Welcome, Mark Steyn Fans

Since I am "reader of the day" on Mark Steyn's website, I have been getting a lot of new traffic. I would like to welcome my visitors and thank them for stopping by. Hope you peruse the content and check out what other San Diego tea party movement bloggers have to say.

How do you get to be "reader of the day?" A little shameless sycophancy in recommending Mr. Steyn for the Pultizer.

Corporate Welfare, OWS and the tea party movement

This morning's WSJ editorial page picked up on a theme from this blog that the occupiers and tea partyers can come together in opposition to corporate welfare. The whole article is worth a read, but they offer additional egregious examples of the waste of your tax dollars in support of companies that should sink or swim on their own.

Some of the most expensive flops include the Supersonic Transport plane of the mid-1970s, Jimmy Carter's $2 billion Synthetic Fuels Corporation (the precursor to clean energy), Amtrak, which hasn't turned a profit in four decades, and the most expensive public-private partnership debacle of all time, Fannie Mae and Freddie Mac, which have lost $142 billion of taxpayer money.

The ethanol subsidy, benefiting mostly corn farmers and corporate fuel blenders in the Midwest, costs about $6 billion a year through an array of tax subsidies, tariffs and mandates while making fuel and food more expensive.

Crop price supports for wheat, corn, rice, sugar and soybean farmers are supposed to help struggling family farms, but at least half the subsidies go to large and wealthy farmers and corporations. Congress can't seem to wean the farm belt off these payments even though commodity prices and farm incomes are near an all-time high. Restricting those funds to farmers with incomes below $250,000 would save $30 billion over the next decade.

The Export-Import Bank has a portfolio of $14.5 billion of outstanding loan guarantees to assist major U.S. exporters. More than 90% of the funds went to 10 corporations, including Boeing ($6.4 billion), General Electric ($1.043 billion) and Caterpillar ($424 million).

The Presidential candidate that can capture the anger over these outrages can easily beat Obama, because he is all in for government subsidies, and has doubled down on defending the likes of Solyndra.

The Republican nominee doesn't have to have a great track record on this issue, he just has to show a credible change of heart on the issue. Fortunately, there is an easy way to do so, campaign against ethanol subsidies in Iowa, and then consistently oppose any other such subsidies the rest of the campaign. Tying Obama to corporate welfare is relatively easy. Given the justified anger over giving our tax dollars to corporations, Obama should have no chance. That he does is shameful.

Rope-A-Dope in Greece?

So the win-win idea to hold a referendum is paying off for Greek P.M. George Papandreou, aka Γεώργιος Α. Παπανδρέου (pictured at left, with Antonis Samaras, aka Αντώνης Σαμαράς). His own socialist party rebelled against the idea, and he barely survived a no confidence vote. But it got the opposition party "New Democracy" to the negotiating table, and look at the result.

In a statement early Monday morning, the Greek Finance Ministry said that delegations from the Socialist Party and New Democracy met on Sunday “to discuss the time frame of the actions” to implement the debt deal, and added that the two parties regarded Feb. 19 as “the most appropriate date for elections.”

In reaching the agreement, Mr. Papandreou agreed to meet Mr. Samaras’s demand that he step down as prime minister, while Mr. Samaras agreed to back the debt deal and a seven-point plan of priorities proposed by Mr. Papandreou that would essentially commit the new government to the terms of the debt deal.

So Samaras's party seemed poised to trounce the Socialist in elections that must certainly come within the next few months. Now, the debt deal and the attendant consequences will be an albatross around the neck of New Democracy. I wonder if the Greek voters will react in a similar manner to American ones in 2008. (The link is to my analysis of why McCain lost.) Given the choice between an unsteady maverick who seems to have no clue or principle as to how to handle a financial crisis vs the representative of the party of government, Americans chose the Democrats. Might the Greeks choose Socialists in the next election for the same reason? New Democracy was against the austerity measures right up to the point of final crisis. They dropped opposition for a chance to share in power. How unprincipled does that look?

