Independence Day ReadsPosted: July 4, 2011
We have a republic and a lot of people have sacrificed a lot over the last several centuries to keep it. Too bad most of our politicians aren’t in that number. They can’t see past their next elections.
It seems that two senators– McCain and Corynyn–say they’re open to tax increases as a way to solve the budget stand off. Guess there are a few of them left that would prefer not to tank our economy. Let’s hope this starts some real negotiations instead of the usual Republican hostage taking and Democratic cave-in that’s been politics as usual the last dozen years or so.
One of the senators, John Cornyn of Texas, said he would consider eliminating some tax breaks and corporate subsidies in the context of changes in the tax code, provided there was not an overall increase in taxes.
“I think it’s clear that the Republicans are opposed to any tax hikes, particularly during a fragile economic recovery,” Mr. Cornyn said on “Fox News Sunday.” “Now, do we believe tax reform is necessary? I would say absolutely.”
But he insisted that any changes in taxes be “revenue neutral,” meaning that the government would not take in any more money from individuals or businesses than it does now.
The other senator, John McCain of Arizona, said he would be willing to consider some “revenue raisers” as part of a broad deal, but he refused to name specific measures.
Mr. Cornyn, a member of the Senate leadership, also said that Republicans would be open to a short-term deal on the debt ceiling to provide more time for a comprehensive agreement.
Let’s also hope that more reasonable and less ideological heads prevail on the right and that the left stands up for what’s right for a change. Former President Clinton had a words of policy advice over the weekend. His advice to President Obama is “not to blink”.
Former President Bill Clinton Saturday night urged President Obama not to “blink” at Republican demands to exclude revenue increases from any agreement to extend the government’s debt ceiling.
If Republicans maintain their opposition to revenue increases, Clinton said, Obama should pursue a short-term deal to extend the debt ceiling based on spending cuts both sides have already accepted in the negotiations between the administration and Congressional leaders from both parties.
“I hope they will make a mini-deal,” Clinton said in an interview conducted with him at the Aspen Ideas Festival here.
The White House and Congressional negotiators from both parties are attempting to assemble a deficit reduction package that could win support in Congress for legislation to extend the nation’s debt ceiling, which the Treasury says the government will reach on August 2. The talks have foundered amid demands from Congressional Republicans to exclude any revenue increases from that prospective deficit reduction package.
Asked what the administration could do if GOP leaders hold to that posture, Clinton replied: “First the White House could blink. I hope that won’t happen. I don’t think they should blink.”
If Republicans will not accept revenues in a package to lift the debt ceiling by August 2, Clinton said, Obama should pursue a short-term agreement based on the spending reductions both sides have already accepted.
“There are some spending cuts they agree on …and he can take those and [get] an extension of the debt ceiling for six or eight months,” Clinton said.
Clinton also called on a package of reforms to US tax policy that includes a corporate tax cut if special interest tax loops are closed. This is something Obama has also supported.
“It made sense when I did it. It doesn’t make sense anymore – we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So, we SHOULD cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a FAIR amount, and there’s not so much variance in what the corporations pay. But how can they do that by Aug. 2?”
Clinton also said Grover Norquist, who as president of Americans for Tax Reform is the GOP’s unofficial enforcer of no-new-taxes pledges, has a “chilling” hold on the nation’s lawmaking.
The former president said it has seemed like Republicans need any revenue concessions need to be “approved in advance by Grover Norquist.”
“You’re laughing,” he told the crowd of 800. “But he was quoted in the paper the other day saying he gave Republican senators PERMISSION … on getting rid of the ethanol subsidies. I thought, ‘My GOD, what has this country come to when one person has to give you permission to do what’s best for the country.’ It was chilling.
There’s an extremely interesting piece at The Atlantic Wire on “What Really Happened at Fukushima”. It includes interviews with workers that have been inside the crippled nuclear plant.
Throughout the months of lies and misinformation, one story has stuck: “The earthquake knocked out the plant’s electric power, halting cooling to its reactors,” as the government spokesman Yukio Edano said at a March 15 press conference in Tokyo. The story, which has been repeated again and again, boils down to this: “after the earthquake, the tsunami – a unique, unforeseeable [the Japanese word is soteigai] event – then washed out the plant’s back-up generators, shutting down all cooling and starting the chain of events that would cause the world’s first triple meltdown to occur.”
But what if recirculation pipes and cooling pipes, burst, snapped, leaked, and broke completely after the earthquake — long before the tidal wave reached the facilities, long before the electricity went out? This would surprise few people familiar with the 40-year-old Unit 1, the grandfather of the nuclear reactors still operating in Japan.
The authors have spoken to several workers at the plant who recite the same story: Serious damage to piping and at least one of the reactors before the tsunami hit. All have requested anonymity because they are still working at the plant or are connected with TEPCO. One worker, a 27-year-old maintenance engineer who was at the Fukushima complex on March 11, recalls hissing and leaking pipes. “I personally saw pipes that came apart and I assume that there were many more that had been broken throughout the plant. There’s no doubt that the earthquake did a lot of damage inside the plant,” he said. “There were definitely leaking pipes, but we don’t know which pipes – that has to be investigated. I also saw that part of the wall of the turbine building for Unit 1 had come away. That crack might have affected the reactor.”
