“The Failure Of A Theme”: “We Built It” On The Taxpayers Dime
The Republican National Convention’s organizers probably thought they were being clever. They announced this week that on the second night of the gathering — with local, state, and federal officials standing by to help in the event of a hurricane — they’d host a “We Built It” day.
The idea, of course, is to mock President Obama’s belief that public institutions and government investments help create a society in which the private sector thrives. Republicans intend to host their “We Built It” day in an arena largely financed by taxpayers.
Wait, it gets worse.
On the day that the GOP convention will tout Fox-fueled myth “We Built It” as its primary theme, Delaware Lt. Gov. candidate and small business owner Sher Valenzuela is slated to deliver a speech about small business issues. But contrary to the evening’s theme, Valenzuela’s company, First State Manufacturing, has received millions of dollars in federal loans and contracts. Valenzuela has not only attributed her success in part to this outside assistance, but urged other small business owners to follow the same strategy of seeking government funds.
Media Matters found that Valenzuela even gave a presentation earlier this year on her small business success, crediting the use of “millions of dollars in secure government contracts.” She encouraged other entrepreneurs to take advantage of public institutions and government investments to help their businesses get ahead.
Making matters slightly worse, a featured guest at a Paul Ryan event yesterday boasted about getting government funding to help build his business, and in a new op-ed on his private-sector background, Mitt Romney boasted today about the success of many Bain businesses, several of which have benefited from government largesse.
As attacks go, this out-of-context smear has always been problematic. Romney was desperate to prove that American free enterprise thrives without the support of government, but when he pointed to examples, they all thrived thanks to the support of public institutions and tax dollars. This happened over and over and over and over again, ultimately proving that the entire line of attack is self-defeating.
And the problem will apparently continue, as if self-awareness no longer matters at all.
By: Steve Benen, The Maddow Blog, August 24, 2012
“No Budget, No Pay”: How To Get Congress On Good Behavior
If taxpayers want better results from Congress, they must stop paying their elected officials for failure. After all, you get what you pay for.
That’s why I’ve introduced a bill called No Budget, No Pay. It’s not your typical congressional reform. It is the first effort to pay Congress for performance, the way that an increasing number of doctors, teachers, corporate executives, athletes, and other professionals are paid.
The bill, H.R. 3643, is so simple that it sells itself. If Congress fails to pass a budget and all 12 appropriations bills by the beginning of each fiscal year, October 1, congressional pay will stop. If Congress is even a day late, the penalties could be hundreds of dollars per day per congressman. Longer delays mean greater penalties (and the missed pay cannot be retroactively restored). It’s a harsh regime, but a necessary one. Our nation suffers when Congress fails to pay America’s bills on time.
Today’s Congress has not passed a budget in three years and has not completed all of its budget and appropriations bills on time in 15 years. Few incumbents can even remember meeting these obligations. This is no way to run a superpower.
Congress is so accustomed to today’s back-loaded schedule that it cannot imagine efficiency. Congress barely meets in January and February and, this year, the House was in session for only 10 days in May. Each house delights in passing bills that are dead on arrival in the other body. No Budget, No Pay would make the House and Senate actually talk to one another again. The heat from members to meet the deadline would be so intense that Congress, as a whole, could start forging deals.
A conventional reform would simply levy a flat penalty to punish Congress for tardiness. That’s like yanking a teenager’s allowance because he misbehaved. The goal should be to encourage better behavior. The threat of cutting congressional pay would do precisely that.
Properly understood, No Budget, No Pay is gentler than you think. It will not result in a single senator or congressman losing any pay. The reason: When everyone has an incentive to meet a deadline, you naturally finish on time, even early. For example, when California legislators tried it, they suddenly got much better at meeting deadlines. This is the power of aligned incentives: When everyone is on the same team, you have a much better chance of winning. The threat of punishment is more effective than the punishment itself.
This new type of reform engages the most powerful lobbyists on earth: congressional spouses. No one wants to miss a paycheck, especially spouses who are tired of excuses. These spouses will force Congress to work much harder much earlier in the winter and spring, instead of procrastinating into the summer and fall. Remember, members’ spouses have never let Congress miss a major holiday like Christmas. No Budget, No Pay puts October 1 in the same elite category as December 25.
The dirty secret of today’s Congress is that many members actually benefit from missing our financial deadlines. When they hold up negotiations, highlight a parochial cause, and take a budget or appropriations bill hostage, they get lots of free publicity and become a hero to the special interests they are protecting. This helps them finance their reelection campaigns. Some of their colleagues will honestly object to the delays, but most are just waiting for their own chance to grandstand. Meanwhile, taxpayers suffer because government agencies are crippled with unpredictable funding starts and stops on a month-to-month or even week-to-week basis. Sometimes a key agency like the Federal Aviation Administration is even forced to shut down many of its operations, as happened last August.
