Mexico is getting a lot of attention for how the illegal drug business has distorted its politics, economy and society. A Dallas Morning News story reports that there have been 4,500 murders in Ciudad Juarez since January 2008.
Black markets affect parts of the United States, too, and not just major urban areas. There is the case of bucolic Humboldt County California, a verdant rain forest hard up on the State's northwest coast.
Yesterday the White House released the Administration's first annual report on the "stimulus bill" (the American Recovery and Reinvestment Act of 2009, or "ARRA"). The Administration and its critics are sparring over how many jobs the bill "created or saved."
Washington Post staff writer Ed O'Keefe says the "Obama administration's economic stimulus program created nearly 600,000 jobs in the final three months of 2009."
Previously, we have noted that the Recovery Accountability and Transparency Board, which is responsible for ensuring accountability and transparency in the reporting of jobs "created or saved" by the American Recovery and Reinvestment Act (ARRA, or "stimulus" bill), was not actually performing this task. Further, the underlying data were invalid and unreliable because the Office of Management and Budget did not specify a consistent estimation methodology.
Recently, Washington Post staff writer Alec MacGillis reported that White House Council of Economic Advisers chairman Christina Romer now claims ARRA "has created or saved between 1.7 million and 2 million jobs."
Examining these figures closely reveals that they are not estimates at all, but assumptions built into the Administration's estimation model.
On October 28, 2009, the Office of Management and Budget solicited comments on its implementation of the Paperwork Reduction Act. The purpose of the PRA is to minimize burdens on the public resulting from the federal government's information requests.
Neutral Source managing editor Richard Belzer submitted comments on his own behalf. These comments eventually will be uploaded by OMB to Regulations.Gov, the Federal government's web portal for all regulatory matters. (Clicking on the link above will reveal a fundamental weakness of the web portal: Unless the agency chooses to include information identifying the name and organizational affiliation of the submitter, there is no way to find any specific comment without opening them all.)
In response to numerous requests, a copy of these comment is posted to the Library.
The federal government's reported figures for jobs "created or saved" by the "stimulus" bill (formally the American Recovery and Reinvestment Act of 2009, or "ARRA") are now known to be wrong. The Recovery Accountability and Transparency Board, which oversees these figures, apparently has decided not to correct them.
A scandal has erupted over the federal government's reporting of the number of jobs created or saved by the "stimulus" bill (formally the American Recovery and Reinvestment Act of 2009).
This scandal would have been avoided if the government had complied with the Information Quality Act.
We've published a long series on the controversy over retentions bonuses paid by AIG and other firms. (To see the entire series, search for "The AIG Bonuses" using the Google search utility in the upper right corner.)
There are three general problems with executive pay restrictions. First, pay restrictions have no effect on those who were responsible for decisions that went south if they no longer work for the institutions in question.
Second, when imposed retroactively, pay restrictions impair legal contracts. This is both constitutionally suspect and creates serious economic and financial uncertainty. Markets perform poorly when parties cannot rely on the rule of law--including contract law.
Third, pay restrictions deter the recruitment and retention of the most qualified people. Some will be motivated by nonfinancial considerations such as a sense of duty or public spiritedness. However, these motivations are undermined when the public or its representatives treat them as if they were culpable for the problems they have agreed to serve, often without pay, to correct.
Today's Wall Street Journal suggests that AIG now faces this government-induced dilemma.
On July
8 we
blogged on a commentary published in the Wall Street Journal under the
joint bylines of UK Prime Minister Gordon Brown and French President
Nicolas Sarkozy. The two European leaders alleged
that speculation had damaged the world crude oil market by
making
it "dangerously volatile." We surmised that the sudden interest in oil
market speculation, which seemed to have come out of the blue, was
instead highly coordinated. There is now more evidence supporting that
hypothesis, but some indication that it is encountering resistance. More...
It was in this setting tha the Administration announced a new Public-Private Investment Program (PPIP), the stated purpose of which was to provide a facility for banks to sell so-called 'toxic assets" and for investors to buy them at fire sale prices. An obvious deterrent to buyer participatin is the Treasury Department's decision to impose on buyers TARP-like restrictions on employee compensation.
Both banks (sellers) and investors (buyers) have declined to participate. As we predicted, buyers are deterred in large part by political risk: they do not trust the government as a business partner.
In the seventh in our series of posts on the AIG bonuses and the incentive effects of efforts by the Obama Administration and Congress to forcibly recover them, we predicted that investors in the Treasury Department's "Legacy Loans Program" would be regulated by the same constraints on employee compensation and, ultimately, profits. We said that H.R. 1586, the House-passed bill to impose confiscatory taxes on bonus recipients, would have unintended consequences on the Treasury Department's Public-Private Investment Program (PPIP):
In short, the House's action, which President Obama did not contemporaneously discourage, creates the precedent that the government may choose not to honor the legal commitments it makes to investors who participate in the Treasury Department's new program. If investors earn "too much" in profit -- a term that would be defined subjectively after the fact -- they may be prevented from realizing these earnings. It is reasonable for prudent investors to discount the government's credibility.
The Obama Administration could have included strong language promising to protect these property rights in [the Treasury Department's Public-Private Investment Program], but it did not do so. Such a promise might prove to be unenforceable in fact, but the absence of a promise means there is nothing yet for investors to rely upon. This uncertainty may (or may not) be resolved when the Treasury Department issues implementing regulations. For now, the cleanup of underwater financial assets has entered a zone in which political risk -- uncertainty about the government's reliability -- may be as great or greater than financial risk.
A story in today's Washington Post says that this has come to pass.
Several recent news stories have covered the efforts of some large financial institutions to repay the funds they received from the federal government under the Troubled Assets Relief Program. Executives of these firms are chafing under the costs resulting from acceptance of these funds, which in some cases they did not accept voluntarily.
The federal government is imposing conditions on repayment that mean recipients cannot get out from under the TARP without the federal government's permission. What lessons can be learned from this experience?
In this series we've predicted that the government's efforts to confiscate employee bonuses would have significant unintended consequences. Specifically, the highest-valued employees of AIG and other targeted firms would quit rather than subject themselves to public humiliation and the loss of income to which they were contractually entitled.
In the Wall Street Journal, Liam Pleven and Randall Smith report that this is now happening, with predictably adverse consequences for the taxpayers who now own these companies.
