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22 December 2003

State Tax Credits: Dumb and Dumberer

Earlier this month, Kirk Stark, a professor of tax law at UCLA wrote an op-ed in the Los Angeles Times that argued that California should take federal tax policy into account in making its own tax decisions. Taxes that are deductible on federal tax returns effectively costs taxpayers less money (as long as they itemize their federal tax deductions). Stark notes that paying attention to how the federal government treats various state taxes makes more sense than fretting that California doesn't get amply rewarded in federal largesse.

There is real money at stake here. According to the California legislative analyst, the sales tax brought in $22.3 billion for the fiscal year 2002-2003, accounting for roughly one-third of all general fund revenues. Projections show that percentage holding through fiscal year 2008-2009. Over the next six years, California will collect an average of roughly $27 billion per year in sales taxes. If that revenue stream were converted from the sales tax to a deductible tax, the tax savings to Californians would be significant—perhaps as much as $5 billion a year.

Alternatively, the state itself could capture that saving by raising more than $27 billion in deductible taxes. For example, $32 billion raised through deductible taxes would increase state revenues by $5 billion, but because of the federal deduction it would keep the net tax burden on Californians the same.

Indeed, relatively few state legislators take federal taxes into consideration when making state tax policy. If they did, then state tax credits for corporations would be rare birds indeed. Most corporations deduct state taxes as expenses on their federal income tax returns. (For some corporations, state taxes have no immediate effect on their federal tax payments—some have no federal tax liability, and some pay the federal corporate Alternative Minimum Tax.) For a large corporation, the federal tax rate is 35%, so a $100 of state tax credit saves it only $65: it saves $100 in state taxes but pays $35 more in federal taxes because its federal taxable income increased by $100.

In other words, for most corporations, a state tax credit costs the state a full dollar but is worth only sixty-five cents to its intended recipients. (Similar logic applies to many state tax credits aimed at individuals, but only if the individuals itemize their federal deductions. A taxpayer claiming the federal standard deduction would not pay any more in federal income tax by means of claiming a state tax credit, because the state income tax does not affect her federal taxable income. For example, states that have Earned Income Credit programs that piggyback on the federal EIC give state tax credits to low-income taxpayers who usually claim the standard deduction for federal tax purposes. These programs, therefore, are generating state tax credits that are generally worth as much to the recipients as to the issuers.)

In affordable housing, one popular state tax credit is the state low-income housing tax credit (LIHTC). This sort of credit is modelled on the very successful federal program that generally generates corporate equity investments of 75 to 85 cents per dollar for a 10-year stream of tax credits. The price per credit is less than 100 cents because credits are worth less and less in today's money the farther one lookes in the future.

A state LIHTC program has appeal to many states. Usually, the state housing finance agency already administers the federal program; the state LIHTC requires little to no additional bureaucracy; and in most states, affordable housing needs all fo the resources that it can get. But the state LIHTC is a lousy way to get money into affordable housing. In Arkansas and Missouri, developers are lucky to see prices of 30 cents per dollar of credit. In Massachusetts (where the credit vests over four years, not ten), 50 to 55 cents per dollar of credit is typical. If the state LIHTC were a prescription drug program, it would involve sending bureaucrats to Canada to buy pharmaceuticals, but to use American dollars, one for one, to pay bills demoninated in Canadian dollars.

The story is similar for historic rehabilitation tax credits. The federal credit, equal to 20% of the qualifying cost of a building, aims to subsidize the cost of doing the extra work to preserve, reuse, and rehabilitate historic structures. A qualifying property generates historic tax credits in the year that it is placed in service. The quick vesting of the credits means that investors usually pay between 88 and 92 cents per dollar of credit. (The price would be higher if the historic tax credit did not reduce the depreciation deductions allowed to the owners of the property.) Massachusetts ,like many other states, has found a state historic credit to be attractive. Like the LIHTC, a state historic credit would ride piggyback on a federal credit. It would not need an army of bureaucrats to make it work. The amount of credit available each year is easily limited, because developers would need to apply for it. And the money available for historic preservation is far below what could properly be used.

