Buy a House, Get a Visa

Posted on March 24, 2009 by Jorge Costales

The always interesting Marginal Revolution blog, endorses an idea so simple and smart, it must have no chance of succeeding. Thomas Friedman describes the source of the idea:

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

Gary Shilling outlines the idea:

The Obama administration should seriously consider granting resident status to foreigners who buy surplus houses in this country. This makes more sense than the president’s $275 billion housing bailout plan, which Americans greeted with a Bronx cheer.

The housing bailout … doesn’t get to the basic problem — the huge inventory of excess houses. We estimate that 2.4 million houses over and above normal working inventories are left over from the 1996-2005 housing bubble. That’s a lot, considering the long-term average annual construction of 1.5 million single- and multi-family units.

Excess inventory is the mortal enemy of house prices, which have already fallen 27% since the peak in early 2006. We predict another 14% drop through the end of 2010 if nothing is done to eliminate the surplus.

Doing nothing to eliminate the excess inventory might well push the recession through 2010 and into a depression. Declining home values, for example, are eliminating the home equity that has funded oversized consumer spending for years.

A better idea is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. — if they buy houses of minimal values (not shacks). They wouldn’t need to live in those houses, but in order to remove the unit from the total housing market, they couldn’t rent them. Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% — but where many foreigners like to live.

All articles referenced are copied in full at end of post.

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Immigrants Can Help Fix the Housing Bubble

MARCH 17, 2009, 9:49 A.M. ET

By RICHARD S. LEFRAK and A. GARY SHILLING

The Obama administration should seriously consider granting resident status to foreigners who buy surplus houses in this country. This makes more sense than the president’s $275 billion housing bailout plan, which Americans greeted with a Bronx cheer.

The federal bailout forces taxpayers to subsidize overextended homeowners who bet on ever-rising house prices and used their abodes as ATMs, and it doesn’t get to the basic problem — the huge inventory of excess houses. We estimate that 2.4 million houses over and above normal working inventories are left over from the 1996-2005 housing bubble. That’s a lot, considering the long-term average annual construction of 1.5 million single- and multi-family units.

Excess inventory is the mortal enemy of house prices, which have already fallen 27% since the peak in early 2006. We predict another 14% drop through the end of 2010 if nothing is done to eliminate the surplus.

Doing nothing to eliminate the excess inventory might well push the recession through 2010 and into a depression. Declining home values, for example, are eliminating the home equity that has funded oversized consumer spending for years.

As consumers retrench, production is cut, payrolls are slashed, and consumer confidence, incomes and spending are savaged in a self-feeding downward economic spiral. But if the government buys surplus houses and sells them at low market-clearing prices, other house prices will drop, destroying more home equity and driving many more mortgages under water. Bulldozing excess houses would be an inefficient end for perfectly habitable structures.

A better idea is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. — if they buy houses of minimal values (not shacks). They wouldn’t need to live in those houses, but in order to remove the unit from the total housing market, they couldn’t rent them. Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% — but where many foreigners like to live.

Each year, 85,000 H-1B visas are granted for foreigners with advanced skills and education, and last year, 163,000 petitions were filed in the first five days after applications were accepted. The Ewing Marion Kauffman Foundation estimates that as of Sept. 30, 2006, 500,040 residents of the U.S. and 59,915 individuals living abroad were waiting for employment-based visas. Many would buy homes if their immigration conditions were settled.

These people tend to be highly productive. In 2006, foreign nationals residing in the U.S. were listed as inventors on 25.6% of the patent applications filed in the U.S., up from 7.6% in 1998. A Council of Graduate Schools survey found that in the fall of 2007, 241,095 non-U.S. citizens were enrolled in graduate programs. Some 55% were in engineering and the biological and physical sciences, compared with only 16% of U.S. citizens. In 2007, more people on temporary visas received doctorates in physical sciences and engineering than U.S. citizens.

There is a high correlation between education and incomes, and in today’s uncertain economic climate, many wealthy foreigners desire U.S. resident status just as a number in Hong Kong secured residences in Singapore and Canada before the British handover to China in 1997. They rapidly became over a quarter of Vancouver’s population, and brought in billions of dollars to buy houses and make other investments.

We could benefit from such an influx. Merrill Lynch estimates that in 2007 there were 10.1 million individuals in the world, 7.1 million outside the U.S., with at least $1 million in financial assets that totaled $29 trillion. If new immigrants bought the 2.4 million excess houses at today’s $184,000 median price with funds from abroad, they would bring untold billions. The immigrants would also buy consumer goods, pay taxes, and start many new businesses.

The blueprint for a program to sell surplus housing to immigrants is already in place with the EB-5 visa program. Each year, 10,000 EB-5 visas for this country are available for foreigners who each invest $1 million in a new enterprise ($500,000 in economically depressed areas) that creates at least 10 full-time jobs. After two years, the entrepreneur and his family can become permanent residents.

America’s relatively open immigration policy makes this country better off than many other developed lands whose governments also must fund the pensions and health care for growing numbers of retirees. Yet there’s still a huge need for more productive and skilled people, both current residents and immigrants, who will produce enough goods and services to provide for their own needs and for those in retirement. Otherwise, entitlement spending eventually will touch off intergenerational warfare.

Granting permanent resident status to foreigners who buy houses in this country will curtail a primary driver of the deepening recession and financial crises — excess house inventories and the resulting collapse of prices. Since the people who will buy these houses will tend to have money, education, skills and entrepreneurial talents, they will be substantial assets to America in both the short and long runs.

Mr. LeFrak is chairman and CEO of LeFrak Organization, a real estate builder and developer. Mr. Shilling, an economic consultant and investment adviser, is president of A. Gary Shilling & Co.
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Buy a House, Get a Visa (2)

The buy a house, get a visa program which I have been pushing for some time is getting some serious play. Writing in the WSJ, Richard Lefrak and Gary Shilling note:

The blueprint for a program to sell surplus housing to immigrants is already in place with the EB-5 visa program. Each year, 10,000 EB-5 visas for this country are available for foreigners who each invest $1 million in a new enterprise ($500,000 in economically depressed areas) that creates at least 10 full-time jobs. After two years, the entrepreneur and his family can become permanent residents.

Why not reduce the investment required and expand the program to 100,000?

Barry Ritholz has further thoughts and links. Thanks to Jim Ward for the pointer.

Posted by Alex Tabarrok on March 22, 2009 at 07:40 AM in Economics | Permalink
Comments

The no free lunch department requests an accounting of the downsides. (Other than the “foreigners suck our jobs away” argument which is a known issue.)

Posted by: Andrew at Mar 22, 2009 8:01:00 AM

Possible TINSTAAFL side-effects for Andrew:

Rich foreigners who otherwise wouldn’t meet the requirements to get in might be able to find easier access through this.

All some of this investment could go to less-useful programs, though it seems they’d go to less-useful programs in the US and the “more useful” programs would be over seas. So less efficient global allocation of capital.

Foreign capital crowds out native US investors who would otherwise have invested in these opportunities, potentially driving US capital overseas.

All of these seem pretty benign to me. I really like this idea. We always like to tell ourselves that one of the things that makes the US great is the freedom it offers. Seems like if we’re concerned about strengthening this country, we should be willing to use this as a selling point to bring in foreign capital and foreign skilled laborers.

Posted by: mravery at Mar 22, 2009 10:26:08 AM

In the last 10 years the average the average number of people utilizing the EB-5 visa is less than 800 per year.

