High Speed Choo-Choo Update - End of the Line?

This is normally Dean's turf, but this article made me so happy, I had to post. From the LA Times Headline:

Bid to appease bullet train critics may violate law
Revisions are in conflict with the ballot measure approved by voters and may go against the Obama administration's plans.

It seems that all the changes being made to this boondoggle are violating the terms of Proposition 1A. Some provisions that can't be met and would violate the law:

• Any initial segment has to use high-speed trains. Instead, the rail authority has agreed to run fewer trains at slower speeds on tracks shared with commuter rail systems.
• Passengers must be able to board in Los Angeles and arrive in San Francisco without changing trains.
  
• The system is supposed to run without taxpayer subsidies. I can't stop laughing at that requirement.

King's County is suing, "two of its residents alleges that the plan to start construction in the Central Valley is also illegal" and the Calwhine blog is reporting that the Howard Jarvis taxpayer association will also be engaging. He reports on an email from Jon Coupal of the association:

“We don’t see how these bonds could ever be issued with such a significant legal cloud hanging over them,” he wrote in an email to me. “In addition to the existing legal challenges, it is likely that multiple parties would jump into any validation action filed by the state seeking to inoculate the financing. Wall Street itself may demand that the issue be revisited by the voters.”

It's hard to describe my jubilation in the firm belief that the taxpayers won't get bilked. H/T Temple of Mut.

Quote of the Week

Comes from Walter Russell Mead:

The question before the country isn’t whether the law will stand. It is headed for failure; the question is whether the Supreme Court will kill it quickly and at a relatively low cost, or will it impose huge costs and inefficiencies across the country as its contradictions and inadequacies are successively revealed.

The whole article is worth reading, it is a scathing critique of the poverty of thinking of modern progressivism.

Tea Party Canada? Updated Links

Canada seems poised to experience significant economic growth. The Conservative government of Stephen Harper has announced reforms to keep government spending down and entitlement spending under control. I would hope this is what a tea party government would look like in America. Part of their plan includes raising the retirement age will rise from 65 to 67 in 2023. The government also announced:

Under the plan, Canada will cut its deficit this year through "moderate" spending cuts, as the economy grows by 2.1 percent, Flaherty announced.

But much deeper cuts, including the laying off of 19,200 government staff, or 4.8 percent of the federal workforce, are planned for the coming years.

Canada's debt to GDP ratio, while good compared to other industrialized countries, at 84%, is too high for the comfort of the government. As a result they are focusing on not allowing the ratio to rise.

The deficit was projected in the budget to fall to Can$21.1 billion (US$21.1 billion) or 1.2 percent of the gross domestic product (GDP) for the fiscal year ending March 31, 2013, down from a revised Can$24.9 billion last fiscal year.

1.2% of GDP? We can only dream. Finally, I like what they are doing to grow the economy.

Looking to the longer term, the minister outlined immigration reforms to attract more foreigners with skills and money to "strengthen Canada's economy," and a streamlining of the review process for major resource projects.
. . .
Since 2006, Canada has signed nine free trade deals and is now negotiating pacts with the European Union and India, as well as trying to grow its trade ties with China.

Free trade and immigration of skilled foreigners, I like this plan. The article also mentions how the U.S. is losing out by cancelling the XL pipeline and how it has strained relations between the two countries.

H/T CDR Salamander.

UPDATE

Fellow SLOB, WC Varones has some more material supporting this tea party thesis, liberated from the comments.

From August 2010:

You know why Canada doesn't have Tea Party protests?

Because they already have type of sensible government policies that Tea Partiers are trying to implement here!

Relative to the U.S., Canada has lower taxes, lower debt per capita, lower debt to GDP, and a sound banking system:

From July 2011:

In today's WSJ, Fred Barnes writes that Canada had a debt crisis in 1993 very similar to our current situation. And Canada's Liberal prime minister saved his country by doing exactly the opposite of what Obama is doing now.

Weekend Music Chill

This weekend's music is from one of my favorite bands from the 80s, even though this song was released in 1993. Most bands with these kind of personal issues don't make such a successful comeback. From the "Wedding Album" here is Duran Duran with Ordinary World.




Another of their 90s singles that I like.



