I Gotta Agree

Krugman nails it on Romney:

And like everyone else, I’m really beginning to wonder about him. All he has to do to avoid creating a mess while on this trip is to stay bland and talk in generalities; instead, he’s causing international incidents every step of the way. Something is very wrong with what’s going on inside that impressive head of hair.

Why Can't They Just Sit Back and Enjoy It?

Roy Edroso on the conservative blogosphere's response to the Olympic Games.

Simon Johnson on the LIBOR Scandal

Two great posts from Simon Johnson on the LIBOR Scandal:

The Market Has Spoken and It Is Rigged.

The Federal Reserve and the LIBOR Scandal

Money Quote from the second article:

More broadly, we do not yet know with whom Barclays personnel colluded – or the full extent of the damage to investors and borrowers. Consequently, no one yet knows the scale of balance-sheet damage that will be done by settlements of Libor-rigging claims.


This could even become a “tobacco moment,” in which an industry is forced to acknowledge its practices have been harmful – and enters into a long-term agreement that changes those practices and provides ongoing financial compensation. Certainly attorneys general from states that have been damaged will be thinking along these lines.

Yet at his conference call with analysts on July 13, JPMorgan Chase’s chief executive, Jamie Dimon, was already discussing the possibility of resuming share buybacks later this year. It is hard to know how the Fed could agree to such reduction in shareholder capital. It is also hard to understand why the Fed continues to allow the payment of bank dividends under these circumstances.

Indeed, with all of the crap these institutions have been doing for the past decade, their exposures on this are huge.  But they just keep paying out dividends and distributing money to their stockholders, with nary a peep from our regulators.  Really kind of unbelievable.

The One-Sided Deficit Debate

Michael Hiltzik has a piece in the LA Times about who is really driving the debate over the deficit.

The highest marginal tax rate today is 35%.  When Ronald Reagan took office it was 70%. 

Obviously, the solution to cutting the deficit is lower tax rates!

Hat tip: Angry Bear

Astronomy Pic of the Day

Dusty Iris Nebula:

From NASA:

These clouds of interstellar dust and gas have blossomed 1,300 light-years away in the fertile star fields of the constellation Cepheus. Sometimes called the Iris Nebula and dutifully cataloged as NGC 7023, this is not the only nebula in the sky to evoke the imagery of flowers. Surrounding it, obscuring clouds of dust and cold molecular gas are also present and can suggest other convoluted and fantastic shapes. Within the Iris, the dusty nebular material surrounds a hot, young star. The dominant color of the brighter reflection nebula is blue, characteristic of dust grains reflecting starlight. Central filaments of the cosmic dust glow with a faint reddish photoluminesence as some dust grains effectively convert the star's invisible ultraviolet radiation to visible red light. Infrared observations indicate that this nebula may contain complex carbon molecules known as PAHs. At the estimated distance of the Iris Nebula this remarkable wide field view is over 30 light-years across.

Quote of the Day

A person usually has two reasons for doing something: a good reason and the real reason.

                                    - Thomas Carlyle

They Didn't...Did They?

They didn't really sell these pins at the 2002 Olympics in Salt Lake City, did they?

God help us if this guy gets elected....

Quote of the Day - a Two-fer

Since I couldn't post yesterday...

"Music washes away from the soul the dust of everyday life."

- Berthold Auerbach

"I wish Frank Sinatra would just shut up and sing."

- Lauren Bacall

Depressing...Just Really, Really Depressing

I read stuff like this and I really wonder where things are going to end up.

And it's spilling over to here as well.  I have a lot of friends here in New York that are European transplants, and it's kind of amazing to me to hear how those from certain countries are bad-mouthing those from other countries.  Germans bad-mouthing those dirty Greeks and Spaniards, etc.  All of the cultural prejudices the EU and the Euro project were intended to overcome are instead coming to bear again. 

And as Krugman says, what this is really doing is empowering the radicals on the right and the left, who will be the only ones left standing when the dust settles. 

It's already beginning of course.  Hungary, Romania and Bulgaria are all beginning to show signs of abandoning their democratic institutions in the face of economic hardship.  This cannot be good....

The Articles of Confederation?

Amity Shlaes wrote a column lauding the Articles of Confederation.  Apparently, she thinks the system under which only the states have the power to collect taxes, which the pay over to the Federal government, is a great idea.

