Ron Paul and Barack Obama on Earmarks

Earmarks have come to be recognized as the epitome of government waste in Washington. This has been a growing phenomenon over the last several years, but reached new heights on the campaign trail over the last two years. Both John McCain (R-AZ) and Barack Obama criticized earmarks while running for President.

I used the web archives to grab quotes from the pages of both McCain and Obama while they were seeking the Presidency. McCain's site had the following:

As president, John McCain will work to ensure that money spent by Congress, and contributed by hardworking American taxpayers, is used wisely and prudently on legitimate national priorities, not squandered on wasteful pet projects and special interest earmarks...

Year after year, powerful members of Congress divert taxpayer dollars to special interest pet projects with little or no national value...

Every dollar irresponsibly spent by Congress is a dollar diverted from pressing national priorities including lowering the tax burden on working Americans, supporting the men and women fighting the war on terror, making good on the nation's financial commitments at home, including to senior citizens, and paying down the national debt.

And Barack Obama said this:

Obama introduced and passed bipartisan legislation that would require more disclosure and transparency for special-interest earmarks. Obama believes that spending that cannot withstand public scrutiny cannot be justified. Obama will slash earmarks to no greater than year 2001 levels and ensure all spending decisions are open to the public.

Obama also joined McCain and other Senators to explicitly call for a one year moratorium on earmarks early last year in an amendment to the Budget resolution for FY2009. This amendment, sponsored by Jim DeMint (R-SC), failed to pass on a vote of 29-71. Obama was one of only five Democrats to support the amendment. The other Democrats who joined him were Clinton (D-NY), McCaskill (D-MO), Feingold (D-WI), and Bayh (D-IN).

As has been noted in the news this past week, Obama has signed the latest Omnibus Appropriations Act which featured 8,814 earmarks according to the group Taxpayers for Common Sense. Obama made the following statements this week upon his signing of the legislation:

Now, let me be clear: Done right, earmarks have given legislators the opportunity to direct federal money to worthy projects that benefit people in their districts, and that's why I've opposed their outright elimination...

But the fact is that on occasion, earmarks have been used as a vehicle for waste, and fraud, and abuse...

I recognize that Congress has the power of the purse. As a former senator, I believe that individual members of Congress understand their districts best. And they should have the ability to respond to the needs of their communities.

And this brings me to Ron Paul (R-TX)...

According to the Taxpayers for Common Sense, Paul has eleven "solo earmarks" totaling nearly $15M and thirty-three "solo and with other members" totaling nearly $64M. In fact, Paul is one of the biggest "offenders" when it comes to earmarks in this bill. (Only 57 of 451 members and former members of the House have zero earmarks.) So, how does Paul, one of the most outspoken fiscal conservatives in Washington, defend this? Well, Paul spoke on the House floor to address this issue (full text available linking here and here). Here are some highlights:

It's very popular today to condemn earmarks... even if you voted against all the earmarks... you don't save any money... that money then goes to the executive branch... [Congress is] supposed to tell the people how we are spending the money... Earmarks really allow transparency, and we know exactly where the money is being spent... what we need are more earmarks.

Paul goes on in his speech to discuss the lack of transparency in the creation and spending of money by the Fed. He raises some interesting and fundamental issues. The Constitution grants Congress the power to tax and spend. While Paul clearly has issue with the scope of spending by the Federal government both in terms of volume and purpose, he is looking to the Constitution to support his earmarks. But, it is also interesting to note that Paul voted against the Omnibus Appropriations Act along with all but sixteen Republicans - including some of the other most prolific GOP earmarkers. The full list of earmarks can be found for download here.

Does this make Ron Paul a hypocrite? It's hard to say. His arguments for earmarks do not contain contradictions, nor does his general stance on spending. It is not at all uncommon for members of Congress who oppose legislation to insert provisions or propose amendments to make the legislation "less bad" in their view. It seems like a bit of a dirty trick in some ways, but that's part of the game.

I Sure Hope PM Brown Likes Movies

While watching Glenn Beck on Monday, I learned an interesting news tidbit that I really haven't heard too much about elsewhere or since. British Prime Minister Gordon Brown visited Washington last week--his first visit (also the first of any world leader) to the White House since Obama took office. Since Theodore Roosevelt and Lord Salisbury crafted the Hay-Pauncefote Treaty in 1901, the U.S. and Great Britain are said to share in a "special relationship" that has typically been "on display" when the leader of one nation visits the other...it seems like it has developed into a rather ritualistic affair, of course most diplomatic visits probably are.

