Elizabeth Warren is a Harvard law professor and currently chair the five-person Congressional oversight panel for the $700 billion bailout fund. She was on the Daily Show

Jon Stewart: Why isn’t the first thing we do is to say that no one will be allowed to be too big to fail. That is a license to commit poor banking practice.

Warren: So what you’re asking is if we can get this bus pulled out of the ditch – the economy – what does the road look like going forward? This really is the big question.

Let me start that question in 1792. Young country, George Washington is in his first term, and we have a credit freeze. There’s a financial panic. Every ten to fifteen years, there’s a financial panic in our history. You can just look at it. And there’s a big collapse, big trouble, people lose their farms, wiped out. Until we hit the Great Depression. We come out of the Great Depression, and people say you know, we can do better that this. We don’t have to go back to this boom and bust cycle.

We come out of the Great Depression with three regulations: FDIC Insurance, it’s safe to put your money into banks; Glass-Steagall, banks won’t do crazy things; and some SEC regulations. We go fifty years without a financial panic, without a crisis …

Stewart: A couple of recessions in there, some down times …

Warren: But no crisis, no banks failing, no big crisis, that sort of thing …

Stewart: S&L…

Warren: Now wait a minute. I said fifty years. Because then what happens is we say regulation is a pain, it’s expensive, we don’t need it. So we start pulling the threads out of the regulatory fabric. The first thing we get? We get the S&L crisis. 700 financial institutions fail.

Ten years later what do we get? Long term capital management, when we learn that when something collapses in one place in the world, it collapses everywhere else.

Early 2000’s we get Enron, which tells us that the books are dirty.

And what is our repeated response? We keep pulling the threads out of the regulatory fabric.

We have two choices. We’re going to make a big decision, probably over the next six months. The big decision we’re going to make – it’s going to go one way or the other. We’re going to decide, basically, hey, we don’t need regulation. No, it’s fine … boom and bust, boom and bust, boom and bust and good luck with your 401K. Or alternatively, we gonna say you know, we’re going to put in some smart regulation, it’s going to adapt to the fact that we have new products. And what we’re going to have going forward is some stability and some real prosperity for ordinary folks.

Stewart: And that’s socialism.

This has been a work in progress today as I do other things. This is the third graph I have done – each requires that I input data into Excel, draw a graph, scan the graph and load it into WordPress. I hope I am done with that.

The lines are, top to bottom:

Total Federal Government Expenditures (Gay blue)
Total Revenue (Purple hue)
General Fund Expenditures (Navy Bluish hue)
Income Tax Collections (Dark Blue)
Payroll Tax Collections (Green)
Social Security Expenditures (Tan)
Corporate Tax Collections (Brown)

All are inflation-adjusted – 1980 = 100.

Conclusions:

1) The more lines, the harder to interpret, and the narrow space allotted by WordPress makes matters worse. The colors assigned by Excel are too close together in the blue range.

2) Total revenue (purple) has taken serious hits in the early 1980’s and early 2000’s, due to tax cuts. After taking those hits, it climbs back up to the same line it was on before the tax cuts took effect. In other words, we are on the left side of the Laffer Curve. Furthermore, tax cuts do not produce increased revenue. Never have. That’s Reaganist mythology.

3) Social Security revenues (green) and expenditures (tan) run a straight line. Revenues outpace expenditures consistently, though not so much as indicated on the chart, as “Payroll Tax” (green) also includes Medicare receipts.

4) Corporate revenues have been relatively flat – that sector is carrying less and less of the burden. The “corporate tax is paid by consumers” set has had their way, no matter popular opinion. Corporations have a lot of power, I might add.

5) At one time, in 1999, we ran a true surplus – it is that little purple point you see above the blue line around 1999. It means that revenue from all sources exceeded all expenditures. That was probably an accident, dot-com bubble and all that. Clinton didn’t plan it, I’m sure. It’s even perilous, as people begin to clamor for thing like health care and infrastructure spending when there is a surplus. That’s why the surplus was quickly undone in the 2000’s.

6) Income taxes shot up in the 1990’s, and this was after a tax increase during a recession. This confounds the right wing, as the tax hike should have had the opposite effect.

7) Dave Budge says “You can’t draw any conclusions from this. Too many variables. (He was commenting on an earlier version I put up, but still, I take that to mean that it did not demonstrate that he is correct in his economic outlook. Otherwise, it would be highly demonstrative of practical use of right wing economics.) As it is, it pretty much shows that right wing economics is the result of flat-earth thinking.

PS: Anyone who wants to play with this some more, let me know in the comments below and I will email the Excel file to you.