Jonathan Chait and Jonathan Bernstein are much to kind.  This is simply asinine.

But Bernstein does make a good point that is worth exploring:

Surveys find that people always believe that taxes have recently gone up, even then they've been cut; while federal income tax is obviously not the only tax out there, we also know that a lot of people who feel oppressed by tyrannical levels of federal income tax actually pay none at all. The truth is that most people who take home a paycheck do in fact know about the tax bite out of that paycheck (even if they mistake exactly which tax it is), and that's by far the bulk of federal tax revenues. Sales taxes (or even more so, a VAT) are far less obvious than a payroll tax or income taxes.

Now why do you think people are so misinformed about how the government raises their revenues?

Jeez, I wonder...

What Is It They Do Again?

I'm not sure exactly what the New York Fed is supposed to be doing, but obviously regulating the banks isn't it....

The fact that people there knew the banks were engaged in criminal activity and did nothing should get those people fired.  The people doing it at the banks should be going to jail.  Instead, the most that will happen is "embarrassing" articles like this one.

Want to know what real embarrassment is?  Go stand in an unemployment line.....

Astronomy Pic of the Day

The Dark Tower in Scorpius:

From NASA:

In silhouette against a crowded star field toward the constellation Scorpius, this dusty cosmic cloud evokes for some the image of an ominous dark tower. In fact, clumps of dust and molecular gas collapsing to form stars may well lurk within the dark nebula, a structure that spans almost 40 light-years across this gorgeous telescopic portrait. Known as a cometary globule, the swept-back cloud, extending from the lower right to the head (top of the tower) left and above center, is shaped by intense ultraviolet radiation from the OB association of very hot stars in NGC 6231, off the upper edge of the scene. That energetic ultraviolet light also powers the globule's bordering reddish glow of hydrogen gas. Hot stars embedded in the dust can be seen as bluishreflection nebulae. This dark tower, NGC 6231, and associated nebulae are about 5,000 light-years away.

Quote of the Day

I often quote myself.  It adds spice to my conversation.

                            - George Bernard Shaw

Voter ID Laws Have Nothing to Do With Vote Fraud

Kevin Drum on the current litigation involving Pennsylvania's voter ID law:

Supposedly, these laws are designed to reduce voter fraud, but the only kind of fraud that voter ID addresses is in-person fraud: the kind where someone walks into a polling place and pretends to be someone else. And yet, the state of Pennsylvania says they have no knowledge of such fraud ever occurring, or any expectation that it will occur in the future...

....

it's sort of a remarkably bald admission. The truth is that voter fraud is vanishingly rare in the United States, and in-person voter fraud is all but nonexistent. Everyone knows this, including the courts. That's not why Republican legislatures pass these laws.

Kevin points out that this will probably make no difference in the outcome of the litigation.  After all, the Supreme Court already upheld Indiana's voter ID law even after it noted that there was no indication voter fraud had ever occurred there. 

So why are these laws passed?

Do you really have to ask?

The Financialization of America

From Randy Wray, via naked capitalism:

As the Global Financial Crisis rumbles along in its fifth year, we read the latest revelations of bankster fraud, the LIBOR scandal. This follows the muni bond fixing scam detailed a couple of weeks ago, as well as the J.P. Morgan trading fiasco and the Corzine-MF Global collapse and any number of other scandals in recent months. In every case it was traders run amuck, fixing “markets” to make an easy buck at someone’s expense. In times like these, I always recall Robert Sherrill’s 1990 statement about the S&L crisis that “thievery is what unregulated capitalism is all about.”

After 1990 we removed what was left of financial regulations following the flurry of deregulation of the early 1980s that had freed the thrifts so that they could self-destruct. And we are shocked, SHOCKED!, that thieves took over the financial system.

Nay, they took over the whole economy and the political system lock, stock, and barrel. They didn’t just blow up finance, they oversaw the swiftest transfer of wealth to the very top the world has ever seen. They screwed workers out of their jobs, they screwed homeowners out of their houses, they screwed retirees out of their pensions, and they screwed municipalities out of their revenues and assets.

Financiers are forcing schools, parks, pools, fire departments, senior citizen centers, and libraries to shut down. They are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in firesales at prices rigged by twenty-something traders at the biggest and most corrupt institutions the world has ever known.