Posted by: Zack at Mar 22, 2009 10:57:00 AM

The downside is that sooner or later, bleeding hearts will start whining about how unfair this is to immigrants who can’t afford a house. At that point, congress will figure out a way to subsidize it.

Posted by: ian at Mar 22, 2009 11:26:29 AM

This is an interesting idea.

But what about starting new programs? Like: 1) Individuals who owe backtaxes get a pass if they buy a foreclosed home; 2) nature conservancies can get a matching grant from the government if that non-profit turns swaths of depressed/ghost-towns into nature preserves; 3) people in depressed areas are paid to moved to high-growth areas; etc.

Honestly, those would do better than expanding the EB-5 program.

Possibly some of the reasons why foreign capitalists are not applying to this program is droves are: 1) the US is not THAT desirable to rich foreigners; 2) rich foreigners do not see an economic advantage coming to the US or gaining US citizenship (which one might believe cause sneaking around taxes in Spain, Italy, Turkey, Laos, etc. is easier than in the US); 3) once rich foreigners become rich Americans their assets and earned income anywhere in the world are taxable by the IRS & due to new-ish agreements with secret banking states (the Swiss, Luxembourg, etc) offshore accounts are now easier to identify; and 4) if you had the money to life anywhere in the world would you really WANT to live in Detroit or some other economically depressed US city/state? (Put another way, if you one the Powerball, what incentive would you need to move to Moscow or Bombay or Mexico City [and those are fun cities]?)

Posted by: Jim at Mar 22, 2009 11:30:22 AM
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The Open-Door Bailout By THOMAS L. FRIEDMAN

February 11, 2009 – Bangalore, India

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”

While his tongue was slightly in cheek, Gupta and many other Indian business people I spoke to this week were trying to make a point that sometimes non-Americans can make best: “Dear America, please remember how you got to be the wealthiest country in history. It wasn’t through protectionism, or state-owned banks or fearing free trade. No, the formula was very simple: build this really flexible, really open economy, tolerate creative destruction so dead capital is quickly redeployed to better ideas and companies, pour into it the most diverse, smart and energetic immigrants from every corner of the world and then stir and repeat, stir and repeat, stir and repeat, stir and repeat.”

While I think President Obama has been doing his best to keep the worst protectionist impulses in Congress out of his stimulus plan, the U.S. Senate unfortunately voted on Feb. 6 to restrict banks and other financial institutions that receive taxpayer bailout money from hiring high-skilled immigrants on temporary work permits known as H-1B visas.

Bad signal. In an age when attracting the first-round intellectual draft choices from around the world is the most important competitive advantage a knowledge economy can have, why would we add barriers against such brainpower — anywhere? That’s called “Old Europe.” That’s spelled: S-T-U-P-I-D.

“If you do this, it will be one of the best things for India and one of the worst for Americans, [because] Indians will be forced to innovate at home,” said Subhash B. Dhar, a member of the executive council that runs Infosys, the well-known Indian technology company that sends Indian workers to the U.S. to support a wide range of firms. “We protected our jobs for many years and look where it got us. Do you know that for an Indian company, it is still easier to do business with a company in the U.S. than it is to do business today with another Indian state?”

Each Indian state tries to protect its little economy with its own rules. America should not be trying to copy that. “Your attitude,” said Dhar, should be “ ‘whoever can make us competitive and dominant, let’s bring them in.’ ”

If there is one thing we know for absolute certain, it’s this: Protectionism did not cause the Great Depression, but it sure helped to make it “Great.” From 1929 to 1934, world trade plunged by more than 60 percent — and we were all worse off.

We live in a technological age where every study shows that the more knowledge you have as a worker and the more knowledge workers you have as an economy, the faster your incomes will rise. Therefore, the centerpiece of our stimulus, the core driving principle, should be to stimulate everything that makes us smarter and attracts more smart people to our shores. That is the best way to create good jobs.

According to research by Vivek Wadhwa, a senior research associate at the Labor and Worklife Program at Harvard Law School, more than half of Silicon Valley start-ups were founded by immigrants over the last decade. These immigrant-founded tech companies employed 450,000 workers and had sales of $52 billion in 2005, said Wadhwa in an essay published this week on BusinessWeek.com.

He also cited a recent study by William R. Kerr of Harvard Business School and William F. Lincoln of the University of Michigan that “found that in periods when H-1B visa numbers went down, so did patent applications filed by immigrants [in the U.S.]. And when H-1B visa numbers went up, patent applications followed suit.”

We don’t want to come out of this crisis with just inflation, a mountain of debt and more shovel-ready jobs. We want to — we have to — come out of it with a new Intel, Google, Microsoft and Apple. I would have loved to have seen the stimulus package include a government-funded venture capital bank to help finance all the start-ups that are clearly not starting up today — in the clean-energy space they’re dying like flies — because of a lack of liquidity from traditional lending sources.

Newsweek had an essay this week that began: “Could Silicon Valley become another Detroit?” Well, yes, it could. When the best brains in the world are on sale, you don’t shut them out. You open your doors wider. We need to attack this financial crisis with green cards not just greenbacks, and with start-ups not just bailouts. One Detroit is enough.
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Tagged , | 2 Comments

The Logic of Billy Preston and the Ballpark Vote

Posted on March 23, 2009 by Jorge Costales

I got tired of not finding an actual headcount on how the Miami-Dade County commissioners might vote tomorrow, so I’ll take a shot at it here. [Warning: I’m getting killed in my Descarga NCAA Brackets–I’ll never trust Clemson again–so please, no wagering.]

I bring no particular insight into the topic of how the commissioners might vote, given that I was unfamiliar with more than one of them before I started this post. What I can contribute as a long-time Miamian, is to say that any politician of a Hispanic background would be loathe to cast the deciding no vote on the Marlins ballpark deal. Whereas white politician’s with a non-Hispanic background, would wear that no vote like a ‘stinkin-bage‘ among their Howard Beale-sque constituencies. To say nothing of the annually replenished Norman Braman vehicles at their disposal [new ones for the first two years, then pre-owned, then … listen, just talk to Buddy Ryan] such a vote would produce. The African-American vote is more of a wild-card. This and what follows represents my shameless attempt to channel The Wire.

Publicly committed: 3 Yes votes – 3 No votes

District 4 – Sally A. Heyman – No
District 5 – Bruno A. Barreiro – Yes
District 7 – Carlos A. Gimenez – No
District 8 – Katy Sorenson – No
District 9 – Dennis C. Moss – Yes
District 12 – José “Pepe” Diaz – Yes

Publicly undecided – the Circumspect Six = 6 Yeses

All six of these commissioners voted for the stadium project in 2008.

District 1 – Barbara J. Jordan: Ms Jordan was recently appointed Chair of the Transit, Infrastructure and Roads Committee by the Commission Chairman Dennis Moss, who is a stadium supporter. No seemingly ideological agenda re public funding etc, so I assume she’s a reliable Moss ally on this issue.District 2 – Dorrin D. Rolle – Mr Rolle’s most recently sponsored legislation involved the Port of Miami tunnel. That tunnel is a key component of the mega-plan which is encompassed by the Marlins ballpark deal. Further, he is very active with inner-city youth groups. If MLB doesn’t end up sponsoring one of his activities in Liberty City, someone should get sued for political malpractice.
District 3 – Audrey Edmonson – Ms Edmonson’s district is adjacent to Little Havana neighborhood where the Marlins ballpark is to be built. Further, she co-sponsored the Port of Miami tunnel legislation with Mr Rolle. Her activities include a lot of outreach to the Hispanic community. Again, I have to assume she’s a reliable Moss ally on this issue.

