Herman Cain improvises

Maybe this isn't fair. Candidates often haven't worked out their policy positions before they run for office. On the other hand, Cain was mostly retired, was doing political commentary, and then decided to run for president, only the highest office in the entire country. So, yes, it is fair to expect him to have his plan worked out a little better than it appeared this week.

Monday - He says there will be tax relief for poorer workers living or working in "empowerment zones."

Friday - He announces the 9-0-9 plan for workers at or below the poverty line, meaning that they don't pay the payroll tax. Change of plans, I guess. The benefits for business of empowerment zones, well that's still being worked on.  (By the way, this website hasn't caught up yet either.)

Here's what I think: Herman Cain latched onto someone's economic plan. It sounded good in the echo chamber, but not so good out in the real world that contains 1) poor workers 2) noisy liberals in the media that will point out the plan's effect on poor workers.

So Cain conferred with his economic adviser, trying to alter the plan for the real world after the tour bus is on the road. Between Monday and Friday somebody pointed out that poor workers may live somewhere outside of an "empowerment zone." Cain, as a former poor child, should have known this already. Actually, everyone in this country should know this.

Soon we'll hear about problems with the 9-0-9 plan. I've got two already:

1. How does the government know you're under the poverty line unless you file a tax return? 
2. If you're under the poverty line, you don't have any incentive to get slightly over the poverty line unless the income tax is phased in. So there be 9-1-9 plan, then 9-3-9 plan, etc?

Maybe this commentator is right--Herman Cain's 9-9-9 Plan Is Disintegrating In Front of Our Eyes.

Herman with his favorite focus group

Romney's economic plan - FAIL

It's time for me to accept that Romney may well be Republican nominee, despite the appearance that half the Repub base can't stand him. Since I live in Massachusetts, I've experienced Romney as a governor but I can barely remember it. That indicates that he wasn't a great governor or an awful one. That's the sum of my firsthand experience. For any other questions, I have to research just like anyone else. This comment from an Atlantic blog seconded my impression of him and prompted my flurry of Romney research:

"He's seeped himself in the republican orthodoxy with a wink wink and nod and a smile at the camera.  I think he can largely free himself from that come the general election." --Atlantic post

My impression of Romney as a campaigner: polished delivery, strong on the details, personable, moderate. I don't remember many policy proposals, but the entire field has been rather lean on policy (except 9-9-9), so that's par for the course. I had to look at the goods, so I skimmed Romney's 87-page economic plan.

The good news is that the plan is not a typical Republican conservative supply-side fairy tale. Of course there's Obama-bashing on every other page, but there's some promising stuff too. What I liked:

• Lower tax rate on cap gains, dividends, interest, but importantly, only for tax payers under $200,000.
• Cut corporate rate to 25% and end rules that discourage repatriation of overseas profits.
• An explicit shout-out to Simpson-Bowles' recommendations on tax reform - broader tax base, simpler, fewer deductions.
• A cap on regulation that measures compliance costs, and doesn't allow an overall rise in compliance costs.
• A bit of respect for Dodd-Frank disguised as criticism.
• Cut, cap, and balance but at 20% of GDP, not the 18% level that most conservatives quote.

What I didn't like:

• Eliminate estate tax (but this is such a Republican plank, I'm not too surprised).
• Mention of the illusory tax compliance cost of $400 billion a year. I don't believe we spend 2.7% of our GDP in tax compliance. Where the spending is concentrated, in complex business arrangements,  will likely remain.
• A poke in the eye at the auto industry over the bail-out--UAW made out, but investors (carefully not called creditors) got screwed. I predict he'll change his tune on this one in the general campaign.
• Only small fixes to Social Security.
• A shout-out to Ryan's plan to voucherize Medicare, but with unspecified differences. This void shows how dangerous a definite policy commitment would be. I doubt that Romney will choose the deeply unpopular voucher approach.
• Turn Medicaid into a block grant. (I'm on the fence as to whether this will be beneficial or not.)
• Support for a balanced budget amendment that is more a strait-jacket than a workable plan.
• Tough talk about sanctioning China for currency manipulation.

Gaping holes in the plan:

• No plan for the uninsured or for lowering health care costs.
• No specific areas of spending cuts, but a reduction of the federal workforce by attrition.
• No proposed federal budget with numbers.