The treatment of PM Brown by Obama has already been widely criticized in the British media for its "coolness"--he broke tradition by not posing for a photo in front of the U.S. and UK flags with Brown; the customary press conference on the White House lawn was cancelled and replaced with a small affair; Obama did not invite Brown to Camp David, etc. While I can certainly understand how there might be some hurt feelings if these things are true since, whether one likes it or not, "ceremony" is important. What I found most interesting, however, were the reports of the traditional "exchange of gifts" between the Obamas and the Browns. I suppose it makes perfect sense that there would be such an exchange, not only between the U.S. and the UK, but also during any such visit. The selection of a gift is important, even more so I imagine if you are the leader of a country. Choosing the "wrong" gift could anger or embarrass the givee and reflects poorly on the giver. Now, as one would imagine, the types of gifts traditionally given in such exchanges are often rather grand and meaningful, showing that the giver took time and care to select them.

So...what gifts were exchanged between Obama and Brown during this visit? Here is what was given to the Obamas:

**An ornamental pen holder made of the timbers of the Victorian anti-slave ship HMS Gannet (an aside--there is a desk in the Oval Office made of wood from the Gannet's sister ship, HMS Resolute, that has been there since 1880)

**A framed commission of the above-mentioned HMS Resolute

**A first edition of the seven-volume biography of Winston Churchill by Sir Martin Gilbert

**The Obama children, Sasha and Malia, were each given an outfit from a fashionable British store called TopShop and a collection of six British children's books which have not yet been published in the U.S.

Whoever it was that actually chose/purchased these gifts, it is clear that care and thought was put into them...they were most certainly intended to be "special" to the recipients. Well then, one can only imagine then what sorts of gifts Obama chose to give (although, I admit it would be hard to beat the fur-lined leather bomber jacket that George W. Bush gave to Brown, who apparently subsequently refused it), right?

Well, not exactly...Obama chose to give Prime Minister Brown a box set of 25 "classic" American DVDs. Yup...that's right...granted, Obama reportedly specially commissioned the American Film Institute to produce this box set but c'mon...this is like the lame cop-out gift that you buy for your uncle because you can't figure out what else to get him. It would perhaps make a bit more sense if Brown was known as being a film buff, but he's not. Here's what was included in the set, since I'm sure you'll be curious:

Citizen Kane, The Godfather, Casablanca, Raging Bull, Singin' in the Rain, Gone With the Wind, Lawrence of Arabia, Schindler's List, Vertigo, The Wizard of Oz, City Lights, The Searchers, Star Wars: Episode IV, Psycho, 2001: A Space Odyssey, Sunset Boulevard, The Graduate, The General, On the Waterfront, It's a Wonderful Life, Chinatown, Some Like It Hot, The Grapes of Wrath, ET: The Extra-Terrestrial and To Kill a Mockingbird.

To make matters worse, the gift the Obamas presented to the Browns for their children (they have 2 sons--John and Fraser)--2 plastic models of the presidential helicopter, Marine One, from the White House gift shop. Seriously??!! I don't know about you, but I find this terribly embarrassing. You may think that the whole idea of "ritualistic" gift-giving is stupid or superficial, but I think part of good diplomacy is making a good first impression and nurturing a good personal relationship. I don't think that Obama got off to a good start with this one; if he didn't pick the stuff out, he seemed to think it was ok enough to give anyway. So, either he's the dunce or his staff is...neither is particularly good. I mean, at least they could have given Blu-Rays!

Just for fun--here's the jacket from W (photo from the UK Telegraph)

Loose Ends... Vol. XXXIII

A few weeks ago, city-county councilor Ed Coleman (of Indianapolis/Marion County) left the Republican Party to formally join the Libertarian Party. Coleman is now one of the highest ranking Libertarians in public office in the entire country. Some people may feel that this defection is not a good thing. I think it is debatable. Do our elected officials represent us as a member of a party? Or do they represent us as individuals? It is an interesting question. The leadership of the city-county council have decided that party is more important. Coleman has now been stripped of his committee assignments as punishment for his defection.

*****

The stock market continues to fall and fall quickly. We are quickly approaching my previously predicted range of 600-640 on the S&P 500. It is not happening in the way in which I thought it would happen. At these prices, Obama has decided that it's time for the market to stop sliding:

On the other hand, what you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it. I think that consumer confidence -- as they see the American Recovery and Reinvestment Act taking root, businesses are starting to see opportunities for investment and potential hiring, we are going to start creating jobs again.

