Blunt Ax Economics

Many observers would like to dismiss the referendum to appear as Question 1 on the November Massachusetts ballot, as crazy talk. Among the choices facing the voters Question 1 will be an up or down vote on eliminating the state income tax. In round numbers, income tax revenues for fiscal 2009 are expected to provide $12.5 billion against total budgeted expenditures of $28 billion. It doesn't take a fiscal analyst to envision the disruption that such a change would cause. Out-of-state readers must be scratching their heads to learn that Question No.1 is garnering increasing support. Writing in today's GLOBE, house conservative, Jeff Jacoby does an excellent job of tracing the ongoing frustration endured by Massachusetts voters seeking lower taxes. Not only has the state government ignored previous voter initiatives to lower taxes, but the rate of growth in the state budget continues unabated:

"Just last week, Governor Deval Patrick's office promised "hundreds of millions of dollars" in reduced outlays this fiscal year. And yet, somehow, the state budget continues to bloat: It was $22 billion in 2005, $23 billion in 2006, $25 billion in 2007, and $26 billion in 2008. The fiscal 2009 budget adopted in July - the one Patrick now claims he will cut unilaterally - totaled $28.2 billion. But if anything in Massachusetts is certain, it is that when the books close on the current fiscal year, state spending will have gone up by hundreds of millions of dollars, not down."


The Greek chorus of Politicians, public employees and others with a stake in the continued flow of income tax dollars have been sounding the alarm, citing the litany of crucial services that would fall victim to the passage of Question 1. Rather than reflecting taxpayer ignorance, however, the growing support for Question 1 may show the limits of taxpayer patience.

The Rock Unveiled

Just in time for the busy winter tourist season, the Massachusetts Department of Conservation and Recreation announced the completion of the renovations to the portico covering one of America's most enduring landmarks, Plymouth Rock. All summer, glimpses of the Rock have been available only through a cloudy Plexiglas window as the almost ninety-year-old portico has been shrouded with scaffolding. The project missed its July 4th completion date apparently due to the lack of availability of authentic ceiling tiles. To everyone's relief, the tiles have been acquired and installed and the $500 thousand project is now completed.

As many as a million tourists a year visit Pilgrim Memorial State Park to see the historic piece of stone commemorating the point at which the first settlers of the New World, aka, the Pilgrims, in 1620 stepped on what would become American soil. To gaze upon the Rock as the simple beginnings of our great country is clearly a thought-provoking and inspiring experience. Now, thanks to the re-hab, the experience won't be interrupted by falling ceiling tiles.

In honor of the event, the View is adding a new photo to its masthead showing, what else, the view from Plymouth Rock.

The Massachusetts Bailout

While our attention has been riveted on the Congress and its struggles with the enormous proposed bailout for the nation's financial markets, the federal Department of Health and Human Services has quietly approved a three-year renewal of a Medicaid waiver for the Massachusetts health care program. Remarkably, amid intense concern for the impact that massive amount of bailout funds would have on the federal government's budget, the three-year renewal also included a $4.3 billion increase over the next three years!

The Massachusetts program essentially follows a dual track to achieve the goal of universal coverage: Most employers are mandated to provide health insurance for their employees or face stiff penalties; while, individuals must buy health insurance on the market, unless they qualify for subsidized coverage from the state. To date, roughly two-thirds of the 650,000 formerly uninsured have secured coverage. While the View is not a big proponent of this program, we will acknowledge that the coverage is provided primarily by private insurance companies, which, at least, prevents the birth of a whole new bureaucracy. Unfortunately, that is about the limit of the good news.

Governor Patrick speaks of "our commitment to affordable, accessible, high-quality health care for every man, woman and child in the commonwealth." A very noble pronouncement, but what is missing is any reference to the growing costs of the program. If any of you have had to purchase individual health insurance, you are well aware of the cost of these programs, driven by the high cost of our health care system.

The state's way of dealing with this expense is to provide free, or subsidized coverage through its Commonwealth Care program. One of the issues during the renewal negotiations was the fact that Commonwealth care provides subsidized coverage for people making up to three times the poverty level, while the federal limit is two times. This means for example, that a family of four making less than $63,500 per year qualify for subsidized coverage. No wonder people are rushing to enroll. Well over half of the new enrollees have signed up for free or subsidized coverage.

It's not clear at this point how the federal government justifies this this renewal, especially without getting a reduction to the income eligibility threshold. Maybe the folks at Health and Human Services have been too busy to tune into C-Span and its coverage of all the dire predictions for financial ruin. Oh and by the way, many commentators have pointed out that provisions of the Massachusetts health plan bears a strong resemblance to that being proposed by Barack Obama for the whole country.

The Bailout and ACORN

There is at least one fact that all the various warring parties of the current financial crisis can agree upon. We have big problems and we haven't got a lot of time to fix them. Watching the legislators parading in front of the TV cameras the last few days makes it seem as though we have all the time in the world to play the blame game and point fingers.

