Scaled-Back Prison Bill Done, Water Bill Not

Notes from yet another long session in the Legislature:

The Senate could wait no longer for the Assembly to get their act together, so they passed a reduced prison package along the Assembly's lines, one that falls $200 million short of projections and does not have a sentencing commission. The Governor has announced he'll sign the bill. It's marginally worthwhile for the parole reforms, but really nowhere near what's needed. And so the federal judges will in all likelihood order a mass release, and because little is being done to address root causes, the cost of prisons and the population as a whole are both still likely to increase. The cowards in the Assembly who think they have designs on higher office after this travesty should know that this vote will have importance, but not in the way they think.

The bill to waive CEQA requirements (California Environmental Quality Act) to put a football stadium in Southern California - without an NFL team, mind you - did not get by Darrell Steinberg, despite lots of energy and effort from special interests. He's giving the various parties more time to negotiate a settlement. Sports stadiums are among the biggest corporate welfare projects we have in America.

The much-ballyhooed water deal has been scuttled, as Karen Bass announced she did not have the votes to move it. The Speaker may ask for a special session on water, and the Governor would probably move that as well. The middle-of-the-night rush obviously didn't work, so some transparency would be preferable.

Still waiting on the renewable energy standard bill, which would put California in the vanguard of the nation in terms of its portfolio (33% by 2020).

Health Insurance Companies Sucking Up Corporate Welfare

It's not a bad idea to look to how Wall Street reacts to the health care debate to determine winners and losers. After all, when you see insurance industry stock prices skyrocketing, you can safely say that investors believe whatever "reform" happens this year, if any, will not create a hardship for insurers, and more likely a windfall. Most of the major insurance companies are up 6-12% in the last month, far above the rise in the overall market. All of that is true.

However, we should note that these constant rises in the stock prices are most certainly not based on current fundamentals. Indeed, most insurance companies are losing market share.

But it turns out the current arrangement, through which employers are supposed to buy coverage from large insurance firms and enlist their employees to cover the costs, isn't working so well for the insurance industry, either. In fact, the system by which insurance coverage is tied to payroll jobs is a huge problem—especially in a period when Americans are less likely to have payroll jobs than they have been in the recent past and when employers are less likely to cover the costs of that insurance. A look at the earnings reports and stock prices of big insurance companies reveals that tying insurance to employment probably isn't a good idea, after all—unless the employer happens to be the government.

Since December 2007, the U.S. economy has lost 6.5 million payroll jobs, or about 4.7 percent of the total. The economy is likely to lose at least 1 million more by the end of this year. When people lose jobs, they frequently lose their insurance. (COBRA allows former employees to continue purchasing insurance for a period of time, but the costs are frequently prohibitive.) So large insurers have been losing millions of members. A chart in a recent Wall Street Journal article shows that seven large insurers have collectively lost 4.34 million members in their "commercial risk" plans since December 2007. ("Commercial risk" or "risk-based membership" generally refers to people whom insurance companies insure directly.)

Insurance company stocks have actually lagged behind the S&P 500 dating back from the beginning of the recession in December 2007. So why are they shooting up now, considering that job loss is continuing, which will erode their client base further? The answer is that insurance companies are actually being propped up by government money.

In fact, there's pretty good evidence that government spending is all that stands between the struggling insurers and complete disaster. Look through the insurers' earnings reports, and you'll see that a portion of the loss in commercial business has been offset by growth in Medicare and Medicaid programs. At UnitedHealth in the past year, for example, enrollment in its public programs rose from 6.185 million to 7.115 million.

The system of employer-provided health care coverage is crumbling before our eyes, and for more Americans—and for more American insurance companies—government-funded health care is all that separates them from financial disaster.

If investors are making a bet, they're assuming that government will continue to subsidize private industry, moving toward a model of quasi-nationalized health care, where private companies manage public programs, or get government to funnel direct payments through their customers to keep them covered. This is why two elements of reform are crucial - ending useless programs like Medicare Advantage, where private companies run public programs like Medicare for more money with no consequent increase in service; and instituting a public option, so that the government is not forced to bail out the insurance industry. With such shaky fundamentals based on the erosion of the employer market, insurers will be forced to change their practices or literally go out of business. But that's only if they aren't treated like corporate welfare cases, and injected with the cash they need to survive. Cash which often goes directly into the pockets of super-rich CEOs.

That's essentially the nature of the fight over the public option - should our tax dollars go to rescuing insurance companies which have added no value to the health care system, or should they go to treatment and care?

Still Masters Of The Universe

What we're seeing from the big bank earnings reports is that the government reacted to a situation where the financial industry titans were too big to fail, and facilitated theconsolidation of them so that they grew even bigger. Goldman Sachs and JP Morgan Chase are the biggest of the lot, having seen their competition either eliminated or weakened.

“One theme here is that Goldman Sachs and JPMorgan really have emerged as the winners, as the last of the survivors,” said Robert Reich, a professor at the University of California, Berkeley, who was secretary of labor in the Clinton administration.

Both banks now stand astride post-bailout Wall Street, having benefited from billions of dollars in taxpayer support and cheap government financing to climb over banks that continue to struggle. They are capitalizing on the turmoil in financial markets and their rivals’ weakness to pull in billions in trading profits.

Even Bank of America and Citigroup posted big profits in the last quarter, although the elimination of mark-to-market accounting plays a major role in hiding the true weakness of a lot of these banks. The imminent failure of more community banks and larger firms like CIT present opportunities for JP Morgan and Goldman Sachs as well.

Paul Krugman gets shrill on Goldman Sachs today, and he makes the larger point that we have only made Wall Street more dangerous to the overall economy through no-strings bailouts and failing to rein in the excess.

Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.

Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers [...]

The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded — and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.

And the events of the past year have skewed those incentives even more, by putting taxpayers as well as investors on the hook if things go wrong.

Basically, Krugman hinges the success of the bailout on meaningful financial regulation to keep Wall Street from making the same gambles. I'm not hopeful about that. But what I am hopeful about is the recognition, from across the political spectrum, that the bailout has produced perverse incentives that need to be reversed in whatever way possible.

The (Wall Street) Journal's take -- "We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how the companies conduct their business" -- is actually more in keeping with that of Robert Reich, who says that "Goldman's resurgence should send shivers down the backs of every hardworking American who has lost a large chunk of retirement savings in this economic debacle, as well as the millions who have lost their jobs.... Goldman's high-risk business model hasn't changed one bit from what it was before the implosion of Wall Street." [...]

There is much in the Wall Street Journal that I don't agree with but, when it comes to the failure of the administration to address and fundamentally reform what Kessler calls "the structural problems that got us into trouble in the first place," we are of the same mind. There is no daylight between a progressive position focused on the paramount need to get the real economy going and one based purely on what makes free markets work.

The editorial goes so far as to suggest imposing a tax (yes, the Wall Street Journal is proposing a tax!), an FDIC-style bailout tax to be precise, "for those in the too-big-to-fail camp."

Even Reagan-era economist Bruce Bartlett is arguing for higher taxes, albeit regressive ones. I actually think the proper context is in terms of the health care debate. Goldman Sachs and other Wall Street firms took advantage of a financial crisis to redistribute wealth upwards. To pay for health care for the indigent, we should unwind that redistribution, perhaps with Charlie Rangel's surtax that adds brackets at the high end. It is impossible for conservatives to argue against redistribution of wealth with a straight face, given the example of Goldman Sachs.

