30 January 2004
Being Bush Means Never Having To Say You Are Sorry
"George Bush promised to bring honor and integrity back to the White House. Instead, he got rid of accountability."—Paul Krugman
If Bush runs on his record, how can he win? He can't. His administration has been a miserable failure. He will have to run on ideology. He will have to run on fear. This has the makings of a very nasty election.
Spell Checking the Politics of Language
I ran my prior post on Arundhati Roy through "Spell Check" before posting it to our blog. "Spell Check" did not recognize the word, "elites." Enough said.
Winning the Lottery to Frying Pan Park
Arundhati Roy, writing in February 9, 2004, issue of The Nation, makes a great allegory for our times and the perfect metaphor for the Bush presidency: the annual presidential turkey pardoning. For those not familiar with this Thanksgiving Day event, essentially one turkey is selected to live out life in privilege and security and 50 million are slaughtered.
Roy's piece essentially lays out her thesis on the "New American Century" and the "New Racism" and is well worth a read. It is thoughtful and serious article on empire and imperialism. I love it when a writer can simplify such a complex topic as Roy has done. When she writes that "a few carefully bred turkeys—the local elites of various countries, a community of wealthy immigrants, investment bankers, the occasional Colin Powell or Condoleeza Rice, some singers, some writers—are given absolution and a free pass To Frying Pan Park," I both laugh at her humor and admire her insight.
28 January 2004
That Takes Guts
Whatever one thinks of General Clark's campaign, his back-and -forth with Jeremy Scahill of Democracy Now was an incredibly frank exchange. Can you even imagine your average mediawhore and Rumsfeld having such a discussion? Never mind Bush. Most candidates wouldn't give someone from Democracy Now the time of day, let alone have a civil discussion. Even when Scahill used inflammatory language, Clark answered him seriously. That takes guts.
27 January 2004
Identity Theft from the Left
The Democrats need to insert more humor into their message. A great way to do it is to run commercials that spoof other television ads. Jordan's Furniture, a company that started with one store in Waltham, Massachusetts before its success led to its acquisition by Warren Buffet's Berkshire Hathaway, has successfully used such ads to create goodwill and name recognition. Knocking-off a knockoff just might help the Democrats knock off Bush.
There must be some creative people in advertising that would love to donate their time to ending Bush's presidency. A good advertising script writer would have a field day putting Bush into different roles knocking-off Citi Bank's "Identity Theft" commercials.
Bush slouched in an easy chair with a can in his hand and the same woman's voice in the "bustiers ad" would be hilarious. Instead of talking about how she spent someone else's money on the bustier, she could talk about taking America's budget surplus to its largest deficit in four years and then say: "I didn't care, it wasn't my money."
Another ad I would like to see knocked-off is the Budweiser "Real Men of Genius" campaign. Bush is perfect for such a knockoff. How about "Mr. Fake Cowboy" and "Mr. Look at My Crotch"? The humor would be the catch but the message would be to tell the truth about Bush's character.
26 January 2004
State of the Union Highlights
Comedy Central did not broadcast the State of the Union speech last Monday, but it could have. The five nominees for the funniest moment in a speech to joint sessions of Congress are:
- Declaring that Saddam Hussein had "weapons of mass destruction-related activities." Better weasel words are going to be hard to find, in this year or any other. The sourdough starter in my fridge is "related" to biological weapons systems. Stocking the household cleaning aisle at Wal-Mart is "related" to chemical weapons production.
- Taking a bold stand against steroid use in professional sports. Now that's a bold stance unparalleled since a 2001 City Council race in which one of the candidates called for better playgrounds in my city's parks.
- The cheering of many Democrats when Bush announced that some provisions of the vile and repressive USA PATRIOT Act would expire soon.
- Deriding "[a]ctivist judges" who are granting gays and lesbians the right to marry under statelaw, but then proclaiming "that each individual has dignity and value in God's sight." Dignity apparently does not include the full gamut of civil rights accorded to straight Americans.
