2010 - %3, February

Our Oppressed Billionaires

| Wed Feb. 24, 2010 10:48 AM EST

Sure, you already know this. But it never hurts to post a reminder with a nice graphical memory aid. Nickel summary: the richest of the rich have gotten even richer over the past two decades — 400% richer for the top 400, according to CBPP, in a nice bit of symmetry — and at the same time their federal income tax rates have gone down from 30% to 16%. Needless to say, this is further evidence that America's heirs and Wall Street tycoons, the targets of endless class warfare from liberals and Democrats, deserves to have the estate tax eliminated. They've suffered enough already.

But you come here for more than snark. You want substance. So here's some substance:

The low effective tax rate for the top 400 filers is largely due to the fact that capital gains and qualified dividends are taxed at much lower rates than ordinary income....It is not surprising that two of the largest reductions in effective tax rates for the top 400 filers occurred in two two-year periods (1996-1998 and 2002-2004) that coincided with the capital gains tax cuts enacted in 1997 and 2003.

The second half of this paragraph seems fine: tax rates for the wealthy really did fall starting in 2003, which is almost certainly due to the Bush tax cuts. But the Clinton capital gains cuts took effect in mid-1997. How could they be responsible for a drop that began in 1996? What happened in 1995 to get the ball rolling?

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Advocate: Rein in CEOs!

| Wed Feb. 24, 2010 10:33 AM EST

The pro-financial reform organization Americans for Financial Reform (AFR) today sent a letter [PDF] to the Senate banking committee, who's leading financial-reform talks right now and is expected to release a bill next week, to make sure it includes new oversights and protections of corporate boards—the very leaders, AFR says, who blindly let financial markets implode under their watch:

"Institutional investors have recognized that risk management oversight failures by the boards of Wall Street banks were a central factor in the financial collapse. Moreover, it is well documented that the executive compensation plans prevalent on Wall Street, in which the vast majority of pay comes through stock options and bonuses based on short-term performance, ensured that bank executives reaped huge gains while the housing bubble grew, but suffered none of the downside when their over-leveraged bets and gambles on complex derivatives went sour."

In a November financial-reform discussion draft in the Senate [PDF], a number of investor protections and executive-compensation crackdowns were included, like giving shareholders a "say on pay" and requiring a majority vote for uncontested director elections, among others. Right now, though, it's unclear whether those reforms from last fall will make it into the draft being crafted by Sen. Chris Dodd (D-CT), the committee's chairman, Sen. Richard Shelby (R-AL), the ranking member, and Sen. Bob Corker (R-TN), who joined Dodd after Shelby briefly dropped out of the talks earlier this month.

AFR's letter is intended as well a counterbalance to recent lobbying efforts, most visibly those by the US Chamber of Commerce, to oppose corporate-governance reform. For instance, Chamber CEO Tom Donahue said in January that the "mad scientists" who created tricky financial instruments (read: synthetic collateralized debt obligations, derivatives, option adjustable-rate mortgages) deserved the high salaries and bonuses they've earned in the past. However, AFR goes after Donahue in today's letter, citing his past leadership roles in maligned companies like Qwest and Sunrise Senior Living, and says his checkered record in corporate governance should cast serious doubt on any of his reform suggestions. "The US Chamber under Mr. Donohue is uniquely unqualified to speak credibly on what corporate governance structures are necessary to protect shareholder wealth," the letter concludes.

"Underwater" Crisis Grows

| Wed Feb. 24, 2010 9:11 AM EST

"Underwater": that's a watchword you've probably heard plenty throughout the Great Recession and the still dismal housing crisis. It's people who owe more than than their house in worth, and who essentially have few economic reasons (setting aside their own beliefs and fears) to stay underwater when they could rent more cheaply in a comparable, and sometimes better, home. Well, in a sign that the housing crisis remains bleak, the number of people underwater continues to increase, up to 11.3 million by the close of 2009 compared to 10.7 in 2009's third quarter, according to data from analyst FirstAmerican Core Logic. Another 2.3 million, the analysis says, are approaching negative equity but aren't underwater yet. Nationwide, homeowners are a whopping $800 billion underwater.