The second song is on a Sonos playlist that includes these two songs.

Your Economics Lesson for the Week

H/T Carpe Diem. From NBC News in the Bay Area.

The catchy Subway sandwich shop jingle involving a variety of foot-long sandwiches available for $5 doesn't apply in San Francisco.
. . .
Apparently, the city's new minimum wage, raised to $10.24 as of Jan. 1, make $5 footlongs an impossible business model.

There was an eruption of comments on Carpe Diem. One complaint was about how it was impossible to live by oneself on minimum wage in San Francisco. No sharing apartments! The new cri de guerre of aspiring Bolsheviks.

Fletcher Leaves Republican Party

Nathan Fletcher, California Assemblyman and San Diego Mayoral candidate announced that he was leaving the Republican party today. VOSD discusses his long history with the GOP.

He had Ronald Reagan in mind when walked door-to-door campaigning for Republicans as a teenager and registered Republican voters outside Home Depots in college. He became a professional Republican operative, even working as the state party's political director. He married a former campaign staffer for President George W. Bush. He counts big-name Republicans — Karl Rove, Pete Wilson, Meg Whitman and Mitt Romney — among his supporters in his bid to become San Diego's next mayor.

Over at sdrostra, the announcement has generated a flurry of comments about Fletcher's choice, but I think that his trouncing in the GOP endorsement process led to this decision. The VOSD article opines that this was a result of Tony Krvaric remaking the San Diego Republican party into a less "establishment" mold. If that's really true, then I applaud the move. I'm tired of paying for largesse to downtown business establishments through my city taxes. I have been critical of Krvaric in the past, but if he is really moving the party in that direction, then great. It remains for the moment, unproved.

Meanwhile, polls show Fletcher in last place, so what did he have to lose? The latest polling showed:

DeMaio 24%
Filner 20%
Dumanis 10%
Fletcher 10%
Undecided 35%

It seems that the betting would be for a November runoff between DeMaio and Filner, since neither looks capable of getting more than 50% in the officially non-partisan June primary.

The Challenge of Tax Reform

Paul Ryan's budget proposals are being excoriated by the left. His push for reform is of course laudable, but we should acknowledge that there are some difficulties with the approach he has taken. First the good stuff.

Mr. Ryan wants to avoid a tax increase and reform the tax code because he realizes that the budget will never balance over the long term without economic growth faster than today's 2% a year.
. . .
He has also issued a second budget estimate based on evidence from the 1960s, 1980s and 2000s that tax reform and spending restraint will increase GDP by about 0.5 to one percentage point a year. This means the Ryan budget reduces the debt to GDP ratio to 50% in 10 years from 74.2% this year (and heading higher) and thus steers the U.S. away from the Greek fiscal rocks.
. . .
But what really matters on spending over the long term is entitlement reform, and on that score Mr. Ryan goes further than any Republican Congress or President since 1995. He understands that without converting Medicare into a market-based program with more choices for seniors, and without devolving Medicaid to the states and repealing ObamaCare, tax increases will soon become the political default option.

I agree that reforming entitlements, including social security, not just medicare and medicaid are necessary elements of reform. The Rebublican party needs more Congressman like Ryan.

Ryan proposes a simplified two tier tax system with rates of 10% and 25% and a corporate rate of 25%. He proposes to pay for this with unspecified cuts to tax loopholes. The following chart from the CBO illustrates the relative size of the loopholes, aka tax expenditures, on the budget in GDP percent.

The problem is that every one of these deduction/credits are very popular. What do Republicans propose to remove to make up for the lowered rates? According to Ruth Marcus at the Washington Post, there are about $12 trillion over ten years in such "tax expenditures" and Ryan needs $4.6 trillion over the same period to keep revenue static. However, I'm not sure revenue needs to be static, since Ryan's goal is to reduce the federal government's size to under 20% as it has historically been. Even so, which deduction is the tea party supporter willing to forego?

• Taxing health care benefits makes sense to me, but can you imagine the uproar after Obamacare is repealed or struck down and now we want make health insurance even more expensive?
  
