Business, Deficit Still Better Than Under Bush

Questions:

1. What was the average monthly private sector job growth in 2008, the final year of the Bush presidency, and what has it been so far in 2010?

2. What was the Federal deficit for the last fiscal year of the Bush presidency, and what was it for the first full fiscal year of the Obama presidency?

3. What was the stock market at on the last day of the Bush presidency? What is it at today? . . .

Answers:

1. In 2008, we lost an average of 317,250 private sector jobs per month. In 2010, we have gained an average of 95,888 private sector jobs per month. That's a difference of nearly five million jobs between Bush's last year in office and President Obama's second year.

2. In FY2009, which began on September 1, 2008 and represents the Bush Administration's final budget, the budget deficit was $1.416 trillion. In FY2010, the first budget of the Obama Administration, the budget deficit was $1.291 trillion, a decline of $125 billion. . . .

3. On Bush's final day in office, the Dow, NASDAQ, and S&P 500 closed at 7,949, 1,440, and 805, respectively. Today, as of 10:15AM Pacific, they are at 11,108, 2,512, and 1,183. That means since President Obama took office, the Dow, NASDAQ, and S&P 500 have increased 40%, 74%, and 47%, respectively.

From here.

Federal Court Nominations Scorecard

President Obama's progress in making appointments to the federal appellate courts is par for the course based upon recent history.

But, President Obama has lagged in nominating federal trial court judges. He has nominated 59 trial court judges to date, of whom 30 have been confirmed, compared to George W. Bush, who had nominated 94 federal trial court judges at the same point in his presidency, of whom 64 had been confirmed. The urgency of the lag is exacerbated by the fact that there have been 14 more federal trial court vacancies in the Obama administration than in the administration of George W. Bush.

So, there are currently 55 federal trial court vacancies for which President Obama has made no nominations at this time, while there were just 2 at the same point in the administration of Geroge W. bush.

10 Obama nominees have been confirmed to the federal circuit courts to date. At the same point in George W. Bush’s presidency (September 13, 2002), 13 of his nominees had been confirmed to the circuit courts. . . . Obama has also placed two justices on the Supreme Court. George W. Bush secured appointments of two Supreme Court justices but not until his second term in office. . . . at the same point in his first term, Clinton had placed thirteen circuit court judges and two Supreme Court Justices . . . . There are currently 20 vacancies in the circuit courts. On September 13, 2002 there were 28 circuit court vacancies. . . .

So far, 30 individuals nominated by Obama have been confirmed to the district courts. By September 13, 2002, 64 district court judges nominated by George W. Bush had been confirmed by the Senate. (Clinton had placed 70 district court judges at the same point in his presidency.) . . . there are currently 84 vacancies in the district courts. On September 13, 2002, there were just 32 district court vacancies for George W. Bush to fill. . . . Right now, there are only 29 pending nominations for district court judgeships. Half of those have been pending only since May of this year. On September 13, 2002, George W. Bush had 30 pending nominations for the 32 district court vacancies he faced.

From here.

President Obama has also made one nomination for a U.S. District Court post where a resignation has been announced but not yet taken effect, which is not included in the total above.

As of today, September 15, one of the circuit court vacancies described above has been filled, and there are 19 U.S. circuit court vacancies and 11 nominees pending for those posts. So, there are only 8 circuit court vacancies for which no nominations have been made by President Obama. They are, with the date the vacancy arose;

04 - CCA 07/08/2009
09 - CCA 06/12/2010
09 - CCA 12/31/2004
10 - CCA 06/30/2010
11 - CCA 08/29/2010
DC - CCA 11/01/2008
DC - CCA 09/29/2005
FD - CCA 06/30/2010

Senatorial privilege per se doesn't apply to circuit court of appeals appointments, but there are some rather complex traditions involved in appointments to the regional circuit court of appeals designed to balance appointments of judges so that all states in the numbered regional circuit are represented by some judges, and so that Senators from the affected states have a particularly large say in the discussion of those nominees. There are five vacancies on regional circuit courts of appeal for which no nominations have yet been made by the President.

Judicial appointments to the DC Circuit and to the Federal Circuit, like appointments to the U.S. Supreme Court, are largely in the President's discretion, so long as the nominee can secure a filibuster proof majority, which the vast majority of nominees do. Some members of the minority party usually agree to an up or down vote on any judicial nominee unless the particular individual is particularly polarizing, and a nominee who any filibuster threat to receive an up or down vote is almost always approved. There are three vacancies on these court for which no nomination has been made at this point.

In the case of four of the eight vacancies for which no nomination has been made, this is probably simply a consequence of the fact that the vacancies are only about three months or less old.