And since they’ve bought the politicians, the policy-makers, and the courts, no one will stop it. Few will even discuss it, since most university administrations have similarly been bought off—in many cases, the universities are even headed by corporate “leaders”–and their professors are on Wall Street’s payrolls.

We’re screwed.

Read the whole thing....

Astronomy Pic of the Day

Star Forming Regiou S-106:

From NASA:

Massive star IRS 4 is beginning to spread its wings. Born only about 100,000 years ago, material streaming out from this newborn star has formed the nebula dubbed Sharpless 2-106 Nebula (S106), pictured above. A large disk of dust and gas orbiting Infrared Source 4 (IRS 4), visible in dark red near the image center, gives the nebula an hourglass or butterfly shape. S106 gas near IRS 4 acts as an emission nebula as it emits light after being ionized, while dust far from IRS 4 reflects light from the central star and so acts as a reflection nebula. Detailed inspection of images like the above image has revealed hundreds of low-mass brown dwarf stars lurking in the nebula's gas. S106 spans about 2 light-years and lies about 2000 light-years away toward the constellation of the Swan (Cygnus).

Quote of the Day

For the merchant, even honesty is a financial speculation.

                                - Charles Baudelaire

Corporate Austerity

I noticed this statement in John Authers' commentary in today's Financial Times:

[E]ven though most companies are beating earnings estimates, 56 per cent have so far failed to match their revenues estimates. The latest running tally from Thomson Reuters shows that the S&P 500 is now on course for pathetic year-on-year revenue growth of only one per cent – against profit growth of 5.4 per cent.

....

With companies disappointing on sales while surprisingly positive on profits, cost cuts must be running far deeper than Wall Street had thought. Building big cash piles that can be drawn on does now seem to have been wise. But Corporate America cannot cut its way to prosperity forever.

You know what "cost cuts" means, right?

Sooner or later our elites will understand that they are hanging themselves by doing this sort of thing.  Without an economically well-off consumer base, eventually the house of cards will crumble.  You think this is an unrelated phenomenom?
 
Cut costs, cut costs, cut costs.  As Atrios points out, "the people in charge are determined to destroy the world."
 
We're doomed.

Hoarders

Last week I saw this article, about how corporations are stockpiling huge amounts of cash - over $5 trillion is the current estimate.  And this is only non-financial corporations.  It excludes banks and other financial institutions.

Now comes this article today about the amounts of money being stockpiled in offshore banking centers.  The estimated amount is $20 trillion, although the authors of the study say it could be as high as $30 trillion.  Now granted this is not just Americans squirreling away their cash - this is economic elites from around the world.  But you gotta believe a lot of this comes from America as well.

There are a lot of things that can be said about this phenomenon.

None of them are good.

Astronomy Pic of the Day

The Triangulum Galaxy:

From NASA:

Gorgeous spiral galaxy M33 seems to have more than its fair share of bright emission nebulae. In fact, narrow-band and broad-band image data are combined in this beautifully detailed composite to trace the reddish emission nebulae, star forming HII regions, sprawling along loose spiral arms that wind toward the galaxy's core. Historically of great interest to astronomers, M33's giant HII regions are some of the largest known stellar nurseries - sites of the formation of short-lived but very massive stars. Intense ultraviolet radiation from the luminous, massive stars ionizes the surrounding gas and ultimately produces the characteristic red glow. Spanning over 50,000 light-years and a prominent member of the local group of galaxies, M33 is also known as the Triangulum Galaxy. It lies about 3 million light-years distant.

Quote of the Day

Three classes of people: Those who see. Those who see when they are shown. Those who do not see.

                                                - Leonardo DaVinci

Juat a Little Reminder....

Headline from yesterday's Wall Street Journal:  "US Speeds its Selloff of Bailout Securities."

Until all this crap is sold or collected, we really don't know how expensive the Big Bank Bailout of 2008 was.

Frankly, I don't think these things should be sold.  Obviously, lot's of predators are lining up to buy them, thinking they'll make a killing.  The government should keep them, so that it keeps the profits.

But, of course, that ain't gonna happen.

Teaching Evolution - That's The Problem! Right...

Rick Warren tweets that evolution is the reason people act out:

When students are taught they are no different than animals, they act like it.

