The similiarities between Enron and U.S. Govt. financing

A substantial part of the Justice Department‘s criminal cases against former Enron executives Jeff Skilling and Richard Causey involves their complicity in Enron’s liberal use of “off-balance sheet” partnerships that Enron used to shift risk on debt that otherwise would have diluted Enron’s net worth. In an ironic twist, history professor Niall Ferguson and economist Laurence Kotlikoff explain in this insightful paper how the United States Government uses the same off balance sheet liabilities in accounting for its Medicare and Social Security liabilities to mask the true financial condition of the Government. The entire paper is well worth reading, and here are a couple of tidbits:

During the Clinton Administration, the CBO routinely projected that, regardless of inflation or economic growth, the federal government would spend precisely the same number of dollars, year in and year out, on everything apart from . . . entitlements. At the same time, the CBO confidently assumed federal taxes would grow at roughly 6 percent each year. As a result, it was able to make dizzying forecasts of budget surpluses . . . These phantom surpluses were the money Al Gore promised to spend on voters and George W. Bush promised to return to them during the 2000 election.
[T]he crisis of the American welfare state remains a latent one. Few people, least of all in the government, wish to believe it is real. But the crisis could manifest itself with dramatic suddenness if there is a significant shift in the expectations of financial markets at home or abroad. And when the finances of the United States “go critical,” there will inevitably be moves to cut back any federal program that lacks strong popular support. Though relatively inexpensive, and not in themselves a cause of American overstretch, “nation-building” projects in far-away countries will surely be among the first things to be axed.

Messrs. Ferguson and Laurence Kotlikoff also argue that our politicial leaders, the public, and bond market investors are all in denial about the large future liabilities that the government faces. This is provocative economic analysis and essential reading for anyone interested in understanding the financing of our government’s future liabilities.

VDH’s latest

Victor Davis Hanson‘s latest column at National Review Online addresses America’s supposedly new preemption policy in its overall foreign policy. Mr. Hanson observes in a part of his piece:

Despite the current vogue of questionable and therapeutic ideas like “zero tolerance” and “moral equivalence” that punish all who use force ? whether in kindergarten or in the Middle East ? striking first is a morally neutral concept. It takes on its ethical character from the landscape in which it takes place ? the Israelis bombing the Iraqi reactor to avoid being blackmailed by a soon-to-be nuclear Saddam Hussein, or the French going into the Ivory Coast last year, despite the fact that that chaotic country posed no immediate danger to Paris. The thing to keep in mind is that the real aggressor, by his past acts, has already invited war and will do so again ? should he be allowed to choose his own time and place of assault.
Hitler was ruthless in starting a war against Poland. Yet he could have been stopped far earlier in 1936 or so ? had the democracies preempted him. Indeed, a failure to preempt is often far worse than the act itself. Serbia posed no “imminent” threat to the United States in 1998; but President Clinton ? with no U.N. sanction, no U.S. Congress resolution ? finally decided to act and end that cancer before it spread beyond the Balkans.

Rise and fall of a ‘Haitian Mandela’

This Christian Science Monitor article details the signs that Jean-Bertrand Aristide was doomed to failure as President of Haiti. The CSM notes:

How a man hailed as a potential Nelson Mandela for his impoverished and oppressed nation of 8 million could fall so far appears to be as much a tale of wishful thinking by desperate Haitians and the international community that backed him, say experts, as it was a tale of the old clichÈ that “absolute power corrupts absolutely.”
Aristide was given that rarest of political gifts – a second chance. But, reinstalled in the presidency in October 1994 by a multinational military force, he used his resurrection to perfect an autocratic style, say even those close to him who were interviewed for this story.
Today, having infuriated, humiliated, and – some allege, killed – any once-devoted followers who crossed him, Aristide has few political allies left. Even his strongest credential – his election to a second term in 2000 – counts little as rebels gobble up territory and threaten to take the capital.
Languishing in that familiar pre-coup limbo that is a trademark of modern Haitian presidencies, Aristide is a symbol of a political culture that has been bankrupt nearly since it began as a slave revolt 200-plus years ago. . .

Gore’s Revenge

Comedian Argus Hamilton is offering a strategy that would give Al Gore sweet revenge for Ralph Nader‘s costing him the 2000 Presidential election while guaranteeing that Mr. Nader wouldn’t collect enough Democratic votes to alter this year’s election outcome. “There’s only one way Al Gore can get even with Ralph Nader,” Mr. Hamilton advises. “He’s got to wait for the crucial moment in the campaign and then endorse him.”

