Friday, December 12, 2008

A Wire Tap on a Governors Phone?!?!?!

While I enjoyed this actually sort of humorous piece in the Trib the other day, I think it missed the over all point.
When news broke that Gov. Rod Blagojevich allegedly got busted on tape gabbing about various shakedown schemes, you had to wonder, hasn't he ever seen "The Sopranos"? How could he ignore the lessons of TV crime shows? Everybody knows:

1. Never talk "business" on your home or office phone. Ever. There was a reason Tony Soprano had his underlings use pay phones. And considering that the feds have been on his heels since 2003, perhaps the governor should have known better.
Okay as for point #1... very true.  Never talk business on the phone.  But Tony and company always worked under the assumption that they were being listened to by the Feds.  Blago had no reason to think this because, you know, getting a wire tap on a governor's phone is unheard of in this country.

I mean that's something that you only seen in bad summer blockbuster movies or the next John Grisham novel.  This never ever happens in real life--a wire tap on the governor's phone.  It still amazes me.

This Blago stuff is one of the most amazing stories, frankly, ever in American politics. Attempting to get writers fired from the Chicago Tribune, selling the Senate seat, shamlessly trying to extort money from a children's hospital... I mean, it's all stranger than fiction.  Disgusting... and absolutely hilarious in that 21st century ironic kind of way.

Oh and to Cliff Schecter of the Guaridan who asked "Where the hell is Eliot Ness when you need him?"  His name is Patrick Fitzgerald and he has been doing his job quite well.  

Thursday, December 11, 2008

Because it's fun to not know what you're talking about

Apparently Harold Meyerson had so much fun sounding like an idiot last week, that he did it again this week. What was the topic at hand? Why Chicago politics!! And if the inner Beltway doesn't know anything, it's Chicago politics. Thankfully for us/me, Mr. Meyerson started typing.

Chicago's Karma
by Harold Meyerson
Wednesday, December 10, 2008; Page A25

At moments like this, it's worth remembering that Illinois gave us both Abraham Lincoln and Al Capone.

It also gave us Ronald Reagan, Dwyane Wade, Miles Davis, Luis Farrakhan, Roger Ebert, and Vince Vaughn. But hey, I'm sure there is a reason why he picked Lincoln and Capone (both of whom were not born in Illinois).

Plainly, some sort of karmic balance controls the destiny of that heartland state. For every inspiring leader that Illinois produces, it must also turn out a scoundrel or two -- petty thieves in governmental office, egomaniacal monsters in corporate suites -- who share an indifference to the idea of a public trust.

He clearly doesn't know his Illinois history or politics. There have been a lot more bad than there has good. And oh yeah, Al Capone never held political office, but again, with Harold, that's just details.

On Monday, Sam Zell, the nation's only newspaper mogul who genuinely detests journalism, placed Chicago's signature Tribune Co. into bankruptcy -- effectively wiping out his employees' equity in the company and a share of their pensions, while still managing to come out pretty well himself.

If there is one thing journalists hate, it's Sam Zell and Harold seems to hate Zell more than most. You would think that Zell was a baby seal killer who kicked puppies while paving over a beach. God forbid someone different buy a newspaper. Has the Zell Era worked out? No, not really. But guess, what, neither is the Old Era.

Yesterday, Illinois Gov. Rod Blagojevich was indicted for allegedly trying to dispose of what had been Barack Obama's Senate seat in a private auction, with all proceeds to go to the care and feeding of Rod Blagojevich.

Just remember, Blagojevich's website in 2006 was We should have known then that anything was possible with Rod, he is a Cub fan after all. But why does Harold bring up Blago right after Zell? I wonder what they have in common.

At their core, however, the stories of Blagojevich and Zell tell essentially the same tale -- that of men in positions of great power who believed that their only real responsibility was to themselves.

WHAT?!?!?! Did he just compare a totally corrupt governor to a real estate mongul—granted with a big ego—who hasn't broken the law?

It's been a great week for resurrecting stereotypes: Not only does Blagojevich come off as machine pol straight out of "The Front Page," but Zell has more than a passing resemblance to the guy who gets hired this time of year to play Scrooge.

No, no it hasn't been a great week for stereotypes. Blago is a sick, disgusting human being (if guilty). Zell is a businessman whose recent business move didn't work out. Big difference Harold. Very big difference.

But Dickens never contemplated a Scrooge with so much power. Zell disparaged and to a considerable degree dismantled the staffs of the major newspapers he owned, one of them (the Los Angeles Times) a great national paper. He did so to pay down the debt he incurred when he bought Tribune last year -- debt he incurred by refusing to put much of his own money into the paper.

Should we tell Harold that the old owners of Tribune agreed to the deal? That they couldn't give away the Tribune Co. two years ago? That in a weird way, Zell saved the day, and then being the savvy businessman that he is, he didn't put much of his money on the line. Should we also tell Harold that most business deals go down this way? Or is that too much detail?

...Zell stands to recoup a decent share of his own $315 million investment because he structured it in such a way that a bankruptcy court must treat him as a creditor. Smart guy, that Zell. As for the multitude of reporters, editors and other laid-off employees who are still collecting their severance payments, Tribune has announced that their payments will come no more.

Harold got one thing right, Zell is smart. But guess what, he didn't bring down the Tribune or the L.A. Times! There are major cuts at non-Zell owned papers like the New York Times and Boston Globe! But hey, let's compare Zell to Blago because they're clearly on the same level on the horrible people scale.

Zell isn't the sole culpable party in the disgrace that is Tribune.

The board members who sold him the company could have sold it, in disaggregated parts, to buyers who were willing to put up their own money.

So now you admit that Zell isn't the problem? So everything you said about Sam is just you running your fingers? Make up your mind Harold! Important people may be reading! So let's get to the end where I'm sure you'll tie this all up and clearly lay out why you're comparing Sam Zell to Blago.

It's been a rough week for employees in Chicago. Last Wednesday, the workers at Republic Windows and Doors were informed that their factory would close last Friday and that they would not receive the 60 days' pay mandated by federal plant-closing statutes. Republic's workers occupied the plant, pledging to stay until either their employer -- which seems to have bought a lower-wage plant in Iowa -- or its lender, Bank of America, paid them what they were owed. Yesterday, Bank of America agreed to do just that.

Good for the sit-downers. Blagojevich may be a throwback to a cruder age, and Zell may be the boss from hell, but in their lack of responsibility to the people who vote or work for them, they are emblems of the same moral fecklessness that the Republic workers fought -- fecklessness that has depressed the prospects of ordinary Americans throughout the long age of Reagan that is now, one hopes, coming to an end. Barack Obama means to build a more equitable nation, but it would help him in that task if more workers sat down, or hauled the Sam Zells of the nation into court. It's not just Illinois' karma that could use some upward balancing.

To quote Bill Simmons, I will now light myself on fire. What happened to Capone and Lincoln? Why did the Republic Windows guys come into play? And once again, why is Harold comparing Blago to Zell? And why didn't the Washington Post editors:

1) Edit this

2) Kill this column?


Monday, December 8, 2008

The Most Popular Person In Washington, D.C.

It was always a long shot but it is now official. The Democrats will not have a filibuster proof 60/40 split in the Senate. Saxby Chambliss'* victory in Georgia on Tuesday night was the first 'official' sign that the Democrats weren't going to have the SUPER-MAJORITY needed and while things in Minnesota are still up in the air, it now appears that Norm Coleman^ will win in Minnesota. So what does this all mean... well now the Democrats need two Republicans to invoke cloture and thus bring a vote to the floor of the Senate (little know fact about the U.S. Senate, it actually operates at the SuperMajority level of 60 votes).

So who might these people be? 538 ran them down the other day and there are no major surprises:
59. Snowe (ME). Obama won Maine by 18 points, making it the bluest state to be home to a Republican senator -- and in fact, it has two of them. Per Voteview, Olympia Snowe is incrementally more liberal than Susan Collins; she's also up for re-election two years sooner. It will be very interesting to see how the two of them will legislate under an Obama administration.
60. Collins (ME). See above.
61. Specter (PA). Under re-election pressure in a state that Obama carried by double digits. Mitigating factor: possible that he'll be under pressure from the right too in the form of a primary challenge.
62. Lugar (IN). On good terms with Obama, who (barely) won his state. Voteview has him becoming slightly more liberal over the past several Congresses.
63. Voinovich (OH). Under serious re-election pressure. Has often been moderate -- or even slightly left of center -- on pocketbook issues, and increasingly so on other ones.
What does this mean? The state of Maine is going to be getting a ton of money over the next two years for pet projects. But I think it gets more complicated than that. With the Democrats so close to having a filibuster proof Senate, clever GOPers will position themselves so that they are that final swing vote. This will bring home the bacon for their constituents—so expect to hear Specter and Voinovich's names, along with Snowe and Collins, a lot in the next two years.

