Archive for the ‘Political Rhetoric’ Category

Top Democrat Donor Shut Down Hostess Twinkies

In Obama Administration, Political Rhetoric, Uncategorized on November 22, 2012 at 12:53 am

Box of Twinkies

Richard Trumka of the AFL-CIO had it all wrong in his bizarre attack on the private equity firm that backed Hostess Foods, maker of Twinkies and Ding-Dongs.  He said, “What’s happening with Hostess Brands is a microcosm of what’s wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor.” [1]

Not only does Bain Capital have nothing to do with Hostess, union overindulgence hurt the competitiveness of the maker of Wonder Bread, which was already strained by market changes.  Even more rich than white Twinkie filling is the fact the actual private equity owner is Ripplewood Holdings.  According to tracker, Ripplewood gave $141,000 to the Democratic National Committee in the 2010 cycle, making it the 10th biggest DNC donor and the largest amongst private equity firms. [2]  Ripplewood was founded by Timothy C. Collins, a major donor to Democrats. [1]

Collins’ family gave a half million dollars to the Obama Super PAC Priorities USA. [3]  That means he personally is responsible for almost all the anti-Bain ads of the 2012 election, because they were almost all run by Priorities USA.  [6] This includes ads rated as wholly false by the Washington Post Factchecker such as the one that claimed a death was caused by Bain. [7] 

Collins gave another “$90,800 to Democratic campaigns and committees during the 2012 election cycle.” [3]  Collins also is on the board of the Hamilton Project, a liberal interest group, where he sat with big Obama Administration names like Timothy Geithner, Peter Orszag, Jason Furman, and Democratic power Robert Rubin. [3]  He leveraged former Democratic House leader Richard Gephardt to aquire Hostess. [1]  Collins met personally with President Obama six times at the White House and another four with Obama advisor Valerie Jarrett. [3]  A search of the Huffington Post’s political donation database shows 85 instances of Collins making donations and they were almost exclusively to Democrats. [4]

Hostess logo with heart.jpg

Did Ripplewood cause the demise of Hostess?  As discussed in many business periodicals, Hostess struggled with evolving American tastes, high costs and antiquated union work rules.  As written by Holman Jenkins in today’s Wall Street Journal

Union-imposed work rules stopped drivers from helping to load their trucks. A separate worker, arriving at the store in a separate vehicle, had to be employed to shift goods from a storage area to a retailer’s shelf. Wonder Bread and Twinkies couldn’t ride on the same truck. [5]

Hostess spent eight of the past 11 years in bankruptcy.  Trunka’s quote is nearly Marxist in its off-base attack on a private equity firm that tried, but failed, to save Hostess.  Ripplewood isn’t “making itself rich.”  Despite taking some amounts out, Ripplewood will lose almost its entire $140 million investment in Hostess.  What put the Hostess workers into the unemployment lines?  Look in the mirror, Mr. Trumka.

Collins and his Ripplewood firm have every right to donate to the same Democratic Party that spent the past year demonizing what they do for a living.   We see they are quite capable of ding-dong decisions.  The First Amendment lets Trumka spout nonsense.  But, he is wrong to attack the Bain firm which was less involved in Hostess than good nutrition was.  Blaming Hostess on Bain while absolving the unions is a case as flimsy as a tower of Ding-Dongs piled as high as a stack of the 140 million dollars Ripplewood lost on its investment.  And to Mr. Collins, now that you are getting blowback from your anti-capitalist “friends” like Richard Trumka, just remember one of Hostess’s own products: when you deal with Devil Dogs…








Pictures from Wikipedia Commons.

Obama Brokered Private Equity Oil Deal & Pressured EPA to Waive Environmental Review

In 2012 Elections, Obama Administration, Political Rhetoric on November 1, 2012 at 9:49 pm

At the exact time Obama ran attack ads against Bain Capital, his Administration brokered a deal to sell a carbon-based fuel processing plant to a politically-connected private equity firm, yes, read that again, a private equity firm.  Ever more amazing, the Administration pushed its own EPA to waive an environmental review of the deal.   The report from Mark Maremont in the Wall Street Journal [1]  is behind a pay-wall, so I paste much of it below:

Since the spring, President Barack Obama’s re-election campaign has repeatedly hit Mitt Romney for his career as a private-equity executive and has aired ads accusing his former firm, Bain Capital, of ruining businesses and sending jobs overseas.

At the same time, the Obama White House played a central role in encouraging another private-equity firm to rescue a Philadelphia oil refinery, whose imminent closure by owner Sunoco threatened to send gasoline prices higher before the election.