...Simon Johnson:

We are looking at a concentration of political power in the US banking system that we haven’t seen since the 1830s: Shades of Andrew Jackson vs. the Second Bank of the United States. We put up with a lot from our banking elite in this country, but historically we draw the line at financial power so concentrated it can confront the power of the President.

The logic for reform and for breaking up the big banks begins to build. Bank of America’s fall was, in some senses, a fortunate accident for Goldman and JP Morgan. But it has also given them an excessive and unsustainable degree of political power.

Of course, you also have to ask: Who can break that power, when, and how?

...This is a dangerous time, politically. 80% of the public believe that Wall Street benefited from the bailouts, and not taxpayers. That's an unsurprising result. The question is how the public reacts. We could see a right-wing populism take shape if the teabaggers ever get their act together, or a New Deal coalition reformed. I talked to a writer last night who said he felt like he was living through history, as the Depression-era battle lines are being drawn. We don't know who will win yet, but it doesn't look good from where I sit.

Goldman's Record Taxpayer-Subsidized Profits

Matt Taibbi's excellent reported piece on Goldman Sachs is now online, and he's created a kind of sequel with this piece about Goldman's big profits, mostly the result of handout after handout from the Feds:

Last year, when Hank Paulson told us all that the planet would explode if we didn’t fork over a gazillion dollars to Wall Street immediately, the entire rationale not only for TARP but for the whole galaxy of lesser-known state crutches and safety nets quietly ushered in later on was that Wall Street, once rescued, would pump money back into the economy, create jobs, and initiate a widespread recovery. This, we were told, was the reason we needed to pilfer massive amounts of middle-class tax revenue and hand it over to the same guys who had just blown up the financial world. We’d save their asses, they’d save ours. That was the deal.

It turned out not to happen that way. We constructed this massive bailout infrastructure, and instead of pumping that free money back into the economy, the banks instead simply hoarded it and ate it on the spot, converting it into bonuses. So what does this Goldman profit number mean? This is the final evidence that the bailouts were a political decision to use the power of the state to redirect society’s resources upward, on a grand scale. It was a selective rescue of a small group of chortling jerks who must be laughing all the way to the Hamptons every weekend about how they fleeced all of us at the very moment the game should have been up for all of them.

Goldman's profits only count as "profit" if you consider a pass-through federal subsidy to AIG, quick and easy loans and multiple bailout programs made available to them by the FDIC and the Fed after converting themselves into a bank holding company, the forced collapse of much of its competition and fees from stock issuance from other banks having to repay TARP to be something based on hard work and ingenuity and not political connections and corporate welfare.

But what's most amazing about all of this is how Goldman Sachs is taking all this federal largesse and plowing it back into the market at HIGHER rates of leverage than even during the crisis which amount burnt down the entire financial system:

As Felix Salmon notes, Goldman last year, after it converted to bank holding company status, announced that it was “taking steps to reduce leverage.” But what’s happened since then is that Goldman has actually been emboldened by all its state backing to borrow more and gamble more than ever. This is the equivalent of a regular casino gambler who hears that the house has doubled down on his credit line and decides to stay up at the tables all night, instead of going home and sobering up. Just look at Goldman’s VaR, or Value at Risk, which measures the amount of money the bank puts at risk on any given day: it’s soared since last year.



Taken altogether, what all of this means is that Goldman’s profit announcement is a giant “fuck you” to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it’s untouchable and it’s not going to change its behavior for anyone. And it doesn’t matter who knows it.

And meanwhile, out in the country, unemployment will top 10 percent soon, and lots of people will be wondering why those Wall Street profits haven't trickled down.

Ian Welsh has a lot more.

So Let's Talk About Spending

Today House Republicans are going to engage in an extended whine about the omnibus federal spending bill, which they claim is being pushed through in the dead of night even though the bills have been written and available for over a year. This is a leftover from FY2009 because George Bush constantly threatened to veto the bills. But be sure to hear plenty of Republicans clamor about "runaway spending" today. They're even planning on calling for a spending freeze in the midst of a recession where government spending is practically the only economic activity available. But if they want to yammer on about waste, they might want to look in the mirror.

Republicans are expected to deliver a daylong rant Wednesday against Democratic spending legislation, yet the bill is loaded with thousands of pet projects that Republican lawmakers inserted.

Rep. Ralph Hall, R-Texas, included $142,500 for emergency repairs to the Sam Rayburn Library and Museum in Austin, Texas. Sen. John Ensign, R-Nev., joined state colleagues to include $1.425 million for Nevada "statewide bus facilities." The top two Republicans on Congress' money committees also inserted local projects.

In all, an estimated $3.8 billion worth of specific projects, called "earmarks," are in the $410 billion spending bill that the House of Representatives is to vote on Wednesday. Easy passage is expected. The Senate is expected to act soon, too, since federal agencies will run out of money a week from Friday unless new funds are enacted.

It should be noted that the earmarks are less than 1% of the overall spending. And increases for appropriations like the Congressional budget, for example, are a cause of the GOP wanting to keep the same number of staffers despite having 20% less members of Congress, turning the whole concept of welfare on its head.

The strongest part of Obama's speech last night, in my view, was when he identified the hundreds of billions if not trillions of dollars in the federal budget that are entirely a consequence of corporate welfare, contractor fraud and a host of other methods that the GOP has been using for decades to funnel cash out of the Treasury to their contributors. They want to have a conversation about "fiscal responsibility" that slashes any worthwhile investment in people, while keeping intact the flows into executive bank statements and massive trust funds. They have played budget games for years, hiding the true costs of their giveaways to the rich, and this is the reckoning. We don't have a spending problem, we have a priority problem. And President Obama is vowing to fix it.

In this budget, we will end education programs that don’t work and end direct payments to large agribusinesses that don’t need them. We’ll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use. We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.

Our job is to hold the President to this rhetorical flourish, as he'll doubtlessly be under a lot of pressure to do the opposite. But what this said to me is that Republicans and fiscal scolds are being called out. If they want to talk about runaway spending, they have to be willing to talk about where the waste actually is. There's been a class warfare in this country for 30 years and the rich have won. This is the blueprint to turning that around.

Obama's Budget Hawkery - Ending Corporate Welfare

There are excerpts of the President's address floating around, and most of it is pretty standard stuff: the rah-rah lines about how America "will emerge (from the economic crisis) stronger than before"; campaign talk about how the economic turmoil is a reckoning for the short-sighted and the laissez-faire crowd; the urgency of making investments in the key challenges of the future, in "areas like energy, health care, and education"; how a budget is "a blueprint for our future." But there are a few paragraphs about fiscal responsibility that I would like to highlight.

My budget does not attempt to solve every problem or address every issue. It reflects the stark reality of what we’ve inherited – a trillion dollar deficit, a financial crisis, and a costly recession.

Given these realities, everyone in this chamber – Democrats and Republicans – will have to sacrifice some worthy priorities for which there are no dollars. And that includes me.

But that does not mean we can afford to ignore our long-term challenges. I reject the view that says our problems will simply take care of themselves; that says government has no role in laying the foundation for our common prosperity.

Yesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office. My administration has also begun to go line by line through the federal budget in order to eliminate wasteful and ineffective programs. As you can imagine, this is a process that will take some time. But we’re starting with the biggest lines. We have already identified two trillion dollars in savings over the next decade.

In this budget, we will end education programs that don’t work and end direct payments to large agribusinesses that don’t need them. We’ll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use. We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.

I don't know what he means by "education programs that don't work," but I know exactly what he's talking about with the rest, and those are things that should have been cleaned up years ago. I haven't heard the phrase "reform our defense budget" come out of a President's lips in a long time, probably since Eisenhower. Obama is taking on bloated military spending, contractor fraud in Iraq, corporate welfare and Medicare Advantage. That's quite a chunk of change.

And I'm assuming this will segue into how reducing health care spending is the only path to fiscal stability and yes, Liz Sidoti, you magnificent idiot, "the single most pressing fiscal challenge we face by far." (She lied and said Obama was talking about Social Security.) The fiscal scolds may not like it - maybe that's why they got uninvited to the White House - but Obama's team is pressing the case that health care reform is crucial to the long-term budgeting process, and that only through a cost-controlling universal health care plan can we bring the budget in line.

I understand that calling to slice the budget in half during this precarious time may not be very smart in the long-term. And calling for austerity and shared sacrifice just doesn't seem like the right message. However, the spending Obama wants to eliminate really is truly wasteful, and a lot of it just goes into the pockets of corporate executives and heightens inequality. The broad view may not look so good, but based on these specifics I am completely comfortable with it.

Budget Ugliness Continues To Reveal Itself

The California Budget Project has done a preliminary report on the "solution" (and I'm glad they put it in quotes) reached yesterday and expected to be signed by the Governor today. They demystify the fact that this is, once again, a short-term fix that will actually worsen our budget situation in the future. The $42 billion dollar hole from this year is a direct result of constant short-term fixes over the past several decades, pushing off the problem until the current legislators are out of office. Even in this budget, it is balanced through $6 billion in borrowing, which might as well be magic since we have the worst bond rating in the country.

The worst part of this is the spending cap, which could cripple future budget and severely ratchet down state services well beyond demand or even the rate of inflation and population increases. We have seen from other states how this is a hammer on the heads of the least of society and it must be fought in the May 19 special election. But the CBP is just as perturbed about the massive tax cuts, at a time of a $42 billion dollar deficit, to large multinational corporations:

Give multi-state corporations the option to choose between two different formulas for determining how much of their income would be subject to tax in California. This provision would be in effect in tax years beginning on or after January 1, 2011 and would cost $650 million in the first full year of implementation, eventually increasing to $1.5 billion annually. This provision provides no benefit to small businesses that only operate in California.

The tax breaks for movie companies and new construction home buyers and for hiring new workers (which history has shown doesn't end up increasing employment but increasing employer chicanery with their payrolls) are all temporary, as are the tax increases. The only PERMANENT tax in the entire plan is this giveaway to giant corporations like Exxon. This is why Richard Holober claims that big business is the "only winner" in this budget.

The worst of the business tax cuts is a permanent change in the formula for calculating the income tax for multi-state and multinational corporations. This produces an initial big business tax cut of about $700 million a year. The State Senate analysis estimates the recalculation will eventually yield a corporate tax reduction - and state revenue loss - of $1.5 billion a year. This is not tax fairness. Combined with the tax hikes on everyday Californians, it is redistribution of income away from workers and consumers and into the pockets of our state’s biggest businesses. And it provides no tax savings for the mom and pop businesses that we usually count on to provide the camouflage for these corporate welfare schemes.

Another major sin in this budget are the agreements secured by Republicans to essentially increase greenhouse gas emissions by relaxing environmental regulations for large diesel vehicles. This is another example of Arnold Schwarzenegger being a complete hypocrite, running around the country painting himself as the "green governor" while ramming through a provision directly contrary to that.

Like the budget itself, AB 8 XX was not the subject of any public hearings. The measure’s scaling back of emission controls was one of many concessions sought by Republicans in order for three of them in the Assembly and three in the Senate to vote for the budget.

Since there were no public hearings on the measure, it was easy for the GOP to side with the construction industry and ignore the majority of its members who want California to reduce greenhouse gas emissions and improve air quality.

A 2006 statewide by the Public Policy Institute of California found that 62 percent of Republicans strongly support state action to ratchet down greenhouse gas emissions. So do 73 percent of Democrats and 70 percent of independent voters.

That same poll found that two-thirds of likely voters for rolling greenhouse gas emissions back to 1990 levels by 2020. That is the legislation that became AB 32.

Finally, there is $5.8 billion that will be on the ballot for voters to agree upon, including a privatization of the lottery (which assumes a $5 billion sale... who is lining up to buy the California Lottery?) that would be a net loss of revenue for the state in the long-term, and $800 billion in raids from various voter-approved funds for things like mental health treatment. Considering how unpopular the legislature is these days, there is no guarantee that any of these will pass, which will leave another hole to fill by June.

These are just some of the details that reinforce the object lesson that major fundamental reforms, in particular repealing the 2/3 rule, are desperately needed. None of the above measures help the state. They were put in to placate a fanatical minority who is emboldened by a conservative veto. Sign the pledge to repeal 2/3.

25 Things About The California Budget

Done for the Facebook reference: I may not get to 25.

1. One bit of schadenfreude in this is that Doug McIntyre of KABC and the comment section of the OC Register are flipping out over the heretics who broke with dogma and voted for tax increases. McIntyre was particularly incensed about a Sacramento Bee editorial lauding Dave Cogdill as a "hero." He's not a hero, he's an extortionist, but McIntyre was calling him a guy who "took money out of your pocket to give to someone else." Typical Yacht Party jihadism.

2. It's very clear to me that this got wrapped up today before the Yacht Party's meeting in Sacramento, just blocks from the Capitol, so the spectacle of the crazies on the lawn demanding that old people eat cat food and public schools use the weeds out back for lunches be averted.

3. Joan Buchanan voted for the budget and then voluntarily cut her pay 10% in the name of shared sacrifice. It's a stunt, but it will probably go down well back home.

4. One loser in all of this is Zed Hollingsworth. He got nothing in this budget for his newly-minted Minority Leadership, including no re-negotiation, and the next major talks may not be until summer 2010, at which point a repeal of 2/3 may be a fait accompli. Meanwhile he's already embarrassed himself by scheduling a $1,000-a-person fundraiser with fat cat lobbyists just HOURS after being made leader, one that generated such bad press he had to cancel it.

5. The big winner in all of this, perhaps the only one? Twitter. In a cavernous Capitol with a dearth of political reporting, the microblogging site was practically the only way to get quality information in real time. It cannot replace in-depth analysis for a mass audience, but it was great for opinion leaders.

6. Though I've knocked him in the past, kudos to John Burton for recognizing the real problem and seeking to boldly fix it. From an e-mail:

If the last 48 hours has proven nothing else, we can no longer allow Republicans to hold the people of California hostage and therefore dictate to the Democratic majority the terms under which the budget is passed.

California should join the 47 other states who don't require a supermajority to pass the budget.

If I am elected as the next Chair of the California Democratic Party, I will make majority vote budget a top priority.

