While attempting my first half-marathon, I decided that listening to a podcast would sufficiently distract me from my wheezing more than my usual music playlist. So as I set off, I hit play on Bill Maher’s HBO show, Real Time.
If you’ve read this blog before, you may be surprised to hear that I would listen to Maher’s show, but I find it thought-provoking and funny, and while it is heavily slanted away from many of my views (at least fiscally), I like that Maher is usually not afraid to call “BS” on his fellow liberals when required, and he almost always has some element of balance to his guests, and treats them respectfully. I think it’s an entertaining and relevant format, and have enjoyed it ever since it was “Politically Incorrect” years ago on Comedy Central. Being on HBO gives it that extra little kick as well as nothing is out of bounds!
Anyway, five minutes into the podcast, I cringed in horror when I was told that his guests that evening would be Michael Moore, Paul Krugman and Elliot Spitzer. Maher usually does a good job of at least providing a little bit of ying to the typical Hollywood liberal yang, but I guess Fox News had a monopoly on guests that night. Despite my initial urge to turn off the podcast and go back to the new Pearl Jam album, I decided to stick with it. Like they say, keep your friends close, but your enemies closer.
Moore kicked off the show promoting his new movie that lays out the evils of capitalism. The irony of promoting a film about the evils of capitalism was apparently lost on Maher and Moore.
The conversation moved on to health care and Moore started ranting about the need for a governmental health care system punctuating it with the fact that “the New York Times said two-thirds of the American public want a public option.” Whether the NYT is capable of unbiased reporting on this poll remains to be seen, but let’s assume this was a scientific poll.
Herein lies the problem.
The results of a public poll allow Moore and more importantly, real politicians that matter, to bypass the difficult conversations around healthcare reform, and go straight to the populist view that “the American people want it, so we must give it to them!”
However, before we throw a trillion dollars at the problem just because “the people” want to, we need to take a look at who wants the government to continue spending vasts amounts of money and why.
The key to understanding any public opinion on public spending is to understand that, in 2009, 47% of Americans will pay zero or negative income taxes. Therefore, 47% of Americans have access to all the benefits of new government spending, without contributing a dime to the bill. It’s like the friend that is always at happy hour, but never buys a round.
Therefore, it’s immediately clear why at least 47% of the 67% quoted by the NYT want a public option, or more broadly, anything that is funded by the government. Who doesn't like free stuff? The poll question might as well been, if the government is willing to buy you a new car, would you want it? I couldn’t find the equivalent numbers for those who only pay a small % of income tax, but I’m sure that would get the 47% much closer to 67%.
Therefore, the sneaky trick of politicians is to get as few people as possible paying taxes. That way, when politicians want to expand government programs that will provide them with more job security, a huge segment of the population will automatically be in favor of those proposal because they stand to get something from the government for nothing. Once this free-riding-off-the-government merry-go-round starts, it’s very difficult, if not impossible to stop it or even slow it down, just ask Europe.
We’ll get to fixing the tax code another time…
In the meantime, if we rely on polls to draft legislation, shouldn’t the next House bill declare that every other Friday is free pizza day - all you can eat pizza, paid for by your local pizzeria owners. We could call it Populist Pizza Day. Hey, I’m sure a NYT poll would show that at least 75% of Americans would want that!
Our politicians need to start passing government spending bills only if they make sense and are fiscally sound, not just because they are popular. Unfortunately, they don’t have the guts to buck the populist sentiment because it’s much easier to run a popularity contest than it is to run the United States of America.
Tuesday, October 13, 2009
Tuesday, September 29, 2009
Banker Bonus Bashing Continues...
Based on the attention on banker bonuses at the G20 meetings, you would have thought banker bonuses were the root cause of all our global problems - financial meltdowns, expensive oil, global warming, poverty, nuclear proliferation, Kanye West’s behaviour and the Wiggles.
The G20, a collection of the most powerful men and women on the planet, have spent a huge amount of time and conjuring up bonus restrictions to curb the “fat cat bonus” culture.