The details are even more troubling in states hit hardest by the subprime meltdown. In Nevada, for instance, 70 percent of all mortgage properties are underwater; elsewhere, 51 percent are in Arizona, 48 percent in Florida, 39 percent in Michigan, and 35 percent in California. That so many millions of homeowners are underwater reverberates throughout the economy as well: As real estate expert Brent White of the University of Arizona points out in a recent paper, underwater homes result in decreased consumer spending, the lifeblood of the American economy; and decreased household mobility, which can lead to higher unemployment and less productivity. It's a multi-pronged attack on our economy, dragging down not just the housing market but leading to people buying less and working less.

To blame for this pandemic of underwater homes are lenders, mortgage servicers, the government, and—yes—homeowners. Lenders and mortgage servicers, as myself and others have written, are generally loath to write down principal amounts on a homeowner's loan in, say, a modification setting—they don't want to take the losses, preferring to lower interest rates or extend the loan's term. The government, too, has utterly failed to tackle the negative-equity problem: It's flagship homeowner rescue, the taxpayer-funded Home Affordable Modification Program, doesn't force mortgage servicers to reduce principal balances, which is at the heart of our housing dilemma, and offers cursory, modest solutions; the program also has a ceiling on how far underwater you can be to qualify—125 percent underwater—and if you're in even worse shape than that, well, too bad.

And finally, homeowner are to blame for at least two reasons. First, because they purchased their home, as many did, during the housing bubble when prices were grossly inflated, the only direction their home's value could go was down; the odds were high they'd be underwater to some degree. And second, a lot of homeowners, as White highlights in his paper, remain in their underwater homes when the smartest thing to do—economically, at least—is strategically default, walk away, and start anew. For many of those 11.3 million underwater homeowners, walking away makes perfect sense, you can rent for cheaper, and you can take that extra money from your previous mortgage payment and invest or save it. "The real mystery," White writes, "is not—as media coverage has suggested—why large numbers of homeowners have been walking away, but why, given the percentage of underwater mortgages, more homeowners have not been."

Health Care Summit: The Sham Before the Storm?

| Wed Feb. 24, 2010 8:47 AM EST

Is Thursday's White House health care summit merely a show? In a word, yes. At PoliticsDaily.com, I explain why:

At the White House daily briefing on Tuesday, press secretary Robert Gibbs said repeatedly the aim is to have an "honest discussion" about the best way to fix the nation's troubled health care system. But hasn't there been a year-long discussion already? It included hours of debate within House and Senate committees, hours of negotiations between Democratic and Republican senators that led to nothing, hours of debate on the House and Senate floor. Obama and the House GOPers covered health care reform during their historic Q&A session at a Republican retreat last month. There have been presidential speeches, scores of op-eds, a cacophony of cable chattering, a blitz of blogs, and maybe a trillion tweets.

Why more discussion? And how honest can it be? On Tuesday, House Republican Whip Eric Cantor called Obama's approach to health care "insanity." And House Republican leader John Boehner accused the president of having "crippled" the summit by releasing earlier this week his proposal, a modified version of the Democratic-backed legislation that was approved in the Senate with 60 votes and no Republican backers. These particular Republicans don't want a conversation; they want to kill the House and Senate bills that have passed. Cantor declared Obama's plan "is a non-starter." Boehner claimed, "The American people have spoken: They want us to scrap the Democrats' health care bill and start over." But a plan based on legislation already approved by a majority of legislators is actually a pretty good starter.

The bottom line:

The time for bipartisanship is done. The Republicans think their opposition to Obamacare is a winning ploy. They're not going to abandon it. And Obama's not going to trash his signature issue. So once the summit concludes, it's back to the real show: power politics. If Obama and the Dems want major health care reform legislation, they will have to run over the not-dead bodies of Republicans. To do so, they will likely need to employ reconciliation, a legislative procedure that allows the House and Senate Democrats to resolve the differences between their already-passed bills on a majority vote (and duck a Republican filibuster). This is a slightly complicated maneuver -- but quite feasible -- and Senate Democratic aides say they are close to rounding up at least 50 D's. But they're not there yet. Consequently, the real challenge for Obama is not conjuring up a last-minute bipartisan breakthrough at this summit, but getting his own party lined up and ready to roll.

Once the summit is done, there will be only one item on the agenda: getting health care through Congress.

You can follow David Corn's postings and media appearances via Twitter.

We're Still at War: Photo of the Day for February 24, 2010

Wed Feb. 24, 2010 7:39 AM EST

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A U.S. Army Soldier patrols with Afghan soldiers to check on conditions in the village of Yawez in Wardak province, Afghanistan, Feb. 17, 2010. Photo via the US Army by Sgt. Russell Gilchrest.