And, lo, the Massachusetts legislature included an historic preservation tax credit in a recent spending bill, at Section 22. The problem, as with the state LIHTC, is that it is horribly inefficient. he state will spend $10 million per year on these tax credits, but can expect those tax credits to generate only $6 million in corporate equity. Because the investors are federal taxpayers, they will probably value the state credits at 55 to 60 cents per dollar.

The state could have pledged $10 million per year in soft debt to qualifying developments, or even started a revolving loan program to make investor's dollars go farther. But either of those choices would have committed the state to spending money, and spending money is a politically incorrect concept, even if it is a quite efficient one. The politically correct notion is targeted tax credits, even if they are glaringly inefficient.

Posted by Tim W at 12/22/2003 12:44:00 AM

21 December 2003

Dean's Real Message on Southern White Voters

Many of his Democratic rivals and much of the Washington press corps have excoriated Howard Dean for his remark in early November that he wanted "to be the candidate for guys with Confederate flags in their pickup trucks." For deacdes, Southern politicians of various political parties have angled for the votes of poor white through appeals to racism, sometimes overt and sometimes encoded. The irony of the angst over Dean's remarks lies in that he has aimed to gert poor whites to vote for him because of their class—because they are poor.

The Black Commentator website recognizes that irony and recently published an excellent article on a speech that Dean made earlier this month, a speech that received much less attention than it deserves.

Howard Dean’s December 7 speech is the most important statement on race in American politics by a mainstream white politician in nearly 40 years. Nothing remotely comparable has been said by anyone who might become or who has been President of the United States since Lyndon Johnson’s June 4, 1965 affirmative action address to the graduating class at Howard University.

For four decades, the primary political project of the Republican Party has been to transform itself into the White Man’s Party. Not only in the Deep South, but also nationally, the GOP seeks to secure a majority popular base for corporate governance through coded appeals to white racism. The success of this GOP project has been the central fact of American politics for two generations—reaching its fullest expression in the Bush presidency. Yet a corporate covenant with both political parties has prohibited the mere mention of America’s core contemporary political reality: the constant, routine mobilization of white voters through the imagery and language of race.

Last Sunday, Howard Dean broke that covenant.

The article makes the vital point that what the media terms Deans's "southern strategy" is really the only intelligent approach that fair-minded Democrats can take, to ask voters "to vote their interests, or vote for their bosses’ interests (if they are lucky enough to have a job)."

Howard Dean by no means represents the left extreme of the Democratic Party. If elected, he would surely make some of the same sort of compromises with conservatives that so annoyed me and my ilk during the Clinton presidency. But speeches like Dean's speech in Columbia, South Carolina are the sorts of speeches that his rivals should be making as well. Every American voter should know well before November that the Democratic nominee, whoever he or she is, will side with workers over bosses, and for the schools and clinics and money that impoverished communities need.

However, it may be too compelling to continue to reduce Dean's arguments to his "confederate flag" remark.

Posted by Tim W at 12/21/2003 10:12:00 PM

20 December 2003

The PowerPoint Presidency

The New York Times Magazine last weekend listed several dozen new ideas that its staff noticed during 2003. One idea was Edward Tufte's claim that using PowerPoint, the Microsoft presentation software, encourages bad thinking. Tufte has been making this argument for years, but the explosion of the space shuttle Columbia gave him new ammunition.

In August, the Columbia Accident Investigation Board at NASA released Volume 1 of its report on why the space shuttle crashed. As expected, the ship's foam insulation was the main cause of the disaster. But the board also fingered another unusual culprit: PowerPoint, Microsoft's well-known ''slideware'' program.