7. The federal stimulus is really helping out to reduce the pain in this budget. It does appear that as much as $10 billion dollars will flow to California in this fiscal year, which would "trigger" some jiggering to the cuts (which would be reduced by $950 million) and the tax hikes (reduced by $1.8 billion). It's an open question whether or not all of them can be spent right away because of the cash crunch, but we'll have to see how the markets react.

8. This is a baseline overview of the deal. The cuts are going to be really, really bad: 10% across the board for education, huge cuts for public transit operations, health care, etc. The new revenues basically fill in the loss of revenue from massive unemployment. Essentially, this is the same level of spending as a decade ago, adjusted for inflation and COLA, despite greater need and higher population. Not pretty.

9. Capitol Weekly reports that the cuts could hit Republican-leaning areas harder:

But data from the Legislative Analyst’s Office (LAO) suggests that cuts under the budget plan approved Thursda morning could likely hit many Republican areas hardest—while the tax burden is already falling more heavily on Democratic leaning counties.

According to the data distributed by Assembly Budget Committee chairwoman Noreen Evans, D-Santa Rosa, the majority of the counties using the most in state services are generally represented by Republicans. When this data on 2007-2008 state spending is compared to registration data from the Secretary of State’s office, it shows that seven out of the top 10 counties receiving state expenditures, measured per capita, have Republican registration majorities. Of the top 10 counties that contributed the most per capita tax dollars in 2006, eight have Democratic registration majorities.

“I hate to put this in partisan terms, but it’s the wealthier counties who are paying that are represented by Democrats,” Evans said. “Everybody needs to take a step back and look at what the data actually says.”

Food for thought.

10. Wrapping the week up into a nice little bow, on the day the deal was secured, they found Lance Armstrong's bike.

11. There's a big TV/film production credit in here. While as a member of the industry I'm mindful of runaway production, I reject the "race to the bottom" that constant credits to get crews to shoot in California presume. It's corporate welfare, essentially.

12. The "single sales factor apportionment," which is the massive business tax cut, doesn't kick in until FY2011, predictably and conveniently after Gov. Schwarzenegger is out of office and it will be someone else's problem to make up the revenue! It's almost like somebody planned it that way!

13. Of the items on the May ballot, only privatizing the lottery would really kill this whole thing and send everybody back to the bargaining table. That would be $5 billion in lost projected revenue for this fiscal year. But it's a NET LOSS OVER TIME, which is what makes the provision so completely absurd. Also, I'm not convinced anyone wants to buy our lottery, as revenue has shriveled in the past year.

14. Arnold still has $600 million in line-item vetoes to make to bring this into balance. Hands up if you think they will impact the poor, the elderly, the blind, and others with almost no voice in Sacramento!

15. Karen Bass is vowing "additional Legislative actions before the start of the new fiscal year on July 1." So get ready for more fun!

There is no 16-25.

More Corporate Welfare

Bloomberg reports that Congresscritters are going to tweak Obama's stimulus package:

Democrats on the Senate Finance Committee will make some “tweaks” to President-elect Barack Obama’s fiscal stimulus plan to add items sought by lawmakers such as a “stronger energy component,” said the tax-writing panel’s chairman.

There is “strong support” among Senate Democrats for additional tax breaks to spur energy production, said Senator Max Baucus of Montana, who held a closed-door meeting today in Washington with Democrats on his committee. He said lawmakers may make a “slight shift” in the portion of the stimulus plan dedicated to tax cuts.

Baucus’s comments open the window for lawmakers from both parties to seek inclusion of favored issues, said New York Senator Charles Schumer, who attended the meeting. “There was a lot of interesting discussion on how to change certain parts and make it better,” Schumer said.

I certainly hope that slight shift in tax cuts falls on the side of less of them, though that's not really what it sounds like. For instance, these business tax cuts could take a flying leap.

As part of economic stimulus efforts, the incoming Obama administration is considering tax changes that could give stumbling financial companies increased tax rebates. Right now, companies can use losses to reduce taxes on any future earnings, as well as on profits going back two years. In theory, a company that lost $10 billion in 2008 would be able to claim back taxes paid on an equivalent amount of taxable income in 2006 and 2007.

This is basically saying that Uncle Same is going to bail out corporations that shoved profits forward, and caused economic meltdown [...] Strangely, this provision will not force executives who sold options on inflated stock values to give the money back, but will allow them to force Uncle Sam to give back tax money. Pretty neat trick to run fictional profits, cash out options, and then have Barack Obama bail out your company with a tax break.

Someone has to explain to me how that will increase economic activity rather than infrastructure spending, direct aid for EITC holders or relief for state and local governments, all of which are crucial to save or increase jobs. And if it's simply necessary, offset it with a return to the Clinton-era tax rates on the wealthiest Americans. The Wonk Room has more on this bonanza for corporate America.

The biggest problem with such a tax break, of course, is that it shrinks the size of the bill that will actually be devoted to stimulus, making it ineffective.

I am somewhat concerned that if we're looking at a $700 billion stimulus and $300 billion is going to tax cuts, some of which will not be very effective stimulus, then the package will be far to small to deal with the size of the contraction.

On the other hand, my hope is that he will have some big boosts to health care spending coming later this year as part of his health care reform plan. We will need much more than $700 billion over two years to combat the downturn, but it does not all have to be in his initial stimulus package.

I'm sure this giveaway is the price of support for Republicans, and we know Obama values consensus. But is it worth minimizing the effectiveness of the bill? Is it worth playing nice with Republicans who aren't likely to reciprocate? And isn't it politically stupid to try and craft a compromise bill from the start instead of through negotiation?

Politically, Obama's generosity is unlikely to be rewarded. The congressional Republican caucus is more conservative and clueless than ever. They will see Obama's preemptive concessions as weakness, not generosity. They are already pocketing them and asking for more. Boehner is grousing about "the size of the package." Mitch McConnell responded by calling for more tax cuts and peddling the lunatic notion that rather than providing grants to states and localities to avoid massive layoffs—perhaps the most effective dollar-for-dollar spending that we can do in terms of saving jobs—the federal government should loan them the money instead [...]

(Obama is) likely to pay a price both in delay and in diminished effectiveness for the plan that emerges. He'd be more likely to get a big and bold plan passed swiftly if he had put together his package, called on the Congress to pass it, invited Republicans to join or take the risk of standing in the way, while saving any concessions on business taxes until the end if he actually needed to round up the votes. I suspect that he'd have won just about as much Republican support that way.

Obama seems to be choosing a path that builds consensus at the potential cost of effectiveness. But if the plan fails, he'll take the blame no matter how many Republicans vote for it. And Republicans will attribute the failure to government spending, no matter how much of the plan consists of tax cuts.

Absolutely. Time to be bold. I fear Obama is not getting the message.

Magnificent Disaster

As Emperor Paulson dithers and shuffles papers pretending to look busy implementing the bailout, the lobbyists are lining up for their piece of the bailout cash, and apparently, nobody is keeping tabs on them:

In the six weeks since lawmakers approved the Treasury's massive bailout of financial firms, the government has poured money into the country's largest banks, recruited smaller banks into the program and repeatedly widened its scope to cover yet other types of businesses, from insurers to consumer lenders.