• Do we really want to discourage saving for retirement by taking 401(k) and IRA savings?
• Mortgage interest is very powerful in propping up the prices of homes.
• What about long term capital gains? Don't we want to encourage investing?
• How about state taxes? Doesn't seem fair to pay taxes on money that was taken away by taxes.
• Charitable giving? How are we going to show that we need less government if charities don't step up.
  

These are tough calls. My belief is that we are going to have to go for a package deal that persuades people that they are better off without the deductions in return for lower rates and growth.

Obama: Counter-Revolutionary

The founders of our nation bequeathed us a Republic, if we could keep it, to paraphrase Benjamin Franklin. The duty of the government of the Republic was to protect the rights of its citizens. To quote the Declaration:

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

The founders didn't promise us ever increasing wealth, freedom from want or poverty; only the opportunity to take control of our own lives to pursue those ends we thought best.

But Obama, like other progressives before him, actively seeks to subvert the meaning of the revolution by pressing government into service to supply our every need. Such a government becomes our master, not the servant it was meant to be. In this way, Obama is a counter-revolutionary. He seeks to return the U.S. to the condition of Europe in which the greatness of the state and what it accomplishes, not the greatness of the people, is the measure by which the nation is judged. This is part of the underlying meaning of his so called health insurance reform, and why I so strenuously oppose every bit of that legislation.

In fact, the nation has always delivered first rate insurance and health care, but certainly not equally to all people. But that is not the promise of our nation. We will all be better off we let free people figure out how to best buy their health insurance amid freedom of choice among providers and plans. We will be better off if providers, doctors and hospitals are free to innovate not only with the technology of health care but with innovative business models for delivery. Look at the abundance of food delivered at low cost in a relatively free market. Health care will be as plentiful and filled with variety when we introduce free market reform.

Ultimately, this President, who promised to fundamentally transform America, is not the revolutionary, but a counter-revolutionary, reversing the promise of our founding, a limited government that protects the rights of its citizens.

Obamacare - Taxing Issue

Hot Air is reporting, actually re-reporting from Philip Klein, that even the liberal justices were skeptical of the idea a tax not called a penalty could be called a tax. Congress explicitly withdrew language from Obamacare that called the penalties enforcing the individual mandate a tax.

On the first day of oral arguments in the case challenging President Obama’s national health care law, justices seemed skeptical that the individual mandate should be considered a tax — one of the main consitutional defenses being offered for the law.

To be clear, today’s 90 minutes of oral arguments did not concern the underlying merits of the case, but whether an 1876 law called the Anti-Injunction Act bars the Court from ruling on the suit at this time. Under the Anti-Injunction Act, people cannot challenge a tax in court until after they have paid it, something that would effectively punt the issue until at least 2015. However, there is some overlap between this question and the idea of whether the mandate is a tax, and justices on both sides of the ideological fence expressed skepticism that the mandate should be treated as a tax.

Even though the smart money seems to be on the Justices upholding the law, I remain optimistic that the vast overreach of stretching the commerce clause will come to its limit. Frankly, if the individual mandate is not overturned, I don't see how the federal government can have any constitutional limits to its reach.

David Axelrod Sent Me this Stupid Email

David Axelrod sent me this email touting the purported benefits of Obamacare. The hashtag #IlikeObamacare has been an epic fail on Twitter as well, but I wanted to highlight how weak the case is for this pork laden, lobbyist written epic fail of a legislative effort.

B. --

I like Obamacare.

I'm proud of it -- and you should be, too.

Here's why: Because it works.

So if you're with me, say it: "I like Obamacare."

Obamacare means never having to worry about getting sick and running up against a lifetime cap on insurance coverage. It gives parents the comfort of knowing their kids can stay on their insurance until they're 26, and that a "pre-existing condition" like an ear infection will never compromise their child's coverage.

It's about ending the practice of letting insurance companies charge women 50 percent more -- just because they're women.

And Obamacare can save seniors hundreds of dollars a year on prescription drugs -- and gives them access to preventive care that is saving their lives.

President Obama never lost sight of the fact that this reform is about people. People like his own mother, who spent the last years of her life fighting cancer -- and fighting with insurance companies, too.

That shouldn't happen. And because of Obamacare, it can't.

So next time you hear someone railing against Obamacare, remember what they're actually saying they want to take away.