NASA, the board argued, had become too reliant on presenting complex information via PowerPoint, instead of by means of traditional ink-and-paper technical reports. When NASA engineers assessed possible wing damage during the mission, they presented the findings in a confusing PowerPoint slide—so crammed with nested bullet points and irregular short forms that it was nearly impossible to untangle. ''It is easy to understand how a senior manager might read this PowerPoint slide and not realize that it addresses a life-threatening situation,'' the board sternly noted.

PowerPoint is the world's most popular tool for presenting information. There are 400 million copies in circulation, and almost no corporate decision takes place without it. But what if PowerPoint is actually making us stupider?

Tufte's thinking reached a wide audience earlier this year when Wired gave him space to rail against the evil that he saw in PowerPoint.

Imagine a widely used and expensive prescription drug that promised to make us beautiful but didn't. Instead the drug had frequent, serious side effects: It induced stupidity, turned everyone into bores, wasted time, and degraded the quality and credibility of communication. These side effects would rightly lead to a worldwide product recall.

Yet slideware—computer programs for presentations—is everywhere: in corporate America, in government bureaucracies, even in our schools. Several hundred million copies of Microsoft PowerPoint are churning out trillions of slides each year. Slideware may help speakers outline their talks, but convenience for the speaker can be punishing to both content and audience. The standard PowerPoint presentation elevates format over content, betraying an attitude of commercialism that turns everything into a sales pitch.

NASA is hardly the only governmental body using and abusing PowerPoint, of course. One of the more famous PowerPoint presentations of 2003 cascaded across the screens of the Security Council of the United Nations in February, when Colin Powell presented the Bush administration's proof that Iraq possed weapons of mass destruction. The Powell presentation fits neatly into Tufte's critique. Bulleted lists and graphics dominate the presentation, which would fit neatly onto one piece of paper if it were a handout. The promised "proof" contains flashy graphics, but only the faintest scintilla of data. At least the PowerPoint presentations that most of us endure at work are merely mind-numbing ciphers, not tools used to hype wars through wishful thinking and outright falsehood.

At least the standard PowerPoint presentation pretends to make logical arguments. When President Bush makes a speech, almost anywhere he speaks, the White House press conference is eager to use the magic of computers to bolster his arguments. As Fox News reported in January, the White House uses repeated short phrases on backdrops to keep "up with the Information Age." That sort of thinking makes one yearn for the intellectual depth of PowerPoint.

Posted by Tim W at 12/20/2003 12:06:00 AM

19 December 2003

Mad as Hatters

Two recent news pieces make one wonder if every generation has incredibly daft diplomats, or whether some times just outdo others for sheer lunacy. The first concerns the initial contact on 20 December 1969 between H. G. Balfour-Paul, the British ambassador to Iraq, and Saddam Hussein, then the vice chairman of the Revolutionary Command Council.

Indeed, he struck me as a much more "serious" character than other Ba'athist leaders; and his engaging smile, when he deployed it, seemed part and parcel of his absorption with the subject at hand and not, as with so many of the others, a matter of superficial affability. I should judge him, young as he is, to be a formidable, single-minded and hard-headed member of the Ba'athist hierarchy, but one with whom, if only we could see more of him, it would be possible to do business. It may have been an "act"; but if so, it was a skilful performance for someone with so little experience of the outside world.

In 1983 and 1984, Donald Rumsfeld was making all too similar observations in the interest of "doing business" with Iraq's autocrats. In today's world, politicans dare not say such things about Saddam Hussein. (Instead, they gaze into Vladimir Putin's visage and claim to see his soul.)

And earlier this year came the story of the death of the former Ugandan dictator Idi Amin. In London, The Observer noted that during his political ascent during British colonial rule, he was viewed with a mixture of praise and bemusement:

He was one of only two native Ugandans to receive a commission from the British Army during colonial rule. British officials assessed him thus: 'A splendid type and a good [rugby] player... but... virtually bone from the neck up, and needs things explained in words of one letter.'

How very splendid he turned out to be.

Posted by Tim W at 12/19/2003 10:26:00 PM

Unindicted Co-conspirators?

