The Fed's listening session

The Fed always inspires debates among stakeholders like institutional investors, economists, politicians, financial journalists and industry leaders.

Now the Fed has received an activist group at its annual Jackson Hole symposium to hear their views on monetary policy.  This week, a movement called “Fed Up” sponsored by The Center for Popular Democracy met with Federal Reserve officials including Bill Dudley, president of the Federal Reserve Bank of New York. 

The Fed Up team merits an A grade for inventiveness.  Such groups often petition the legislative and executive branches of government that control spending and tax policy, but now one has successfully lobbied the The Federal Reserve within spitting distance.  To be fair, the group had some trained economists in their midst and they did nothing disruptive; but do political organizations belong at this annual forum?

http://whatrecovery.org/ website 

Yes, economics and politics are inextricably linked, but Fed actions are logically debated on the long view of what’s good for the economy as a whole.  

The Fed's annual meeting shouldn't become a town hall with listening sessions like one conducted by your local Congressman.  

I haven't seen any reporting of the Fed Up attendees causing problems at Jackson Hole, but Fed officials' willingness to receive them in the first place is unsettling.  

After all, if Fed "independence" is advanced by the number of constituencies it receives in public, they must receive all comers.  Ultra low interest rates and massive bond buying by the Fed have juiced the stock market, but also crushed returns for elderly people living on payments from fixed income investments and cash.  Therefore, should the AARP or another group representing retirees have been granted equal time at Jackson Hole to advocate for monetary tightening?  

A clear and present danger to civil liberties

Destruction of evidence, failure to comply with Congressional subpoenas and giving false testimony before Congress, are impeachable offenses.  One might think of Watergate, but these same offenses also apply to the IRS scandal I wrote about over two years ago ("IRS Plot Could Be Worse Than Watergate" June 9, 2013).  Little fallout has occurred since.

An article for interested readers to examine, was published in the Wall Street Journal (WSJ) last month by Congressmen Ron DeSantis and Jim Jordan.  Anyone who still denies existence of a partisan scandal might want to read this WSJ article:

"The Stonewall at the Top of the IRS" -- July 28, 2015

by Congressman Ron DeSantis and Congressman Jim Jordan

(Also worth reading in WSJ: "How Congress Botched the IRS Probe" -- May 15, 2015 by Foley & Lardner attorney, Ms. Cleta Mitchell.)

Last week, during the Republican Presidential debates, Sen. Rand Paul complained about meta data collected to catch terrorists, but he said nary a word about the IRS issue. 

IRS Commissioner John Koskinen
Official photo

The IRS scandal is more tangible than any federal surveillance problems we've seen, yet Sen. Paul prefers to focus on the NSA without evidence of citizen abuse.  

To be clear, I cherish privacy rights and respect the instincts behind Senator Paul's effort, but I also wonder why he is not more troubled by what's occurred recently at the IRS. 

Spring has sprung!

While it's still too cool in southern Wisconsin to get excited about the weather, the morning sunlight streaming across my lawn is enough.  A week of travel on a sour stomach and poor weather in north Texas, makes me appreciate the moment all the more.  

Image by freepik

On a heavier note; I recently discovered a quote by John Stossel.  I don't know much about Stossel, other than he's a Libertarian.  I've only seen a few of his topical reports on television but his pithy take on the nature of taxation is amusing.  Mr. Stossel says....

"Politicians, bureaucrats and the people they 'rescue' get money through force — taxation.  Don't think taxation is force? Try not paying, and see what happens."

Related to that Christmas Eve post...

There's a piece in today's Wall Street Journal called "The Fed's Needless Flirtation With Danger" in which Martin Feldstein writes that in order to stimulate demand, "Well-designed tax rules are a safe and effective alternative to quantitative easing".  

Dr. Feldstein argues that we'd have been better served by tax policies that induce businesses to make new investments and help consumers consume, instead of unleashing so much QE, but some of his contemporaries would challenge that assertion.   Major economists in the media often disagree in practice and do so with the type of certainty reserved for hard science and their views are frequently colored by their political leanings.   

I once saw an Economist on Squawk Box who insisted that professional economists collectively agree on nearly all major policy prescriptions.  I

Nassim Taleb, Wikipedia

wish I could recall his name.  His remarks still strike me as wishful.  Maybe he was right, but it sounded as though he wanted viewers to believe that the discipline of economics breeds the kind of metaphysical certainty found in the natural sciences.  There's a reason that the name for the field of study has long been referred to as "Political Economy". 

