May 24

The Fiscal Cliff: You Must be this Intransigent to Board this Ride, Let’s Go!

DivingIf you’re like me, you love roller coasters, most notably the incarnations that retain the preliminary long steep climb accompanied by the ominous clickity clack of the chain and track below the car until the pinnacle is reached. At the apex, all is silent, and just as you can see nothing but sky before you and the tiny heads of fellow park visitors hundreds of feet below you, the car proceeds downward at a ridiculous speed sucking the breath from your lungs. It’s exhilarating fun, and generally lasts no more than a minute or two. At this very moment, the United States is scaling hill number one while frantically ensuring that the lap bar has engaged properly. On December 31, 2012, a series of economic events are scheduled to take place that many are referring to as the “fiscal cliff.”

The Bush tax cuts enacted in 2001 and 2003, and extended through 2012 by President Obama in a December 2010 agreement, are set to expire. The expiration would adjust marginal tax rates upward across all income brackets and modestly raise the tax on capital gains–income earned from investments–from 15% to 20%. The expiration will also remove qualified dividends from special tax treatment, and undo a temporary patch to the Alternative Minimum Tax, among other smaller changes. Additionally, as part of the deal to raise the debt ceiling in 2011, Democrats and Republicans agreed to automatic across the board spending cuts of $1.2 trillion over the next ten years. The cuts are part of a sequester agreed to by both parties which will go into effect because the two sides could not agree on an alternative as required by the original pact. While certain mandatory outlays are exempted from the spending reductions, the total amount will be split roughly 50/50 between discretionary and defense spending unless consensus is reached before or sometime shortly after January 1, 2013. The federal unemployment extension and temporary 2% payroll tax reduction would also expire at years end. If Republicans are not willing to move into a position of rationality and responsibility, my position is that we should all buckle up and see where the ride takes us, rather than concede to incoherent demands in order to to avert a greater short term disaster. Continue reading

Mar 16

Uh Oh CBO

Just when you think Wall Street could not possibly be uncovered as having influence over yet another arm of government, some Goddamn Ph.D. who actually knows what she is talking about comes forward and exposes the Congressional Budget Office of overtly ignoring the impact of foreclosures on the larger economy.

Dr. Lan Pham, a former senior staffer financial economist for the Congressional Budget Office, was terminated from the CBO for her attempts to measure the effects on home prices and property revenues of foreclosures and foreclosure fraud. The letter she sent to Senator Chuck Grassley, from February 23, 2011, was just released publicly today and can be viewed here. In it she accusses CBO Director Doug Elmendorf, among others, of suppressing views which run counter to popular thinking at the CBO.

When foreclosure fraud and robosigning first became public in or around 2010, Pham attempted to bring her viewpoint to the CBO table. Her analysis was based only upon the data available to her. The data illustrated the detrimental effect the robosigning and foreclosure problems were having on the housing market, and most importantly to the CBO, the potential disastrous ramifications for the banking sector and public confidence. She believes that she was silenced in an effort to downplay public sentiment that the housing sector was weak in order to limit bank losses, and to circumscribe public awareness that the banks were exposed to potentially fatal ramifications. Continue reading