Virgina Postrel in this post looks back at the 1960’s and 70’s, and relates those times to Ronald Reagan’s election as president. Read it. Virginia hits the nail on the head on this one.
Virgina Postrel on the 1960’s and 70’s
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Monthly Archives: June 2004
This year’s lousy tax bill
As noted in a post here several days ago, the 1986 Tax Bill was one of President Reagan’s enduring accomplishments, not as much for the tax rate reduction as for the bill’s bold move toward tax simplification. Using that bill as a standard, Steve Pearlstein in this Washington Post article analyzes this year’s tax legislation. The result is not promising:
One of Reagan’s greatest achievements was passage, with bipartisan support, of the 1986 Tax Reform Act. The goal of the landmark bill was to make the tax code simpler and fairer while boosting economic efficiency. Loopholes were closed, tax rates were reduced, and all sorts of distinctions were eliminated so that individuals and companies with the same income or profits were required to pay roughly the same tax.
Those principles, however, are violated on nearly every one of the 930 pages in the recently passed Senate tax bill and the 398-page draft released last week by the chairman of the House Ways and Means Committee, Bill Thomas (R-Calif.).
With a few exceptions, both bills are grab bags of special-interest provisions designed to reward the well-connected at everyone else’s expense. They reward companies that have played cynical tax games and open up new vistas for the tax shelter industry.
Mr. Pearlstein notes that tax legislation has again become the favorite tool for providing political favors:
Let’s begin with those provisions designed to favor particular companies or industries. In the Senate bill, these include cruise-ship operators, foreign gamblers, NASCAR track owners, insurers, timber companies, cattle ranchers, movie theater owners, and manufacturers of small planes, bow-and-arrow sets and fishing tackle boxes. And notwithstanding the fact that skyrocketing oil prices should provide all the incentive anyone would need to develop new energy sources, there’s a couple of billion dollars a year in new tax breaks for energy companies already well-endowed with them. In a final, gratuitous insult to the taxpayer, there’s even a provision for a blue-ribbon commission to study “comprehensive tax reform.”
The House would leave out the energy provisions but add tax breaks for bourbon distillers and wealthy taxpayers in places like Texas that, poor things, have no state income tax to deduct on their federal 1040. High-tech industry tucked in a provision that would ensure its employees pay no payroll taxes on all those stock options. And in a shameless vote-buying effort, Thomas’s draft would have the government pay $2 billion a year to tobacco farmers for the right NOT to pay them annual crop subsidies in the future, as if the quotas were some sort of property right.
Mr. Pearlstein closes by observing that this awful piece of legislation could be used by an able politician for the better good:
This may well be the worst piece of tax legislation to come along since 1986. If Sen. John F. Kerry (D-Mass.) wanted to steal the Reagan mantle, he would make plans now to return to Washington from the campaign trail and, Jimmy Stewart-like, lead a protracted Senate filibuster of the final bill. From his final resting place, the Gipper would be cheering him on.
Tax simplification is one of the many domestic issues on which the Bush Adminstration has abdicated its leadership position. Curiously, if President Bush loses in November, my sense is that it will be more a result of this type of political lethargy than anything that occurs in the Middle East.
Hat tip to Professor Sauer for the link to the WaPo article.
Chronicle revises Landry’s story
After embarrassingly missing the point in its earlier article on the recent firing of Landry‘s CFO, the Chronicle finally makes the connection between that event and the firing of Landry’s auditor a month ago.
By the way, I do not buy Landry’s explanation that these two events were “coincidental.”
The Onion has the scoop on Kerry’s VP choice
2004 Presidential Election Trackers
The LA Times (free online registration requried) has this cool 2004 Presidential Election Map Tracker.
Also, the Wall Street Journal Online Edition ($) continues to provide an excellent overview of the battleground states in the election. Just scroll down to the “Interactive Features” section and click on the “Battleground States” hyperlink.
Plaintiffs counsel in Enron civil litigation involved in merger
Lerach Coughlin Stoia & Robbins LLP — lead plaintiffs’ counsel in the multi-district civil litigation against Enron Corp. — announced today that it is merging effective August 1 with Boca Raton-based Geller Rudman PLLC. Both firms specialize in class action and individual cases on behalf of shareholders and institutional investors.
As reported in this previous post, Lerach Coughlin is a spin off of the former class action firm, Milberg Weiss Bershad Hynes & Lerach.
Mr. Spitzer: Get ready to rumble!
In this refreshing Wall Street Journal ($) op-ed, Home Depot co-founder Ken Langone, who chaired the New York Stock Exchange compensation committee that approved Richard Grasso’s $140 million pay package, throws down the gauntlet regarding New York Attorney General Eliot Spitzer’s lawsuit against Grasso and Langone to recover alleged overcompensation to Grasso. In essence, Langone says “bring it on.”
First some background. When the Grasso pay package first came to light, both men sat on compensation committees that determined pay for the other — Grasso on Home Depot’s and Langone on the NYSE’s. Grasso decided to leave Home Depot’s board and Langone stepped down as head of the NYSE committee.