- The winner: in a successful attempt to prevent any cataclysmic terrorist attacks, Trent Lott was one of two senators who stayed out of the Capitol for the duration of the speech. Not even al-Qaeda, so the logic seems to go, would want to restore Trent Lott to a place of political prominence.
25 January 2004
The Perils of the Undiclosed Location
The only decent explanation for Dick Cheney's interview last week with NPR is that he's been spending way, way too much time in his undisclosed locations. The other choices are unpalatable. Either the United States has a vice president who is an unabashed liar; or the United States has a vice president who is utterly divorced from the real world; or a host of other administration officials, the entire International Atomic Energy Adminsitration, and independent experts are all fools or liars.
The Los Angeles Times reported that Cheney revived claims about Iraq that Secretary of State Colin Powell and chief weapons inspector David Kay had already dismissed as groundless:
The vice president stood by positions that others in the Bush administration have largely abandoned in recent months, as preliminary analysis of the trailers [that Cheney asserted were evidence of a biological weapons program] has been called into question and new evidence—including a document found with Hussein when he was captured—cast doubt on theories that Iraq and Al Qaeda collaborated....
Members of Congress and some in the intelligence community said Thursday that Cheney's comments could lead the public to believe there was collaboration between Iraq and Al Qaeda, and that that was not supported by the evidence.
Cheney's predilection for finding evidence of weapons of mass destruction seems out of place with a war effort that concentrated so little on securing military and scientific sites within Iraq. (Of course, if one knew that no weapons of mass destruction existed, then one would have no reason to secure them in the first place.)
Tricky Dick II
Reading Brad DeLong's recent posts on Dick Cheney, and Cheney's propensity to make comments that are either bald-faced lies or poor judgment, I look forward to this year's vice presidential debate. I have to believe the Democrats will nominate a candidate that will not sit back and let Tricky Dick II spin lie after lie as did Joe Lieberman in 2000. Hopefully, this year we will have a candidate that will call Cheney on his indefensible statements about Saddam's links to Al Qaeda, the reasonableness of US deficits, and Halliburton's merits.
24 January 2004
Lie Then Deny
The nonsense the White House and its political operatives have been selling of late, that Iraq had "weapons of mass destruction related program activities," is aimed at keeping the truth from taking hold in the minds of the American electorate.
The initial lie the Bush administration sold to the American people was that Iraq had weapons of mass destruction. Based on that lie, Congress gave Bush its approval to wage war on Iraq. After the invasion Bush's victory party was proved premature and published reports indicated the evidence the Bush administration relied on was fabricated. These reports were supported by the fact that no such weapons had been found. The Bushies responded by doffing their party hats and shifting their public statements to ensure the American people that these weapons would be found. Now that David Kay, the top US weapons inspector in Iraq, has stepped down stating there is no evidence of weapons of mass destruction, we are left with the Bush administration's final defense: Saddam "could have" and "would have" developed these weapons in the future. This defense is played out with constant reminders that Saddam was evil and that God supports America.
The Bush position reminds me of what a Tennessee Titan player said after a hard-fought loss to the New England Patriots in the divisional playoffs: "the better team lost." I am sure a number of people back home in Memphis agreed with that assessment. Well, the facts indicated otherwise no matter how hard this Titan denied them. The Patriots victory was their second in two games against the Titans, their 13th in a row, and their seventh against a team with ten or more victories. In sports, the biased and ill-informed often deny the facts in evidence and distort the truth. We call that sort of person a fan, which is short for fanatic.
The NFL will not award the Super Bowl trophy to the Titans because they "could have" beaten the Patriots. Americans should not award the presidency to a man that leads us to war based on a foundation of "could have," "would have," and lies.
23 January 2004
American Politics 101
How to explain the Bush presidency in six easy installments? You could do much worse than the Over The Hedge comic strip this week. Thursday's installment explains the Electoral College admissions system. And check out the other strips this week, like the one from Wednesday on which 2000 votes mattered the most.