And, today, stand with me in saying, "Hell yeah, I'm for Obamacare":

http://my.barackobama.com/I-Like-Obamacare

Thanks,

David

P.S. -- Side note: Can you imagine if the opposition called Social Security "Roosevelt Security"? Or if Medicare was "LBJ-Care"? Seriously, have these guys ever heard of the long view?

The "long view?" That's exactly why we call it Obamacare, because we intend to fight until it is repealed and the label indicates the temporary nature of the bill. Let's take down some other aspects of his arguments.

It works? Rising premiums, people losing their coverage, cost curve bending upwards, adding to the deficit and trampling freedom of conscience. No I don't like Obamacare, but I like the snarky use of the #IlikeObamacare hashtag at Twitchy.

Lifetime cap on insurance coverage? In a truly free market, the public would have the right to make choices about the type of coverage needed. In fact, if we didn't tie health insurance to employment, and freed the marketplace, all sorts of innovative products might spring up.

Pre-existing conditions? This is the item that most resonates with Americans. But it is a red herring. The reason that pre-existing conditions are a problem is that health insurance is not portable. It ties people to their jobs and limits labor mobility. However, as part of a real health insurance reform package, the right to buy portability would overcome this problem. People could get started on their health insurance at birth, funded by their parents, and keep the insurance their whole lives. Wrecking the entire health care system over this one issue is a cover for stealth imposition of a socialist agenda by controlling this portion of the economy.

Charging women more? Free markets and transparency are the answer. Preventive care for seniors? How was this prevented under the previous system? Since Medicare was an existing program, why wouldn't changes to medicare have sufficed to fix any such problem? Again why wreck the entire nation's health insurance market, when a single reform to a single program would have sufficed.

Finally, with regards to the insurance companies, they are no different from any other business. Bad business practices are corrected by competition, sometimes by lawsuit for breach of contract and sometime by regulation. Obamacare did not solve this problem, in fact, it will probably make it worse, because of the nightmare thicket of regulations that will make it harder to understand actual standards of coverage. Contract law is a much more straightforward way to enforce standards of coverage. Further, because many people have little choice in who their insurance provider is, because it is tied to their job, competition on service, which drives auto insurance, isn't present in the health insurance market.

Obamacare is still not popular, and no amount of cheerleading will change the fact that it was a bad bill. I hope the Supreme Court will overturn it. The individual mandate is an unacceptable extension of the Commerce Clause. Further, the individual mandate is both legally and practically non-severable from the bill. We'll see what happens. I thought the court would go the other on Kelo vs New London, which ranks with Dred Scott and Plessy v Ferguson for horrible decisions, so what do I know?

Stand Up for Religious Freedom Rally San Diego - Link Update

I went to the Stand Up for Religious Freedom Rally today in downtown San Diego. I was struck by how impassioned both the speakers and participants were. The President's policies are uniting people of faith against him. The speakers all spoke of the importance of freedom and conscience to the proper functioning of government. They spoke of the continued assault on religious liberty. They spoke of the laughable accounting shell game of the administration: "Religious associations don't have to pay for birth control, only their insurers will be required to provide that." My personal estimate was that about 700 people turned up. We got honks of support throughout the rally.

I expect Temple of Mut to give a more complete update which I will link when available. UPDATE: Link here for full coverage of event. Best quote is from San Diego Bishop Cirilo Flores:

“Religious freedom is not a gift from politicians: It is a gift from God,” said Bishop Flores. “Today’s debate is not about the access to contraceptives…it is about the federal government forcing the Church to act against its teachings”.

Two pictures.

Weekend Music Chill

I had a great time at today's "Stand Up for Religious Freedom" event at the county building in San Diego. My favorite line was about Obama uniting Christian denominations. To show a little solidarity with Temple of Mut and especially with the thoughts expressed in her blog Flight into Egypt, here I have some music today that is very different from what I normally post.

Obamacare Quote of the Week

Dean, at Beers with Demo, takes down Nancy Pelosi idiocy about how Obamacare is constitutional because it enables the pursuit of happiness, which is of course in the Declaration, not the Constituion. Read it all here, but the money quote follows:

It's done. Some 236 years later, we've completed the journey started by our founding fathers. Not merely content with inherent or God-given rights, we've progressed to a point in our post-constitutional republic where a back room deal-brokered, kick back-laden, lobbyist-written piece of legislation that nearly two years from full enactment is going to cost twice as much as advertised as when it was voted into law, will now be the guarantor of life, liberty and the pursuit of happiness.