The invaluable folks at the National Security Archive have just published another set of gleanings from our government's archives. Among the latest revelations was this gem:

The newly declassified briefing notes for special envoy Donald Rumsfeld's second trip to Baghdad in March 1984 reveal Rumsfeld's instructions to reinforce the message of U.S. interest in improved relations "at a pace of Iraq's own choosing," and to emphasize that U.S. criticism of Saddam's chemical weapons use versus Iran was not meant as a pro-Iranian or anti-Iraq gesture.

Remember, at that time, the Reagan administration knew full well that Iraq had used chemical weapons—what the Bush administration now calls "weapons of mass destruction"—against both Iranian troops and Kurdish insurgents. But in the 1980s, Hussein could actually implement anti-Communism and anti-Shi'ism, tenets of Reagan adminsitration foreign policy, implement in every sense of the word. Once the Soviet Union imploded, however, Hussein was utterly expendable.

Posted by Tim W at 12/19/2003 10:14:00 PM

15 December 2003

A Trial of Hussein Could Be Bad for Bush

The world can certainly rejoice that American troops captured Saddam Hussein alive and pretty much unharmed. But the Bush administration cannot be looking forward to what might come out of any trial of Hussein. Key members of the administration, and their political forebears, would certainly find that the bright light of publicity is hardly a welcome one, when you are complicit in a litany of horrible deeds.

Our president might be ecstatic that Saddam Hussein has been captured, but our troops are surely expecting more chaos in Iraq. If Saddam Hussein was reduced to hiding in an underground crypt, either it is far easier than ever to terrorize thousands of American troops, or the Iraqi insurgency is more autonomous, more elusive, and more dangerous, than our dear sainted leaders will ever admit.

But onto why the Bush administration cannot long for a full and fair trial. By 1983, the Iran-Iraq war was going badly for Saddam Hussein. Iraq was in danger of losing a war with its bitter enemy, and Iraq's use of chemical weapons had led Iran to cry foul. The Reagan administration carefully shifted its policy on the Iran-Iraq war away from strict neutrality toward a policy that favored Baghdad over Tehran. National Security Decision Directive 99, issued on July 12, 1983, has yet to be released in unexpurgated form. But the independent National Security Archive notes that "[a]n interdepartmental review of the implications of shifting policy in favor of Iraq was conducted following promulgation of the directive."

By 21 November 1983, the Reagan administration knew that Iraq had used chemical weapons in the Iran-Iraq war, and even that European companies had supplied "production related technology" for chemical weapons. A state department memorandum urging quiet conversations with Iraqi officials included the following gem:

Please present the following points in appropriate manner to Foreign Minister Tariq Aziz: ...

—We raise the issue now because we believe continued Iraqi use of C[hemical] W[eapons] will play into the hands of those who would wish to escalate tensions in the region, as well as constrain the ability of the U[nited] S[tates] G[overnment] to play a helpful role in the region.

In 1983, the Reaganites meant the big, bad Soviet Union, led by forgotten apparatchik Yuri Andropov. Today, it is the United States government that is doing its utmost to escalate tensions in the region and prevent any sort of helpful role.

Later, the attachments in the memo refer to several incidents in 1982 and 1983 in which Saddam Hussein's government used chemical weapons against not only the Iraqi army, but against Kurdish insurgents within Iraq. These are some of the incidents used by the current administration to justify the invasion and occupation of Iraq.

In 1983, the reaction of the Reagan administration was not to present proof of Iraqi perfidy to the United Nations. Indeed, the memo noted that it was Iraqi use of chemical weapons that constituted a violation of existing treaties.

The existing convention [on chemical weapons] prohibits the use, repeat use, of lethal and incapacitating chemical weapons. No international treaty yet prohibits development, production, or deployment of lethal and incapacitating c[hemical] w[eapons].

By 2003, the Bush administration was hyping the supposed existence of chemical weapons in Iraq, when so far the cleaning aisle of the local Wal-Mart has the ingredients for more chemical weapons than the United States has found anywhere within the borders of Iraq.