All that's missing is for the so-called liberal media in this so-called liberal metropolis to run this strip anymore.
21 January 2004
Horsetrading for Dummies
Why would Dennis Kucinich, who has staked positions significantly to the left of most of the other Democratic candidates, instruct his Iowa supporters to vote in caucuses for John Edwards in precincts where Kucinich would fail to reach the minimum 15% figure? Everyone seems to be stumped.
Kucinich has to buck very long odds to win the nomination, but the most likely scenario in which he is a political force in July—probably as a kingmaker, not a king—requires that no candidate have a majority of delegates when the Democratic National Convention opens. And in order for no one to have a majority, Kucinich wants, or rather needs, no one to run away with the nomination.
Let's say that Kucinich would have garnered 5% of the votes in a mythical Iowa primary. In the actual caucuses, his expected 5% of the voters in any precinct would prevent his votes from being counted. But they mean an extra 5% for another candidate, if those votes all go to one candidate. if Kucinich read the polls accurately, he knew that Kerry didn't need any help in Iowa and that Gephardt needed more help than he could give. He had to know that Dean has enough cash and volunteers to keep his campaign going. And he had to know that Edwards needed a strong showing in Iowa to show his viability outside the South.
Kucinich is still running a quixotic campaign, but if he wins enough delegates and the rest of impossible dream comes true, then he will have traded Rocinante for Seabiscuit.
Labor and Delivery
The New York Times reports the conventional wisdom that the results of the Iowa caucuses represent a repudiation of organized labor.
The labor unions that backed Representative Richard A. Gephardt of Missouri and Howard Dean, the former Vermont governor, were embarrassed yesterday and searching for answers why their candidates—and the unions themselves—fared so poorly in the Iowa caucuses.
But the caucus was hardly a defeat for the politics of union members: they made up roughly 23 percent of caucus voters, far above their roughly 14 percent share of the voting-age population in Iowa.
What the conventional wisdom has missed is that three of the major candidates (Gephardt, Kerry, and Dean) had received union endorsements, and that the other candidates had no trouble establishing their pro-labor credentials. Yes, to some union members, NAFTA was the foremost issue in the campaign, and Richard Gephardt was long its most prominent Democratic critic. But to many union members, the economy in general and the forces that make health insurance so expensive are bigger concerns. It is not surprising that many union members thought that Richard Gephardt was not the only candidate who could address those issues.
Organized labor is certainly a factor in Democratic politics, simply because union members usually vote Democratic. In a primary contest full of worthy candidates, it is folly to think that politically active union brothers and sisters would only consider one candidate to be worthy of their votes.
(At the excellent Daily Kos site, Jordan Barab notes that what has energized the labor movement since 1994 has been a focus on educating union members on pertinent issues, not the particular endorsements that unions make. For two recent online ventures in this arena, cehck out Fight for the Future from the Service Employees International Union and Union Blog from the American Federation of Government Employees.)
20 January 2004
Cry For US, Argentina
Have you seen the report released by the The International Monetary Fund earlier this month? The IMF, an international organization of 184 member countries with a charter to promote international monetary cooperation and fiscal discipline, had this to say about the Bush administration's record and its threat to both the US and global economy:
US government finances have experienced a remarkable turnaround in recent years. Within only a few years, hard-won gains of the previous decade have been lost and, instead of budget surpluses, deficits are again projected as far as the eye can see. The deterioration has not been restricted to the federal budget but has also taken place at the state and local government levels. As a result, the US general government deficit is now among the highest in the industrialized world, and public debt levels are approaching those in other major industrial countries.
Readers familiar with the IMF should recall that the agency has acted for decades as the fiscal nanny to developing countries in Latin America, South America, Asia, and Africa. Bush, doing his best impression of a tinhorn dictator, is thumbing his nose at the IMF and their calls for fiscal discipline. Bush's answer to the mess is to make his tax cuts permanent in the face of the demographic tidal-wave about to hit the Social Security and Medicare systems, all while increasing spending for defense, security, and missions to Mars.
