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The Rosett Report

Monthly Archives: September 2008

When do taxpayers finally get angry enough to tell Congress that with the big bailout, the subsidy bonanzas stop here and now?

Someone I know was planning to buy a house. But after calculating the likely tax hit from the $700 billion mortgage crisis bailout, he’s not sure he can afford it anymore. His mistake was that instead of borrowing and spending beyond his means, he has been a thrifty, hard-working American, supporting a wife and a couple of kids, paying his bills in full and on time, and forking over a big whack of his earnings every year to the tax man.

Congress has repaid him with policies that produced the current financial crisis. For him, the bottom line is that he will now be so busy working to pay for other people’s houses that he may no longer be able to afford one of his own. So he’s written a letter to his congressman, giving one of the best summaries I’ve seen of the problem, the cause, and, what it means for him, as a member of the American Middle Class. With the names edited out, here it is – 

Dear Congressman,

I am a Professor of Economics at a college in your district, and believe I understand the current economic condition at least as well as most. The root of the current crisis lies in the Community Reinvestment Act, which is essentially an income redistribution plan. I have been taxed heavily over many years. Based on the ratio of the current plan’s cost to total annual tax receipts taken in by the federal government (about 27%), and my tax bill last year, I estimate the bailout will cost me, personally, $20,000. After all, money for this comes from me, the taxpayer, and I do not expect congress will have the guts to find $700 billion in cuts to offset the cost of this program. At the same time, I will need to buy a house next year in your district as I am no longer eligible for college-subsidized housing.

To put this simply, I can either afford to bail out irresponsible lenders and borrowers created by a huge redistribution policy I have already subsidized in the past, or I can buy myself a house. I don’t think there is room in my budget for both. How should I feel if the federal government decides on the former?

Best wishes,

An American Taxpayer

The North Korean Nuclear Payola

September 27th, 2008 - 10:34 pm

Economists can tell you — and on this one they are usually right — that when you raise the rewards for a specific form of behavior, you tend to get more of it. Suppliers will increase production, and potential suppliers will enter the market, all trying to profit by satisfying the increased demand. For example, when the U.S. government provided a de facto taxpayer guarantee for risky home loans, there was a boom in this kind of lending — and so we got the subprime mortgage crisis.

To take a simpler example of incentives at work: If a schoolchild kicks his classmates, and the teacher responds with a gentle chiding accompanied by a piece of candy in diplomacy, (in the world of soft-power diplomacy, this is called carrot-and-stick) do not be surprised if the rest of his classmates try kicking each other. After all, whatever the teacher’s intentions, the message is: kick someone, and at relatively low cost, you will get a piece of candy.

So it is with incentives in foreign policy. When the U.S. government offers North Korea rewards for scrapping its nuclear arms projects, U.S. diplomats — whether they mean to or not — are creating incentives for other rogue regimes to pursue nuclear programs, if only with the aim of then using them to leverage rewards from the U.S. and friends. Once this becomes the established pattern, there are incentives for lots of folks to try it.

Another word for this routine is nuclear extortion — and the higher the pay-offs America is willing to provide, the greater the incentives for rogue regimes to give it a whirl. Libya is a marvelous example of a regime that in exchange for surrendering a nuclear kit that it shouldn’t have had in the first place has been handed privileges — out from under sanctions, off the terror list, and seated on the UN Security Council – that Tripoli might otherwise never have obtained… at least not without reforms on which Gadhafi has not remotely embarked.

In theory, these pay-offs for denuclearization are coupled with penalties — not just carrots, but sticks, which on balance are supposed to reduce or negate the rewards meant to chivvy rogue regimes away from bad behavior. In Libya’s case, the potential penalty shoved in Gadhafi’s face in 2003 was the fate of Saddam Hussein — and that, at the time, was quite a stick.

But in recent years, the penalties have largely dried up. Since defying the UN to invade Iraq in 2003, the U.S. and allies have resumed trying to channel penalties through the UN, where the mix of an opaque and self-interested bureaucracy, and the conflicting interests of member states tend to water down measures such as sanctions into a big puddle of mush (remember Oil-for-Food, or note the more recent failures of three resolutions meant to stop Iran’s uranium enrichment extravaganza).

