How's Your Bailout? Financial Edition

The Washington Post reports that 46 firms that received money from the Troubles Asset Relief Fund, otherwise known as TARP or the federal bailout, "had missed required dividend payments to the government as of the end of September".

Analysts expect more bailed-out firms to fail in the months ahead. Others may survive but will struggle to repay the government. Steven Rattner, the former head of the government's efforts to bail out the auto industry, said recently that the full public investment in GM is unlikely to be repaid. Meanwhile, AIG is dismantling itself, selling healthy subsidiaries at what critics say are bargain prices in an all-out effort to get cash to repay the government.

About $400 billion of federal investments remain in the corporate sector, much of it channeled through TARP. Critics of the program say losses were inevitable, in many cases.

There was a reason private investors didn't want to give these failing firms their money. It was a bad investment. Congress was more than willing to invest our money, though.

Half done on health reform

David Broder's column in the Washington Post defines the conventional wisdom in Washington. He relaibly reflects what the Inside the Beltway crowd think about politics, and even he is acknowledging that the numbers used to justify the House-approved health care bill don't add up.

But, as many sympathetic voices have been telling them: Unless you find more realistic ways of paying for the promises included in the bill, you are simply setting up the public for more frustration -- and yourselves for a political backlash.

At least a dozen health and budget experts have filled the Web and the airwaves with warnings that the House bill simply postpones the cost controls needed to finance the vast expansion of insurance coverage and Medicaid benefits envisaged by its sponsors.

George Will warns of dollar's demise

In his column in the Washington Post, George Will warns that this year's federal spending spree is endangering the long-term value of American currency.

The fiscal 2009 budget deficit, triple that of 2008, was 10 percent of GDP. Lawrence Lindsey says probable policies will produce deficits of 7 percent of GDP for a decade. Ronald Reagan's worst deficit was 6 percent of GDP and for only one year.

Lindsey -- a former member of the Federal Reserve board of governors and director of George W. Bush's National Economic Council (2001-02) -- says Americans' net worth has dropped at least $13 trillion since the recession began in December 2007. What is to be done?

Americans could suddenly begin saving substantially more, but this would deepen and prolong the recession. Alternatively, America could reflate the value of its assets by printing money. Lindsey says it is already doing that -- printing bonds promiscuously and lending money to banks at negligible rates, money that banks can use to buy the bonds. This sharply increases the money supply, which sets the stage either for inflation -- too much money chasing too few goods -- or for recovery-snuffing higher interest rates to try to prevent inflation. Or for something like Japan's lost decade -- banks pouring money into government bonds rather than the real economy.

Dozens in Congress under ethics inquiry

The Washington Post has obtained a copy of a report on the ongoing ethics investigation into more than 30 Members of Congress. The report was inadvertantly left on a public server before being sent to the Post.

Many of the broad outlines of the cases cited in the July document are known -- the committee announced over the summer that it was reviewing lawmakers with connections to the now-closed PMA Group, a lobbying firm. But the document indicates that the inquiry was broader than initially believed. It included a review of seven lawmakers on the House Appropriations defense subcommittee who have steered federal money to the firm's clients and have also received large campaign contributions.

The document also disclosed that:

-- Ethics committee staff members have interviewed House Ways and Means Chairman Charles B. Rangel (D-N.Y.) about one element of the complex investigation of his personal finances, as well as the lawmaker's top aide and his son. Rangel said he spoke with ethics committee staff members regarding a conference that he and four other members of the Congressional Black Caucus attended last November in St. Martin. The trip initially was said to be sponsored by a nonprofit foundation run by a newspaper. But the three-day event, at a luxury resort, was underwritten by major corporations such as Citigroup, Pfizer and AT&T. Rules passed in 2007, shortly after Democrats reclaimed the majority following a wave of corruption cases against Republicans, bar private companies from paying for congressional travel.

Washingto Favor Factory turns earmarks into campaign cash

The Washington Post examines the close ties between a little-known Congressman, a lobbying firm, and millions in federal money flowing to campaign contributors.

