The Koch brothers have become the nation's leading cheerleaders for free markets where consumers, employees, entrepreneurs and investors are free to pursue their own selfish interests without interference from government or unions or anyone else for that matter.
Now comes word that the billionaire brothers want to buy up the Los Angeles Times, one of the nation's last remaining quality newspapers, or its parent, the Tribune Co., which has only recently emerged from bankruptcy reorganization following the disastrous takeover by real estate mogul Sam Zell.
by Steven Pearlstein
In case you haven’t noticed, the economy is actually getting better. Noticeably better.
Yes, it’s been painfully slow in coming, as we continue to tack against strong headwinds coming from Europe and the Middle East as well as the strong ebb tide created by the wind-down of fiscal stimulus. And certainly the recovery has been halting and uneven.
The data points for this optimism are to be found in recent reports on private payrolls (averaging just under 200,000 jobs per month for the past year), gross domestic product (growing at an annual rate of 3 percent), consumer confidence (as high as its been since 2008) and income (up 5 percent in the past year before adjusting for inflation).
On Wall Street, the Dow is at its highest point in nearly four years and Nasdaq at its highest point in a decade, reflecting both record profits and renewed investor confidence. Federal and state tax revenues are beginning to come in better than projected and households are continuing to whittle down their debt, with a savings rate of 4.5 percent. There are even enough green shoots in the housing market to suggest that residential construction might contribute to GDP growth this year rather than subtract from it. Revisions of government data are now reliably up rather than down.
And yet, there are those on the Republican right and the Democratic left who have so much invested in a bad economy that they are reluctant to acknowledge any of this good news.
Ground will be broken this week on Washington’s newest museum, the National Museum of African American History and Culture, and in all honesty I’m of two minds about it.
Certainly if there is to be a separate national museum devoted to the history and culture of any group of Americans, this should be it.
Americans have been arguing about slavery since before the founding of the republic. We fought a bloodywar over the enslavement of African Americans and we’ve been living with the social, economic, political and moral consequences ever since. African Americans also have had an outsize influence on American arts, science and athletics. That this week’s cere-mony will be presided over by the first black president of the United States should be a moment of national pride.
They are two of Washington’s architectural and historical gems: The Old Post Office Pavilion on Pennsylvania Avenue and the Smithsonian Arts and Industries Building on the Mall. The good news is that both are slated for renovation and what the bureaucrats like to call “re-purposing.” The bad news is that, in both cases, the process is headed in the wrong direction.
Let’s start today with the Old Post Office and the General Services
Administration’s curious selection of Donald Trump and Colony Capital to develop it into a luxury hotel.
I say curious not because of any concerns about the hotel concept, or even out of concern for what might be called the “Trump aesthetic,” the over-the-top sensibility that tends toward the big, the fancy and the gaudy. My guess is that by the time the historic-preservation police are finished with their painstaking reviews and requirements, any traces of an architectural comb-over will have been thoroughly expunged from the plans, along with any profit from the five-year pro forma.
There is a branch of economics known as game theory, which tries to figure out how various “players” in a market maximize their welfare based on the expected behavior of other “players,” all of whom are doing the very same thing.
One of the earliest game theorists was the mathematician John Forbes Nash, who was the subject of the book and subsequent movie, “A Beautiful Mind.” In game theory, a Nash equilibrium is that point where no player has anything to gain by unilaterally making a change in his own strategy. The game, in effect, has been played out to a draw.
These days, Washington is stuck in a nasty Nash equilibrium. The two dominant parties -- the anti-tax, anti-regulation, anti-government wing of the Republican Party, and the raise-taxes-on-the-rich-but-don’t-touch-my-entitlement wing of the Democratic Party -- have fought each other to stalemate. Every few weeks or so, some event or deadline comes along that appears to hold out the prospect that one side or the other might prevail and thereby break the deadlock. But, in the end, nothing really gets resolved, nobody wins and the stalemate continues.