Also, I would expect Mary Landrieu and other conservative Democratic Senators to move to the right. That seems odd, but again, it puts them in a better position to bring pork projects for their state. This looks good to the constituents and helps in re-election campaigns.

Politics aside, the Democrats are in a fantastic position to get a lot of things done without consulting the Republicans. Since they're only going to need two votes to get whatever they want done, the Republicans have little chance of stopping them. Snowe, Collins, Specter, and Lugar are all better off ditching their party on most issues if it allows them to get money or projects for their home state.

* Doesn't sound like a very American name does it? Who names their child Saxby? Okay so his first name is Clarence. But Saxby... really?
^ If there was ever a 'Soter name, this is it.

Wednesday, December 3, 2008

Harold Meyerson: Idiot

I've been saying for years that the most overrated newspaper in America is the Washington Post. Sure, they cover the political side of D.C. very well but they still get out scooped far too often when you consider they have homefield advantage. But their entertainment coverage is sub-par. They do a bad job with world news and they do a horrible job covering the metro area (note: I lived in D.C. for five years between 2000 and 2006).

But what I always found interesting about the Post was that their lack of good columnists. I've always enjoy Marc Fisher but their op-ed page and writers have always seemed more reactionary than at the forefront. And now I can see why, because when they try to be out there at the forefront of the news you get crap like this. So in honor of Fire Joe Morgan calling it quits, it's the policy equivalent of what Ken Tremendous et all used to do. Our subject today? Harold Meyerson.

As he prepares to move back to Texas, our 43rd president is the beneficiary of Bush fatigue. The nation has long since repudiated him. Americans are looking ahead to the promise of Barack Obama.

Good start. How can this possibly go wrong? An anti-Bush column is harder to mess up than the Bush Administrations handling of pretty much anything!

And it's lucky for George W. Bush that they are, because his handling of our plunging economy is Hooverian in both its substance and inadequacy.

Ummm, okay. What's happening here?

Herbert Hoover, we should recall, had a program for dealing with the Depression. It consisted of lending to banks but opposing fiscal stimulus or direct aid to individuals. Which is why Hank Paulson's frenzied endeavors to prop up the banking sector and Bush's dogged resistance to assisting anybody else amount to pure neo-Hooverism.

Harold, Harold. Did you forget that we already had a stimulus? And about those banks... oh wait a second... okay.

Under immense pressure to do something, in late 1931 Hoover asked Congress to establish the Reconstruction Finance Corporation, to provide funds to banks it deemed creditworthy.

Yes! See this is the problem Harold! Hoover reacted TOO SLOWLY. It had been nearly two years, bank runs had taken place, Hoovers cash injection to banks happened at least 12 months too late. You can call W a lot of things, but he and his people did not wait too long to get money to the banks. They acted very quickly there, within weeks, but hey I'm going to guess you've never taken a history or economics class so this 'fact' is lost on you.

As breadlines lengthened, he vetoed a bill appropriating funds for public works on the grounds that it was inflationary and contained pork-barrel spending. Bankers would be saved; everyone else was effectively damned.

But see, this really didn't work out too well for FDR—the public spending that is. It actually didn't really help the American economy at all in the short run.

The Bush administration's approach to today's meltdown is to direct all its energies and largess to lending institutions. There is, as yet, no program to help floundering homeowners renegotiate the terms of their mortgages.

Yeah, but that's what they should have done. This is what the Swedes did in 1992 and what the Japanese didn't do in the 1990s. You're basically arguing that Bush should be more like Japan and Hoover (do nothing) and less like the Swedes (do something).

It's becoming increasingly clear, however, that while saving the banks may limit further calamities, it doesn't really save anybody else. Even with government-guaranteed lines of credit, financial institutions are refusing to lend money.

But it does! See if the banks don't have any money they won't lend it to anyone! Right now they have money and are hopefully just letting things sort out. Maybe Mr. Meyerson is calling for more bad loans from banks? I'm not sure... and yeah, I'm a little worried that banks aren't lending money right now, but you know what... maybe they're just getting their house in order. Figuring out what they own and who they owe money to. If banks are not lending money in six months, then yes, let's panic. But just because things haven't turned around in TWO MONTHS doesn't mean jack shit.

And this is the problem with the reporting of the Wall Street meltdown, credit crisis, and now the recession. Most of the media is expecting this to go away tomorrow. That just like this everything will be fixed. But it doesn't work that way. It takes time.

In a sense, Bush's inactivity is even less excusable than Hoover's. Unlike Hoover, Bush could learn from the successes of New Deal and World War II-era programs to revive the economy.

But he is doing something! Haven't you been paying attention? Bush and friends are giving billions (I mean trillions) of dollars away! Did you miss the bailout?

What's more, virtually every reputable conservative economist, from Martin Feldstein on down, now supports a government stimulus program.

True, but Congress needs to pass this and Congress is going to play politics, hold their breath for a few weeks, and let Obama sign that law.

So where's the outrage? Why aren't demonstrators besieging the White House? Where are the "Welcome to Bushville" signs in those neighborhoods where abandoned homes outnumber the occupied ones?

Well for starters 25% of Americans aren't unemployed and the farms haven't gone under and people's entire savings weren't wiped out... but that's details Harold. Details!

Yet in the hearts of his countrymen, Bush's place is already fixed. Even before the financial collapse, he was in the ninth circle of presidential hell, with Buchanan and Hoover.

Well at least you got one thing right.


Monday, December 1, 2008

Obama and Education

With Barack Obama now only a few weeks away from becoming the 44th President, let’s take a look at what he said during the campaign about education and what his education policy might look like. While education is probably about tenth on his list of things to do; some of Obama’s most interesting policy ideas during the campaign were in education.

First the facts about U.S. education—it ain’t fair and the Federal government has little to do with it. Less than 10% of total spending on schools comes from the Feds. That means the states and local governments come up with over 90% of all school funding. This reduces the Feds roll in education.

However, one of the few major domestic policies that George W. Bush was able to get done was No Child Left Behind. When this was passed at the beginning of Bush’s tenure, it was a bi-partisan effort and when completed everyone patted each other on the back. Sadly, NCLB looks much better on paper than when put into action.

It’s hard to criticize a policy where policymaker’s hearts were in the right place, but NCLB has been a minor disaster. It was poorly thought out, somewhat unjust, and gave the states far too much control for what was supposed to be a national policy. NCLB set national standards that schools had to meet, but the catch was that each state was allowed to design their own means of evaluation—most states crated easy standardized tests. The result is bizarre numbers like this: 90% of Mississippi 4th graders were declared proficient by the state, but only 22% met the national standard.

Can and will Obama bother fixing NCLB? It’s hard to say and nothing in his campaign rhetoric leads me to believe that he will. This isn’t necessarily a bad thing, throwing more resources and money at NCLB probably would be a mistake.

So what can we look for Obama to do? Recent academic work has discovered that early intervention of “at risk children” or pre-school aged kids by non-profit services and/or educators has had promising results. Obama has mentioned pre-school programs and other programs that would involve early intervention a number of times on the campaign trail—I would expect this to be his pet project (and this is also a post for another day…)

Obama has suggested a $4,000 tax-credit for college fees noting fears that nearly 2 million Americans will not go to college between 2002 and 2010 because they can’t afford it. I find this somewhat hard to believe. There are plenty of options students have to pay for school—student loans are not that difficult to obtain—and while costly, they’re worth it. The lifetime earnings a college grad are much greater than those of a one with only a high school education. On the flip side college is very expensive for the middle class and there isn't a lot of money for them to help pay for university.

In September Obama announced that he would double federal funding for charter schools. This is exciting news as charter schools have, thus far, gotten great results in urban America.

Obama would also like to create a career ladder for teachers. A policy like this would create a pay structure for teachers based on classroom results and a clearer career path. This is actually ingenious—if it works. How do you measure results in the classroom? And setting out a career path for teachers—which has been ignored—could be a roaring success if done correctly.