Note to Republicans, if you believe in your principles, dropping them in a crisis, like Bush did in 2008, won't bring your party electoral success. In fact, sticking by those principles is the only path to long term success.

In the meantime, one wonders if George Papandreou is a fan of Muhammed Ali, and if Antonis Samaras is ready to lead his nation.

Conspiracies - Pearl Harbor and 9/11

I listened to a Pearl Harbor survivor today who described in somewhat horrific detail his experiences on the USS West Virginia on December 7, 1941. He was a dynamic speaker, with a great memory for detail, especially considering he celebrated his 90th birthday recently. What struck me was that towards the end he brought up his belief that the U.S. government was aware the attack was coming and did nothing to prevent it. It made me think of the "truthers" in our generation who want to blame 9-11 on a conspiracy. It seems that there are always conspiracy theories to explain events with complex causes, because we can't accept their complexity. Even the sinking of the Maine has been attributed to a conspiracy by the U.S. government.

As someone who has experience in government, as well as some knowledge of intelligence operations, I can tell you that hindsight is a great thing to have, when discussing the clues that some untoward event was going to take place. In a government as vast as ours, with responsibilities for intelligence gathering split, by necessity among so many agencies, it amazes me that we figure out anything ahead of time. I liken the problem of predicting adversary actions based on intelligence to solving a jigsaw puzzle, except that you don't have the picture available to guide you and some joker has added thousands of extra pieces to a puzzle of only a few hundred.

Stupid things happen, people are occasionally incompetent, agencies protect their own turf rather than share. All this is human nature as it manifests itself within government. "Never ascribe to malice what can be explained by stupidity" is a good rule of thumb for evaluating a bad situation.

Local Talk Radio Changes

Sdrostra.com has the scoop here and here on changes coming to local talk radio station KOGO, AM 600. Some of the highlights:

• The station will start simulcasting on FM 95.7 to draw a younger audience.
• Chris Reed is leaving KOGO immediately. He is well respected, see some of the comments.
• Roger Hedgecock is also leaving, but he is already building a nationally syndicated show.
• Tea party favorite LaDona Harvey will move to the 2-6 pm slot. She has a younger audience than the other shows on KOGO now.
• Rush Limbaugh stays in the 9-12 morning slot.
  

This news was posted yesterday, and I haven't seen any confirmation about Chris Reed leaving.

Weekend Music Chill

Going for a triple play covers edition on this weekend's music. All three versions are covers of the original "Girls Talk" by Elvis Costello. BTW, Dean and I have completely different ideas about what is great about Costello. He likes the whole "blue eyed soul" thing, and I go for more rockin' efforts like "Peace, Love and Understanding" and this gem, where Elvis covers himself, with a variation on the original.



Dave Edmunds.




Finally, Linda Ronstadt.



Interestingly, this song was a hit for all three artists, a testimony to the songwriting talents of Declan Patrick McManus, his given name.

Susan Davis Town Hall

6:45 p.m.Susan Davis' office robocalled me to participate in a telephone town hall. She repeated all of Obama's talking points about helping students with loans, bailing out homeowners on their loans, and how much she adores the occupy wall street types. She is now taking questions, and frankly they are pretty ignorant. The first two callers thought that Congresscritters could accept unlimited gifts. To her credit, Susan Davis corrected them. However, she is implying that corporations can give unlimited money to campaigns anonymously, which is not true. I believe that she is referring to independent expenditures, but she didn't make it clear.

A staffer wanted to know my question. I asked if the government was going to put price controls on college tuition, since the high cost of college was causing students to take out loans they can't pay back. Waiting to see if I get to ask this question. Amazingly, she earlier implied that the bankers were to blame for the college loan problem, because they didn't consider the student's ability to pay back loans when they made the loan. Hasn't she read the Obama memo, that the Department of Education is taking over guaranteed student loans. Further, if banks refuse to make these loans, they will be pilloried for setting back the dreams of students.

