2009 - %3, May

The Real Sotomayor Gamble

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| Fri May. 29, 2009 7:13 AM PDT

The New York Times reports:

Judge Sonia Sotomayor’s lucky streak is apparently at least six months long.

A financial disclosure report for the judge, released on Thursday, included this nugget: income of $8,283 for a “Jackpot Game Winning” on Nov. 23, 2008, almost exactly half a year before President Obama tapped her to be on the Supreme Court.

A spokeswoman for the White House said Judge Sotomayor hit it big while gambling with her mother at a casino in Florida.

Impressively lucky, but anyone can win a jackpot game. I'd be more interested to learn whether Judge Sotomayor is any good at poker. President Barack Obama has been known to play.

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On "The Ed Show": Rain, Sotomayor, and Me

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| Fri May. 29, 2009 6:36 AM PDT
From the Thursday's night edition of MSNBC's "The Ed Show." I don't know if you can tell, but I was being rained on, as we discussed the SCOTUS nominee. You can follow my postings and media appearances via Twitter by clicking here.

Regulating Derivatives

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| Thu May. 28, 2009 10:41 PM PDT

The Wall Street Journal reports that big banks aren't happy with the Obama administration's plans to make trading of credit derivatives more transparent by putting them on a public exchange:

Wall Street banks with large derivative-trading businesses have been outwardly supportive of greater regulatory oversight of the $684 trillion market. But behind the scenes, there has been hand-wringing over the details of certain proposals and discussions about how the industry can help shape the rules.

Potentially billions of dollars in revenue is at stake. An effort earlier this decade to improve transparency in the corporate-bond market ended up cutting bank fees by more than $1 billion in a year, according to some studies.

....For credit-default swaps, information about intraday trades and prices has long been controlled by a handful of large banks that handle most trades and earn bigger profits from every transaction they facilitate if prices aren't easily accessible.

For example, credit-default swaps tied to bonds of companies such as General Electric Capital and Goldman Sachs typically have a pricing gap of 0.1 percentage point between the bid and offer price. That translates into a $40,000 margin for every $10 million in debt insured for five years. Greater price transparency could narrow that gap, lowering costs for buyers and sellers but reducing fees for banks.

That's a sad story, isn't it?  When you make trades public, suddenly banks find that they can't rob their clients blind anymore.  Break out your violins, boys and girls.

Paying for College - Part 2

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| Thu May. 28, 2009 9:28 PM PDT

A few days ago I linked to a Robert Reich post in which he suggested that the skyrocketing cost of student loans was forcing too many grads to take high-paying private sector jobs instead of lower-paying but more socially beneficial positions.  As a solution, he recommended limiting loan repayments to 10% of income for ten years, and I sort of agreed.

Well, that hasn't happened yet, but this morning Mike Kruger of the House Committee on Education and Labor emailed to tell me about some of the provisions of the recently passed College Cost Reduction and Access Act:

The biggest thing is the Income-Based Repayment Program that will cap a monthly payments based on income.

Under the income-based repayment program, such borrowers will never have to spend more than 15% of their discretionary income — an amount based on federal poverty guidelines — on student loan payments. Those whose income falls below 150% of the poverty level won't be required to make any payments.

Here's how it could work: Suppose a student has the average $22,000 in student loans, and gets a job making $25,000/year. Assuming the loans have a fixed interest rate of 5.6%, the monthly payment under the income-based repayment program would be $110, vs. $240 under a standard 10-year repayment plan. Obviously, when the student’s income rises in the future, so will the payments.

For some students, the reduced payments won't cover the interest on their loans. For those with subsidized Stafford loans — which are provided to students who demonstrate economic hardship — the government will pay the interest for the first three years of the program.

For unsubsidized loans, the interest will be added to the balance, so a student could come out of the program with a larger loan balance. However, any amount owed after 25 years of qualifying payments will be forgiven. This is significant, because in the past, it was nearly impossible for borrowers to get out from under their student loan debts.

Now, this isn't what Reich was proposing.  You still have to pay back the full amount of the loan eventually (or make payments for 25 years, whichever comes first) regardless of your income.  But it's sort of a nudge in the right direction, so I thought I'd pass it along.

Why Soot Sucks

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| Thu May. 28, 2009 6:30 PM PDT

Here's a most excellent video to illuminate my last blog post on the link between black carbon soot and the melting Arctic. How springtime burning of farm fields may account for 30 percent of Arctic warming to date. The good news: It's an easy 30 percent to fix. The video, from Earthjustice, tells us how in slightly more than 2 minutes. I'm impressed. We need more relevant videos with super clean message lines and good looks.