All in all, some very interesting ideas coming out of the Obama camp in regard to education. Personally, I’m more than sold on the early childhood intervention and education and I would love to see work done there. Everything else is pretty sound and one would have to nit-pick at these proposals to find any problems with them. Outside of Obama’s rhetoric, his education ideas are probably the most exciting and most sound.

Monday, November 24, 2008

What's the Fed to do?

Even though Wall Street has suddenly decided that American companies are worth 15% more than they were worth at about 2:00p.m. est on Friday. I still don't think that anyone has any clue what's going on with the American and global economy. Last week was mostly bad news all around. This is a short week here in the States and I expect it to be quiet.

But of interest is a continuation of what I touched on Friday... what is the Fed to do?

Right before Halloween, the Fed set the target rate for federal funds at 1%. But the reality is much lower than that: the effective rate according to the Economist is 0.25% (it is now about 0.50%):
The irony is that, were the gap to disappear, there would be a de facto tightening of monetary policy. On the other hand, if the effective rate remains near zero, the Fed will have to turn to more unconventional means of stimulating growth. Michael Feroli of JPMorgan Chase proposes outright purchases of mortgage-backed securities—another faint echo of Japan.
So what are unconventional means?

I'm not sure, but one suggestion: Don't do what Japan has done since the 1990s.

Friday, November 21, 2008

And suddendly things look bad again...

The stock market is down, unemployment is up, consumer spending is down, banks aren't loaning money to anyone... that's right the economy still looks bad. And while we might have dodge a total collapse of the credit markets, the key word is "might". A week ago I think most people would have assumed that we/the world had done so. Now? Not so much.

And on top of all this the truly scary word of deflation has begun to be uttered after the announcement this week that consumer prices had fallen 1% in October.

Deflation is, simply, a continuous fall in the general price level of goods and services. This sounds like a great thing—prices go down meaning you and I can buy more stuff. But that's in the very short term. If firms are making less from their goods or services, that means they have to cut back on costs—that can mean anything from cutting jobs, wages, or closing factories. And therefore you and I will be making less, and thus not spending more.

The other worrisome aspect of deflation is that firms and consumers may decide to wait to build/expand their business or wait to purchase goods. If prices are falling, I may wait to buy a new TV or car knowing that in 9 months it will cost less. A firm may wait to build a new factory because the price of the material goods and labor will be less in six months than it is today. What this means is that people aren't spending money and therefore demand continues to fall.

From a policy perspective there is only so much a government can do. Interest rates can only be cut so low—zero percent obviously. The Fed has set interest rates at about 1%. So it can't cut rates too much more (and more on that later).

Krugman and some others have begun to call for a huge stimulus. This makes sense since it would inject billions into the U.S. economy (if Americans are good at anything, it's spending money). While this might be problematic—people might just save that money, pay off debt, or invest it in some market—it also may fix the problem at hand if people spend the money.

But again, policy makers can only do so much in a deflation cycle or period. However, we are seeing policy makers acting quickly and doing something, and as I've aruged, something is better than nothing. Why? Becuase the last time we did nothing, the Depression went from bad to Great. Japan did nothing and it's stuck in 1991. Sweden did something at it is still one of the strongest economies in the world. So although you and your neighbor and some talking heads on TV might not like, sitting on our hands has proven to be the wrong decision.

Wednesday, November 19, 2008

Three Reasons Why We Should (and Should Not) Bailout GM (and maybe Ford)

Although it doesn't look likely at the moment, The Big Three from Detroit have gone to Congress asking for money to bail them out.

I'm working under the assumption that Chrylster is unsavagable. Also, as a disclaimer, your author owns seven shares of GM stock. That's right, $20 bucks! Drinks on me!

Why the U.S. Government Should Bailout GM (and maybe Ford)
1.) According to David Cole of the Center for Automotive Research if:
Detroit’s production falls by 50%. He estimates that in the first year that
would cost 2.5m jobs: 240,000 from the carmakers themselves; 795,000 from
suppliers and 1.4m from other firms indirectly affected. The cost in transfer
payments and lost taxes would exceed $100 billion over three years. Some of Mr
Cole’s assumptions are likely to be too pessimistic, but his blood-curdling
forecast and others like it have helped to convince legislators that the $50
billion of help that the carmakers are asking for would be cheap at the price.

If the Center for Automotive Research's cost/benefit analysis is even sort of on target, giving the money to GM and Ford is a no brainier.

2.) The long term prospects of each company are actually pretty good. Both have a strong presence in Europe (especially Ford) and other emerging markets (especially GM). They have both started producing competitive compact and fuel efficient cars (everyone seems to rave about the Focus) moving away from the SUVs that American drivers demanded for such a long time. And in 2007 GM and Ford struck a deal with the UAW union which allowed them to cut costs by about $1,000 a car.

Should they have been making more fuel efficient cars? Probably, but that's easy to say today. The SUV market in the 90s and early 2000s was not a result of Ford and GM forcing American buyers to buy big gas guzzling cars. SUVs were attractive to American consumers because gas was so cheap... thanks in part to the U.S. government levying such small taxes on gasoline.

3.) Lehman Brothers - When the Treasury let Lehman Brothers die everyone seemed to support the decision. But it quickly became evident that letting Lehman 'die' might have been a huge mistake. The financial world simply was not ready for a bank as big as Lehman Brothers to go "buh-bye". Is the American economy ready to lose a few million jobs? And what about the pressure the bankruptcy of GM and Ford would have on the Pension Benefit Guaranty Corp--the Federal agency that insures benefits to retirees in the auto industry and other industries?

Why the U.S. Government Should NOT Bailout GM (and maybe Ford)
1.) When Becker speaks, I listen:

Nevertheless, I believe bankruptcy is better than a bailout for American consumers and taxpayers. The main problem with American auto companies is that during the good times of the 1970s, 1980s and 1990s, they made overly generous settlements with the United Auto workers (UAW) on wages, pensions, and health benefits...

It is not that cars cannot be produced profitably with American workers: the American plants of Toyota and other Japanese companies, and of German auto manufacturers, have been profitable for many years. The foreign companies have achieved this mainly by setting up their factories in Southern and border states where they could avoid the UAW, and thereby introduce efficient methods of production. Their workers have been paid well but not excessively, and these companies have kept their pension and health obligations under control while still maintaining good morale among their employees.

Bankruptcy would help GM and Ford become more competitive by abrogating significant parts of their labor contracts with the UAW.

2.) A.I.G. - What a mess this has become. This is in part the fault of the Treasury which basically has given A.I.G. billions upon billions of dollars without out any oversight. Conservatives cannot complain about welfare anymore after the A.I.G. fiasco. These guys are paying themselves bonuses for running the company into the ground... why? Because they don't want to lose the talent that nearly caused the company to disappear. Congress and taxpayers are right to be cautious about handing any private company billions of bucks after watching A.I.G. reward themselves for being total fucking morons (pardon my French).

3.) While I don't agree with much of Mitt Romney's reasoning he does make an important point in his Op-Ed today:
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
A bailout does not guarantee further restructuring within Ford and GM. Both companies need further diversification in their products--the pickup truck and SUV business was lucrative until gasoline became expensive. And since both companies relied far too much on those big gas guzzlers and didn't really have smaller, fuel efficient cars to offer consumers, they're in the position that they're in today. Giving them a few billion won't guarantee a change in philosophy in Detroit, something we should all be worried about.

Monday, November 17, 2008

Not surprisingly Joesph Stiglitz has Some Good Ideas on How To Fix Everything

Nobel Prize laureates Joesph Stiglitz has been busy over the last two months writing about the economy. But of interest for us here, is his 'State of the Economy' piece in Vanity Fair "Reversal of Fortune." Let's break it down... Dr. Jack style.

The real meat of the essay is towards the end, but he does pick apart the policy decisions that got us into this mess. And he places much of this blame on George W. Bush. This is a tad harsh—there were fundamental policy problems prior to Bush taking office. But Stiglitz is correct to place more blame on Bush's handling of the economy (if you can call it that) than other non-critics:
...the tax cuts in 2001 and 2003 set the stage for the current crisis. They did virtually nothing to stimulate the economy, and they left the burden of keeping the economy on life support to monetary policy alone. America’s problem today is not that households consume too little; on the contrary, with a savings rate barely above zero, it is clear we consume too much. But the administration hopes to encourage our spendthrift ways.
He is on the mark with this assessment. What is happening today is a result of the spend today worry about tomorrow... tomorrow ways of the last five plus years. The Bush administration encouraged everyone to spend, spend, spend. Aside from cutting the capital gains taxes, Americans weren't encouraged to save money.

