AIG Suing the Government... Have Pity On the Orphan

Even if willing to excuse the incompetents, those who didn't want the criminals who helped take down the economy to avoid any consequence have been reminding us for years that the statute of limitations was running:

In the meantime, the statute of limitations, generally five years for securities fraud and most other federal offenses, is running out, precluding the possibility of bringing many new suits dating from the bubble years.

The result is a public perception that the big banks and their leaders will never have to answer fully for the crisis. The shameless pursuit of Wall Street campaign donations by both political parties strengthens this perception, and further undermines confidence in the rule of law. There may be more civil fraud suits related to the financial crisis, producing settlements and fines. But to date, those cases have rarely named top executives and the banks have rarely admitted wrongdoing. And the fines, even those in the hundreds of millions of dollars, have been small compared with bank profits and banker bonuses.

After all these years, what is still needed are cases with convictions and settlements severe enough to deter future bad behavior. If institutions operating at the heart of the economy really cannot be held to account, the solution should be to break them up, not give them and their leaders a pass.

In an editorial that reminds me of the joke about the lawyer defending his client, accused of murdering his parents, "How can you say such awful things about this poor orphan," David Boies makes the case for AIG's suing the federal government for having the audacity to bail it out:

Objections to AIG shareholders having their day in court to contest the terms of the government's takeover of their company are based on ignorance of the law and the facts.

Opening your argument by pounding the table? Not a good sign.

David Boies is the lead attorney representing Starr International in a shareholder lawsuit against the government. Starr's chairman is Maurice "Hank" Greenberg, AIG's former chief executive.

One statement I do not expect to be hearing from Boies,

This suit was not commenced at an earlier date because it was complex, not because my client has done anything wrong or has anything to hide, and my client happily waives the statute of limitations for any criminal charges or civil claims arising from his own conduct. Pure as the driven snow, he is.

Most of Boies' arguments, no offense to the man, strike me as the leavings of a ruminant. I am to believe that private investors were lining up to bail out AIG with sweetheart deals, but that the U.S. government scared them off? Care to name one, or should we refer to them for now as "Hank Greenberg's invisible friends"?

Remember all that nonsense about "the sanctity of contracts" from back in the day, when insurance executives were insisting that gargantuan bonuses be paid to the idiots who took down the economy, and that payouts be made in full with taxpayer cash, because insurance companies cannot survive unless their word is gold? (Ever make an accident claim only to be lowballed by the insurance company, or fight to get a medical procedure covered? Then odds are you weren't fooled.) Remember how we were instructed that it could even be illegal for AIG to try to negotiate reduced payouts to counterparties? Now Boies complains that AIG actually had to live up to its word, the so-called "back door bailout", because the government used taxpayer money to fully fund AIG's liabilities.

If Darrell Issa has a spine hidden somewhere beneath his suit coat, perhaps he'll stop peering unsuccessfully under the skirts of Obama Administration officials, in search of fake scandals, and turn his attention full bore on AIG. And perhaps he can rally his fellow Republicans to authorize a blank check for the defense of the lawsuit - enough of the excuse for failing to prosecute of, "It's just too complicated". You didn't want to take the war to AIG, fine, but now AIG has brought the war to you. If Hank Greenberg has a case to make, let him make it - but turn the heat way up.

It's a Conspiracy, I Tell You!

"We're through the looking glass here, people. And down the rabbit hole. And we've just had some kind of mushroom...."

Charles Krauthammer and Glenn Beck are on the same page: General Petraeus is the victim of a vast, left-wing conspiracy. As they say, "Great minds...."

I can't wait to learn about how Eric Cantor is actually a Democratic Party mole, or what "they" have on Darrell Issa that would prevent him from issuing a subpoena to Petraeus.

It's Fantastic, It Works, And... You Can't Have It!