Having experienced (and often envied) their colleagues’ selfishness, many members are naturally afraid to be held accountable for the behavior of Congress as a whole. They are particularly afraid to vouch for the other body, either the House or Senate. Social scientists call this a collective action problem. It seems foolish to bet a paycheck that any group of politicians will be prompt. But these doubters have never been in a capitol where everyone was desperate to get paid.
Some fear that wealthy colleagues could afford to grandstand, while poorer members would be deprived of that free publicity. This is possible, but the rich are just as vulnerable to peer group pressure, sometimes more so, because they do not want to be stigmatized for being wealthy. The vast majority of members in the Senate and House need their paychecks and would be quick to ostracize anyone who slowed the budget process down, particularly a rich colleague. Fearing for their positions, party leaders would also make sure that wealthy members were not able to obstruct.
The task is an urgent one. The bill currently has 10 cosponsors in the Senate and 73 in the House. We need more cosponsors now, because there are only a few weeks left in this session of Congress before the November elections. Of course, Congress will miss its October 1 deadline again this year, but passage of No Budget, No Pay this fall would help us meet the deadline next year, in October of 2013. Unless Congress passes No Budget, No Pay this session, no adjustments to congressional pay will be possible until at least 2015, because the 27th Amendment requires an intervening election before any adjustment to congressional pay.
Since no president or Supreme Court has the constitutional power to reform Congress, Congress must heal itself with help from voters back home. Ultimately, Congressional medicine is like veterinary medicine: It must be strong enough to work, and tasty enough to swallow. No Budget, No Pay meets all these tests. It is hugely popular with voters, potent enough to make Congress meet the annual October 1 deadline, and palatable to members once they understand that they will be paid — because they will finish their work on time.
By: U. S. Rep Jim Cooper, The Atlantic, July 26, 2012
“Only A Suggestion”: Joe Ricketts Demands Massive Taxpayer Subsidies For Baseball Stadium
This week, the New York Times reported that Joe Ricketts, a right-wing billionaire and founder of TD Ameritrade, is soliciting multi-million dollar ad proposals to attack President Obama. One such proposal, leaked to the paper, was a $10 million, racially-charged campaign entitled “The Defeat of Barack Hussein Obama: The Ricketts Plan to End his Spending for Good.” The proposal, which center on Rev. Jeremiah Wright, suggests hiring an “extremely literate conservative African-American” to break down Obama’s image as a “metrosexual, black Abe Lincoln.”
Ricketts moved quickly to publicly reject the plan after it leaked. His spokesman said it “reflects an approach to politics that Mr. Ricketts rejects and it was never a plan to be accepted but only a suggestion.” (The statement seems somewhat disingenuous as the Ricketts had already given “preliminary approval” for the $10 million concept after seeing a separate ad about Jeremiah Wright.) Nevertheless, Ricketts’ spokesman confirmed his intention spend money attacking Obama through an organization he controls called “Ending Spending Political Action Fund.”
There is one area, however, where Ricketts is much more open to government spending. He’s seeking a massive government subsidy for the Chicago Cubs, which he owns with his family, to renovate Wrigley Field. Here is the deal the Ricketts family is seeking, via Crain’s Chicago Business:
That means $300 million is needed for the ballpark proper.
Half would come from the team, presumably in increased revenue from more signage inside Wrigley and retail and other entertainment in what amounts to a game-day carnival on Waveland Avenue on Wrigley’s north side and Sheffield Avenue to the east.
And half would come from $150 million or so in bonds to be retired with increased revenue from the existing city and Cook County amusement taxes on ticket sales. Specifically, debt service would get the first 6 percent in growth above a base level of around $15 million a year now.
But it’s a little more complicated than that.
The team also wants a 50 percent cut of any increase in amusement tax revenue growth above 6 percent. And unlike the bonds, which would be retired in 30 or 35 years, that would be forever.
So Joe Ricketts and his family not only want a $150 million subsidy directly from taxpayers but also a large chunk of tax revenue from the city in perpetuity. In other words, taxes from the City of Chicago would no longer go to roads, schools and police officers but also into Joe Ricketts pocket. Without this taxpayer welfare, the family will presumably let Cubs, which they acquired in a highly competitive bidding process in 2009, play in a stadium that is falling into disrepair.
Ricketts negotiating position seems completely at odds with his public stated political views. In a video posted by another organization he controls, Taxpayers Against Earmarks, Ricketts says “I think it’s a crime for our elected officials to borrow money today, to spend money today and push the repayment of that loan out into the future on people who are not even born yet.” Of course, that’s what he is attempting force the taxpayers of Chicago to do for the benefit of his team and his family.