DeLay records subpoenaed

As noted in earlier posts here and here, a political action committee ? Texans for a Republican Majority ? that House majority leader Tom DeLay of Houston created is the subject of a grand jury investigation in Austin. Yesterday, the Travis County District Attorney’s office released information on over 50 subpoenas that it has issued in the investigation over possible criminal misuse of corporate funds in the 2002 legislative campaign. Here is the Chronicle article on this development.

What a surprise! (just joking)

A recent study shows that United States Senators stock portfolios regularly outperformed the market by an average of 12% a year.

Harvard Prof on Gay Marriage

Harvard University Law Professor Mary Ann Glendon has a Wall Street Journal op-ed ($) today that addresses several important issues that are often overshadowed by the supporters’ casting of the debate as one over civil rights issues:

Those judges are here in Massachusetts, of course, where the state is cutting back on programs to aid the elderly, the disabled, and children in poor families. Yet a four-judge majority has ruled in favor of special benefits for a group of relatively affluent households, most of which have two earners and are not raising children. What same-sex marriage advocates have tried to present as a civil rights issue is really a bid for special preferences of the type our society gives to married couples for the very good reason that most of them are raising or have raised children. Now, in the wake of the Massachusetts case, local officials in other parts of the nation have begun to issue marriage licenses to homosexual couples in defiance of state law.
A common initial reaction to these local measures has been: “Why should I care whether same-sex couples can get married?” “How will that affect me or my family?” “Why not just live and let live?” But as people began to take stock of the implications of granting special treatment to one group of citizens, the need for a federal marriage amendment has become increasingly clear. As President Bush said yesterday, “The voice of the people must be heard.”
Indeed, the American people should have the opportunity to deliberate the economic and social costs of this radical social experiment. Astonishingly, in the media coverage of this issue, next to nothing has been said about what this new special preference would cost the rest of society in terms of taxes and insurance premiums.
The Canadian government, which is considering same-sex marriage legislation, has just realized that retroactive social-security survivor benefits alone would cost its taxpayers hundreds of millions of dollars. There is a real problem of distributive justice here. How can one justify treating same-sex households like married couples when such benefits are denied to all the people in our society who are caring for elderly or disabled relatives whom they cannot claim as family members for tax or insurance purposes? Shouldn’t citizens have a chance to vote on whether they want to give homosexual unions, most of which are childless, the same benefits that society gives to married couples, most of whom have raised or are raising children?

Martha’s team is confident

That is the only explanation for this normally risky move in a white collar criminal case.

Incompetence defined

As noted earlier in this post, the street rebuilding project that has been going on in downtown Houston during almost the entire administration of former Mayor Lee Brown has been one of the mostly poorly managed public works projects in recent Houston history. This Chronicle article gives a good example of the legacy of this mess that new Mayor Bill White has inherited.

Civil liberties and the War on Terror

Ethan Bronner, deputy foreign editor of the NY Times, has a review in today’s New York Times Book Review on several recent books that share a central theme — i.e., that the War on Terror combined with Attorney General John Ashcroft, as one book put it, ”are responsible for some of the most egregious civil liberties violations in the history of our nation.” Mr. Bronner is much more measured than that statement, and the entire article is well worth reading. Here are a couple of tidbits:

If you believe these changes are eroding the liberties that make this nation great, these books are for you. They will give texture and sharpness to your rage. You can pick from among them based on your level of concern. If you are incensed, go for the Brown essay collection, ”Lost Liberties.” In it, Aryeh Neier says, ”We are at risk of entering another of those dark periods of American history when the country abandons its proud tradition of respect for civil liberties.” And Nancy Chang of the Center for Constitutional Rights says that executive measures taken in the wake of the Patriot Act ”are responsible for some of the most egregious civil liberties violations in the history of our nation.” Given the suspension of the writ of habeas corpus during the Civil War, the Palmer raids in World War I and the internment of Japanese-Americans in World War II, both of these statements seem to me hard to defend.
Of course, one legitimate complaint that Ashcroft and many others could lodge against nearly all these books is that they fail to spend any time on the threat to liberty not from Ashcroft but from Al Qaeda. Liberty is meaningless without security, as Viet Dinh, the former assistant attorney general who wrote much of the Patriot Act, has often said. Stuart Taylor Jr., a legal journalist, put it this way in The National Journal in December 2002: ”Should we eschew fishing expeditions through Ryder truck rental records and fertilizer purchases? Not if we want to prevent terrorist mass murders. And I, for one, am a lot less worried about the government snooping through my credit card bills and psychiatric records than about being anthraxed in the subway or killed by a nuclear explosion in my downtown Washington office.” While this strikes me as too far in the other direction, such words are useful to keep in mind while reading of Ashcroft’s sins.