In the case of North Korea, carefully targeted U.S. Treasury sanctions were actually inflicting some pain a few years ago, but were then sidelined and effectively watered down by the State Department, as chief negotiator Chris Hill chose to brandish before Pyongyang as the main instrument of U.S. soft power a gigantic carrot. 

In return for paying out big rewards to the Pyongyang regime — cash, diplomatic concessions, fuel, food – the U.S. has gotten not much more in return than a big pile of paper (that would be the uranium-contaminated documentation of activity at the Yongbyon reactor, which North Korea is now threatening to fire back up). So, in the marketplace of foreign policy, as other unsavory governments weigh the costs and benefits of pursuing illicit nuclear weapons programs,  the State Department has effectively abetted North Korea in sending the message that there are big payolas waiting for any rogue regime willing to get into the nuclear extortion business. (Hello, Iran). In effect, the U.S. State Department has upped the demand for such stuff. More on that in my column this week for Forbes online: “A Clear and Present Nuclear Danger.”

From the UN for You: The Beautiful Future

September 23rd, 2008 - 9:25 pm

At the annual opening of the United Nations, they’re just getting warmed up right now for another year of inserting themselves ever deeper into the lives of people everywhere, underwritten mainly by the taxpayers of America, Europe and Japan. You can count on a fresh torrent of programs so opaque and multitudinous that even UN officials themselvs can’t keep track, punctuated by scandals for which the UN, with its diplomatic immunities, has learned the perfect answer: Call an investigation, handpick investigators with old-boy ties to the UN, refuse to answer questions due to the ongoing and inevitably delayed investigative process, eventually issue a report accompanied by a press conference that declares exoneration, wait for everyone to get tired of it all, and move on.

But while we wait for such further dramas to unfold, it is already possible to glimpse in broad terms the world the UN plans for us all… or, as Ahmadinejad put it in his speech Tuesday from the UN stage, the “brilliant, desirable and beautiful future.” We have heard something about it already from — variously — Secretary-General Ban Ki-Moon, General Assembly President and once and future Sandinista Miguel d’Escoto Brockman, Iranian propagandist-in-chief Mahmoud Ahmadinejad, and President Bush.

In this beautiful UN future, as Ban Ki-Moon exhorts, we will all work in global “partnership,” putting the the world collective ahead of the interests of individual nation states. But it won’t stop there. As General Assembly President d’Escoto further explains,  there will be an end to selfishness, a quick and effective redistribution of wealth around the planet — presumably unhindered by the glitches that tripped up communism in the last century, since this time the redistribution will be engineered not by nation states, but by the bureaucracy of the UN.

Ahmadinejad has further elaborated how all this will be powered by countries, such as his own, powered by peaceful nuclear projects. Helping out in the happy process of unselfish, collective partnership will be the the UN’s flagship agency, the UN Development Program, or UNDP. Never mind that the UNDP is so busy spending and transferring billions worth of nontransparent funds around the globe every year that UNDP administrators have no time to waste on such frivolities as disclosing, even to those who fund them, the findings of their own in-house audits — many of which, according to some of the UN’s own public records, have a tendency to be late or incomplete. The important thing is that the UNDP how houses the grand UN project known as the UN Millennium Development goals. These have replaced the old Soviet five-year plans as the cutting edge of central planning for impoverished nations — except unlike the five-year plans, the Millennium goals roll on for decades.

And lest anyone think the U.S. has no more voice in this process, President Bush has called upon the UN eminences to be “focused and resolute and effective.” Plus, now that he has called, again, for the UN to reform, no doubt they will.

See you in the beautiful future. 

Ahmadinejad’s Best Idea Ever

September 21st, 2008 - 10:30 am

Yes, it’s that time of year again — time for the annual Mahmoud Ahmadinejad roadtrip to New York, to which the annual UN General Assembly opening happens to be appended.

If only by contrast with the usual migraine-sustaining tedium of UN proceedings, these visits, involving their own special brand of totalitarian burlesque, are never dull. For four straight years now, Ahmadinejad has managed every September to come up with fresh antics. Who can forget his interest last year in dropping by Ground Zero? Blessed relief — that was foiled. But along with dining and whining with select members of the media, he did get to Columbia University for a speech in which he offered to his ivy league audience the epiphany that no one in Iran is gay.