Gene Sperling, director of Mr. Obama’s National Economic Council, helped kick-start discussions to sell the refinery to Carlyle Group, a well-connected Washington, D.C., private-equity firm.

Mr. Sperling later talked numerous times to Carlyle executives, government officials and union leaders as part of a bipartisan effort, according to participants in the talks.

Carlyle last month said it would take a two-thirds stake in the refinery and invest at least $200 million, staving off the potential for fuel-price increases and saving 850 unionized jobs in Pennsylvania, a likely battleground state in November.

To help seal the deal, expected to be made final in September, the Obama administration and state regulators agreed to loosen certain environmental restrictions on the refinery.

Pennsylvania’s Republican governor, Tom Corbett, contributed $25 million in state subsidies and other incentives.

The refinery story is an example of how the private-equity industry is a more complicated place than the image kicked up by this year’s presidential election, in which first Mr. Romney’s Republican primary rivals, and then the White House, used Bain as a cudgel….

In September 2011, Sunoco said it planned to quit the refining business and sell refineries in Philadelphia and nearby Marcus Hook, Pa. The company has said its refineries lost $1 billion over three years. Sunoco warned it would close both facilities if it failed to find a buyer.

By the end of last year, it had halted refining at Marcus Hook, and talks with possible buyers for the Philadelphia refinery, including Carlyle, had fizzled.

Closing the Philadelphia refinery, the largest on the East Coast, threatened to disrupt gasoline and heating-oil supplies in the Northeast.

A Feb. 27 report from the federal Energy Information Administration warned of the potential for prices to “spike.” Republicans at that time were criticizing the administration for rising gasoline prices.

The EIA warnings, along with a broader reduction of refinery capacity in the region, set “alarm bells” ringing inside the White House, an administration official said. Aides concluded gas prices could rise 20 cents to 30 cents a gallon in parts of the Northeast.

In late February, Rep. Bob Brady, (D., Pa.), a union-friendly congressman from Philadelphia, met with Sunoco’s incoming chief executive, Brian P. MacDonald.

Mr. Brady said the White House was concerned and asked Mr. MacDonald to think about options “if there was broader help,” according to a timeline later circulated by Carlyle, which Sunoco said was accurate. Mr. MacDonald asked to talk to the White House directly.

A Brady representative said the congressman was traveling and unavailable to comment.

On March 8, the White House’s Mr. Sperling hosted a call with the Sunoco CEO, Mr. Brady and Deputy Energy Secretary Dan Poneman. The White House confirmed the call.

The group discussed the possibility of $5 gasoline prices for the summer, Sunoco’s Mr. MacDonald recalled.

When the officials pressed him on a potential solution, he said Sunoco might be willing to keep a piece of the Philadelphia refinery through a joint venture with a partner that could contribute expertise and cash.

“It would have to be a very capable party,” Mr. MacDonald recalled saying. “Sperling pushed me: ‘Who would a party like that be’?”

Mr. MacDonald said Carlyle fit the bill.

Soon after, Mr. Sperling called Carlyle co-CEO David M. Rubenstein about the refinery, according to Carlyle, and left a message.

Carlyle has shied away from any overt involvement in politics. Mr. Rubenstein worked in the Carter administration, and the firm employs executives who have worked in administrations from both parties. It doesn’t donate to political campaigns.

Mr. Rubenstein passed the message from Mr. Sperling to a Carlyle executive who had worked with Mr. Sperling in the Clinton White House, David Marchick, according to Mr. Marchick.

Mr. Marchick said Mr. Sperling told him the White House was willing to help move the deal along. Mr. Sperling also told him the White House wouldn’t do anything just to help Carlyle and that the same assistance would be available to any potential buyer, Mr. Marchick said.

“They didn’t care who bought it,” he said.

Eventually, Sunoco and Carlyle agreed to explore a joint venture, with Carlyle paying nothing for a majority stake but contributing cash for an upgrade.

On March 19, Mr. Sperling talked to Pennsylvania’s Mr. Corbett to see if the Republican governor was interested in cooperating. Mr. Corbett, whose office was already trying to rescue the refinery, agreed.

The White House “helped with Carlyle, and we helped with state government,” he said.

A key issue Carlyle identified was a 2005 consent decree with the Environmental Protection Agency under which Sunoco agreed to limit emissions at its refineries.

Carlyle wanted to work on the refinery without triggering costly environmental reviews.

The White House referred the issue to the EPA, which along with state and local environmental officials agreed to modify the decree, allowing Carlyle to transfer emissions credits from the Marcus Hook refinery, in effect giving the Philadelphia refinery greater leeway to pollute.