To help settle the issue or at least test it, a long form Krugman-Feldstein debate or a Taleb-Krugman debate would be an interesting spectacle, like the sort we could watch years ago.

Paul Krugman, Wikipedia

I'm referring to the old TV debates on public television that featured thought leaders from opposite ends of a policy spectrum who respectfully but forcefully hashed out their differences on politics and economics.  

My favorite debater remains the late William F. Buckley.  Though not a PhD economist, he did hold an undergraduate degree in economics from Yale.  Amazon Prime members can access some of WFB's old "Firing Line" debates for free.

WFB, Wikipedia

Holiday gifts for the American consumer

Have you read about the recent boost in U.S. consumer spending?  Of course you have and you know it is attributed -- at least in part -- to a steep drop in energy prices, particularly a drop in gasoline prices.   

Office.com clip art

This development is described by some in the financial press as a tax cut because the benefit accrues to the consumer in much the same way a tax cut does.  That is, by paying less at the pump, we automatically keep more of what we earn.  I wonder how Keynesians who routinely advocate for enormous government spending to stimulate demand are reacting.  Putting money directly in the hands of taxpayers can also spur consumption.  

The Romney tax policy

Conceptually, it's not more regressive than what we have but it's being labeled as such by Obama supporters who conflate marginal tax rates with effective tax rates.

Lower marginal rates on a broader base of income is a step toward real tax reform.  Reduce the mountain of deductions, credits and incentives -- apply lower marginal rates to a greater aggregate of taxable income and in the process remain revenue neutral while simplifying the tax code.  What's wrong with that?

Perhaps the problem for Mr. Obama's supporters is that remaining revenue neutral might help curb run away government spending.

(This is a CEO, not a Community Organizer)

To: Editorial board at the Milwaukee Journal Sentinel

Their question to readers:

Would you be willing to pay a higher sales tax on gasoline to pay for bridge maintenance and replacement?

My reply...

Dear Editorial board,

My answer is no I would not and it’s the phrasing of your question that might draw scrutiny from other like-minded readers. That is, why do you presuppose that the only way to fund such infrastructure improvement is through an increase in the gas tax- or an increase in any tax for that matter? We already pay among the highest sales tax rates at the pump.

During the previous budget cycle, Governor Doyle, like a modern day Cesar Augustus, used his famous “Frankenstein veto” to instantly transfer over $400 million dollars from the highway fund to K-12 education. The magnitude of his audacity surprised pols on both sides of the aisle. Perhaps some of those funds might have remained better invested in infrastructure like that suggested by your query to readers in today’s paper.

In any event - why not ask a follow up question to JS readers?

“In order to fund such bridge work, would you allow the consolidation of school districts where enrollment no longer justifies operating such schools, or through asset sales of state owned property and land used by a paucity of our population, or through cancellation of marginally-necessary pet projects?”

OK, I understand space limitations -- but you get my point.

Respectfully,

John J. Maddente

Still weary about our punitive state tax burden

Published July 5, 2007 Milwaukee Journal Sentinel

Watching our state's political budget process is not easy. There are so many additional taxes - and some with such vast implications - all under discussion at once. One billion, 2 billion, 3 billion, 15 billion: all numbers I have seen to describe potential tax increases.

The characters involved mirror stereotypes of both political parties: Democrats are seeking a broader governmental role in fixing our problems through tax increases and government spending. The GOP is digging in its heels, wanting to hold the line on taxes and government spending and government's increased involvement in our affairs.

Reminiscent of the high stakes budget showdown that occurred between President Clinton and House Speaker Newt Gingrich in 1995, Republican Assembly Speaker Mike Huebsch stated he would block the process if the budget delivered to him contains tax increases. By any credible measure, we live in a high-tax state, and this budget season reminds me of the myriad ways government can tax us and how far Gov. Jim Doyle and his coterie of party faithful are prepared to go in order to exercise their views about what government ought to do. But what about the long-term picture beyond the current two-year budget cycle?

I was troubled by a June 24 column by John Tornius that referenced a credible third-party analysis of our state's annual "structural deficit" of $2.2 billion ("State's accounting doesn't pass muster"). The analysis revealed that relative to population, Wisconsin is at the top of all deficit-running states in the nation.