Is Glenn Beck A Secret Treehugger?

| Wed Feb. 24, 2010 6:00 AM EST

Is Glenn Beck a closet environmentalist? That might sound like a strange question. In his lucrative book and television career, the conservative talk show host regularly bashes the science of climate change and anyone who believes in it. Last week he mocked climate scientists for being "alarmists" who believe that "we're all going to die in a fiery flood." Not long ago he touted the global warming chapter of his An Inconvenient Book as "kryptonite against your Gore-worshipping psycho friends." And in May 2007 he hosted an hour-long television special, Exposed: The Climate of Fear, featuring an all-star lineup of climate change denialists and promising the "other side of the climate debate that you don't hear anywhere." Beck was also, of course, the driving force behind the successful right-wing push last year to bring down Obama's green jobs guru, Van Jones.

But an interview with Beck in USA Weekend revealed that his private views on climate are very different from those he espouses on his day job. In fact, Beck appears not only to be convinced that global warming is real, but that it's a genuine problem: 

"You’d be an idiot not to notice the temperature change," he said. He also says there’s a legit case that global warming has, at least in part, been caused by mankind. 

The article also says that Beck has felt compelled to "buy a home with a 'green' design and using energy-saving products." "I’m willing to do anything but use the CFLs," he tells USA Weekend, referring to energy efficient light bulbs. "I put them in once and couldn’t stand the way they lit up the room." These are hardly the words or actions of a hardcore climate denialist.

The comments—made in passing during the course of a longer interview—attracted almost no attention. But they've stirred up a frenzy among right-wingers in certain corners of the web who are horrified to hear their standard-bearer sounding suspiciously like Al Gore. Prison Planet, a news hub for conservative conspiracy theorists, called his remarks "a shocking stab in the back of conservatives who consider Beck to be their anointed leader." A post on the interview provoked more than 200 comments on the right-wing website Free Republic, with one asking whether Beck was "moving to the left," and another saying the news was the "final straw for Beck with me." WorldNetDaily attempts to explain the remarks by musing that they perhaps reflect Beck's "kinder, gentler" side. (In the same interview, Beck also admits to liking liberal celebrity George Clooney, and it's noted that his publicist is Matt Hiltzik, a Democratic heavy hitter who worked on Hillary Clinton's Senate campaign.)

On his show, Beck had plenty of criticism of the USA Weekend story. But he didn't raise any objections to the article's portrayal of his environmental views. That must leave his supporters contemplating the possibility that when it comes to climate change, Beck may not really be one of them.

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Blackwater Outtakes

| Wed Feb. 24, 2010 5:00 AM EST

When Senator Carl Levin (D-Mich.) and his staff briefed reporters Tuesday on their six-month investigation into Blackwater subsidiary Paravant, ahead of a hearing on the topic scheduled for this morning, the chairman of the armed services committee was asked whether the findings of the probe had given him any ideas about strengthening the contracting "procedures" currently in place. His response didn't make it into my story, but it's worth sharing:

What you need is oversight and hopefully this hearing is going to lead to dramatically better oversight, as well as much more care with who we contract with, looking at backgrounds of contractors before we contract with them, so I would say that the deterrent effect will be forthcoming. I don't see that we need new rules. What we need is an implementation of contract terms. And much more care as to who we contract with.

The Party of No (Jobs)

| Wed Feb. 24, 2010 1:58 AM EST

Some headlines today:

#1: Jittery Shoppers Dim Stores' Hopes "Americans show little sign of regaining the confidence that once made them world-champion shoppers, and that caution has retailers leery about the prospects for the economy in 2010."

#2: Nearly 25% of all mortgages are underwater "First American CoreLogic, the research firm that monitors housing equity, reported Tuesday that 11.3 million homeowners — or 24% of all homes with mortgages — were underwater as of the end of 2009."

#3: Number of US ‘problem’ banks soars "No longer confined to Wall Street, the financial crisis has cascaded over to regional and community banks that are feeling a disproportionate amount of the pain. 'The great recession has very much become a Main Street problem,' said Richard Brown, the FDIC’s chief economist."

#4: Lending Falls at Epic Pace "U.S. banks posted last year their sharpest decline in lending since 1942, suggesting that the industry's continued slide is making it harder for the economy to recover."