Two of the vacancies on the 9th Circuit and one of the vacancies on the D.C. Circuit, however, predate President Obama's election, and one vacancy on the 4th Circuit is more than fourteen months old. Presumably, the circuit court judgeship vacancies that pre-date President Obama's election are vacancies that Democrats, including President Obama when he served in the U.S. Senate, fought hard to prevent President Bush from filling. So, the delay in these nominiations is hard to understand.

What Proportion Of Judgeships Are Vacant?

As of today, there are a total of 876 Article III judgeships in the United States:

Supreme Court 9 (No vacancies)
Court of Appeals: (11 nominations for 19 vacancies)
Regional Courts of Appeals 167
Federal Circuit 12
District Courts: (31 nominations for 84 vacancies and 1 pending vacancy)
Article III 675
Territorial Courts 4
Court of International Trade 9 (No vacancies)

Is It Bad To Prioritize Appellate Court Nominations?

Some pundits have faulted President Obama for prioritizing appellate court nominations over trial court nominations, but I don't agree.

Appellate court nomination fights are more likely to provoke partisan fights in the U.S. Senate. Given the political reality that the President's party almost always loses some ground in Congress in midterm elections, it makes sense to try to resolve as many potentially controversial appellate court nominations as possible before the political composition of the U.S. Senate changes.

Vacancies in federal trial courts are much less likely to provoke partisan fights since the Senators from the state involved have generally already signed on to the nomination. Also, federal trial court judges don't make binding precedents interpreting the law. This is not to say that they aren't important or don't have great discretion that hinges on ideology, particularly in the area of criminal sentencing, but it makes their decisions less relevant to Senators in other states.

A filibuster of a federal trial court nominee isn't enitrely unheard of, but it would be unusual.

Why Are There So Many U.S. District Court Judicial Vacancies?

Failure to act on Presidential nominations to the judiciary is the fault of the U.S. Senate, and not the President, of course. But, the failure to nominate judges may be only partially the President's fault.

Under the tradition of Senatorial privilege, a federal trial judge nomination will be considered by the U.S. Senate only if both U.S. Senators from the state where the judge will serve agree with the President's nominee. It would be foolhardy for a President to nominate a federal trial court judge without receiving approval in advance from that state's U.S. Senators.

It is possible that what we are seeing now is that Republican Senators are continuing their strategy of all but a handful of moderate Republican Senators this legislative session of refusing to compromise to any extent with the President on almost anything, even if they might have supported a compromise in prior administrations.

If Republican Senators are refusing to agree to judges who aren't strong ideological conservatives for federal trial court vacancies in their states, this could explain why there have been fewer nominations in the past twenty months for federal trial court posts than in prior administrations.

Does this hypothesis pan out? If the federal trial court vacancies for which there have been no nominations made are disproportionatley in states with one or more Republican Senators, the Senatorial privilege explaination is a plausibe one. If the vacancies don't show that pattern, then this explanation may not hold up to scrutiny.

A list from the administrative office of the courts shows the current judicial vacancies. I have thinned it out to highlight those without a nominee and the date that vacancy arose, followed by the number of Republicans Senators from that state and the number of months that the vacancy has existed:

01 - ME 04/30/2010 (2) 5 months
01 - RI 12/01/2006 (0) 46 months
02 - NYE 10/16/2008 (0) 23 months
02 - NYN 03/13/2006 (0) 54 months
02 - NYS 06/01/2009 (0) 15 months
02 - NYS 04/22/2010 (0) 4 months
02 - NYS 09/17/2009 (0) 12 months
02 - NYS 08/11/2010 (0) 1 month
02 - NYS 09/01/2010 (0) Two weeks
02 - NYW 03/03/2009 (0) 6 months
03 - DE 07/31/2010 (0) 1 month
03 - NJ 05/30/2010 (0) 4 months
03 - NJ 02/09/2010 (0) 7 months
03 - PAE 06/08/2009 (0) 15 months
03 - PAE 07/31/2010 (0) 1 month
03 - PAM 03/31/2009 (0) 17 months
03 - PAM 01/30/2009 (0) 20 months
03 - PAM 04/21/2010 (0) 5 months
03 - PAW 03/15/2007 (0) 42 months
04 - NCE 12/31/2005 (1) 56 months
04 - SC 12/27/2009 (2) 9 months
04 - VAW 07/01/2010 (0) 2 months
04 - WVN 12/18/2006 (0) 45 months
05 - LAE 12/15/2008 (1) 21 months
05 - TXE 01/01/2010 (2) 8 months
05 - TXS 11/12/2009 (2) 10 months
05 - TXS 06/11/2010 (2) 3 months
05 - TXW 02/26/2009 (2) 7 months
05 - TXW 11/30/2008 (2) 21 months
06 - MIE 01/01/2009 (0) 20 months
06 - MIE 05/25/2010 (0) 3 months
06 - OHN 06/01/2010 (1) 3 months
06 - TNM 03/01/2007 (2) 42 months
07 - ILC 02/28/2010 (0) 7 months
07 - ILN 08/12/2009 (0) 13 months
07 - ILN 07/31/2010 (0) 1 month
07 - ILN 02/01/2010 (0) 7 months
08 - ARE 09/30/2008 (0) 23 months
08 - ARW 10/31/2008 (0) 22 months
08 - MOE 12/31/2009 (1) 8 months
09 - AZ 08/03/2010 (2) 1 month
09 - CAC 11/02/2009 (0) 9 months
09 - CAC 01/15/2010 (0) 8 months
09 - CAN 04/03/2008 (0) 29 months
09 - CAS 08/15/2010 (0) 1 month
09 - CAS 06/06/2010 (0) 3 months
09 - MP 02/28/2010 (NA) 7 months
09 - WAE 07/12/2009 (0) 14 months
10 - CO 01/05/2008 (0) 20 months
10 - OKN 01/04/2010 (2) 8 months
10 - UT 11/30/2009 (2) 10 months
11 - FLM 04/08/2010 (1) 5 months
11 - FLS 08/31/2010 (1) 1 month
11 - GAN 01/20/2010 (2) 7 months
11 - GAN 02/09/2009 (2) 19 months