The agreement compressed into a few months what participants said could have taken much longer. Carlyle said it doesn’t plan to use the added credits, and over time will reduce emissions. It said the changes will provide flexibility as it carries out the upgrade.

Carlyle’s plan to turn the refinery profitable includes a partial shift to oil from North Dakota that is cheaper than crude from West Africa it now refines, and switching to newly abundant natural gas to power part of the refinery.

In mid-May, as Carlyle and Sunoco were briefing the White House and other officials on their plan, the Obama campaign launched a broadside against Mr. Romney’s Bain career, which featured a worker saying Bain was a “vampire” in its handling of a steel company.

Later, an independent group supporting the Obama candidacy released an ad implicitly accusing Mr. Romney of contributing to the death of a laid-off worker’s wife.

On a July 2 conference call announcing the refinery deal, Carlyle and Sunoco executives and public officials repeatedly thanked the White House and Mr. Sperling.

This shows Obama’s attack ads were nothing more than nonsensical politics.  Imagine what negative ads the Obama campaign would run if it were President Romney pushing a deal toward a connected private equity firm and then relaxing environmental regulations to seal the deal.


Oil refinery picture from Wikipedia Commons.

There Is No Tax Deduction For Off-Shoring Jobs

In Political Rhetoric, President Obama, Tax Breaks on October 13, 2012 at 10:24 pm

During the first presidential debate against Mitt Romney, President Obama repeated a charge I see in the netherworld of liberal blogs and progressive’s Facebook posts.   As the head of the Business Round Table, John Engler, wrote in an op-ed:

What the candidates didn’t agree on was whether there is a deduction in the U.S. tax code that encourages companies to move plants overseas. Mr. Obama contended that such a deduction exists. Mr. Romney said, “I’ve been in business for 25 years and I don’t know what you’re talking about.”

According to the nonpartisan congressional Joint Committee on Taxation, there are no specific tax credits or deductions for moving plants and jobs overseas. …the tax code provides a deduction for all business expenses, including plant-closing costs, severance pay and worker retraining. [1]

I’ve never seen any “offshoring” deduction and am confident the Joint Committee on Taxation is correct that no offshoring jobs tax credit exists.

As President, Mr. Obama should know the law.  If he thought there’s a tax credit for exporting jobs, why didn’t he undo it during the past four years, especially the two when his party held complete control of Congress?  The answer is no such tax credit exists, Obama continued the spread of a false internet rumor.

Image of a globe centred on India, with India highlighted.


Pictures from Wikipedia Commons.

You Built Your Business, President Obama Did Not

In Economy, Political Rhetoric, President Obama on July 16, 2012 at 9:23 pm

Sorry, Mr. President, but you’re wrong. 

If you have a business, you built it.  It’s yours, not Barrack Obama’s.  You’re the one who quit your comfortable day job to take on a dream.  It was your 401(k) savings you dipped into for the start-up.  It was your credit card that purchased office supplies.  You’re the one who had trouble sleeping at night when you signed for the lease, knowing you needed to sell like crazy to justify the risk.   You’re the one who sped to the bank before it closed to deposit a receivable check you personally picked up.  It is you who sent a check to the state to incorporate. 

It is you who learned QuickBooks and how to do payroll.  You learned about liability insurance and key man policies and a million other tidbits of business you never imagined you’d have to.  You’re the one who reassured your spouse you weren’t insane when the economy took a downward trend or you lost your big customer.

You’re the one who gets up at 4AM and leaves last in the evening.  You’re the one who signs personally for your bank loans.  You’re the one who signs the tax returns.  It is you who negotiates with salespeople of your vendors.  You work so hard because your day seems to be filled with meetings, meetings and more meetings.  You’re the one who deals with the angriest customers when things go wrong.  You’re the one who does the thankless jobs – like interviewing or firing people when times are tough.  It’s your drive and vision that pushed each new product.

You’re the one who has to be a rock.  When customers or employees scream and swear, you’re the one who has to settle things down.  You’ll get sued if you don’t, after all, you’re the supposed ‘deep pocket’.  When times are tough, you cheer up the staff.  When times are good, you dampen overenthusiasm, lest it put the firm in a bad spot later.

You’re the one who had trouble sleeping at night when you contemplated adding a second location or moving to a larger facility.  There were no guarantees.  You’re the one who had to testify in court about the frivolous lawsuit.  Even though the judge tossed it, your insurance rates went up, anyway. 