Obama should have brushed up on his Wall Street terminology before spouting off... he meant to say "price to earnings ratio" - I'm sure that helped with investor confidence.

*****

In the midst of TARPs and bailouts, stimulus packages and housing plans, the matter of "normal spending" has not been in the news. Well, this week the Omnibus Appropriations Act of 2009 was the matter of debate in the Senate. The bill passed the House on February 25th, but it has stalled in the Senate - largely over pork. Senator Evan Bayh (D-IN) wrote an op-ed piece in the Wall Street Journal this week urging the Senate and/or Obama to reject the bill. We should see a vote this week.

Potpourri

Every once in a while on Jeopardy!, they will have a category of questions on miscellaneous topics and I believe the category is usually called "Potpourri." This was the "inspiration" for the title of this post, as there have been a number of things I've been wanting to write about for the past week or so but haven't had time (it's hard working and taking care of a toddler when your husband's out of town). I was reminded of this when I opened my notebook earlier this morning and happened to shuffle past the page containing my hastily scribbled list of things I wanted to write about..this is a running list I've been keeping so that I don't forget something that happens to strike me (for some odd reason, this usually happens while I'm driving). If I'm being realistic with myself, there's no way now that I'll be able to devote an entire post to each of these topics so instead, I'm just going to mention them briefly and let you all follow up or comment as you are so inspired.

#1 -- Last Tuesday (February 24th), NASA launched their Orbiting Carbon Observatory (OCO) from Vandenberg Air Force Base in California. The satellite was supposed to orbit 438 miles above the Earth and take detailed measurements of the levels of carbon dioxide in the atmosphere. Unfortunately, only 3 minutes after the satellite launched, NASA scientists noticed that the Taurus XL rocket that was supposed to carry the satellite into space has failed to shed a protective component that should have separated after the rocket reached space. The failure of this piece to disengage itself from the rocket made it unable to make orbit, as the extra weight did not allow for the satellite to reach the speed it needed. As a result, the satellite crashed into the ocean near Antarctica about 5 minutes after its launch. Ok, so what, right? The cost of this crashed satellite was $273.4 million dollars!!! Yep, several years of work and research, along with $270 million dollars spent (courtesy of U.S. taxpayers), all for nothing. It's the same as if they just took that money, put it in a big pile and lit it on fire. I can think of a million better ways that money could have been spent. And now, NASA has formed a board for investigating what went wrong with the satellite which will doubtless waste more money and probably eventually lead to recommendations for building another satellite.

#2 -- This Tuesday (March 3rd), Peter Orszag, the Director of the Office of Management and Budget (OMB), gave the Fiscal Year 2010 Budget Overview to the House Budget Committee. There was nothing terribly shocking in Orszag's presentation on the budget--spend, spend, spend being the main theme. What I thought was worth mentioning though was hearing uber-nerd Orszag sound rather ridiculous by using a country music quote toward the end of his opening statement. From what I've read, apparently he is a country music fan but still, he sounded really silly. Here he quoted country singer Toby Keith in saying "there ain't no right way to do the wrong thing." The link to the full presentation from C-SPAN is below, this particular quote is at 18:16.

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=284394-1&showVid=true

I first heard this quote on the radio and the next day, again on the radio, heard Orszag discussing the same budget before the House Ways & Means Committee where he quoted another country duo, Montgomery Gentry, saying "This ain't about easy -- it's about tough." Unfortunately, I haven't been able to find a video of this particular hearing.

#3 -- Quite a few weeks ago (as I'm looking it up now, I see that it was on February 10th) I was watching C-SPAN fairly late at night (embarrassingly, this is not uncommon for me) and happened to catch 60 minutes of "Special Order" floor speech time controlled by the Progressive Caucus in the House. Being that this was supposedly live at 11pm, it was basically just Rep. Keith Ellison (D-MN) and Rep. Lynn Woolsey (D-CA) talking back and forth to each other in an empty room. They were talking about H.R. 1, the American Recovery and Reinvestment Bill of 2009, and how they were "concerned" about the cuts the Senate had made from the House version of the bill. Below is an excerpt from Rep. Ellison that came toward the middle of the 60 minutes; it caught my attention at the time and I will quote it here without comment, as I'd really like to get some thoughts from all of you out there reading this first.