So, what did the Reagan administration do in the face of evidence that Saddam Hussein and his government were using banned weapons? The administration sent a high-level envoy in a high-profile mission to meet Saddam Hussein, negotiate about possible cooperation on an oil pipeline, and generally treat him as a potential ally of the United States against the twin scourges of the Communists and the Shi'ites. Gentle reader, you might known that envoy as our current Secretary of Defense, Donald Rumsfeld. Both he and Saddam were smiling in December 1983. In December 2003, neither one really has much to smile about.

Posted by Tim W at 12/15/2003 10:29:00 PM

13 December 2003

The Real Road Map

Le Monde diplomatique has a useful summary of the unofficial agreement signed in Geneva recently by Israeli and Palestinian citizens. And by unofficial, we mean governments were not doing the negotiating, although some governments, like the Swiss, were very supportive. The Israeli negotiators, for example, included left-leaning politicians long known for their pursuit of peace with Palestine,

The key parts of the initiative are that Israel would abandon almost all of its settlements and outposts in the West Bank and Gaza Strip, and that Palestine would accept cash payments in lieu of a right to return to Israeli lands. This initiative hardly represents a breakthrough in Israeli-Palestinian relations, but it does present a real chance for peace. The United States can provide another vital ingredient: money. Cash from the United States has made an unlikely peace between Egypt and Israel work for decades, and can make another one work as well.

The American news media generally covers Israel and Palestine from a decidedly Likudnik perspective: Palestinian attacks on Israelis are, quite correctly, deplored, but Israeli colonization of the West Bank and the Gaza Strip gets only fleeting attention. In Israel, by contrast, what Israel does to Palstinian territory is the subject of much debate. And trading land for peace—giving up the settlements and outposts, and accepting a viable Palestinian state—has often found favor with a majority of Israelis.

Ariel Sharon's government, so often praised by the American right wing, has railed about the Geneva initiative. In last October, the Guardian reported that the Israeli prime minister felt threatened:

Although Mr Sharon dismissed the initiative as close to treason and illegitimate, his government's vigorous denunciations suggest it is unnerved by the plan.

The Geneva initiative's originators are seeking about £600,000 from foreign governments and wealthy individual donors to print and distribute copies of their draft agreement to every household in Israel and the Palestinian territories.

In its efforts to discourage overseas support, Israel is not directly challenging the content of the plan.

Instead it is questioning the propriety of foreign governments supporting an initiative the Israelis say undermines the moribund "road map" initiated by the US, the EU, the UN and Russia.

And moribund is exactly the word for not just the "road map" but for American policy towards Israel in general. The current Israeli government is building a wall in, around, and through the West Bank: thousands of Palestinians will be cut off from their neighbors; thousands of acres will be open to Israel but cut off from Palestine. Our reaction has been to cut some promised loan guarantees—not actual money, but the backing for some loans—to Israel by a measly three percent.

With a lot of work, the Bush administration could do what previous administrations could not, to forge agreement between Palestinians and Israelis. But the "war on terror" and its myriad diversions and discursions are distracting the most powerful country on the planet when its influence could be so very helpful.

Update—5:00 p.m. on Saturday, 13 December: The lead editorial in the current Nation has similar observations, available online only to subscribers:

The Geneva Accord, engineered by former Israeli Justice Minister Yossi Beilin and former Palestinian Authority negotiator Yasir Abed-Rabbo, is a detailed blueprint for a resolution to the conflict. It seeks to overcome the chief defect of the Oslo process and the road map by settling the most difficult issues right away, rather than putting them off to "final status" talks....

