The Unbroken Window

532,000 warrants for delinquent income taxes are outstanding in New York State. There are about 19.5 million people in New York. If taxation at the state level is anything like at the Federal, roughly 9.5 million of these pay state income taxes. Therefore, well over 5% of New York State Taxpayers have a warrant outstanding from the state for unpaid taxes. Note that this number dramatically understates the number of people with tax problems - it only includes state income taxes, not local property taxes or federal income taxes, and it also takes some time before a warrant is handed down. Further, our local paper indicates that the number of warrants outstanding exceeds 1.4 million, including warrants on businesses.

When I become President of La La Land, the first thing I would do is to ban the practice of withholding - without changing any other thing about the tax rates, exemptions, credits, deductions. If people can pay their cellphone bill every month, why can’t they pay their taxes the same way? I’d like to see this happen after the Health Care Bill, the Climate Bill and the next round of stimulus spending rolls through Congress. Any predictions on what would happen?

The place has gone mad. Here is a quote from New York City’s assistant commissioner for tobacco control:

it can be effective to display gruesome health effects such as amputations and throat cancer

That is in response to a proposed bill requiring tobacco retailers to post gruesome anti-smoking signs. And this for a product that is voluntarily chosen. Can we make the DMV post signs about the impact on people’s sanity from having to step foot in that door, only to be treated rudely and extorted for the “privilege” of driving? Or how about posting something like this the next time you go into the voting booth or take a tour of Washington, DC? Or how about something like this at the statehouse?

I was thinking about tenure the other day. One of the common arguments in favor of tenure is made by folks that do not have tenure. They argue that over half of the courses that are taught in colleges and universities are done so by faculty off the tenure track. While this neither surprises nor alarms me what gives me a chuckle is that the arguments that non-tenure track teaching makes universities weak are being made by … non-tenure track faculty.

By the way, I made an idiot of myself on major network news yesterday in a short interview about whether tenure makes faculty lazy (I do not believe so). I had prepared for a discussion of the case in Denver, and on whether institutions had the right to hire and fire employees as they please … but it turned into something else. I tried to mention that the hosts themselves did not need the protection of tenure (nor folks in the media, think tanks, etc) in order to be encouraged to speak their mind, and do interesting work. Further, if they were fired for such a thing, there would be an opportunity for someone else to hire them if in fact what they were saying was important and had an audience (increasingly likely in this day and age). I must have offended them before I got to the point - I think they thought I was bashing them. They cut me off before I could make that clear, and I knew the rest of the interview was a goner at that point.

Lately I’ve taken to over-reacting to things by conventional societal standards. Adam Smith recognized that the world was not perfect, and that for any society to work well a great deal of compassion, understanding, sympathy, empathy, patience and tolerance was necessary to be had by all citizens. I tend to agree. But that does not mean that each of us should stand idly by while some among us steamroll over us, or set the stage for others to steamroll over us.

So we came home yesterday to find an SUV parked with its right side up on our lawn. There is generally no parking on the streets where we live, everyone spends a good deal of effort trying to keep their yards neat and clean, and it had just finished downpouring for the 20th time in the last 20 days (that is exagerrating). The car remained there for a good 6 or 7 hours. And after reading the President strong-arming folks into passing the Climate (Not Small) Change Bill, I was a little peeved. I left the owner of the car a note on their windshield that went something like:

Dear Sir or Madam,

Despite what Lord Obama and his Congregation have been doing, there is still a strong property rights tradition in this country.

We work hard to keep our property neat and in good order and do not welcome tire tracks from a 3 ton SUV, particularly after a heavy rain storm.

We did not give you permission to trespass as such, and legal precedent would suggest that there wa sno compelling reason for you to have to park on our grass (as opposed to say, this).

You might think I am getting worked up over nothing, but it is the complete disregard for persons and property, in matters even this small, that condition people to accept large scale intrusion and confiscation of property as not only necessary, but also just and fair.

I have had enough. I expect an apology at a minimum (I’d prefer a recognition of the larger issue I raise), but in either case I’ll have to deal with the impacted soil myself.

And I invited the owner to take this up with me here. No response yet. Being around lots of students, I am particularly sensitive to not encouraging them to behave in “gateway drug” social behavior. By that I mean engaging in seemingly harmless behavior now, but that when practiced as professionals and later in life, have the potential to be extraordinarily harmful. I’ll provide some explicit examples of what I mean when the semester begins in the fall.

Am I over-reacting? Perhaps. But how many times has anyone, anywhere, spoken up about these things? How many times have you gone to the market and found customers leaving shopping carts in the lots (and not returning them) and said nothing? How many times have folks been obnoxious and loud at a public event and said nothing? And so on. What would the behavioralists say about this? In the early-to-middle part of this excellent podcast, you can learn something useful about it.