I have a problem with Obama, and it goes back to the day after he was elected. True to form for Democrats who appeal to liberals to get elected and then veer right again, he very quickly brought in Rahm Emmanuel to be his Chief of Staff. That meant that liberals were officially shut out. Emmanuel, a pro-war Democrat, is largely given credit for the 2006 takeover of the House by Democrats. In truth, most of his candidates, who he selected because they were pro-war, lost. The Democratic takeover happened in spite of him, and not because of him.

I just got done criticizing Republicans down below for their herd mentality and blind following. That’s target practice. Republicans are as Republicans are, and who really cares anyway. But Jeremy Scahill, a true progressive, has written a nice piece, Rahm Emanuel’s Think Tankers Enforce ‘Message Discipline’ Among ‘Liberals’, at Common Dreams. Emmanuel is gathering in the sheep to back Obama’s rightist agenda, and of course, they are following.

There were no blogs back in the 1990’s when I first became aware of this phenomenon. Bill Clinton led liberals over to the right and governed from the right, using what his adviser Dick Morris, now a FOX news analyist, called “triangulation”. Basically the strategy was to attack liberals from two angles, both to the right of them – Clinton and the “new Democrats”, and Republicans. It worked. Democrats supported Clinton as he starved kids to death in Iraq, bombed the place for eight years, and attacked Serbia, gave away large chunks of the commons, “reformed” welfare, sent guns and missiles to right wing paramilitaries in Colombia, sent massive aid to Turkey to aid them in a counterinsurgency against Kurds. A partial list. He had plans to privatize Social Security, but had to back off because of the Monica scandal.

Right wingers do as right wingers do. Not much we can do but sit back and enjoy the antics. It’s the art of roping liberals to follow right wing Democrats that annoys me most. Here’s Scahill:

Over the past several weeks, independent journalists and anti-war activists have tried to shine a spotlight on how groups like the Center for American Progress and MoveOn, which portrayed themselves as anti-war during the Bush-era, are now supporting the escalation and continuation of wars because their guy is now commander-in-chief. CAP has been actively pounding the pavement in support of the escalation in Afghanistan, the rebranding of the Iraq occupation and, more recently, Obama’s bloated military budget, which the group said was “on target.” MoveOn has been silent on the escalation in Afghanistan and has devoted substantial resources to promoting a federal budget that includes a $21 billion increase in military spending from the Bush-era.

MoveOn was a Democratic invention from the beginning, and we should not be surprised that they are now abandoning liberal and progressive policies in favor of their guy. Center for American Progress is probably just a front group for Clintonites. The question is, they own the administration now. Why do they even need a front group?

I guess the answer is obvious. Triangulation.

Watching the right wing is like watching bears under the whip at a circus. They all dance in circles on command, sit back on their flanks, open their wide jaws in unison, and growl. The tea parties are the latest examples of this unity of purpose, reminding me of the old saying that when everyone thinks alike, no one is thinking at all.

What are they upset about? They’re not real clear on this. They have been instructed to say that it is about spending, and not taxes. That’s going to be a separate issue, and I imagine the Koch family is working on it right now. But what about spending?

Well, they don’t say much about it except that they are against it. It’s a completion of the circle for them. Prior to Ronald Reagan, they were against deficits and social spending, and as the Great Communicator ran up the largest deficits in history, they lined up like school children behind him. Then came Bush Sr., and the S&L bailout, and more spending, and not much protest except among the few true conservatives and libertarians left over there. Then Goldwater died, and there was but one left. Ron Paul.

Clinton came along, and due to an unexpected bubble, in the last few year of his administration we had a surplus (if you don’t count borrowing from Social Security). That’s a dangerous thing – when the government runs a surplus, people begin to think about things like health care and infrastructure. Along came Bush II, who very deliberately and methodically eliminated the surplus, and again went about the business of running up massive debt.

And the children lined up and cheered. As Dick Cheney said, “Reagan proved deficits don’t matter”.

Bush left the Obama Administration with a $1.2 trillion deficit, basically disabling any kind of health care reform. Not a word about spending from the circus clowns.

Oh, why go on. We know what this is all about. It’s a stage play, much like New Gingrich’s Contract on America, designed to lure moderate voters over to the far right. Will it work? Doesn’t appear so at this time.

But the children are lined up.

Truthfully, there’s no salvation for us here. Americans are trained to believe that their salvation lies in one party versus another, even as both shut out populist movements and play patty whack with the bankers and wealthy families and corporations. There’s very little left of this Republic to pick over – it’s a carcass now. But watching these fools, these circus clowns doing their tricks is disturbing. It makes me wonder if there is a thoughtful person left on the right.

Budge has been silent on this matter. Kudos to him.