There was, as you recall, the threatened government shutdown last December, followed by the debt ceiling fight in the spring, which led to the supercommittee failure this fall, which gave rise to another threat of government shutdown last week, while postponing until March 1 the battle royale over a further extension of a temporary payroll tax cut. Anyone who believes that these dramatic showdowns will actually resolve anything of significance might also want to rush right out to the mall and let Santa know which color mink you would like for Christmas.
Maybe you’ve noticed that companies that are already at the top of their industries have become rather brazen about trying to increase their profits and share prices by buying up their nearest competitors.
Who can blame them? For years now, the courts and regulators have
turned a blind eye as industry after industry consolidates into two or three dominant firms. And for years, fee-driven corporate lawyers and investment bankers have been knocking on boardroom doors peddling the notion that they can win approval for any merger just by divesting a subsidiary or two or establishing some fictitious “Chinese wall” to prevent one division from knowing what the other is doing. (Alas, we’re even importing our metaphors from China!)
That “anything goes” mentality took a hit recently when the Justice Department dared to challenge the purchase of T-Mobile by AT&T. Now its stepsister, the Federal Trade Commission, has the opportunity to definitively usher in a new era in antitrust by blocking the $29 billion merger between Express Scripts and Medco, two of the biggest pharmacy benefit managers -- the companies that handle the prescription drug portion of your health insurance.
This past summer, billionaire Warren Buffett dusted off an old line about how his secretary pays a higher tax rate than he does, and ever since there’s been a running debate over tax fairness.
The reason Buffett’s overall tax rate may be lower than his secretary’s
is because nearly all of his income comes in interest payments, dividends and profits on the sale of stocks and bonds known as capital gains. Under the George W. Bush tax cuts, the tax rate on this “unearned” income was reduced to a flat 15 percent, a level below the effective tax rate for most households earning more than $100,000 a year (Buffett’s is no ordinary secretary!).
From one angle of view, this seems absurd, particularly in a country that boasts of a progressive tax code. With that in mind, President Obama has weighed in with what he called the “Buffett rule,” proposing a minimum effective tax rate on all income, irrespective of its source. Subsequent proposals have taken the form of a surtax of about 5 percent on income of over $1 million.
But from another angle, the “Buffett Pays Lower Tax Rate Than Secretary” story looks to be something of a statistical mirage.
The conventional wisdom on the season-jeopardizing dispute between the NBA and its players union goes something like this:
Millionaire owners and millionaire players are once again squabbling
over how to divvy up a $4 billion annual booty, even as 15 million Americans can’t find full-time work and the average worker hasn’t received a raise in a decade.
Certainly, there is a legitimate question about how out of touch the owners and players are with the economic reality of the fans who actually pay that $4 billion, either by buying tickets or the products marketed through TV advertising during NBA games.
Allow me, however, to suggest a slightly different take - namely that the dynamic playing out in the NBA is the same dynamic playing out throughout the U.S. economy.
I’m very excited to announce that Wonkblog will be republishing Pulitzer-prize winner Steve Pearlstein’s Sunday Business column. Steve has long been an inspiration for my work and, more recently, a mentor to me, and I couldn’t be prouder to be showcasing his pieces. Here’s the first. — Ezra.
The global financial system teeters on the edge of collapse because European politicians refused to tell citizens of their crumbling economies that they could no longer guarantee them “la dolce vita” - the sweet life - they had come to expect.
Top executives at Olympus, one of Japan’s leading companies, resign in shame after acknowledging that for nearly 20 years they used a complex accounting scheme to hide billions of dollars in speculative trading losses.
A revered coach and a respected president at Penn State are fired because they were more concerned about protecting their own reputations, and that of their school, than protecting young boys from an alleged sexual predator.
And a former governor, senator and head of Goldman Sachs resigns as chief executive of MF Global after bankrupting the broker-dealer with overleveraged bets on European sovereign bonds.
Welcome to this week’s exciting episode of “Failures in Leadership.”