In rapid succession, the three-employee technology firm, NanoSonix, filed its incorporation papers in Skokie, Ill., and hired a Washington lobbying firm, K&L Gates, which boasted to clients of its close relationship with Visclosky. A week later, Visclosky wrote a letter of support for a $2.4 million earmark for NanoSonix from the House Appropriations Committee's defense subcommittee.

"I understand how this can look from the outside," NanoSonix chief executive Sean Murdock said in an interview, describing his company's rush to get research funding to develop night-vision goggles. "My belief was we had to pursue government funding if this technology was going to see the light of day."

Murdock's company was not the only one to find a winning formula in pursuit of federal earmarks through Visclosky. The congressman sponsored or supported at least $44 million in earmarks in fiscal years 2008 and 2009 for more than 15 technology firms that had hired K&L Gates as lobbyists. None of the companies operated in Visclosky's home state, but nearly all of them donated to Visclosky's campaign just before or soon after receiving the promise of federal money.

The Post reports that federal investigators are also looking into K&L Gates efforts to market itself with its close ties to Visclosky and whether a campaign aide solicited campaign contributions with the promise of federal funding.

The True Costs of ObamaCare

The Washington Post takes on the crippling costs of ObamaCare as a pair of columnists write that the plan costs much more and delivers much less than it promises.

Robert Samuelson

The promise of the public plan is a mirage. Its political brilliance is to use free-market rhetoric (more "choice" and "competition") to expand government power. But why would a plan tied to Medicare control health spending, when Medicare hasn't? From 1970 to 2007, Medicare spending per beneficiary rose 9.2 percent annually compared to the 10.4 percent of private insurers -- and the small difference partly reflects cost shifting. Congress periodically improves Medicare benefits, and there's a limit to how much squeezing reimbursement rates can check costs. Doctors and hospitals already complain that low payments limit services or discourage physicians from taking Medicare patients.

Fred Hiatt

The claim merits skepticism. If, as advocates sometimes argue, a public plan operates without favoritism, it will be simply one more entrant in the marketplace. Like other companies, it will have marketing and administrative costs. In some markets served by few private plans, it could offer a useful alternative. But it won't radically reduce costs.

If, as advocates argue at other times, the point is to insure sick people whom private companies, despite all regulatory efforts, find ways to shun, the public plan could offer a valuable safety net. But that wouldn't save money.

And if, as seems likeliest -- and as House legislation mandates -- the plan uses government power to demand lower prices from hospitals and drug companies, those providers may lower quality or seek to make up the difference from private payers. Private companies would have to raise their rates, so more people would choose the public plan, so private rates would rise further -- and we could end up with only the public option and no competition at all. Single-payer national health insurance may be the best outcome, but we should get there after an honest debate, not through the back door.

Fox wars

In the Washington Post, Charles Krauthammer blasts the Obama Administration for its ill-conceived "War on Fox News".

The signal to corporations is equally clear: You might have dealings with a federal behemoth that not only disburses more than $3 trillion every year but is extending its reach ever deeper into private industry -- finance, autos, soon health care and energy. Think twice before you run an ad on Fox.

At first, there was little reaction from other media. Then on Thursday, the administration tried to make them complicit in an actual boycott of Fox. The Treasury Department made available Ken Feinberg, the executive pay czar, for interviews with the White House "pool" news organizations -- except Fox. The other networks admirably refused, saying they would not interview Feinberg unless Fox was permitted to as well. The administration backed down.

This was an important defeat because there's a principle at stake here. While government can and should debate and criticize opposition voices, the current White House goes beyond that. It wants to delegitimize any significant dissent. The objective is no secret. White House aides openly told Politico that they're engaged in a deliberate campaign to marginalize and ostracize recalcitrants, from Fox to health insurers to the U.S. Chamber of Commerce.

Uncle Sam's gift to the prudent saver: Less money

Writing in the Washington Post, business columnist Allan Sloan finds more evidence that the bailouts are hurting savers to help spenders.

Here's the deal. The government is spending trillions to keep interest rates down to support the economy and prop up housing prices, and those low rates have inflicted collateral damage on savers' incomes. "It's a direct wealth transfer from savers and retirees to overly indebted borrowers," says Greg McBride, senior financial analyst at Bankrate.com.