I remember a line from an early Star Trek episode that seems an appropriate response:

Did you know that humans are one of the few predator species that preys even on itself? 

Really, animals don't do this to each other.  Only humans do.

I mean really, given this guy's history supporting and justifying needless war, he's the last person who's qualified to comment on someone else's humanity.

Jerk.

Astronomy Pic of the Day

The Crab Nebula:

From NASA:

This is the mess that is left when a star explodes. The Crab Nebula, the result of a supernova seen in 1054 AD, is filled with mysterious filaments. The filaments are not only tremendously complex, but appear to have less mass than expelled in the original supernova and a higher speed than expected from a free explosion. The above image, taken by the Hubble Space Telescope, is presented in three colors chosen for scientific interest. The Crab Nebula spans about 10 light-years. In the nebula's very center lies a pulsar: a neutron star as massive as the Sun but with only the size of a small town. The Crab Pulsar rotates about 30 times each second.

Quote of the Day

A Christian is a man who feels repentance on Sunday for what he did on Saturday and is going to do on Monday. 

                           -Thomas Ybarra

Enjoy your Saturday everyone!

You Gotta Wonder

Sometimes when you see a political ad you gotta wonder "what are these guys thinking?"  Gary Silverman from the Financial Times:

Mr Romney’s senior moment came as he responded to a withering television commercial released by President Barack Obama’s campaign last weekend. That advertisement features Mr Romney delivering an off-key rendition of “America the Beautiful”, while the viewer is treated to scenes of empty offices and factories and headlines alleging that Mr Romney moved jobs from the US to other countries and kept money in offshore accounts.

Mr Romney counter-attacked with a commercial noting the country’s dismal economic condition and suggesting that Mr Obama only cares about helping his campaign donors. To drive that point home, it concluded with the president singing “I’m so in love with you”, a line from the old Al Green hit “Let’s Stay Together” to cheers from supporters at a fundraiser this year that was attended by Mr Green himself.

Viewed from a tactical standpoint, I was surprised that the Romney camp used Mr Obama’s performance. I could see why Mr Obama featured Mr Romney in his commercial; the Republican’s warbling suggested a lack of harmony between his rhetoric and his record in government and the private equity business. But unlike Mr Romney, Mr Obama sang quite well, raising the question of why the opposition would show him off to his advantage, even in this limited sense.

One of the better answers I have found comes from a well-known supporter of Mr Romney – Suzy Welch, former editor in chief of the Harvard Business Review, and wife of Jack Welch, former CEO of General Electric. In an appearance on CNN with her husband, Mrs Welch suggested that Mr Obama’s personal style and choice of musical material define him as a member of a “different America”. I would imagine this is why Mr Romney’s campaign included the snippet of Mr Obama singing “Let’s Stay Together” at the Apollo Theater in Harlem. They hoped it would convey his otherness.

“It’s the difference between the songs that they’re singing,” Mrs Welch said. “Mitt Romney didn’t exactly do a beautiful job on that song, but think about what he’s singing, OK? I mean it’s that patriotic song and he goes all the way through it. Then you’ve got the very cool Barack Obama singing Al Green. That is the two different Americas. Isn’t it?”

For the record, here is the song they are talking about:

As Silverman points out:

I think it spells trouble for Mr Romney’s strategic effort because you have to be really old – or, I guess, spend a lot of time with someone really old – to hear “Let’s Stay Together” and think of it as a symbol of a “different America”.

Al Green’s song topped the US pop charts more than four decades ago, in 1972, meaning people who bought the record as children are eligible for membership in the AARP (American Association of Retired Persons).

Krugman notes:  "How “other” is Al Green? So other, so alien, that, well, he’s included on the Muzak they play in Red Lobster restaurants.  Somebody is alien and out of touch with America here, that’s for sure. But I don’t think it’s the president."

But I agree with Duncan.  The real reason this song represents the "other America"?   "Did I Mention Al Green is Black?"
 
These people are really pathetic.

I Agree with Charlie - Let's All Take a Deep Breath....