So, my overall impression is that the plan isn't extreme considering it came from a Republican: no major tax cuts, a reasonable goal on regulation. But it fails in two essential ways:

• It isn't a plan unless it contains actual numbers.
• It isn't honest about what will be painful. 

This plan is meant to get Romney elected, and only then will we find out if he'll grapple with tough issues. I'm sure no one is surprised that Romney is playing it safe.

 ...but don't expect a straight answer.

Should I review Michele Bachmann's plan now? ... No, I'll stick to real candidates.

Update 12/13/11. Romney announced his plans for Medicare reform, and they look a lot like Ryan's plan to voucherize the program.The big advantage of vouchers is that the federal government can decide how much to spend year-to-year. A big disadvantage is that it puts cost-containment onto insurance companies. To be fair, cost-containment is the boogey man in all Medicare plans. ...Oh, it's not a voucher, it's premium support. Don't ask me to explain the non-existent difference between the two.


Wall Street Journal review of Romney's plan

Debating with Ron Paul

No, I don't get the pleasure of debating Dr. Paul, but I do get to debate a few of his (always) avid supporters. Here are a few observations:

• They assert that life would be better without the federal oversight, but they never provide any data to back up the contention. Their belief is based on a faith and hope, not data. This isn't unusual in politics, but Paul supporters tend to think of themselves as more intelligent, so pointing this out galls them.
• Since they don't have an answer when you point out that their politics are based on faith, they don't come back with any answer. The conversation is over. They probably move on to someone who won't ask any hard questions.
• There's a strong strain of nostalgia for times before the federal government got so large (either before the first federal income tax, before the New Deal, or before Teddy Roosevelt). I definitely have sympathy for this longing for a time when a brave person or family could go to the frontier and homestead without farming regulations, water regulations, estimated tax payments, housing standards, gun permits and waiting periods, etc. But getting rid of government won't bring back that period. We'd still be the more crowded country we are now.

Maybe this is the vision that draws such fierce support to Ron Paul--you wouldn't have various governments or other entities telling you what you have to do. You can drink raw milk. You can sell raw milk without being closed down. There's something good there. But how can we enable the good without opening the door to the ruinously bad?

Maybe you don't try to prevent the bad. You accept both the good and the bad that freedom and liberty bring. Maybe Ron Paul supporters shouldn't say it would be much better under these policies (more accurately, lack of policies), but it would be freer. That isn't the choice our society made before, but it's worth looking at our decisions again.

Coming to your street soon...

Update 10/19/11. Here's a highlight from the comments. Nick points out that that personal autonomy (ie., freedom) is the fundamental ideal for Paul. That prompted me to see him as a fundamentalist, which means he won't make decisions on a rationalist basis. He's also somewhat utopian, believing (or proclaiming) that a return to his view of constitutionalism will cure many of the problems in this country. In either case, he never acknowledges the possible drawbacks to his policies. Reality isn't allowed to impinge on his ideal world. It's really quite bizarre--how he'll call out the failures of others, but never think he or his firm beliefs could lead to any failures.

Obama's Disappointing Leadership

My disappointment with Obama has been growing since summer '09. I've been trying to figure out whether that's an unfair response on my part, or whether my discontent arises from significant failures on Obama's part.

It's not that Obama is a clear disaster. In fact, it's hard when you're president not to have some solid accomplishments, which I realized when I tried to come up with the ultimate failed president, and couldn't find one disastrous enough. (Governor of Arizona Evan Mecham is probably the gold standard of executive failure.)

So the problem isn't total absence of accomplishment, but a pattern of lapses in leadership. It's easy for steadfast supporters to argue against this perception as being subjective. However, these types of judgments are important when evaluating leadership, and voters do this naturally during an election cycle. Here are my complaints about Obama's leadership:

• Not up for the fight
• Doesn't take it to the people
• Gets glum and doesn't do anything
• Misreads mood (sputnik moment falls flat)
• Didn't rein in house Democrats

Many of these are a symptom of not being comfortable as president after his previous role as legislator. For example, Obama was largely absent from the work hammering out the health bill, even after things were just grinding in Congress. Despite his campaign promise that the work would be done in the open, he allowed the House Democrats to negotiate it in secret. The procedure used by Congress left them open to legitimate charges of favoritism to supporters (unions) and must-win senators, not aiming for a smaller sized bill, and ill-defined charges like ramming it down America's throat.