Since October 2007, when government intervention in the financial system began picking up speed, yields on the ultrasafe one-year and five-year investments that many retirees favor have tanked. Two years ago, the average yield on a five-year federally insured bank CD was 3.9 percent, according to Bankrate.com. Now it's 2.2 percent, a drop of more than 40 percent. Yields on one-year CDs have almost vanished: 0.92 percent, compared with 3.6 percent. On five-year Treasury securities, the yield is down to 2.3 percent from 4.4 percent. On one-year maturities, you get a minuscule 0.3 percent, down from more than 4 percent in 2007.

Stimuluating to some

The Washington Post reports on the jobs attributed to the $787 billion stimulus package. Surprising, they seem to be centered around Washington, DC.

Businesses that received federal contracts from stimulus spending reported creating or saving about 30,000 jobs, according to figures released Thursday. The reports also suggest that the program has been particularly beneficial for the Washington region.

The contracts represent just a sliver of the spending under the $787 billion package. Also, much of the $16 billion allocated to the 9,000 businesses has not been spent.

How do you get your protest covered?

Protest something the Washington Post doesn't like.

The protesters convened for a final planning meeting, already triumphant, convinced that nine months of preparation was about to pay off. Antiwar organizers who had come to Washington from 27 states exchanged hugs inside a Columbia Heights convention hall and modeled their protest costumes: orange jumpsuits, "death masks," shackles and T-shirts depicting bloody Afghan children. Then Pete Perry, the event organizer, stood up to deliver a welcome speech.

But if over a million people protest bigger government, the Post will go out of its way to downplay the event.

Tens of thousands of conservative protesters, many complaining that the nation is racing toward socialism, massed outside the U.S. Capitol on Saturday, angrily denouncing President Obama's health-care plan and other initiatives as threats to the Constitution.

I was told there would be no math- Part II

In the Washington Post, columnist Harold Meyerson displays his own ignorance by attacking free-market economics for using all of those confusing numbers.

The problem with contemporary economics, at least with the purer strain of free-market economics associated with the University of Chicago, is not simply that it failed to predict the near-collapse of the world financial system last year. The problem is that it believed such a collapse could not happen, that all risk could be quantified by mathematical models and that these quantifications could help us correctly price just about everything. Out of this belief arose the banks' practice of securitization, which put a value on all manner of mortgages and enabled buyers to purchase and swap them with the certainty that such transactions reflected an accurate judgment of the value of the properties and the risks associated with them.

The housing bubble that burst last year was fueled by government subsidies and a Congress pushing banks to loan to unqualified home owners. The Chicago School certainly never postulated that home values always go up, or that excessive risk should be rewarded through government bailouts.

Meyerson's straw man is that free market economists believe that everything is always correctly priced, and therefore bubbles can't exist. He is, to use a technical term, an idiot. No school of economic or political thought has the power to predict the future, but the theory of markets does predict that people will respond to incentives. Government intervention created incentives for people to buy homes they could not afford, and for businesses to take foolish risks knowing that Uncle Sam was there to bail them out.

Ignoring these ideas, Meyerson falls back on the Church of John Maynard Keynes, which he interprets as having a single commandment; more government spending. It doesn't work, but why believe the evidence of the last century? Far better to base our national economy on anecdote and logical fallacy. Besides, all of that math makes his head hurt.

Costly Carbon Cuts

Bjorn Lomberg, author of "The Skeptical Environmentalist", pens a column in the Washington Post warning that global warming alarmism will lead to harmful trade barriers.

Imagine for a moment that the fantasists win the day and that at the climate conference in Copenhagen in December every nation commits to reductions even larger than Japan's, designed to keep temperature increases under 2 degrees Celsius. The result will be a global price tag of $46 trillion in 2100, to avoid expected climate damage costing just $1.1 trillion, according to climate economist Richard Tol, a contributor to the Intergovernmental Panel on Climate Change whose cost findings were commissioned by the Copenhagen Consensus Center and are to be published by Cambridge University Press next year. That phenomenal cost, calculated by all the main economic models, assumes that politicians across the globe will make the most effective, efficient choices. In the real world, where policies have many other objectives and legislation is easily filled with pork and payoffs, the deal easily gets worse.

