90% tax on AIG, other bonuses

So today we hear that Congress--at least the House-- is about to pass a law that taxes at 90% all bonuses paid out to AIG and other institutions that have recently received money from the federal government. The intent of the bill is clear: take back some of those "outrageous" bonuses paid to executives at institutions that they helped drive into the ground. Regardless of what you think about the bonuses, the thought struck me: wouldn't this be an unconstitutional bill of attainder? The Constitution expressly prohibits Congress from passing a bill of attainder, which is a bill or law that focuses expressly on one particular person or group. (The purpose being I think pretty clear-- the government can't pick favorites but must instead pass laws that are generally applicable both on their face and in substance). Here, it's pretty clear that the one particular group inspiring the law are these AIG executives.

Just a thought. Not going to write a law review article about it. My guess is that there is a Supreme Court case that says that the Commerce Clause gives Congress enough leverage to override the proscription against bills of attainder and that the section referencing bills of attainder has been narrowly construed... but I'd like to hear a law professor's thoughts about this. Any law professor is welcome to appropriate this thought up and contact NPR!

That's enough for today-- and tomorrow! NCAA madness beckons!

Musings on the Effects of the Stock Market's Precipitous Decline

The DOW Jones Industrial Average is, as I type this, hovering around 6,750. There are other things to talk about, including the sobering news about AIG and continuing bank failures and the struggles of the financial system... but let's think about this one issue for a minute from a couple of different angles. What does it mean that broad stock averages (and I mean the S&P 500 and Wilshire 5000 more than the DOW, really, but most people who are not brokers focus on the DOW, even though it is probably the worst of the averages as an indicator of stock market performance) are down roughly 60% from their highs less than a year and a half or so ago?

First, clearly, a lot of people have lost a tremendous amount of money. But not everyone lost the same amount-- to have the prices drop as they have, a great deal of selling has to have and did occur. So, some people cashed out earlier, and though there were some straight-out losses, it was not a zero-sum game. Where did that money go? Well, it's hard to say definitively, but based on market movements and such, a lot of it seems to have gone to precious metals and to (government) bonds. It doesn't take a PhD in Economics to know that the macro effect of over half of the investment in our public companies moving to metals which, last time I checked, sit in coffers and don't go out and hire people, make things, or offer services, is extremely bad. Funding the government isn't so bad, though, especially if the only way the government can spend money is through borrowing, which is certainly the case with the federal government of the U.S. these days. But it also is not as good a vehicle for economic growth, because it means that the public at large will have to service interest payments on huge sums for up to 30 years. Interest payments don't do much, though I suppose it funds the incomes of the people collecting them and thus would presumably stimulate the economy when they spent money-- which might have been okay in 1970 when over 90% of US bonds were held by US residents or the US itself andwould presumably spend money in the US, but isn't so good now, when roughly 40% of US bonds are held by foreign governments, and that number is likely to grow much higher as the public debt increases by about $3.5 trillion over the next 3 years. So, from a macro perspective, this is a body blow to the economy it seems to me.

Let's step away from the macro-economic viewpoint (which no one really understands anyway)for a minute here, though, and focus on some micro-economic effects of the stock market's raging decline. Here's one that cooks my own goose: if you started investing in 1996, then you have seen a 0% return on your money. 0%. Let me just type that number again (before it goes negative, because it probably will): 0%. I graduated from college in 1996. If you're like me, and started working in the late 1990s, and saved--okay, I could have saved a little more, but I tried--you haven't gotten anything out of it, basically. I should have bought a fancy car, gone on a couple of nice vacations, had a few more great meals, seems to me.

Another micro-economic impact: those poor employees who were incentivized to invest their 401ks in company stock have gotten slammed, especially those working for any bank anywhere or for AIG and other countless institutions.

Let's go back to the macro here quickly, because another bad effect of all this just occurred to me: what will be the impact of over a decade of lost return on social security? These people, including myself, who have done what they were "supposed to do"--not even talking about the people who have blown all their money or got into stupid credit card debt-- they are going to be, net and average, just poorer when they retire. Thus, they will be relying on social security MORE, not less. There's been talk about saving the liquidity of social security by lengthening the number of years it takes to qualify for it or reducing payments in some way-- we could be in a for a really sad episode in about 30 years, when a lot of old people will desperately be scrimping and saving and competing in the workplace long past the time when their parents and grandparents retired. All in all, we've stepped back. Our parents were better off; our grandparents were better off.

But maybe our kids will be okay. If they don't mind us oldsters around so much later on.

Republicans Repeat 1936

All right, this will be just a short post. Mainly, I just wanted to put something up because I haven't in a little while.