You’re the one who gave back to your community as you succeeded.  You sponsored a little league team, you organized fundraisers and gave more and more to local charities.  You volunteered for Junior Achievement and you offered leftover food from your restaurant to a homeless shelter.  As your company grew, more and more people in your community asked for your advice.  They started recommending you get involved.  You didn’t have the time, but you ran for school board or village board, anyway.  You paid a fortune in taxes, not only income but real estate and sales taxes for your business.

No matter what politicians say, you are the bedrock of the American economy and society, too. 

President Obama revealed perhaps more than intended of his feelings toward entreprenuers and successful people in general.  Ironically, most successful people are quick to extend credit to people who’ve helped them along the way, be it parents, mentors, teachers, spouses and the like. 

But, Apple and Hewlett-Packard didn’t become great companies because of the workmen who build the garages they started in. [1]  They became industry leaders by the endless hard work, drive and brilliance of Steve Wozniak, Steve Jobs, Bill Hewlett and David Packard.  Millions of American business owners toil away in far less glamorous surroundings, though the dry cleaner, cleaning service and local restaurant are all crucial to local economies.

I reprint Obama’s remarks at length below, sourced from

They know they didn’t — look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something — there are a whole bunch of hardworking people out there.  (Applause.)

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business — you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet. [2]

[1] Early Apple computers really were made in Steve Job’s parent’s garage in Los Altos, CA.

[2] Note he is even wrong about the internet, which was created by the Defense Dept. for national security purposes, not “so companies… could make money”.  The internet is nothing without private telecomm, too (phone lines, switches, routers, etc.)  Many years after the invention of the internet, smart entrepreneurs figured out ways to make the internet useful to consumers and thus, make money.

Pictures (Steve Jobs’ parent’s garage and early HP & Apple logos) from Wikipedia Commons.

Warren Buffett’s Firm Regularly Requests SEC Disclosure Exemptions

In Political Rhetoric, Regulation, Warren Buffett on January 31, 2012 at 9:23 pm


Back on December 8, 2011, the Wall Street Journal disclosed something interesting in light of recent political news, namely, billionaire investor Warren Buffett’s Berkshire Hathaway conglomerate recently obtained an exception from a SEC disclosure rule.  It turns out Buffett has sought SEC confidentiality exemptions in no less than 10 of the past 20 quarters, according to the WSJ article below.

Given Mr. Buffett’s recent political activism, it is interesting he has opted to keep Berkshire investments in the dark.  It is also interesting because of Mr. Buffett’s advocacy of higher tax rates, though he personally carefully structures his own income to minimize his own taxes.  Perfectly legal, but an example of “do as I say, not as I do”.

The rationale for the SEC exemption is certain high-profile investors, like Mr. Buffett’s firm, could be harmed if people know about their investing activities.   Presumably, though, any firm is at a competitive disadvantage to have to disclose their holdings to their competitors.  The WSJ reports:

“Fifty money managers have used Securities and Exchange Commission rules to keep confidential their stakes in certain companies so far this year, an analysis of securities filings shows.  The longstanding practice got a new burst of attention last month when billionaire Warren Buffett’s Berkshire Hathaway Inc. disclosed a $10.7 billion bet on International Business Machines Corp.  The Omaha, Neb., conglomerate had been secretly accumulating the shares since March, twice receiving an exemption from the SEC on a 36-year-old law that requires investment firms owning more than $100 million in publicly traded stocks to disclose their holdings quarterly.”

Full article at:

Disclosure: at the time of this writing, the author was a long-term owner of Berkshire Hathaway stock.  SEC building picture from Wikipedia Commons.

MexicUSA: What the Merger of Mexico and the United States Would Mean For English

In Immigration, Mexico, Political Rhetoric, Spanish Language on January 27, 2012 at 12:11 am

Let us consider the merger of the United States and Mexico!  Welcome MexicUSA!

I sometimes hear we need to limit immigration or else Spanish will someday overtake English in the United States.  Is that possible?  What would a hypothetical US-Mexican country be like demographically?

First, let me say this is a wildly hypothetical example.  Mexico is a proud country and a merger with the United States is as unthinkable to most Mexicans as it is to most Americans as well.

I bring up a US-Mexican merger simply to show what it would be like demographically, as an extreme case, since it helps address whether there are linguistic or cultural challenges to the United States from a half million or million immigrants.  Let us not talk small ball but instead consider welcoming all of Mexico as immigrants all at once!

Mexico has 112.4 million residents. [1]  The USA has 312.9 million residents. [3]  In our new MexicUSA, the old Mexico will account for just 26% of the new US population.