Another caller, Ron, is asking if she would support single payer system. The caller has private insurance through COBRA, says that he keeps getting denied care. He says that he pays $800 per month. Davis ducked the question about single payer, but hinted that she would support single payer. "I am working toward implementing affordable care act." The caller continued to discuss how he keeps getting denied approval procedures. He then started a second rant about needing 60 votes in the Senate to pass.

Laura called about bickering and uncooperative behavior in Washington. What the heck? Davis responded that she tries on a personal level. She lied about Republicans not passing any bills in House. Launched into "infrastructure" investment. Hopes that super-committee does something for the country, whatever that is. "I will be asking people to send one minute speech on floor of Congress."

Another guy, Steve, I think, called out executive pay like the guy who just left HP. He also talks about how airlines have gutted their workforce. We shouldn't blame unions, according to him. Davis says this is part of occupy movement. "Growing inequality is a problem in this country." People who are struggling today are most fearful that there will be additional pressure on them." Davis talks about re-invigorating American dream. Boards of companies shouldn't give huge bonuses, especially if someone hasn't delivered. If someone has delivered, they should be rewarded. What is Congress' proposed solutions in legislation? Asks Steve. Opportunity is very difficult, according to Davis, blames 60 votes in Senate and these kinds of bills are not brought to the floor of the House. Davis repeats claim that proposals in Obama jobs bill have been proposed by Republicans in past. They should be ashamed, I add. If Davis says infrastructure again, I might scream. "Someone not getting unemployment insurance is a big gain." How is that different from a useless job?

7:33 p.m. Robert is just sucking up to everyone else. He talks about 58 year old friend who is unemployed for three years and "bleeding" and can't afford any medical procedure. Susan Davis talks about how it's Republicans fault that health care can't be fixed. Didn't Dems just pass Obamacare? Robert now complaining about Senate killing Obama jobs bill, and asks about super-committee. Davis' answer is that we have to wait three weeks. Blah, blah about the process.

7:39 p.m. Cy says that tax structure is source of inequality due to low marginal tax rates and low gains rates. Davis' responds by pawning this on super-committee. This is reason why it is evil, now Congresscritter can blame this committee. Now she is talking about suffering due to stagnant wages. "We should reward businesses who keep business here in the United States." "I have colleagues willing to look at tax reform." She is now talking about loopholes, but mortgages are off the table for reform. Too bad, it all should be on the table. She talks as if the suffering has only taken place since the 2010 elections.

7:43 p.m. Chrystal talks about overcoming her own apathy, by going on line. Concerned about huge military machine that we can't support, with soldiers and sailors abroad. She is saying it is hard, because if we reduce military they won't have jobs. She claims that there are also terrorists in our own country, not just overseas. We should be able to serve our own country here, and this would help peace, according to Chrystal. Is there any future to serve the country, not in the military. Davis responds that there are opportunities with non-profits and also points out that the military is already facing cuts over the next ten years. She is a San Diego congresswoman after all. She is defending "forward presence" and how it protects the country. Wow, she must need the military vote. She is also talking about humanitarian role for military. Shifts to "nation building" here at home, and build schools. Davis doesn't want a weak military. More spending at home, more spending abroad, how the heck is spending going to be reduced? At least Chrystal recognizes that defense is a big expense. Discussion that unemployment amongst military (I believe she means former military) is higher than general population.

7:50 p.m. Wrapping up, she said, one last call. Then to voice mail. Made another call for one minute speeches.

7:51 p.m. Last caller, Howard who is amazed by this technology and the participation in town hall. Howard is a teacher, with draconian threat to his environment. We have no money in the budget, supposedly. Rails against those in the corporate world who tell us this and that, they should step and repatriate money into K-12 education. "We're drowning here."

This is what drowning looks like.

Davis' responds about blocks by Republicans to funding school "infrastructure" and "investing" in young people.

1%ers

I'm just sayin'. I guess we should be angry at the 1%. What do you think?


Inspiration for this post from VDH, brilliant as always.