The easy answer, and the one that the Democrats want us to believe is that it's those out-of-control (read non-regulated) Wall Street cowboys who have caused all the problems. But while Wall Street may well have more than its share of greed and excess, it is generally pretty good at assessing risk and making risk/reward decisions. It's hard to get rich lending money to borrowers who aren't going to pay it back.

Writing in this morning's Globe, JEFF JACOBY does an excellent job of succinctly connecting the dots of the mortgage crisis. He describes how the roots of the problem go back to the bleak days of the Carter administration when concerns over the practice of "red-lining" lead to the passage of The Community Reinvestment Act that forced lenders to loosen their standards which started the long slide into the sub-prime mess. This was encouraged by Fannie Mae and Freddie Mac who purchased much of this low quality paper. One of the biggest cheerleaders for these two government-chartered institutions was Massachusetts' own (by way of Bayonne) Congressman Barney Frank, who badly wants to place the blame elsewhere. As Jacoby sums it up:

Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he'll find one suspect in the nearest mirror.


The juxtaposition of the ongoing Bailout negotiations and the first presidential debate on Friday night overlapped in a number of different ways besides the fact that John McCain had almost been a no-show due to his involvement in the negotiations. One of the main stumbling blocks in hammering out a bill has been the inclusion in both the House and Senate Democratic drafts, of a provision to funnel significant funds from the bailout plan to a pair of government slush funds used to transfer government money to advocacy groups such as ACORN. These provisions may or may not survive into the final version of the bill, but their inclusion, as explained in a WSJ EDITORIAL provides a look at the Democratic stealth efforts at funding this controversial organization with a radical left-wing agenda.

ACORN, The Association of Community Organizations for reform Now, uses community organizations to pursue its agenda for social change. Its tactics and strategies however often border, and sometimes cross the line, on the illegal, especially with respect to their efforts at registering Democratic voters as well as their partisan participation in election activities. Adding another link to this daisy chain of intrigue is the fact that Barack Obama has been actively involved with ACORN as well as a similar organization, the Chicago-based Gamaliel Foundation. While this aspect of Obama's background is generally known in conjunction with his experience as a "community organizer", which is generally seen as a marginal activity. But there are at least two aspects of this that need to be examined.

Writing in the September 1st issue of National Review, Stanley Kurtz looks closely at the goals of ACORN and Gamaliel to highlight their radical left objectives. These consist primarily of schemes for economic redistribution through the government rather than programs to better prepare low income people to better themselves. But the interesting point uncovered by Kurtz is the lengths to which these organizations go to disguise their intentions behind a facade of down-to-earth pragmatism. Kurtz concludes:

"Obama needs to detail the nature of his ties to both Gamaliel and ACORN, and should discuss the extent of his knowledge of Gamaliel's guiding ideology. Ultimately, we need to know if Obama is the post-ideological pragmatist he sometimes claims to be, or in fact, a stealth radical."

Supreme Courtship

With the U.S. Congress delaying the financial bail-out program until the politicians have achieved maximum hand-wringing and finger-pointing, perhaps it's time for a reprieve in the form of a cleverly funny new book. Supreme Courtship, by Christopher Buckley was released earlier this month, which implies its text was finalized long before the presidential candidates selected their running mates. This is key as one of the main characters sure sounds like a certain V.P. candidate. This similarity, along with a number of pertinent themes, will have readers wondering about the reflecting link between art and real life.

President Donald P. Vanderdamp is portrayed as man so bland as to make Al Gore look like a rock star. His plain vanilla persona even extends to his favorite hobby, bowling. What does set the President apart from other politicos is a commitment to actually do something about mushrooming public spending. The something involves a presidential veto for every spending bill that gets to his desk. As you might expect, this has his personal stock selling at a very low multiple on Capitol Hill. Although he plans to serve only one term, a plan well-supported by his approval ratings, there are ways in which the legislators can pay him back for his swift veto pen; namely the savaging of his nominees to fill a vacancy on the Supreme Court, the enthusiastic point man on this effort being the Chairman of the Senate Judiciary Committee, one Dexter Mitchell.

After having two eminently qualified nominees destroyed by Mitchell's committee, Vanderdamp decides to take a different tack. He nominates Judge Pepper Cartwright to the Supreme Court. Among the problems with this nomination is the fact that Ms Cartwright's most recent judicial experience consists of six seasons as the star of TV's Courtroom Six. Moreover, the fact that Pepper is certifiably hot adds a lot of spice to the story. She is described, by her slimy husband, who is also the producer of Courtroom Six, as, "... woman in her mid-thirties, tall, lush brown hair,...high cheekbones, and deep dimples. She wore glasses, which she kept putting on and taking off." Except for the fact that she is as Texas as the Alamo, she could easily be confused with a certain Governor of Alaska.

