The Ticker Quick Views on Politics, Economics and Finance
It's full speed ahead for mammoth infrastructure projects in California -- especially the ones designed to build a legacy for Governor Jerry Brown.
Officials last week released the final chapters of a draft plan that would divert water from the picturesque Sacramento-San Joaquin River Delta, a vast Northern California estuary that has long been at the epicenter of the state's battles over water resources.READ MORE
A new report from the Congressional Budget Office says high earners benefit most from the complexities in the U.S. tax code -- which isn't exactly surprising. The system is a thicket of deductions and credits. Those who can pay for professional help or shift their income around benefit most. The preferential rate on investment income is among the largest of these tax breaks.
Long-term capital gains are taxed at a top marginal rate of 23.8 percent as compared to 39.6 percent for ordinary income. That reduces annual revenue by $161 billion, the CBO found. This is also the most regressive of the tax breaks: 93 percent of the benefits accrue to the top fifth of earners and two-thirds to the top 1 percent.READ MORE
A lengthy New York Times report yesterday detailed just how much more Americans pay for medical services than people in other countries. Often a lot more: almost twice what the Swiss pay for a colonoscopy, three and a half times more than the Dutch for an MRI and five times more than Spaniards for a hip replacement, according to the International Federation of Health Plans.
The high per-unit price of medical services in this country is an open secret, well documented in the health-policy world but largely ignored in the political debate. Rather than rail against high prices, Americans should rail against this: The fixes for those higher prices are clear enough, yet they get almost no consideration from policymakers.READ MORE
Issa's love of political theater and his penchant for wild accusations have rendered the House Oversight Committee he chairs completely ineffective. His investigations have been a joke. His hearings are models of partisan hackery. Yesterday he called White House press secretary Jay Carney a "paid liar" -- the kind of language that someone with Issa's record of falsehoods should probably avoid.READ MORE
New York Times columnist James Stewart had an excellent piece on Saturday about Mathew Martoma, the former portfolio manager at SAC Capital Advisors charged with insider trading who, as Stewart put it, "may -- or may not -- be in a position to implicate Steven A. Cohen, the hedge fund's billionaire founder and owner."
Martoma has said he is innocent. He has refused to cooperate with the government. And if I had to make a wager on whether he is in a position to implicate Cohen, I would bet that he isn't. The reason I say this can be found in a paragraph toward the end of the government's original complaint against Martoma last November, which I'll get to in a moment.READ MORE
Changing the Authorization for Use of Military Force against terrorists, as President Barack Obama has proposed (see column), will face considerably more resistance in Congress than did the law itself in 2001.
Other than the declaration of war after Pearl Harbor, few major pieces of legislation have rushed through Congress as quickly.READ MORE
A real estate bust battered the banking system and household balance sheets, so the Federal Reserve responded by cutting inflation-adjusted interest rates to their lowest levels in many years. Meanwhile, tax hikes and cuts in government spending retarded recovery. Some savers were able to earn nice profits by using leverage to purchase long-duration financial assets and farmland, while others complained about low rates.
After several years of weak growth and robust markets, the real economy finally started to turn and the Fed switched to tightening mode. Much to the Fed's surprise, bond yields soared and the stock market stopped rising. Many investors lost huge sums of money, and one municipality was forced into bankruptcy thanks to an ill-judged interest rate swap.READ MORE
In 2011, protesters in Egypt occupied Cairo's central Tahrir Square to call for the downfall of the government and clashed repeatedly with police. Now, in Turkey, police have been fighting running battles to eject protesters from Gezi Park, which is attached to Istanbul's central Taksim Square.
This isn't about toppling the government, though. It's about plans for a shopping mall.READ MORE
Panda diplomacy is a thing of the past. Diplomats and the Chinese elite now have a flashier option: Chairman Mao Zedong's sedan.
The automaker China FAW Group has begun selling modern versions of the venerable Hongqi, or "Red Flag cars," after a 31-year hiatus, Bloomberg News reported. The made-in-China sedans will compete with the likes of Volkswagen's Audi in the domestic car market, which had increased 13 percent year-over-year in April, according to the China Association of Automobile Manufacturers. FAW, which spent $300 million renovating the brand, plans to invest $1.7 billion in development through 2015.READ MORE
Prominent people in Washington and on Wall Street say President Barack Obama is starting to focus on what may be the most important appointment of his second term: the next chairman of the Federal Reserve.
Ben Bernanke's term expires in January and he has told associates that the eight challenging years he will have served would be enough. Some people close to the president say his top personal choice to succeed Bernanke would be former Treasury Secretary Tim Geithner. They established a close bond over four years.READ MORE
Most Americans now think that marijuana should be legalized. A new paper for the Brookings Institution by Bill Galston and E.J. Dionne draws attention to this startling shift of public opinion: Support for legalization has surged by almost 20 percentage points in less than a decade and by 11 points in the past three years.