But what of the future?  Isn’t Mexico growing faster?  Even in 2050, the old Mexico population is projected to be 132.3 million [4], compared to 402 million in the old USA [4], meaning old Mexico would actually drop a fraction to be just 25% of MexicUSA.

That certainly does not suggest Mexico would dominate the MexicUSA.

Most Mexican elites learn English.  Many study in the United States.  The last three Mexican presidents (Felipe Calderon, Vincente Fox and Ernesto Zedillo) all had degrees from top US universities.  I have been unable to find an exact statistic on what proportion of Mexicans, whether elite or general population, speak English, I did find this quote: “As far as second languages go, a relatively large number of educated Mexicans (and those with little or no education who have immigrated to the US and returned) have different degrees of fluency in English.” [5]   Also, “on an every-day basis most Mexicans listen to contemporary music such as pop, rock, etc. in both English and Spanish.” [1] 

Evidence of the popularity of American English culture can be found on the Mexican music charts.  In 2012, through May, the #1 spots are dominated by English language albums from non-Mexican artists (Adele, Madonna, & One Direction).  Contrast that with the almost exclusively English language pop charts in the United States.  The Mexican chart’s top Spanish language album is from Yuridia, who lived in Arizona for nine years and speaks English. [2]

It is well-known that Mexican elites in business, politics and culture generally speak English.  This is, of course, common for elites worldwide.  In MexicUSA, the political, business and cultural leaders from the former Mexico will be able to conduct themselves in English. 

An interesting piece of immigration assimilation is intermarriage.  It has long been extremely high amongst Asians and Hispanics.  “Among all newlyweds in 2008, 9% of whites, 16% of blacks, 26% of Hispanics and 31% of Asians married someone whose race or ethnicity was different from their own.” [6]  Twenty-six percent, of course, means one out of four.  I know many Hispanics who are married to Anglos.  Their children are as “American” as anyone else and always speak English. 

Some argue Hispanic immigrants in the USA, whether from Mexico or elsewhere, do not speak English.  That is simply untrue over time.  Hispanic immigrants learn English and their children speak it better.  By the third generation, many solely speak English.

Twice I had Latina girlfriends, both of whom spoke English.  One was an immigrant from Mexico and the other, born here, had virtually no accent and hardly knew more Spanish than me!  I have had many Hispanic friends and co-workers and invariably they speak English, usually fluently.

“Among second-generation Hispanics, 92 percent speak English well or very well, even though 85 percent speak at least some Spanish at home. Eleven percent of Mexican second-generation children speak only English at home, compared to five percent in the first generation.” [7]

English-only is the predominant pattern by the third generation. These children speak only English at home, making it highly unlikely they will be bilingual as adults… The level of English monolingualism is lower among Hispanics, but, at 72 percent, it is still a clear majority.  71 percent of third-generation Mexicans speak only English.” [7]

The evidence is clear.  Even in the extraordinarily unlikely instance the United States absorbed its Mexican neighbor to the South, the “old” USA would still comprise 75% of the combined population.  Mexican elites already speak English and often attend US universities.  Many Mexicans listen to American pop music and otherwise follow American culture.  Mexican-Americans in the USA learn English over time with second generation children speaking English.  By the third generation, almost 3/4 of Mexican-Americans speak only English.  Intermarriage rates remain quite high so that millions of 2050 Americans will be of mixed Hispanic-other ancestry. 

A half million or million more – or even ten million more – immigrants will never swamp English as a language, no more than your own ancestors’ Yiddish, Polish, Greek, Dutch, Tagalog, German, Italian, Cantonese, Lithuanian, Ukranian, Czech or Swedish held you back from learning English.  Do you even speak your ancestors’ native tongues?  Probably not.

Topography of the United Mexican States

[1] retrieved 1/27/12.  Technically, Mexico is called the United States of Mexico.

[2] retrieved 5/17/12.

[3] retrieved 1/27/12.


[5] retrieved 1/27/12.


[7]  Emphasis in the original.

Pictures (flags, Yuridia, Mexico maps) from Wikipedia Commons.

Occupy Wall Street’s Forgiving Student Loans Is An Unforgiveably Bad Idea

In College Education, Loan Forgiveness, Occupy Wall Street Protests, Political Rhetoric, Student Loans on October 26, 2011 at 12:36 am


University of Chicago Quadrangle, photo by author

One “Occupy Wall Street” idea is across-the-board student loan forgiveness. [1]

It is one thing to offer temporary forbearance or deferment when someone is unemployed, but forbearance is already available to the unemployed. [2]  The “Occupy” concept is a totally different idea of total debt forgiveness.