People who oppose the Affordable Care Act, and health insurance in general, nonetheless seem apt to praise the Federal Employee Health Benefits Program:

In all the Ryan proposals, enrollees in the new regime would use the government's contribution to shop from a broad array of private insurance plans offered by a Medicare exchange. That system is modeled on the highly successful Federal Employee Health Benefits Program, where government workers choose from a wide variety of offerings, from deluxe fee-for-service plans to basic high-deductible programs.

It's real, it's currently in effect, it's (supposedly) a model for Paul Ryan's privatization of Medicare, it's "highly successful" even by the measure of a Paul Ryan fan. And as you recall, Darrell Issa and Jack Kingston have proposed opening the doors and letting everybody in American join this "highly successful" program.

But do you see even the slightest movement by anybody in the Republican Party to put those words into action? Of course not.

The GOP's Eventual Nominee

Richard Cohen offers his take on the list of Republicans who may enter the race to be the party's 2012 presidential nominee. He doesn't find them to be a particularly impressive group. And in fairness to Cohen, they're not. But let's not have any premature triumphalism. The first impression may be of tortoises entering a race with a hare, but....

If you can recall Bill Clinton's climb to the nomination, back in 1992, going into the race he was far from an obvious choice. People had fun talking about what a weak field of candidates the Democrats had. "Paul TaxOnGas. Tsongas. TaxOnGas. Get it?" Hey - I said they had fun, not that they were funny...

During that race an acquaintance who, as I come to think of it, reminds me of Richard Cohen (or perhaps it's the other way around) would triumphantly throw his support being a particular candidate and, invariably, that candidate would be the next to drop out. Now to be fair, I don't think he ever got behind Laughlin, but seriously - his instincts were that good. Throughout that time he would repeat whatever scurrilous rumors were circulating about Bill and Hillary Clinton, whom he denounced as totally unfit for office. Until Bill was the last man standing and the tone of his comments changed to, "He comes pretty close to walking on water." Clinton, of course, won the nomination he wasn't supposed to win, then the presidential election he wasn't supposed to win, and the rest is history.

I personally hope that lots of people join the Republican race, even those from the lunatic fringe, simply for the amusement value. I'll be happy to suggest campaign theme songs.... Tim Pawlenty? Plenty, Pawlenty, get it? (Dang, now you're going to think I made up that TaxOnGas joke.) Seriously, let's have Darrell Issa enter the race and offer some, dare I say, fiery oratory. He could strut onto the debate stage fighter style, in gym shorts and a robe to the chorus of Fire Water Burn - and he has the street cred to pull it off!

Yes, I want the Republicans to "bring on the crazy" for my personal amusement, but at the some time I'm not going to sell the process short. At this point we don't even know who's running.

Equal Health Care For All?

Two legs good, four legs bad? Not if Rep. Dave Reichert has his way:

I was cosponsor of legislation that required all members of Congress to be a part of the public option if it were to pass. the Democrats on the Ways and Means Committee voted that down. So, I want equal health care opportunities for all Americans.

What wonderful news for Rep. Darrell Issa and Rep. Jack Kingston, who apparently have yet to find a third person to join them in their quest to give all Americans the opportunity to buy into the federal health insurance plan.

C'mon guys, what are you waiting for. Now's your moment to live up to your words and bring us equal opportunity in health insurance. You might want to act soon, lest your inaction give rise to the impression that you are capable of delivering nothing more than political grandstanding.

The "Debt-Reduction Sales Tax"

Fareed Zakaria recently ribbed Darrell Issa over Issa's use of euphemisms, suggesting that politicians' use of euphemisms is cowardly, and that those who use them are either lying or at best trying to hide the truth. For some reason this came to mind when I read about the lastest "budget task force" proposal from Pete Dominici Alice Rivlin, and its "debt-reduction sales tax".

We would dramatically simplify the tax system, establishing individual tax rates of 15 and 27 percent (from the current high of 35), cutting the corporate tax rate to 27 percent (from 35 today), ending most deductions and credits while simplifying the rest, and ensuring that nearly 90 million households no longer have to file returns. To reduce the debt, we would supplement our spending cuts with a 6.5 percent "debt-reduction sales tax."