There are 19 vacancies on the list for which no nomination has been made where there could be Republican objections. There are 36 vacancies on the list for which no nomination has been made for which there could not be an exercise of Senatorial privilege by a Republican. The breakdown is quite similar to the partisan breakdown of the U.S. Senate as a whole.

There is also no strong relationship between the number of monnths that a U.S. District Court judgeship has been vacant and the partisan affiliations of the U.S. Senators from that state. Many of the oldest vacancies for which there has been no nomination come fromm states where both Senators are Democrats.

So, the hypothesis that Senatorial privilege is an important factor that is holding up the process of making nominations to federal trial courts, while plausible, isn't well supported by the facts.

Instead, the main factor in the number of district court vacancies seems to be simply delay in naming nominees to those positions by President Obama, perhaps because he feels the need to focus his finite political capital on matters with a strong Democratic majority in the U.S. Senate is necessary to secure his long term objectives.

Rewarding Failure

Mike Vickers, the assistant defense secretary for special operations and low-intensity conflict is one of the few Bush administration DOD holdovers.

His current agenda includes providing foreign advisers to the Yemeni government.

Vickers rose to his current post based upon his work in "Charlie Wilson’s War" (i.e. the U.S. sponsored insurgency in Afghanistan when the Soviets were in charge, and "his advisory experience in El Salvador during the 1980s."

Charlie Wilson's War helped precipitate the collapse of the Soviet regime that led first to anarchy and civil war, then to the Taliban and then to Al-Qaeda bases in Afghanistan and then to 9-11, and then to U.S. constabulary involvement. This has success written all over it. It also put advanced anti-aircraft missiles in the hands of fundamentalist Islamic terrorists that proved to be a bane to U.S. anti-terrorism planners for decades.

U.S. involvement in El Salvador in the 1980s at a cost of about $6 billion supported a government that sponsored right-wing death squads that killed about 70,000+ people including half a dozen Jesuit priests whose government employee murders were identified but not prosecuted by the regime we supported. It didn't end until the U.S. pulled out. Investigation after the fact revealed that our side committed 85% of the atrocities in those twelve years. The turbulence of the 1980s also produced mass refugee and economic migrant relocation to the United States. The politicians we helped massacre en masse are now in charge in El Salvador anyway. What part of this is a good thing?

Obviously, Vickers didn't do this all by himself. He did it with the help of Ronald Reagan. But, he handled the details and knew what was going on and should have known better.

Vickers was also neck deep in parts of the Bush Administration anti-terrorism policy that we regret like a tolerance for extra-legal torture that didn't work and probably helped drum up opposition to the United States and made the terrorism threat face by the U.S. greater and harder to fight, while undermining U.S. support from our usual Western allies.

Success is not a prerequisite to promotion in the United States military, however, and politically the "indirect approach" that Cold Warrior Vickers favors has one big virtue: If you don't look like you're playing, you can't look like you're losing.

Still, I find it appalling that we have someone like Vickers with a record of catastrophic failure in U.S. Special Operations, in charge of Special Operations in the Obama administration.

I despair to see what will become of Yemen in a few decades, but with Vickers handling that part of the operation, it isn't likely to be good.

Bureaucrats Who Act In Bad Faith

Federal banking examiners found serious problems at Washington Mutual Bank at least five years before its 2008 collapse, but their supervisors showed little concern ... During those five years, examiners constantly warned of "less than satisfactory" loan underwriting, the "horrible performance" of its subprime-backed mortgage securities and the failure of WaMu executives and federal regulatory supervisors to do much about it.