Considering the four African-American commissioners as a voting-block–Moss, Jordan, Rolle and Edmonson–it is just hard to imagine one of them breaking off and sinking this project. In addition, one would assume a degree of cooperation with Michelle Spence-Jones over at the City of Miami commission, especially with respect to ensuring that their constituencies are not ignored in disbursing potential CRA funds.

District 6 – Rebeca Sosa – Ms Sosa’s district encompasses the city of Hialeah. A MLB-backed youth baseball academy was established last year in Hialeah. Non-Hialeah Cubans-Americans think Hialeah Cuban-Americans are really loud and intense baseball fans. Forget any issues here. The woman has to vote yes just to be able to enjoy meals in her district.
District 11 – Joe A. Martinez – West Dade district. Has been a commissioner since 2000 and once served as Commission Chairman. He probably is the biggest no vote potential given his experience, but I just don’t see the end game to his no vote. Again, following my perception that Hispanic commissioners would not want to be identified as killing this project, the safe play would have been to be out in front with a no vote.
District 13 – Natacha Seijas – The longest tenured commissioner, since 1993. Recently reappointed as chairperson of a Trade Consortium by Moss. Has ties to the AFL-CIO and recently commented that she is pleased that her concerns about labor unions have been addressed.

So while the ‘Circumspect Six’ may not exactly represent profiles in courage, the logic of the great Billy Preston–Nothin from nothin , leaves nothin’–will likely carry the day. The odds are high that County commissioners will have some new concession to point to–like their brethren at the City of Miami–by the time they vote. When you think about it, the undecideds are are practicing, at a gut-level, the same skill which is earning tenure at universities, game theory–an egghead description:

Game theory is the study of the ways in which strategic interactions among rational players produce outcomes with respect to the preferences (or utilities) of those players, none of which might have been intended by any of them.

See politician’s are laughing at those geeks, ‘Man, you had to go to college to learn to keep your options open?’ It’s actually pretty interesting stuff, see the Pirate puzzle example.

One publicly undecided Commissioner’s odyssey –
From Amerigo Bonasera to Alfredo Amezega

Of the undecideds, Mr Souto is the only one to have voted against the project in 2008.

District 10 – Javier D. Souto – Despite his no vote in 2008, Mr Souto’s remarks about the stadium deal merely express concern about getting a better deal for the County. Which is what politician’s do to keep their options open.

Check out what Mr Souto was doing Saturday according to the Miami Herald:

… County Mayor Alvarez [stadium supporter] spent Friday morning at the Miami International Cattle Show, admiring prized stud bulls with key swing-vote Commissioner Javier Souto. The cattle show is Souto’s pet project. Souto could not be reached for comment Friday night.

My guess is that he is for now, the pro-ballpark forces Amerigo Bonacera, a dormant asset. One text later, he will be their Alfredo Amezaga. Although Mr Souto lacks Amezaga’s distinction of having attended the great Miami Senior High, he can play one on the Commission.

OK we’re done, I’ve officially jinxed the Marlins ballpark deal. Wait, let me bury it completely; Hell, what could go wrong?

The lyrics to Billy Preston’s ‘Nothing From Nothing’ and article referenced are copied in full at end of post.

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Lyrics for: Nothing From Nothing

Nothin’ from nothin’ leaves nothin’
You gotta have somethin’
If you wanna be with me
Nothin’ from nothin’ leaves nothin’
You gotta have somethin’
If you wanna be with me

I’m not tryin’ to be your hero
‘Cause that zero is too cold for me, brrr
I’m not tryin’ to be your highness
‘Cause that minus is too low to see, yeah

Nothin’ from nothin’ leaves nothin’
And I’m not stuffin’
Believe you me
Don’t you remember I told ya
I’m a soldier in the war on poverty, yeah
Yes, I am

[Instrumental Interlude]

Nothin’ from nothin’ leaves nothin’
You gotta have somethin’
If you wanna be with me
Nothin’ from nothin’ leaves nothin’
You gotta have somethin’
If you wanna be with me

You gotta have somethin’
If you wanna be with me
You gotta bring me somethin’ girl
If you wanna be with me
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Struggle for a Florida Marlins stadium comes down to last pitch BY JACK DOLAN AND CHARLES RABIN

Posted on Sun, Mar. 22, 2009

With a final vote on the Florida Marlins’ new stadium looming Monday, the franchise appears to be one tense afternoon away from a goal it has chased since 1994 — a South Florida ballpark to call its own.

For critics opposed to spending hundreds of millions from public coffers to build the stadium in Little Havana — and those pushing the Marlins to pick up more of the proposed $634 million tab — Monday’s vote by the Miami-Dade County Commission could be the last stand.

Momentum swung dramatically in the Marlins’ favor Thursday at Miami City Hall, where the team won a tight 3-2 vote approving the deal.

But city commissioners extracted two significant concessions: a greater share of the profits for the county and city if the team is sold after construction, and a promise that at least half of the people who will build the stadium will be hired from South Florida.

That leaves stadium skeptics on the County Commission eager to extract concessions of their own, even as some begin to admit that the stadium deal will likely pass.

”I think they have the votes now, but you can still make the deal better by changing some aspects of it,” said Miami-Dade Commissioner Carlos Gimenez, the most outspoken stadium critic on the county board.

Commissioner Joe Martinez made a similar point in a memo to his colleagues immediately after the city’s vote.

”In the eleventh hour, the Marlins have now conceded to changes under pressure from the City Commissioners,” Martinez wrote. “If the Marlins will agree to these changes, perhaps they will do even more.”

So the question isn’t so much whether the stadium agreement will pass, but how much the Marlins might have to give up to make the deal go through.

County Mayor Carlos Alvarez, the principal county advocate for building a stadium for the Marlins, argues that professional sports teams are a key feature of any world-class city, and that the stadium will create public-works jobs at a time that the economy is starved for them.

He announced Friday that he wants the commission to cast a single vote on the five contracts that constitute the deal — an effort to avoid the spectacle of the agreement being carved apart piece by piece on the dais.

That’s bold, because one measure — waiving the competitive bidding process to allow the Marlins’ chosen firm, Hunt-Moss, to build the stadium — requires a nine-vote super-majority of the 13-member board.

A SUPER-MAJORITY

”We want it to go forward as one big resolution that requires nine votes, with everything in it,” Alvarez spokeswoman Victoria Mallette said Friday.

That announcement came after Alvarez spent Friday morning at the Miami International Cattle Show, admiring prized stud bulls with key swing-vote Commissioner Javier Souto. The cattle show is Souto’s pet project. Souto could not be reached for comment Friday night.

The agenda for Monday’s meeting, released late Friday, shows all five stadium contracts voted on at once. But the agenda can be changed by a simple majority.

Among those firmly behind the project are Chairman Dennis C. Moss and Vice Chair Jose ”Pepe” Diaz.

On Friday, Diaz said that if the hotel-tax money that would finance most of the stadium could be used for police or social services, he wouldn’t vote for the deal. But by law, bed taxes must be spent on tourist development, such as a stadium.

”We’re going to create jobs in making the park itself,” Diaz said. “We’re going to create jobs around the park. It will create jobs when the stadium is functional.”

Opponents have other ideas.

Gimenez has called for scrapping the existing contracts and writing new ones, with the public contribution dropping from about $480 million to about $76 million. The Marlins are committed to paying $120 million toward construction and repaying a $35 million county loan.