Growing Up Border Patrol

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| Thu May. 28, 2009 5:59 PM PDT
cbp-kids-300x200.jpg

The United States Border Patrol turned 85 this week. What better way to celebrate than by indoctrinating American youth?

Below, four examples of kid-friendly border patrol fun:

[Read more]

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Nice Try, Terry

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| Thu May. 28, 2009 3:39 PM PDT

From the Washington Post:

Consumer activist Ralph Nader accused Terry McAuliffe Thursday of orchestrating an effort to remove him from the presidential ballot in 2004 when McAuliffe was chairman of the Democratic National Committee.

Nader said that McAuliffe offered him an unspecified amount of money to campaign in 31 states if Nader would agree to pull his campaign in 19 battleground states.

I sort of hope this is true.  I've never been a big McAuliffe fan before, but this would certainly raise my opinion of him.

Pentagon and White House Deny Taguba Allegations About Rape Photos

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| Thu May. 28, 2009 1:24 PM PDT

Unreleased photos of US soldiers abusing detainees in Iraq and Afghanistan "show rape," Major General Antonio Taguba told Britain's Telegraph. Not so, say the White House and the Pentagon. The paper displayed "an inability to get the facts right," a Defense Department spokesman said Thursday. "That news organization has completely mischaracterized the images. None of the photos in question depict the images that are described in that article."

White House press secretary Robert Gibbs also denied the report and took a harsh tone towards the British press in general. "Let's just say if I wanted to look up, if I wanted to read a write-up of how Manchester United fared last night in the Champions League Cup, I'd might open up a British newspaper," Gibbs said. "If I was looking for something that bordered on truthful news, I'm not entirely sure it'd be the first pack of clips I'd pick up."

A spokesperson for the ACLU, which is suing for the release of the photos, told Mother Jones the organization couldn't confirm or deny the Telegraph's report. "The government has not provided us with a description of all of the photographs, and we do not have first-hand knowledge of what the photographs show. As a result, we don’t have enough information to comment on these reports," the spokesperson said in an emailed statement.

We'll continue to monitor this story.

More Tough Talk

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| Thu May. 28, 2009 12:29 PM PDT

It would be nice to see an English-language translation of the entire interview, but M.J. Rosenberg has some fairly eye-popping tough talk on Israel from former ambassador Martin Indyk over at TPMCafe.  It's worth checking out.

Spending and Taxes in California

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| Thu May. 28, 2009 12:15 PM PDT

Are California's budget woes due to skyrocketing spending?  Michael Hiltzik says this is a myth:

Analyzing the 2008-09 budget bill last year, the legislative analyst determined that since 1998-99, spending in the general fund and state special funds — the latter comes from special levies like gasoline and tobacco taxes — had risen to $128.8 billion from $72.6 billion, or 77%.

During this time frame, which embraced two booms (dot-com and housing) and two busts (ditto), the state's population grew about 30% to about 38 million, and inflation charged ahead by 50%. The budget's growth, the legislative analyst found, exceeded these factors by only an average of 0.2% a year.

There's a lot of truth to this, but I think it goes too far.  For starters, Hiltzik uses a special measure of inflation, not the usual CPI-U, and he doesn't include spending from bond measures.  The chart on the right, using budget data from the Department of Finance, shows per-capita spending including bond measures, adjusted for inflation using the standard CPI figures from the BLS.  There are two things that jump out at you.  First, even using a standard measure of inflation, Hiltzik is right: per capita spending in the decade between 1999 and 2009 has barely budged.  It's up about 6%.

At the same time, if you compare it to 1997 it's up 23%.  California went on a spending spree during the dotcom boom and we never returned to our old levels even after the bust.  What's more, spending in the years between 1999 and 2009 was up even more.  In the decade between 1997 and 2007, per capita spending increased an impressive 39%.  We've tightened our belt considerably in the past couple of years, but that's against the background of some pretty sizeable increases in the intervening years.

California has multiple problems.  Prop 13 reduced our tax base permanently and made it all but impossible to adjust other taxes to make up for it.  Citizens have approved bond measure after bond measure in the seeming belief that because they don't raise taxes, they also don't cost any money.  The governor and the legislature have relied on way too much smoke and mirrors.  But spending has also gone up.  There's just no way to understand the whole picture without acknowledging that.

UPDATE: California's population actually grew about 15% between 1998 and 2008, not 30%.  However, that was just an arithmetic error on Hiltzik's part.  The overall budget growth result that he quoted from the LAO is correct.

(I used population figures from the Census Department in my calculations.  So the per capita spending numbers in the chart should be correct.)