I haven't railed against it too much here, but I am against our current policies towards corn ethanol. Giving any sort of tax credits or subsideis to corn ethanol production is silly as Stigliz sums up:
Our ethanol policy is also bad for the taxpayer, bad for the environment, bad for the world and our relations with other countries, and bad in terms of inflation. It is good only for the ethanol producers and American corn farmers. It should be scrapped. We currently subsidize corn-based ethanol by almost $1 a gallon, while imposing a 54-cent-a-gallon tariff on Brazilian sugar-based ethanol. It would be hard to invent a worse policy.
And on to fixing the current housing mess:
Remember, too, that we already give big homeowner subsidies, through the tax system, to affluent families. With tax deductions, the government is paying in some states almost half of all mortgage interest and real-estate taxes. But many lower-income people, whose deductions are meaningless because their tax bill is too small, get no help. It makes much more sense to convert these tax deductions into cashable tax credits, so that the fraction of housing costs borne by the government for the poor and the rich is the same.
A ways back I was critical of the Feds handling (or lack there of) concerning inflation. Stiglitz points out that I was off base:
The standard analysis coming from financial markets these days is that inflation is the greatest threat, and therefore we need to raise interest rates and cut deficits, which will restore confidence and thereby restore the economy. This is the same bad economics that didn’t work in East Asia in 1997 and didn’t work in Russia and Brazil in 1998. Indeed, it is the same recipe prescribed by Herbert Hoover in 1929.

It is a recipe, moreover, that would be particularly hard on working people and the poor. Higher interest rates dampen inflation by cutting back so sharply on aggregate demand that the unemployment rate grows and wages fall. Eventually, prices fall, too. As noted, the cause of our inflation today is largely imported—it comes from global food and energy prices, which are hard to control. To curb inflation therefore means that the price of everything else needs to fall drastically to compensate, which means that unemployment would also have to rise drastically.

This makes total sense. Worrying about inflation during a recession or depression is silly, and when the cause of inflation is not a result of domestic economic forces, attempting to control it is only more difficult for central bankers.

Finally, like any good economist, Stigliz believes that American economic policy should follow:
Spending money on needed investments—infrastructure, education, technology—will yield double dividends. It will increase incomes today while laying the foundations for future employment and economic growth. Investments in energy efficiency will pay triple dividends—yielding environmental benefits in addition to the short- and long-run economic benefits.
If growth is the goal of capitalism, then techonology is probably the biggest force in economic expanision. And techonology and innovation comes about though strong education. We could have a debate about how big of a role the government should play in the building and maintaining infrastrucutre; but I think the government should play a bit, if not the biggest role, in infrastrcutre projects.

Anyway, I highly suggest checking out the entire essay, there are some really good ideas, sorry common sense, in there.

Tuesday, November 11, 2008

Spreading the Wealth Around

I got this chain e-mail from a friend of mine a few days ago and heard some GOP Talking Head mention it on the radio a day or two later.
Yesterday on my way to lunch I passed a homeless guy with a sign that read 'Vote Obama, I need the money.' I laughed.

Once in the restaurant my server had on a 'Obama 08' necktie, again I laughed as he had given away his political preference -- just imagine the coincidence.

When the bill came I decided not to tip the server and explained to him that I was exploring the Obama redistribution of wealth concept. He stood there in disbelief while I showed him a ten-dollar bill and told him that I was going to 'redistribute' his tip to someone who I deemed more in need--the homeless guy outside. The server angrily stormed from my sight.

I went outside, gave the homeless guy $10 and told him to thank the server inside as I've decided he could use the money more. The homeless guy seemed genuinely grateful. (surprised me).

At the end of my rather unscientific redistribution experiment I realized the homeless guy was grateful for the money he did not earn, but the waiter was pretty angry that I gave away the money he did earn even though the actual recipient needed the money more.

I guess redistribution of wealth is an easier thing to swallow in concept than in practical application.
A few things about this e-mail:
1) The homeless guy is working and he earned that money... he's hustling. He got 10 bucks out of his efforts/work. While some people might not find pan-handling working, it technically is: one is using their time sitting or standing in high foot traffic areas hoping to get contributions (a wage) from passer bys. And that's what work is—a worker is paid for his/her time for someone else.

2) Obama does not want to take all of Paul's money to give to someone else. And that's what happening in this story, all the money is being taken away from the waiter and given to the pan-handler. No where in Obama's policy proposals does he even imply that he'll do this. While his now somewhat infamous quote to Joe the Plummer about how he wants to "spread the wealth around" is the reasoning behind this story above, Obama is not talking about taking all the money people make and dividing it equally.

Rather Obama is more speaking about closing the gap between the wealthiest and poorest in this country. This indicator, called the Gini Coefficient, has increased over the last 20 to 25 years at a pace that probably worries most policy makers and economists. According to the UN, the U.S. Gini Coefficient is 40.8, which is about the same as Georgia, Sri Lanka, Ghana, Turkmenistan, and Mali. And another recent study showed that American cities are as unequal as those in Latin America or Africa.

Slowing down or even closing the gap between the have and have nots in this country isn't the worst idea in the world; espiecially if it's done so in an intellegent, pragmatic way.

Monday, November 10, 2008

Is the Culture War Over? Did it ever begin?

One of the reasons that Sarah Palin was chosen to be John McCain's running mate was because of her cultural values. A social conservative, Palin helped McCain bring the GOP base together. For a week, it looked like Palin was the perfect pick.

But then Lehman Brothers went under and the credit crunch got rolling... and the voting public became very worried about the economy. The economy was always the biggest issue during the 2008 election, and pretty much every issue (the War on Iraq, energy policy, education) was all put on the back burner. And cultural issues, which weren't a big issue during the summer, became a complete non-factor.

Why? Because people don't care as much about gay marriage, abortion, and school prayer when they're not sure where their next pay check is coming from.

What about Proposition 8 in California? True, cultural issues still exist, but when it comes to voting for a President or Senator or Representative or any elected office, the candidates cultural views do not matter as much as the media and social conservatives (and some social liberals) would like us to believe. If voters did care as much about cultural issues as some would like us to believe, Obama would not have won Califorinia.

And here in lies the problem with the Republican party today—they have lost their way obsessing over cultural issues. True, it delivered back-to-back Presidential victories for Geroge W. Bush (barely), but the fact that the Republicans barely won should have been a sign that as a policy issue, it is a fickle issue. An issue that matters only when things are going very well economically, and even then that's debateable. The cultural divide that we hear so much about actually isn't that deep.

Poll after poll, focus group after focus group show that the vast majority of Americans -- the Silent Majority, perhaps? -- are pragmatic, independent and un-partisan in their basic views. They are eclectic: "liberal" on some matters, "conservative" on others. They are not slaves to that hobgoblin of small minds, consistency. On fundamental matters such as belief in equality for women and minorities, or how large a role religion and family play in individuals' lives, the consensus among voters is broad. Unlike other times in U.S. history, there simply are no issues such as slavery, Prohibition or Vietnam that inspire violent protest or social disruption.
However, no matter what, God has made his decision and therefore social conservatives just have to have faith that it was the right one.

Wednesday, November 5, 2008

A Most Peculiar Editorial

Lame title, I know... but let's just get down and dirty to one of the more peculiar editorials out there today:
His triumph was decisive and sweeping, because he saw what is wrong with this country: the utter failure of government to protect its citizens. He offered a government that does not try to solve every problem but will do those things beyond the power of individual citizens: to regulate the economy fairly, keep the air clean and the food safe, ensure that the sick have access to health care, and educate children to compete in a globalized world.
This is true, but it reeks of anger and raises a fair question: Did W fail to protect America and American citizens? I think it's a bit harsh. Where many of his policies either misguided or short sided? Yes. Is he—most likely—going to go down as one of the worst Presidents in history? Yes. But Bush did not expose this nation to harm. No a better way to say what he failed to do was that... well he failed to do anything.
Mr. Obama inherits a terrible legacy. The nation is embroiled in two wars — one of necessity in Afghanistan and one of folly in Iraq. Mr. Obama’s challenge will be to manage an orderly withdrawal from Iraq without igniting new conflicts so the Pentagon can focus its resources on the real front in the war on terror, Afghanistan.
Obama was not elected to fix or end Iraq. For Obama's political sake, I hope he realizes this.