Along the way, the Bush administration has committed $290 billion of the $700 billion rescue package.

Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

"It's a mess," said Eric M. Thorson, the Treasury Department's inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. "I don't think anyone understands right now how we're going to do proper oversight of this thing."

Considering that the Treasury Secretary can hold press conferences pledging to do the exact opposite of what he initially asked for in the bill, considering that his department can change the tax code to provide a huge windfall to banks, telling me there's "no oversight" seems a bit self-evident.

In fact, the bailout plan itself appears to be working just as the Bush Administration hoped - as a "free-fraud zone" for moneyed interests to get paid off during an economic collapse. They even staffed it with one of the same guys that handed out bricks of cash to contractors in Iraq, before deciding that was too on the nose.

Under cover of an emergency, Treasury is rapidly turning into an economic Green Zone, overrun with private companies collecting lucrative contracts. Fittingly, one of the first to line up at the new trough was none other than the law firm of Bracewell & Giuliani — yes, that Giuliani. The firm's chairman, Patrick Oxford, could scarcely conceal his glee over the prospect of cashing in on the bailout. "This one," he told reporters, "is very, very big." At least four times bigger, in fact, than the post-9/11 homeland-security bubble, from which Giuliani and his various outfits have profited so extravagantly. Even bigger, potentially, than the price tag for the Iraq War itself.

See if any of this sounds familiar: As soon as the bailout was announced, it became clear that Treasury officials would hire outsiders to perform their jobs for them — at a profit. Private companies wanting to help manage the bailout were given just two days to apply for massive, multiyear contracts. Since it was such a mad rush — after all, the entire economy was about to implode — there was no time for an open bidding process. Nor was there time to draft rigorous rules to make sure that those applying don't have serious conflicts of interest. Instead, applicants were asked to disclose their conflicts and to explain — and this is not a joke — their "philosophy in fulfilling your duty to the Treasury and the U.S. taxpayer in light of your proprietary interests and those of other clients." In other words, an open invitation to bullshit about how much they love their country and how they can be trusted to regulate themselves.

I guess there's one positive - at least Treasury is hiring!

Meanwhile, Bush is headed to a meeting of world leaders to tell them they'd better not get any funny ideas about fixing his mess.

Nov. 13 (Bloomberg) -- President George W. Bush today will urge leaders of the world's biggest industrial and developing economies not to abandon principles of free-market capitalism as they seek an escape from the international financial crisis, calling it the "best system'' for delivering growth.

In a speech in New York before weekend talks among leaders from the Group of 20 nations, Bush will say policy makers "should fix the problems we have rather than dismantle a system that has improved the lives of hundreds of millions of people around the world,'' according to a statement released by the White House [...]

For all his defense of markets, Bush this year extended the reach of government by backing bailouts of American International Group Inc., Bear Stearns Cos., Fannie Mae and Freddie Mac. His administration is also implementing a $700 billion financial rescue program which U.S. Treasury Secretary Henry Paulson yesterday shifted toward relieving pressure on consumer credit, scrapping an effort to buy devalued mortgage assets.

Of course, corporate welfare and socialism for the rich IS the "free-market system" that Bush is defending. It's the only type of economy he has ever known.

Wherein I Hate On Democrats

Now, I think the fundamentals are still very positive for a Democratic victory in November, and probably a significant one. Just like how Barack Obama never really topped 45% in Pennsylvania in any poll, and that was where he ended up, John McCain has similarly not topped 45% in any poll, and that appears to be close to his ceiling.

However, Democrats have a lot of opportunities for self-inflicted wounds (outside of intra-party warfare that goes all the way to the convention), and in general they should stay away from those pitfalls. Let me enumerate:

• Apparently both Sen. Obama and Sen. Clinton are pushing a bogus piece of science that suggests that autism is related to vaccinations. That not only is wrong, it has the potential to create a serious public health problem. Vaccinations save lives. They need to stop this silliness and not use their podium and their power to spout bad science. It's disheartening to those who believe science will make a comeback with a new President.

• Al Gore needs to move beyond praising legislators just for paying lip service to the fight against global warming. That's something you could afford to do 2 or 3 years ago. The consensus is further along now, and so is the sense of urgency. John McCain's climate proposals are woefully insufficient, the product of bad "bipartisanship" which posits that the midpoint of any two perspectives must be the best policy, when actually it would be a handout to corporate polluters and a walk away from solving the problem. Gore needs to do more than just pat people on the head, but advocate strongly in the policy arena.

• While Charles Gibson asked a B.S. question about capital gains taxes that relied on an artifact to make its point (it's a long story, but basically people hold back selling stock when they find out there would be a cut in the tax rate on capital gains, leading to a SHORT-TERM increase in revenue that doesn't sustain over the life of the cut), both Democrats kind of agreed with him because they don't think Americans can handle the truth about taxes.

This gets to a generalized problem in Democratic tax talk, which is that they're very unwilling to talk about taxes in terms of value. There are lots of government services which are actually a good deal for middle income families and should be sold as something that Americans would be wise to invest in. But rather than making a positive case around awesome stuff we're going to get, Democrats talk about taxes in complete isolation from the things that taxes buy, and begin with the premise that they're so odious and painful that they should only be levied on folks too rich to notice.

That is the gospel's truth, and reframing the tax argument as the dues you pay for civil society is so urgently needed or else we'll always wind up back here.

• I'd have to see the numbers, but Paul Krugman is arguing that Obama's comment about bitter voters turning to social issues to base their choices when economic issues should drive things may be true (I think black voters may get included in Larry Bartels' sample and skew it). There's an affluent, aspirational, exurban community that is much more motivated by social issues because they have the luxury to do so. However, those are the voters feeling most squeezed by the housing crisis, so we can actually put this to the test in November.

• Democratic silence in the Congress over the bailout of large investment banks is quite disturbing. This is corporate welfare at its most brazen.

It is remarkable that only a right-winger like Will seems upset about the Fed giving taxpayers' money to the very richest people in the country with no strings attached. This makes the battles over programs like the State Children's Health Insurance Program look like silly charades. If the government can cough up uncounted billions for the country's richest people when they get themselves in trouble due to their own stupidity, with no questions asked, isn't absurd that we must have a huge fight over getting $7 billion a year to extend health insurance to kids?

• Finally, whoever said this is not paying enough attention:

There is much speculation that the Democrats will run Mr. Lieberman out of their caucus (he now sits with Democrats and votes with them on most issues not related to the war) if they widen their margin in the Senate after the November elections. But Harry Reid of Nevada, the Senate Democratic leader, has pledged that he would not disown Mr. Lieberman under those circumstances and said he considered him a good friend.

A member of the Senate Democratic leadership, who insisted on not being identified, said: “The bloggers want us to get rid of him. It ain’t happening.” He added: “We need every vote. He’s with us on everything but the war.”

That's not true, actually. He's been dead weight on the Government Affairs committee, and on an array of national security issues he votes with Republicans. And he's endorsed the opposing candidate for President, which is really the last straw and grounds for dismissal. It's disqualifying.

Democrats broadly need to get better on all of these things. It's still a long road.

Corporate Welfare

E.J. Dionne finally says it:

Never do I want to hear again from my conservative friends about how brilliant capitalists are, how much they deserve their seven-figure salaries and how government should keep its hands off the private economy.