Pierce:

I would like to recommend that, when an event like what happened in Aurora occurs, we all give ourselves a decent interval before wedging the bloodshed into the stifling cliches that pass for our current political dialogue. Maybe a day, maybe a week. Then, we can start arguing again about why it's so goddamn easy in this country to outfit yourself to go to the movies as though you were coming ashore at Saipan. Then, we can start defending Rush Limbaugh, or excoriating HollyWeird. I just think it's indecent to do it as soon as the sun comes up the next day.

When something this senseless happens, let's just wait until before we try the impossible - making sense of it.

Astronomy Pic of the Day

Maybe this will help.

Galaxy M101:

From NASA:

Big, beautiful spiral galaxy M101 is one of the last entries in Charles Messier's famous catalog, but definitely not one of the least. About 170,000 light-years across, this galaxy is enormous, almost twice the size of our own Milky Way galaxy. M101 was also one of the original spiral nebulae observed by Lord Rosse's large 19th century telescope, the Leviathan of Parsontown. This mosaic of M101 was assembled from Hubble Legacy Archive data. Additional ground-based data was included to further define the telltale reddish emission from atomic hydrogen gas in this gorgeous galaxy's star forming regions. The sharp image shows stunning features in the galaxy's face-on disk of stars and dust along with background galaxies, some visible right through M101 itself. Also known as the Pinwheel Galaxy, M101 lies within the boundaries of the northern constellation Ursa Major, about 25 million light-years away.

Bad News Links

Today is turning out to be a pretty bad day....

The latest from Colorado...

What is happening in Europe....Governments act to help Spain...But interest rates continue to rise....

The latest on the student loan bubble....

The real estate market continues to tank....

and I've already commented on the drought....

Ugh!

Quote of the Day

A little group of willful men reflecting no opinion but their own have rendered the great Government of the United States helpless and contemptible.

                                 - Woodrow Wilson

We are starting to pay the price.

Today's NYT:

The drought that has settled over more than half of the continental United States this summer is the most widespread in more than half a century. And it is likely to grow worse.

We've known this has been coming for some time - concerns about climate change being wrought by human activity pre-date the Reagan Administration. We were just too stupid or selfish to do anything about it. Get ready for a wild ride....

Astronomy Pic of the Day

Galaxies in the Constellation Draco:

From NASA:

These two spiral galaxies make a photogenic pair, found within the boundaries of the northern constellation Draco. Contrasting in color and orientation, NGC 5965 is nearly edge-on to our line of sight and dominated by yellow hues, while bluish NGC 5963 is closer to face-on. Of course, even in this well-framed cosmic snapshot the scene is invaded by other galaxies, including small elliptical NGC 5969 at the lower left. Brighter, spiky stars in our own Milky Way are scattered through the foreground. Though they seem to be close and of similar size, galaxies NGC 5965 and NGC 5963 are far apart and unrelated, by chance appearing close on the sky. NGC 5965 is about 150 million light-years distant and over 200,000 light-years across. Much smaller, NGC 5963 is a mere 40 million light-years away and so is not associated with the edge-on spiral. Difficult to follow, NGC 5963's extraordinarily faint blue spiral arms mark it as a low surface brightness galaxy.

Quote of the Day

Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel in order to be tough.

                                                - Franklin D. Roosevelt

Modern Business Corruption

Yves has a terrific post responding to an op-ed in Bloomberg entitled "Do Business Schools Incubate Criminals?"  The gist of her argument is:  Are you kidding?  Look at what's going on around us and the messages that are being sent to people:

Mind you, I’m not saying business schools deserve a free pass. Far from it. But business schools are a combination of finishing school and employment agency. They live in, and my sense is they are lagging indicators of broad cultural shifts in norms. In case Zingales has missed it, American elites are openly corrupt. You can see it with the revolving doors between regulators and top industry jobs, the way CEOs and top politicians tell astonishing lies whenever they are in trouble,the weird combination of precision on inconsequential details versus the carefully coached combinations of misleading but not untruthful answers and “I don’t recall” when you sure as hell know they do remember, the way the press is so thick with propaganda that it takes an Enigma machine to pull out any real messages. So with those role models, why should we expect business school graduates to be paragons of virtue? The are aspiring Masters of the Universe. They are smart enough to see what the real game is, and the message conveyed by the business press and who rises to the top in large organizations today is far more powerful than any lecture, no matter how well or frequently delivered.

I've been giving an awful lot of thought to this - if for no other reason than to try and parse how I personally got to place that I am today in my life and career.  More on this after the jump.  But read the whole post by Yves.  It's very, very good.