The campaign began with the war as its central focus. By Election Day, Americans were deeply anguished about their futures and the government’s failure to prevent an economic collapse fed by greed and an orgy of deregulation. Mr. Obama will have to move quickly to impose control, coherence, transparency and fairness on the Bush administration’s jumbled bailout plan.

A harsh critique of W... but the Times is on the right path here. Obama was elected to fix the economy. But unlike Paul Krugman, the NYT editorial board doesn't totally get it.

Climate change is a global threat, and after years of denial and inaction, this country must take the lead on addressing it. The nation must develop new, cleaner energy technologies, to reduce greenhouse gases and its dependence on foreign oil.

Mr. Obama also will have to rally sensible people to come up with immigration reform consistent with the values of a nation built by immigrants and refugees.

There are many other urgent problems that must be addressed. Tens of millions of Americans lack health insurance...

This editorial is exactly what Obama should not listen to and HAS to avoid when he takes office. Obama needs to realize that he was elected to fix the economy—not Iraq, not immigration, not education, not energy—and to a certain extent health care. So why is the New York Times calling for Obama to leave Iraq, bring about immigration policy changes, fix the environment, and change energy policy?

Because the New York Times doesn't get it. They're too busy believing that Obama has this huge mandate to change everything W has done and fix everything he didn't bother to deal with. This would be a mistake. Those are issues you deal with as time moves on. And these were the issues that prevented John Kerry and Al Gore from being elected.

The New York Times is calling for Obama to be ambitious and to tackle a buch of issues quickly. This would be a mistake. There is a lot to be done, but slow and steady wins the race. If Obama can come in and do something about the economy, then he'll have the political capital to fix everything the New York Times wants. But to waste his political capital on something like, oh, climate change or immigration reform, would be a gigantic mistake since there is a good chance nothing would get done. And as we saw with W; once you burn your political capital, it ain't ever coming back.

So much to blog... editorals first

First congratulations to Barack Obama for yesterday's victory over John McCain to be come the President elect of the United States.

So what does this mean? Where to start? Let's look at editorials first.

What's interesting is that they focus on race... which isn't all that shocking until you realize, they the media ignored race throughout most of this election cycle.

From the Chicago Tribune:

Obama’s victory is one of those events that reveal how far the nation has traveled. When he was born in 1961, African-Americans risked death merely to register to vote in some Southern states. The pivotal civil rights and voting rights laws had yet to be enacted. Yet today, the nation is willing to entrust its future to a man whose father was black. His election is a moving vindication of the ideals on which this nation was founded...

Most Americans are ready to give Obama a chance to show he can deliver needed improvements. The financial crisis has also made them open to ideas they would not have considered before. But their motivation is pragmatic, not ideological, and the new president will be judged on results rather than intentions.

And from the LA Times:

By any measure, this is a monumental day in our nation's history. African Americans are rightly proud. The brutal facts of black existence -- slavery, segregation and the stunting of social and political ambition -- have dashed the hopes of black progress time and again. The election of Barack Obama symbolizes the resurrection of hope and the restoration of belief in a country that has often failed to treat its black citizens as kin. For millions of blacks abandoned to social neglect and cultural isolation, Obama's words and vision have built a bridge back into the American family.

And then the BBC:

Back in June, on the night when he finally saw off the challenge from Hillary Clinton, his celebration speech made no reference to his historic racial first, and noticeably he dedicated his victory to his white grandmother.

Throughout the campaign, Mr Obama has emphasised his whiteness as much as his blackness. The president-elect understood one of the great paradoxes of the civil rights era.

While it helped pave the way for his ultimate success, it also made it more difficult for northern candidates, like him, to win the presidency.

And I leave with one of the most condescending pieces of crap journalism ever written. As only the Brits can do:
They did it. They really did it. So often crudely caricatured by others, the American people yesterday stood in the eye of history and made an emphatic choice for change for themselves and the world. Though bombarded by a blizzard of last-minute negative advertising that should shame the Republican party, American voters held their nerve and elected Barack Obama as their new president to succeed George Bush. Elected him, what is more, by a clearer majority than one of those bitter narrow margins that marked the last two elections.
Thanks but no thanks guys. We did something you guys could only dream about.

Tuesday, November 4, 2008

Taking the Day Off

Not a ton of policy to talk about on the purest political day of the year (or of every four years).

I will say, no matter who wins, both Obama and McCain—from a policy position—should be much better than George W. Bush. I'll tackle Bush from a policy perspective in the next few days.

However, I will say this about election day... voters should not have to wait very long in line. There should not be long queues and hour plus waits for people to vote. This only encourages and creates disenfranchisement. So from a policy perspective, we should do what is necessary to keep those lines fairly short.

Monday, November 3, 2008

Palin and Newspaper editorials

No Con Con talk here... just a few articles that I thought I'd pass along.

Newspapers and policy go hand in hand, mainly because it's historically been the easiest place to start to make a case for a policy. Editorial and Op-Ed pages are filled with policy ideas every day. Therefore, I check out a lot of opinion pages every day.

And in this process I couldn't help but notice the number of newspapers endorsing Obama. But what's truly shocking is that most of these editorials read the same: 'Obama is thoughtful, introspective, and pragmatic. While we liked John McCain, but he's has run as the guy we liked, and nothing proves that more than his decision to take Sarah Palin. And we really don't like Sarah Palin'. In fact, the Chicago Tribune who had never endorsed a Democrat for President choose Obama—in what my opinion was the best written endorsement—in part because of the Palin pick. But for a look at a lot of other papers, I turn it over to the Reader here in Chicago:

Alaska’s largest newspaper, of course, also endorsed the Obama-Biden ticket. “Despite her formidable gifts,” said the Anchorage Daily News of the state’s own Sarah Palin, “few who have worked closely with the governor would argue she is truly ready to assume command of the most important, powerful nation on earth. To step in and juggle the demands of an economic meltdown, two deadly wars and a deteriorating climate crisis would stretch the governor beyond her range.”

Palin was a godsend to editorial writers penning Obama endorsements for Republican papers. The Courant: “Most worrisome, however, is Mr. McCain’s choice of a running mate . . . who is not yet ready for prime time.” The Record: “[McCain’s] selection of Palin as a running mate was appalling.” The Eagle: “She is a candidate of little intellectual curiosity who appears to be hopelessly unready to be president.” The News-Register: “What could McCain have been thinking . . . ?”

Without Palin, some historically Republican editorial pages might have struggled to find words to reject McCain that their readers would accept, and perhaps even endorsed him against their better judgment. But now they can make the argument they believe in, knowing they’ve got Palin to nail it down. She signs, seals, and delivers the case for dumping the GOP. She’s the closer.

Ouch. From a political stand point, assuming that McCain does lose tomorrow, it will be interesting to see how the Palin pick goes down in history. Was it increditably stupid? Short sighted? Obviously transparent? Did it cost him the electin? Or did the Fall 2008 Credit Crisis hurt McCain more than Palin?

No matter what, it should be a fun topic of discussion for years to come at cocktail parties.

Oh, and check out the differences between the Guardian and Economist endorsements of Obama. Oh wait, there isn't one. Weird.

Is it Time for a Con Con -- Part VI

Editors note: This is the last one. I swear. Enjoy. Part I
Part II
Part III
Part IV

Part V

The issues that supporters of a Con Con have been laid out, but what do groups who are against calling for a Con Con believe? Or at least, what do they argue as to why the state should not rewrite the constitution?

Opponents to a Con Con will quickly point out that there are no single issues, which calls for a convention. And given the current political infighting in Springfield, opponent’s figure those differences will carry onto a convention. But maybe most importantly, the current Constitution can be changed—amendments can be added to the Constitution. And since this option is available, this is the route that policy makers should take rather than calling a convention where no one knows what the resulting document would look like.

Few people who follow Illinois state politics would claim that the current problems in the state are related to the structure of the government—rather most people would agree the problems the state is currently going though are due to politics. And while the Constitution is not perfect, opponent’s claim that there is no one single issue that should lead voters to call for a convention. So the fixing the Constitution does need can be fixed though the underutilized legislative amendment mechanism .