One of my favorite Ahmedinejad roadshow moments came during his New York visit in 2006. Iran was at that stage in volation of the first in a series of UN Security Council resolutions demanding that Iran halt its program of uranium enrichment. Ahmadinejad gave a press conference in which he said that none other than Kofi Annan, then Secretary-General, had told him not to worry about it.

And of course in 2005, during Ahmadinejad’s maiden speech at the UN, there was the aura, or halo, which he was sure appeared around his head while he was at the podium, speaking to the eminences of the UN General Assembly.

This year, while fresh and surprising thrills might lie ahead, he has already come up with a proposal which, to my shock, I find I can entirely support. He’s actually on to something. The Tehran Times, getting a jump on the news, reports that “Ahmadinejad Proposes Moving UN to an ‘independent state.’ “ Apparently he has in mind someplace “where everyone can make comments… with no limitation.” That would seem to rule out Iran itself, where there are all sorts of limitations on what “everyone” can say. But wherever he wants to take the UN, the proposal would at least have the salutary effect of getting it out of the United States — thereby removing some of the credibility and maybe even some of the billions of U.S. taxpayer dollars that flow yearly into providing a global stage for Ahmadinejad and his ilk.

Notes From Abroad on a Mad, Mad, Mad, Mad World

September 19th, 2008 - 10:11 pm

For the past two weeks I’ve been doing some traveling in the Far East, dropping in on some favorite old places and marveling at the broad leap in living standards achieved in the space of a generation — thanks to the same market forces that are right now causing such dismay. And every time I tune in to the news, it seems to be worse: “The foundations of U.S. capitalism have shattered,” screams Der Spiegel, “The world as we know it is going down.”

By way of contrast I’ve been hauling along a dog-eared collection of Somerset Maugham short stories in which characters of another age of the world spent years gently rotting in colonial outposts — the locals around them decimated regularly by smallpox and cholera. For the folks populating that long-gone Maugham universe, the main contact with the torrent of human events came  via the passing ships that brought outdated newspapers, precious letters and books, and the occasional visitor to sit late into the night on some colonial verandah, telling stories over whisky and cigars. These days, such tales sound surreal. The modern heirs of this crowd would be post-colonial sojourners, following the markets on broadband, and due to the eco-conscious regulations of a great many sovereign states wired in to CNN International, they’d have to choose between whiskey at the table, or cigars in the designated smoking area near an outdoor trashcan.

Maybe it’s our own era that too often seems surreal. While the settings and pace of our own stories have drastically changed, the character of man has not. It takes time to absorb big news, it takes perspective to make wise decisions. And these days, everything seems to be big news — at least for a week — from Sarah Palin’s hair and hacked email, to Woody Allen’s pronouncements on Barack Obama, to the meltdown of assorted U.S. financial giants and bailouts on a scale the average taxpayer can hardly comprehend (but soon will).

Technology has delivered to us the ability to track disasters in parts of the planet that just a generation ago were rarely heard from at all — and since the worst news usually generates the biggest headlines, one might conclude on any given day that the catastrophes of the human race, the perfidies of politics, the threats to the planet (real or hyped), are simply beyond coping. The flip side is, of course, the astounding extent to which human creativity, energy and ambition has provided better lives for billions of people — something which has been happening incrementally enough so that it does not tend to make for howling daily headlines.

Amid this whirlwind, I still subscribe to the idea that when freedom matched with responsibility and fair rule of law is the basis of a political system, mankind can accomplish wonders – not least, the staving off of the apocalypse that seems chronically in one form or another to haunt the human imagination. If that sounds overly broad, of course it is — we live day to day in a welter of decisions and details, and politicians, nations, visionaries and madmen for better or worse can have mighty effects on our lives — all the more so in a world in which old institutions are struggling with evolving new crises. I’ll be exploring some of that terrain in a new weekly column on foreign affairs, running Thursdays on Forbes online, the first one here

Here we go again. With all the charm that has marked his previous three visits to the annual opening of the UN General Assembly in New York, Iran’s Mahmoud Ahmadinejad picked the historically freighted date of Sept. 11 to confirm that yes, indeed, he’s coming b-a-a-a-a-c-k … to take the UN stage on Sept. 23.