One examiner said he was derided by colleagues as "the housing 'bubble' boy" for his "gloom and doom" predictions for some risky loans, and another complained that critics of subprime loans were called "chicken little."...

Former OTS Director John Reich, who served from 2005 to 2009, referred to WaMu Chief Executive Kerry Killinger as "my largest constituent" in a 2007 e-mail.

That attitude pervaded the upper levels of the agency ...

From here.

Porter Goss, the former director of the Central Intelligence Agency, in 2005 approved of the decision by one of his top aides to destroy dozens of videotapes documenting the brutal interrogation of two detainees. . . Shortly after the tapes were destroyed at the order of Jose Rodriguez Jr., then the head of the CIA's clandestine service, Goss told Rodriguez he "agreed" with the decision, according to the document. He even joked after Rodriguez offered to "take the heat" for destroying the tapes.

"PG laughed and said that actually, it would be he, PG, who would take the heat," according to the document, an internal CIA e-mail message.

Current and former intelligence officials said Goss did not give prior approval before it happened . . . The e-mail messages also reveal that top White House officials were angry the CIA had not notified them before the tapes were destroyed.

From here

In both of these cases, neither Office of Thrift Supervision Director John Reich nor CIA Director Porter Goss, both of whom were senior Bush Administration officials, are likely to face criminal or civil liability. It is the job of the OTS director to decide which regulatory concerns to prioritize and which to make a lower priority, and to judge the credibility of his field officers. The documented actions of Porter Goss took place after the CIA misconduct was a fait accompli and has wide discretion to determine how he will discipline his subordinates.

Indeed, if there was criminal or compensatory civil liability for these kinds of actions, it would be much harder to get qualified people to fill these jobs. No federal bureaucrat has personal resources that would be even a drop in the bucket compared to the harm caused by failing to properly regulate Washington Mutual, one of the biggest bank failures in history. When the pressure is on the Central Intelligence Agency to push hard to stop terrorists, it is almost certain that someone, somewhere will cross legal lines and Jose Rodriguez Jr. who actually ordered that tapes be destroyed without approval from his boss and despite a court order probably could face punitive contempt of court sanctions. This breach of the law did untold damage to American civil liberties, and the CIA's credibility as an agency to adheres to the rule of law at home and with our allies.

But, both men also failed to carry out their duties in good faith. The nation's top thift regulator is supposed to enforce federal law regulating thrifts like someone who believes in those laws and to take sincere input from his field agents that is backed up by real evidence seriously. The director of the CIA is supposed to immediately fire people who violate court orders and symbolically show a commitment to the rule of law at the very top of the organization instead of reassuring a subordinate who has blatantly violated the law. And, of course, their boss, in this case, President Bush, is supposed to appoint people who take their duties serious and try to carry them out in good faith. All of them swore an oath to uphold the law and the constitution when they were appointed.

Impunity or Execution?

In China, when a senior bureacrat did something like this connected to a major scandal which is discovered after the fact in an inquiry, he is routinely sanctioned criminally with a long criminal sentence or executed. Maybe the Chinese have higher standards than we do. But, China is also not a nation known for its law abiding and faithful public servants. Countries like Denmark and France, known for their competent and non-corrupt civil services give their bureacrats job security and fat benefits packages, while rarely seeking after the fact retribution and certainly never putting ex-civil servants in jail for long terms or executing them.

The problem of bureacrats acting in bad faith exists in the private sector too. The Securities and Exchange Commission, standing in the shoes of the customers of Goldman Sachs, is suing the investment banking firm and one of its vice presidents for breaching its duty of loyalty to its customers in conduct that was discovered after the fact. But, the owners of Goldman Sachs have no meaningful remedy for the misconduct of the executives who in theory reported ultimately to them, and in general, investors under the management friendly corporate law regime of Delaware that has become the de facto national standard for publicly held copmanies, have no meaningful remedy either through the board of directors election process or through civil suit against self-dealing and bad faith conduct by the executives who are supposed to be acting in their best interest. When investors protest misconduct by selling their shares, they simply let someone else be exploited by management instead of them.

In general, senior bureaucrats can engage in bad faith conduct with impunity, risking only the loss of their jobs and even more rarely a bad reference or public censure (which in a partisan political environment or big business rarely has major negative consequences for them), and they risk losing their jobs only when their boss is seriously outraged by their conduct.

Job Security At The Top and the Importance of Clarity

Moreover, the person at the top of a big business or large political organization bureacracy, while subject to stern selection criteria to get the job in the first place, is generally very hard to remove. No President has ever been involuntarily removed from office except through death (with the arguable exception of Richard Nixon who resigned under a threat of impeachment when implicated in criminal misconduct by his subordinates). CEOs of public held companies are generally involuntarily removed from office only in the case of the purchase of the company in a hostile takeover, incompetence or major personal involvement in actively malfeasant conduct.