That's more than a little disconcerting if you or your children care about life in Wisconsin more than a couple years from now. Many of us grouse about the need to reduce taxes. That's personal income taxes, real estate taxes, corporate personal property taxes, gas taxes, home-selling taxes and they-don't-give-me-enough-space-to-list-all-the taxes. Others counter with, "That's not realistic; our needs have increased." Or my personal favorite, "But look at our fine educational system and park system and whatever system."

Even if I agreed that we derived an equivalent value from the punitive tax burden we've paid through the decades, we cannot afford everything any longer. As opposed to making more hard choices, I read about things like the governor's proposal to increase by some $55 million annually the cost of state-owned lands in "far-flung natural areas" beginning in 2011. What percentage of us has a desire, let alone need, to traverse additional land already owned by the state in the wilds of Douglas County when our long-term fiscal condition is so bleak?

Other troubling budgetary facts:
• The $15 billion universal health care plan is an 11th-hour power play, and whether you believe such a plan is the answer to our health care conundrum or not, the issues and implications are too complex, too far-reaching, too everything to contemplate now. That patient is dead.
• The new gas tax on oil companies that ostensibly would be borne by oil companies and not passed on to you and me has zero chance of success. If it makes its way into law, it will fail in practice or the courts.
• Lifting any real estate property tax cap will diminish any hope I have left in government.

What we will wind up with this budget season is anyone's guess. The only safe prediction is that if any tax increases get out of the Assembly, there will be a run on bumper stickers that read, "Don't blame me; I voted for Green."

Offering gifts and hopes this holiday season

Published 12.21.2006 Milwaukee Journal Sentinel
As this is the season of giving and sharing, I wish to publicly share the following holiday gifts and warm wishes for the new year to some specific recipients.

To project managers of the Marquette Interchange reconstruction or anyone else supporting this multiyear mess: I give a hand-selected bag of high-caffeine coffee that will speed up the work (whether or not it is ahead of schedule now). May all the inconvenience caused by the next state highway project take place no closer to me than Plover but no further from you than your favorite grocer.

To all Wisconsin men and women in the armed forces who won't be home this holiday season: I offer my gratitude for your service and prayers for a safe trip home. For those who want to give more than good wishes, go to the state Department of Veterans Affairs Web site: dva.state.wi.us/supportourtroops.asp or call (800) 947-8387. There are a number of ways to get gifts to our service members overseas.

To Sen. Hillary Clinton: I give the strongest encouragement to run for president in 2008 and speak your mind without reservation. Your candidacy is the single best hope Republicans have to retain the White House.

To the aging, sniveling cynics who welcomed back American soldiers from Vietnam by spitting on them or calling them "baby killers": I didn't have time to get you anything, so why don't you just meet me for a quiet drink at the local VFW? Oh, and take a cab. I have some friends who would be happy to give you a lift home. Let's hope history doesn't repeat itself as our service members return from the Middle East and that your children don't act as disgracefully as you did in the late 1960s and early 1970s.

To the anonymous donors of $25 million to Marquette University: You are doing God's work. No joke. However, my Christmas fund is almost depleted, so I believe I can scratch you from my list without much worry that you'll miss the Sam's Club membership card I had intended to send. I'm not sure where to send it anyway.

To the Milwaukee Public Schools and City Hall: No gift to you would be sufficient in that you already have given so much to Milwaukee taxpayers in the form of that inadvertent (but perhaps temporary) $9.1 million tax break. Now, could you extend your good deed by convincing Madison lawmakers that the rest of us in Wisconsin need more tax relief, too?

To the University of Wisconsin System Board of Regents: At considerable personal expense, I have had made several engraved copies of the Supreme Court's 2003 decision striking down the practice of the University of Michigan's Law School to award an extra 20 points to its applicants purely on the basis of minority status. Please read it with a warm holiday beverage in front of your fireplace and recall what your dear grandma once said about two wrongs never making a right. Discrimination of any kind is unacceptable, even the kind that works in reverse.

To every jewelry store owner or jewelry department manager in southern Wisconsin: I give a large bag of price tags. Please place them in plain view in your merchandise displays so I don't have to repeatedly waste time or feel embarrassed by asking the price of items that I cannot afford to buy.

Finally, my personal holiday wish to all readers, regardless of what you celebrate at this time of the year: God bless you, and may 2007 be just a tad better for us all.