Astronomy Pic of the Day

Spiral Galaxy M83 - The Southern Pinwheel

From NASA:

Big, bright, and beautiful, spiral galaxy M83 lies a mere twelve million light-years away, near the southeastern tip of the very long constellationHydra. Prominent spiral arms traced by dark dust lanes and blue star clusters lend this galaxy its popular name of the Southern Pinwheel. But reddish star forming regions that dot the sweeping arms highlighted in this sparkling color composite also suggest another nickname, The Thousand-Ruby Galaxy. About 40,000 light-years across, M83 is a member of a group of galaxies that includes active galaxy Centaurus A. The core of M83 itself is bright at x-ray energies, showing a high concentration of neutron stars and black holes left from an intense burst of star formation. The sharp image, based on archival data from the European Southern Observatory's Wide Field Imager camera, also features spiky foreground Milky Way stars and distant background galaxies.

Quote of the Day

No one can earn a million dollars honestly.

                                -- William Jennings Bryan

Shenanigans at the FEC

From Alternet, via Yves.

The FEC is about as useless a regulatory agency as one could contrive.

And appropos to my post on teachers, I can't imagine what it's like being a career employee at the FEC....

Teachers and Principals

Atrios asks why school administrators aren't the targets of vitriol like teachers are.  He obviously isn't aware of the state of play in New York.

As a former member of an elected board of education, let me just say this.  There are good teachers and bad teachers, and there are good administrators and bad administrators.  The school community is no different than any other kind of community.  As much as we hate to admit it, sometimes people just do stupid things.

The big problem in the public school context is what can be done about it when these stupid things happen.  I always hear bad things about the tenure system, but I understand why it is there.  It is always problematic for the permanent employees of a government agency - be it schools, the military, or whatever - to be subject to the whims of an elected leadership.  Our government stinks enough of the polution of patronage without it reaching down to the rank and file workers who actually do the nuts and bolts daily work of government.  That has always been the purpose behind civil service protections - or tenure in the public school context.  It is important to have a knowledgeable, experienced workforce in place within the government, and it is important that that workforce not be threatened with dismissal every two years or four years or whenever the leadership of the organization changes. 

So how do you deal with situations like this one?  Frankly, I think the district involved dealt with it in just about the best manner I could think of.  It's hard to fire someone for saying something stupid - chances are the district would be sued and it would lose.  A school board's obligations to the taxpayer require it to weigh that against the harm this nut could do the the children.  Their decision was to just keep him away from those who would be harmed by his stupidity.  I'm certainly not in a position to second guess their decision.

BTW, I'm kind of suprised that in Pennsylvania the law allows a district employee (in this case, a football coach) to serve on the school board.  That's not permitted in New York.

Astonomy Pic of the Day

Crescent Neptune and Triton:

From NASA:

Gliding silently through the outer Solar System, the Voyager 2 spacecraft camera captured Neptune and Triton together in crescent phase in 1989. The above picture of the gas giant planet and its cloudy moon was taken from behind just after closest approach. It could not have been taken from Earth because Neptune never shows a crescent phase to sunward Earth. The unusual vantage point also robs Neptune of its familiar blue hue, as sunlight seen from here is scattered forward, and so is reddened like the setting Sun. Neptune is smaller but more massive than Uranus, has several dark rings, and emits more light than it receives from the Sun.

Quote of the Day

When I do good, I feel good.  When I do bad, I feel bad.  And that is my religion.

                                                                 -- Abraham Lincoln

Red States and Federal Dollars

Steve Roth at Angry Bear has posted this, from an article in the Economist:

The states shaded in green are those where the Federal taxes exceed Federal spending.  For example, over the last 20 years the State of New York has paid nearly $1 trillion - yes that's trillion - more in taxes to the federal government than the amount of federal expenditures spent in New York. 

The Economist also had this information in a table with actual numbers if you're interested.

Now the states with the biggest net benefits - Maryland and Virginia - should be no surprise, since much of the federal government's operations have spread beyond DC into the neighboring states.  But a number of other states beyond that proximity also are significant net beneficiaries.  And, surprise surprise! A majority of those states are red states.