In both the political and business spheres, clarity matters more than severity. Absolutely clear affirmative misconduct is likely to get one booted if it is known, even if the magnitute of the offense discovered is minor.

Watergate itself, probably wouldn't have had any electoral impact, for example if the plot had not been unraveled. But, the Smoking Gun tape that showed Nixon knew about the coverup forced him to resign. Nixon's policy mistakes surely hurt the country far more deeply, but that wasn't the direct cause of his removal from office. But, the apparently clear coverup by Nixon made his position untenable. Clinton was impeached and tried (but ultimately acquitted), based on a misleading statement about a sexual affair of no policy importance in a deposition unrelated to his Presidency.

Dennis Kozlowski, the CEO of publicly held Tyco and his CFO Mark Swartz were sentenced to long prison terms for using corporate funds for personal perks, even though they probably could have secured authorization from the board of directors for increased personal compensation and no one would have faulted them for using compensations as they pleased once the funds were in a personal checking account. The prosecutor, jury and public were more motivated by instances like a $2 million birthday party he threw for his wife on the Italian island of Sardinia and a $6,000 shower curtain allegedly purchased with company funds than they were with the more obscure but far more economically important conduct he engaged in that may have inflated the sale price of their more than $575 million of stock in the company.

The Failure of the Status Quo

The punishment long after the fact through the courts approach to bad faith conduct by bureacrats can be emotionally satisfying, but it doesn't work well. Indeed, in terrorum severe penalties for tempting easy to commit violations of any rule rarely do. It doesn't work for CEOs, it doesn't work for directors of federal government departments, and it doesn't work for people on probation or parole.

The immediate supervisor of the OTS agent investigating Washington Mutual didn't support the agent because he knew that his boss didn't want to enforce the laws that the OTS was charged with enforcing if it could avoid doing so.

The CIA aide who destroyed the detainee tapes did it because he felt it was in the best interest of the CIA and the President and that he probably wouldn't be severely punished by his boss for doing so.

Tyco's CEO and CFO thought that their positions gave them carte blanche to use company assets as their own without repurcussions, because big business boards of directors are usually so timid.

Nixon is famous for saying that if the President does it, that it's legal.

The immediacy of repurcussions for failing to carry out one's job in good faith, and the good faith of one's supervisor matter far more than the severity of a distant and uncertain punishment for misconduct.

To stop senior bureacrats from acting in bad faith, they need to have a boss with a capacity to investigate quickly and act decisively who provides the right expectations. The hard question is how make this happen during periods with good leaders and mediocre leaders.

Solutions

The solution is probably to provide greater accountability at the top to the extent possible. CEOs and Presidents need to know that there will be immediate negative repurcussions if they fail to live up to their responsibilities.

In the case of publicly held businesses, this may mean redesigning the process by which corporate directors are elected and increasing the independent resources available to directors to carry out their job as the CEO's boss, so that directors are more responsive to shareholders than to management, and so that they have a capacity to be effective in carrying out their responsibilities.

In the case of the federal government, this may mean making it easier for Congress to remove executive branch political appointees from office, easier for the judiciary to remove officials who fail to fully comply with court orders or their legal obligations, and making it easier for regulations contrary to a statute's intent to be swiftly overturned. A status quo that is easier for Congress to alter may discourage manipulations of that status quo by executive branch manipulations.

For example, the Senate might give up the power of a Senate minorities to delay or thwart a Presidential nomination, in exchange for the power to remove their appointees by a simple majority vote not subject to the filibuster. Similarly, an end to the legislative filibuster in the Senate or the creation of a requirement that regulations be approved by Congress before they become effective (both features of Colorado's legislature) might discourage executive branch efforts to promulgate regulations contrary to Congressional intent.

Of course, Senators and Representatives are hardly immunity to the disease of acting unaccountably and failing to act in good faith. Campaign finance is often blamed for this problem, but a lack of political party power over its members, and the incentives of the current system for the opposition to use scandal as a political tool and for the party in power to defend members who appear to have engaged in impropriety may be just as serious.

Giving political parties the power to fill vacancies when their members resign from office, as they do in Colorado, and to refuse to allow unfaithful incumbent elected officials to run for re-election under their banner for political reasons rather than for cause, something that parties usually lack (but which a Colorado political party recent did when an elected legislature voluntarily resigned from her party) might give parties who are in a better position to do so than the opposition, an incentive to discipline their own members when they fail to act in good faith. More people would have an interest in seeing the conduct stopped than in tolerating the conduct.