”A motion to start all over? That’s absolutely ludicrous at this point,” Alvarez said.

PUSH FOR REVISIONS

Should Gimenez fail to persuade his colleagues to start from scratch, he said he wants the Marlins to contribute their share for construction first. Under the current deal, the public pays to build the first three-quarters of the stadium; the Marlins pay to finish it.

Gimenez also wants the public to get a share of the profits if the team is ever sold — not just in the first nine years, as the current contract stipulates. And he wants the county to hire an independent auditor to make sure that the Marlins have the money to live up to the deal. Team owner Jeffrey Loria has refused to open the Marlins’ books to show assets and liabilities.

”It’s a major-league franchise,” Alvarez said. “We met with the commissioner of Major League Baseball. These are legitimate people.”

A skeptical Gimenez said the county shouldn’t enter into such a big business deal based on its partner’s word.

Gimenez isn’t the only one who will be waiting for the deal with a legislative scalpel.

Commissioner Sally Heyman said she’ll introduce an amendment to reduce the county’s share of the construction cost to $206 million and to make Major League Baseball cosign the Marlins’ promise to stay in Miami for 35 years. That way, the league could be sued if the team were to leave.

Heyman also wants to get rid of the so-called ”death clause” that would allow Loria’s heirs to sell the team without the requirement to share the profits with the city and the county.

”I am very concerned about the agreements because they offer little financial or legal protection for our citizens,” she wrote in a memo Wednesday.

While commissioners debate the contracts Monday, Loria will sit in the audience, possibly one momentous roll call away from a dream that he and two previous owners have been chasing for 15 years: a permanent home, with a retractable roof, for a team that consistently ranks near the bottom of the major leagues in attendance and payroll.

Despite playing in a football stadium that is often nearly empty, the players have managed to win two World Series.

”South Florida really needs a baseball-only facility,” Marlins catcher John Baker said last week after Miami’s vote. “It would be a great benefit to the community to have a stadium.”

Miami Herald staff writer Andre Fernandez contributed to this report.
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How Do You Know You Have a Monopoly?

Posted on March 23, 2009 by Jorge Costales

I read this on Paul Krugman’s blog:

I’m working at home today, waiting for the Fios [fiber-optic internet] guy. Which means that I’m probably going to drop off the face of the earth for much of today.

Which amazed me. I also read one of the comments on the post which put it in perspective:

Wow, you won a Nobel prize and you’re still stuck at home between 9 AM and 5 PM waiting for the cable guy. Glad to hear that you’re still one of the proles!— Ramesh Mantha

There might be better indicators, but poor customer service has to be one of the best tell tale signs of an oligopoly or quasi-monopoly markets. Cable companies customer service is terrible and even their wealthier customers can’t pay their way out of it.

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Perfect Villains?

Posted on March 22, 2009 by Jorge Costales

Just when the lefty powers that be seemingly found their perfect villains, bailout enabled bonuses, but along comes Henry Blodget with some really inconvenient facts. The House recently passed a 90% tax on any household income exceeding $250,000 for employees of firms that have accepted federal bailout funds. Blodget points out the following:

  • The U.S. taxpayers bailed out those firms to ensure they survived.
  • The U.S. taxpayers now own a major stake in those firms.
  • When young professionals at those firms realize that their family’s pay will be capped at $250,000 indefinitely, they will have a strong incentive to leave those firms.
  • Which ones will stay? The ones who don’t have the ambition, skill, or time to make more than $250,000 a year.

So in effect, we U.S. taxpayers have invested in companies which will increasingly by staffed by persons who would not be hired elsewhere. Would you want to buy stock in that company?

Blodget summarizes:

The frantic passage of the Populist Rage [90%] Tax was a new low in the US government’s response to this crisis. It shows just how likely we are to doom ourselves to a decade or more of misery–by choking our markets, closing our borders, turning our banks into tools of social policy, and wrecking what’s left of our economy.

Seriously, you gotta feel for the left. It was just so much easier to hate President Bush.

Article referenced is copied in full at end of post.

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90% Tax? Now We Really ARE Screwed

Henry Blodget|Mar. 19, 2009, 10:01 PM|comment168

The frantic passage of the Populist Rage Tax was a new low in the US government’s response to this crisis. It shows just how likely we are to doom ourselves to a decade or more of misery–by choking our markets, closing our borders, turning our banks into tools of social policy, and wrecking what’s left of our economy.

In case you’ve been too outraged by AIG (justifiably) to notice what happened, here’s a recap:

If the “TARP bonus” bill the House passed today becomes law, any of the hundreds of thousands of people who work for Citigroup, Bank of America, AIG, and nine other major US corporations will have to fork over 90 cents of every bonus dollar that puts their household income over $250,000.

That’s household income, not individual income. If you’re married and filing singly, you’ll have to surrender anything over $125,000. Indefinitely.* [See the comments below for a discussion of the mechanics of this.]

Is $250,000 per household a lot of money? Sure. But it’s not a lot of money for two moderately successful corporate executives. Or a corporate secretary married to a lawyer. (If you’re a $40,000 a year telemarketer at a TARP company married to a $210,000 lawyer, any bonus will be taxed). So this tax will be felt by a lot more than the handful of execs at AIG and Merrill who ran off with several million dollars apiece.

But that’s not the really distressing part. The really distressing part is what this tax will do to the corporations that we now own and are supposedly trying to save.

(Remember? That’s the reason we bailed Citigroup, AIG, GM, and the rest of them out–to save them. Because we convinced ourselves that civilization would end if we didn’t.)

Thanks to our stupidity bailouts, we now own major stakes in these firms–at mind-boggling expense. So it’s not clear why we want to destroy them. But that’s what we seem determined to do.

Believe it or not, hidden inside these companies are thousands of decent, competent people whose households bring in more than $250,000 a year. Many of these folks had NOTHING to do with the gambling addiction that bankrupted their firms. Many of them still have a choice where to work. And now that they’ve learned that their family’s pay will be capped at $250,000 indefinitely, many of them will quickly decide that now is a good time to pursue their careers elsewhere. (That is, unless their firm takes the easy and obvious step of just paying them a fatter salary, which just renders the whole thing a farce.)

Will everyone leave these firms? No. The folks whose households don’t have the education, desire, ambition, skill, or time to make more than $250,000 a year won’t. But a lot of the rest will. And however little our massive investments in these companies are worth now, they will soon be worth a lot less.

The real lesson here, unfortunately, is that it’s a disaster for the government to run private companies. We used to understand that. But ever since we started telling ourselves that we had to save bankrupt institutions by taking them over and pretending not to “nationalize” them, we have apparently forgotten.

Originally, I read the bill as applying to all income over $250,000. As you can see in the comments, several readers believe it applies only to bonuses, not income.

I feel the same way about the tax even if it only applies to bonuses, because then it is preposterously easy to get around (just raise base salary) and will be almost equally bad for the companies (pay will no longer will pay have anything to do with performance, and the best folks will still leave.) I’ve included the relevant section of the bill below:

(1) IN GENERAL- The term `TARP bonus’ means, with respect to any individual for any taxable year, the lesser of–
(A) the aggregate disqualified bonus payments received from covered TARP recipients during such taxable year, or
(B) the excess of–
(i) the adjusted gross income of the taxpayer for such taxable year, over
(ii) $250,000 ($125,000 in the case of a married individual filing a separate return).