As usual, these “leaders” are way behind the curve as most banks have already changed their compensation structures, including limiting the use of guaranteed bonuses, increasing the proportion of compensation received in stock, etc. So, this work serves no purpose other than to generate hollow headlines that will resonate with the general public.
In fact, the only real impact on these restrictions is to make government investments in financial institutions worth less, and therefore, yet another drain on taxpayer resources. Restricting compensation at companies still under the government umbrella eliminates the last tool they have to attract the best talent in order to make the most money. If you can’t pay the good bankers/traders who are very successful and profitable, they will leave as there is no shortage of competitors who will be more than willing to pay them what you are not permitted to pay them.
Ask any economist, or anybody that knows anything about the financial system, what they believed caused the financial crises, and I doubt the banker bonus issue would be in anyone's top 5 causes. It’s even debatable whether bonuses had any material role in the crisis at all – a point highlighted in a good op-ed here.
Governments have a vested interest in ignoring the real causes because if they did even a cursory review of the causes of the crisis, they would end up looking in the mirror more often than not (Congress requiring loose standards for low-income mortgages via Freddie/Fannie, very low interest rates, tax credits for mortgage interest, etc.). Governmental policies had just as big or an even bigger role in the crisis than any group of bankers, traders, homeowners, mortgage brokers, etc..
Typical populist politics - why would governments criticize themselves when smashing bankers for working hard and making a good living works so well at the polls?
The G20, a collection of the most powerful men and women on the planet, have spent a huge amount of time and conjuring up bonus restrictions to curb the “fat cat bonus” culture.
As usual, these “leaders” are way behind the curve as most banks have already changed their compensation structures, including limiting the use of guaranteed bonuses, increasing the proportion of compensation received in stock, etc. So, this work serves no purpose other than to generate hollow headlines that will resonate with the general public.
In fact, the only real impact on these restrictions is to make government investments in financial institutions worth less, and therefore, yet another drain on taxpayer resources. Restricting compensation at companies still under the government umbrella eliminates the last tool they have to attract the best talent in order to make the most money. If you can’t pay the good bankers/traders who are very successful and profitable, they will leave as there is no shortage of competitors who will be more than willing to pay them what you are not permitted to pay them.
Ask any economist, or anybody that knows anything about the financial system, what they believed caused the financial crises, and I doubt the banker bonus issue would be in anyone's top 5 causes. It’s even debatable whether bonuses had any material role in the crisis at all – a point highlighted in a good op-ed here.
Governments have a vested interest in ignoring the real causes because if they did even a cursory review of the causes of the crisis, they would end up looking in the mirror more often than not (Congress requiring loose standards for low-income mortgages via Freddie/Fannie, very low interest rates, tax credits for mortgage interest, etc.). Governmental policies had just as big or an even bigger role in the crisis than any group of bankers, traders, homeowners, mortgage brokers, etc..
Typical populist politics - why would governments criticize themselves when smashing bankers for working hard and making a good living works so well at the polls?
Thursday, September 17, 2009
You Made Your Bed, Now Sleep In It
I have no particular interest in Massachusetts politics, but a recent story coming out of the Massachusetts legislative bodies highlights why the general public perception of elected representatives is at an all-time low.
Democratic Senator Edward Kennedy passed away recently (R.I.P.), vacating one of Massachusetts’ seats in the US Senate. Given the slim super-majority held by the Democrats in the US Senate, the vote attached to this seat is hugely important in the success or failure of various proposals before the Senate (health care, energy, card check, etc.). As such, Democrats are eager to fill that seat with one of their own as soon as humanly possible.
However, current Massachusetts law requires a special election to be held before the seat can be filled (undoubtedly by a Democrat – this is Massachusetts after all), and the earliest that election could be held is in January 2010.
In order to immediately fill this vacancy, the Massachusetts legislative bodies are in the midst of proposing legislation that would change the states succession law to permit the Governor to name an interim Senator to fill the vacancy until the special election is completed.
Sounds reasonable, right? What state wouldn’t want to make sure it has its full representation in the US Senate? That’s what Illinois did when Senator Obama became President Obama, so what’s the problem?