Yet the real tragedy is that, by exaggerating the threat of global warming, we have awoken the beast of protectionism. There are always forces in society that demand that politicians create more barriers to trade because they cannot compete on an even, fair playing field. Global warming has given them a much stronger voice.

Baucus Bill May End Up Being a Mere Rough Draft

The Washington Post reports on the Baucus health care bill being debated in the Senate Finance Committee.

Baucus has promised to resume committee work Tuesday. But the fight is increasingly shifting away from him and onto the Senate floor, where 99 other independent-minded lawmakers are already scheming about how to put their stamp on what could be the most significant piece of domestic-policy legislation in a generation.

In a plodding week of partisan sniping, the bill that was supposed to be President Obama's greatest hope for a grand bipartisan solution was instead described as little more than a decent rough draft, certain to be rewritten by others.

Of course, it might be easier to debate and amend the bill if they'd actually publish it for both Senators and the public to read.

The best political reporter in New Hampshire?

Chris Cillizza writes The Fix for the Washington Post website. He's looking for the best state-based political reporters in each state.

This is where you come in. Have a reporter from your home state (or adopted home state) that you think does a great job getting to the bottom of the political scrum? Offer his or her name in the comment section.

We have a few of our own personal favorites -- Glen Johnson (the reporter, not the soccer player) in Massachusetts, John O'Connor in South Carolina, Jon Ralston in Nevada -- but we want to have EVERY state in the union represented.

When we get all 50, we'll post the names in this space.

Cillizza already lists John DiStaso at the Union Leader and Kevin Landrigan at the Nashua Telegraph for New Hampshire. But do others belong on the list? How about James Pindell's all-politics website, NH Political Report?* Or our all-policy-all-the-time approach here at NH Watchdog? Or the more partisan commentary at Red Hampshire, Blue Hampshire, and Granite Grok?

Post your vote in the Comments section below, and post it at The Fix.

*Corrected to the new website. Politicker is so 2008.

Should Congress actually read the laws it imposes on us?

Over at the Volokh Conspiracy, the best legal blog in the country, David Post weighs into the question of whether Members of Congress should actually read the bills before they vote on them.

I'm not a fool - I know full well that not a single member of Congress read every word of, say, the 1,427-page Waxman-Markley energy bill. But I think we give up something valuable if we accept that as acceptable behavior. I guess it didn't occur to the editorialists at the Post that if members of Congress actually tried to live up to this most basic obligation, that 1,427-page long bills would no longer be introduced, which would surely, all other things being equal, be a good thing for the Republic.

The Washington Post argues that such a requirement is impractical.

They have a point. But their proposal would bring government to a standstill.

The average college graduate reads about 300 words per minute. Assume that there are about 150 words per page of legislative text, a number we derived from counting the words on a few randomly chosen pages from the Waxman-Markey energy bill. To read all 1,427 pages of Waxman-Markey, it would take at least 12 hours -- tough on a tight legislative timeline. And that assumes that lawmakers can read complex bills at the same pace they do a John Grisham novel (we tried -- it's not even close).

A few suggestions to get around this problem, and give Members of Congress some free time to do all the amendment drafting and constituent service they are allegedly doing now.

1. Shorter bills
2. Fewer bills
3. Have Members of Congress disclose which bills they read themselves, and on which they rely on summaries and staff memos.

I don't think it's unreasonable for someone to support or oppose legislation based on a well-written summary. I've written them. But Congress has started making bills overly long and complex in order to make it harder for the public to know what's in them. Perhaps requiring Congress to read the bills will force Congress to write bills short enough to read.

George Will: The Cost of a Presidential Cave-In

George Will stirred up controversy last week with his column on Afghanistan, but there is no debate that the man can write a sentence.