I tracked down a longer version of the report and, although it found room for four pages of photos and bios of the contributors, it omitted any hard numbers.

Correct me if I'm wrong, but I believe if we kept income taxes 0.5% higher - that is, reducing them to 15.5% and 27.5% (they would eliminate intermediate brackets) the tax revenue raised would be substantially greater than that which would be raised through a new national sales tax. So why not keep things simple and impose a 0.5% or even a 1% "deficit reduction surtax" on income taxes until the deficit disappears? Or, more honestly, just set those tax brackets at the slightly higher rate because it's not as if we're really going to eliminate the national debt, is it....

Seriously, if they want to make a policy case for why we should create a new, regressive national sales tax system, imposing significant costs of tax collection and remittance on the nation's businesses, rather than setting the income tax at a slightly higher level, let them make it. Their use of a euphemism suggests either that they can't make a compelling case for the sales tax, or that they don't want to approach the issue honestly. I personally see no sign of honesty in their choice of euphemism because, contrary to what its name implies, I simply don't see that such a tax will ever go away.

Health Care Reform

One of the biggest problems with healthcare reform is the insistence that it must take the form of a single bill, and that bill must be "everything to everyone." That is, the bill must:

• Bring about universal or near-universal coverage;

• Limit the abuses of the insurance industry; and

• Maintain or reduce present levels of healthcare expenditure;

The Washington Post adds a fourth demand,

• Malpractice reform,

despite there being no evidence that malpractice reform will advance any of the three other goals of reform - and plenty that it will not. (I've written quite a bit about the fiscal reality of "malpractice reform".)

It's not the worst unsigned editorial the Post has ever run, but Fred Hiatt is out to maintain the editorial board's reputation as a gang that can't shoot straight. At least half the time they time they don't know the target, don't actually want to hit it, or both. The editorial praises the atrociously deficient Max Baucus "reform" bill, while at best hinting at its most significant deficiencies: its deliberate underfunding of insurance costs for the uninsured working class, and its deliberate failure to provide any mechanism to pressure insurance companies to bring down insurance costs for people who don't have the good fortune to participate in employer-sponsored group plans. The Bacus bill bends over backwards to make sure that co-ops would be hamstrung and useless. I could cynically ask, how much did the insurance industry pay him (or promise to pay him) - except given the extent to which he kowtows is it truly cynical to ask?

A few years ago, I was paying for insurance through COBRA, continuing my wife's coverage through a full service Blue Cross/Blue Shield group plan. Over the course of eighteen months the price went from "really high" to "extraordinary", inspiring me to check out what I could get from other sources. Even through supposed "group rates" available through some professional organizations of which I'm a member, I couldn't find anything that came close to the group plan's benefits. In fact, the typical plan offered vastly less coverage, very high copays and deductibles, and... came at a similar cost. The only way I could "save" money would have been by using a catastrophic policy and covering "routine" medical expenses out-of-pocket, but given the health problems my family was experiencing at the time that would have been worthless. So I kept on paying under COBRA until my wife found a government job where... she became eligible for a Blue Cross/Blue Shield group plan that wasn't quite as good as her former plan, but was nonetheless very good - and, once again, offered at a group rate that was vastly below the "group" plans available to me as a self-insured individual.

The Baucus plan, quite deliberately, changes none of that. In that same position, I would have been offered only one other option - the co-op option Baucus has deliberately sabotaged, the overpriced "group" plan, or the useless "catastrophic care" plan. Had I faced a mandate at the time, but been ineligible for COBRA, I would have found the absolute cheapest catastrophic insurance plan that met the terms of the mandate, and been very angry at the government for making me waste my money on a useless POS of an insurance policy. The right-wing should be celebrating Baucus's crappy bill - in its present for, it stands to make their angry supporters even angrier.