The fun really starts after she is appointed to the Supreme Court. Like any new appointee, she must learn the ropes, including the eccentricities of her fellow justices, which Buckley describes in living color. You might also want to dig out your Latin Cliff Notes. Amid some upheavals between her and her producer husband, who can usually be found plumbing the depths of depravity for potential reality show subjects, the court attempts to deal with the issues of the day, with Pepper, as the new kid, frequently providing the swing vote.

The book ends amid a great brouhaha of constitutional law, in which the Supreme Court must decide the results of the next subsequent presidential election which has been complicated by a proposed constitutional amendment. The ending is all the merrier as the election involves two old antagonists. It's not quite as dramatic as the score-settling scene in The Godfather, interspersed with a baptism in Latin, but there is a certain satisfaction to the resolution of the saga, one which supports Vanderdamp's nickname, Don Veto.

The Supreme Court? Deciding a presidential election? Who would believe this stuff? The View recommends Supreme Courtship with two thumbs up in spite of this far fetched plot.

Say it Ain't So, Joe

The jungle drums are alive, this week end, with speculation that the Democrats are about to pull a major switcheroo on their presidential ticket. Rumor has it that right after the VP debate, scheduled for October 2nd, Joe Biden is going to step down from the VP spot due to "health reasons" (his, not the tickets). And you will never guess who is poised to take his place. Give up? Hillary Clinton will rise once more from the political crypt.

This stuff of nightmares could easily be written off as the hallucinations of bored email junkies were it not for the fact that the sources on this are reasonably reliable and, within the context of the stumbling democratic ticket, it has a certain logic to it.

Obama clearly blew it when he named Joe Biden as his VP. For a candidate who is presenting himself as the agent of change, he trots out a tired old Capitol Hill re-tread who personifies business as usual. This gaff was made crystal clear when McCain picked Sarah Palin who has stolen the show for the Republicans. And while
we subscribe to the belief that the election is ultimately about the presidential candidates, adding Hillary to the Democratic ticket would give it a major infusion of excitement, at least among the fellow travellers on the left.

Ultimately, we would like to think that cooler heads will prevail and the issues (How 'bout Bill?) that kept Hillary off the ticket in the first place will arise once again. At the same time, if this whole thing gets sprung just a few weeks before the election, who knows?

What A Week

The Dow Jones Industrial Average finished the week down 33 points, but unless you spent the week hibernating in a cave, it was anything but a yawner. If you had told me a week ago that within seven days, Merrill Lynch would be sold, Lehman Brothers would declare bankruptcy and AIG would teeter on the edge of oblivion, I would have suggested a stint in rehab. Shows what I know. And these firms were merely the tip of the ice burg that(excuse the twisted metaphor) emerged as a near meltdown of the entire financial system. Enter the Feds with syringes full of government funds and the patient has stabilized, at least for the moment.

Seems like there was a time when a lot of us could stand aloof during financial crises and marvel as the financial pundits would scramble to explain the unexplainable. But when it starts to impact on our 401(K) accounts and IRA's, it gets real up close and personal in a hurry. And you still might be able to act as a bystander, as long as you, or a loved one, don't have a house to sell, or buy, or any other transaction that requires a mortgage. Of course, if it was your newly-unemployed daughter pictured carrying her possessions out of the Lehman Brothers building, it will be that much harder to be philosophical.

The current financial crisis has just about pushed the presidential election off the front page and relegated the campaigns to touting their prescriptions on page seven. Just as well. If the U.S. Treasury, the Federal Reserve and the SEC are making it up as they go along, Barack Obama's main contribution is ironically his call for hope; as in, I sure hope these guys figure this out. In all fairness, John McCain isn't able to offer a whole lot more, but he is our candidate, so he gets a pass.

Those Wall Street observers with longevity are quick to point out that this is far from the first financial crisis we have been through. Free markets are powerful engines of wealth creation, but they can be wild beasts at times. Market Corrections work with a brutal efficiency that belies their innocuous name. As we hopefully get to the beginning of the recovery phase, the chorus of cries is already rising for increased Regulation to stave off future downturns.

And so, stay tuned for the hand wringing during the inevitable congressional hearings, when financial wizards like Barney Frank will call down curses on Wall Street Greed. "Regulate the Bastards" will be the hue and cry. Let's just hope that they are smart enough to avoid executing the Goose that lays the golden eggs. Everyone hates Wall Street, except when it creates capital to finance companies providing jobs and opportunities. Everyone hates the stock market, except when it provides the returns to allow a comfortable retirement. Everyone hates hedge funds, except when they are cranking off high returns and then the hate is directed at fund managers are slow to accept new money from investors. Everyone hates big corporations, especially when they show eye-popping profits, except they like the taxes that they pay and the jobs and products that they provide.

We have ambivalence about free markets and rightfully so. When they work, we wallow in our good fortune, convinced it stems from our own shrewd abilities. But when corrections occur, and they always occur, we feel victimized by what is suddenly seen as the embodiment of the world's evil greed. The truth, of course, lies somewhere in the middle and on balance, it beats whatever socially-engineered scheme is in second place, by a lot.