The Wall Street titans have turned into a bunch of welfare clients. They are desperate to be bailed out by government from their own incompetence, and from the deregulatory regime for which they lobbied so hard. They have lost "confidence" in each other, you see, because none of these oh-so-wise captains of the universe have any idea what kinds of devalued securities sit in one another's portfolios.

So they have stopped investing. The biggest, most respected investment firms threaten to come crashing down. You can't have that. It's just fine to make it harder for the average Joe to file for bankruptcy, as did that wretched bankruptcy bill passed by Congress in 2005 at the request of the credit card industry. But the big guys are "too big to fail," because they could bring us all down with them.

Enter the federal government, the institution to which the wealthy are not supposed to pay capital gains or inheritance taxes. Good God, you don't expect these people to trade in their BMWs for Saturns, do you?

This is so overdue. We've essentially in the Bush era set up a kind of corporate Marxism, where risk is socialized, but where wealth is privatized. And the middle class, in this case homeowners, are the only ones who feel any pain.

Ben Bernanke believes that he can save the economy by managing and financing the ultimate downfall of these financial institutions. Which is fine, because the alternative is a massive meltdown of the entire system. But let's call it exactly what it is. And let's no longer allow the other side to say things like "let the market make its own decisions," because they only believe that when they're not affected. This is a bailout, and it's government intervention into the markets to save them. Because they currently are non-functional and unregulated.

Greed

How do you deal with something like this? Really, how do you stop a process where someone who destroyed his company, caused pain for thousands of employees and hundreds of thousands of homeowners, ends up with this kind of windfall?

Countrywide Financial Corp. founder Angelo Mozilo, one of the nation's highest-paid chief executives, stands to reap $115 million in severance-related pay if his troubled company is acquired by Bank of America Corp., regulatory filings show.

Free rides on the company jet are also included in Mozilo's departure deal, and the company will pick up his country club bills until 2011 [...]

"This is a failed chief executive -- a failed and overpaid chief executive -- who has driven his company to the brink of bankruptcy," said Daniel Pedrotty, director of the office of investment at the AFL-CIO. "I think shareholders are going to be especially outraged if he walks away with another pay-for-failure package."

But the idea that shareholders control the process is a myth. The board does what the board wants. And more than anything, this is what causes recession; the redistribution of wealth upwards means that ordinary consumer spending suffers due to a lack of resources. And yet so many of these corporations rely on that same consumer spending.

Government has mechanisms to deal with corporations that break the public trust. They apply for charters which are reviewed periodically. They have "personhood" status under the law which doesn't have to remain.

There's a way to channel this outrage.

The Fetishization of Earmarks

So we hear a ton about earmarks. The President had steam coming out of his ears today, saying he's going to have his budget director look at "erasing wasteful spending" (I guess he found a line-item veto in his stocking this year). And Tom Coburn is rightly raising hell about how Don "Road To Nowhere" Young managed to get an earmark into the 2005 highway bill after it was voted on by both houses of Congress.

An Oklahoma senator who has been a strident critic of the "earmark favor factory" has asked for an investigation into how money was earmarked for a study of a highway interchange next to environmentally sensitive land in Florida.

The $10 million earmark was slipped into the 2005 highway spending bill, a $286.4 billion behemoth overseen by Rep. Don Young, R-Alaska, then chairman of the House Transportation Committee.

Sen. Tom Coburn, R-Okla., has asked for an investigative panel with subpoena power to determine who placed the so-called Coconut Road study into the highway bill [...]

The earmark first drew the attention of Florida road planners when they learned they'd received $10 million for the study even though it wasn't one of their transportation priorities. They'd originally sought an earmark that would direct $10 million for the widening of Interstate 75 in Lee County, Fla.

An enrollment clerk changed language in the earmark after Congress had already voted on it, erasing I-75 and adding the words "Coconut Road" as it was being cleaned up to be sent to President Bush for signing.

And again, I agree with Coburn that we must investigate these extra-Constitutional means to add spending into a bill that nobody ever voted on (even though a later bill would fix the glitch and divert the money away from Coconut Road, a bill which Coburn is holding up until he can get an investigative panel). But I highlighted the amount in the bill: ten million dollars. A lot of money, to be sure, but the federal budget is in the trillions. Canceling one improper ten million-dollar earmark isn't going to get us out of our budget mess.

I'll tell you what would: reducing the obscene defense budget.

Last week, both houses of Congress approved the conference report on the Fiscal Year 2008 Defense Authorization bill, H.R. 1585. The bill includes $506.9 billion for the Department of Defense and the nuclear weapons activities of the Department of Energy. The bill also authorizes $189.4 billion for military operations in Iraq and Afghanistan. This funding is NOT counted as part of the $506.9 billion.

Center for Arms Control and Non Proliferation has an itemized description of what's in the budget.

The amount of Cold War lard is truly astonishing, especially given the fact that the military itself is hollering from the hilltops that it can't be responsible for all of our national security needs and that today's problems just don't have military (read "Cold War weapons systems") answers.

Keep in mind, today's defense spending is 14% above the height of the Korean War, 33% above the height of the Vietnam War, 25% above the height of the "Reagan Era" buildup and is 76% above the Cold War average.

And none of it would have stopped 19 men with boxcutters from getting on to commercial aircraft, nor will any of it get the Sunnis and Shiites to reconcile in Iraq, nor will it help lift hundreds of millions out of the crushing poverty that enables many of them to turn to radical Islam.

The defense budget is a joke. Somehow we're demagogued into believing that we must give as much money to defense contractors as possible, lest we be seen as soft on national security. That's a front for massive amounts of corporate welfare which would go a long way to balancing our budget, far longer than the spare earmark for a road.

But you'll never hear any of these so-called "pork-busters" talk about that. They'll rage against all kinds of federal spending, some of it very noble, as long as it's inserted into a bill in a particular way. Defense earmarks, which is where these two pieces of spending come together, totaled $12 billion dollars in 2005. That's a drop in the bucket compared to the total defense budget. Outdated weapons systems, useless missile defense programs, and the like are the way to fiscal responsibility, not Coconut Road.

Who's Bailing Who?

In case you were wondering, yes, we're still in the midst of a major housing crisis. Home sales are down in Southern California by 43%, for example. And foreclosure rates may be starting to stabilize, but that still means that many are losing their homes, plus the rate resets scheduled for next year could transform that trend real quick.

A lot of economists, the Treasury Department, and George Bush himself are making a lot of noise about saving people's homes. But that's not even close to what this is about. This is about bailing out banks who made a lot of horrible decisions and don't want to pay for them.

That's not the first thing you'd think when you hear this quote from St. Greenspan:

GREENSPAN: Well, I think it's important to recognize that there are a very large number of people who are in very major stress and having great difficulty in paying off their mortgages and even when they've tried exceptionally hard.

But when you think of how you come to grips with this, it's important to help those people outside -- without affecting the mortgage rates and without affecting the structure of markets. Cash is available and we should use that in larger amounts, as is
necessary, to solve the problems of the stress of this...

STEPHANOPOULOS: Cash from the government?

GREENSPAN: Cash from the government, yes. In other words, if you're going to do that, it's far less damaging to the economy to create a short-term fiscal problem, which we would, than to try to fix the prices of homes or interest rates. If you do that, it'll drag this process out indefinitely.