The General Assembly can advance a constitutional amendment to voters if both houses agree with a three-fifths super majority. However, the General Assembly has been conservative about using the Legislative Amendment process. Since the current Constitution was written, the legislature has advanced only sixteen proposed amendments of which nine have been adopted . In 2006 and thus far in 2008, the legislature has not proposed any amendments to the constitution. And, ten of the proposals over “the last 37 years have dealt with arcane issues of relative political ease, yet limited substance,” according to the Illinois Business Roundtable.

Other means of changing the constitution like a citizen’s initiative, have had been unsuccessful for the most part and, as noted above, would be a topic of conversation at a convention. Therefore, the legislature is the only branch of government in the state that can amend the constitution. And, the legislature is reluctant to change itself. As Ann Lousin, a law professor at John Marshall said, a constitutional convention and the legislature are “natural enemies.”

So why even have a constitutional convention? Is the political gridlock in Springfield, where hundreds of bills attempting to change or reform the current policy problems the state faces, sit idly, enough of a reason to call for a constitutional convention? The constitutional change that some would like to make can be changed through the legislative amendment process, but since it has not been used very often in the last 38 years, is this a reason to call for a convention? Or is it that the reason we have not seen changes to something like, say the income tax, because there just is not enough popular support behind such a reform? And of course, a convention does not guarantee that the problems the state faces will be fixed with a new constitution.

In the end, a Con Con is a situation of risk and reward. How much of a risk are constituents willing to take for a reward, i.e. progress, in the structure and policies of the state government. Something good and something bad will come out of a Con Con for everyone and each voter or interest group needs to figure the odds that a Con Con would produce the results they so desire. As Steven Pflaum of the Chicago Bar Association asked, “Is the status quo so bad that we should risk making it worse to make it better?” That is something every voter will have to weigh in their minds when they vote on November 4th.

Sunday, November 2, 2008

Is it Time for a Con Con -- Part V

Editors note: I did a lot of work researching the Illinois Constitutional Convention; I'm going to post that research that I wrote up here. It should be about five or six parts in all. I'll do a post or two a day.
Part I
Part II
Part III
Part IV

Term limits
: Some people feel that there are far too many politicians in the state who have been in office for too long. If this were to gain support at a Con Con, delegates would most likely cap the number of terms an official can hold at two, or eight years. Term limits may also be placed on those officials who are appointed to their position.

Tort Reform: Although major tort liability reform legislation was passed in 1995, the Illinois Supreme Court over turned the law in 1997. Those seeking to reform the state’s tort laws, like the Illinois Civil Justice League, may use the Con Con to change the tort laws in a new constitution. The group has said as much in the past, “The League believes the reforms enacted in the Civil Justice Reform Amendments of 1995 were necessary and constitutional, and thus the League will support and lead future efforts to enact similar legislation.” Reformers may attempt to limit the ability to sue for punitive damages and how much of the damages can be shared by the victims and their lawyers.
* * * * * * * *
These will not be the only issues that will be considered prior to the referendum and if it passes, after the Con Con is called. What the Con Con will do is completely get rid of the 1970 constitution and that means anything and everything could find itself into a new constitution. And the fear is that the special interest groups, who where not that influential in the 1970 constitution, may be much more so this time around. “I think the interest groups would have considerably more influence this time than they did in the late 1960s. I think you would see strong interest group involvement in the election of delegates, and that involvement would continue into the session and on the votes on issues in the convention…And then you’d see the right-to-life and the pro-choice people. You’d probably see groups who want to advance gay marriage, and on the other side of it would be some fundamentalist religious groups,” says Lawrence.

Issues such as abortion, gay marriage, gun control, capital punishment, campaign finance, even the right to privacy, could all become focal points in a convention. “I think that there’s a real potential for a lot of mischief,” says Wayne Whalen who was a delegate in 1970. Some of these “cultural” issues could prevent a new constitution from passing. If the delegates were to take a stance on something like gay-marriage or capital punishment, it may sink the new constitution with voters. In 1970, two of the more controversial amendments were put to the voters separately, and doing that with such controversial topics may happen again during the process of writing the constitution. But of course, there is no guarantee, especially if a single special interest group was able to send a block of delegates to the convention—or if enough different interest groups were elected that they divided the pie amongst themselves.

Is It Time for a Con Con -- Part IV

Editors note: I did a lot of work researching the Illinois Constitutional Convention; I'm going to post that research that I wrote up here. It should be about five or six parts in all. I'll do a post or two a day.
Part I
Part II
Part III

Income tax: Of the 41 states that have a state income tax, Illinois has the lowest personal income tax rate and one of the lowest corporate tax rates in the nation. The state has a flat rate of three-percent for personal income and a 4.8 percent rate for corporations. According to the 1970 Constitution the income tax rate is determined by an eight to five (business to individual) rate ratio and has only been hiked twice—once temporarily—since the Constitution was written.

Obviously there are and will be a plethora of opinions about changing the income tax. Those who want to change the tax rate, especially those in favor of changing education funding, will want to raise the rate and then use that revenue to help fund schools in the state. This would lower the burden on funding from local governments for education—and may well lead to a lowering of property taxes.

Proponents of changing the income tax will also point that the poor and middle class in Illinois pay a higher percentage in taxes than those who are wealthy. These reformers will fight to change the income tax in Illinois from a flat tax to a progressive tax where people with higher incomes pay a higher rate of income tax to the state.

The current revenue system places a lot of stress on local governments to raise their own revenue to pay for services. This means that there is a dependence on property taxes, casino/lottery revenue, and sales taxes at both the state and local level. The recent hike in the Cook County sales taxes, giving Chicago the highest sales tax rate of any major city in America, will probably be used as a means of calling for a Con Con. Many will argue that by increasing the income tax and distributing the revenue from the increase will lessen the burden that the county and city governments have in funding services (not only in Chicago but across the state). Therefore they will be able to lower sales taxes and other current forms of taxation that local government’s place upon constituents.

Yet, Chicago falls 13th behind New York, Philadelphia, Portland, Milwaukee, Atlanta, Detroit and Boston when totaling the amount of state and local taxes that a household making $75 thousand pays—or 10.4 percent of income. Based on 2003 data, the tax burden of Chicago, when compared to the largest cities of other states, is not nearly as bad as proponents will claim. Chicago did rank 4th in sales tax but what Chicagoans pay in income taxes was near the bottom and property taxes were still lower than New York and Los Angeles (coming in 12th overall).

However, those in the business community will not want to change the rate and would fight any proposed change. And they will probably gain support from an unlikely source—unions. The Illinois Education Association has already come out against the Con Con. The teachers union is afraid that they may lose pension benefits if a Con Con is called. While other unions, like the AFL-CIO, do not have a lot at stake since they do not have pensions tied to the state—they will probably stand in solidarity with the teachers union.

But to add to the twist, businesses do see the more than $100 billion in debt that the state is under. And much of that debt comes from pension benefits. Because of underfunding since the 1970s, the pension system in the state was only 48 percent funded in 2003. Unless reformed, the state will continue to owe 8.5 percent interest on the $43 billion unfunded pension liability annually—$3.7 billion a year. The huge debt created because of pensions may gain the attention of reformers. At that point it is anyone’s guess at how things would play out. If the income tax is raised, that money may go towards pensions. Or the pension system in the state may be changed to a two tiered system where new employees would see considerably less in pension benefits.

Friday, October 31, 2008

Is it Time for a Con Con -- Part III

Editors note: I did a lot of work researching the Illinois Constitutional Convention; I'm going to post that research that I wrote up here. It should be about five or six parts in all. I'll do a post or two a day.
Part I is here
Part II is here

Gerrymandering: There have been few competitive races throughout the state over the years. Each party has drawn districts so that the Democrats have their seats and the Republicans have their seats. It has allowed the politicians to choose their voters. The 4th and 17th Congressional Districts are probably the most infamous cases of gerrymandering in the state. Supporters of such a change would scrap of the current method of redistricting and would most likely support one of two other systems: an independent redistricting commission or a system similar to that what Iowa uses where a “nonpartisan legislative staff develop maps for the Iowa House and Senate as well as U.S. House districts without any political or election data including the addresses of incumbents.”