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Baseball on the Radio

Posted on March 21, 2009 by Jorge Costales

I had one of those busy nights last Tuesday. I was shuttling my kids, my Mom & Tia around from nightfall on. The next to next to last stop was to pick up a friend on our way to a funeral home for the father of a mutual friend. We arrived at the funeral home around 9:30, paid our respects and engaged in the type of conversations which make you question why we allow petty concerns to dictate so much of our ‘regular’ lives. The conversations can be predictable and yet still cathartic. The seriousness of the moment permits us to outwardly show appreciation towards friends and inwardly entertain big and serious thoughts.

In one of those traditions which ‘we should begin if it didn’t exist,’ the funeral home visit was followed by a stop at a restaurant with friends. By law, the restaurant must serve Cuban coffee, in this case, La Carreta. I skipped the coffee–I said the restaurant had to ‘serve’ the coffee, not that you had to have it–and waddled straight to the flan–staying above 30% body fat is not a hobby for the feint of heart. However, that is not what I meant to write about.

Tuesday night was the night of the exciting Team USA win over Puerto Rico in the World Baseball Classic. After the game, a moving story unfolded as a handicapped U.S. Army veteran–Felix Perez–was brought into the U.S. clubhouse by the usher of the century, Brian Finnegan. Perez was treated, very appropriately, like a hero. However, even that is not what I meant to write.

I listened to the WBC game intermittently on the car radio, catching the entire 9th inning rally on the way home. A local station picked up the ESPN televised broadcast. The play by play guy on the broadcast is very familiar to Miami sports fans. Jon “Boog” Sciambi was part of the Marlins radio network from 1997 to 2004 and for a while hosted a mid-day radio show here. He was a bright guy who knew his stats and could never bring himself to do the typical sports radio thing, i.e. yelling at callers. When someone would try and bait him, he would offer to fight them on their home lawns. I was a fan. Currently, aside from ESPN, Sciambi is part of the Atlanta Braves broadcast team.

Sciambi made my favorite sports ‘call’ ever. The odd part is that I did not even hear his call live, if that makes any sense. He was part of the radio broadcast and I only heard his call on the DVD of the Marlins 2003 playoff run. The thing is that the DVD served as a reliable lullaby for my kids, so I heard it often. The call described Mike Mordecai’s second at bat in the eighth inning of Game 6 of the 2003 NLCS against the Chicago Cubs. It would be hard to describe the absolutely unbelievable turn of events represented by an inning which started with a dominant Mark Prior [as a former Dodger fan, I was having Miamian Steve Carlton [1983] flashbacks during the game] retiring Mike Mordecai to start the inning. That seven runs later Mordecai would be standing on second base still amazes me. Sciambi’s call captured the incredulity of it all.

Sciambi’s call of the WBC game mixed in easily with discussing the home run controversy the previous night and other topics. When Rollins got on base, he lead Buck Martinez into a discussion about the strategy in those situations and highlighted just how good Rollins is in that department. Good stuff for us baseball fans. As I listened to Sciambi, I was reminded of what approaches. The baseball season. Following baseball in Miami in the early 1970’s meant listening to the Braves on WKAT. A lifelong (hopefully) habit was born. So goodbye audiobooks burned to CD’s, MLB is back. Soon, seemingly every time I get in the car at night, there will be baseball, and in the case of the Mets, hopefully their blood.

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Real March Madness

Posted on March 20, 2009 by Jorge Costales

The Real March Madness – By RICHARD VEDDER and MATTHEW DENHART

MARCH 20, 2009

The economy may be tanking and our pocketbooks are slimmer, but we can rejoice in one thing: March Madness is here and we can watch our favorite teams participate in the annual NCAA college men’s basketball tournament. Behind all the hoopla, however, is the reality that the players who entertain us receive compensation that amounts to only a very small percentage of what they would have earned if they sold their services in a competitive market.

Take Kevin Durant, for instance. After a stunning freshman season with the Texas Longhorns in 2008, Mr. Durant elected to forgo his final three years of college and entered the NBA draft. Selected by the Seattle Supersonics (now the Oklahoma City Thunder), he agreed to a contract paying $3.5 million in the first year. By contrast, his yearly compensation (in the form of room, board, books and tuition fees at Texas) amounted to about $33,120, less than 1% of what was offered by the Supersonics.

Football is the other major revenue generating sport. In 2006, Heisman Trophy winner Reggie Bush skipped his senior year at the University of Southern California and entered the NFL draft. Selected by the New Orleans Saints, he agreed to a six-year contract guaranteeing $26.3 million with the possibility of huge performance bonuses. The compensation package of about $44,000 offered by USC paled in comparison to Mr. Bush’s true market value.

Top-level college sports is big business, but very little of this flows to the student-athletes. Ohio State, for example, receives about $110 million in revenue each year from ticket sales, television rights, concessions, parking, logo sales, etc. — over one-fifth of what it receives in tuition revenue from its more than 50,000 students. And its basketball players are paid about $29,500 each.

In a competitive market, companies cannot exploit workers in this way for long, as rival firms will hire them away at higher salaries. In basketball, however, the NCAA cartel prevents that, dictating limits on pay (essentially college costs) and even penalizing transfers to other schools. Strict rules also prevent college athletes from signing lucrative endorsement deals or accepting gifts beyond a certain amount. Soon after entering the NBA, Mr. Durant further augmented his earnings by signing a $72 million deal with Nike; he inked other endorsement contracts with Gatorade, EA Sports and Upper Deck.

If all of that money from ticket sales and television rights isn’t going to student-athletes, where does it end up? In 2006, salaries for coaches and administrators accounted for nearly 32% of total athletic-department expenses. Many head football coaches at top universities earn five times the salary of their university president. At a time when most schools are tightening their belts with salary freezes, staff layoffs and the like, the University of Tennessee just announced it was going to start paying two assistant football coaches $650,000 or more each (the head coach makes $2 million). Jim Calhoun, head coach of the University of Connecticut men’s basketball team, recently made headlines when he launched into a tirade at a blogger who questioned his $1.6 million annual compensation. Those high salaries are financed from the talents of unpaid student-athletes. (Talk about income inequality.) So not only are the young being exploited, but the exploitation is being committed by their adult mentors.

Maybe it’s time the players did something about this situation. Usually when workers think they are getting a raw deal, they form a labor union. For example, to preserve their current amateur status, football and basketball players (and perhaps even all college athletes) might demand that they receive 25% of gate receipts and television revenues, to be placed in escrow to finance annuities for them payable beginning with college completion.

But should we really feel sorry for the players? In a sense, college football is like the minor leagues in baseball — a steppingstone to the top. But top-flight AAA minor league players typically get a “living wage” of about $50,000 and sometimes considerably more a year, none of which need be spent on classes they don’t have time to show up for.

Of course, for the students who go on to the pros, putting off their financial bonanza won’t be a big deal. But most college athletes do not make the pros. They may not even end up with the basic skills necessary to succeed in other workplaces, since only a minority of student-athletes in major sports even graduate (25% in top-ranked University of Connecticut men’s basketball, for example). Long practices and missed classes make it difficult to succeed academically. A recent study funded by the Andrew W. Mellon Foundation shows the academic performance of athletes is lower than non-athletes even at Division III schools.

So why haven’t players unionized already? First, the “workers” are around for only three or at most four playing seasons, making it hard to build up much of a movement. Second, coaches control playing time and enormously influence career success, so it is the rare college kid who will incur the coach’s wrath to form any kind of insurrection. Finally, most players don’t have a lot of contact with the members of other teams. But if you see them whispering before the tipoffs this weekend, you’ll know why.