Now, Obama doesn't control either the House or Senate, but he could have let them know, in the way politically influential figures do, what he expected in terms of content and process. Instead, he let the Congressional Democrats do their thing and make stupid choices that cost them dearly in elections since 2008.

Such periods of inattention or inaction have occurred too often. Just to show what I mean, here's a timeline of significant milestones or achievements:

• 1/20/09 - Inauguration
• 1/22/09 - No Torture policy
• 1/29/09 - Lilly Ledbetter Fair Pay Act signed
• 2/4/09 -  SCHIP (child health insurance plan) expansion 
• 2/17/09 - Stimulus bill signed
• 2/27/09 - Iraq withdrawal announced
• 3/9/09  -  Cancellation of F-22 aircraft
• 3/11/09 - Budget passed
• 3/30/09 - Auto bailout plan announced
• 4/3/09 -   Goodwill tour of NATO alllies
• 4/13/09 - New Cuba policy
• 5/22/09 - Credit Card Act signed
• 6/4/09 -   Goodwill tour of Arab states
• 6/26/09 - Cash for Clunkers signed
  
• 6/26/09 - Swiss bank disclosure agreement negotiated
• 6/27/09 - Iraq troop withdrawal begins
• 10/22/09 - Vets Budget Reform Act signed
• 11/6/09 - First Time Home Buyers program extended
• 12/1/09 - Afghan policy (surge) announcement
• 12/9/09 - Nobel Peace Prize acceptance

• 2/18/10 - Deficit commission formed
• 3/23/10 - Health care reform bill signed (Obamacare)
• 4/20/10 - Ban on offshore oil drilling implemented after BP spill
• 7/21/10 - Wall Street Reform Act signed
• 10/12/10 - Offshore drilling ban lifted
• 12/3/10 -   Deficit commission fails to get minimum 14 votes needed
• 12/10/10 - Bush Tax cuts extended
• 12/27/10 - DADT repeal passes

• 2/2/11 -   START treaty ratification begins
• 5/1/11 -   Bin Laden killed
• 7/29/11 - New mileage standards agreement 
• 8/2/11 -   Debt ceiling deal

I picked out these accomplishments by how significant they seemed to me, so that fits the definition of subjective. However, I didn't know the dates of these events.

The timeline shows a massive slowdown in actions after June 2009, and only 5 significant events in 2010 prior to the mid-term elections. He picked up the ball again only since the debt ceiling agreement this year. That's over two years of relative inactivity, which is inexcusable in my opinion.

My two biggest complaints about Obama's leadership:

1. Obama should have followed the Clinton model of moderating the leftish tendencies of the party. That side of the Democratic party, including many in the House, resented the heavy hand of the Clintons and cheered the end of their centrist Democratic Leadership Conference. They were hoping that Obama would give them a free hand. They got their wish and sowed their own downfall.
2. After mistakenly letting Congress take forever on the healthcare and Wall Street bills, Obama could have regained momentum in 2010 by tackling the next biggest problem--the mounting debt. Since it wasn't on his agenda, the field was wide open for anyone to grab the issue, which the Tea Party did. Thus our current situation.

I don't know if Obama can recover from his errors or whether he even deserves to. Two years is a long time...

Resources: Best list of accomplishments (not too short, not the kitchen sink), timeline


Update December '12. I'm leaning towards blaming Pelosi for her part in a somewhat runaway Congress.

9 + 9 + 9 Doesn't Equal a Plan

Unfortunately, I have to do more debunking. This time the topic is Herman Cain's 999 plan. He's touting this plan quite a bit, and the press is falling down on its job of checking his claims.

Broadly, Cain's plan is to tax all sales 9%, all wages and salaries 9%, and business profits 9%. There would be no other federal taxes--no other payroll taxes, no capital gains tax, no estate tax. Deductions would be severely limited, maybe only charitable gifts would be exempt.

With such major change to the tax structure, would the federal government be collecting the same amount of tax, or would it create even larger deficits? According to Cain, this plan provides the same revenue. But he doesn't provide analysis.

So the analysis is left to motley horde of the internet, which is my favorite horde. Think Progress estimates this:

• $665 billion from tax on wages/salaries
• $112 billion from tax on business
• $500 billion from tax on sales
• $1.12 trillion total

Bloomberg News has this estimate:

• $913 billion from tax on wages/salaries
• $128 billion from tax on business
• $920 billion from tax on sales
• $1.96 trillion total

Critiques of this plan are so rare, I have to include this one from either a joke or racist site:

• $1.13 trillion from tax on wages/salaries
• $270 billion from tax on business
• $378 billion from tax on sales
• $1.78 trillion total

Now, I'm rather ticked that I can't find more information on this plan. In fact, one of the best sources is the Christian Post. That isn't totally surprising, since Cain first explained the rate for his plan at a Christian conference. Cain says in his video introduction of the plan "If 10% is good enough for God, then 9% should be just fine for the Federal Government."