This is something for people of my generation – 55-65 – ” Mark “The Bird” Fidrych was found dead today, age 54, apparently working under his truck. Fidrych was a baseball player, and “a character”, one who who got down on his knees and patted the mound around him as he talked to himself while pitching for the Detroit Tigers in the 1970’s. He was animated, urging on his team mates, congratulating them with high fives after good innings. He earned the nickname “The Bird” because of his posture and curly locks – he reminded people of Sesame Street’s Big Bird.

He made baseball fun, he energized Detroit. He only played 58 games because of injuries – injuries of the type that today can be repaired by surgery. But he never complained. He retired, bought a farm, married his girl friend, had a daughter. I just saw him on MLB Network recently, and he was aging well, was happy and outgoing. A nice guy.

Thanks to Swede for pointing me towards this op-ed in the Billings Gazette, Obama’s Oil Tax Changes Would Cripple Industry, by Tom Hauptman of Billings. Tom is a natural gas producer/explorer who has had much success. He writes about some special tax breaks given people in the oil business. But first,

As a young man growing up in the big city of Billings, my “summer camp” consisted of working for my uncle Stewart at his ranch in the Flint Creek Valley of Western Montana. We worked long hours in the hay fields either picking rocks or driving buck rakes. In those days, loosely stacked hay was the standard. Round bales had never been heard of, and “idiot cubes” were to be avoided at all cost! He made two promises to me, long hours and low pay, and Stewart was always a man of his word.

Conservatives talk like that, I’ve found. They like to think they invented hard work – they imagine that liberals are people who live off their sweat. Honestly, the hardest-working people I’ve ever met are restaurant cooks, followed closely by dish washers, and then the wait staff. Their rewards are paltry compared to Tom’s – heck, they are lucky if their employer provides health insurance. Last I heard, the Montana Restaurant Association was in Helena trying to undercut their pay by making it legal to reduce the minimum wage by any tips they receive. So much for conservatives and hard work. As my rich and surly uncle once told me, “you will never get rich on your own sweat. You make others sweat for you.”

I digress. Let’s get down to business. Tom, like all people who receive special tax breaks, thinks 1) he is entitled to them, and 2) they benefit us more than him. What’s good for him is even better for us.

In the upcoming Fiscal Year 2010 federal budget, the Obama administration is proposing the elimination of the depletion allowance and the further elimination of the expensing of intangible drilling costs for all wells drilled in the U.S. after July of this year. What does this oilfield mumbo jumbo mean? The depletion allowance allows an oil and gas producer to deduct 15 percent of his production income from taxation. The reason for this is simple. As the oil or gas well depletes, the producer must drill more wells or he will soon be out of business. It is exactly the same as depreciation expense for plant and equipment.

We all know depreciation is a real expense. All a rancher has to do is look at that “new” tractor he bought 15 years ago. The green has faded and, some day, he is going to have to knuckle under and buy a new one. Same thing goes for oil and gas wells. They don’t last forever.

That’s not exactly true. Actually, it’s exactly wrong. Suppose, for example, a farmer invests $100 thousand in a combine – he is allowed an expense for depreciation over the useful life of that piece of equipment as it produces revenue for him. When he has “recovered” the entire cost, he can no longer take depreciation expense.

In the oil business, it’s a little different. Tom doesn’t distinguish between “cost depletion”, the equivalent of depreciation of the farmer’s combine, and “percentage depletion”, a tax gift. If farmers were treated like oil men, they would be able to write off their equipment in full when they buy it, and 15% of their revenue forever after. That’s percentage depletion – a permanent and perpetual write off of 15% of all revenue received from oil and wells regardless of cost basis, aka “intangible drilling costs”.

The next item is intangible drilling expense, which is everything that can’t be salvaged from an oil or gas well. That is building the well pad, the cost of drilling the well, the cost of the pipe and the cement used to place the pipe in the ground, the cost of stimulating the well, etc. The majority of these costs are labor. Name one industry that can’t expense the labor costs before determining net income. I can’t think of one!

The ability to write off intangibles for successful wells is another tax gift. Without the IDC writeoff, oil producers would have to recover the cost of a well, it’s “IDC’s”, by cost depletion, a mathematical estimate of the portion of the recoverable reserves produced applied against the cost of drilling. This would be in sync with farmers and their equipment.

And the majority of these costs are not labor – where did that come from? Oil and gas is a capital-intensive business. They drill using rigs costing tens of millions of dollars, and chemicals and muds and technology developed in the last century, the cost of which makes labor a paltry part of the process.

Small producers get special tax treatment (percentage depletion) because they lobbied for it back in the 1980’s. As a matter of public policy, Congress thought it important to encourage domestic oil and gas production by small companies. But don’t confuse this special treatment written into the tax code with normal tax policy that other manufacturers and independent businesses must abide by. It’s a special benefit we gave them.