At the same time, Joe Ricketts has plenty of disposable income available to attack Obama. A Ricketts spokesperson said future attacks on Obama would “be focused entirely on questions of fiscal policy.” Joe Ricketts, however, may want to focus on the fiscal policy of his baseball team. In 2011, the Cubs were “one of nine franchises in violation of MLB’s debt service rules.”
By: Judd Legum and Josh Israel, Think Progress, May 19, 2012
“Why We Regulate”: The Arrogance Of Wall Street And The Lessons Of History
One of the characters in the classic 1939 film “Stagecoach” is a banker named Gatewood who lectures his captive audience on the evils of big government, especially bank regulation — “As if we bankers don’t know how to run our own banks!” he exclaims. As the film progresses, we learn that Gatewood is in fact skipping town with a satchel full of embezzled cash.
As far as we know, Jamie Dimon, the chairman and C.E.O. of JPMorgan Chase, isn’t planning anything similar. He has, however, been fond of giving Gatewood-like speeches about how he and his colleagues know what they’re doing, and don’t need the government looking over their shoulders. So there’s a large heap of poetic justice — and a major policy lesson — in JPMorgan’s shock announcement that it somehow managed to lose $2 billion in a failed bit of financial wheeling-dealing.
Just to be clear, businessmen are human — although the lords of finance have a tendency to forget that — and they make money-losing mistakes all the time. That in itself is no reason for the government to get involved. But banks are special, because the risks they take are borne, in large part, by taxpayers and the economy as a whole. And what JPMorgan has just demonstrated is that even supposedly smart bankers must be sharply limited in the kinds of risk they’re allowed to take on.
Why, exactly, are banks special? Because history tells us that banking is and always has been subject to occasional destructive “panics,” which can wreak havoc with the economy as a whole. Current right-wing mythology has it that bad banking is always the result of government intervention, whether from the Federal Reserve or meddling liberals in Congress. In fact, however, Gilded Age America — a land with minimal government and no Fed — was subject to panics roughly once every six years. And some of these panics inflicted major economic losses.
So what can be done? In the 1930s, after the mother of all banking panics, we arrived at a workable solution, involving both guarantees and oversight. On one side, the scope for panic was limited via government-backed deposit insurance; on the other, banks were subject to regulations intended to keep them from abusing the privileged status they derived from deposit insurance, which is in effect a government guarantee of their debts. Most notably, banks with government-guaranteed deposits weren’t allowed to engage in the often risky speculation characteristic of investment banks like Lehman Brothers.
This system gave us half a century of relative financial stability. Eventually, however, the lessons of history were forgotten. New forms of banking without government guarantees proliferated, while both conventional and newfangled banks were allowed to take on ever-greater risks. Sure enough, we eventually suffered the 21st-century version of a Gilded Age banking panic, with terrible consequences.
It’s clear, then, that we need to restore the sorts of safeguards that gave us a couple of generations without major banking panics. It’s clear, that is, to everyone except bankers and the politicians they bankroll — for now that they have been bailed out, the bankers would of course like to go back to business as usual. Did I mention that Wall Street is giving vast sums to Mitt Romney, who has promised to repeal recent financial reforms?
Enter Mr. Dimon. JPMorgan, to its — and his — credit, managed to avoid many of the bad investments that brought other banks to their knees. This apparent demonstration of prudence has made Mr. Dimon the point man in Wall Street’s fight to delay, water down and/or repeal financial reform. He has been particularly vocal in his opposition to the so-called Volcker Rule, which would prevent banks with government-guaranteed deposits from engaging in “proprietary trading,” basically speculating with depositors’ money. Just trust us, the JPMorgan chief has in effect been saying; everything’s under control.
Apparently not.
What did JPMorgan actually do? As far as we can tell, it used the market for derivatives — complex financial instruments — to make a huge bet on the safety of corporate debt, something like the bets that the insurer A.I.G. made on housing debt a few years ago. The key point is not that the bet went bad; it is that institutions playing a key role in the financial system have no business making such bets, least of all when those institutions are backed by taxpayer guarantees.
For the moment Mr. Dimon seems chastened, even admitting that maybe the proponents of stronger regulation have a point. It probably won’t last; I expect Wall Street to be back to its usual arrogance within weeks if not days.
But the truth is that we’ve just seen an object demonstration of why Wall Street does, in fact, need to be regulated. Thank you, Mr. Dimon.
By: Paul Krugman, Op-Ed Columnist, The New York Times, May 13, 2012
The Virginia Foxx Bill: “Protecting The Freedom Of For-Profit Schools To Suck Off The Government Teat Without Any Accountability Whatsoever Act”
Earlier this year, the U.S. House of Representatives voted to pass a bill with the impressive, everybody-can-get-behind-this title “Protecting Academic Freedom in Higher Education Act.” Sponsored by the ultra-conservative North Carolina Republican Virginia Foxx, the bill ostensibly took aim at an issue close to small-government-loving hearts: intrusive federal regulation of for-profit colleges — fast growing, highly profitable outfits like DeVry University or the online-only University of Phoenix.