The media flurry and high-level maneuvering surrounding the accord may seem odd for what is, after all, merely a "virtual" agreement, signed by ousted politicians with little popular support. But it must be seen in the context of a conflict that has exhausted both sides. After three debilitating years of violence, a spirit of hopelessness has seemed all-pervasive. George W. Bush vowed last June that he would "ride herd" on both parties to make sure they adhered to the road map. Instead, he did next to nothing. Ariel Sharon has refused to halt settlement activity, assassinations or construction of the so-called separation wall, which, according to UN projections, will illegally annex up to 15 percent of Palestinian territory and in effect imprison hundreds of thousands of Palestinians. By August, the Islamists ended their cease-fire with the resumption of suicide bombings.

And yet, even as there seemed to be no exit from the endless conflict, there were fresh stirrings of dissent within Israel, and not all of them from the peace camp. In September a group of Israeli Air Force pilots announced that they would no longer participate in the assassinations in the territories. MosheYa'alon, the army chief of staff—the same man who last year declared that Israel should "sear deep into the consciousness of Palestinians that they are a defeated people"—said that Israel's repressive policies (which the United States is now consciously emulating in Iraq) "are working against our strategic interests."

Soon afterward, four former heads of Israel's General Security Service, or Shabak, representing among them almost two decades of leading the country's most feared and ruthless apparatus of counterterrorism and repression, publicly criticized the direction of government leadership in harsh, almost apocalyptic terms. One of them, Ami Ayalon, said, "We are taking very sure and measured steps to a point where the State of Israel will not be a democracy or a home for the Jewish people." Carmi Gillon added, "It is clear to me that we are heading for a crash." These voices have buttressed the left's warning that under Sharon, Israel is committing moral and economic suicide by pursuing an ultra-Zionist dream of conquering the West Bank, and that in the process it is destroying the more moderate Zionist vision of a secure homeland for the Jewish people.

Posted by Tim W at 12/13/2003 02:52:00 AM

Spread the Word

When the subject is George W. Bush, the one word to keep in mind is unelectable. Pass it on.

Posted by Tim W at 12/13/2003 02:38:00 AM

Lefty Power

Dwight Meredith over at Wampum is now accepting nominations for the 2003 Koufax awards. Make nominations there, or just explore through the comments for all sorts of great work from the better side of the political spectrum.

No, we are not fishing for nominations.

(If you are blissfully unaware of who Koufax is, all you need to know is that Sandy Koufax was the best left-handed baseball pitcher of the last, and perhaps any, generation.)

Posted by Tim W at 12/13/2003 02:30:00 AM

12 December 2003

Bowling Up the Wrong Alley

Joe Lieberman has a television ad running on Boston television stations, but aimed at New Hampshire voters. In it, he reminds viewers that he will have a televised town-hall style meeting airing Saturday night. The metaphor that he uses for him and his campaign is a visual one: we hear Lieberman as we see a bowler roll a ball toward a set of pins.

Bowling hardly represents the most poetic of political metaphors, but the problem with the ad is that Lieberman uses tenpin bowling, the type with heavy balls with finger holes in them and bottom-heavy pins, as his metaphor. There are a few tenpin alleys in New Hampshire, but most alleys feature candlepins, with small balls held cupped in one hand, and pins that have identical tops and bottoms. A cursory amount of research found in New Hampshire five tenpin bowling centers, two centers with both tenpins and candlepins, and nineteen candlepin bowling centers. New Hampshire even boasts the headquarters of the International Candlepin Bowling Association. (Candlepin bowling is almost exclusively a sport played in Massachusetts, New Hampshire, Maine, New Brunswick, and Nova Scotia. A Connecticut politician like Lieberman might equate bowling with tenpins, but one would think that a New Hampshire campaign director might know better.)

Lieberman wants his ad to say that he identifies with New Hampshire residents. What it really says is that he identifies with transplants who never really felt at home in Eastern New England.

Posted by Tim W at 12/12/2003 11:03:00 PM

01 December 2003

Jacoby Redux

In a post last week, I wondered what Jeff Jacoby's take was on Loving v. Virginia, the 1967 Supreme court case that ruled Virginia's anti-miscegenation law to be unconstitutional. (Jacoby had deemed the Massachusetts Equal Rights Amendment to be a slippery slope towards gay marriage, but I thought that Loving v. Virginia better fit the bill.)

