Wednesday, January 7, 2009
Billions for boloney
California's governator wants $44 billion from Obama's $775 billion stimulus package. And the City of Los Angeles wants its share, according to its mayor. It's a feeding frenzy. Guess who the sharks are.
CBO projects $1.2 trillion deficit for 2009
The Congressional Budget Office is projecting a $1.2 trillion budget deficit for the fiscal year that ends in September. The projection does not take into account any stimulus measures that President-elect Obama and Congressional Democrats may propose. Which raises the question: Isn't $1.2 billion enough of a stimulus? Add to that the measures that the Federal Reserve has taken which have increased its balance sheet from $900 billion to more than $2 trillion. Surely enough has been done. Isn't it time to remain calm and let the stimulus work?
California's tax refund IOUs
The LAT reports this morning that it's getting more likely that Californians who overpaid their income tax for 2008 will get IOUs instead of monetary refunds. How much will the IOUs of a bankrupt state be worth? Not much. Will the state ever have enough cash to pay off the IOUs? Not so long as the legislature refuses to cut back expenditures sufficient to balance the budget.
Democrats in the legislature think Republicans in the legislature and the governator will be blamed for the IOUs. Therefore, they'll continue to do what they always do: try to raise taxes. They think it's a winning strategy. For them, not for California.
Democrats in the legislature think Republicans in the legislature and the governator will be blamed for the IOUs. Therefore, they'll continue to do what they always do: try to raise taxes. They think it's a winning strategy. For them, not for California.
Sunday, January 4, 2009
Regulation of financial markets
Lot's of intelligent people argue these days for additional regulation of financial markets. Former SEC chairman Arthur Levitt, Jr. is one. His op-ed on the subject appears in Monday's WSJ. Levitt argues primarily for more people on the SEC enforcement staff and better risk management.
Fair enough, but is there any evidence that more regulation will do any good. Sarbanes-Oxley has been in effect since 2002 and it didn't stop the financial meltdown that occurred last year. Some would argue it did more harm than good.
Arguably, regulators spread themselves too thin, trying to regulate too much and therefore regulating very little. Levitt argues, for example, for regulation of hedge funds. This would do what? Protect wealthy investors and some banks and mutual fund companies from doing something stupid? Weathy investors can take care of themselves -- they can afford the losses -- and banks and mutual fund companies already are regulated.
Surely everyone will agree that banks, investment banks and nearly everyone else took on too much risk in recent years, and that contributed to the financial meltdown as much as anything. One reason why such risks might have seemed acceptable could be that such risk takers were pretty sure that the federal government would bail them out if push came to shove, which is what is happening. The risk takers might have been thinking that nobody ever fails in the U.S., they get bailed out instead.
Failure is a powerful teaching tool.
Fair enough, but is there any evidence that more regulation will do any good. Sarbanes-Oxley has been in effect since 2002 and it didn't stop the financial meltdown that occurred last year. Some would argue it did more harm than good.
Arguably, regulators spread themselves too thin, trying to regulate too much and therefore regulating very little. Levitt argues, for example, for regulation of hedge funds. This would do what? Protect wealthy investors and some banks and mutual fund companies from doing something stupid? Weathy investors can take care of themselves -- they can afford the losses -- and banks and mutual fund companies already are regulated.
Surely everyone will agree that banks, investment banks and nearly everyone else took on too much risk in recent years, and that contributed to the financial meltdown as much as anything. One reason why such risks might have seemed acceptable could be that such risk takers were pretty sure that the federal government would bail them out if push came to shove, which is what is happening. The risk takers might have been thinking that nobody ever fails in the U.S., they get bailed out instead.
Failure is a powerful teaching tool.
The LAT editorializes against disbelief
Saturday's LAT editorial, one of them, began by citing the case of Christine Maggiore, who was infected with HIV years ago and finally died recently of AIDS. While alive, Maggiore insisted that HIV did not cause AIDS and she refused treatment both for herself and for her infant daughter,likewise afflicted, who died at age 3.
That proves, the LAT seems to argue, that people who question whether global warming is caused by human activity and whether it will lead to catastrophic consequences are just plain nuts, like Maggiore.
It's a case of accepting or rejecting scientific wisdom, the LAT argues. But the chief proponents of global warming theory are people like Al Gore, who is hardly the next Albert Einstein.
That proves, the LAT seems to argue, that people who question whether global warming is caused by human activity and whether it will lead to catastrophic consequences are just plain nuts, like Maggiore.
It's a case of accepting or rejecting scientific wisdom, the LAT argues. But the chief proponents of global warming theory are people like Al Gore, who is hardly the next Albert Einstein.
Friday, January 2, 2009
The end of a model
Some argue in the media that the era in which free-market capitalism was the model by which nations determined their economic policies has ended. Our markets have had too much freedom, they argue. What we need now is less freedom and more regulation.
But our markets have not been free. Regulation is omni-present. Look no further than Sarbanes Oxley. We have not too little regulation but too much, and it hasn't helped.
Most recently, the Bush administration, with Congressional support, and the Federal Reserve have been pumping money into banks and other financial institutions, as well as carmakers. Government money demands government regulation. Has it helped?
There's no evidence so far that it has. But deficits are up and the dollar is down, hardly evidence of success.
But our markets have not been free. Regulation is omni-present. Look no further than Sarbanes Oxley. We have not too little regulation but too much, and it hasn't helped.
Most recently, the Bush administration, with Congressional support, and the Federal Reserve have been pumping money into banks and other financial institutions, as well as carmakers. Government money demands government regulation. Has it helped?
There's no evidence so far that it has. But deficits are up and the dollar is down, hardly evidence of success.
California's budget problem
Democrats and their supporters, like the LAT, never cease to argue that the solution to California's budget problem must include tax increases. Yet they never acknowledge that Californians already have the 6th largest state and local tax burden in the U.S., behind New Jersey, New York, Connecticut, Maryland and Hawaii --according to the Tax Foundation. If the tax burden were low in California, higher taxes might make sense.
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