“Cartagena? Angel, you are hell and gone from Cartagena.” – Jack Colton (played by Michael Douglas), Romancing the Stone
A couple of news items of interest today.
Bad Politics …
The first is a cringe on my part. Before the state of the union address I saw reports that Warren Buffett’s secretary would be sitting in the First Lady’s box for the speech. (She would be one of the “Lenny Skutnik” figures.) Mr. Buffett’s secretary has been brought up many times before by Mr. Buffett himself, who claims (and I have no reason to doubt him) that she pays a higher tax rate than he does. (We discussed the issue a while back in “Warren Buffett Should Make a Better Argument.”) Mr. Buffett feels his taxes should be raised, I feel her taxes should be cut, either way the situation appears “unfair” to the populists and envy-ridden amongst us.
Clearly the narrative plays well into Obama’s progressive tax dream, so he brought in this poor secretary to use as a prop. There’s just one problem though, politically speaking. You see, it’s not like Warren Buffett pays no taxes. He actually pays a pretty high tax rate. For the work-a-day secretary to pay a higher rate in our current system, she has to be pretty well-paid herself. Now I doubt that anybody has the hard numbers (other than the Human Resources department at Berkshire and Hathaway), but reports are swirling that this lady pulls down better than $200,000 annually. (And, mind you, that’s $200K in Omaha, NE – not exactly a high cost-of-living area.)
The reason I cringe at this is that I “called it” before the State of the Union … but didn’t tell anybody else. I knew when I saw the report that it was a political mistake, this lady is likely very well paid and the whole ordeal could backfire on Obama and make him look out of touch. And had I actually written it down in an earlier blog I could go back and say “see, I told you so” … but I didn’t. Opportunity missed. (Frequent readers will know that I hate it when people give an “I told you so” – especially with a prophetic tone – when they actually made no declarations whatsoever before the event.)
Bold Lies …
As we discussed in yesterday’s item on the state of the union, it takes a particularly bold kind of lying to say “freedom” and mean “slavery”. It’s actually an encouraging sign in some sense. Here we have one of the most overtly corporatist, fascistic, and socialist-sounding presidents in modern history (yes, it is faint praise to say “one of the most … in modern history” which includes maybe 4-5 guys), and he is selling freedom. If somebody who despises freedom actually feels that freedom is the best way to get votes, then that says good things for America. It doesn’t say much for his impression of American intelligence, but it does say that the language of freedom still matters to people.
Buying Votes while Propping up the Wealthy …
One of the more impressive “bold lie” came in Obama’s flourish on “no more bailouts, no more handouts, no more copouts” – which was preceded by a huge bailout proposal. That proposal is related to a story we meant to pick up a few weeks ago, where the president is going to transfer money from responsible homeowners (those who bought within their means and are maintaining their mortgage payments throughout the housing crash) to irresponsible homeowners (those who bought too much or have otherwise refused to pay hoping to get a bailout). The transfer payment will include the money passing into the hands of bankers along the way, via refinancing at “historically low rates.” So, just to recap, responsible pays for (i) buying votes for Obama from irresponsible and (ii) enriching bankers who hold worthless paper.
While I’d love to go on and on about the immorality of such a proposal, I think Mish does a better job: please consider Obama Proposes Mortgage Bailouts.
As a mild caveat, let me note that it is not a moral judgment on those who have found themselves underwater on their houses. It happens. When asset prices drop this much you will find otherwise fiscally responsible people underwater. They never intended to be there, and they never intended to fall behind on their bills. But the “through no fault of their own” argument only goes so far. Perhaps it wasn’t their fault – but it wasn’t mine either. And clearly it was at least a little bit their fault, if for no other reason than they made decisions that turned out to be bad ones (again, it’s not a moral judgment).
This country is going to have to come to grips with the prospect of guilt-free consequences. Just because something bad happens to you, and you can rationally justify that your decisions which led to the problem made sense at the time, it still doesn’t require the government (that is, your neighbors) to make you whole.
There is no free lunch here. Yes, rates are historically low – because the federal reserve has made them historically low while punishing savers and those on a fixed income and rewarding borrowers and bankers who front-run the bond trade. Somebody pays. Yes, those who refinance could save a lot of money, but any money they save is a transfer from the general coffers, somebody pays. And who is that somebody? Whoever doesn’t get the bailout, that’s who.
If you’re not in line to make money on the latest bailout offer, then you are paying for it.