While in Pittsburgh, a sense of seemliness should prevent President Obama from again exhorting the Group of 20, as he did April 2 in London, to be strong in resisting domestic pressures for protectionism. This month, invertebrate as he invariably is when organized labor barks, he imposed a 35 percent tariff on imports of tires that China makes for the low-price end of the market. This antic nonsense matters not only because of trade disruptions it may cause but also because it is evidence of his willowy weakness under pressure from his political patrons. (Emphasis added)

Search Is On for Best Cost-Cutting Ideas

The Obama Administration is trying a new approach to cutting costs, asking federal employees for their ideas.

Confronted with a staggering federal deficit, the White House is inviting employees across the federal sector to submit suggestions on how to cut waste and make government more efficient. A Web site, http://www.saveaward.gov, has been established to receive the ideas.

There is no monetary award for the winning entry. The winner will, however, present the suggestion in person to President Obama. Moreover, the idea will be immortalized by its inclusion in the fiscal 2011 budget.

Governor Craig Benson tried a similar approach in New Hampshire, but offered employees a cut of the savings their ideas produced. It will be interesting to see if non-financial incentives work well in generating cost-cutting ideas from the federal bureaucracy.

Dartmouth authors overestimate potential health cost savings

The Concord Monitor runs a Washington Post column from Richard Cooper questioning a Dartmouth study showing that savings and Medicare and Medicaid could pay for health care reform.

The Dartmouth Atlas Project uses Medicare data to assess how health-care resources are distributed throughout the United States. Dartmouth has long maintained that "Medicare spending is closely correlated with overall spending," as it argued in the journal Health Affairs last year.

Later, in rebutting an article I published in the same journal, Dartmouth officials asserted that "Medicare accurately measures what doctors and hospitals do." But officials at the Center for Medicare and Medicaid Services, who have the responsibility for these data, have written in the same journal that "Medicare spending does not explain much of the variation in total per capita health care spending."

When the rubber meets the road

The Washington Post reports on the first test of President Obama's trade policy; whether or not to make tires more expensive for American drivers.

By Sept. 17, Obama must decide whether to slap a 55 percent tariff on tires imported from China, as recommended by a federal trade panel, or leave the matter alone, as a phalanx of lobbyists representing manufacturers in China and U.S. companies that import from them are urging.

From 2004 to last year, the number of Chinese tires imported to the United States more than tripled, and their share of the U.S. market rose from 5 percent to 17 percent. Over the same period, the share of the U.S. market served by U.S. factories declined by a similar amount. More than 5,000 U.S. jobs were lost.

Opponents of the tariff say the U.S. industry's shrinkage is unrelated to the surge in Chinese imports. The U.S. manufacturers, they say, have strategically moved into pricier, more profitable tires, shifting production of cheaper tires overseas.

American companies decided to start charging more for their product. Consumers sought more affordable options. Those companies now want the federal government to lock in their higher prices.

Like Obama, President Bush campaigned with free trade platitudes, faced a similar test early in his Administration. Bush failed that test by slapping import tariffs on steel. Though he repealed those tariffs a few years later, and pushed for several free trade agreements that have helped the American consumer, it was a bad decision. Here's hoping President Obama lives up to his campaign rhetoric, and allows competition in the tire business without punative tariffs.

Using web techniques to fight terrorism

The Washington Post reports on an innovative and controversial way for intelligence agencies to share information- interactive wikis.

"There were a number of things posted that were ahead of what was being reported in the press," said Sean Dennehy, a CIA officer who helped establish the site.

Intellipedia is a collaborative online intelligence repository, and it runs counter to traditional reluctance in the intelligence community to the sharing of classified information. Indeed, it still meets with formidable resistance from many quarters of the 16 agencies that have access to the system.

But the site, which is available only to users with proper government clearance, has grown markedly since its formal launch in 2006 and now averages more than 15,000 edits per day. It's home to 900,000 pages and 100,000 user accounts.

Traditional bureaucracies treat information as currency to be hoarded and traded only for something else of value. But in truth, information becomes more valuable when it is shared.

Several years ago, DARPA proposed terrorism futures contracts as a way to gain distributed knowledge of impending terrorist attacks. It probably would have worked, but politicians slammed the idea for fear that someone, somewhere would profit by predicting and then carrying out an act of terrorism. The concern was appropriate but could have been addressed. Let's hope this effort to harness the power of distributive knowledge gets a more open-minded reception.