According to recent polling by the Pew Research Center for the People and the Press, 52 percent of Americans favor legalization. Just 20 years ago, 80 percent of Americans opposed it. Note that these figures are for outright legalization. (Support for legalizing the medical, as opposed to recreational, use of marijuana is far stronger: 77 percent are currently for it.) Seven years ago, 50 percent of Americans thought that using marijuana was immoral; that has dropped to 32 percent.READ MORE
David Petraeus, the four-star general and former head of the Central Intelligence Agency, has recently been hired by the private equity firm KKR & Co. Bloomberg News reports that Petraeus will be leading a new unit called the KKR Global Institute. He will also be expected to "help the company evaluate investment opportunities in new markets."
Petraeus would hardly be the first person to cash out of a career in government to go into high finance, although most people who follow that path are politicians and bureaucrats rather than military officers. After all, it isn't clear what Petraeus brings to a firm like KKR that it doesn't already possess. As Kevin Roose of New York magazine put it, "his only qualifying resume line seems to have been a lucky friendship with KKR co-founder Henry Kravis."READ MORE
This is bound to be just the kind of news that genetically modified food opponents will exploit, while also causing worries for U.S. wheat exporters.
A farmer in Oregon recently found genetically modified wheat that Monsanto Co. had designed to be immune to the company's Roundup weed killer. The trouble is that the wheat was never approved for commercial use, according to the U.S. Department of Agriculture Department, and Monsanto stopped its development efforts eight years ago amid opposition from farmers, environmentalists and consumers.READ MORE
There are obvious reasons for the U.S. to update its roads and bridges: stimulating the economy, creating middle-class jobs, improving commercial efficiency. Another equally appealing and less obvious reason for upgrading our infrastructure is the opportunity to develop the products and materials needed around the world for the next generation of bridge design.
The collapse of the bridge over the Skagit River in northwest Washington state last week was blamed on its "fracture-critical" design, meaning that when one part of the bridge fails, the rest of the structure is compromised and will probably fail as well. This is what happened in Washington when a truck with a tall load struck the top of the bridge, causing it to collapse. Two vehicles plunged into the Skagit River below, leaving three people with minor injuries.READ MORE
With the expected appointment of Jason Furman to become the new head of the Council of Economic Advisers, former Treasury Secretary Robert Rubin has completed the remarkable feat of placing five of his acolytes in key positions of power in the Obama administration.
Furman, a Harvard-trained economist who helped Rubin set up the Hamilton Project at the Brookings Institution, is just the latest Rubin mentee to get an important economic role with Obama. Others include: Treasury Secretary Jack Lew; Sylvia Mathews Burwell, the director of the Office of Management and Budget; Gene Sperling, the director of the National Economic Council; and Michael Froman, the nominee for U.S. Trade Representative.READ MORE
Jonathan Bernstein at the Washington Post issued an advisory this week to journalists covering immigration legislation in the House. Due to the squirrelly nature of the politics within the Republican caucus, he wrote, reporters can't take at face value all Republican Party opposition to immigration reform.
It may be the case that a fair number of Republican members want a bill to pass -- but without their votes. They may believe that the bill is good for Republicans in general but not in their districts; they may even believe that their own long-term prospects are better with an immigration bill in place but that their short-term prospects could be endangered if they support it.
If that’s the case, however, those members who support passing the bill but don’t want to vote for it are certainly not going to want reporters to print that; for the record, they may even be among those who denounce “amnesty” the loudest.
This situation is not unique. Legislators sometimes vote their consciences, other times their districts and most of the time their party. Once in a while, on gay rights or National Institutes of Health funding, for example, they may even vote their family member.
The weeks of speculation about whether JPMorgan Chase & Co. Chairman and Chief Executive Officer Jamie Dimon would be forced to give up one of his titles has ended. I didn't take a side in the battle, if only because I couldn't get beyond the threshold questions: “Why does anyone even care, and why do we believe we are still beholden to people like this?”
Since the 2008 financial crisis, we have seen a massive decline in trust in the financial services industry: Lehman Brother, Bear Stearns, American International Group, the "London Whale," Cyprus and a host of lesser scandals have prompted consumers to say one thing loud and clear: “I don’t trust you.” Or "You're only in it for yourself.” Or “Who made you king?” Or some very reasonable variant thereof. It seems the financial services industry’s best response is, “Trust me, I went to Harvard Business School.”READ MORE
The U.S. Supreme Court is poised to announce its decision in the biggest affirmative action case in years: Fisher v. University of Texas. Before it does, let's consider two important findings about the real world of higher education.
The most recent one is a Brookings Institution study published this month showing that several long-standing federal programs intended to prepare low-income students for college don’t work. These programs send funds to colleges and universities, which run summer schools, counseling programs and other initiatives to help disadvantaged high schoolers get ready for college. Despit the billion-dollar-a-year investment, they make no apparent difference.READ MORE
Albert R. Hunt
Minnesota Representative Michele Bachmann's announcement yesterday that she won't seek another term is having an unexpected effect: Her fellow Republicans are rejoicing and Democrats are in despair.
Parties usually lament the retirement of incumbent lawmakers because their seats become harder to hold. Bachmann's perch, however, was a top Democratic target for takeover next year. She barely won re-election last time and now faces several ethics and campaign-finance investigations.READ MORE
Is health care America's economic savior or scourge? The answer, strangely, might be both.
In the short term, growth within the health-care sector provides a boost to a weak economy. But the same rise will eventually be more trouble than help.