How bad an idea is a blanket erasure of student debt?  Let us look:

(1) People with college degrees earn ~75% more than people without degrees. [3]   Loan forgiveness means asking lower-income people to write off loans made to their more affluent neighbors.

(2) The Census Bureau reports a mere 28% of Americans have college degree. [4]  Not all graduates have student loans, either.  A very small slice of the population would be receiving a windfall from the rest.

(3) The unemployment rate for people with a college degree is half the rate of the non-college educated. [3]

(4) There is a correlation between the cost of an education and the prestige of the offering institution. Degrees from Columbia or University of Chicago are much more expensive than those from smaller privates or directional state colleges.  The University of Chicago will set you back $56,640 a year (full disclosure:  there are several Chicago alums in my family, including me) and the Ivy League’s Columbia University runs $43,815 in tuition and fees alone. [5]   University of Chicago and Columbia graduates also earn more

A mass forgiveness would mean the greatest benefit would accrue to those who financed educations from the costliest (and most prestigious) schools who, on average, will earn more in their careers.  Thanks, but no thanks.

(5) Grants and tuition reductions are widely available to lower-income graduates, so those who take on the most debts generally will not be “poor”.

(6) The programs least likely to offer grants and tuition breaks are professional degree programs.  It also is true people with Masters and Doctorate degrees will necessarily have spent more years in college and take on more debt than an undergraduate.  As a result, many MBAs, doctors and lawyers graduate with huge, even 6-figure, student loans.  I personally took on a serious amount of student loan debt for my MBA.  Any mass forgiveness would disproportionately benefit those with advanced degrees:  lawyers, doctors, professors and MBAs, meaning many of the richest Americans.  The Top 1% of earners is disproportionately doctors, lawyers and business executives, many of whom hold MBAs. [6]  This is quite ironic, indeed, since Occupy Wall Street is so focused on the Top 1%.

(7)  Any mass forgiveness would be extraordinarily expensive at $1 trillion [7] and the federal budget is already deeply in the red. 

(8) It is good for people, who can, to foot some of the cost of their education. I believe things you pay for can be more meaningful. I also am certain a mass forgiveness would send a message of “don’t worry about the cost of college, have fun” to current students. College is fun, but it should not be perceived as free, lest people take even longer to graduate.

(9) A mass forgiveness would be very unfair even amongst college grads. A doctor who graduated in 2000 and lived simply so she could pay off her loans by 2010 would receive no benefit at all, while her profligate classmate who made minimum payments in preference of BMW’s and European trips might enjoy a $100,000 benefit. People who completed school in the 1970s, 1980s or 1990s would receive little to nothing in benefit because their student loans are already paid off, while those who happened to have graduated in recent years would benefit greatly.   Forgiveness is no panacea for all young people, either.  People starting college today would receive no benefit at all.

(10) Lastly, some argue a mass forgiveness would be a huge economic stimulus. [8]  A mass forgiveness would actually be a very inefficient stimulus because the loans are repaid over many years, even decades.  A doctor who was suddenly relieved of all debts would have some extra spending money and could look forward to a lighter burden in the years ahead, but the fact is only a tiny fraction of the total loan is payable in the present.  A 10 year loan with level payments has a mere 1/120th impact this month.

Student loan forgiveness is an idea that might sound good as a populist sound bite but would be patently unfair, concentrate the benefits amongst the rich and soon-to-be-rich, and would be extremely expensive.

Big Loans, Big Future Salaries. MBA Graduates, University of Chicago. Photo from author.









Johns Hopkins University photo from Wikipedia Commons.

Comments are welcome below.

Occupy Chicago Is Completely Wrong on CME Tax & Job Claims

In Illinois, Income Tax Rates, Job Creation, Occupy Wall Street Protests, Political Rhetoric on October 15, 2011 at 12:51 am

Occupy Chicago protesters rally Thursday in the Loop, echoing their Occupy Wall Street counterparts in New York. But how about a march on Main Street by the wealthy? That may be just the catharsis America needs.

I heard a theatre teacher from Occupy Chicago talk on the radio about the movement’s demands.  The various Occupy movements have been criticised in many corners for a lack of specific proposals, but Occupy Chicago has a specific demand.  A quick analysis shows the math does not work behind an Occupy Chicago idea and the concept is completely divorced from reality.