Not surprisingly, given his obeisance to corporate interests, Hiatt's editorial page doesn't express any concern for the quality of health insurance that will be available to individuals. It does mention cost:

Asking families earning $66,000 a year to devote 13 percent of their income to insurance premiums - and more once deductibles and co-payments are involved - is asking them to assume a heavy lift.

They have a gift for understatement. A head of household with a $66,000 income takes home about $52,000. After the cost of housing, one or two cars, food, clothes... it's unlikely that the family has a great deal of wiggle room in its budget. Asking them to devote more like 16-17% of their take-home pay to an insurance plan - even more, to an overpriced insurance plan... and "more once deductibles and co-payments are involved" - is going to push a lot of families into foreclosure or bankruptcy. What a solution - rather than having your medical bankruptcy after you get sick (and your insurance proves inadequate), Baucus will force you into a preemptive medical bankruptcy! What's not to love?

I recognize why the disingenuous cowards, Jack Kingston and Darrell Issa, are afraid to put their (or is it our) money where their mouths are, and introduce an option allowing individuals to buy into the current federal insurance plan. (Maybe Kingston wrote a bill, but accidentally left it somewhere with his flag pin, never to be found?) But why doesn't Baucus have the cajones to add that option? (Or are we back to that "bought and paid for by the insurance industry" thing?) Conversely, if he thinks his watered-down co-ops are worth the paper their written on, why not require that federal employees obtain their coverage through co-ops? Including, of course, Senators? No, as you know, when a self-serving Senator is involved (and you rarely find another kind) sauce for the goose is never sauce for the gander - if he did that he would either have to fix the myriad defects in his co-op proposal or face hurricane-force blowback.

Top it off with this:

In addition, the proposal's version of an employer mandate - a so-called "free rider" provision that would penalize employers not offering insurance only if their employees obtained government subsidies - could have the perverse effect of discouraging employers from hiring workers from low-income families.

Are we sure Baucus hasn't changed parties? Given his apparent eagerness to cause the uninsured working and middle class to hate the Democratic Party, I'd swear he has his eyes on Michael Steele's job....

Where's The Bill?

Darrell Issa and his sidekick, Jack Kingston, were on Real Time this past weekend, where they deplored the absence of a very simple healthcare reform - simply letting all Americans buy into the federal cafeteria plan, unsubsidized, thereby obtaining the same insurance coverage available to federal workers and Members of Congress at group rates. Now why does that idea seem familiar....¹

While the Issa-Kingston bill would hardly be the end of healthcare reform, it's something I would favor. It would also be a very simple bill to draft, and with the support of the Republican Party should quickly and easily pass in both Houses.

So what are they waiting for?

_______

1. If you recall, John Kerry proposed something similar in 2004, but his formal proposal involved creating a parallel pool comparable to the federal employees' insurance program rather than in fact allowing the nation's unwashed masses into the federal pool. I expect this was because somebody told him what would happen to the group rates available in the federal pool if, in fact, any American with a pre-existing health condition were allowed to buy in and get immediate, full coverage.

Please Explain These Economic Theories To Me....

Please speak slowly and use small words.

Rep. Darrell Issa (R-CA) was on Real Time with Bill Maher, advocating a VAT (a significant national sales tax) as good policy, premised upon his position that imported goods are sold without contributing to Social Security or the general fund. There, he argued, European nations have better tax policy than the U.S. So help me out here - how is he not arguing in fact for tariffs? And why is it better to have a VAT which affects all goods - whether or not they are manufactured in the U.S. - even though by Issa's logic that would amount to the double-taxation of U.S.-manufactured goods? (And wouldn't the VAT, a regressive tax, swallow whole Sebastian Mallaby's notion of Wal-Mart as a giant welfare program?)