18 January 2004
Hubble or Nothing
Last week, President Bush announced ambitious plans aimed at establishing a manned base on the Moon and sending a manned mission to Mars. Such missions would be very expensive, so expensive that even the planning stages would be dear. On Friday, we found how just how dear, when NASA announced the death warrant for the Hubble Space Telescope.
By cancelling any future missions to maintain the telescope, NASA essentially insures that it will fall out of orbit before astromers are finished with the telescope's capabilities.
A visit by astronauts to install a couple of the telescope's scientific instruments and replace the gyroscopes and batteries had been planned for next year. Without any more visits, the telescope, the crown jewel of astronomy for 10 years, will probably die in orbit sometime in 2007, depending on when its batteries or gyroscopes fail for good.
The announcement represents not only an affront to the scientific community, but also an astounding lack of budgetary probity.
As the news flashed around the world by e-mail, other astronomers joined the Hubble team in their shock. Dr. David N. Spergel, an astronomer at Princeton and a member of a committee that advises NASA on space science, called it a "double whammy" for astronomy. Not only was a telescope being lost, but $200 million worth of instruments that had been built to be added in the later shuttle mission will also be left on the ground, Dr. Spergel said.
There are no plans to replace the Hubble with anything similar; despite advances in adaptive optics, space-based telescopes outstrip even the best and newest ground-based telescopes.
The demise of the Hubble will leave astronomers with no foreseeable prospect of a telescope in space operating primarily at visible wavelengths. The announcement also precludes hopes that astronomers had of using the Hubble in tandem with the James Webb Space Telescope, scheduled for launching in 2011 and which is being designed for infrared wavelengths, to study galaxies at the far reaches of time.
Ground-based telescopes like the 10-meter-diameter Kecks on Mauna Kea are growing more powerful, and the use of adaptive optics to tune out the blurring effects of the atmosphere lets them approach the resolution of the Hubble in limited cases. But they are blinded by the atmosphere to ultraviolet and infrared light.
Who needs science, anyway, when the White House has made such nifty promises of interplanetary travel right out of 1930s science fiction?
17 January 2004
A Truly Free Market
Naomi Klein, writing in the Guardian, reports that the U.S. government is likely to be left underwriting the private investment of rebuilding Iraq:
[W]ith bidding now starting on Iraq's state-owned firms, and foreign banks ready to open branches in Baghdad, the insurance issue is suddenly urgent. Many of the speakers admit that the economic risks of going into Iraq without coverage are huge: privatized firms could be renationalised, foreign ownership rules could be reinstated and contracts signed with the CPA could be torn up. Normally, multi-nationals protect themselves against this sort of thing by buying 'political risk' insurance. Before he got the top job in Iraq, this was Bremer's business—selling political risk, expropriation and terrorism insurance at Marsh & McLennan Companies, the largest insurance brokerage firm in the world. Yet, in Iraq, he has overseen the creation of a business climate so volatile that private insurers, including his old colleagues at Marsh & McLennan, are simply unwilling to take the risk. Bremer's Iraq is, by all accounts, uninsurable.
Where is the outrage in conservative America about the federal government socializing private business risk? Then again, it's only $500,000,000,000.
Deep Pocket Denial: CBS Blocks Move On's Super Bowl Ad
The Associated Press is reporting that CBS has rejected two Super Bowl advertisements, one promoting vegetarianism and the other attacking the record of President Bush, because they violate CBS's advocacy rules. The ad time was sought by PETA (People for the Ethical Treatment of Animals) and MoveOn.org. The PETA ad asserts that meat-eating causes impotence, and the MoveOn.org ad criticizes the federal budget deficit.
An executive at CBS, exhibiting some serious false consciousness, issued the following statement: "We do not accept advertising on one side or the other of controversial public issues, partly because we don't think the debate ought to be controlled by people with deep pockets."