And then there's this one, about Republican Scott Brown's vote to support a tax cut that would help employers increase hiring:

#5 GOP's Brown branded turncoat for vote on jobs bill "Literally overnight, the fledgling Republican senator who ended Democrats' filibuster-proof majority by winning a special election in Massachusetts has gone from being the darling of America's conservative activists to being their goat....The conservative Drudge Report colored a photo of Brown on its home page in scarlet. Cries of 'let down,' 'betrayal,' 'sell out,' and 'RINO' — Republican In Name Only — flew around Twitter. By Tuesday afternoon, more than 4,200 people had left comments on Brown's Facebook page, the majority of which were harshly negative."

Ladies and gentlemen, the modern Republican Party. In the midst of the deepest, sharpest economic slowdown since the Great Depression, only five of 41 GOP senators were willing to vote for a modest jobs bill based entirely on tax cuts. One of those five, a conservative hero a mere four weeks ago, is practically excommunicated from the movement for voting in favor of the bill. A bill, to repeat, based entirely on tax cuts that would spur hiring. What's left to say?

Corn on Countdown: Will Palin Help the Dems in 2010?

Tue Feb. 23, 2010 11:34 PM EST

David Corn appeared on MSNBC's Countdown with Keith Olbermann to discuss the 2010 midterm elections and how Sarah Palin's endorsements of Tea Party candidates may actually help the Democrats.

 

David Corn is Mother Jones' Washington bureau chief. For more of his stories, click here. He's also on Twitter.

That Elusive Common Ground

| Tue Feb. 23, 2010 6:30 PM EST

What could Barack Obama offer congressional Republicans in return for support of his healthcare bill? How about malpractice reform? Jon Cohn ponders:

The key is finding ways to fix the malpractice system so that it helps both physicians and the patients, rather than one at the expense of the other. And there are several promising possibilities for achieving that. One is to have doctors report medical errors to hospital administrators, who would then notify patients and begin negotiations....[Another] proposal — perhaps the most intriguing — is to tie malpractice to quality incentives, by offering some sort of legal protection to physicians who demonstrate they have abided by accepted clinical guidelines.

....This is where the Republicans could push the discussion forward. Both the House and Senate health reform bills encourage more experimentation. But they don't set aside enough money. If Republicans wanted to do something to change malpractice, they could call for more funding of these programs — and, perhaps, more aggressive guidance about how to handle the results.

Of course, that would mean achieving malpractice reform, a cause they've long championed, in a different manner than the Republicans have traditionally embraced. But that's the definition of compromise: Finding common ground with an adversary in order to achieve a goal you both share. Obama has shown he's willing to do that. Will the Republicans do the same?

Jon is too....decorous....to say this outright, but the answer is no. The reason is that Republicans have a very specific motivation for pursuing tort reform, and it has nothing to do with actually making tort law fairer. Here's me a few years ago, in a review of Stephanie Mencimer's Blocking the Courthouse Door:

In the 1980s and 1990s, conservative activists began pursuing a series of strategies aimed not just at increasing Republican votes and campaign contributions, but also at reducing Democratic votes and campaign contributions — and doing so in a structural way that would permanently erode the Democratic Party’s ability to win elections. The result was an increased interest in gerrymandering, union busting, voter ID laws, and the K Street Project, a party-wide program aimed at persuading lobbying firms to stop hiring Democrats.

And, of course, tort reform. Tort reform was already a natural Republican Party issue thanks to its support in the business community, but it was [Grover] Norquist, in his usual bald style, who pointed out in 1994 that there was more to it than just that: The big losers in tort reform are trial lawyers, and trial lawyers contribute a huge amount of money to the Democratic Party. “The political implications of defunding the trial lawyers would be staggering,” he wrote.

When it comes to medical malpractice, the Republican Party doesn't really care about "reform." They want one thing and one thing only: caps on punitive damages. Why? After all, big punitive awards, almost by definition, are only handed out in the worst, most egregious cases of malpractice. It's the little suits that are most likely to be frivolous.

Here's why: because big damage awards are where trial lawyers make a lot of money, and trial lawyers support Democrats. Capping damages hurts trial lawyers in a way that serious reform most likely wouldn't.

Democrats, of course, generally support trial lawyers, and in return they get a lot of money from them. Still, there are a lot of Democrats who would support serious efforts at making our malpractice system better and more efficient. This would reduce trial lawyer income, but it most likely wouldn't decimate it the way damage caps would. Republicans, conversely, only care about decimating trial lawyer income, which means that none of them are interested in serious reform. It's caps or nothing. This makes finding common ground more than a wee bit difficult.