There are plans for a “Wall of Shame” demonstration near the UN in Manhattan, with protestors calling for the Iranian regime to be held to account for its repression and atrocities. But that wall will end when Ahmadinejad steps inside the UN gates, to enter the sacrosanct UN-world, in which accountability is a concept reserved almost exclusively for the likes of the UN’s chief sugar-daddy, the United States. For Ahmadinejad, representing a terrorist-backing regime that is in violation by now of three UN Security Council resolutions meant to stop Iran’s nuclear bomb program, the UN will provide diplomatic entry to Manhattan, and a world stage with a golden backdrop in the grand council of nations.

This in turn will provide the usual springboard for Ahmadinejad to wine and dine select members of the media, give interviews, swagger around town and gloat over the “Death to Israel! Death to America!” vision to which Tehran’s mullocracy dedicates so many of its resources (never mind the economic trainwreck back home in Iran). Will Ahmadinejad make another attempt to visit the site of the World Trade Center? Will he make one of his trademark calls for the annihilation of Israel? Will he thrill to intimations of the apocalypse while addressing the eminences at Turtle Bay?

We need not wait long to find out. The Ahma-mushroom-cloud road show returns soon. And with it, the question – How, exactly, does it serve America’s interests to bankroll and host the UN (now enjoying a $2 billion headquarters renovation) in the heart of New York?

So now we have the mystery of the missing “Dear Leader” of North Korea, Kim Jong Il, who did not show up in public Tuesday for the 60th anniversary parade to mark the founding of the modern world’s most brutally repressive state.

Is Kim alive? Is he dead? Has he had a stroke? Who knows? There’s even a story making the rounds that Kim died five years ago, and well-trained doubles have been filling in for the rotund tyrant — in which case someone behind the scenes has been doing a thorough job of keeping alive the tradition in which Pyongyang ruling elite swill cognac, build nuclear weapons and extort aid, cash and concessions from the U.S. while millions of ordinary North Koreans starve.

Whatever’s become of the elusive Kim, his current vanishing act highlights the willful idiocy of U.S. policy that has sought, first under President Clinton, and again during the second term of President Bush, to strike nuclear disarmament deals with North Korea that depend on Kim’s promises of future cooperation. The problem is not solely determining whether Kim himself is alive or dead, but that nothing issuing from him (assuming it IS him), or his regime can be trusted, and as we are now observing, it cannot even be verified.

That hasn’t stopped the Bush administration, with the Condi Rice State Department blazing the way, from sending Kim — or whoever it might be in Pyongyang — $25 million in hard cash, re-starting the Clinton era shipments of free fuel, shoveling in aid (which North Korea can all too easily divert from hungry people to its massive military machine) and ladling out a series of dipomatic concessions in hope of pleasing Kim enough so that he will at least provide a full accounting of his nuclear programs — which North Korea has yet to deliver.

More than a year-and-a-half has passed since the State Department trumpeted a breakthrough nuclear disarmament deal with North Korea — which has turned into a debacle. Just last weekend, U.S. special envoy to the Six-Party Talks, Chris Hill, was back in Beijing nattering on about the need for North Korea to provide a “verification protocol” for its nuclear ventures.

Give us a break. Step one ought to be a “verification protocol” for who’s actually in charge, and where he/they are. Step two should be the end of that regime. Not payoffs and dignification of the mystery tyrant.

I was doing some traveling over the weekend, with connecting flights through Chicago’s O’Hare, and during what seems to be the routinely scheduled five-hour O’Hare delay, decided to kill some time browsing the magazine racks – with their displays replicated in one terminal after another of this major hub of American airborne gridlock. Looking out from row upon row of the racks were covers devoted to the two women most prominent in the presidential campaign, now that Hillary, with a salute to the pantsuit set, has left the stage to the ladies in heels.

Here’s what jumped out:

There were two covers showing Sarah Palin. One was Time, “The Education of Sarah Palin.” The other was the already much-commented upon cover of Us, showing Palin holding her newborn son, stamped with the headline: “Babies, Lies and Scandal.”

That second Palin cover was paired in main displays with OK magazine’s cover showing Michelle and Barack Obama and their two daughters, a happy frolicking family; headline: “Life With My Girls.”