It seems that Jacoby addressed this issue in a recent column that I had overlooked. On 17 November, he wrote:

The anti-miscegenation laws that made it illegal for blacks and whites to marry were evil and contemptible because they perverted the age-old definition of marriage by adding a wholly irrelevant ingredient: race. Skin color has nothing to do with the institution of marriage. The laws that
barred men and women from marrying across the color line were intended to bolster segregationism and white supremacy, not matrimony. Indeed, it was precisely because race is not a core element of marriage
that laws had to be passed to make it one.

By contrast, no law has ever been required to limit marriages to members of the opposite sex. It would take a radical legal innovation to remove that limitation. The prohibition on same-sex marriage isn't an analogue to the anti-miscegenation statutes of old; it is the opposite. Race is immaterial to marriage, but sex—gender—goes to its very essence. And just as it was a perversion of marriage for the law to force race into the equation, it would be a perversion for the law to force gender out of the equation.

It is noble of Jacoby to admit that the anti-miscegenation laws, so common on the books of the various states through much of the twentieth century, were awful laws. But none was overturned in court until 1948, when the California Supreme Court overturned that state's anti-miscegenation law.

Jacoby is correct to note that an "age-old" element of marriage was the procreation of children. And historically, the various states were very, very interested in making sure that the children of marriages fell into very specific racial categories. In any state, being "white" had numerous advantages, but in many states, those advantages were ensconced in any numbers of laws. The problem with the Virginia anit-miscenenation law was twofold. It not only interjected race into the definition of marriage, but it also, by implication, equated marriage with procreation.

As the main opinion in Goodridge v. Department of Public Health made clear, marriage is much more than the procreative act. A man and a woman need not consummate their marriage, or even be able to consummate their marriage, let alone have children, for their marriage to be considered legitimate in the eyes of the state. Indeed, the rights that the plaintiffs wanted from the Department of Public Health had nothing to do with having children: one lesbian among the plaintiffs is birth mother to a child that she and her partner have raised as parents. Instead, the plaintiffs wanted the other benefits that civil marriage grants to heterosexual couples, from property rights to visitation rights in hospitals to economic rights. None of these rights are age-old. They stem from the state, not from religion. The laws that have prevented gays and lesbians from marrying each other have always bolstered—whether intentionally or unintentionally—homophobia and heterosexual privilege, not matrimony.

Posted by Tim W at 12/01/2003 02:01:00 AM

Diplomacy Means Never Having to Say You're Really Sorry

The Bush administration is finally putting its foot down in protest not only of the continued construction of settlements in the West Bank and the Gaza Strip, but also of the security fence that the Israeli government is building, often on the Palestinian side of the Green Line between Israel and the West Bank. Ha'aretz reports that the Bush administration will make a Draconian cut of three percent in its promised loan guarantees to the state of Israel.

"The cut in loan guarantees is an expression of the government's disagreement with settlement construction and the planned path of the security fence," said U.S. State Department spokesman Richard Boucher, who added he is unable to provide a breakdown of the cuts.

Officials in Jerusalem downplayed Wednesday the American decision to cut almost $300 million of the loan guarantees it has granted to Israel, as a penalty for ongoing settlement activity in the West Bank and Gaza Strip.

The Bush administration has announced that it will trim $289.5 million from the $9 billion package, to cover the cost of construction in the territories, a move that Palestinian officials said was not stringent enough.

"Not strongent enough" is a whopper of an understatement. The punishment in this case is so small as to be trivial. Both the settlements and the planned path of the security fence represent significant takings of land for Israel that doesn't belong to Israel. (It is telling that American conservatives, so eager to decry takings of private property for public use at home, are so silent about similar takings in the international arena.) Each settlement is a miniature invasion of sorts, and each hectare cut off from the rest of the West Bank by the security fence is a minature annexation. If most sovereign nations tried these sorts of stunts, their leaders would risk quick and decisive actions from the United States, something in the continuum from economic sanctions to undeclared war.