New institutions like private stock markets emerge. It will be entertaining to watch the dogs in DC chasing their tails after they institute their new financial institution regulatory overhaul, and when they try to regulate hedge funds, derivatives, money funds and more. A key point from the article:

Besides the economy, startup investors say the high costs and regulatory requirements associated with going public have also stymied many smaller, younger companies. According to the National Venture Capital Association, the median span from a company’s founding to its IPO was 9.6 years in 2008. In 1998 it was 4.5 years.

One factor is compliance with the Sarbanes-Oxley anti-fraud law, which was enacted in 2002 after accounting scandals at companies like Enron Corp. and WorldCom Inc. A key part of this law requires public companies to file reports on the strength of internal financial controls and fix any problems - steps that can be costly for a startup.

Issues like this have “just made it more and more difficult for companies to make it to that next step,” said Thomas Foley, chief executive of XChange, which he developed with venture capitalist Tim Draper.

Really, I do live in one of the least freedom friendly places in America. Is there really any place to go anymore? If you were at your wits end, what would you do to escape the greedy and grabbing hands? Where would you go?

… to a Senator that happened to be sitting two rows from you on your flight from DC to NY, what would it be? I was going to hand him a copy of the book I am in the middle of, but I would have interrupted his reading of important memos and briefs. Actually, he ended up flipping through the NY Times the entire flight - I guess “saving” the economy and fixing health care could wait. That was comforting - until I remember sitting at dinner the night before and listening to two pre-25 year old Senatorial staffers bragging about marking up such important health care legislation.

Just got back from a two-day trip to Washington, DC. I made sure I went to tour the Library of Congress.  A must see is the reincarnation of Jefferson’s library as he wished it to be organized (in a circle so that he could see all of his apx 6,500 books at once). In any case, on the first floor in the great hall, you can see a Gutenberg Bible (one of the originals printed by the first Westerner to employ moveable type).

I decided to ask the tour guide a question - how did “we” come to acquire this priceless relic? She proudly responded that during the deepening Depression, the U.S. Congress authorized the purchase of the bible from a German monastary for the tidy sum of $1.5 million (about $21 million in today’s) dollars. She called it remarkable foresight. This from a Congress that was soon to pass Smoot-Hawley, and permit the slaughter of millions of livestock in order to improve economic conditions during this time.

What is my point? Actually, I do not have one. Spending two days in DC can do that to people.

My wife went to the American Museum of Natural History for an afternoon last week. I glanced at her ticket stub and it read:

“Climate Change proudly presented by Bank of America”

You just cannot make this stuff up.

HT to Anthony Ivancich. What will my special treatment be for printing this? The din of suppression of speech is rising - I feel like I am in the beginning of an Orwell novel.

To My Fellow Citizens:

Please be advised that effective immediately (i) the economic system heretofore known as “Capitalism” in the United States of America shall now be known as “Government Capitalism”, and (ii) the following rules, to the extent not already in effect, shall be implemented immediately.

1. Any person who purchased a home or other real property without sufficient income to afford the mortgage payments and/or without sufficient documentation of his income, and/or who was advised by a mortgage broker or lender that his mortgage could be refinanced in the future because real estate values always go up in value (and without question accepted such assumption as valid because of greed, stupidity or ignorance), shall be entitled to a modification of his mortgage to the extent necessary to ensure that the owner will not only be able to make the modified loan payments based on a reduced principal amount, but also will be entitled to realize all of the profit generated from a future sale of the property without having to repay the amount of the reduction of the mortgage. The cost of the mortgage reduction shall be absorbed by such person’s neighbors and other taxpayers, who have continued to pay their mortgages without government assistance and who only purchased properties they could actually afford based on their incomes.

2. All banks and other financial institutions that failed to properly manage their risk and instead sought to increase their profits by use of excessive leverage that was based on a continued increase in the value of real estate, and whose failure would cause “systemic risk”, as arbitrarily defined by the Treasury Department and the Federal Reserve (since no written definition thereof exists, or if it does nobody knows how to apply it except arbitrarily), shall be entitled to billions if not trillions of dollars of government bailouts to create the artifice of solvency. The U.S. Government will increase the deficit by up to or exceeding $2 trillion in the next fiscal year (and trillions more in subsequent fiscal years) by borrowing money from the OPEC nations, China and Japan and other countries that currently maintain massive trade surpluses with the U.S.