Like so many of the bills passed by the House since Republicans gained the majority in the 2010 midterm elections, the bill was designed to repeal specific actions taken by the Obama administration. In this case, the issue at hand was the Obama administration’s efforts to ensure greater “program integrity” in the for-profit educational sector. Specifically, a new federal definition of what constitutes a legitimate academic “credit hour” and a new requirement that all online providers of post-secondary education be accredited in each and every state in which they do business.
Foxx’s bill repealed both measures. (The Senate has yet to address the measure.) According to Foxx, the new federal regulations threatened “innovation” in the educational sector. As reported by InsideHigherEducation, Foxx is on record as declaring that for-profit colleges do a “a better job of being mindful about efficiency and effectiveness than their nonprofit peers.” By, for example, flexibly providing online education when and where low-income working Americans want it, the for-profit free market delivers the kind of quality higher education that Americans so desperately need. The government should just stay out of their business.
I stumbled upon this story while researching the student loan crisis and at first I was perplexed. I didn’t understand why Republicans were opposed to higher academic standards for the for-profit sector, and I didn’t get the connection to student loans. But it didn’t take much research to discover what was really going on: an example of blatant hypocrisy sufficient to outrage even the most jaded observer of American politics.
The for-profit educational sector is an industry almost entirely subsidized by the federal government. Around 70-80 percent of for-profit revenues are generated by federal student loans. At the same time, judging by sky-high dropout rates, the for-profit schools do a terrible job of educating students. The Obama administration’s efforts to define a credit hour and require state accreditation were motivated by a very understandable desire: to ensure that taxpayers are getting their money’s worth when federal cash pays for a student’s education. In contrast, Foxx’s legislation is designed to remove that taxpayer protection. So here’s a more accurate title for her bill: “The Protecting the Freedom of For-Profit Schools to Suck off the Government Teat Without Any Accountability Whatsoever Act.”
The for-profit educational sector has been growing extraordinarily rapidly for the past decade: 12 percent of all post-secondary students are now enrolled in for-profit schools, up from 3 percent 10 years ago. But the main beneficiaries of the growth appear to be the shareholders and executives of the largest publicly traded for-profit schools, not the students.
- In 2008, for-profit schools registered a a graduation rate of 22 percent. (Public and private non-profits registered 55 percent and 65 percent respectively.)
- 54 percent of the students who enrolled in 2008-2009 in 14 publicly traded for-profit schools had withdrawn without a degree by 2010.
- The biggest player in the for-profit sector, the University of Phoenix, graduated only 9 percent of its B.A. candidates within six years.
The pathetic performance of the for-profit sector in delivering actual degrees becomes all the more alarming when you realize that most of the students who are dropping out paid for their educations with student loans that have to be paid back: According to a report released in the summer of 2010 by Sen. Tom Harkin, D-Iowa, “Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education,” in 2009, the five largest for-profit schools reported that government grants and loans accounted for 77.4 percent of their revenue.
The Harkin reports comes to a stark conclusion:
The Federal government and taxpayers are making a large and rapidly growing investment in financial aid to for-profit schools, with few tools in place to gauge how well that money is being spent. Available data show that very few students enroll in for-profit schools without taking on debt, while a staggering number of students are leaving the schools, presumably many without completing a degree or certificate.
It is precisely this situation that the Obama administration’s efforts to ensure “program integrity” were designed to address. Student loans are tied to credit hours: By requiring a more rigorous definition of credit hour, the administration was attempting to make sure that government money was paying for actual education. Similarly, the requirement that all for-profit schools must be accredited by the individual states in which they do business was a measure designed to keep fly-by-night online schools operating out of states with weak accreditation requirements from enrolling out-of-state students and ripping them off. The issue is not “innovation.” The issue is basic consumer protection.
One would imagine that Republicans, who theoretically oppose government involvement in the private sector, and are always looking for ways to cut government spending, would approve of efforts to seek greater accountability for taxpayer funds. Virginia Foxx, after all, was notorious for being one of only 11 members of Congress to vote against a federal relief package for victims of Hurricane Katrina, citing the “high potential for the waste, fraud and abuse of federal tax dollars.”
But as it turns out, Foxx herself is benefiting from the waste and abuse of federal tax dollars. Among the top 20 financial contributors to Foxx in the 2011-2012 cycle are the Association of Private Sector Colleges/Universities, the Apollo Group (owner of the University of Phoenix), and Corinthian Colleges. Since federal student loans comprise the vast majority of the revenues of those for-profit schools, it follows that their campaign contributions to Foxx are also made possible by U.S. taxpayers.
By: Andrew Leonard, Salon, April 16, 2012
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