Senators Say the Darndest Things

“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer,” says Sen. Claire McCaskill.

One could level the same charge at Congress; but I digress.


Sen. McCaskill was talking about her new bill. It would cap salaries at companies that take bailout money. In a nice bit of symbolism, Wall Street executives would be allowed to earn no more than President Obama’s salary.

Now, suppose that you’re a talented executive who specializes in rehabilitating poorly performing companies. A turnaround artist. Why would you go someplace that would only pay you $400,000? You’ll work somewhere else. The companies that need top talent the most wouldn’t be able to attract it. To do so would be illegal.

Somehow, I don’t see Sen. McCaskill’s legislation helping ailing companies. Or the jobs they provide.

Stimulus and Taxes, Part Two

When taxes are cut and spending isn’t, future taxes go up. It’s the only way to pay off the resulting debt. That’s why the stimulus plan’s tax cut isn’t really a tax cut.

CBO just came out with a number for this future tax increase: $347 billion. (Hat tip to Katherine Mangu-Ward)

Wait, hold on a minute. I missed something. Actually, that’s just the interest payments on the debt from the stimulus package.

Just the interest payments. $347 billion.

Wow.

That’s going to be a pretty big drag on the economy. Maybe this stimulus isn’t such a good idea.

Geithner Confirmation Silliness

Tim Geithner was confirmed as Treasury Secretary today. He’s been dealing with a scandal lately over unpaid taxes. That’s probably why the Senate’s confirmation vote for him was the narrowest for a Treasury Secretary in over 60 years.

Here’s what’s troubling. I haven’t heard a peep about Geithner’s stances on the issues, or his qualifications for the job. This despite being a bona fide news-hound.

What does Geithner plan to do as Treasury Secretary? Who knows? All we hear is unpaid taxes this, unpaid taxes that. Who cares! Of course he should pay what he owes. It’s a good way to stay out of jail.

But late tax payments have little to do with whether or not Geithner is a good fit for his new job.

That’s the kind of news I’d like to see. How sad that that’s precisely the kind of coverage that would lose the ratings race, and hence we do not see.

Tax Effects of the Stimulus Package

Christina Romer and Jared Bernstein’s January 9 report on “The Job Impact of the American Recovery and Reinvestment Plan” marshals an impressive array of theory and data in support of President Obama’s stimulus package.

Some of their tax analysis seems suspect, though. On page 5 they write, “tax cuts only have effects [on employment] when people go out and spend money.” Sounds reasonable enough. If people don’t spend money, they save it. And people save most of their tax cut windfalls.

But the only way for saved money to have no effect on the economy is to keep it under a mattress. And very few people do that.

Most people save their money in a bank. Or they invest it. The banks spend the money by lending to businesses and homebuyers. They in turn spend the money on their own projects. Companies receiving investment funds spend the money on salaries, capital, and so on. Saved money is still spent, you see. Just by different people.

There is no reason for saved money to create fewer jobs than spent money. Different jobs, certainly. But more or fewer? No compelling theory points in either direction. It depends on what it’s spent on.

The long-run effects of tax cuts are a little trickier. The stimulus package will increase spending. Deficits, too. So really, the tax cut… isn’t. Deficits have to be paid back. That requires higher future taxes. Lower taxes now mean higher taxes later.

Higher government debt also crowds out private investment. Every dollar that investors put in government bonds is a dollar not invested in the private sector. Hard to tell what the net employment effects are. Depends on what the investment opportunities are.

Maybe the stimulus package is a good idea. Maybe it isn’t; I have a strong hunch it isn’t. As regards tax policy, Romer and Bernstein’s report sheds little light.

Change?

Maybe President Obama really does believe that he can change Washington. Let us laud his intentions while smiling at his naivete. He’ll learn.

His first learning experience is happening right now. Obama has pledged that his stimulus package would be pork-free. All $825 billion of it.

But Washington does not work that way. President Obama’s earmark ban is only one more rule for lobbyists to circumvent; rules are made to be broken. This morning the AP reports that lobbyists are quick learners.

Washington’s Iron Triangle works like a balloon. President Obama is pushing down on one end of it. But the amount of air inside stays the same; it simply moves to the other end of the balloon.

Obama’s earmark ban may actually have an unintended negative consequence. Earmarks won’t go through the usual channels, where it’s easy to keep an eye on them. They will be forced underground. Less transparent. More secretive.

In this case, banning pork could mean more pork. A paradox. But it’s how Congress works.

Good luck to you, President Obama, in your fight against earmarks. You’ll need it. Just don’t expect very much to, ahem, change.

Clarity in the Immigration Debate

Immigration is not always the clearest of issues. Just watch the talking heads on the tv. Both sides have the maddening tendency to claim the same argument as their own — “I am for legal immigration, and against illegal immigration.”

Sounds reasonable enough. That’s probably why so many people say it in the first place. But where does that kind of thinking take us?

The quota on H1-B visas for highly skilled workers is currently 65,000 per year. Remember the pro-legal, anti-illegal argument. That requires being for 65,000 visas, and against 65,001 visas. Think about that for a minute. Isn’t that weird? 0.0015% is the difference between saying yes and no.

It gets stranger. Congress constantly changes the definition of “legal immigration.” Restrictions are tightened in one bill. Loosened in the next. Do people then change their mind every time Congress passes new immigration legislation?

This is not a rigorous line of thought. That’s why I don’t think very many people actually think that way, even if they say they do. Most people have some optimum immigration level they’d like to see. This is where the real immigration debate lies.

My preference is on the high side. For a lot of reasons, I favor letting in more immigrants. Morally and economically, in my heart and my head, that is what I believe to be right.

Others would prefer to have fewer immigrants. They have their own reasons, just as sincerely held.

Being for legal immigration and against illegal immigration may sound sane and pragmatic. Really, it is neither. It reduces a debate over the well-being of millions to semantics.

Combatants in the immigration debate should base their opinions on what they feel is just. Not on whatever happens to be legal this year.

Peanuts: EVERYBODY PANIC

Salmonella-contaminated peanut products have caused quite the uproar of late. 6 people have died. 486 have gotten sick at latest count.

Will I get sick? Let’s calculate the odds. U.S. population is currently about 300 million people. Odds of death? 1 in 50,000,000.

Let’s assume 600 people get sick before the outbreak ends. Odds of illness? 1 in 500,000.

Pardon me while I continue to enjoy delicious peanut-based snacks.

Remembering President Bush

Reason‘s Nick Gillespie asks: “Can somebody invent a machine capable of fully measuring the disaster that was the Bush presidency?”

Traffic Cameras On the Outs?

There’s a new sheriff in Pinal County, Arizona. No more speed cameras on his highways: “[new Sheriff] Babeu said speed cameras created dangerous road conditions and offered little financial benefit for the county.”

He’s right. Accidents and fatalities both went up after the cameras were installed. Similar stories have played out in other camera-friendly jurisdictions, including where I live.

Still, don’t get your hopes up too much about the new sheriff. I don’t think he quite gets it. The article ends: “[Babeu] wants to bring red-light cameras to the county.”

High McGwire Act

This could make things a little awkward at baseball great Mark McGwire’s next Thanksgiving dinner – Brother’s book claims McGwire took steroids