This is not at all what it seems, however. Companies like Merrill Lynch and Morgan Stanley are taking billions of dollars in "write-downs," which basically means a total loss on a portion of their securities. Practically all of those bad securities are due to mortgages that have been defaulted on. The banking industry is in serious crisis and looking for a handout. And while they're getting it from the Federal Reserve, to the tune of $20 billion in short-term loans, and also in foreign investment (Morgan Stanley got a $5 billion dollar stake from China today), it's far more palatable to make it look like a bailout for John and Jane Doe than for Mr. $100 million dollar bonus CEO. When it would have meant something to take action, before the thousands upon thousands of foreclosures, the Fed and the Bush Administration stood mute.

Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.

But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.

In 2001, a senior Treasury official, Sheila C. Bair, tried to persuade subprime lenders to adopt a code of “best practices” and to let outside monitors verify their compliance. None of the lenders would agree to the monitors, and many rejected the code itself. Even those who did adopt those practices, Ms. Bair recalled recently, soon let them slip.

And leaders of a housing advocacy group in California, meeting with Mr. Greenspan in 2004, warned that deception was increasing and unscrupulous practices were spreading.

John C. Gamboa and Robert L. Gnaizda of the Greenlining Institute implored Mr. Greenspan to use his bully pulpit and press for a voluntary code of conduct.

“He never gave us a good reason, but he didn’t want to do it,” Mr. Gnaizda said last week. “He just wasn’t interested.”

Of course he wasn't interested. It didn't affect him or his fellow shareholders. But as soon as it did, suddenly the financial aid packages just HAD to kick in. For the good of the people, you see.

I suspect there will be a bailout of "Big Shitpile," laundered through the false "good intentions" of cash payments to homeowners. What that bailout won't go is give any incentive to the banks or the lenders to be careful ever again. Because they can always count on that yummy corporate welfare to bail them out.

Fourth Amendment For Me But Not For Thee

Are you poor? Black? Hispanic? Congratulations! The city of San Diego wants to look at everything you own without a warrant! All of this is in the context of ensuring that there are no "cheaters" and that money distributed to the poor by the state is being done legitimately. This is actually a Constitutional question that was upheld in 1971. Oddly enough, and sit down for this one because it's shocking, it's only ever applied to the poor and not the literally millions of other entities, whether corporate or agricultural, who receive the same type of largesse.

If waiving one's Fourth Amendment rights based on the receipt of government funds were applied outside of the impoverished, most people would instantly see the problem. Given the number of people who benefit from some kinds of government subsidy, the government could simply abrogate the Bill or Rights through its spending power. This can't be right. And whether or not it's unconstitutional, certainly these kinds of searches without cause are bad policy, for the same reasons. As soon as executives at Archer Daniels Midland agree to waive their Fourth Amendment rights, we can start talking about welfare recipients.

I know that the Fourth Amendment is no longer operative, so this may be something of a moot point. But it's so clear that those quick to jump on the indigent for "ripping off the taxpayer" has no similar fervor for those in corporate America. I was astonished when I heard Bill Richardson use the phrase "corporate welfare" at the Yearly Kos Presidential Forum. Maybe some of our more progressive cities might want to start barging in to some corporate offices just to make sure their books are the same as they claim. Who knows, maybe we can end welfare as we know it again.

End Corporate Welfare

People try to devise these triple bank-shot solutions to our most pressing problems, involving miniscule increases in tax rates to raise revenue, or incentives for engaging in particular actions above a certain threshold, or experimental pilot programs that may be turned into laws at a later date, when in actuality, the simplest and most effective way to solve so many of our problems is just to stop giving away the federal treasury to corporations that don't need the money:

Senate Democrats are seeking a major reversal of energy tax policies that would take billions of dollars in tax breaks and other benefits from the oil industry to underwrite renewable fuels.

The tax increases would reverse incentives passed as recently as three years ago to increase domestic exploration and production of oil and gas. The change reflects a shift from the Republican focus on expanding oil production to the Democratic concern about reducing global warming.

On Tuesday, the Senate Finance Committee will take up a bill that would raise about $14 billion from oil companies over 10 years and would give about the same amount of money on new incentives for solar power, wind power, cellulosic ethanol and numerous other renewable energy sources. The bill is one of the signature issues this year for Democrats, along with immigration and the war in Iraq, and one in which they hope to clearly distinguish themselves from the Republicans.

There's no reason that oil and gas companies need billions of dollars in incentives for domestic exploration. Their incentive to find oil is that they can sell it for a lot of money. That's how capitalism works, I thought. They spend the capital to extract the product, and then sell it at a profit. But we don't have capitalism in this country, we have a rigged system of corporate welfare payouts where a company gets to a certain size where they don't have to spend a dime in labor costs or taxes or infrastructure because it's all paid for them by the government. And we talk about the evils of "nationalizing" industry.

Take away the incentives and subsidies, demand royalties for drilling on federal land and shore, and plow that money into renewables (which, by the way, could go to the same companies, if they wished to alter their business model to a sustainable one). Governments should incentivize what they want more of and tax what they want less of. We do the opposite, and it ought to stop. And I'm not talking about energy independence, which I agree is a stupid poll-tested phrase that doesn't reflect reality. I'm talking about severely reducing greenhouse gas emissions to mitigate the inevitable impact of global warming, instead of just passing out checks to anyone who'll pull oil or coal out of our ground or water.

Arnold's Canadian Vacation - All-Expenses Paid!

This is about the eighth time I've seen a report simliar to this one that undisclosed donors are financing a Schwarzenegger trade mission.

Fifty-two business delegates will join Schwarzenegger on the trip, according to a list the Governor's Office released Friday. A third of those going represent interests that have donated to Schwarzenegger's campaigns.

The governor's trip will be financed by the California State Protocol Foundation, a tax-exempt organization not required to disclose its donors. California Chamber of Commerce leaders, including President Allan Zaremberg, serve as the group's officers.

The foundation is not required by law to disclose its contributors and has not done so. In 2005, the last year for which IRS forms were available, the group received nearly $2 million in revenue. It reported $1 million in travel expenditures that year after Schwarzenegger led a weeklong trade mission in China.

The excuse put forth by the Governor's spokespeople is always the same: this SAVES taxpayer money because they don't have to finance these trade missions! Really? What about all the corporate welfare checks that get cut as a result of this access? What about all the watered-down regulations that cost taxpayers, not only with money but with public health and quality of life? What about the state contracts that could go to lower bidders who don't have the same relationships (read: bribery poke) with the Governor?

Frank Russo is right:

Take a look around and you'll see that this is a bipartisan problem that needs fixing--the same way that a true reformer, Hiram Johnson-- took on the railroads which controlled our state a hundred years ago. His legacy is a California Constitutional prohibition against accepting any gifts of free transportation from railroad or other transportation companies. It needs to be extended to cover today's corruption, subtle and otherwise, of our elected officials. [...]

We've seen a record of obscene campaign contributions in California the last election cycle--topping $600 million dollars. The next campaign season is upon us, and the Governor has proposed bans on fundraising during certain months of the year when the budget is being considered and at the end of the session and bill signing times. The California Progress Report has railed against the influence of campaign contributions on the political process and the corruption of state government. But these other "gifts" to public officials also need to be scrutinized.