I do not pretend to know all the relevant history concerning what I am about to briefly reflect on. But here I go anyway. Apparently, after Democrats had taken power in the mid-1930s in overwhelming numbers during an economic crisis (sound kind of familiar?), Republicans voted, to a man, against all of the economic policies implemented by the Democratic majority to stimulate the economy Keynesian-style. Only 3 Republicans last week voted for the stimulus package. So true that history repeats itself.

Other parallels are striking. The 1920s saw large-scale de-regulation under Republican administrations and Congressional majorities. So did the early 2000s and even the late 1990s under a centrist Clinton administration and the later Bush administration, together with Republican majorities in Congress. (As an aside, surely it made more sense in the 1920s than in the 1990s/2000s to de-regulate, as most of the woker protections and etc. were "new" (though more were introduced in the 1930s and 1940s, things we are very familiar with today like Social Security)).

I can only hope that efforts to produce a broader consensus are more successful in further initiatives by the Obama administration to resolve the financial crisis and jerk the economy back on track than we have seen so far in 2009. I also consider it a bit of a foolish political gamble by the Republicans to take the contrarian view in the current climate. People want solutions, not invective. If the last few weeks becomes the norm rather than an aberration-- if Republicans continue to unite in opposition primarily to be the opposition-- then I think they may find themselves on the wrong side of history yet again. And hoping for a future age in which to resurge.

It takes two to tango (or, thoughts on the inauguration)

I was there. Something no doubt we will all here 20 years from now, but I WAS THERE. Without a ticket, I trekked to the Mall with a friend, and we witnessed (via Jumbotron) Obama's inauguration. Living in Alexandria, I had no excuse to not go, and as the friend who accompanied me put it best - this is our "Woodstock."

And it was. The feeling was incredible. The entire "witnessing history" is a mix of hyperbole and cliche, but this was really something. And I like to think I have seen quite a few "somethings" in my life. The mass of humanity, the 28 degree weather (16 with wind chill), the random strangers with whom we talked, the guy who looked remarkably like Ben Stiller who had come from Colorado... the 6 ft tall guy in the goofy fur hat who blocked my view, but helped (as a landmark) my friend make it back from the porta-potty. It was an experience. The sense of community. It made me proud to be an American again. There are a lot of things we have done in the past 8 years that do not make me proud, but my faith in my country was redeemed on Jan 20 - NO WHERE ELSE IN THE WORLD would a man like Barack Obama be elected to the highest post in his nation. NO WHERE ELSE.

But I sensed something else as well - a desire for retribution. I jokingly cheered when Dick Cheney finally made it to the dais... and was immediately the center of all local attention. For the record, I voted for Obama, and have no affection for Cheney, Rumsfield, Wolfowitz, Feith, or any of that crowd. But the response - while not altogether unexpected - still alarmed me.

I was alarmed because of what it presaged for our country. The Republican party ran the country into the ground through a populist orgy of spending and tax cuts while railroading their partisan "foes." Tom DeLay's (remember him?) justification? He "won" the election. The same phrase uttered by Nancy Pelosi this week. After Obama attempted to build bipartisan support, the stimulus package was rammed through with few changes on a nearly straight-partisan vote (some Dems joined the GOP in voting no). And thus Pelosi passed a $800+ Billion package through the House. (by way of context, $800 Billion is FAR more than has been spent on both the Iraq and Afghanistan "wars" combined since 2001). Listening to the radio this morning, I heard the GOP referred to as the "Grand Obstructionist Party" and worse. While I do not believe the GOP should be dictating the terms of the bill - they did come out below the Dems (though it was Obama who really "won" the election)- their ideas should be given consideration. The constant mutual vilification serves no one, and because Tom DeLay did it does not make it right. Are the Democrats in power no better than Tom DeLay? Because we all saw where he led the Republican party.

I believe Obama is making concerted efforts to be post-partisan - as do most Republican lawmakers, interestingly. It is his fellow Democrats in Congress who are more interested in investigations of Bush & Co. and excoriating the past than in building the future. Rather than the Republicans' special interest groups running the show, now it is the Democrats' special interest groups calling shots. One group is no better than the other. The Republicans' deserve no special treatment based on their operation of the levers of government, but Nancy Pelosi and Harry Reid would be wise to remember no single group holds a monopoly on truth. President Obama said the very same thing. Unless the Democratic leadership recognizes this fact, they will be doomed to the same fate to which their GOP brethren currently find themselves subjected.

Obama won the election, not Pelosi or Reid. His lead should be followed - not theirs.