Mark Steyn Deserves the Pulitzer

. . . the Pulitzer Prize for commentary, but judging by past winners, that is unlikely to happen. His article in Commentary Magazine, "The Case for Pessimism" should win by itself, as it lays out the grave dangers to the nation due to the "red menace" as Mitch Daniels calls it. (Is it too late to get him to run?) Please read the entire thing if you are at all sympathetic to the goals of the tea party movement, it is intellectual ammunition needed for our cause. To be clear, I am not pessimistic, but still find his analysis to be penetrating. A few quotes.

The global reach that enables America and a handful of other nations to get to a devastated backwater on the other side of the planet and save lives and restore the water supply in a matter of days isn’t a happy accident or a quirk of fate. It is something that derives explicitly from our political system, our economic liberty, our traditions of scientific and cultural innovation, and a general understanding that societies advance when their citizens are able to fulfill their potential in freedom.

The United States is the only country in the world where a mass movement took to the streets in 2009 to say we could do just fine if you, the government, stayed the hell out of our pockets and the hell out of our lives. That fact, that populist refusal to be Europeanized, represents the best hope for this country. Those now-caricatured, much-maligned Tea Partiers moved the meter of public discourse significantly back in the direction of sanity. And that includes Barack Obama.

If we don’t turn this thing around by mid-decade, if we let China become the dominant economic power in a world where the Iranians are nuclearizing and where Russia is making whatever mischief it can, we will see something new in world history. Something terrifying. This will not be like the transition from Britain to America, from a crucible of liberty to its greatest exponent. This will be the greatest step backwards for the civilization that built the modern world and spread its blessings across the map. There will be no new world order. There will be no world order.

Exactly.

The Mess that is SDUSD

The actions of the San Diego Unified School District board are irrational. Consider the following.

• The board proposed a plan to shutter schools, including high performing magnet schools to save money for a reported savings of $5 million.
• In the same article, it stated that the board is considering selling or developing real estate to save money.
• Two credit rating agencies have recently downgraded the district's bond rating.
  

So the district is in deep trouble, right?

• ". . .the district continues to hire back teachers whose layoff notices were rescinded some four months ago."
• ". . .instrumental music lessons offered at every elementary school also seem to belie the troubles that have been touted."

Now the district is talking about a new bond measure, but admitting that some of the money would be used to pay operating expenses. [Isn't that a violation of law or at least generally accepted accounting practice?]

The new bond money would ostensibly go for construction, upgrades and equipment, including new technology for students.

But officials openly discussed the potential of using the bond to free up general fund money for teacher salaries and classroom programs.

What gives with these guys. Melanie Nickel lambastes the board in a letter to the editor.

How much staff time was spent preparing this poorly thought-out, unrealistic list of proposed closures? (Example: The proposal suggested moving a K-8 magnet program to a middle-school campus that has no facilities for elementary students.)

Whose idea was it to put the selection process in the hands of a group of downtown bureaucrats, working in secret without any input from parents or working educators?

I guess this is what we get when we get a board whose election is dominated by the teachers' union. I don't recall a single board member being elected without union endorsement, because no one pays attention to those elections. If we are ever going to fix the school district, the voters are going to have to vote exactly the opposite of the union recommendation. Otherwise we will continue to pour money down the rathole of the public education system in this city.

[Full disclosure, both of my sons have graduated high school, from private schools here in the city of San Diego. We made financial sacrifice to save them from the cesspool of incompetence we witnessed in this school district.]

Taking Responsibility in Greece

I had the same reaction as fellow SLOB KT, regarding the decision by Greek PM George Papandreou to call a referendum on the euro bailout package. (By the way, I'd like to welcome KT to the SLOBs, he is a great addition, as well as a good friend.) The Greek people need to face up to their own responsibility for their future. A referendum is a good way to concentrate their attention and take the air out of their childish demands to be bailed out without making any fundamental changes to their system of government or economy.