Then again, there is also much to be said for making it easier for members of the same political party to challenge incumbents, which political parties tend to strongly discourage, and for making it easier to recall elected officials. Measures intended to have the first result have been widely adopted but rarely successful, in part because it is easier to organize an insurgent campaign against an incumbent without a lot of financial backing within a political party than it is to do some via a process more open to the public. See, for example, the current Bennet v. Romanoff and Norton v. Buck races in Colorado for the U.S. Senate nomination in the respective political parties. The latter has worked well at the local level in Colorado in places with small populations, where collective action is less difficult to coordinate, but has not worked nearly so well in larger political entities.

Giving elected legislators more staff resources or better pooling those resources, similarly, might make them less reliant on lobbyists whom they are now dependent for information on the never ending torrent of legislation that comes before them.

Tax Rates On Flush 400 Down

In 1992, the 400 highest income earners in the United States earned 0.52% of the nation's aggregate adjusted gross income. In 2007, they earned 1.59% of the nation's aggregate adjusted gross income, more than three times as large as a share of the pie. In 1992, these high income earners paid an average of 26.4% of the AGI in taxes. By 2007, that had fallen to 16.6%. Only 71 members of the Flush 400 paid 25% of more of their AGI in federal income taxes.

On an after federal taxes tax basis, the Flush 400 have seen their share of national AGI go from 0.40% to 1.25%, a 313% increase over fifteen years.

The average AGI of a member of the Flush 400 is $344.8 million per year; the cutoff for membership in the Flush 400 is $138,815,000. This cutoff has increased in both real and inflation adjusted terms over the past sixteen years.

Two-thirds of that income (66.3%) was classified as a capital gain for tax purposes (in 1992 it was 36.1%). Income classified as salaries and wages was only 6.5% of the income of the Flush 400 (in 1992 it was 26.2%). Sole proprietorship and farm income fell from 5.2% of AGI in 1992 to 0.1% of AGI in 2007. Partnership and S corporation income has fallen from 17.7% of Flush 400 income in 1992 to 12.2% in 2007. In 1992, earned income accounted for 49.1% of the income of the Flush 400, in 2007, earned income accounted for 18.8% of the income of the Flush 400.

The key trend is the tax driven convertion of wage, salary, and closely held non-C corporation business income into capital gains income like stock options and carried interests. This accounts for 100% of the shift in the income mix to capital gains income for the Flush 400. Other kinds of income, collectively, held a steady percentage of the total (although, of course, there were some variations in the exact mix in other categories of income).

Over sixteen years about a third of members of the Flush 400 appeared only in one year, while seven appeared every year. A little under half of them appeared three or more times in sixteen years.

President Clinton started the practice of releasing the information. George W. Bush refused to release the information. President Obama reinstated the public release and back filled the information gap from the Bush Administration.

The Trouble With Agency Action

One way to deal with a problem is to give a government agency the power to enforce a law. Another is to create a private right of action for an aggrieved party. Agency action often is half-hearted, however. For example, the track record for agency action isn't very impressive at the United States Labor Department's Wage and Hour division:

In a report scheduled to be released Wednesday, the Government Accountability Office found that the agency, the Labor Department’s Wage and Hour Division, had mishandled 9 of the 10 cases brought by a team of undercover agents posing as aggrieved workers.

In one case, the division failed to investigate a complaint that under-age children in Modesto, Calif., were working during school hours at a meatpacking plant with dangerous machinery. . . .

[T]he Wage and Hour Division had mishandled more serious cases 19 percent of the time. In such cases, the accountability office said, the division did not begin an investigation for six months, did not complete an investigation for a year, did not assess back wages when violations were clearly identified and did not refer cases to litigation when warranted. . . .

The report said undercover agents recorded Wage and Hour Division officials urging workers who complained to file lawsuits.

The agency also accepted very flimsy and incomplete settlements, for inexplicable reasons. A recent examination of the work of the Civil Rights Division of the Justice Department under the Bush Administation shows that it was also run dismally and corruptly.

Justice Dept Covers Up Prosecutors' Misconduct

The Department of Justice is in charge of handling complaints of unethical conduct by federal prosecutors. About 30% of cases involve prosecutors hiding exculpatory evidence in criminal cases from defense attorneys, in violation of the U.S. Constitution. But, rather than prosecute cases it sits on them, releases no public information (not even at a statistical level after 2006), and the punishments imposed are frequently minor (like private reprimands) even in situations that experienced federal judges see as serious violations and follow up upon.

Most of the degradation in the Office of Professional Responsibility, in charge of these cases in the Justice Department, apparently happened during the administration of George W. Bush and it isn't clear how much change President Obama will bring to the situation (incumbent U.S. Attorney General Eric Holder took office February 3, 2009, Deputy Attorney General David W. Ogden was confirmed March 12, 2009, as was Associate Attorney General Thomas J. Perrelli). Eric Holder's public statements about Justice Department reform are encouraging. It appears, however that H. Marshall Jarrett has led the Office of Professional Responsibility since 1998 (presumably as a senior civil servant) and that he, in turn, reports to the Deputy Attorney General and the investigated attorney's "component head" with the results of the investigation in each case. In Jarrett's defense, the Bush administration was not always cooperative (citing the New York Times):

Jarrett sought to investigate DOJ approval for the National Security Agency's domestic wiretapping program in 2006, but requisite security clearances were denied. On February 22, 2008, Jarrett announced an investigation of DOJ legal memoranda by John Yoo, Jay Bybee, Steven Bradbury, and others justifying waterboarding and other harsh interrogation techniques.