False Choices or Growth?

John H. Cochrane, The Grumpy Economist, proposes a set of economic policies that I think the tea party should support. He dispenses with the false choices of austerity vs stimulus that has plagued the debate over economic policy. Stimulus has clearly failed and failed the world over. Austerity isn't fairing much better. Why not, Cochrane asks, just choose policies that allow growth?

“Growth Now.” Forget about “stimulating.” Spend only on what is really needed. We could easily stop subsidies for agriculture, electric cars or building roads and bridges to nowhere right now, without fearing a recession. Most "spending" is in fact transfer payments, which even Keynesian economics recognizes are not very stimulative, not the mythical (and curiously carbon-intensive) roads and bridges, and most of that goes to people who are relatively well off.

Rather than raise tax rates further on “wealth” and the “rich,” driving the underground, abroad, or away from business formation, fix the tax code, as every commission has recommended. Lower marginal rates but eliminate the maze of deductions. In Europe, eliminate the fears of wealth confiscation, euro breakup and currency devaluation that are driving saving and investment out of the south.

Most of all, remove the profusion of regulation and (increasingly) direct government management of the economy.

Exactly. I would add to end the uncertainty in this country about how regulation, especially in the area of health insurance will impact business in the future. Lower marginal rates while eliminating deductions will increase the tax haul from the rich, but more importantly will grow the economy as the distorting effects of the tax code are removed.

A tea party growth plan would have these elements:

• Eliminate loopholes, deductions and credits for a low flat tax rate below 19%.
• Tax all sources of income at the same low rate.
• Eliminate subsidies to all industries, no matter how "green." This includes all the hidden subsidies in the tax code.
  
• Tax profits in accordance with the same accounting principles that corporations use to report their earnings. This will eliminate stupid arguments over things like depletion allowances and simplify the tax code.
• Repeal Obamacare. Start over on health insurance reform using principles of economic freedom.
• Halt the application of new regulations and require a review of all existing regulation for economic cost benefit analysis.
• Repeal Dodd-Frank. End too big to fail by simply increasing capital requirements for the largest financial institutions in proportion to their market share.

That should get us started.

Good Order and Discipline and Tea

Sgt. Gary Stein (pictured) created the Facebook page "Armed Forces Tea Party" in 2010. As you might expect, he eventually made comments critical of the President on Facebook. He is now facing discharge from the Marine Corps (pronounced "core" for the pronunciation challenged) for Conduct Prejudicial to Good Order and Discipline. He argues that he has merely been exercising his free speech rights. However, those rights are not absolute. A member of the Armed Forces may not participate in partisan political activity nor appear in uniform while endorsing a political candidate for office. These are sensible rules that keep the Armed Forces from unduly influencing or being drawn into partisan politics. The subordination of the Armed Forces to the civilian control of the President and the Congress have served our nation well.

At issue is whether Gary Stein's comments critical of the President and his statements that he wouldn't follow Obama's orders, later amended to not following unlawful orders, cross that line. At first blush, the Facebook page doesn't appear to violate the rules as I understand them. However, it may have changed after Stein came under investigation. The Marine Corps seems to have taken a different view.

The Marine Corps issued a statement saying that Stein’s commanding officer ordered a preliminary inquiry on March 8 after receiving allegations that the sergeant “posted political statements about the president of the United States on his Facebook web page titled ‘Armed Forces Tea Party.’ After reviewing the findings of the preliminary inquiry, the Commander decided to address the allegations through administrative action.”
. . .
Stein attracted national media attention when he started his Armed Forces Tea Party page, which has nearly 18,000 followers. Then a complaint was lodged against him with the Marine Corps this month after Stein made a comment online using his personal Facebook account. Stein said he can’t remember exactly what he posted — the comment has been deleted — but he paraphrased it as “I say screw Obama. I will not follow orders given by him to me.”

