up to the rest of his party. He will negotiate but once some interest group objects, he is gone. No deal.

It’s a good thing the Soviet Union is gone.

Booze and Minnesota

A few times Dan and I have joked that Wisconsin has the highest per-capita drinking in the USA. I’m sure that Minnesota isn’t far behind, with winters just as brutal as those in Wisconsin and not too much sunlight during those dark days and nights.

It is summer now in Minnesota and the state is shut down. As it turns out, apparently that isn’t a big deal. They don’t let all the prisoners out of jail, they just shut down the inessential services such as the annoying bureaucracy that requires you to get innumerable permits and papers to conduct your daily business. These not-so-essential state workers total 22,000 in Minnesota; probably a great batch of employees to cut next.

The new Democratic governor in Minnesota, Mark Dayton (wealthy heir who turned into a stone-redistributionist Dem) actually ran on a platform of taxing the top 1%, which is literally the stupidest thing in the world from a state tax perspective, since THOSE ARE THE PEOPLE THAT CREATE ALL THE JOBS IN MINNESOTA. As it is, you’d have to be nearly out of your mind to live in the darkness, snow and miserable mosquitoes (in summer) of Minnesota in the first place; but to put dis-incentives for the rich to live there is even more insane (note – I worked in Minnesota for many years and long winters and met some of the nicest, smartest people in that hard working state. But they are still insane for living in that weather).

As in Illinois, with our governor Quinn, the Democrat eked out a win (with 43% of the vote in the case of Minnesota) and then took this as a “mandate” to implement all of their programs as if they were Roosevelt trying to get the country out of the great depression (although that didn’t work so well, either). In the case of Quinn he raised Illinois taxes 67%, abolished the death penalty, appointed his cronies to state positions, and didn’t cut any spending. Awesome. In the case of Dayton, his plan was to raise taxes on the richest to 13.95%, on top of the Federal rates. Unclear in his plan is WHY anyone wealthy would intentionally stay in Minnesota to have all of their income taxed away while many other states with better climates (Florida, Texas) don’t have any state income tax AT ALL.

I think Dayton was crazy enough to hold out forever, as a populist. Unfortunately for him, the state was running out of booze. Apparently bars need to fill out a permit for $20 or so in order to buy booze and as they expired the bars would have to shut. Miller was going to have to shut down their operations for a clerical snafu (they overpaid so the state sent their permit back) and not distribute booze at all.

I really do think that the impending stopping of alcohol in the state of Minnesota helped precipitate a resolution to this budget standoff, where the governor gave in on his plan to drive all job-creators from the state.

Hats off to the Minnesota legislature for standing firm. Unlike Illinois, where not only do the dems run our legislature but our red representatives aren’t creative enough to flee the state at the prospect of a giant tax increase, like they did in Wisconsin to attempt to block Walker’s reforms.

Cross posted at LITGM

Obama, Tax Policy, and Manufacturing

Fact #1: Obama has been giving many speeches about how much he values American manufacturing and also introducing various initiatives which he claims will be help manufacturing businesses

Face #2: In his recent budget proposal, Obama proposed the elimination of LIFO inventory accounting for tax purposes. This would generate additional business income tax revenues for the government of an estimated $72B by 2016.

In what universe do the above two things go together?

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