Then again, the fact that the investigation cited above started in 2005 and still hasn't concluded apparently, isn't impressive.

The evidence of weak attorney discipline at the Office of Professional Responsibility in the Justice Department, as reported by the American Bar Association Journal, suggests that the world's largest law office (i.e. the Justice Department) needs to hand off attorney regulation to disinterested third parties, in the same way that private firms are not permitted to judge their own lawyers. The truth of the matters is that professional and industry discipline agencies in almost every profession and industry tend towards regulatory capture, but most do take complaints of serious misconduct by individuals within the profession seriously.

The apparent failure of the Office of Professional Responsibility in the Justice Department is particular worrisome because some of the most culpable violations of civil liberties and incidents of torture were condoned by administration lawyers, like John Yoo, in ways that appear to violate professional ethics for lawyers in government service. The breakdown of professional ethics monitoring in the Justice Department may also color the rulings of judges who have first hand experience with these issues, in the Padilla v. Yoo civil lawsuit currently pending, where the complaint of Jose Padilla, who was detained as an enemy combatant and allegedly treated improperly while detained under the cover of a Department of Justice memoranda was held to state a claim for relief against a lawyer involved in writing those memoranda.

Illegal Section 382 Tax Regulations Adopted

The Bush Administration has illegally adopted regulations under Internal Revenue Code Section 382 in Notice 2008-83, that give banks a tax break of more than $100 billion. The regulations concern the power of banks that acquire other banks that have accumulated net operating losses to apply those loses to their profits.

The banking industry has repeatedly asked Congress to amend Section 382 to permit this and been rebuffed.

The question is who has standing to challegen the illegal regulations, and whether anyone with standing will choose to do so. A challenge could threaten several bank mergers that have taken place in reliance on the illegal regulations.

Because Colorado tax laws are linked to federal tax law, this illegal regulation will also produce a significant hit to Colorado's corporate tax revenues.

Republican Socialism

One of the main talking points for Republicans in this Presidential election has been to label Obama a "Socialist." But, when it comes to nationalizing industries, involving government in private economic decision making, favoring existing programs to redistribute wealth, and increasing government's share of the economy, Republicans look a lot like socialists themselves.

Governor Palin is a firm supporter of the socialist message of collective ownership of resources so that the government can share the wealth with the common man.

A few weeks before she was nominated for Vice-President, she told a visiting journalist—Philip Gourevitch, of this magazine—that "we’re set up, unlike other states in the union, where it’s collectively Alaskans own the resources. So we share in the wealth when the development of these resources occurs."

From here.

McCain has repeatedly favored taxing the wealthy more than the middle and working class, something he now attacked Obama for as a form of "Socialism." Republicans also voted together with Democrats, and President Bush agreed, to create Medicare Part D, the new prescription drug program that is the largest expansion of the social safety net in the United States in a couple of decades. Medicare Part D costs an amount comparable to the cost of providing bare bones universal health care to all in the United States.

The Bush Administration, as a result of a proposal that both McCain and Obama voted in favor of, and that both men went to the White House to help negotiate, is currently in the process of taking equity stakes in all nine of the biggest banks in America, plans to do the same with many smaller banks, and has taken an 80% stake in Fannie Mae and Freddie Mac, that collectively own 50% of the mortgages in America. The foreign press, and some of the domestic press, has accurately described this as a partial nationalization of the banking system.

The Bush Administration has also invested in a major international insurance company (AIG), brokered a banking merger (PNC and National City) designed to avoid the limitations on golden parachutes in the bailout bill despite the fact that the merger is financed with bailout bill money, and is reported by the Wall Street Journal to be working on a plan to use $5 billion in federal funds to broker a General Motors acquisition of privately held Chrysler.

According to the conservative Cato Institute:

President Bush has presided over the largest overall increase in inflation-adjusted federal spending since Lyndon B. Johnson. Even after excluding spending on defense and homeland security, Bush is still the biggest-spending president in 30 years. His 2006 budget doesn’t cut enough spending to change his place in history, either.

Total government spending grew by 33 percent during Bush’s first term. The federal budget as a share of the economy grew from 18.5 percent of GDP on Clinton’s last day in office to 20.3 percent by the end of Bush’s first term.