Now I don't begrudge anyone who needs the benefit of these programs, although I might question the programs themselves.  But what always confuses me when I see this (note that these kinds of imbalances have existed for many years, and typically the map looks like this one) is, why are the representatives of these states constantly calling for cuts in federal spending?  Don't they see that the pain to their own citizens will be greater than to the average American if what they seek actually comes to fruition?

I can only think of two possible reasons for this.  First, they are too stupid to recognize the consequences of their own actions, which is a very real possibility.  But the second and more likely explanation is that they see the benefits of federal largess undermining their real goals, which is to further drive down the standard of living of the have nots.  

Can anyone else think of a better explanation? 

I Wonder Who Controls His UGM Account?

I'm sure we're going to see more of this.....

Privatizing Government Services

Remember, the goal of private corporations is always to make the greatest amount of revenue at the least amount of cost.  And when you are talking about a one-off event like the Olympics, the idea that these kinds of screw-ups are accidental is incredible.

ht/ Atrios.

Shorter David Brooks

Saturday's column in a nutshell:

"Today's elites just don't have the sense of noblesse oblige that our WASP elites had 100 years ago.  That's probably because they earned their wealth rather than inherited it."

hat tip Booman.

Astronomy Pic of the Day

SN 1572 - Tycho's Supernova:

From NASA:

What star created this huge puffball? Pictured above is the best multi-wavelength image yet of Tycho's supernova remnant, the result of a stellar explosion first recorded over 400 years ago by the famous astronomer Tycho Brahe. The above image is a composite of an X-ray image taken by the orbiting Chandra X-ray Observatory, an infrared image taken by the orbiting Spitzer Space Telescope, and an optical image taken by the 3.5-meter Calar Alto telescope located in southern Spain. The expanding gas cloud is extremely hot, while slightly different expansion speeds have given the cloud a puffy appearance. Although the star that created SN 1572, is likely completely gone, a star dubbed Tycho G, too dim to be easily discerned here, is being studied as the possible companion. Finding progenitor remnants of Tycho's supernova is particularly important because the supernova was recently determined to be of Type Ia. The peak brightness of Type Ia supernovas is thought to be well understood, making them quite valuable in calibrating how our universe dims distant objects.

Quote of the Day

I talk democracy to these men and women. I tell them that they have the vote, and that theirs is the kingdom and the power and the glory. I say to them You are supreme: exercise your power. They say, That's right: tell us what to do; and I tell them. I say Exercise our vote intelligently by voting for me. And they do. That's democracy; and a splendid thing it is too for putting the right men in the right place.

                                                  - George Bernard Shaw

The LIBOR Scandal

During my one-month plus hiatus another banking scandal erupted.  Ho hum.  What else is new?

Of course I'm not surprised.  Nor am I surprised that there is evidence the government knew this was going on for years and did nothing to stop it.

As one of our more prominent Democratic Senators put it 3 years ago, "the banks own Washington."  And nothing in the past three years has changed that....

The LIBOR scandal is huge.  Yves Smith at naked capitalism has a post up that shows the current attempts to quantify the damage.  But this only reflects how much the big banks that are involved in setting LIBOR are exposed.  The fact is, globally, LIBOR has replaced the prime rate as the benchmark rate against which all variable interest rate instruments are set.  There are undoubtably millions of instruments out there which key off of LIBOR that the big banks aren't a party to.  The parties to those contracts have been screwed to.  How does one deal with that issue?

This is a colossal clusterf***.  At what point will our elected officials realize how much damage these guys are doing?

Astronomy Pic of the Day

The Orion Nebula:

From NASA:

Few cosmic vistas excite the imagination like the Orion Nebula. Also known as M42, the nebula's glowing gas surrounds hot young stars at the edge of an immense interstellar molecular cloud only 1,500 light-years away. The Orion Nebula offers one of the best opportunities to study how stars are born partly because it is the nearest large star-forming region, but also because the nebula's energetic stars have blown away obscuring gas and dust clouds that would otherwise block our view - providing an intimate look at a range of ongoing stages of starbirth and evolution. This detailed image of the Orion Nebula is the sharpest ever, constructed using data from the Hubble Space Telescope's Advanced Camera for Surveys and the European Southern Observatory's La Silla 2.2 meter telescope. The mosaic contains a billion pixels at full resolution and reveals about 3,000 stars.