Occupy group Stand Up Chicago is demanding the City of Chicago place a 25 cent per trade tax on all contracts traded at the Chicago exchanges, of which the CME is the largest.   Occupy Chicago says this would earn $1.4 billion of fresh tax revenue, which it claims could be used to create 40,000 new City of Chicago jobs. [1] [2]

One sign of a complete lack of perspective and knowledge is how Stand Up Chicago’s statement demanding the tax calls the Chicago exchanges “giant casinos” it claims brought on the financial crisis.  Considering the financial crisis was caused by subprime mortgages going bad, it is quite curious to blame Chicago’s options and futures markets.  The CME and Chicago Board Options Exchange did not make loans nor did they bundle mortgages for securitization.   CME is the parent of the legendary Chicago Mercantile Exchange and iconic Board of Trade.  Clearly, Stand Up Chicago does not understand.

It just so happens the CME was already negotiating with Florida and Texas about relocating its operations.   Illinois raised its state income tax in January, becoming the 3rd highest in the nation.  [3] The CME then announced its attention to look at alternatives.  Illinois was desperately trying to keep the CME from leaving before Occupy Chicago’s idea of a fresh $1.4 billion tax came along.  Such a tax certainly is not going to stop the CME from leaving.

The idea of taxing the Chicago exchanges will not work.  Surely, the CME will leave and Chicago will end up with fewer taxpayers and thus fewer taxpayers as a result.  CME employs 2,000 in the Chicago area, but it has a large multiplier effect because of the numerous trading firms that reside in Chicago to be near the CME’s trading floors.  Banks and other financial institutions employ many who service the CME and trading firms.  Large private firms maintain traders and support staff, for example, meteorologists who predict weather patterns on behalf of agricultural companies’ hedging activities.  “Some estimates place the job count from the trading industry here, which includes the Chicago Board Options Exchange, at more than 60,000.” [3]

But Occupy Chicago’s ideas are even more outlandish than they seem at first blush.  Let us look at the math.  First, the CME had 2010 revenue of $3 billion, on which it earned a profit of $951 million. [3]    A $1.4 billion tax on a local industry where the primary firm, the CME, earned less than $1.0 billion is a very significant tax, indeed. 

Even if the CME were to stay in Chicago despite the special tax, there is nothing stopping aspiring exchanges in Singapore, London, Dubai, Mumbai, Hong Kong, Shanghai or Tokyo from working to steal away the CME’s business.  Since they are not in Chicago and thus not subject to a special tax, these international competitors would gain a significant opportunity.

Would $1.4 billion create 40,000 new jobs for the City of Chicago? 


A quick check of the City of Chicago budget shows the City employs 32,922 employees at a cost of $3.3 billion.  [4]The average city worker earns about $75,000. [5]  The average worker costs about $100,000, including benefits.  That means a $1.4 billion tax, even if enacted and collected, would employ one-third of the claimed 40,000 but rather 14,000.  Adding 40,000 employees would more than double the entire City of Chicago workforce. 

Adding the 40,000 workers would require a tax of $4.0 billion, or more than 4X the entire profit of the CME.  As a reference for the relative size of a hypothetical $4.0 billion Occupy Chicago tax, consider that the entire city budget, serving 2.7 million residents and long known as one of the least efficient and most corrupt of municipal governments, is $6.2 billion. [6]

The cost of an employee is more than just payroll and benefits.  The 40,000 hypothetical workers will require new leases of office space, and expenses for business cards, computers, telephone connections, pens, staplers, and many other things, all costing money.  Any tax will hire fewer City workers because of these other overhead costs.

The Occupy Chicago tax idea and related job claims may make for good populist press, but they are so divorced from reality they must be dismissed out of hand.  Chicago’s financial industry is already at serious risk of leaving the city over the tax burden already in effect.  A $1.4 billion tax increase would certainly drive it out altogether, putting as many as 60,000 private sector jobs at risk.  The Occupy Chicago claims of 40,000 new City of Chicago jobs are triple what a $1.4 billion tax could realistically pay for.  [7] The Chicago exchanges are not in the mortgage business and did not cause the financial crisis.   Just as protesting capitalism will not create any jobs, excepting the occasional protester paid by a union to attend, a huge tax on financial transactions will cause Chicago to lose jobs, not gain them.






[4] pg. 5 of 


[6] pg. 3 of

[7] I take the $1.4 billion tax revenue claim at face value though it seems a bit rich.  The CBOE had 1.124 billion contracts trade in 2010 ( and the CME approximately 3.0 billion contracts (based on daily avg. 12.2 million contracts ( multiplied by 250 trading days a year).  Apply 25 cents to 4.124 billion contracts and we only get $1.0 billion in tax.  There are a few other small, inconsequential exchanges.