Mr. Vedder directs the Center for College Affordability and Productivity, where Matthew Denhart, a student at Ohio University, serves as a research associate.
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City of Miami approves Ballpark

Posted on March 20, 2009 by Jorge Costales

Marlins Ballpark Approved

Articles referenced is copied in full at end of post.

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Miami Commission OK’s Florida Marlins stadium – BY CHARLES RABIN AND JACK DOLAN

Posted on Thu, Mar. 19, 2009

A month of deliberations by Miami commissioners turned into a moment of joy for the Florida Marlins on Thursday, when city officials agreed to help build the team its long-sought new stadium.

Next up: Miami-Dade County, where the 13-member commission will be asked Monday to bankroll the lion’s share of funding for the $634 million stadium and parking complex in Little Havana.

With the county’s blessing there, the mirage is closer to reality: a new 37,000-seat retractable-roof stadium to rise in 2012 for the financially strapped ball club with a history of low payroll and attendance.

In Miami, commissioners Thursday cemented the city’s end of the stadium plan at the old Orange Bowl site. The first vote — approving the stadium’s core contracts — passed by a one-vote margin.

”It’s just like beating the Cubs in Game 6. We still have to come back and play Game 7,” a buoyant Marlins President David Samson said moments after the vote, recalling his team’s storied 2003 playoff run.

The Marlins won Game 7 in a rout, then took the World Series against the New York Yankees.

If Thursday is any indication, Monday at County Hall may not be as easy.

Though the Miami Commission was required to pass three votes, the big one supporting the stadium and parking garage construction plan passed 3-2, with Commissioner Michelle Spence-Jones the swing vote. She was on maternity leave during a deadlocked 2-2 February vote.

Joe Sanchez and Angel Gonzalez also voted yes on Thursday, as they had before; Commissioners Tomás Regalado and Marc Sarnoff were once again against.

Two other votes followed. One, a no-bid waiver for $24 million worth of road and utility work, required a supermajority. It passed 4-1, with Sarnoff joining the majority and Regalado the lone holdout. A final vote to approve an interlocal agreement between the city and county passed unanimously.

THE BATTLE LINES

The six-hour battle over spending hundreds of millions of dollars of public money began early in the morning with dueling protests outside of Miami’s scenic City Hall.

Union workers holding Marlins signs shouted about the need for work. Activists in coordination with Liberty City’s Miami Worker’s Center questioned the plan, arguing the jobs would be temporary, and the bed-tax dollars paying for most of the stadium would be better spent elsewhere.

Inside, City Manager Pete Hernandez began the proceedings informing commissioners of changes to the stadium agreement since last month’s meeting.

The Marlins would now contribute $500,000 a year to charity, with $125,000 going to city and county parks programs the first seven years.

More significantly, the team agreed to boost the share of profit Miami and Miami-Dade would split should Marlins owner Jeffrey Loria sell the club within nine years of groundbreaking.

The governments had previously agreed to a scale beginning at 18 percent that lowered each year. The new deal beefs that up to 70 percent the first year, 60 the second, down to 5 percent in year nine, Hernandez explained.

Chamber seats filled up and the line of 73 public speakers stretched out the door. Some were unemployed construction workers who spoke in favor of the stadium.

”I’m not here to ask for a bailout. I’m here to ask for a job,” said Carpenter’s Union Local 79 member Greg Mikenas.

Miami Worker’s Center organizer Hashim Benford countered: “It doesn’t serve the interest of the working people. I’m concerned once the stadium is built, those jobs are gone.”

Following three hours of public input, the commission took control.

Regalado, a stadium critic since the plan was announced more than a year ago, voiced concern over giving away city land, not getting enough public guarantees and the fact that county police — not city — would patrol inside the facility.

”Under this deal city of Miami police would only be able to go to the stadium to use the bathroom,” he said.

Sarnoff focused on the economy, worrying that the $634 million plan could balloon to $1.8 billion or more with interest payments. He also questioned whether the Marlins could meet their commitment to pay $155 million toward construction.

”You have no idea what the Marlins are worth, or aren’t worth,” he said of the team, which previously won a court order to keep its financial books private.

`OPPORTUNITY’

Sanchez, representing Little Havana, said a stadium would mean jobs and economic vitality for a portion of his district badly in need. He said the public money, most coming from tourist hotel taxes, can’t be used for police, fire or social services.

”I don’t look at this as being a Marlins stadium,” Sanchez said. “I look at it as an opportunity.”

Spence-Jones, who had already secured more than $100 million for her Overtown district in a separate vote this month, flexed her swing-vote muscle — speaking for an hour and calling teems of officials to the podium before voting yes.

”Leadership requires sometimes taking bold steps,” Spence-Jones said. “Really what I wanted to do was hear the voices from this room. And I’ve heard them loud and clear.”

The vote means Miami commissioners approved a plan for the county to pledge $297 million in tourist taxes, and another $50 million from a bond referendum, toward stadium construction. The Marlins would spend about $120 million toward construction, and repay the county a $35 million loan. Miami will build the $94 million parking garages.

After Thursday’s approval, applause was somewhat muted, in part because Commission Chair Sanchez often asks the audience to refrain. But mainly, because the decision took so long, supporter greeted the final verdict mostly with relief.

Miami commissioners had been set to vote Feb. 13, but Sarnoff stalled the process by demanding a string of concessions from the Marlins. Sanchez continued the meeting to Thursday.

Immediately after Thursday’s votes, Marlins owner Loria was mobbed by supporters and media.

”We’re making a major private contribution here,” he said, when asked about the major public contribution toward the stadium.

Loria refused to answer a question about whether he’d open the team’s books.

Instead, the owner looked ahead. Perhaps, to Opening Day 2012, when the Miami Marlins could take the field in Little Havana.

”As we look back years from now,” Loria offered, “we’ll realize how good this decision was.”
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Greed vs Incentives – Liberals Take a 2nd Look

Posted on March 20, 2009 by Jorge Costales

Fans of Alec Baldwin would not recognize him–even skinny non-elder ladies who strive mightily, but without success, to retell his 30 Rock jokes–in his latest role, supply-side economist. That’s right one of Hollywood’s most vocal liberals has seen the low-tax incentives light–from a WSJ Editorial:

The actor recently rebuked New York Governor David Paterson for threatening to try to help close the state’s $7 billion budget deficit by canceling a 35% tax credit for films shot in the Big Apple.

“I’m telling you right now,” Mr. Baldwin declared, “if these tax breaks are not reinstated into the budget, film production in this town is going to collapse, and television is going to collapse and it’s all going to go to California.”

This is a great example of the need to recognize the importance of incentives, instead of moralistic judgments [i.e. greed], when it comes to setting public policy, especially taxation. From a conservative point of view, by acknowledging that people’s actions are largely driven by responding rationally to incentives, we avoid being exposed as frauds when the issue hits closer to home. So while we agree with Mr. Baldwin’s current economic analysis, it reinforces the perception that liberals like him who advocate a greater role in for government in public life, do so never expecting to be affected themselves. He is not alone in his hypocrisy.

Liberal nonprofit organizations are now also invoking the I-word. Again from an earlier WSJ Editorial:

… one of Obama’s ideas for funding public welfare is to reduce the tax benefit for private charity. His budget proposes to raise the top personal income tax rate to 39.6% in 2011 from 35%, and the 33% rate to 36% while reducing the tax benefit from itemized deductions for the top two brackets to 28% from 35% and 33%, respectively. The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.

