Monday's interesting reads

"Clinton Tax Lessons" WSJ op-ed:

"[T]he Clintons also made liberal use of the charitable deduction, claiming $10.2 million in charitable giving over the eight years. Intriguingly, nearly all the donations went to the Clinton Family Foundation, which has disbursed only half the money. The Clintons can thus use the foundation for, er, strategic giving, such as the $100,000 it donated last year to a local South Carolina library – the day after Mrs. Clinton debated in that key primary state. There are other examples of such politically targeted philanthropy, and it's worth noting that most of the foundation's disbursements came only after Mrs. Clinton announced her Presidential run."

Does anyone else have a problem with someone getting a tax deduction for charitible giving to a related-party foundation? I realize it happens all the time, but it seems very easy to take advantage of. Now she has her own personal war chest (I think it's funny the media often refers to available campaign funds as a "war chest") or, even better, 527 to give out money as she sees fit.

What I'd like to see is a comparison of charitible contribution made before the Bush tax cuts ("We didn't ask for George Bush's tax cuts. We didn't want them, and we didn't need them.") and after. If she didn't need them, surely she would have given more to charity since she was paying less to the government. That is, apparently, the government's role in her opinion: take money from the people who don't need it and give it to the people who do. Maybe it's because she assumes everyone else donates strategically like she does and needs more encouragement. Actually, when you look at the returns, the main reason the Clintons "didn't need them" was because capital gains were such a small percentage of their income. They made so much from books and speaking, any capital gains tax cuts would've been a drop in the bucket.

"Beltway Fun House" WSJ op-ed:

"This CDBG fiasco is consistent with other provisions in this stinker of a bill. The main Republican contribution (thanks to Georgia's Johnny Isakson) is a $7,000 tax credit for those buying homes out of foreclosure. This means that Americans who behaved responsibly and paid their mortgage but are now trying to sell their homes will have to cut their offering price by $7,000 to compete with foreclosed properties nearby. Thus does the Senate contribute once again to tax fairness and personal responsibility."

I've mentioned my dislike of my own Senator Isakson's tax credit proposal. This is an aspect I haven't considered. What this means is that giving tax credits, the cost of the foreclosed home is actually lower by the amount of the credit, making it cheaper than it already is in comparison to non-foreclosed homes. If you want to articially increase demand for homes (again, think this is the wrong approach to take), increase the demand for all homes, not just a segment of homes.

"There's also...authority for states to issue another $10 billion in tax-exempt bonds. The bonds will fund – of course – subprime mortgages. Having witnessed this disaster for investors, states will now run the experiment again, except with taxpayers eating the losses."

Is this saying the bond funds will be used to purchase subprime mortgages? If so, this is ludicrous. If investors making lots and lots of money can't sort out the risks, why would a government bureaucracy do any better?

As an additional note, this post makes the further observation that the tax credit will be a further incentive for banks to carry through on foreclosures. (HT: Arnold Kling)

"The Cleansing Power of Recessions" by Larry Kudlow at Real Clear Politics (HT: Club for Growth)

"And let's also remember that recessions are therapeutic. They're even necessary to create the foundations for the next recovery. Economic excesses always occur in free-market capitalist economies, and from time to time they must be cleansed. Just think about the excessive risk-speculation, leverage, and housing prices of the current episode. If anything, recessions make for clean starts."

Recessions are a cost of capitalism. And I believe they're a cost worth paying. Free-market capitalism makes for higher highs AND lows than the other options out there.

Two thoughts on pessimism:

"Economic Pessimism: No Excuse for Protectionism" by Anthony Kim with the Heritage Foundation (HT: Club for Growth):

"In a time of economic uncertainty, responsible policymakers should be realistic rather than pessimistic about the future. Especially in this presidential election year, the challenge to Washington is not to get trapped in attempts at quick fixes of short-term problems at the risk of eroding the economic freedom that has been the backbone of America's prosperity. Congress must take a long-term view focused on strengthening economic fundamentals. Pessimism is not an excuse for burdensome regulation or protectionism."

"The Pessimistic Bias" by Don Boudeaux at Cafe Hayek:

"Russ and myself (because we're economists?) and many of the commentors here at the Cafe are not pessimistic about the long-run. Problems come; problems are solved. Inability to see the details of the future scare many people; this inability doesn't scare me. As long as individuals have a sufficient quantum of freedom, their self-interest and creativity and inevitable competition will "solve" almost any problem over the long-haul. It's a pattern repeated countless times over the past two-hundred years in capitalist countries."

Why is it that Democratic candidates seem to stress the negative? Even Obama, who is supposedly a candidate of hope, doesn't really seem to have much. From this WSJ editorial (kind of long):


"Listen closely to that Tuesday night Wisconsin speech. Unhinge yourself from the mesmerizing voice. What one hears is a message that is largely negative, illustrated with anecdotes of unremitting bleakness. Heavy with class warfare, it is a speech that could have been delivered by a Democrat in 1968, or even 1928.

Here is the edited version, stripped of the flying surfboard:

"Our road will not be easy . . . the cynics. . . where lobbyists write check after check and Exxon turns record profits . . . That's what happens when lobbyists set the agenda. . . It's a game where trade deals like Nafta ship jobs overseas and force parents to compete with their teenagers to work for minimum wage at Wal-Mart . . . It's a game . . . CEO bonuses . . . while another mother goes without health care for her sick child . . . We can't keep driving a wider and wider gap between the few who are rich and the rest who struggle to keep pace . . . even if they're not rich . . ."


Here's his America: "lies awake at night wondering how he's going to pay the bills . . . she works the night shift after a full day of college and still can't afford health care for a sister who's ill . . . the senior I met who lost his pension when the company he gave his life to went bankrupt . . . the teacher who works at Dunkin' Donuts after school just to make ends meet . . . I was not born into money or status . . . I've fought to bring jobs to the jobless in the shadow of a shuttered steel plant . . . to make sure people weren't denied their rights because of what they looked like or where they came from . . . Now we carry our message to farms and factories."


It ends: "We can cast off our doubts and fears and cynicism because our dream will not be deferred; our future will not be denied; and our time for change has come."


"Inequality and Excess" by Arnold Kling at TCS Daily (HT: none other than Arnold Kling himself):


"I feel awkward and defensive when the subject of economic inequality comes up. The fact is that I cannot say that I feel comfortable with the levels of inequality and excess that exist in our society.

However, I am loathe to call inequality a problem that requires a government solution. I do not see how it solves the problem to take power away from wealthy people who have a lot of it in order to increase the power of politicians who have far more of it.

What the American people really should feel awkward and defensive about is the level of inequality and excess of political power. Instead of asking ourselves what we can do about Warren Buffett or Bill Gates, we should be asking ourselves about what we can do about the Clintons and the Spitzers. Those who want more and more power should be our biggest concern."


This one is really worth reading the whole thing. He compares the financial power, which he basically defines as spending money, of multi-billionares to that of elected officials. He equates the financial power of a council of nine local politicians with a $3.8 billion budget ($400 million apiece) to someone with $8 billion of assets earning 5% return a year. But not only do they have similar spending budgets, but the politicians have power to tell people what kind of building they can build on their properties, how much local business must pay their employers, etc.