Action is needed, not because our elected officeholders are corrupt--any more than anyone else--but because they are human and influence is why campaign donations and private funding for trips and the like are given by private interests in this state. The same was true in when bold Progressive Reforms were needed in 1911 and human nature is the same today. Only now it's not the railroads.

It should frankly be outlawed for a private company with business before the state to finance the Governor's travel, especially when it's supposed to be official business. This is government for sale from the guy who was supposed to be such a big reformer because he was richer than dirt. This is also why I've been so adamant about the CDP-Chevron donation. Influence peddling in the capital is an epidemic that needs to stop.

A Government Without A Head

There are these two big scandals looming under the surface that are affecting people right now, and they cannot be twisted as political, they cannot be explained away by blaming Democrats or Bill Clinton or whatever trick the executive branch wants to use. They are the pet food scandal (I should say human food too at this point) and the student loan industry scam, which was well-known to this government for six years and yet they did nothing to stop it, allowing predatory lenders to buy their way into university's favor and limit choices for consumers. These aren't political scandals; they're simply the obvious outgrowth of an ideology that views the mechanisms of government with contempt, and perceives power as a way to make money for cronies and friends.

In the case of both the student loan industry and the pet food industry, oversight was non-existent, and companies were allowed to subvert the rules at the expense of taxpayers. This is not incidental - it's what Republicans call "good, solid American enterprise." This is exactly what they want, and they turn a blind eye to the consequences. As someone said to Bill Kristol in his embarrasing display of a debate with Robert Kuttner at yesterday's "Failure of Conservatism" conference, "Why is it that, 6 years after 9-11, this government can't guarantee the safety of my cat's food supply?" The answer is because they have no interest in it. And Republicans usually won't tell you that, although sometimes they'll slip up and tell the truth:

Health and Human Services Secretary Tommy G. Thompson today joined an exodus from President Bush's first-term Cabinet, announcing his resignation at a press conference in which he also warned that the world faces a potentially catastrophic flu pandemic and that the U.S. food supply is vulnerable to terrorists [...]

Thompson said he also worries constantly about food poisoning.

"I, for the life of me, cannot understand why the terrorists have not, you know, attacked our food supply because it is so easy to do," he said. "And we are importing a lot of food from the Middle East, and it would be easy to tamper with that."

Although inspections of food imports have risen sharply in the past four years, "it still is a very minute amount that we're doing."

That idiot wants to be President, after he admitted that in four years as Health and Human Services Secretary he made no effort to inspect the human food supply coming into the country.

But there are even more examples of this failure of governance that have come out in the last couple days. The White House used a rural Internet financing program to reward rich companies, and did nothing to actually finance Internet infrastructure in rural areas, which was its intent:

Members of a House committee charged yesterday that a five-year, $1.2 billion program to expand broadband Internet services to rural communities has missed many unserved areas while channeling hundreds of millions of dollars in subsidized loans to companies in places where service already exists.

The Post reported that since 2001 more than half the money has gone to metropolitan regions or communities within easy commutes of a mid-size city. An Internet provider in Houston got $23 million in loans to wire affluent subdivisions, including one that boasts million-dollar houses and an equestrian center.

Congress created the rural broadband program in 2002. To date, according to Andrew, 69 loans for $1.2 billion have been approved to finance infrastructure in 40 states. Only 40 percent of the communities benefiting were unserved at the time of the loan, Andrew said.

They can't implement laws they've passed because they have no interest in doing so. And the laws they don't like, they try to change, if the change can reward big businesses or their own pocketbooks:

An Interior Department official who was recently rebuked for altering scientific conclusions to reduce protections for endangered species and providing internal documents to lobbyists resigned Monday, officials said.

Julie A. MacDonald, a deputy assistant secretary who oversaw the Fish and Wildlife Service's endangered species program, also faced conflict-of-interest questions in a report issued by the Interior Department's inspector general in March. [...]

In 2004, MacDonald was criticized for overruling field biologists on the habitat requirements of the greater sage grouse, disputing their conclusion that oil and gas operations could interfere with the birds' breeding and nesting.

The inspector general's report outlined instances where MacDonald, a civil engineer with no formal training in natural sciences, advocated altering scientific conclusions in ways that favored development and agricultural interests.

H. Dale Hall, director of the Fish and Wildlife Service, told investigators that MacDonald overrode field experts on designating habitat for the endangered southwestern willow flycatcher.

Hall, a wildlife biologist, told investigators he was in a "running battle" with MacDonald over the issue. Hall said MacDonald had a particular interest in endangered species rulings that affected California because her husband had a ranch in the state.

California property records show that MacDonald and her husband, Charles, own 80 acres identified as crop land in Yolo County near Sacramento.

McDonald was about to face a House committee on this issue, so she did the brave thing and resigned first.

Right wingers like to call the anger that comes from hearing these stories "Bush Derangement Syndrome." Actually, the anger comes from living in a country where anarchy is reigning. The government doesn't exist for any primary function other than profit-taking. This makes principled, reasonable people furious, because it's our government, and we're paying the price. I guess those who would rather spin the truth and dismiss the effects, one must conclude, enjoy being ripped off this way, and don't care that their government has been turned into a cash register for the rich and connected. I do care, and so do a lot of people. At the roots, this is the real reason that conservatism is a dirty word nowadays. People actually want a government they can count on to be minimally competent in carrying out its mission and its policies. That is sadly lacking today.

Get the Minimum Wage Bill to the White House already

OK, I'm going to slam the Democratic leadership again. In general I think they're doing a good job, but this one baffles me.

So the House and Senate decided on a compromise on how much money in corporate welfare it'll cost to give poor people a $2/hour pay raise (turns out it's $5 billion. They also had to throw out a limit to deferred compensation plans, which are a major corporate giveaway.

So, the bill's done, and the President has incdicated that, with these welfare payments to corporate America in place, he'll sign it. So the Democrats threw it into the Iraq spending bill?

The White House has indicated support for the minimum wage increase, but the measure is attached to an emergency spending bill for the Iraq war that President Bush has threatened to veto. Should he follow through on the threat, Democrats are likely to revive independent minimum-wage legislation.

Look, everybody's already on the record on this legislation. Those who voted against it will alredy be clubbed by negative ads. I sort of get that you can club those who voted for it in the first place with a "Congressman X voted against the minimum wage" ad when the Repubs vote against the final Iraq bill en masse, but here's the thing. Somewhere in America tonight a family is going hungry. They have to figure out if they're going to buy medicine or pay the rent. They have to figure out which child gets a Christmas gift this year, or if they don't. They actually need this pay raise, without delay. The House is for it, the Senate is for it, the President is for it. But the Dems just want to play a little bit more politics with it before these people can get their money.

Even if that's not a consideration, because the wage increase are gradual and timed and those timings won't change with a delay in passage (I'm not convinced), Democrats need to get a piece of their agenda to the President's desk. Most of the other 100 hours legislation has been bottled up in the Senate or in conference. Nothing's become law. The minimum wage is low-hanging fruit, and even though I detest the fact that you have to give rich businessmen money to let a poor guy make $7 an hour, this would be a major accomplishment. It should happen immediately.