I think the key issue that will sink Gary Stein is that he has identified himself as a member of the armed forces and publicly criticized the President. More subtly, his comments seem to indicate that the President is contemplating issuing unlawful orders. I think that would cause me concern if I were the Commanding General.

A more cautious approach by members of the Armed Forces would be to comment primarily on law and policy rather than criticize individuals. For example, in the above mentioned case, Sgt. Stein could have said that in keeping with his oath of office, he intended to not arrest civilians or perform some other act that was unlawful.

I wish Sgt. Stein well, but I think he is going to be discharged and that he won't be reinstated on any sort of appeal.

Economic Freedom 2012 Campaign

I listened a bit to Mitt Romney and Rick Santorum speak after the Illinois primary results came in. I was glad to see that Romney's speaking has noticeably improved over the course of the campaign. He really hit the right notes when he talked about freedom. Here is what I have been waiting to hear from him:

The American economy is fueled by freedom. Economic freedom is the only force that has consistently succeeded in lifting people out of poverty. It is the only principle that has ever created sustained prosperity.

But, over the last three years, this administration has been engaged in an assault on our freedom.
. . .
Under President Obama, bureaucrats prevent drilling rigs from going to work in the Gulf. They keep coal from being mined. They impede the reliable supply of natural gas. They even tell farmers what their 15-year-old sons and daughters can and can't do on the family farm.

The administration's assault on freedom has kept this so-called recovery from meeting their projections, let alone our expectations.

And now, the President is trying to erase his record with rhetoric. Just the other day, he said, "We are inventors. We are builders. We are makers of things. We are Thomas Edison. We are the Wright Brothers. We are Bill Gates. We are Steve Jobs."

That's true. But the problem is: he's still Barack Obama. And under this President, those pioneers would have faced an uphill battle to innovate, invent, and create.
. . .
I see an America where we know the prospects for our children will be better than our own; where the pursuit of success unites us, not divides us; when a government finally understands that it's better for more to pay less in taxes than for a few to pay more; where the values we pass on to our children are greater than the debts we leave them; where poverty is defeated by opportunity, not enabled a government check.

I see an America that is humble but never humbled, that leads but is never led.

This should be the natural rhetoric of the Republican party, and indeed the tea party. But it has disappeared from the campaign for a while. Americans understand that Romney is correct in assessing the state of freedom in America.

Santorum, for his part gave a good speech on the topic of freedom as well. He claimed to have been speaking of this core issue well before Romney, and indeed, he may be right. He also landed some good punches on Romney and global warming. But I have two complaints. First, he spent far too much time emphasizing his humble roots and his identification with hard working ordinary Americans. It sounded like pandering after a while. Further, I don't care how much you identify, I want to know that you have policies that will lead to those ordinary Americans being better off. Which brings me to my second complaint. After talking about freedom and ordinary Americans, Santorum trotted out his support for manufacturing as a jobs plan. It was inherently self-contradictory of course. If you believe in economic freedom, you don't believe that government picking winners and losers in the economy advances that cause. Santorum doesn't seem to understand that.

Assembling for Religious Freedom

I have blogged extensively on the administration's assault on religious freedom with respect to contraception mandate. It's time to get out and protest. The SCTRC and like minded groups will be part of nationwide protests this Friday, titled "Stand Up for Religious Freedom." Here in San Diego we will be protesting on Friday – March 23, 2012, from Noon – 1 pm at the San Diego County Administrative Building on 1600 Pacific Highway. See you there.



H/T Temple of Mut.

Working to Wreck California this November

Governor Jerry Brown has reached a "compromise" with the Californian Federation of Teachers (CFT) on competing tax increase measures for November's ballot. The teachers' union wasn't happy that the Governor wasn't proposing to drive enough millionaires out of the state. To make sure there weren't competing measures on the ballot, the gov reached out to the teachers, like one family of thugs to another, dividing up the spoils. From the Sacramento Bee:

The Democratic governor and CFT announced last week that they had reached an agreement to work together to try to qualify a measure that combines parts of their rival tax proposals. CFT had been working with the Courage Campaign to qualify a special tax increase on millionaires.

The "Courage Campaign?" How much courage does it take to propose a tax on a small minority of the population. Of course, this is all supposed to be "temporary", until the crisis passes.