13 January 2004
The O'Neill-Plame Connection
How long will it be before the White House identifies Paul O'Neill as the source of the leak that outed Valerie Plame?
Whom Would You Believe?
Paul O'Neill has documentary evidence that the National Security Council started discussing how to overthrow Saddam Husseinin meetins on 30 January and 1 February 2001. The New York Times reported the inchoate response of President Bush:
"And in the initial stages of my adminsitration, as you might remember, we were dealing with desert badger or fly-overs and fly-betweens and looks, and so we were fashioning policy along those lines," Mr. Bush continued, apparently referring to confrontations with Iraq over the no-flight zones. "And then all of a sudden September the 11th hit."
Perhaps it was apparent that Bush was talking about the no-flight zones. But it was also apparent that Bush was wholly unable to explain the genesis of his current Iraq policy, even though his aides surely prepared him for such a question. And the last sentence is an exemplar of the public rhetoric used in the past twenty-eight months by Bush and his coterie. Juxtaposing Iraq and the 11 September attacks to justify an invasion, without actually making a causal connection between Iraq or its leaders and those attacks, is sophistry at its best.
In this corner stands Paul O'Neill, who has documentary evidence of early planning of an invasion. In the opposite corner stands George Bush, whose pathetic bleatings forced Richard Stevenson, the Times reporter, to stop his quote and deliver the journalistic equivalent of a standing 8-count. Who is more trustworthy? Whom would you believe?
12 January 2004
And Jerry Brown was supposed to be the crazy governor from that populous state out West. After months of being fed rainbow-colored Kool-Aid, it's only fitting that the first major policy initiative from the Bush administration would be reminiscent of the most febrile acid trips of the 1960s.
Last week, the Bush administration let it be known that Bush would announce this week an ambitious plan for a lunar base and a manned trip to Mars. The cost, depending on whom to believe, would be in the range of $400 billion to $1 trillion. That would be an absurdly expensive proposition, even if it did not involve huge risks. Two of the five American space shuttles have suffered catastrophic failure. The unfinished International Space Station has a mysterious air leak that has halted all scientific work there at present and threatens its long-term viability. And flight scientists have found that the vast distance between Masr and Earth makes landing probes on Mars quite difficult. The lag in communication with a Moon probe is little more than a second, but that lag grows to several minutes if that probe is a Mars probe.
My favorite paragraph from the Associated Press story describes the bountiful goodies to be found near our Moon base:
The moon is just three days away while Mars is at least six months away, and the lunar surface therefore could be a safe place to shake out Martian equipment. Observatories also could be built on the moon, and mining camps could be set up to gather helium-3 for conversion into fuel for use back on Earth.
The only way that helium-3, an isotope of helium that is much more common on the Moon than on Earth, can be used as a fuel is in a deuterium-helium fusion reactor. There are only three problems with using helium-3 as fuel. First, it requires strip-mining a good chunk of the moon's surface. Second, it requires bring the helium-containing rocks back to Earth, by rocket. And that's going to be more than a little expensive. Third, it requires fusion technology that is decades off—and that's if you're an optimist.
Essentially, there is no economic benefit now, or anytime soon, from establishing a base on the Moon. Don't let President Moonbeam persuade you otherwise.
Correction (14 January): the Moon base and Mars expedition are not the first major policy proposal from the Bush White House this year. That honor goes to the proposed resurrection of the late and lamentable bracero program. I regret the error.
11 January 2004
Good News and Bad News on the Civil Liberties Front
The good news is that the Supreme Court will decide the legality of indefinite detention of Americans declared to be illegal combatants. The bad news is that we have to rely on the Supreme Court to enforce a direct affront to the letter and spirit of the United States Constitution.