"Reclaiming my time, you know, the Federal Government has been there for so many of us, even those of us who are under the mad delusion that we did it all ourselves. You know, you may be a big successful businessperson, but you get out of the bed in the morning knowing that if somehow you had a medical problem, 911, you could call them, and the EMS truck -- that's the government -- would come take care of you and take you to the hospital.

If you do manage to get all banged up and clean, the water coming out of the shower, somebody's inspected it to make sure that it wasn't going to poison you.

You get in your car and you get out on the road, that's the government, too, buddy, making sure that you have a decent road to go on.

And then because people aren't driving a gazillion miles an hour driving crazy, there's a cop out there making sure that people obey traffic rules. That's the government as well.

And there is a light that's properly regulating the traffic flow, the government. And then you drive to work and you see your employees, and you know what, they were educated in public school, the government again.

And after all of that help you turn around and said I did it all myself, and I don't want to pay these taxes because they're reaching in my back pocket, wait a minute; we've been helping you every single step of the way. Maybe the invention that you sell was on a government research grant.

So many opportunities are afforded us because we come together, because we are a society that operates for the common good, and yet, we have some people who only want to say that it's all me, I did everything, it's just me, I don't want to pay any taxes, I don't want to help anybody out, I don't care about any poor people. I don't care if a husband had a mental health issue, couldn't maintain his livelihood; she ends up having to turn to a welfare system which really is a caring society. I don't care about them. I don't care about those three kids. I don't care about those homeless people.

That kind of psychology is why we exist to try to tell people that we're better off together than we are apart. We're not trying to stop you from being able to do your own thing, but don't forget about the rest of us as you do your own thing."

#4 - Finally (this is obviously much belated), on Inauguration Day I was prompted by strange comment made by Sam Donaldson involving the fence around the White House grounds and something about "Calvin Coolidge's goat" grazing on the White House lawn to read a bit more about President Coolidge. Suffice to say, I read enough that I became interested enough to want to do deeper research on Coolidge and his administration and would like to devote a post to this topic sometime in the future. I wanted to mention though, since I find it quite fascinating and entertaining, that I also learned that President Coolidge and his wife, Grace, were great lovers of animals and kept quite an array of "pets" both in the White House and before. This included several cats, 10+ dogs, several birds (including a mockingbird and a troupial--a tropical bird from South America), rabbits, a bear, a pair of lions (which they named Tax Reduction and Budget Bureau), a small hippo, a wallaby, a duiker, 13 Pekin ducks, a pair of rock bass (sent to them as a gift intended to be eaten; instead, the Coolidges kept them for a while in their bathtub in the White House), and a raccoon named Rebecca who apparently enjoyed playing in the water in the bathtub with a cake of soap. Apparently, the Coolidges ended up giving some of the animals to the Rock Creek Zoo (now the National Zoo) in hopes they would have a better environment. Anyway, here's a link to a story written by historian David Pietrusza about the Coolidges and their pets that's quite interesting...something you don't hear about in history books.

I Agree With Krugman

Shudder to think.

Yes, I just read a recent op-ed from Krugman - available here. I have to say, for the most part, I agree with him completely in this article. The Obama administration, in concert with the Federal Reserve, continue to "dither" along - avoiding the "bold action" which has been promised.

At this point, whether we like it or not, we must realize that ad hoc injections of taxpayer dollars will not fix the banking system and do not qualify as bold action. Despite Ben Bernanke's claims, we have a system of "zombie" banks. These banks are dead (bankrupt) and are being fed brains (taxpayer dollars) by the Fed and Treasury. And speaking of the Treasury, Tim Geither's claims that the "toxic" assets are undervalued is simply not a plausible explanation. Sure, some of the assets are undervalued, some are overvalued. But, it is nearly impossible to determine the value of these assets with the corporate lies, government guarantees, and lack of clarity which distorts market action.

The only bold actions which will help us at this point are ones which allow the market to cleanse itself. That means significant pain (we're going there anyways) by letting the banks go bankrupt. We need to put a bullet through the head of each zombie.

I'll leave you with Krugman's words:

[O]fficials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.

But this refusal to face the facts means, in practice, an absence of action. And I share the president’s fears: inaction could result in an economy that sputters along, not for months or years, but for a decade or more.

Let's kill the zombies.