Tax Case of the Week

I've decided that I will start this new series highlighting interesting - and troubling - things that are happening in the world of tax law.  This is the first.

One of the things that has bothered me for a very long time is the incredible growth in so-called "non-profit" organizations seeking tax exempt status.  You see, I am one of those crazies that thinks that if you make money doing something, then you should pay taxes on the money you make.  You know, just like the guy working on the assembly line or the gas station or driving a bus.  I understand that there are some kinds of activities that the government needs to incentivize - I just don't believe that a blanket tax exemption - let alone tax credits of some sort - are the best or most efficient way of doing that.

But one of the things that really makes the tax-exempt issue so problematic is defining what constitutes activities that should be exempt.  This is illustrated in today's case of the week, Asmark Institute, Inc. v. Commissioner, which was decided last week by the Sixth Circuit Court of Appeals.  In that case, the owners of a private company reincorporated their business into a non-profit organization.  The court described the business of the company as follows:

AI was a consulting business, specializing in regulatory compliance for the agricultural industry; specifically, AI provided compliance-related “educational material[s], training programs, and on-site inspection[]” services to farms and “farm retailers” (i.e., retailers in the business of selling goods and services to farms and farmers). AI also “developed computer programs that allowed [agricultural] businesses to file timely reports with government agencies.

The tax exempt entity did exactly the same things as the former private company, and in fact charged the recipients of its services in exactly the same manner.  It's hard to see how they could view themselves as a charitable organization, unless they were trying to argue they provided some sort of 'educational" services.  Thankfully, the Court of Appeals upheld the IRS's denial of a tax exemption in this case.

But it's got to make you wonder - given the broad range of services that fall within the tax exemption provisions.  Take a look at section 501 of the Internal Revenue Code - here is a link to that section - especially subsection (c), to see the extensive list of activities that qualify for a tax exemption.

Now I will admit that philosophically I am against tax exemptions for almost all activities.  My feeling is that if someone makes a profit doing something, they should pay an income tax just like everyone else.  Remember, all the exemption does is exempt an organization from tax on its profits.  By definition, if a organization doesn't make a profit then it gets no benefit from qualifying for an exemption.  So the exemption does not benefit the true charitable organization.  It benefits those that make profits on their activities.

Oh - and I should mention that contributions to organizations generally are not income.  When I make a donation to the United Way, I am making a gift.  Even if the United Way was not exempt from tax, it would not have to pay tax on my gift, because gifts are not income.  So the kinds of organizations that benefit from the exemption are those whose income - interest, dividends and rents from investments or income from products or services they sell - are greater than their expenses, including the expenses they pay in charitable activities.

In short, the exemption benefits businesses who the Congress has determined are so special they should not have to pay tax even when they make a substantial profit.

I am not going to speculate as to why Congress has decided that so many activities should be exempt from taxation.  But it is clear that the exempt organizations sector is continuing to grow, and that a growing portion of our national wealth and income is being placed in these kinds of organizations with a view to exempting that wealth and income from taxation.  

One of the prevailing theories for the fall of the Roman Empire is that in the later centuries the powers that be continued to exempt themselves from taxes, with the result that the result of a weakening of the government to the point that the empire no longer had the ability to function.  This is best espoused in Chapter 1 of one of my favorite books - How the Irish Saved Civilization, by Thomas Cahill.  One wonders if we are going down that track as well.

I'll revisit the issue of tax exempt organizations again in the near future - next time in the context of religious organizations, which are a particularly thorny issue.

Why Are Progressives Such Wimps?

I agree wholeheartedly with Krugman on this one.  In fact I would go even further.  There is little question in my mind that many who oppose Obama do so in spite of his policies, not because of them.  From national defense to health policy, he has continued the moderate to conservative business-friendly and pro-defense policies that have dominated our politics for the last 30 years.

Republicans are vehemently opposed to Obama as a person, not his policies.  There is no reason why Democrats can't be opposed to Romney the man, as well as his policies.  

In fact, I think most voters will be more likely to respond positively to such opposition in any event.

It's just too bad that while the Obama campaign will decry Romney's business past and how he earned his wealth, from a policy perspective I seriously doubt that, if Obama wins, anything will be done to prevent the Romney's of the world to continue to enrich themselves at the expense of the average middle class worker.