The appeal filed on behalf of [Yaser Esam] Hamdi, a US citizen who grew up in Saudi Arabia and was captured in Afghanistan late in 2001, challenges his detention without charges in a Navy brig. The lawyer handling his appeal, public defender Frank Dunham Jr., called the case "an important one for the nation, and for the courts." The Justice Department vowed to "vigorously defend the president's authority to capture and detain enemy combatants. This authority is crucial in times of war." The purpose of such detention, according to department spokeswoman Monica Goodling, "is to prevent enemy combatants from continuing to aid those who would seek to injure our people, as well as to gather intelligence to thwart further terrorist assaults."
The justices' review will require an interpretation of how much power Congress granted to the president in its terrorism resolution passed in the immediate wake of the 2001 attacks, and it will sort out how far federal courts can go to review presidential and congressional actions to deal with this new form of warfare.
If we are indeed in a "time of war," then this war is the most poorly defined, bizarrely waged, war in our country's lengthy history. The opponent is a concept, "terrorism," not a country. The underlying motive for our involvement is elusive and shrouded in cant and doublespeak. Worst of all, the war has provided the administration an excuse to ignore not only our country's own constitutional protections for criminal defendants, but also the protections accorded to prisoners or war under international law.
The leaders of both parties in Congress are quick to proclaim their love for liberty, freedom, and the rule of law. But their love of these concepts only goes as far as is convenient. Their cowardice reflects poorly both on them and on the voters whose interests they nominally serve.
Nathan Newman has periodically denounced judicial activism on several matters as inherently inferior to legislative action, even when the net effect of the activism meshes with his progressive views. But the Hamdi case, as well as the cases of the detainees in Guantanamo Bay make clear that the judiciary is often the only hope for any sort of progress, let alone progressivity.
This is Our Due
To CBS's credit, tonight's "60 Minutes" finally aired the much talked about interview with former Treasury Secretary Paul O'Neill and Wall Street Journal reporter Ron Suskind, the author of "The Price of Loyalty." Suskind has put virtually every major media outlet covering the White House to shame by telling the truth about President George W. Bush and his administration. These truths are self-evident to anyone willing to look at the record. Simply stated, the Bush administration has lied, cheated and stole to take what they believe is their "due." It is time for the American public to take back control of our country.
If Dean is McGovern, Then What is Bush?
A number of political pundits have decided that the best historical analogy for the upcoming election is that of Howard Dean to George McGovern. As our readers surely remember, George McGovern losts in a landslide to Richard Nixon in 1972, winning only the electoral votes from Massachusetts and the District of Columbia.
Some Democrats have made this comparison in good faith: they hope that their party's nominee is not so far to the left as to scare off moderate voters. But their analysis is flawed: Dean is not so much a leftist as an energized mainstream Democrat. The real radical in the race is George Bush, the presumptive Republican nominee.
It seems less clear why Republicans like to make this comparison. For if Dean (or any other Democrat) equals George McGovern—war hero, patriot, honext fellow, nice guy— then Bush has to equal Richard Nixon—liar, crook, paranoiac, creep. There are a host of factors that helped McGovern lose in 1972, but high among them were a number of instances of outright cheating by Nixon and his Republican Party.
Democrats should welcome comparisons to McGovern, and they should be ready and willing to compare the Republicans to Nixon.
08 January 2004
To the Shores of Tripoli
I rejoice in the news from Libya nowadays, that Moammar Gadhafi is dismantling his nascent nuclear program. But it is hard to see this news as any sort of victory for the foreign policy of the Bush administration. Its hallmark has been a supposed iron resolve against international terrorism. As the kids say, as if.
Months of occupation in Iraq has found absolutely no evidence that Saddam Hussein had any links to international terrorism, save his practice, shared by many Arab leaders, of monetary rewards for families of Palestinian suicide bombers. On the other hand, Libya has an admitted record of actual terrorism. In 1988, for example, Libyan agents killed 270 people on board Pan American Aiways flight 103, which exploded over Lockerbie, Scotland. For that and other actions, Libya and its leaders were international pariahs, vilified by leftists, liberals, and conservatives alike.