Loose Ends... Vol. XXXII

Another Sunday night... another round of Loose Ends where I wish I hand more time. I have a lot of other reading to catch up on, so I'm going to try to keep this brief.

I encourage all readers to spend more time on whitehouse.gov - the Obama team does a very good job of keeping the country informed of what is going on in the White House. Sure, the information is a little biased. But, it's still pretty good. A lot came out of the Executive Branch this week:

Troop withdrawal plan for Iraq
First release of the FY2010 budget
Vice President Biden kicked-off the Middle Class Task Force
Treasury owns 36% of Citigroup common stock
Former Washington Governor Gary Locke nominated to be Commerce Secretary

Clearly, there was a lot more going on too. Just visit the official site to stay on top of things. I'm happy to offer my opinion (backed with unbiased facts where applicable) for any item you see... just drop me a line.

*****

On the state front, members of the Indiana State Senate have submitted a resolution to re-assert the Tenth Amendment of the U.S. Constitution. This is a great step forward - I hope it is passed. Indiana is now on the growing list of states who have legislation introduced to assert their sovereignty in some shape or form.

Rebuttal to Colander, Hass, Juselius, Lux, Follmer, Goldberg, Kirman, and Sloth

I was catching up on the blogs that I follow and came across a link to a research paper on naked capitalism. The paper is entitled "The Financial Crisis and the Systemic Failure of Academic Economics" and is co-authored by all those listed in the long title to this post.

First off, I have to agree with the fact that most all models used in practice to assess risk, hedge portfolios, and understand the economy are dangerous. They are dangerous in the sense that the models are built on assumptions which may hold true most of the time, but fail to be true all of the time. In fact, this has been a contributing factor to some of the systemic risk which has crippled the financial and economic system.

However, I can't agree with a statement like this:

In our view, economists, as with all scientists, have an ethical responsibility to communicate the limitations of their models and the potential misuses of their research. Currently, there is no ethical code for profession economic scientists. There should be one. [emphasis theirs]

This is a very arrogant statement. I think it is a stretch to refer to economists as scientists - especially macroeconomists. I'll concede that in a strict sense of the definition, economists are scientists. But, the public view of "scientist", especially when it comes to those using numbers, allows for a gross overstatement in the applicability of economic science. Regardless, I cannot agree with any statement which implies that there is some sort of higher moral and ethical standard which individuals should have to apply to their trade. If you don't agree with that statement, then ask yourself who decides what is moral and ethical?

The article also states other research:

The most recent literature provides us with examples of blindness against the upcoming storm that seem odd in retrospect. For example, in their analysis of the risk management implications of CDOs, Krahnen (2005) and Krahnen and Wilde (2006) mention the possibility of an increase of 'systemic risk.' But, they conclude that this aspect should not be the concern of the banks engaged in the CDO market, because it is the governments' responsibility to provide costless insurance against a system-wide crash.

Bingo! Banks very well may have recognized the systemic risk that was running through the system due to exotic derivatives such as CDOs (collateralized debt obligations - packaged debt products which shifted risk from lenders to investors). But, as is clearly stated, banks felt they could engage in these risky products because they perceived that the government would insure massive losses. Hmm... looks like perception has become reality. The authors ignore this basic reality in the rest of the paper and instead argue that economic and financial models are to blame for the crisis. It appears to me that if banks and investors did not have an implicit or explicit guarantee against massive risks, they would have behaved differently.

Finally, the authors state the following in their conclusion:

The current crisis might be characterized as an example of the final stage of a well-known boom-and-bust pattern that has been repeated so many time in the course of economic history... Research on the origins of instabilities, overinvestment and subsequent slumps has been considered as an exotic side track from the academic research agenda... because it was incompatible with the premise of the rational representative agent.

The Austrian School of economics offers a simple explanation of the boom-and-bust cycle which the authors feel is either elusive or not well understood. The Austrian School points directly to the statements I have noted above and briefly mentioned by the authors. Government intervention via interest rate manipulation, control of the money supply, explicit subsidies and implicit guarantees drives malinvestment - including, as the authors state, "overinvestment". It is difficult to infer if this paper is providing a small tip-of-the-hat to the Austrian School or is feigning willful ignorance of their free-market explanations. Given that no Austrian economist is mentioned in the paper, the authors' call for more regulation, and their views against the principles of rational actors, I would have to surmise that the authors simply seek to ignore the Austrian School and implore mainstream economic academics to do the same in a search for an alternate, government-friendly, explanation.