There were another four covers showing Michelle Obama. On the cover of “Upscale” (which has as its slogan, “Living the Affluent Lifestyle), with a story about Michelle as a powerful force who will never lie to her husband. On the cover of ”Ladies Home Journal” hugging Barack, headlined: “Barack and Michelle Obama/Why he calls her his chief adviser and what jolts him awake at 3 A.M.” On the cover of Ebony, headlined ”The Real Michelle Obama. The First Lady Hopeful Talks Family, Fidelity & the Future of America.” On the cover of Essence, yet another in the series of magazine stories on the idyll: “At Home With the Obama Family.”

There’s no law — nor should there be — that says magazines have to be fair. But there’s also no law that says anyone has to buy this stuff. My advice, if transit O’Hare you must: bring a book.

Outta the Ball Park, Sarah!

September 3rd, 2008 - 10:00 pm

That was the most refreshing speech from an American politician in years. She did it with humor, and grace, and steel. There were loads of good lines – one of my favorites, that the American presidency “is not supposed to be a journey of personal discovery.”

What a relief, to hear from a national pulpit such a litany of sweet sense.

Watching the dynastic politics swirling around the White House these past 20 years – Bush, Clinton, Bush, (Clinton) — has become wearing. Listening to the collectivist chant of “We are the change we seek” has been alarming.

John McCain has picked for a running mate someone who gives me real hope for the years ahead, and a new generation. Sarah Palin talked tonight about an America of individual responsibilities, a country proud to win its wars and defend its interests  – not a vale of groaning victims waiting for rations of relief from Washington.

On Obama: “What does he actually seek to accomplish, after he’s done turning back the waters and healing the planet? The answer is to take more of your money…give you more orders from Washington…and to reduce the strength of America in a dangerous world. America needs more energy… our opponent is against producing it.”

We can expect quite a dogfight ahead. Her joke about the difference between hockey moms and pitbulls — “lipstick” — was not cosmetic. Tonight, clearly, directly, Palin looked straight at the Obama campaign and laid out the real issues. Whatever the smears and attacks and discoveries ahead, that kind of clarity has got to be good for American politics.

As for teen pregnancy, does anyone still think that’s the defining issue of this election?

What Sarah Palin Won’t Say

September 3rd, 2008 - 12:32 am

Sarah Palin is preparing to take the stage at the Republican convention, and if you believe the chorus in the MSM, the pivotal issue she must deal with is the pregnancy of her teen-age daughter — which in the space of two days has apparently become one of the most burning policy matters of our time. Move over, U.S. economy, world markets, jihadis, oil despotisms, resurgent Russian aggressors, Kim Jong Il and Mahmoud Ahmadinejad. 

I don’t know what Sarah Palin is going to say. But I am trying to imagine the effect it would have if she stood up before the crowd and declared the following:

There are a few more things you need to know about me. As a troubled teen-ager, I myself used cocaine and marijuana (yes, I inhaled), and as an adult, I attended and took my family to (and my inspiration from) a church where the preaching included hate-speech about America and assorted ethnic and religious groups. In my business career, before entering politics, I had talents that allowed me, simply by reading the newspaper, to earn a 10,000% return on a $1,000 investment in cattle futures in the space of 10 months. While holding elected office, my experience included the pursuit of assorted adulterous liaisons, including intimate activities in my landmark government office with an  intern less than half my age, though as I regard it, I did not have sex with that person (depending on the meaning of “is”). When I got caught, my spouse denounced my critics as members of a vast political conspiracy. I could add a great deal more to this list (though please remember that when I got caught taking home state silverware, I eventually did send it back), but let us now turn to the mighty issue of the hour…

That scene, of course, is fantasy. Sarah Palin won’t say these words, because they do not apply to her. But the activities listed here do apply, as a quick compendium, to the three most prominent political figures (the politicians themselves, not their children) who paraded across the stage at the Democratic convention in Denver last week — to wild ovations from the crowd.

Somehow, the awkward moments of Barack Obama, and Hillary and Bill Clinton, rank as pardonable and ultimately unimportant in the eyes of many of the same folks who would now pillory Sarah Palin as unfit for office … because her 17-year-old daughter got pregnant and plans to marry the father and have the baby.

Enough with the audacity of hypocrisy. Now may we go ahead with the real political debate?