The Bush administration would like the world to believe that its invasion and occupation of Iraq are responsible for all good in the world. But as Patrick Tyler notes in today's New York Times, international politics in the real world is often a complicated subject:
In the space of the last few months, something seems to have come over one of the world's best known boogeymen, an alteration that some American officials attribute to Western resolve in toppling Saddam Hussein, but that many experts say has been percolating in Colonel Qaddafi's mind for a decade.
These experts agree that the main factors underlying his decision are more likely to be his disastrous economic policies at home, the squandering of Libya's bountiful oil resources and a deepening isolation that threatens any hopes for the country's future.
Gadhafi is clearly interested in trading his nuclear ambitions, vestigial or otherwise, for better economic relations with Europe and the United States. It seems hard to believe that Saddam Hussein was unwilling to make a similar deal when he still ran Iraq.
Many of the desks used in the United States Senate have long and florid histories. For example, the desk that George Murphy started using in 1968 traditionally holds a bevy of sweets generously provided by the candy industry. Having the "candy desk" stocked with sweets reminds senators not only that corporate lobbying has tangible benefits to the chamber, but also that even the most lightweight of senators can establish a real legacy.
Two desks in the chamber go to specific senators under the rules of the Senate. Since 1974, the rules specifically assign the desk used by Daniel Webster to the senior senator from New Hampshire, currently Judd Gregg. Webster served four terms in the House of Representatives, served two full and two partial terms in the Senate, served two presidents as Secretary of State, and ran for president in 1836. His skills as a lawyer and orator rightly made him famous even without taking into account his acumen and considerable political accomplishments. It is not for nothing that senators from New Hampshire are proud of him, even if he did move the Massachusetts in 1817.
Since 1995, the Senate rules have specifically assigned the desk used by Jefferson Davis to the senior senator from Mississippi, currently Thad Cochran. The two sponsors of the Senate resolution were Thad Cochran and Trent Lott, the two Republican senators from Mississippi. The resolution saw no debate, and was passed by unanimous consent as one of the last actions by the Senate on the evening of 8 August 1995, the day that it was introduced.
Davis served on term in the House of Representatives and two partial terms in the Senate, before he made his real mark in the sphere of politics as president of the Confederate States of America.
Daniel Webster is known for his efforts as a private citizen and a politician to protect his country and Constitution. By contrast, Jefferson Davis is most notable for his prolonged effort to rend his country and Constitution to pieces. Alas, it is not for nothing that his supporters, including Senators Lott and Cochran, continue to glorify him.
04 January 2004
Terminator 1040: Schedule C
Arnold Schwarzenegger's official website is schwarzenegger.com, and, as one might expect, it's a modest affair, with only six pictures of the publicity-shy fellow on the front page. But what's interesting is not the content, but the copyright. "Copyright © 2004 Oak Productions, Inc."
As we wrote in October, Oak Productions is Schwarzenegger's "loan-out corporation," an entity designed to let professionals deduct expenses on their tax returns than would normally be legal. Until now, Oak Productions was essentially the recipient of Schwarzenegger's acting income. But now, it seems it is doing more than a little bit of political publicity. The IRS has not made loan-out corporations a very high priority, but its own training materials single them out for special opprobrium.
The question that someone in the press should be asking is whether Schwarzenegger will use Oak Productions to deduct as business expenses some of his political activities.
State Credits Redux
I wrote last month about the absurdities of many state tax credits, and I forgot to mention an important development in North Carolina. The state low-income housing credit program in that state now includes an option to receive the state tax credit proceeds as a loan. Under this option, the developer avoids a number of aggravations, from finding an investor with the requisite state tax liabilty to navigating the reefs of partnership tax law. The state not only gets full value for money for its investment in affordable housing, but also eventually receives principal repayments that it can use yet again. Other state legislators, take note!