If this provision passes, the independent oil and gas industry in America is basically over. No one will drill wells with their hard to come by after-tax dollars. The business is just too risky. The mineral rights under Montana’s farms and ranches will become basically worthless. Even if you don’t own any mineral rights, it will hit you in the pocket, too.

Stand back! I think he’ll really do it! This is self-serving, I’m afraid. Tom has done what we all do – he has taken the special treatment given him by Congress, internalized it, and now believes that what is good for him personally should be public policy.

That’s a matter for debate. If we decide that independent producers no longer deserve special tax break, life will go on, wells will be drilled, farmers and ranchers will still farm and ranch, and lucky ones might find they have some Texas Tea underneath. Loss of the IDC writeoff would slow down deductions, but not eliminate them.

It all rests with the U.S. Senate. Call Sens. Max Baucus (800-332-6106) or Jon Tester (406-252-0550) and tell them you support the domestic oil and gas industry and are opposed to these destructive tax law changes. Time is of the essence. Our energy future is in peril.

Lives are at stake.

Let’s be frank here. The United States will always be dependent on oil from other countries. Oil is where you find it, and there isn’t much of it left here. Small producers, taken in total, provide some relief from the need to import, but mostly they are gamblers playing for high stakes, men and women not content to make their money a buck at a time. They want huge rewards, and so entered this very risky business. Most of them minimize their risk by doing infield drilling, expanding on known reserves, and by shying away from wildcatting. The really big risks – the deep-sea drilling and stone-cold wildcatting under arctic tundra, are taken by the Exxons and Shells and BP’s – only they have enough money to justify the risks taken.

I just finished doing a tax return for a corporation, and the sole owner of this corporation will soon realize one of the greatest benefits of the corporate structure: protection of personal assets in bankruptcy proceedings. We on the left often demonize “corporations” as if they were persons. In fact, a corporation is nothing more than a legal fiction, a way of encouraging risk-takers, and of raising large pools of capital. It’s very hard to envision an industrial society without such a structure.

Are corporations evil? (Are “sole proprietorships” virtuous?) Not at all. All of the evil perpetrated by humans on one another is done by humans, and humans alone. The corporate structure merely facilitates some of our worst traits.

When I lived in Billings, I encountered a term bandied about by employees of the Billings Gazette: “making book”. It’s not something ever seen in print. (As Molly Ivins reminded us, if you want real news, you don’t read what reporters write. You drink with them.) “Making book” meant delivering a certain rate of return to the corporate owners, say, 12%. The owners didn’t care how the Gazette publisher went about it – let some people go, raise rates, trim the page size, boost the ad/news ratio. Didn’t matter. Just make book.

So the publisher did what he had to do. People got hurt – the publisher, unless his name rhymes with wheelie, was not a bad person. In fact, with very few exceptions, none of us are bad people. Yet we are constantly doing bad things to one another. We do it out of necessity – we need to eat, we want to accumulate wealth and be secure. We do so without corporations, but the corporate structure magnifies our worst traits.

The reason is simple – top-down authority. In corporations, people below must carry out the orders of people above. If they don’t, they are soon gone. For the people above, they are removed from the effects of their decisions. (The management of Union Carbide didn’t live near Bhopal; the Dow boys never smelled napalm-burned flesh or gazed upon a deformed Agent Orange baby.)

Greed is a tool, like a hammer, than can build or destroy. Corporations are built around greed. Removal of accountability unleashes naked greed, and it is unabashed, unrestrained greed that gives large corporations a bad name. Monsanto right now is pushing legislation (HR 875) introduced by Rep. Rose De Lauro (whose husband works for Monsanto) that would put organic farming out of business. It’s called the “Food Safety and Modernization Act”. It’s not about safety, and its not modern. It’s as old as time itself. Monsanto doesn’t like all the competition it’s getting from non-chemical based farming. They want it stopped.

Hugh Grant is the CEO of Monsanto. He made the decision to introduce that legislation. It is being carried out below, by the wife of one of his employees. It’s a very bad deal for thousands of small farmers and people, like me and my wife, who like organic food. The farmers will either buy and use Monsanto’s (or some similar corporation’s) pesticides and fertilizers, or stop farming. And we’ll have to eat that crap. We’ll all be hurt.

Hugh Grant will never have to answer to us. He’s alone in his office, unaffected by his decisions.

Perhaps we on the left need to clean up our own act, clarify our concepts. We attack evil corporations. What we mean is that we want to bring corporations under control of law and stakeholders, make them accountable. That’s all we mean. If we do that, if CEO’s are held accountable for more than just making book, we will have a better, cleaner, safer, and nicer world.