Prior to 2004, the Massachusetts Governor had the ability to name a temporary replacement, but in the run up to the 2004 Presidential Election, when Massachusetts Senator John Kerry was up against President Bush, the Massachusetts House and Senate (currently 90% and 88% Democrat, respectively) passed a bill that removed the Governor’s ability to immediately appoint a temporary replacement.
Why did they do that?
In 2004, Mitt Romney, a Republican, was Governor of Massachusetts and the Massachusetts legislature (again, mainly Democrats) was concerned that if Senator Kerry won the Presidential Election, his vacated US Senate seat would be filled by Romney with a fellow Republican. To alleviate that concern, they simply changed the law, removing the Governor’s power to appoint a temporary replacement, and requiring the seat to remain vacant until filled by the winner of a special election, which would unquestionably be won by a Democrat.
Fast forward to today. Deval Patrick, a Democrat, is now Governor of Massachusetts and the Massachusetts legislature has changed their tune.
Both bills remind me of the scene in Big Daddy when the 5-year old, Julian, is playing poker with the delivery guy and just changes the rules on each had so he always wins:
The Massachusetts Democrats are doing the same thing as 5-year old Julian – changing the rules on the fly to suit their current needs. What’s next, changing the law to say that only Kennedy’s or heirs to enormous ketchup fortunes can be elected to the US Senate in Massachusetts?
Unfortunately, this is just business as usual - politics for politics sake - and is a complete waste of government time and taxpayers money.
Democratic Senator Edward Kennedy passed away recently (R.I.P.), vacating one of Massachusetts’ seats in the US Senate. Given the slim super-majority held by the Democrats in the US Senate, the vote attached to this seat is hugely important in the success or failure of various proposals before the Senate (health care, energy, card check, etc.). As such, Democrats are eager to fill that seat with one of their own as soon as humanly possible.
However, current Massachusetts law requires a special election to be held before the seat can be filled (undoubtedly by a Democrat – this is Massachusetts after all), and the earliest that election could be held is in January 2010.
In order to immediately fill this vacancy, the Massachusetts legislative bodies are in the midst of proposing legislation that would change the states succession law to permit the Governor to name an interim Senator to fill the vacancy until the special election is completed.
Sounds reasonable, right? What state wouldn’t want to make sure it has its full representation in the US Senate? That’s what Illinois did when Senator Obama became President Obama, so what’s the problem?
Prior to 2004, the Massachusetts Governor had the ability to name a temporary replacement, but in the run up to the 2004 Presidential Election, when Massachusetts Senator John Kerry was up against President Bush, the Massachusetts House and Senate (currently 90% and 88% Democrat, respectively) passed a bill that removed the Governor’s ability to immediately appoint a temporary replacement.
Why did they do that?
In 2004, Mitt Romney, a Republican, was Governor of Massachusetts and the Massachusetts legislature (again, mainly Democrats) was concerned that if Senator Kerry won the Presidential Election, his vacated US Senate seat would be filled by Romney with a fellow Republican. To alleviate that concern, they simply changed the law, removing the Governor’s power to appoint a temporary replacement, and requiring the seat to remain vacant until filled by the winner of a special election, which would unquestionably be won by a Democrat.
Fast forward to today. Deval Patrick, a Democrat, is now Governor of Massachusetts and the Massachusetts legislature has changed their tune.
Both bills remind me of the scene in Big Daddy when the 5-year old, Julian, is playing poker with the delivery guy and just changes the rules on each had so he always wins:
Julian – “I got a 2, a 4, a 10, an 8, and a 6. I WIN!!!”
Delivery guy – “WHAT??”
Julian – “I WIN!!!”
Delivery guy – “HEY I got the same hand as that last time and I didn't
win...”
Julian – “WELL I WIN!!!”
The Massachusetts Democrats are doing the same thing as 5-year old Julian – changing the rules on the fly to suit their current needs. What’s next, changing the law to say that only Kennedy’s or heirs to enormous ketchup fortunes can be elected to the US Senate in Massachusetts?
Unfortunately, this is just business as usual - politics for politics sake - and is a complete waste of government time and taxpayers money.
Subscribe to:
Posts (Atom)