Further, from a political perspective, the prime minister has little to lose. The New York Times is reporting that his government may collapse over the referendum question. But he was already a dead man walking, politically; new elections would give him a fresh mandate to govern or toss the problem to some other hapless sap who would have to live with the consequences of either default or austerity.

My personal opinion is that the Greeks should just default and exit the eurozone. They have proved they can't live within the rules laid down by the union, and full default, like bankruptcy would give a fresh start. The lack of foreign meddling would also concentrate the minds of the Greeks on solving their own problems, starting by re-instituting real capitalism and getting the government out of the shipping and tourism industries. Where would they get the capital to grow? They still own plenty of assets, including many islands that the wealthy or large corporations would love to lease or buy.


Here is a picture from the Greek island of Ios.


This could be the start of the Greek nation making a comeback. The first step is always taking responsibility for one's self.

Racism?

So, John Edwards fathers a child out of wedlock, covers it up with the connivance of his campaign manager, while his wife is dying of cancer. He further sneaks into LA to visit the mistress while still campaigning. The mainstream press, including the Los Angeles Times, on whose beat much of the action took place, refuses to cover any part of the story, and its left to the National Enquirer to scoop them all.

Meanwhile, Herman Cain is alleged to have made ". . . physical gestures that were not overtly sexual but that made women who experienced or witnessed them uncomfortable and that they regarded as improper in a professional relationship," and the mainstream press seems to have nothing else to discuss.

Maybe the left is correct. Maybe there still is racism in America.

tea party Outreach to Occupy Wall Street

A guest at our Halloween party Friday night (not pictured, but that's your author on the right) had attended some of the Occupy San Diego events, and said that the press image of the movement distorted what they are trying to achieve. No surprise there, as I have seen the tea party movement's principles and activities similarly distorted. She said that the movement has serious demands that are the result of government enriching particular companies through undue influence. Further, she stated that one of the demands of the group is to prevent a revolving door between corporate lobbying and government. She also said that the Iraq war was the result of weapons contractors being highly placed in the Bush administration, a point on which I disagree. However, we had many points of agreement, but disagree fundamentally on what is to be done about government regulatory and tax policies, as well as subsidies and bailouts that enrich the privileged elite with the connections to benefit. The occupy movement seems to believe that we can build "good government" free from the influence of the wealthy and powerful, which will then regulate the activities of that group for the greater good of all Americans.

I fundamentally disagree that this goal is possible. What then is to be done? The fundamental problem is that the wealthy, and especially those in the financial sector, have benefited from government subsidies, bailouts and implicit guarantees. They make risky bets, knowing that the taxpayers will be on the hook to bail them out, while they still walk away rich. The only solution is to attack the source of the problem, which is to allow banks and other financial firms to fail. Further, we must ban subsidies and pork barrel projects. We must press for transparent and simple regulation that applies evenly to all businesses. To protect ourselves from financial meltdown from "too big to fail" we must enforce ever higher capital reserve requirements for ever larger firms, rather than execrable and impenetrable regulation like the 2319 page Dodd Frank bill.

The occupy movement targets the outrageous outcome of taxpayers bailing out the already wealthy. But there movement is being hampered by other deficiencies, and they could learn from the tea party movement. But I think they could get more traction and even tea party support if they made a few changes. On the other hand, the tea party should be thanking them for protesting the problem of crony capitalism. Crony capitalism and corporate welfare are a twin cancer on America, depleting our ability to grow the economy in a just way. However, the occupy movement is not getting the traction it deserves due to a number of distractions.

• It seems that #occupy is protesting all wealth, not just the unearned wealth. Americans think that Steve Jobs, for example, deserved to keep the wealth he earned, Wall Street bankers with implicit guarantees from Uncle Sam, not so much.
• Too many socialists in the movement call for the collapse of capitalism. The tea party purged racists from its movement, occupiers should purge the anarchists and socialists from theirs. (Yeah, I'm comparing socialism to racism. Various forms of socialism, such as national socialism and communism, have killed far more people than racism ever did. If you don't like the comparison, you're reading the wrong blog.)
• The occupy movement is perceived as trashy, as in literally leaving trash in its wake. Be model citizens, and the 99% of the public that isn't protesting might take #occupy more seriously. It leaves the impression that you are spoiled children, not adults taking responsibility for changing the republic.