The measure is similar in structure to the constitutional amendment initially proposed by Brown, which relied on a temporary half-percent hike in the sales tax and temporary income tax increases for Californians earning more than $250,000. The new version features a quarter-percent hike in the sales tax and steeper increases for higher earners. The sales tax increase would last four years and the income tax increases would last seven years.

What hogwash, we know that these tax increases will be permanent and rising until the state goes broke from failing to offer meaningful pension reform. Nothing is so permanent as a temporary tax increase. It took 108 years to repeal the long distance telephone tax originally intended to fund the Spanish-American war. Most shockingly, that tax was also billed as a "tax on the rich."

Delta vs Boeing and the Larger Impact of Export Subsidies

Delta Airlines and Boeing are in the news in a fight over the role of the U.S. Export-Import Bank, which despite its name, only seems to fund export activity. A quick summary of the current issue from the WSJ:

The bank—overseen by a White House appointee and funded by customer fees and interest payments—has doubled its financial support in the past four years to $41 billion annually. But without congressional action, the bank may soon hit its limit.
. . .
Boeing, the bank's top beneficiary, which is leading the corporate charge in support of the administration's efforts to renew and expand lending. The bank has helped finance billions of dollars in sales of Boeing aircraft to foreign customers.

One of those customers is Air India, which until 2008, competed directly with Delta on the New York to Mumbai route. But Delta stopped flying the route, which it had switched to Atlanta, saying it couldn't compete with Air India's fares.

In summary, the good faith and credit of the United States provides loans to foreign customers of U.S. products. What could go wrong?

We could start with the crony capitalism angle, but that's too obvious. We will assume that our readers recognize how the politics of the bank's decisions could cause donations to flow to particular candidates for office. Let's talk about the basic economic unfairness of allowing foreigners subsidies to purchase U.S. made products. Glad to know that you're on the hook for a loan to Air India? But wait, say the defenders of the bank, it never loses money. So what? There is real risk that it will.

Second, given that economics is about the study of comparative, not absolute advantage, this means that corporations' sales abroad are subsidized through lower interest payments by their customers. To the extent that this shift productive capacity towards those customers, it has an impact, albeit small on domestic customers, who pay a higher price for goods intended for domestic consumption.

Back to the crony capitalism issue, once again Obama shows himself to be in thrall to the big corporations he routinely pillories. Boeing couldn't swing the loan to Air India itself? Well no, because Boeing would have to pay the market risk for the loan in the form of higher interest rates. Less money for Boeing to pay its somewhat unionized work force.

U.S. companies that buy planes and other goods don't have access to assistance from the U.S. Export-Import Bank, but they often turn to similar institutions in other countries. Delta acknowledges that it benefits from export financing when it purchases airplanes from Canada's Bombardier Inc. or Brazil's Embraer S.A.

What stupidity. The net effect is just to shift risk of borrowing to various national governments and make it more desirable for airlines to buy from foreign competitors, even if there would be higher costs associated with such transactions.

Pictured at top is a Boeing 737-800.

Michelle Obama Sent Me This Creepy Letter

Got this email from Michele Obama, since I have signed up for barackobama.com emails.

B. --

I see this happen a lot:

Someone in a crowd yells at my husband, "We love you, Barack."

That's when he interrupts himself, smiles really big, and says, "I love you back." And he does.

That's why Barack's dinners with supporters mean so much to him -- because they give him a chance to show it and to say thanks.

I can say from experience you won't want to miss out on the next dinner. I hope you'll consider donating $3 -- or whatever you can to support the campaign -- and be automatically entered today:

[redacted]

Thank you,

Michelle

It's hard to get my mind to come to grips with all that's wrong with this. The shamelessness with which it was sent is a nice starter. Bragging not about your husband's accomplishments, but about how many groupies he has? And Obama's response is not the humble "thank you" of a man who might be uncomfortable with such adulation, because his native humility reminds him that he is not perfect. Rather, he responds as the immature rock star who wants more and more.

Next the image of Obama as loving father figure to the masses of adoring fans smacks of a personality cult worthy of Kim Jong Il. He is not our father figure, he is a fellow citizen of the Republic. He is the President, to be sure, but that position is limited and temporary.

What do you think? I am too harsh?