That statement doesn't allay my doubts, maybe because "trust me" or "God will deliver" aren't reassuring to the hard scientist in me. On comment threads, Cain's supporters even throw out this one:

Let's see. Herman Cain has a degree in mathematics and a Master's degree in computer science. You have an English-major understanding of math.... What is more likely is that Herman Cain explained his economic policy quite clearly and ... anyone with more than an English-major understanding of math would understand....

Look, don't whip out your degree from Harvard or Yale or wherever and expect me to stop asking the question. Instead, go borrow Glenn Beck's unused chalk board and write up your figures. I'm completely capable of checking the math... and of calling bullshit on a candidate who won't give us the math. I'm waiting, Herman...

Major Update!!!!
And Correction

10/12/11 - Cain's economic adviser finally released some figures to Bloomberg. For people like me, who like tangible things like pounds and dollars and hard numbers, this was big news. To most of the media... I guess they gave up on math long ago. But bear with me.

• $7.7 trillion in wages/salaries x 9%  =             $693 billion
• $9.5 trillion in business gross income x 9% =  $855 billion
• $8.3 trillion in taxable sales x 9%     =            $749 billion
• Total   $2.3 trillion --on par with current revenues

But look again at the numbers. Cain's plan overestimates sales by 35% over Bureau of Labor stats. Wages/salaries are on par.

Now the correction: I had written that the business tax was on profits. I was wrong. The tax is on gross income minus certain major deduction. I haven't been able to check whether $9.5 trillion is reasonable or not. I tried, and found that the Bureau of Economic Analysis reported $21.6 trillion total private industrial output in 2009. Now, that confuses me because I thought our annual GDP was approximately $14.6 trillion. So where does the extra come from? Trade deficits? I've reached my limit on trying to understand this on my own. I hope some journalist with real economic understanding will clear this up.

Update 10/21/11. I finally noticed the inconspicuous links to the plan details on Cain's website. But they just lead to more confusion. Good luck if you go there.

Obama's budget plan - FAIL

Obama unveiled his job plan with a great rhetorical performance on Sept. 8, and promised a deficit reduction plan for Sept. 19. The job plan didn't live up to its roll-out, and neither does the deficit reduction plan.

Now, I have to admit my bias, in case you haven't figured it out from my blog so far. I'd like to see a balanced budget within ten years, so I'm going to be critical on anything substantially less than that. I'm going to be on the lookout for funny numbers. Obama's plan triggers some of my alarms.

Obama has debt maxing out at 77% of GDP. That's odd, because I thought it was 100% already and heading higher. He counts only public debt, not what government owes to itself (SS and Medicare funds, probably federal reserve money too).

Cuts are modest at best:

• $257 billion from mandatory spending, mostly cuts in agricultural subsidies
• $248 billion from Medicare
• $73 billion from Medicaid
• Various other small cuts: post office, federal pension contributions, raising certain fees
• $1 trillion savings from not having wars
• Total $1.5 trillion above the $1 trillion in the August debt deal

These are ten year numbers. Divide everything by 10, then tell me that cutting $25 billion per year from Medicare is going to be enough savings.

Even the best part of the plan, tax reform, is less than it appears. Obama plans to let Bush cuts expire for >$200,000 people and reduce deductions for them. That will bring in about $1.1 trillion. The plan also closes various other loopholes for a total of $1.5 trillion.

The reform plan includes talk about "measures to broaden the tax base." This is a current Republican talking point. Perhaps Obama is trying to defuse it, but his use is somewhat misleading. A few more households may be taxed due to closing loopholes in personal income tax. Most of the broadening will be from cutting business tax loopholes. Not a bad idea, and actually a good critique on "broadening the tax base."

This plan will appeal of the left wing of the party, but probably not many others. Having even more people heading to the edge of a party isn't a good prescription for the country, and I doubt that it'll save Obama's reelection prospects. I don't see signs that his "Pass the bill" demands appeal to moderates or independents. It looks like Democrat grandstanding, which is no more charming than Republican grandstanding.