Moreover, according to a research firm report issued last year, Langone has been active on compensation committees with a history of granting large executive compensation despite poor share performance. As recently as late last year, Langone served on the compensation committees of each of the five public companies of which he is a director: ChoicePoint, General Electric, Home Depot, Unifi, and Yum! Brands.
Research firm Glass Lewis rates the executive compensation practices of many public companies, comparing the amount executives receive with the company’s financial and stock performance. Of the companies on which Langone served as a director, ChoicePoint received the highest rating, a “C.” The other companies received a “D” or an “F.” “For some reason [Langone] seems be a compensation committee favorite,” one sage observer noted. “We think we know why: He tends to overpay people.”
So, I think it’s fair to say that Mr. Langone is, as we put it in business circles, “a player.”
And is Mr. Lagone quaking in his boots over Mr. Spitzer’s lawsuit? Not a chance:
At a showy, televised news conference recently, New York Attorney General Eliot Spitzer announced a lawsuit that attacked my business integrity and my character. Accustomed to bullying settlements, mistaking bluster for substance, Mr. Spitzer apparently expects I will capitulate, to the tune of $18 million. But his claims were false and his suit will fail.
At any point I could have caved. Settled. Paid whatever money was claimed I owe. Avoided a trial. Walked away and licked my wounds. Most people think that simply cutting a check would be the easy way out. Expedient? Sure. Resolute? Hardly.
Here’s why. It was baseless that I, as chairman of the New York Stock Exchange compensation committee from 1999 to June, 2003 had somehow failed to inform the NYSE board of a benefit they themselves had approved. Having been there, I know the records will prove it was all above-board, well-vetted and fair. It is absurd to suggest that the brightest minds and keenest thinkers on Wall Street were befuddled by the complexity of Richard Grasso’s compensation package — especially one composed just like their own. Might as well say NASA couldn’t launch a Goodyear blimp.
And it was thick-sliced baloney how this case came to be defined by some: Wall Street cop takes on greed. I gained not one nickel. Mr. Grasso earned his pay, over the course of years, as the members themselves affirmed, time and again.
Mr. Langone then goes on to compare Mr. Grasso to A-Rod and Nicole Kidman:
The value that Richard Grasso brought to the NYSE was remarkable and helped generate value out of all proportion to what he himself earned. He did a stellar job. Under his leadership, the value of seats on the exchange increased several-fold, new companies joined the exchange in droves and healthy revenue stayed consistent even through rough economic waters. That was the studied opinion of the board and, yes, even Mr. Spitzer himself.
Good thing, too, since members belong to the NYSE for one reason — the opportunity to maximize wealth. Such high performance was the hope when, nearly 10 years ago, board member Stanley Gault was tasked with defining the organization’s leadership qualities. He urged that, “If the organization is to remain successful, we will need to staff the Exchange with what the compensation committee has come to call ‘world class talent.’ To attract and retain this talent, we will be competing directly for people with world class organizations — particularly at senior management levels.”
Yankee infielder Alex Rodriguez is paid a nine-figure salary not for his winning smile but for his value to the franchise. Actress Nicole Kidman reaps tens of millions per film not for her fashion sense but for her ability to sell movie tickets. Executive Paul Tagliabue, head of the NFL (yes, a nonprofit, and yes, funded by the members) reportedly also makes around $10 million a year and is clearly worth every penny.
And Mr. Lagone then turns to Mr. Spitzer’s alleged selective prosecution:
Reasonable observers are far more likely to see through the political cynicism of Mr. Spitzer and his cheerleaders. This is a man, after all, who sent out photos of himself wielding a flaming baseball bat, asking people to pony up $100,000 apiece for his political bank account. Is it coincidence, everyone is asking, that Mr. Spitzer’s Democratic Party colleague, Carl McCall, who chaired the compensation committee after me and signed Mr. Grasso’s contract, was shielded from the lawsuit?
Read the entire WSJ piece because it is delicious stuff. This lawsuit is going to be the legal equivalent of of a free-for-all, and it’s going to be fun to follow. The New York courts could sell tickets to this trial. Stay tuned.
Anadarko plans big asset sale
The Woodlands-based Anardarko Petroleum Corp. is one the largest energy producers in North America. Yesterday, the company announced that says it plans to sell oil and natural-gas properties valued at about $2.5 billion and redirect its focus to overseas efforts.
Anadarko will be selling interests in producing oil and gas fields in Oklahoma, Texas and Canada, and then plans on managing its remaining North American assets as a source of capital for high-risk, high-reward exploration projects in Qatar, Algeria and the deepwater Gulf of Mexico. In addition, the company will use proceeds of the asset sales to pay down debt by $1.4 billion and fund at least a $1.1 billion stock repurchase plan.
Although the sales when completed will cut Anadarko’s production by 25% and proved reserves by 15%, the theory behind the plan is for the company to imporve its growth rate. Anadarko’s new CEO, James T. Hackett, said the plan is similar to “pruning the tree to make it healthier.”