Tax Cheaters and Associates, LLP
Last week, David Cay Johnston wrote a typically insightful piece in the New York Times on (try this reprint after 4 January if you don't mind run-on paragraphs) on a new focus by the Internal Revenue Service on the lawyers and accountants who make dodgy tax shelters possible.
[IRS Commissioner Charles] Everson said he wanted to weed out "attorneys and accountants who sacrifice their independence and integrity at the altar of higher fees."
Opinion letters, typically scores of pages long and freighted with caveats, sell for as much as $1 million each. Such letters typically assert that a particular tax strategy is "more likely than not" to survive an I.R.S. audit, but often they are based on unreasonable economic and legal assumptions that do not necessarily match the specific circumstances of the taxpayer who buys the letter.
Under regulations to be issued this morning, such opinion letters would become worthless for deals made since last Jan. 1, as a defense against penalties, which can run as high as 75 percent of the taxes not paid.
Most law firms and accounting firms currently operate as limited liability partnerships, (LLPs), in which each of the partners is responsible for his or her own negligence, but not for negligence wholly the fault of other partners. Until a few years ago, the same firms were generally professional corporations, in which the negligence of one partner could bring down the whole firm. Guess what has happened in too many firms since the change?
This strategy is intended to counter the weakening of self-policing resulting from a shift in the legal form of most professional firms—from partnerships to limited liability partnerships—a change that has gone virtually unnoticed by Congress in its inquiries into the spread of tax cheating.
Under the old form, each partner was liable for all acts by all partners, a powerful incentive to enforce compliance with the law. Under the new form, the liability of each partner for misconduct by other partners is limited or even eliminated, provided that the partner remains unaware of the misconduct.
Johnston is right to imply that Congress has been woefully ignorant of the implications of the structure of professional firms on their actions. But more responsible are the various state legislatures, which have passed statute after statute allowing the existence of the new types of corporate entities. In most cases, bar associations and accounting groups encouraged the passage of these statutes by pointing to the real advantage of preventing a rogue partner from ruining the careers of his or her innocent peers and employees. But it should have taken very little mental effort to realize that the shield of limited legal liability could become a weapon against not only the IRS but also the revenue department of any state with an income tax for either corporations or individuals.
In the coming weeks, I will shed a bit of light on a few other implications of new kinds of legal entities. For one thing, gormless state legislators are making a new aristocracy a very real possibility.
03 January 2004
Four cartons of Parmalat, milk packaged in cardboard cartons with an amazingly long shelf-life, sit in the cabinet above our refrigerator at home. My wife has used the product for years. It took months for me to get comfortable drinking unrefrigerated milk. It was not until I traveled to Europe that I realized that Parmalat, and the process behind it, had captured broad acceptance. Parmalat is also the family name of the Italian-based company that makes the milk and is now embroiled in scandal.
Parmalat, and its founder, Calisto Tanzi, are accused of fraud. Similar to Enron, and its head, Kenneth Lay, Parmalat used off balance sheet financing to first obscure the company's true financial position, and then to defraud investors on a massive scale to the tune of approximately $10 billion. That is billion with a "b." The fraud was carried out under the noses of auditors, regulators, and numerous financial institutions. It was carried out despite reforms in Italy's accounting practices that require rotation of the independent auditing firms that audit corporate financial statements.
From a distance there are some striking similarities and differences in the cases of Parmalat and Enron. Both companies used off balance sheet companies in the Cayman Islands to create paper assets and hide losses, paid huge fees to the banks and investment banks that capitalized the fraud, and have senior executives that are likely to walk away from the scandal wealthy beyond the dreams of the individual investors and workers that will pay with lost savings and lost jobs. The striking difference is that Calisto Tanzi is in prison, having admitted to over $500 million in misappropriation, while Ken Lay lives lavishly in denial.
One would think that such cases would require more public scrutiny than an act of consensual sex and a lie to cover it up. But, then again, there is a "War on Terror" being waged and a president to re-elect. Oops, that gets us back to fraud.
02 January 2004
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