Home Rule: One of the major reasons that the 1968 Con Con occurred was because the 1870 constitution, according to some, did not provide local governments enough autonomy. The state had been operating under Dillon’s Rule, which requires state legislative and executive approval for any changes local governments would like to make no matter how small. The famous example that was given in 1970 was that the City of Chicago had to get approval from Springfield to change the color of the lights on its squad cars. Home rule, which freed cities that had populations of 25,000 or more, was written into the 1970 constitution and it liberated cities from the child/parent relationship that had been created. It gave municipalities more authority to raise taxes and borrow money.

The Illinois Municipal League sees little reason to revisit the issue unless delegates want to lower the population threshold. However, the recent financial problems and the tax increases in Cook County and Chicago may, although unlikely, create a grassroots effort to rid the state of Home Rule and go back to Dillon’s Rule.

Open ballots access: If granted, open ballot access would give every person equal access to being on the ballot no matter what party affiliation. Right now, independents and other third parties are often required to obtain more than 10 times the number of signatures that established parties do.

Recall elected officials: According to recent polls, 2 in 3 constituents in Illinois would like the right to recall elected officials. However, the right to recall is denied to voters under the current constitution. Considering dislike with Governor Rod Blagojevich among citizens and the dysfunction in Springfield, the right to recall elected officials figures to be a popular means of selling the Con Con. A majority of states in the U.S. do not allow for the recall of statewide officials.

Selection of Judges: Currently judges are elected to the bench. However, there is a lot of support to change this system to one where judges are chosen by merit. There are quality concerns over electing judges and many feel that partisan politics plays too great of a role in choosing and electing judges. Also the amount of money spent on judicial races is concerning—millions are being spent on some of these races and people worry about where the money comes from especially since judges are expected to be neutral.

However, there would be resistance to changing from the current system to a merit system. In Cook County there is a laundry list of judges and the public does not know whom they are electing because there are so many. This has lead to some unqualified judges being elected. But downstate, the electorate is much more informed about their judges and would resist changing the current system.

If the Con Con changed to a merit based system it would most likely be based on what is called the Missouri plan. The plan calls for a non-partisan judicial commission who chooses three candidates to fill a bench seat. The governor then selects one of three candidates. Yet such a system would face a battle over who would select the commission. Also and whether the governor, legislature, or the state Supreme Court would be given the power to select the judges would have to be decided.

Thursday, October 30, 2008

Is it Time for a Con Con -- Part II

Editors note: I did a lot of work researching the Illinois Constitutional Convention; I'm going to post that research that I wrote up here. It should be about five or six parts in all. I'll do a post or two a day. Part I is here.

If a constitutional convention is called, the entire constitution would have to be rewritten. This obviously would have a major impact on the state and future governance. In effect, what calling a convention would do is open every political and policy topic up for debate. Calling for the Con Con could be the first step in opening up the political equivalent of Pandora’s Box. Some popular outcomes from the 1970 Constitution, like home rule, could be changed; while currently unpopular powers, like the amendatory veto, may not be amended. Opponents to the Con Con, like the Illinois Business Roundtable, say that “a constitutional convention cannot be limited to specific issues.” And they are right, as a single issues there appears to be little need to call for a convention. But when all the issues are taken as a whole, some voters may conclude that a Con Con would be the easiest way to fix all the problems the state is facing. The major issues that will be debated prior to the vote and if a Con Con is called are as follows:

Amendatory veto: This power given to the governor came up most recently when Governor Rod Blagojevich gave free rides to seniors during the CTA funding saga. The amendatory veto allows the governor to return a bill to the house it originated from with specific recommendations for change. According to the Constitution “The bill shall be considered in the same manner as a vetoed bill but the specific recommendations may be accepted by a record vote of a majority of the members elected to each house.” In effect, this allows the governor to initiate legislation independently of the legislative branch. “I think that power was abused though the years… I don’t think the governor is a legislator,” said Mike Lawrence the former press secretary to Jim Edgar. A bid to limit the amendatory veto was on the 1974 ballot; however, voters refused to limit the veto power.

Ballot initiative process: Illinois is considered to be a non-initiative state. An initiative is a public vote on a proposed amendment, law, or ordnance. The ballot initiatives from California are probably the most famous examples and there have been a wave of ballot initiatives concerning gay marriage in the last five years across the country. The gridlock in Springfield has created the perception that very little is getting done while the state faces increasing challenges. Many feel that citizens should be able to bring up solutions to these problems directly through ballot. However, the current initiative process in Illinois is limited and difficult—there has been only one successful ballot initiative in Illinois history, which was in 1980 and reduced the size of the state legislature from 177 to 118 members.

Cumulative Voting: Used by the state from 1870 until 1980, when the ballot initiative reduced the size of the legislature by a third it also eliminated cumulative voting. For those delegates who long for the days of cumulative they may fight for it to be used again in the state. Cumulative voting allows for multiple winners in an election and is used to foster proportional representation. The old three member districts had ensured each party had at least one seat—a few people feel that the move to the current system began “the consolidation of power among legislative leaders that has facilitated the current gridlock in Springfield.”

Education Reform and Property Taxes: In the upcoming months, expect to hear more about education than any other issue having to do with a potential Con Con. Illinois ranks 49th in the nation in the amount of funding the state provides for education. The state, on average, only covers 34 percent of the cost of educating a student (the national average is 50 percent). As a result, property taxes are extremely high—the ninth highest in the nation in 2005. This puts a heavy burden on local residents—especially seniors.

Currently in Illinois there are about 1,000 schools that are failing to meet the federal standards set out by No Child Left Behind. On top of that, eight in ten school districts are facing budget deficits and the number of schools on the financial watch list increases every year.

Reformers will want to lower the reliance and burden on property taxes and local taxpayers for education funding. They will probably fight for an increase in the income tax and take some of that revenue and place it towards education. Noting that Illinois has the second worst per-pupil-spending gap in the nation, others may fight for a property tax and education system like California.
Proposition 13 (or Serrano v. Priest) was a ballot initiative passed by California voters in 1978. The proposition capped property taxes at one-percent of the asset value of the property. The result has been two fold; funding responsibilities have become centralized making local governments more reliant on funds from the state, and education funding has also become both centralized and equalized. However, by making the state more responsible for education funding, it has reduced public school quality. California schools are now ranked among the worst in the nation. This may have driven families to send their children to private schools or find other means to improve local education.
The decision has been fiscally regressive and local governments, without the stream of revenue from property taxes, have turned to other means of taxation like sales taxes or fees. Proposition 13 has also made local governments more reliant on state funds, which has given the state more control over local matters.

Continue to Part III

Wednesday, October 29, 2008

Is it Time for a Con Con? -- Part I

Editors note: I did a lot of work researching the Illinois Constitutional Convention; I'm going to post that research that I wrote up here. It should be about five or six parts in all. I'll do a post or two a day.

Many people will say that the most important vote that Illinoisans will cast next month will be for President—Barack Obama, John McCain or a third party candidate. While others may argue that the race for the U.S. Senate seat between Dick Durbin and Dr. Steve Sauerberg is the most significant. But according to polls both of those races appear to be open and shut cases. Therefore, it may just be that the most important decision that the electorate makes is if we should, as citizens of Illinois, rewrite the Illinois Constitution. Every twenty years Illinois voters are given the opportunity to call a constitutional convention, and on November 4, 2008, the people of Illinois will have that chance for the first time since 1988.

Illinois has had four constitutions in its history—the original constitution of 1818, and then three rewrites 1848, 1870, and finally in 1970 (a convention was called in 1918 but the constitution was rejected by voters in 1922). The current document came about after a convention was called in 1968 due to the fact that the then constitution was seen as outdated and reflected a state that no longer existed. “In ’68 there was a long developed consensus to change the constitution,” says Jim Nowlan, a former member of the Illinois House of Representatives and Senior Fellow with the University of Illinois Institute of Government and Public Affairs. The 1970 constitution reformed may things including increasing the power of the governor and granting home rule to cities with a population over 25,000. The constitution also guaranteed freedom from discrimination on the base of race, color, creed, ethnicity, and sex, and revenue and finance articles were rewritten creating a flat income tax rate for both personal and corporate income.

The current Illinois Constitution has an automatic call for a constitutional convention every twenty years written into it, starting with 1968 the last time a convention was called. A super-majority of 60 percent of those voting on the question or a majority of total voters is required to call a convention. When the question was last on the ballot in Nov. 1988, voters rejected the question by a three to one margin (900,109 voting in favor of a convention, 2,727,144 voting against it and just over 1 million voters skipping the question).

