Points of Interest 08/23/2011

Reads:

Kings in everymans clothing.

It’s not hard to guess what these people see in Tea Party politics. Here is a movement united around an unfailing support of tax cuts for people like them, at a time in which poll after poll (23 polls, by one count) reveals the American electorate to be united by unprecedentedly broad-based support for doing the opposite. But there also more specific interests at play: the wealthier freshmen generally made their livelihoods in one of three economic sectors—health care/insurance, real estate and energy—whose profit margins not too long ago appeared particularly vulnerable to Obama’s policy goals.

"With its handling of an ongoing spill in the North Sea..."

...it would seem oil multinational Shell has not absorbed the lesson of BP’s 2010 catastrophe. Small compared to last year’s Gulf of Mexico spill, the Shell leak is nevertheless the worst for the North Sea in over a decade.

A news channel should have enough allotted in the budget for news coverage. dontcha think?

Mike Konczal over at Rortybomb has a good wrap-up of the whole Administration versus AG battle over mortgage fraud investigations.

"Top Ten Myths About the Libyan War"

"This is, to put it mildly, a heartening development, for which President Obama and his team deserve a lot of credit."

Deportations will continue for those who commit felonies and those considered security threats, but DHS and the Justice Department will review existing cases and will “halt deportations of longtime residents with clean police records who came here illegally when they were children, or are close family of military service members, or are parents or spouses of American citizens.”

"(Tax)Free at last! Thank God Almighty, we are (tax)free at last!"

"The point is that there is objectively a lot not to like about Bank of America."

And now that investors have decided to start thinking critically, as opposed to blindly accepting bank equity as the faith-based paper that it is, one shouldn’t be surprised that they are getting cold feet. And the fact that the authorities have undermined the limited value of bank balance sheets via allowing all sorts of rosy accounting treatments is a self inflicted wound.

"But apparently President Obama feels that these people need to make greater sacrifices."

For an average retiree who can expect to get benefits for 20 years, President Obama's plan would cut their lifetime Social Security benefits by roughly 3 percent. By comparison, his much feared tax increases on the rich would reduce the after-tax income of someone earning $300,000 a year by just 0.5 percent. In this case, a beneficiary who will be mostly dependent on their Social Security income in retirement will take about six times as large a hit relative to their income under President Obama's plan to cut Social Security than a couple earning $300,000 would from his plan to raise their taxes.

This cut to Social Security seems especially inappropriate since the near retirees who would feel the full impact of this cut have just seen most of their wealth destroyed by the collapse of the housing bubble and the plunge in the stock market. The typical near retiree (ages 55-64) has just $170,000 in net wealth, including the equity in their home.

This means that if they used every last penny in their 401(k) and other savings, they would have just about enough money to pay off the mortgage on a typical home. This would leave them 100 percent dependent on Social Security for their income. And of course, half of near retirees have less than this amount, meaning that they will not even be able to pay off the mortgage on a typical home.

"A delay of just 10 days in renewing the tax would mean the permanent loss of $1 billion in highway funding..."

...(and layoffs for thousands of workers). Longer delays would measurably increase the national unemployment rate. [...]

Incredibly, the system of highway financing championed by Republican President Dwight D. Eisenhower six decades ago is a target for today’s Tea Party-influenced Republicans.

"Edmund Phelps, a Colombia University professor who won the prize in 2006 for his theory on growth..."

...says that during the past decades the West has lived above its means and in so doing has already consumed part of its future. That means that the United States, but also Europe now face a long period of stagnation.

Phelps says the West has to pay for the mistakes of the past, but if it can get back on track rapidly, recovery can start that much faster and the mistakes will take less of a toll. He considers the political system to be the greatest problem. In the United States, political parties are busy putting spokes in each others’ wheels, while leaders in Europe have managed to create a system of perverted incentives with banks and insurers having to hold government bonds and governments exceeding agreed-on debt ceilings. Phelps says politicians need to show both more courage and a greater sense of responsibility, facing the fact that they are going to have to be the bearers of bad news -- such as tax hikes -- to their citizens.