3. In addition to U.S. Government borrowings, the Federal Reserve will print money to the extent necessary to fund any shortfall from the aforesaid borrowings. In addition, the Federal Reserve shall continue to loan trillions of dollars to the mismanaged financial institutions to guarantee that they make profits in the future at the expense of the American taxpayers and of retirees and other individuals who prudently saved money (”Risk-Averse Investors”) on which they were anticipating a reasonable rate of return to fund their ongoing living expenses without having to deplete their principal balances.

4. Any financial institution that was insolvent based on FASB mark-to-market accounting rules in effect until FASB buckled under political pressure and quickly changed them, and which received U.S. Government and Federal Reserve assistance shall remain in existence. Shareholders whose interests were actually worth nothing and were not entitled to retain an ownership stake in such insolvent institutions without infusion of additional capital from them, will nevertheless continue to own their shares in such institution on a diluted basis. Such dilution shall be as little as possible even though private investors in such institutions received or would receive a much higher percentage ownership of in exchange for the same level government assistance in such institutions, whether in the form of bailouts or continuing policies to funnel money to such institutions by the manipulation of interest rates by the Federal Reserve at the expense of, among others, the Risk-Averse Investors.

5. If a federally-chartered bank is sufficiently large so as to possibly cause said systemic risk, the FDIC will not declare the bank insolvent under any circumstances. The U.S. Government via the Treasury Department, in conjunction with the Federal Reserve and and the FDIC will devise a plan to manipulate the bond market and the stock market to benefit those parties who are the least deserving of assistance.

6. In accordance with Rule 5 above and as alluded to elsewhere above, the U.S. will never wipe out shareholders and become the 100% owner of in an insolvent bank because to do so would require the exercise of honest judgment and transparent economic policies and equal treatment amongst all banks.

7. Any secured lender of an automotive company filing for bankruptcy protection such as Chrysler or General Motors, shall not be entitled to a greater return as a result of its secured position as compared to unsecured lenders or trade unions possessing unsecured claims. In fact, such a secured creditor requesting a greater return on account of its secured interest shall be ostracized by the Federal Government and shall be treated as a scapegoat by an over-reaching Executive Branch.

8. Any automotive company filing for bankruptcy due, in part, to rising health care costs, exorbitant union benefits as compared to non-bankrupt automotive companies and excessive corporate taxes, all of which costs impede the ability of U.S. car manufacturers to compete effectively in the global market, shall be entitled to sell all of their viable assets via a government-sponsored sale, the end result of which will ensure either majority control of the reorganized entity by the U.S. Government or the United Auto Workers or some combination of both.

9. Any government-sponsored bankruptcy sale in an automotive bankruptcy case shall not be required to distribute the proceeds thereof or such other value obtained for the bankrupt’s assets pursuant to the the various contracts and agreements of the subject automotive company or the priorities established by the Bankruptcy Code and longstanding legal precedent unless the government, in its sole discretion, decides to abide by the law.

10. Any Risk-Averse Investor or responsible banking institution shall be required to bear the cost of the foregoing policies along with the American taxpayers. No Wall Street executive or other highly-compensated individual of those institutions shall be required to disgorge any bonus payments made with respect to highly speculative transactions which ultimately contributed to the insolvency of those institutions absent government bailouts.

11. In addition to the recent change of the FASB mark-to-market accounting rules that required an institution to write-down the value of real estate to the best estimate of its current market value based on actual real estate transactions occurring in the marketplace, all new accounting rules and regulations by FASB shall permit irresponsible banks to reflect real estate assets on their books based upon a fantasy model of the value of such assets in the future and the assumptions underlying such fantasy valuations shall remain within the sole discretion of such financial institutions that were unable to manage their risk properly in the first place.

12. The term “Generally Accepted Accounting Principles” shall be changed to “Sometimes We Feel Like A Nut And Sometimes We Don’t Accepted Accounting Principles. The organization called the Financial Accounting Standards Board or FASB, as referred to above, shall hereafter be referred to as the Insipid Financial Board of Standards or “IF-B.S.”.

13. This is just a preliminary list of the rules of new Government Capitalism that will go into effect. Additional rules will be adopted and implemented if and when any of either the U.S. Government, Treasury Department, Federal Reserve or FDIC have a wild hair up their respective posterior.

We welcome suggestions for further changes to the previous system of Capitalism in order to conform more closely with the principles and philosophical foundations of Government Capitalism. We look forward to working with you to develop as many regulations as possible so as to undermine the principles of Capitalism that have led to the unprecedented and unequalled economic success of the U.S. since its formation.

Good luck on surviving the new Government Capitalism without filing for bankruptcy, losing your job or the value of a substantial portion of your net worth due to massive inflation in the coming years,

Uncle Sam