Looking Back at the Presidency of George W. Bush

As so many of us look forward to the inauguration of the new president (or focus on the current economic crisis we find ourselves in), I thought it would be useful to look back at the legacy of the departing president. For most of my readers, I know that it has been eight years of frustration. For some of my younger readers, the initial frustration and exasperation that I felt with Mr. Bush is probably a pretty faded memory-- interspersed among teen-age angst and turmoil manifested in dramatic form by High School Musical parts 1, 2, 3, and etc. (Actually, I probably shouldn't use that analogy, having never actually seen any of them. N.B.-- this is not criticism of the younger generation, merely recognition of the fact that this president has been in office eight long years. If you are 25 now, you were only 17 when the whole circus began).
So, here is the (roughly) chronological list-- off the cuff and woefully incomplete-- of a few events in the dismal legacy of George W. Bush:

NEGATIVE (listed first because there's more of it):

-- Bush's selection (not election) by the Supreme Court in 2000

-- Enron and energy policy; scandal over Cheney's secret energy policy meeting with energy executives, including Ken Lay, his good friend (this is often overshadowed because it occurred in the summer of 2001)

-- Iraq War

-- "Mission Accomplished"

-- No WMDs in Iraq

-- Paul Bremer and the frat boys in charge in Iraq

-- Abu Ghraib prison scandal and general chaos in Iraq

-- Torture at Guantanamo and various other places (Eastern Europe in particular)

-- Katrina and Rita ("Brownie's doing a great job!")

-- Warrantless wire-tapping

-- Denial of global warming (in face of scientific community; and editing by federal science agencies' reports for political reasons)

-- Cheney's assertion that vice-president is not part of the executive branch (wow!)

-- Outing of Valerie Plame and political fall-out

-- Afghanistan-- mismanagement after initial success

-- Economy-- he's not solely responsible here. So is Clinton, GHW Bush, Reagan, Greenspan, Congress for the last 20 years, etc. But he didn't help by feeding the deficit, thus putting us to our current terrible Hobbesian choice of massively increasing our debt or moving to 12% or worse unemployment

POSITIVE:

-- Afghanistan-- initial success (Northern Alliance and etc.)

-- AIDS program in Africa (most support to stop epidemic ever from US)

I'm leaving out a bunch of "policy" sorts of things--e.g., tax policy, gay rights, abortion, and etc. I am only trying to include specific issues or policies that were prominently reported. (Arguably, I shouldn't give him the AIDS thing, because I could just as well add that his foreign health policy also precluded financial support for any organization that offered family planning advice, including birth control options (condoms and etc.) or abortion rights because of the right-to-lifers in his administration who believe only in abstinence-- an absurd position that will be reversed in... let's see... 2 days.) I've got to draw the line somewhere! This is a blog, not an encyclopedia.

My personal feeling about Mr. Bush-- and it is problematic to take too much license, here, because I do not know the man personally-- is that he actually is a nice man but not a leader. He allowed himself to be overridden and influenced by other men with greater will and determination, men whom he appointed to high positions of influence. On the foreign policy side, this led to disastrous results. Rumsfield, Wolfowitz, Cheney, and (to a lesser extent) Bolton led us with neo-conservative idealism into war in the Middle East in Iraq and, more damning, convinced by their idealism, laid no foundation for the restoration of Iraq (its government, military, and economy) and proceeded without any understanding of the culture, history, or ethnic makeup of that country or the region. On the economic policy side, there was no vision-- only following the party line, trying to eliminate taxes on the wealthy (capital gains to 0%, elimination of the estate tax, elimination of social security), eradicate public schools, and erode labor rights; basically, an attempt to turn back the clock to late 19th century cut-throat capitalism-- the conservative ideal. Because the policy was so simple, other appointments were considered unimportant-- like Michael Brown's appointment as head of FEMA. Incompetence and cronyism reigned.

**

Good riddance. Open the window and let the fresh breeze in.

Defense Contractors and General Motors

I work in DC and live in Alexandria. Consequently, when I take the Metro into work, I pass by the Crystal City, Pentagon City and the Pentagon Metro stations. For those not familiar, at each of these stops are a plethora of signs from defense contractors - each saying how they save soldiers lives in the field, or how the particular item they are hawking is essential to the fight against terrorism, Iraqi insurgents, the next enemy, etc.

As I ride past them, I never fail to get angry. Really angry. Because I see them in the same light I have come to see General Motors - a company I fully expect to fail or be bought within the next 10 years, bailout or not. Because both groups are building products the customers don't really want. GM is moving its 8 mpg only because GMAC has received bailout money and can offer these gas hogs at 0 percent interest. The defense sector is the same. The argument is the companies are too crucial to national security to fail... or their products are the latest segment of the revolution in military affairs... or vital to the "next war."

GM will fail because it builds substandard products with poor maintenance records at too high a cost. Our defense industry is in trouble for exactly the same reasons. Exactly when the US should be leading the world in the supply of defense equipment (to reputable allies...), we are on the cusp of losing the entire market. The reason is we have priced ourselves out of the market. When we accept that a single warship (or single airplane like the B2) can or should cost over $1 Billion, we have lost the battle for pocketbooks. If that is the cost of their products, we are all doomed.