Taking a look at this Occupy Wall Street web site, I can find common cause with some of their complaints, such as:

• They have taken our houses through an illegal foreclosure process, despite not having the original mortgage.
• They have taken bailouts from taxpayers with impunity, and continue to give Executives exorbitant bonuses.

But some of the complaints seem shear fantasy:

• They have used the military and police force to prevent freedom of the press.

Really? How are you able to publish your manifesto, and how am I able to read it?

So I will end with what I told our young guest, Friday.

It's the crony not the capitalism and its the corporate welfare not the corporation that are causing the problems in America today. You complain about money in politics, but after forty years of successive reforms, nothing has been done to stop it. At the end of the day, you never will because the rich have freedom of speech as well. The situation is like what Steve Forbes described. You have vermin in your kitchen. So you set traps, put out poison, and plug up the holes, but somehow the vermin keep coming back. That's because you have to stop keeping the cake under the kitchen sink! The cake is the largesse shelled out by government through crony capitalism and a regulatory excess that favors some businesses over others. The only way to get the money out of politics, is to get politics out of the business of dispensing money.

So how about it occupiers? Could we agree on ending all corporate subsidies, loans and tax loopholes as our common platform? Could we ask for a ban on government giving tax dollars to favored groups? Could we ask for regulatory simplicity, not complexity? Could ask for an end to "too big to fail?" I look forward to your response.

Quotes of the Week

Some great quotes about the state of the nation this week. First from Dean, on diagnosing the exact reason that the occupy movement appears to be careening out of control.

By rejecting the norms and institutions of civlized society they only find themselves recreating those institutions but without the underpinning of the rule of law. Without the rule of law, the Occupy "villages" become a study in the tyranny of the majority where pendulum swings in the "mood" of the General Assembly. . .

Next, from Peggy Noonan, quoting Paul Ryan on what should be the real object of our ire, both tea partyer and occupier:

The "true sources of inequity in this country," he continued, are "corporate welfare that enriches the powerful, and empty promises that betray the powerless." The real class warfare that threatens us is "a class of bureaucrats and connected crony capitalists trying to rise above the rest of us, call the shots, rig the rules, and preserve their place atop society."

Amen, brother.

Happy 125th to an American Inspiration

Today marks the 125th anniversary of the dedication of the Statue of Liberty. The statue has become synonymous with the aspirations of immigrants the world over coming to America's shores seeking refuge from the tyranny that has plagued most of mankind's history. Today's events include the swearing in of 125 new citizens of this Republic. As I have opined before, we need to have skilled immigrants on the order of millions to solve our economic woes in this country.

Weekend Music Chill - Halloween Edition

Probably light blogging as the youngsters are hosting a Halloween party tonight. A small sampling from the party queue on the Sonos playlist follows.

Romney Quote on Mortgages

I earlier posted about Mitt Romney taking heat for getting it right on mortgages. I neglected to include his quote. He is responding to the question of what should be done about housing and foreclosures.

"One is, don't try and stop the foreclosure process. Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up. Let it turn around and come back up. The Obama Administration has slow-walked the foreclosure processes that have long existed, and as a result we still have a foreclosure overhang."

Anyone who doesn't think that is the swiftest way for the market to recover should demand their tuition back for their economics classes at Columbia and Harvard. If they took economics, because we don't know; there is no transcript available.

Obama Inflates the Education Bubble in the Name of Stimulus

What could go wrong? The President announced he is using his power to make a slight expansion in the program that the Democratic Congress passed in 2010, that basically allows students to never have to repay their student loans and gives them an incentive not to report income after graduation. Republicans should repeal this program after they gain control of the White House and the Congress in 2012. The President's idea is to cap student loan repayment rates at 10 percent of a debtor’s income that goes above the poverty line, and then limiting the life of a loan to 20 years. Take this example, even if not typical:

If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Suzy opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure.

Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy.

The president will also allow student debtors to refinance and consolidate loans on more favorable terms, further decreasing the payoff for taxpayers.

What's really wrong is that the cost of education has increased far faster than its value, in terms of increased earnings. There is in fact, an education bubble, that is already starting to collapse, if the complaints of those with master's degrees in comparative ethnic dance studies are to be believed. Check this graph from Carpe Diem:

If we had a housing bubble that burst in 2008; how would you describe the tuition graph? Clearly, the government subsidies are partially to blame for this increase. More importantly, the subsidies distort the economy and depress economic growth, because the supposed "investment" in college is providing the return on investment.

The Economist provides an excellent summary of the situation. The whole article is worth a read.

Mr Thiel believes that higher education fills all the criteria for a bubble: tuition costs are too high, debt loads are too onerous, and there is mounting evidence that the rewards are over-rated. Add to this the fact that politicians are doing everything they can to expand the supply of higher education (reasoning that the "jobs of the future" require college degrees), much as they did everything that they could to expand the supply of "affordable" housing, and it is hard to see how we can escape disaster.

Mary Lacey, at TechCrunch, interviews legendary venture capitalist and PayPal co-founder Peter Thiel, and has this to say.

Instead, for Thiel, the bubble that has taken the place of housing is the higher education bubble. “A true bubble is when something is overvalued and intensely believed,” he says. “Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. It’s like telling the world there’s no Santa Claus.”

Like the housing bubble, the education bubble is about security and insurance against the future. Both whisper a seductive promise into the ears of worried Americans: Do this and you will be safe. The excesses of both were always excused by a core national belief that no matter what happens in the world, these were the best investments you could make. Housing prices would always go up, and you will always make more money if you are college educated.

Like any good bubble, this belief– while rooted in truth– gets pushed to unhealthy levels. Thiel talks about consumption masquerading as investment during the housing bubble, as people would take out speculative interest-only loans to get a bigger house with a pool and tell themselves they were being frugal and saving for retirement. Similarly, the idea that attending Harvard is all about learning? Yeah. No one pays a quarter of a million dollars just to read Chaucer. The implicit promise is that you work hard to get there, and then you are set for life. It can lead to an unhealthy sense of entitlement. “It’s what you’ve been told all your life, and it’s how schools rationalize a quarter of a million dollars in debt,” Thiel says.

That sense of entitlement explains a lot about the unemployed twenty-somethings who are occupying Wall Street.

Should the Rich Pay More Taxes?

Of course, they should. And in a growing economy they would be. But raising the marginal tax rates on the "rich" actually produces little extra revenue, especially, given the flawed, loophole riddled tax code that we have in the United States. The question of how to increase revenue without discouraging economic growth has fortunately been answered by our experience with the 1986 tax reform. Economist Martin Feldstein explains.

The Tax Reform Act of 1986, enacted 25 years ago last Friday, showed how a tax reform that includes lower rates can change incentives in a way that grows the tax base and produces extra revenue.

How does this work?

This dramatic increase in taxable income reflected three favorable effects of the lower marginal tax rates. The greater net reward for extra effort and extra risk-taking led to increases in earnings, in entrepreneurial activity, in the expansion of small businesses, etc. Lower marginal tax rates also caused individuals to shift some of their compensation from untaxed fringe benefits and other perquisites to taxable earnings. Taxpayers also reduced spending on tax-deductible forms of consumption.

The path ahead for the Congress to raise the revenue needed to run the government and grow the economy is straightforward. The Economist editorializes

Make sure the rich pay their share, but in a way that makes economic sense: you can boost the tax take from the wealthy by eliminating loopholes while simultaneously lowering marginal rates.

The growth that results from fewer economic distortions in the tax code can also spur job creation in the economy.