Anadarko’s plan is a fairly typical response of energy companies that rely heavily on declining North American oil and natural-gas production. Such large independent producers eventually are forced to make a choice between riskier international and deepwater exploration or boosting profits on their declining reserves by hacking costs and improving efficiency. Anadarko’s plan is announcing to the market that the company prefers to play rather than clip coupons.
This plan comes after a period of upheaval at Anardarko, with management changes and a failed sale bid. The above-described plan is new CEO Mr. Hackett’s first step in charting the company’s future course.
Stros shut out M’s again
Wade Miller followed the Rocket‘s fine performance the previous evening and threw six innings of shut out ball as the Stros shut out the rather hapless Mariners for the second straight night, 3-0. Miceli, Lidge and Dotel again mowed down the M’s in the last three innings to preserve the zip out.
You just never know what you are going to get from the inconsistent Miller. In his three previous starts, Miller had given up over a run an inning, which is not the way to establish a stellar earned run average. On the other hand, he is capable of being dominant as he was on Wednesday night when he gave up only four singles and a double and struck out four. A big key for Miller is walks — he is one of the National League leaders in that category and when he controls them (he had only two on Wednesday), he has a much better chance of success.
Ex-Stros farmhand Freddy Garcia (he came over to Seattle in the Randy Johnson trade five years ago — has it really been that long?) cuffed the Stros for most of the night, but Bags, Berkman and Hidalgo led an uprising in the third that generated all of the Stros’ runs.
Despite his contribution in this game, Hidalgo — who has been scruffing ever since the beginning of May and has not hit a yak since April 13th — continues to have buzzard’s luck. In this game, he whacked a shot over the fence in deep center only to have the M’s Randy Winn make one of the best catches of the season by extending his arm well over the fence and snagging the ball. Hidalgo couldn’t believe it.
Meanwhile, the Reds have started their inevitable descent from first place (their pitching generally stinks) as they lost three straight in Oakland this week. The Cards, whose pitching has been the best in the division so far this season, now share first place with the Reds and the Stros are a game and a half back.
The Stros try to get in a golf game today in Milwaukee before beginning a weekend series on Friday with the Brew Crew, who are uncharacteristically playing reasonbly well so far this season. Tim Redding, Roy O, and whoever is replacing Andy Pettitte in the rotation this time around (probably Pete Munro) will hurl this series. The Stros finally return to the Juice Box on Monday for an 11 game homestand against the Cubbies, the Angels, and the Pirates.
Finally, it turns out that the Stros still hold at least one option under Brandon Duckworth‘s contract, as he was mercifully optioned to AAA New Orleans yesterday. Journeyman reliever Kirk Bullinger replaces Duckworth on the 25 man roster.
Judge Hittner goes nuclear on Mike DeGeurin
U.S. District Judge David Hittner today took the unusual step of issuing a ten page order admonishing prominent Houston criminal defense attorney, Dick Degeurin, for sending a background report about DeGeurin’s client, Lea Fastow, to the Bureau of Prisons.
Mrs. Fastow, wife of ex-Enron Chief Financial Officer Andrew Fastow, was ordered this week to serve her term for a tax misdemeanor in the cell block-like downtown Houston Federal Detention facility starting in July. DeGeurin had been trying to arrange for her to serve the year in a more comfortable federal minimum security unit in Bryan. DeGeurin’s letter to the Bureau indicated he was sending the report so that the Bureau had all the possible information on Mrs. Fastow before assigning her to a facility to serve her one-year sentence.
Presentencing background reports are routinely sent to the Bureau and both the prosecution and the defense requested that one be sent in this case. However, Judge Hittner refused to send the report in this case, reasoning that the report was based on the felony charges that the government dropped when Mrs. Fastow pled to a misdemeanor tax evasion charge. Judge Hittner contended that the lawyers waived a new report, but DeGeurin and the prosecution apparently did so only because a report already existed and they thought it was fine to send to the Bureau.
Judge Hittner took the unusual step of distributing his order regarding DeGeurin to all the district judges in the Southern District of Texas saying DeGeurin “circumvent(ed) the rulings of the court, as well as the procedures of the United States Probation Office and Federal Bureau of Prisons.”
Judge Hittner previously refused to accept a 5-month prison plea bargain for Mrs. Fastow. Although this is speculation, I suspect that Judge Hittner has not been pleased with the way in which the Enron Task Force handled the case against Mrs. Fastow — i.e., prosecuting her until her husband cut a plea bargain and then agreeing to a minimum level plea with Mrs. Fastow that indicated that they really were not serious about the prosecution in the first place. However, I have no idea why the judge has gone off on DeGeurin, who appears to have done nothing other than vigorously represent his client.
One thing looks certain — I suspect that all parties in any future Enron criminal prosecutions that land in Judge Hittner’s court will file joint motions to recuse him from the case. It was somewhat surprising that Judge Hittner handled the case against Mrs. Fastow because he was a former Enron Corp. shareholder. Neither the prosecution nor the defense in Mrs. Fastow’s case raised that fact as grounds for the judge’s recusal.