Israel is, of course, a close American ally. But would any other American ally receive so mild a rebuke from the United States government?

Posted by Tim W at 12/01/2003 01:01:00 AM

The Old Man Knew Accounting

The mainstream business press is usually great fodder for leftists and liberals, because the capitalists who read the press need to know the truth about how businesses work. The Financial Times, the New York Times, Business Week, and the reporting side of Wall Street Journal are often chock full of excellent stories.

Sometimes, capitalists and leftists will understand the same basic lessons from these stories—think Enron or Worldcom. Everyone paying attention to the stories behind these companies knows that they had systemic problems; the only debate is how deep the rot went. But sometimes, the lessons behind the stories will not be that onvious to the main audience.

Take this story from the Boston Business Journal about the shortage of accountants in Boston and elsewhere.

Between 1995 and 1999, the number of students majoring in accounting declined 20 percent according to the American Institute of Certified Public Accountants. While the numbers edged up in 2001, they dipped slightly again last year, according to the AICPA.

Locally the pipeline of new graduates has grown stronger, says Theodore Flynn, executive director of the Massachusetts Society of Certified Public Accountants, but there is still a need for auditors with three to five years of experience.

The article casts the problem in terms of new accounting regulations, and surely those regulations means more work for accounting firms and their staffs. But there are two chronic, systemic problems at play here.

First, in Massachusetts and many other states, becoming a CPA now requires, in essence, a fifth year of college work. Currently, 42 states, plus the District of Columbia and Puerto Rico require the extra college work. Within a year, Arizona and New Mexico will join the club. Becoming a CPA already meant doing years of low-level accounting work and taking a series of long, high-pressure exams. Now it also means taking the time and money to get a fifth year of undergraduate education.

Second, the problem with being a CPA is working in a CPA firm. Many partners in accounting firms recognize that many of their best employees will never make partner because they will leave to take corporate jobs elsewhere. Working in an accounting firm during December through April ("busy season" for most firms) is long, enervating, work. It is not necessaruily bad that some accountants leave before having a chance at making partner, because most firms want to limit the number of partners, but all worthy partners nonetheless want their best employees to stay. But this dynamic is just the superstructure on the base of the real dynamic of most accounting and legal firms. Marx writes at length in Volume I of Das Kapital about surplus value, primarily in the context of manufacturing. But in a legal or accounting firm, surplus value determines the worth of many employees, particularly the senior employees, to the firm. (Recall that the article talked about the shortage of senior accountants, those with three to five years of experience.)

To accounting firms, senior accountants are integral to their daily functions. They have the experience and ability to work quickly and efficiently. Further, they supervise employees just out of school and have adminsitrative authority over the day-to-day aspect of many engagements. (Managers and partners are ultimately responsible for audits and tax returns, of course.) The supervisory aspect of the jobs of senior accountants means that they are ineligible for overtime pay as such, although many firms pay bonuses or give extra time off during slow times of year to senior accountants who work especially long hours.

The value of senior accountants to the firm, indeed of most accountants to the firm, is a function of their hourly billing rates and of the number of billable hours that they accumulate during the year. For it is because the firms bill their time in hours and fractions of hours that one can truly quantify the surplus value of accountants to their firms. In short, the value of a senior account to her firm bears direct relationship to how much unpaid overtime she is willing to endure. This relationship holds in other industries, but in accounting (and law, and in architectural and engineering firms) the relationship is an obvious mathematical one. It is so obvious that even the senior accountants themselves understand, even though they are well indoctrinated in the lore of classical economics and standard theories of management. Lots of them vote with their feet and land jobs in firms where one's surplus value is not quite so obvious to management. Others stay with their firms in the hope that some day the surplus value of the senior accountants will wind up in their boats and vacation homes.

Posted by Tim W at 12/01/2003 12:23:00 AM

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