And speaking of Mallaby, in today's homage to labor, he proposes saving us all through tax reform - but surprisingly not a VAT. (I guess he wants to preserve the benefits of those low Wal-Mart prices.) Trade protection, he tells us, is bad - so I guess he's really not at all on the same page as Rep. Issa. He argues that "The case for unionization appears better than it has in a generation," but sees it as at best a minor part of the solution to inequality. He also argues that a minimum wage increase won't have much benefit as it will only "directly benefit fewer than 6 million workers" - apparently indirect effects don't count.

Then he proposes his first "meaningful" reform - the elimination of the mortgage interest deduction. "More than half of this subsidy flows to the top 12 percent of households with incomes over $100,000; the poor get very little." Okay... so if the problem with the subsidy is inequality, why eliminate it? Why not cap it, the way we cap contributions to Social Security in order to be, um, fair to the wealthy? Yes, as he argues, "affluent families would own their own homes anyway," but how would the elimination of the mortgage interest deduction increase home ownership? Or if it wouldn't - if he really believes it makes no difference - what alternative does he propose that will help the poor obtain homes, the middle class keep the homes they have, and let the rich carry on as usual? Even if he sees the mortgage interest deduction as flowing largely to the wealthy, by his own assertions its elimination would effectively significantly increase the tax burden on the middle class - and is there any real question that without the mortgage interest deduction a significant number of people in the middle class will have to move to lesser housing? This is a tax reform that will reduce inequality?

Then he proposes eliminating tax subsidies on retirement savings. Again, its that the rich will save anyway, so they don't need the subsidy. He argues that the poor don't save. He somehow forgets to mention the middle class. If you subsidize savings, it seems, "A chance to boost national savings is wasted." How, exactly, does he come to believe that eliminating a subsidy for savings will boost national savings?

Finally he complains that some people have really good health insurance (probably himself included) which "throw money at health services; health inflation goes up, making insurance too expensive for poor families". He argues that "the ranks of the uninsured could be reduced by at least 1 million if the tax deduction for health insurance were capped at a reasonable level." Okay.... As we approach fifty million uninsured people in this country, he has a plan that in theory will cause the rich to get less insurance coverage. Unlike their houses or savings accounts, when it comes to their health the rich apparently won't spend their own money to make up the difference, so there's less money flowing into treatment and health inflation drops. And that means we end up with 45.6 million Americans who are uninsured instead of 46.6 million? Wait - didn't he just tell us that it's not even worth doing something if you only directly benefit six million people?

And seriously - he suggests that if we cut these subsidies, which he argues largely benefit the middle class, we will be able to redirect the increased tax revenues (we won't call it a tax increase) to "a big expansion in the earned-income tax credit plus a cut in the regressive payroll tax"? It seems fair to assume that he's not proposing that Social Security contributions be paid out of the general fund, so those would stay the same? So... it will be a greater contribution to Medicare from the general fund to allow the reduction in payroll taxes? Does he truly anticipate that the "big expansion in the earned-income tax credit" will result in more of the poor people who qualify for that subsidy to save money or buy houses?

I would venture that Rep. Issa would propose a reduction in income taxes in association with the implementation of a VAT, such that the rich pay a lot less tax and the poor pay a lot more. Mallaby seems to believe that the rich don't need tax deductions and the middle class will take care of themselves, but does he sincerely believe that this nation is in any sort of mood (particuarly following the elimination of tax deductions which significantly benefit the middle class) to increase its subsidies to the poor? Fergudnissake, we already let them shop at Wal-Mart.

Our nation's tax policies are pretty awful, and they could use a lot of heavy-duty housecleaning. But look at the Tax Code - look at the manner in which it caters to the wealthy and to various special interest groups. Oh, you may be able to get changes through which benefit those groups, while tricking the middle class into going along. (Isn't that the story of GW's "tax reforms" to date?) But if you truly believe you can take away deductions which you argue don't matter to the rich (as if such a deduction exists) at significant detriment to the middle class, so you can provide an increased subsidy to the poor... is it really necessary to tell you, "Ain't gonna happen?"