From the Ivy League to the United Jewish Appeal, petitions and manifestos are in the works. The Independent Sector, otherwise eager to praise the Obama budget, worries the tax change “could be a disincentive to some donors.” According to the Center on Philanthropy at Indiana University, total itemized contributions from the highest income households would have dropped 4.8% — or $3.87 billion — in 2006 if the Obama policy had been in place. That year, Americans gave $186.6 billion to charity, more than 40% from those in the highest tax bracket. A back of the envelope calculation by the Tax Policy Center, a left-of-center think tank, estimates the Obama plan will reduce annual giving by 2%, or some $9 billion.

If the groups protesting are in favor of expanding the role of the Federal Government, did they think about how it would happen? My guess is no, they hoped or assumed there were enough greedy corporations, not in their communities of course, who would be the ones affected.

All articles referenced are copied in full at end of post.

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Tax Me If You Can

WSJ Editorial – MARCH 14, 2009

We’re constantly told that taxes don’t matter to business and investors, but listen to that noted supply-side economist, Alec Baldwin. The actor recently rebuked New York Governor David Paterson for threatening to try to help close the state’s $7 billion budget deficit by canceling a 35% tax credit for films shot in the Big Apple.

“I’m telling you right now,” Mr. Baldwin declared, “if these tax breaks are not reinstated into the budget, film production in this town is going to collapse, and television is going to collapse and it’s all going to go to California.” Well, well. Apparently taxes do matter, at least when it comes to filming “30 Rock” in Manhattan.

Believe it or not, Mr. Baldwin’s views are shared across the movie industry, which is pleading in state capitals across the country for most-favored-tax status. Hollywood productions are highly mobile and can film just about anywhere. So they have taken to shopping around the country — and the world — for the most lucrative tax avoidance deal.

According to the Motion Picture Association of America, nearly 40 states have corporate tax carve outs or generous cash rebates to lure movie studios to their states. In Michigan, producers negotiated a 40% tax credit on their production costs. A bipartisan bill introduced in the Texas legislature last week and supported by Governor Rick Perry would allocate $60 million into the Texas Film Incentive Program. Members of the Screen Actors Guild held a rally last week in front of the state capitol urging the tax breaks.

In some cases these state tax credits exceed a company’s tax liabilities, which means that Disney, Dreamworks and others can get a net cash subsidy from state taxpayers. “In many states, today, movie producers actually pay a negative tax,” says a Tax Foundation report on the subject.

The Hollywood studios are ruthless profit maximizers and are expert at playing state suitors against one another. In the midst of California’s recent $42 billion budget showdown, producers threatened to leave the state if the legislature didn’t offer more inducements. So lawmakers in Sacramento gave the industry a new $250 million deal to stay put.

The film “Annapolis,” about the Naval Academy, was supposed to be shot in Maryland, but producers negotiated a better offer in Pennsylvania shortly before filming was set to begin. So they packed the trucks and drove up the interstate to save $10 million on their taxes. A film based on the John Grisham novel, “The Runaway Jury,” is set in Mississippi but filmed in Louisiana thanks to tax incentives.

Of course, this is the same Hollywood film industry whose members fund causes and candidates that favor raising taxes on everyone else. The Motion Picture Production and Distribution industry last year gave $14 million in political contributions: 89% went to pro-tax Democrats. A few years ago, director Rob Reiner funded a successful California initiative to raise the state income tax rate to more than 10%. Unlike a film shoot, which can relocate on a moment’s notice, your average small businessman in Encino is stuck paying the highest tax rate in the country — at least until he gives up and moves to Reno.

We’ve got nothing against industries trying to reduce their tax liability. Shareholders expect nothing less. When we asked the Motion Picture Association to justify these tax breaks, a spokesman gladly pointed to studies showing that the industry is creating thousands of jobs and hundreds of millions of dollars of new investment in the likes of Michigan and New York. Fair enough. This is called “dynamic analysis.” The movie industry’s tax machinations are irrefutable evidence that low tax rates do affect business decisions.

As a general principle, however, states shouldn’t chase smoke stacks or film production crews with specific tax breaks. It makes much more sense for cities, states and the federal government to lower tax rates for everyone. New York City can survive without Alec Baldwin and “30 Rock,” but it can’t function without the thousands of small businesses that pay taxes without the benefit of lobbyists and loopholes.
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The Charity Revolt – Liberals oppose a tax hike on rich donors

WSJ Editorial – MARCH 10, 2009

Among those shocked by President Obama’s 2010 budget, the most surprising are the true-blue liberals who run most of America’s nonprofits, universities and charities. How dare he limit tax deductions for charitable giving! They’re afraid they’ll get fewer donations, but they should be more concerned that Mr. Obama’s policies will shove them aside in favor of the New Charity State.

What did these nonprofit liberals expect, anyway? Mr. Obama is proposing a vast expansion of the entitlement state, and he has to find some way to pay for it. So logically enough, one of his ideas for funding public welfare is to reduce the tax benefit for private charity. His budget proposes to raise the top personal income tax rate to 39.6% in 2011 from 35%, and the 33% rate to 36% while reducing the tax benefit from itemized deductions for the top two brackets to 28% from 35% and 33%, respectively. The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.

From the Ivy League to the United Jewish Appeal, petitions and manifestos are in the works. The Independent Sector, otherwise eager to praise the Obama budget, worries the tax change “could be a disincentive to some donors.” According to the Center on Philanthropy at Indiana University, total itemized contributions from the highest income households would have dropped 4.8% — or $3.87 billion — in 2006 if the Obama policy had been in place. That year, Americans gave $186.6 billion to charity, more than 40% from those in the highest tax bracket. A back of the envelope calculation by the Tax Policy Center, a left-of-center think tank, estimates the Obama plan will reduce annual giving by 2%, or some $9 billion.

In defense, White House budget chief Peter Orszag wrote on his blog: “If you’re a teacher making $50,000 a year and decide to donate $1,000 to the Red Cross or United Way, you enjoy a tax break of $150. If you are Warren Buffet or Bill Gates and you make that same donation, you get a $350 deduction — more than twice the break as the teacher.” This Administration wants to turn even philanthropy into a class issue.

Mr. Orszag revealed the real agenda at work when he pointed out that the money taken from the “rich” would be used to fund such Obama state-run charities as universal health care. The argument is that any potential declines in private gifts, whether to universities or foundations, will be balanced by increases in government grants paid with higher taxes — redistribution by another means. This is how Europe’s welfare state works: Taxes are so high that private citizens have come to believe it is only the state’s duty to support cultural institutions and public welfare. The ambit for private giving shrinks.

America has always operated on a different philosophy, going back to Tocqueville’s discovery of thousands of private associations that sustained communities without a commanding state. We doubt that a tax benefit is what drives most giving even today. The exception may be the confiscatory death tax that drives many of the superrich to form foundations to avoid the tax. But we suspect that without the death tax the wealthy would give even more of their income away.

Americans of all income levels have long given generously, notably in the 1980s as income tax rates fell and the economy boomed. Over the last five decades, American giving overall has hardly deviated from 2% of personal income, according to the Tax Foundation. In an ideal world, the U.S. would eliminate most tax deductions, including the one for charity, in return for a simpler, flatter tax that would help create more wealth to give away. With his many new income-limited tax credits and deduction phase-outs, however, Mr. Obama is sprinting in the opposite direction.