Pictures from Wikipdia Commons, except Chicago protest from Chicago Tribune (credits embedded in picture).

Who Pays What Average Income Tax Rates

In Income Tax Rates, Political Rhetoric, President Obama, Warren Buffett on October 9, 2011 at 2:23 am

Average Tax Rate by Share of Income, Source: IRS 2008 Data

There is an awful lot of misinformation floating around about what average tax rates are paid at different income levels.  It is actually very simple, which is why I put together this graph. 
Some would have you believe the richest of the rich pay a lower average rate than “a secretary”.  On average, that is simply not the case.  The Bottom 50% of taxpayers paid an average of 2.59% of their Adjusted Gross Income (“AGI”) as income tax.  The Top 1% paid 23.27% of their AGI as income tax.

Share of Income Average Tax Rate
Bottom 50% 2.59%
25-50% 6.75%
10-25% 9.29%
5-10% 12.44%
1-5% 17.21%
Top 1% 23.27%
The bottom 50% of taxpayers paid 2.7% of all income taxes paid, and the top 5% paid more than half of the total.

Share of Income Group’s Share of Income Taxes
Bottom 50% 2.70%
25-50% 10.96%
10-25% 16.40%
5-10% 11.22%


Top 1% 38.02%
Data source: 2008 IRS data from

Jimmy Hoffa & Tea Party Zombies Game “Take Out” Civility

In Koch Industries, New York Times, Paul Krugman, Political Rhetoric on September 8, 2011 at 12:16 am

Screen shot of "Tea Party Zombies Must Die" game

Was it not just eight months ago, after Tuscon, people on the Left decried “eliminationist rhetoric” and the military technology common in many political campaigns?   

It was.   So where are those New York Times columnists today? 

There is a double standard in the silence from the Left about an online video game called “Tea Party Zombies Must Die”, featuring prominent Tea Party members such as Sarah Palin, Mike Huckabee, Newt Gingrich, Michele Bachmann and even the Koch Brothers.  The gamer is instructed to kill each Tea Party member with weapons like a gun or a crossbar.  [1] [2]  In January, Paul Krugman opined, “It’s true that the shooter in Arizona appears to have been mentally troubled. But that doesn’t mean that his act can or should be treated as an isolated event, having nothing to do with the national climate.” [3]

US Rep. Andre Carson (D-IN) said Tea Party Members of Congress want to see blacks lynched and “hanging on a tree”.  [4]  Let us refresh ourselves of the January words of Paul Krugman: “Where’s that toxic rhetoric coming from? Let’s not make a false pretense of balance: it’s coming, overwhelmingly, from the right. It’s hard to imagine a Democratic member of Congress urging constituents to be “armed and dangerous” without being ostracized” [3]  The Times’ Matt Bai wrote,  “the problem would seem to rest with the political leaders who pander to the margins of the margins, employing whatever words seem likely to win them contributions or TV time, with little regard for the consequences. ” [5]

I provided many other recent examples of uncivil Left-wing rhetoric in my recent post:

President Obama just attended a Labor Day rally where James Hoffa, head of the Teamsters Union, said:

“We’ve got to keep an eye on the battle that we face — a war on workers. And you see it everywhere. It is the tea party.  And there’s only one way to beat and win that war — the one thing about working people is, we like a good fight.”

President Obama, this is your army, we are ready to march.  But everybody here’s got to vote. If we go back, and keep the eye on the prize, let’s take these son-of-a-bitches out.” [6] [7]

Much has been made about the historic Teamster-Mafia connection and the fact James Hoffa’s father was reportedly “taken out” by the Mob.  Whether “we like a good fight” and “let’s take these son-of-a-bitches out” is intended as speaking purely of elections or not, it is ironic this is akin to the sort of Republican militaristic rhetoric like “take back our country” or “targeted” races that left-wingers like Krugman used to say would cause political murder.  Yet, when a prominent Labor leader makes these sorts of statements, neither the President nor his Press Secretary will raise a word against the violent imagery.
Again, let us refer to Krugman in January: “So will the Arizona massacre make our discourse less toxic? It’s really up to G.O.P. leaders. Will they accept the reality of what’s happening to America, and take a stand against eliminationist rhetoric? Or will they try to dismiss the massacre as the mere act of a deranged individual, and go on as before?” [3]
I ask Mr. Krugman, will he stand up against “eliminationist rhetoric” when it comes from the Left? 
The silence is deafening. 

Do you disagree?  Feel free to post your comments below.








[8] p

Picture of Jimmy and James Hoffa from Wikipedia Commons.