And yet, there is also the side that pisses me off. Because the words I see used I have heard before, when I was in Iraq. There, more than anywhere else, I gained my disparagement of defense contractors. As a measure of disclaimer, there are many good contractors - good people trying to do their best for their country. Then there is KBR (Kellog, Brown and Root - formerly "owned" by Halliburton, the company with which VPres Cheney was associated) and L3 Communications. KBR has allowed soldiers to die because they have held fast to the letter - not the spirit - of their contract, which does not require them to be certain Iraqi-built structures are electically safe. They may argue it is a matter of money - they can't afford to fix everything. And yet, while being paid to hire Americans, they hire Ugandans, Romanians, Hungarians, Ukrainians, Philippinos, Malays, Indonesians, etc. I do not say there is anything necessarily wrong with foreign nationals are hired - my concern is they are being exploited. And then there is L3... they are requested to supply trained, experienced analysts, and they provide untrained, inexperienced junior personnel whose only qualification is their security clearance. Many have never written a report before, and most lack the ability to write coherently.

Then I see advertisements about how bad guys aren't waiting for some integrated network to be built, or how some project is crucial to US security. And yet, I have been at the tip of the spear - indeed, I have spent most of my career there - and what these companies are offering, is usually not what the actual "warfighter" really wants. One more piece of software, one more piece of unecessary (expensive) gear... I have come to believe many of these companies are only in the game for the profit. I see no difference between them and GM - the Chevy Corvette I once had was a beautiful machine, but cheaply built and succombed by problems from the day I took possession of my custom-built vehicle.

We have come to expect our defense equipment to be expensive, but the day is soon coming where neither us - nor our many allies - will be able to afford US manufactured equipment. Not even GM would refuse to fix the tire of a car being driven off a lot. Yet frequently, that is the case with US built equipment. For example, with the LPD program, the ships were built, but any required repairs identified during acceptance trials had to be paid for by the Navy.''

Unless we are careful, our defense industries will go the way of GM. But if an equivalent product can be bought for a fraction of the price, maybe that isn't such a bad thing.

Ruby Slippers

I took my family to the newly-refurbished National Museum of American History on the National Mall today. The museum has recently reopened following a 3-year renovation. The museum houses both some of the finest artifacts of American History and famous pop-culture notables as well. Exhibits include the original Star-Spangled Banner which flew over Fort McHenry in Baltimore and so inspired Francis Scott Key , the famous lunch counter from Greensboro, N.C., documents and artifacts from many immigrants - "legal" and otherwise - to the United States, and a plethora items such as doll houses, T.V. sets, and - most famously - the "ruby slippers" Dorothy wore in the "Wizard of Oz."

The only remaining hand-written copy of Abraham Lincoln's Gettysburg Address is also at the museum for a limited engagement. The document - three pages of neat, cursive script on hand-lined parchment - is on loan from the White House until Inauguration Day. This document was the reason I dragged my family into the city on a windy, cold January day and it is every bit as inspiring as I had hoped it would be.

As I read the words written in Lincoln's own, neat script, tears literally welled up in my eyes - and I say this as a Virginian reared in the mythology of the old Confederacy. Lincoln was a great man, whose simple eloquence has been unmatched in presidential oratory either before or since. It is hard to describe the feeling of reading the words "that this nation, under God, shall have a new birth of freedom - and that government of the people, by the people, and for the people shall not perish from the earth." A combination of excitement and sorrow... My heart stirred reading those words today because I think we are at a similar crossroads now, and no less important a moment in the history of our great nation.

However, after I passed through the exhibition hall, my blood began to boil. There were many lines at the museum today. Lines to see the Star Spangled Banner, newly restored like its home museum. Lines to see the gowns of various First Ladies. Lines even to see Julia Childs' kitchen, lovingly rebuilt in its own exhibition space. But no line was as long as the one to see Dorothy's "ruby slippers" - a cheap pair of faux-leather pumps covered with red sequins.

As for the Gettysburg Address... there was no line.

I looked around the museum with newly opened eyes, and wondered what that portended for the United States. We Americans who abound in "reality television" and cheap journalistic voyeurism - where are we headed collectively as a nation, I wondered? That we care more for gowns worn by the wealthy or cheap props worn by actors and actresses... what does that mean for our future?

Many gave all in Gettysburg on those hot summer days in 1863. And many more have given all since that day - on the fields of France, in the sands of the Pacific, in the jungles of Vietnam, and even among the palm groves of Iraq. But many more do not understand the gift they have been given by those who have given all... a fact never on display as much as on January 3rd, 2009, at the National Museum of American History...