That's too bad, since both the jobs bill and this plan have some good, specific ideas. It's too bad Obama felt he had to go big, but didn't have enough high-quality options to offer.

I can add this budget plans to the other ones I didn't like, such as Rand Paul's and Paul Ryan's. This is better than those, but not as good as Simpson-Bowles, which is the best I've seen so far.

The Political Lie Machine: Dems caused the mortgage meltdown

I scoffed at this one at first. The idea that it wasn't the likely suspects (greedy bankers, greedy Wall Street execs, greedy mortgage brokers, useful fraudulent applicants, and pliant bond rating agencies), but those do-gooding Democrats, seemed ludicrous. Perfect for conservatives, since it moved blame off allies and potential donors and onto their favorite scapegoat. But ridiculous. But I heard it so many times, I had to find the truth.

Frankly, I wish someone with better financial chops than me would look into this question and give a definitive answer, apportioning blame fairly and accurately. However, there hasn't been a high-profile 9-11 type commission, so it's been open season for the usual political spin apparatus.

For the Republican lie machine version, let me paraphrase Kevin Hassett: Fannie and Freddie, pushed by the Democrats, sponsored huge numbers of sub-prime mortgages that allowed unqualified borrowers, many being minorities, to buy properties way more expensive than they could afford.

"Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans... Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened."

According to Kevin Hassett, Wall Street banks were just "bystanders injured in the blast" even though they originated sub-prime loans through legions of mortgage brokers and then securitized and sold them to unwary investors. Sure, bystanders. Hassett himself doesn't point out that there were large numbers of minorities, because he's wearing a Republican uniform, but sites like RenewAmerica.com do. Other mouthpieces trace the blame back to Jimmy Carter and the Community Reinvestment Act that tried to reverse banks' practice of red-lining.

For a rare balanced explanation, I had to search a lot, and finally found a readable one at FactCheck.org. They blame a long list, most of them on my suspects list: Federal Reserve, Alan Greenspan, Wall Street firms, Congress, the Bush Administration, Clinton Administration, mortgage brokers, buyers, real estate agents, certain accounting rules, and collective delusion that this wasn't a bubble. They absolve the repeal of Glass-Steagal, and don't even comment on the Community Reinvestment Act.

FactCheck.org doesn't discuss how the mortgage meltdown migrated to affect the entire financial industry, but that's where AIG and other speculators get involved. They sold the slice-and-dice packaged mortgage-backed securities, wrote insurance on the poorly vetted mortgage securities churned out by Wall Street firms, and betted on one or both sides using credit-default swaps.

Based on my research, this is what I think happened:

• The Carter through Clinton Administrations had programs to help lower-income buyers purchase homes. To support these programs, there was some relaxation of lending standards.
• Selling sub-prime mortgages became very profitable. Selling mortgage-backed securities was very profitable. Selling insurance on these securities was very profitable. Buyers of these securities didn't know what was in them, but knew that they paid higher returns than most bonds. Profit motive all around.
• So, these small programs opened the doors a crack, and Wall Street firms rammed their trucks through.
• Yeah, sounds like it was the Dems.

Fairly Balanced Sources: Mortgage Explanation Site, economics paper and Andrew Sullivan
Left and left-leaning: Barney Frank, Southern Poverty Law Center, NYRB, and McClatchey News
Right: Forbes, The Sun, House Republican, FreedomWorks
Non-expert right and far right: Yahoo question and white nationalist

Update 10/7/11: Per a comment from the Atlantic website: "Let's not forget the SEC saying okay to the banks to go with a 30-1 leverage..." Agree! How did FactCheck.org miss that one?

Update 12/18/11: Per a new report, house flippers also had a role.

Update 9/15/12. I'm still reading that it was the Dems' fault. I've had unsettled questions about how much the government was responsible for lowering mortgage underwriting standards. The answer is that government goals for lower income house ownership did loosen standards. However, it was the profitability of securitizing subprime loans that pushed and expanded those loose standards within the private sector:

More sources:  A short, readable summary from Wikipedia; a history of Fannie, and the source of the graph above; a conservative blames Barney Frank again using the same complaint that Fannie invented subprime securitization so everything afterwards is their fault.

Another update on 12/12/12 here. A few more facts, but nothing that shakes up the story. The Dems did more than "opened the doors a crack." But all the other factors are still also to blame.