The reactor walls of the reactor are quite fragile, he notes. “If the walls are too rigid, they can crack under the slightest pressure from inside so they have to be breakable because if the pressure is kept inside and there is a buildup of pressure, it can damage the equipment inside the walls so it needs to be allowed to escape. It’s designed to give during a crisis, if not it could be worse – that might be shocking to others, but to us it’s common sense.”
Here’s some frightening news on the disaster in Japan. Radioactive Cesium has been found in Tokyo’s water supply.
Radioactive cesium-137 was found in Tokyo’s tap water for the first time since April as Japan grapples with the worst nuclear disaster in 25 years.
Cesium-137 concentration registered at 0.14 becquerels per kilogram in the city’s Shinjuku ward on July 2, compared with 0.21 becquerels on April 22, according to the Tokyo Metropolitan Institute of Public Health. No cesium-134 or iodine-131 was detected, the agency said on its website.
The Nuclear Safety Commission of Japan sets a safety limit of 200 becquerels per kilogram for cesium-134 and cesium-137. The limit for iodine-131 consumption is 300 becquerels per kilogram.
Japan is battling radiation leaks into the air, soil and water after an earthquake and tsunami on March 11 knocked out cooling systems at Tokyo Electric Power Co.’s Fukushima Dai- Ichi nuclear station, resulting in the meltdown of three of the six reactors at the plant.
The UK Guardian lists an interesting set of Greek public assets for sale. Many have no buyers. Bobby Jindal is putting up a lot of Louisiana assets for sale too. I wonder if this is going to be the new way to raise money. The Kochs already rent a big chunk of Yellowstone. Let’s hope we don’t have to put our national treasures on the chopping block.
Up for sale are 39 airports, 850 ports, railways, motorways, sewage works, a couple of energy companies, banks, defence groups, thousands of acres of land for development, casinos and Greece’s national lottery. George Christodoulakis, Greece’s special secretary for asset restructuring and privatisations, said the sell-off would raise €50bn (£44bn) to help pay back the country’s €110bn bailout debt.
The private equity bosses gathered in the hotel’s ballroom for the parade of Greece’s national treasures showed little interest in buying anything.
Nikos Stathopoulous, managing partner of BC Partners, which has invested more than €3.5bn in Greece, said investors are put off by bureaucracy, strong unions, corruption and a lack of transparency. “Even in the good times Greece is not a country that attracts investment. Foreign investors don’t want to invest in a country where there is no flexibility in hiring and firing people,” he said. “You don’t want to invest in a country in which you wake up and a new law has been passed which totally undermines and destroys the value of the investment you’ve just made.”
Stathopoulous said investors were finding it very hard to assess the risk of investing into Greece, which means assets “will be priced at lower than they are worth, lower than the Greek government, and even the European Union, expects”.
Here’s a compelling argument for getting the shadow banking sector into a more regulated, transparent, and standardized order. It’s written by Henry Tabe who is a Founding Partner of Sequoia Investment Management Company Ltd. It particularly addresses the use of the Structured Investment Vehicle (SIV). Complex, nonstandard, and unregulated markets make pricing assets difficult and introduce unnecessary risk and volatility.
Risk management requires identification, measurement, aggregation, and effective management of risks. It should help businesses allocate sufficient capital for survival and growth. The SIV’s extinction highlights risk management failures by the vehicles, their sponsors, rating agencies, policymakers, and regulators.
Financial regulators permitted bank, insurance company, pension, and hedge-fund sponsors to establish SIV “mini-banks” without ensuring that they maintain sufficient capital or back-stop liquidity in the event of a run. Policymakers also seemed unaware of the knock-on effects of the SIV’s demise on the securitisation and global credit markets. The Financial Security Authority’s call for regulators to incorporate sectoral analytical capabilities in their micro-prudential policies should help close the knowledge gap and ensure that timely solutions can be implemented to avert collapses that engender significantly more stress on the financial system (FSA 2009).
Lessons learned include the tightening of regulation governing the sponsorship of off-balance-sheet structures and the sizing of their capital and liquidity needs. These require that regulators adopt a more proactive, dampening role in the wild swings from exuberance to despair that are so characteristic of the financial markets. Discussions around contingent capital and similar products suggest regulators have embraced that dampening role and moved away from the prevailing pre-crisis philosophy of minimal regulation.
Lessons learned also include closer supervision of shadow banks, more skin-in-the-game for their sponsors, in-house retention of risk-analytics capabilities by investors, and less reliance on credit-rating agencies. The agencies themselves are more tightly supervised in order to reduce ratings shopping by issuers and inherent conflicts of interest in the business model (CESR 2009). Tighter regulation will also help to ensure that the agencies improve the monitoring of analyst performance, qualifications, and experience (Dodd-Frank 2010).
These measures should help restore confidence in rating agencies and the global financial system, an outcome more urgently required given on-going turmoil in the sovereign debt market.
So, there’s some wonky goodness to keep you entertained if you’re inside today. Be sure to let us know what you’re reading and blogging! Hope your Fourth of July is a happy one!