the larger issue in Wisconsin

So I meant to make this post awhile ago but didn't get a chance. I just wanted to voice my opinion on what went down.

States and municipalities were faced with a decision years ago to diversify their investments. One investment opportunity was in CDOs (credit default obligations) which have the coveted AAA stamp of approval from the ratings agencies meaning in their opinion this is as safe of a bet as treasury bonds. Don't worry that they're really just tranches of mortgage debt. Besides, they also offer a better yield! Not your flavor how about a synthetic CDO (bundled credit default swaps), oh you don't know what that is? Here's a pretty brochure and salesman to tell you how "there would have to be 15 Enrons for this to go sour" In the meantime just kick back and enjoy the free money that's going to help solve your budget problems. Oh and why you're here, have you heard of a  interest rate swap? Well it turns out these investments weren't as secure as they had hoped and along with everything else in the financial collapse they tanked.

So now states are faced with a difficult decision. They've squandered money by making poor investments and someone is going to have to pay for it. No bailout for you sir! Why not target public employees? Throw out some arguments about how they're overpaid compared to their private sector counterparts without any qualifications for equivalent education levels.

In the end the natural conclusion is to get angry and want to blame someone, but unfortunately there's probably a lot to go around. The state/municipality fund managers for not bothering to do due diligence in researching what exactly they were investing in. The investment banks for offering these and not disclosing in some cases that they were actually betting against them.  The ratings agencies for rating these pieces of crap as AAA because why not? After all its just their opinion and they suffer no repercussions if it turns out they're wrong. Way at the bottom of the list is any possibly difference in pay between private and public sector employees but that's a lot easier to put in a talking point and diffuses the spotlight from those that are actually responsible.

I really wanted to share this clip from The Daily Show as well because its so well done:

The Daily Show - Crisis in Dairyland - For Richer and Poorer - Teachers and Wall Street
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Tax Cut Extension

I realize my first post should probably be more of the 'Hello World' inaugural post variety.  Perhaps it could outline my goals and motives for creating this blog. Possibly ending with a concise summary of what I hope to achieve. Unfortunately that is not the case.

Given the pace of the current political landscape I wanted a chance to comment on the current tax-cut extension bill before it becomes as irrelevant as The Bed Intruder. Was he ever caught? Who cares, it made for a catchy song!

This bill in my opinion is great example of how the two major political parties can collaborate to create a monumental piece of crap. They've managed to come together and despite what I can only imagine is harsh opposition from lobbyists and at the risk of losing campaign backers approved a tax-cut extension for just about everybody. What courage they have to make such an unpopular decision as to extend tax cuts and maintain the status-quo. Well done!

This summary by CNN spells out the major components of the bill. The argument for extending the tax cuts as I understand it is to stimulate the economy. I have an issue with that especially among the top earners. Are the Ted Turners and Warren Buffets of the world really making business decisions based on tax cuts? I don't think so. In fact, they said they don't. If I'm making that much bank I'm bringing most of it home in capital gains anyway and diversifying worldwide. I can't think of any more likely group to spend money immediately in their local economies than the unemployed and that was only tacked on at the end as a compromise.

The Republican party took the stance that they wouldn't consider any other legislation until this issue was addressed, including the 9/11 health and compensation act. While its hard for me to think of a more unpopular act to hold hostage for political maneuvering I can only recall the famous 1979 Drowning Kitty Rescue Act. Pres. Obama maintained the tax-cuts should be extended for income levels below 250k, then it was modified to under 1mil. perhaps hoping public opinion would side with them, because who doesn't hate millionares? After all of this failed they finally have decided to approve it as is, claiming some type of victory by extending unemployment benefits and a payroll tax cut.

Here's a nice summary of the bill:

It will cost $900 billion over the next two years — larger than the bailout of Wall Street, GM, and Chrysler put together, larger than the stimulus package, larger than anything that’s come out of Washington in years.

It makes a mockery of deficit reduction. Worse, the lion’s share of that $900 billion will go to the very rich. Families with incomes of over $1 million will reap an average of about $70,000, while middle-class families earning $50,000 a year will get an average of around $1,500. In addition, the deal just about eviscerates the estate tax — yanking the exemption up to $5 million per person and a maximum rate of 35 percent.

The trend as of late seems to be in debt commissions, talk of reducing the debt, cutting costs etc.  Didn't we just freeze federal wages after all? However this mammoth super-sized behemoth of an expenditure is one of the first actions congress takes? Once again, well done!