If voters this time around decide to call for a convention, the General Assembly is required to call for and fund the constitutional convention. It would also set the date for the election of delegates and what type of election would take place—possibilities include a single general election or a primary followed by a general election. Whether candidates would run on partisan or nonpartisan ballot would also be settled by the General Assembly. Any person can run to be a delegate, however, candidates must be at least 21 and have resided in their district for at least two years (and be a U.S. citizen). Legislators most likely will not run, but chances are people close to them would run instead. In 1970, the delegate elections were non-partisan with a single general election. This prevented party insiders from capturing all the delegate positions. However, if it were a nonpartisan election, special interests groups would likely run their own candidates.

Two delegates from each of the 59 state senate districts, a total of 118 delegates in all, would then travel to Springfield and write a constitution, probably late in 2009 and into 2010. The new convention must meet within three months of the delegate’s election. After the delegates have finished writing the new constitution, it will be presented to the voters in a special election and must be approved by a majority of the voters.

The 1970 convention lasted nearly nine months and cost $13.9 million. Delegates were paid a monthly salary for what was typically a four-day workweek. Experts predict that a convention held today would cost $78 million.

The political scene in Illinois today is much different than it was in 1988. Voters are fed up with what is (or rather what is not) going on in Springfield. Recent budget crises at the state level and in Cook County have constituents frustrated. In Cook County, the sales tax was recently increased to the highest rates in the country. The legislature in Springfield appears too busy fighting amongst themselves to pass popular bills, like the ethics reform bill, and it takes far too long to pass necessary bills, like funding for the CTA. And when a bill is finally passed, the highly unpopular governor uses powers granted to him to not only veto the bill but also legislate from his desk by adding to the bill in consideration. To say voters are unhappy may be an understatement. “There was a positive attitude towards a Con Con,” Nowlan says about the efforts in 1968 but today there is a negative and sour outlook on the state government. Governor Rod Blagojevich was found to be the least popular governor in the U.S. this summer according to Rasmussen. And a recent poll in The Chicago Tribune had his approval rating at 13%.

Continue to Part II

Tuesday, October 28, 2008

McCain's Energy Plan -- Part III

Part I of the analysis on energy policy – How did we get here?
Part II of the analysis on energy policy – Obama’s plan

And finally, it’s the last time I have to write about a whole bunch of bad policies ideas that would, if implemented, only make things worse. Read McCain’s proposals in his own words here.

We all heard the chorus of Republicans at their convention chanting, “Drill Baby, Drill!” The idea behind this is that drilling offshore and in Alaska will lower our need for foreign oil and at the same time bring down the price of oil (by increasing supply). But let’s clear this up right away—it won’t. While both of those statements are technically true, the impact is extremely small. First, it will take years for that oil to reach consumers and more importantly, oil is traded on worldwide market. That means that oil from Nigeria, Saudi Arabia, Venezuela, Canada, etc, is bought and sold on the same market. If U.S. production was to increase and every other country was to keep output at their current level (or at least rising with demand) then yes, the price of oil would drop. But not a lot. “Drill baby, drill!” won’t have the impact that people seem to believe it will.

This isn’t to say that drilling offshore (or in Alaska) is a bad idea or bad policy—it isn’t. And McCain does support offshore drilling. However, there are some environmental concerns and of course there is always the risk of a spill or some sort of disaster.

Let me quickly go through the rest of McCain’s energy plan.
-- Unlike Obama, McCain is against ethanol, something that not only I’m in agreement with, but the quicker this country moves away from corn based ethanol the better (for reason’s I’ll chronicle another day).

-- McCain wants to build 45 new nuclear power plants by 2030. Nuclear power is cheap. But plants are very expensive to build, so McCain would probably be offering subsidies and tax credits to companies who build nuclear plants. And then there is the issue of what to do with the nuclear waste. No one wants the waste in their back yard because it’s radioactive thus disposing of the waste has been a problem for years. Burying it usually means it ends up in the water supply. Shooting it into space is very, very expensive and a launch failure would probably be a Chernobyl like disaster. So what it really comes down to is that we haven't really figured out what to do with nuclear waste. Anyway, here is some info on what France does with all their radioactive waste.

-- McCain also favors a cap-in-trade system to lower carbon output. A cap-in-trade system is fairly simple: the government creates credits or permits that allow a certain amount of carbon usage. It then sells those permits on the market to carbon producing companies (or speculators). But many economists prefer a carbon tax, were companies are taxed at a fix rate for the carbon they produce. (again, this would be a good post a few weeks from now).

Finally, McCain didn’t want Obama to be the only one with bad energy ideas. McCain has suggested suspending the tax on fuel. (Personally, I think it should be raised). This is a horrible idea because it would manipulate the price of gas. Supply is not being increased, however suspending the tax would lower the price of gas which would encourage driving, leading to an increase in demand… which only increases the price of gas. All the while, Uncle Sam is receiving less money but the oil companies are pocketing more (since the price of gas has increased). In other words, suspending the fuel tax would increase the price of gas and make Big Oil even richer while making the U.S. government poorer.

McCain’s energy plan isn’t as bad as Obama’s, but it is not as environmentally friendly and is very short sighted. Obama’s plans, for all its faults, does look a bit towards the future. McCain’s ideas aren’t exactly fresh, and while he gets major points for being anti-corn ethanol, there also isn’t a ton to really get behind here.

Thursday, October 23, 2008

Obama's Energy Plan -- Part II

Read it in Obama’s own words here. And I covered the back ground of the U.S. and energy policy yesterday.

Let’s start with the bad—Obama wants to increase the tax on oil companies and then take that money and give Americans a rebate to cover the increased costs of oil, gas, electricity, heat, air condition, etc. In theory this sounds great, a bit like Robin Hood even—the oil companies are reporting record profits, why not help out the very people they’re making their money off of?

Well here’s the catch—increasing the tax on oil companies will boost the price of production. All the oil companies will do is pass on their increased costs to the consumer AND the higher taxes will discourage investment which will lower domestic output—increasing the U.S.’ dependence on foreign oil and maybe even decreasing supply. The end result? Higher gasoline prices for consumers and the world. While in theory the government’s tax revenues should increase, Lord knows where and how that money will be spent, but if production drops eventually the increase in revenue will turn into a decrease.

Unfortunately, but not unexpectedly, Obama also supports the use of corn ethanol as an alternative fuel. At this point there is little reason to support corn ethanol—that’s a post for another day—but it’s not as efficient as other bio-fuels, it takes as much energy to produce as it saves, it uses a lot of water, and on and on.

His website also wants to put a million plug-in hybrid cars on the road by 2015. Sounds like a great idea and I’m sure GM is happy to hear that, but how will this be accomplished… well I’m not sure. He says he’ll hand out a $7,000 tax credit, but the odds of Congress approving that are pretty small. You know what, let’s give this proposal an OUTRAGEOUS CLAIM.

Is there anything good in Obama’s energy proposals? Well, he would like to raise fuel standards for cars, something that the U.S., because of the Detroit lobby, has been reluctant to do. While one could argue that the market and consumers have rejected more fuel-efficient cars for big SUVs, Greg Easterbrook wrote a very good op-ed about this very topic last summer and the relationship between building cars with better fuel-efficient and horsepower and fatal car crashes (which I can’t find but he touches on here). Sometimes it is necessary for the consumer to be regulated (Marshall Field be damned). Obama is also more likely to support and seek public transportation funding.

Although details are a bit sketchy, Obama would also like to invest about $150 billion of government money on scientific research—most of it going towards green collar jobs. Obama claims that this will create 5 million jobs, but I’m not sure were his team came up with number. Therefore I’m a bit skeptical.

Obama would like to up grade the electricity grid and make it more efficient for using renewable energy. And the same time, he wants 10% of all the U.S.’ energy to come from renewable sources by 2012. T. Boone Pickens is on board with this and it’s not a bad idea. The problem will be getting the funding—especially after the bailout and War in Iraq.

Finally, Obama does not want to drill off shore for oil, but reasons as to why this is remain unclear. Back in August he kind of sort of said he’d consider it, but that’s about it.

Overall, Obama’s energy policy leaves me with more questions than answers. Other than raising the fuel-standards for automobiles, it’s hard to find good policy in here. From a policy perspective, this is probably Obama’s weakest issue. But as you’ll see later, McCain’s isn’t much better.