JANUARY 16, 2009

The big news of the day, of course, is All 155 aboard survive crash of jetliner into icy NY river. This really is a remarkable story. My daughter called pretty soon after the crash to ask if I heard the news. Nothing was yet on my computer screen---Yahoo news must be slow on the uptake. She lives in Manhattan so I had a freak out moment as I was not sure what she was telling me. While on the phone I found the story and soon it became apparent no one died in the accident. My first thought, which remains of course, is the pilot was a genius. He had to make a decision and he made the correct one. Then he executed it perfectly. Runway to River in 3 minutes---shorter than it took me to write this paragraph. Then I watched the stories. I am not surprised by how quickly "responders" arrived. But I still am amazed. What I found most compelling were the passenger stories. The lack of panic, the quietness on the plane, the natural response of "women and children first", the reports of dignified prayer, the mutual help, the professional response of the crew who also feared death. Talk about "nothing to fear but fear itself". Well, they had plenty to fear, but fear was not going to be one of the things to cause more fear. Let's all imagine we were on that plane with them. And then move on with a greater appreciation and optimism about our own lives.

(posted at 10:00 am by Mike Rulle

  

Christina Romer, new CEA head for Obama, for Treasury Secretary. Lawrence Summers to CEA. Do small lies matter? Yes. Without trying to define "small" lets stipulate that if Timothy Geithner has fudged his response on lack of tax payments it is a "small" lie. Remember, the IRS reports to the Treasury Secretary. I will give the most favorable interpretation possible in what follows. He still fails the test, in my opinion. At the time of the Geithner appointment I was happy with the decision. Not that we knew much about him, but he seems like a competent and calm person. This struck me as what was needed in a Treasury Secretary versus the transparently uncalm Henry Paulson. The only new news we have about Geithner since his appointment is he fudged his taxes. It is risky to fudge taxes, knowingly at least. I do not think think there is some great moral obligation to pay them, but there is a legal obligation to pay them. Having the IRS after me is something I can live without. So I hire professionals to prepare my taxes. I have knowingly invested in tax shelters that have been reversed---costing me high borrowing costs from the Government. So at the end, I still paid and then some. Taxes at the rate we are required to pay them are immoral in my opinion, but we are legally required to pay them, so we pay them.

But back to small lies and Tim Geithner. Is it possible he did not know he should have paid those taxes back in 2001-2002? Yes. But that presents problems. What are we supposed to make of that? That he did not spend enough time filling them out because he had more important things to do? That he is not a detail guy? That tax returns are boring, so lets just get them over with? That he was not smart enough to figure it out? If it was ambiguous, he just chose not to ask anyone who has had a similar position? Do we get the benefit of a break when we engage in such sloppiness? No. So the man who would be boss of the IRS fails on that score. Most likely, he saw that there could be an interpretation in his favor and chose to take it. That is fine with me. But it is not a "common mistake", it is a position on the law he chose to take. That is fine with me too. But when it came down to his later years being audited for the same issue, he knew he owed the taxes. But he got lucky, apparently, as there seems to be a statute of limitations on his '01-'02 taxes. So he chose not to pay. That too is ok, by me at least. But apparently not by the Obama transition team who ordered him to pay the '01-'02 taxes. Fine. So it seems to me the correct description--at best by the way---should be described by Obama and Geithner as follows.

"I, Timothy Geithner, knowingly took an aggressive, but justifiable position on my tax returns in 2001-2002. I chose not to have this reviewed by outside tax accountants but did this myself. When in later years I used an accountant to review my 2003-2004 taxes, I was informed my prior position was wrong. I was legally required to adjust my tax bill in 2003-2004, but not so in the earlier years because of the statute of limitations. As it was my legal right to do so, I chose not to make the payments for 2001-2002 until I was requested to do so voluntarily prior to my nomination. Why? I preferred to keep the money myself and was justified by law in doing so. I would think most US taxpayers would act the same and I certainly support their right to do so as long as their actions are lawful. Given my position as Treasury Secretary, I certainly understand why paying the back taxes voluntarily is the correct thing to do---however, when I originally made the decision I was a private citizen and acted lawfully and appropriately as a private citizen. As a Treasury Secretary, of course, that standard is higher which is why I complied with the transition team's request".

Of course he will not say this. The reason is he might not be approved if he does so, although I would support him if he did. Most people will still see it as unfair. But to Tim Geithner I say, that's life. Better than being a petty liar. Not to him apparently. This, as mentioned, is the most favorable interpretation of the truth. A more venal interpretation is he knew all along which makes my following point even more correct. Instead, the administration, in trying to save his candidacy, chooses to lie to us. There are vague concepts of "honest mistake" and "complexities" and "did not know". Oh, it is all so complex. Where is Giethner's previous support for tax simplicity? There is none. You do not need to work for the IMF to have complexity. This is absurd. We are supposed to believe what morons like Lindsay Graham tell us that we should not play "gotcha politcs". Sorry Senator, but the world does not "need" Tim Geithner. I am sick of venal lies by officials of Government, because they mask the much larger lies which come later. I realize we might get the eccentric oddball Summers in his place---don't know why we should. I would rather have Christina Romer anyway.

(posted at 12:05 pm by Mike Rulle)

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Regarding the post right below, I found this on Greg Mankiw's web page from the Chicago Tribune:

"John Cochrane, a professor at the University of Chicago Booth School of Business, says that among academics over the last 30 years, the idea of fiscal stimulus has been discredited and in graduate courses, it is "taught only for its fallacies". New York University economist Thomas Sargent agrees: "The calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research." 

Yet principles the Economic's profession do know are routinely ignored. Incentives to produce are attacked and/or distorted by regulation and tax policies. This happens at many levels in our economy. Federal, state and local bureaucracies create laws and rules beyond what is reasonable by any common sense standard. We approach these cyclical economic problems using random "Macroeconomic" policies. Why doesn't Government approach these issues from the "bottom up" using non-discredited Microeconomic principles? Free up "animal spirits" by lightening the regulatory and tax load. What Government primarily does is create disincentives---it is their job--telling others and forcing others to do what they think should be done.

(posted at 10:31 am by Mike Rulle)

  

Yesterday, I experienced a personal lesson in economics and Microeconomics. Microeconomics is that branch of economics where we actually know things and is largely about incentives at the individual level. We also seem to ignore the simple and fairly obvious and powerful principles which derive from it. For some reason, policy makers prefer the more universal principles of Macroeconmics, the study of aggregate supply and demand and a field for which there is little agreement beyond some basic accounting identities, at least when it matters, like now. We had purchased a fairly expensive and complex computer from Dell in my office, the kind you have to swear you will not take out of the Country and to state for the record what its purpose is. The Dell technical support guy just could not get motivated enough to help out sufficiently, apparently used to more mundane problems. When the salesman was called, you know, the guy who gets the commission, and was told that we were returning the computer he called his technical guy. The latter called back shortly and in 45 minutes the problem was diagnosed and solved. That is Microeconomics in action. Government does much to encourage the technician's response and not enough to encourage the salesman's response.

(posted at 8:03 am by Mike Rulle)

Street smart, Hockey dad and blue collar". What image does that invoke? Someone who cannot have the wool pulled over his eyes. Yet, Madoff's `Street-Smart' Aide Frank DiPascali apparently heard no evil and saw no evil. He is not charged with anything according to reports, but if he truly knew nothing we can scratch the street smart.

(posted by at 8:43 am by Mike Rulle)