Serious talk about reforming our dysfunctional tax code is a winner for the Republican nominee for President. This is why I am encouraged to see Rick Perry come out for a flat tax, although I am less impressed to find that he would give taxpayers the option of filing under the old system. Since the wealthiest have the most impact on the economy, this undermines the outcome of increased growth from a flat tax. Herman Cain's 9-9-9 plan also pushes the conversation, but a new national sales tax, on top of income taxes is irresponsible because there is no limitations on future Congress' ability to hike both rates.

I think the best plan would involve lower marginal rates for all forms of income, but an end to all deductions and loopholes, including the mortgage interest rate deduction. I would be willing to consider a charitable deduction, but that might be all. The same is true for the corporate tax code. All of the special tax breaks need to come out and profit should be calculated using generally accepted accounting principles. Top marginal rates around 20% and a corporate tax rate of 20% would be achievable. I am in favor of keeping corporate taxes rates and personal income tax rates the same to prevent shifting between retained profits and income, available to owners of corporations. Better to cause all business decisions to be unbiased by tax code considerations. The only way I would favor a national sales tax would be if the 16th amendment were repealed.

Mr. Feldstein concludes.

Combining that base broadening with a 10% cut in all tax rates would be revenue neutral in a traditional static analysis. But the experience after the 1986 tax reform implies that the combination of base broadening and rate reduction would raise revenue equal to about 4% of existing tax revenue. With personal income-tax revenue in 2011 of about $1 trillion, that 4% increase in net revenue would be $40 billion at the current level of taxable income, or more than $500 billion over the next 10 years.

The Joint Select Committee should insist on counting that revenue as the starting point for a serious deficit reduction plan.

Romney Gets One Right

Supposedly, Mitt Romney gave a "political opening" to Obama when he suggested that the housing mortgage crisis should be allowed to run its course. I don't see how. As is typical, the White House obfuscates on this issue and makes a spurious argument. Here is Jay Carney:

What we firmly do not believe is that the answer is not to simply let the housing market bottom out and let investors come in and fix the problem. That’s not a solution. That’s a solution that basically says to middle-class Americans who have been responsibly paying their mortgage and who, through no fault of their own, have seen their economic situation get quite desperate because of the prices in the housing market that you’re on your own — tough luck, I’m not going to help you. That’s not this President’s approach.

The problem isn't the people who responsibly paying their mortgages. That sets up a straw man that doesn't exist to make it sound like homes are being seized illegally. The mortgage industry certainly bears investigation for certain practices, but for the most part, homes being foreclosed are in arrears. Whether the mortgage holder such as a bank, thinks it would be better to foreclose or renegotiate should be decided on a case by case basis. When a house is "underwater" the mortgage holder is going to take a haircut either way, so I don't see how they are not sharing in the losses.

The other issue is purely economic. Here is what the administration proposes.

The key to the new approach, hashed out by Housing and Urban Development Secretary Shaun Donovan in recent weeks: allowing homeowners to refinance at lower rates regardless of how far their home values have fallen, while reducing or eliminating prohibitive refinancing fees.

Sounds great, but the economic incentives don't add up for most homeowners who are underwater and behind. If someone has a mortgage on a home with a loan amount of $500,000 against a home valued at $350,000; it doesn't matter if the mortgage interest rate is 7% or 4.5%, there is little incentive to pay back the loan. Plus, many of these people can't repay, even if on favorable terms.

We have commented on this situation and our message remains the same, the sooner housing prices fall to market clearing prices to attract investors, the sooner we will start an economic recovery. Mitt Romney is essentially saying the same thing.

In an interview published Tuesday ahead of presidential debate, Romney told Las Vegas Review Journal's editorial board that solving the foreclosure crisis would require letting banks proceed against homeowners who have defaulted on their mortgages. New investors could then rent out the homes until markets adjusted.

"As to what to do for the housing industry specifically and are there things that you can do to encourage housing: One is, don't try to stop the foreclosure process. Let it run its course and hit the bottom," Romney said.

I like his competent understanding of the economy.