Meanwhile, the White House may have underestimated the power of the liberal nonprofit lobby. The charity deduction cut is the only one of the President’s many tax increases that Democrats on Capitol Hill have publicly criticized. Politics hath no fury like a rich liberal scorned.
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Cuba’s WBC loss in San Diego alters urban planning in Santiago de Cuba

Posted on March 19, 2009 by Jorge Costales

Japan knocked Cuba out of the World Baseball Classic yesterday in San Diego and its effects were felt as far away as Santiago de Cuba. A major infrastructure project, the first in the city since 1967–largely due to Soviet largess then–was dependent on the Cuban Baseball team staying in the Classic through the final round for funding.

Now it will have to be explained to the citizens of Santiago, that imperialist plots in the planning for more than twenty years — involving the CIA and unnaturally athletic Japanese families, including, but limited to, the notorious Matsuzaka, Ichiro and Iwakuma tribes — have unfortunately borne fruit. Another special period of sacrifice will be needed to overcome this setback. Ironically, a park with a baseball diamond was part of the plans.

Tangled non-Spalding Web

A Cuban baseball official dreams of defecting. But not for the typical reasons his former players always cite–family, freedom and hunger–no his reasons are largely professional. He sees his counterparts and his face turns a Cuban uniform red [that’s another thing, why couldn’t the revolution’s color have been a nice teal] with envy. See all those other baseball guys get to evaluate talent alone. In his case, he has to factor in the relative defection potential [it’s always there to a degree, the kid would have to be an idiot not to consider it]. You know how hard it is for a guy in his 50’s to figure out what young men are thinking? Figure out how desperate and unhappy his family is? Impossible, even for a ‘New Man.’

So for a number of years, he just kept everyone who appeared to want to be on the National team which gets to travel outside the country, off the team. But players caught on to that. So then he only kept players on the team who appeared to want to be on the team, thinking he was one step ahead of the con. But that proved to be a disaster when the players actually did defect. Just you try and explain that you didn’t think he would defect because he appeared anxious to get out of the country. God, he would never forget the recent Viciedo interrogation, they made him feel like a real chump. The moronic State official even lecturing him on baseball strategy.

He struggled to fall asleep last night. He was like most Cuban middle-aged men, resigned to their fate, but yet hoping that some nameless, impetuous younger man would act and pull them all out of this nightmare. Not tonight ‘viejo,’ not tonight. He was thinking politics, not baseball, now. Not his strong suit and never a good recipe for falling asleep. This would be a very long night indeed. To make it even worse, the first stanza of that stupid Yeats poem kept running through his head:

I know that I shall meet my fate
Somewhere among the clouds above;
Those that I fight I do not hate,
Those that I guard I do not love;

William Butler Yeats poem, ‘An Irish Airman Foresees His Death,’ is copied in full at end of post.

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An Irish Airman Foresees His Death by William Butler Yeats:

I know that I shall meet my fate
Somewhere among the clouds above;
Those that I fight I do not hate,
Those that I guard I do not love;

My country is Kiltartan Cross,

My countrymen Kiltartan’s poor,

No likely end could bring them loss

Or leave them happier than before.

Nor law, nor duty bade me fight,

Nor public men, nor cheering crowds,

A lonely impulse of delight

Drove to this tumult in the clouds;

I balanced all, brought all to mind,

The years to come seemed waste of breath,

A waste of breath the years behind

In balance with this life, this death.
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The Fine Print on the War on Terror

Posted on March 18, 2009 by Jorge Costales

If the Obama administration’s war on terror were a radio commercial, the first 10 seconds would criticize former President Bush and the next 15 seconds would be delivered in that super fast-talking disclaimer style. The unintelligible remarks would note that the Bush administration policy was largely preserved in the following areas:

  • Interrogation
  • Surveillance
  • Rendition
  • State secrets

There is a big change however, when it comes to detention. Under the Bush administration detained persons were referred to as an:

  • Enemy combatant

But those were the dark days [juxtaposition imagery pun intended]. With the new [Red Dawn?] dawn, comes new terms. From henceforth [insert drum roll], all generations gathered before thee shall call them one of the following:

  • Members of enemy forces, or
  • Individuals captured in connection with armed conflicts and counter-terrorism operations, or
  • Persons who [the President] determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, and persons who harbored those responsible for the September 11 attacks

Boy this Obama fella ain’t messing around.

At a time when 99% of us only see the headlines [‘Obama announces change!’], the value of the WSJ editorial page is great. Here is their summary of all this hype:

President Obama’s lather-rinse-repeat approach to the legal war on terror is familiar: He lambastes his predecessor, then makes cosmetic changes that leave the substance of Bush policy intact. But Mr. Obama’s decision last week to renounce the term “enemy combatant” is almost a parody of this method, given that the “new standard” for detaining terrorists is identical to the old one.

Article referenced is copied in full at end of post.

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Prisoners of W– / WSJ Editorial

MARCH 18, 2009

By now, President Obama’s lather-rinse-repeat approach to the legal war on terror is familiar: He lambastes his predecessor, then makes cosmetic changes that leave the substance of Bush policy intact. But Mr. Obama’s decision last week to renounce the term “enemy combatant” is almost a parody of this method, given that the “new standard” for detaining terrorists is identical to the old one.

Strunk & White counseled simplicity in prose, so whoever wrote the Justice Department’s filing with the D.C. District Court learned his elements of style elsewhere. To avoid using enemy combatants, we instead get “individuals captured in connection with armed conflicts and counterterrorism operations,” or “members of enemy forces,” or “persons who [the President] determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, and persons who harbored those responsible for the September 11 attacks.”

These gyrations are bizarre because the brief is actually a solid legal argument for detaining e—- c———. Justice argues that the U.S. has the right to hold indefinitely, without legal charges, those who “substantially supported” al Qaeda or the Taliban, reserving the right to define what qualifies as “substantial” in each case. It also extends its writ to people who support terror networks away from the battlefield, such as financiers.

The concept of the unlawful enemy combatant is deeply rooted in international law and custom, including the Geneva Conventions. It refers to those who violate the laws of war by killing civilians or fighting out of uniform, and thus are not entitled to prisoner-of-war status. The Justice brief cites the Supreme Court’s 2004 Hamdi decision, in which a plurality of Justices held that capture and detention is “so fundamental and accepted an incident to war” as to be an afterthought.

The one difference between the Bush and Obama detention standards concerns core executive powers. The Obama team argues that its authority flows from the Authorization for the Use of Military Force Act, which Congress passed after 9/11 and authorizes the President to use “all necessary and appropriate force” to prosecute “nations, organizations, or persons” associated with the attack. Here, again, there is less than meets the eye. Bush lawyers also cited this act of Congress, but in addition they asserted inherent war power under the Constitution.

Eric Holder’s Justice Department does not assert Commander in Chief prerogatives, but it doesn’t disavow them either. Justice knows it doesn’t need the argument given Hamdi and that it appeases the anti-antiterror left not to echo every Bush claim. The risk is that Mr. Obama could one day face a more isolationist GOP Congress, run by a Tom DeLay or a Senator William Borah that is unwilling to endorse the President’s national-security policies. Then Justice will not be able to cite its own precedents as the courts intrude on executive war powers.

We’re delighted that Mr. Obama has come around on one of the most rancorous controversies of the last eight years. Even so, Mr. Obama’s supporters must be suffering some kind of post-traumatic stress disorder, because on the range of Bush antiterror policies that Mr. Obama has largely preserved — interrogation, surveillance, rendition, state secrets, now detention — no one seems to be vilifying him with the same intensity. Or maybe the problem with President Bush’s policies was that they were President Bush’s policies.
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