The Republican Congress has enthusiastically assisted the budget bloat. Inflation-adjusted spending on the combined budgets of the 101 largest programs they vowed to eliminate in 1995 has grown by 27 percent.

Fiscal responsibility has suffered as a result. Bush has run up record deficits and is not the exception in this regard either. Republican Presidents have added far more to the federal debt than Democratic Presidents.

In the wake of 9-11, one of the Bush Administration's first responses was to nationalize the previously private sector function of providing airport security screening, creating the Transportation Security Administration (TSA). The TSA is the biggest new federal government function, in terms of employees added to the federal payroll, in recent memory, and has made a name for itself for its ham handed handling of its job.

Republicans have also favored prohibiting voluntary accurate labeling of U.S. farm products or additional inspections of U.S. farm products that would increase the marketability of these products abroad. Concerns about the safety of imports of food from the U.S. in the absence of these inspections and labeling has led to riots in the streets of Seoul, South Korea. And, the Bush Administration has also strongly favored protectionist prohibitions on importing prescription drugs from Canada, despite the fact that there are no genuine reasons to doubt the safety of Canadian drugs. Both Bush and McCain have proposed setting government targets in imports of oil to the United States. This doesn't sound like a party driven by a desire for free trade.

Pro-government conservatives have become one of the main constituencies for the Republican party as the Pew Research Center has noted for several years. They make up 10% of registered voters, and are 58% Republican, with most of the balance considering themselves to be independent voters. While pro-business "Enterprisers" and "Social Conservatives" make up larger shares of the Republican Party coalition, pro-government conservatives make up much of the balance of the Republican party.

In short, present day Republicans seem to favor bigger government, a larger role for government in the economy, redistribution of wealth, and a bigger social safety net, without much concern for the size of the national debt. This makes the sting of their "socialist" taunts unimpressive.

Meet The Bailout Czar

Nobody can accuse the Bush Administration discriminating against the young and inexperienced. George W. Bush would make Kennedy's Camelot crew blush.

After putting a very inexperienced young woman in charge of immigrations and customs enforcement, and putting a group of six very inexperienced people in charge of running the Iraqi reconstruction, the Bush Administation has now put a 35 year old fellow with four years of experience at Goldman Sachs, and two years of experience in the Treasury Department as a junior political appointee, in charge of the $700 billion financial sector bailout. Before going to business school, he was an engineer.

I'm sure he is a smart and smooth guy. But, one has to wonder is he has the experience necessary to run a program with a budget bigger than the Department of Defense or the Social Security program.

California Case Impacts Colorado Amendment 56

The legality of state and local laws mandating that employers provide their workers with health insurance, like proposed Colorado Amendment 56, is uncertain. But, a rulling from the United States Court of Appeals from the 9th Circuit yesterday, in the case Golden Gate Restaurant Association v. City and County of San Francisco, upheld the legality of such a plan in San Francisco suggests that state and local governments can impose health insurance mandates on businesses. Employers had argued that such laws were pre-empted by ERISA, a national law that regulates employee benefits.

The San Francisco Plan

The opinion describes the San Francisco plan in detail (citations, statutory references in the text, and footnotes omitted):

The Ordinance has two primary components: the Health Access Plan (“HAP”), and the employer spending requirements. The HAP is a City administered health care program. It went into effect in the summer of 2007. In funding the HAP, the City “prioritize[s] services for low and moderate income persons.” According to the City’s web page, as of August 9, 2008, 27,395 persons had enrolled in the HAP.

Persons who already have health insurance or who live outside of San Francisco are not eligible for the HAP. Instead, such persons may be entitled to establish medical reimbursement accounts with the City. As we will explain in detail below, the Ordinance also requires all covered employers to make a certain level of health care expenditures on behalf of their covered employees. The Association does not challenge the HAP. It challenges only the employer spending requirements. . . .

The Ordinance mandates that covered employers make “required health care expenditures to or on behalf of” certain employees each quarter. “Covered employers” are employers engaging in business within the City that have an average of at least twenty employees performing work for compensation during a quarter, and nonprofit corporations with an average of at least fifty employees performing work for compensation during a quarter. “Covered employees” are individuals who (1) work in the City, (2) work at least ten hours per week, (3) have worked for the employer for at least ninety days, and (4) are not excluded from coverage by other provisions of the Ordinance.

The Ordinance sets the required health care expenditure for employers based on the Ordinance’s “health care expenditure rate.” For-profit employers with between twenty and ninety-nine employees and non-profit employers with fifty or more employees must make health care expenditures at a rate of $1.17 per hour. For-profit employers with one hundred or more employees must make expenditures at a rate of $1.76 per hour.

Under the Ordinance, “[t]he required health care expenditure for a covered employer shall be calculated by multiplying the total number of hours paid for each of its covered employees during the quarter . . . by the applicable health care expenditure rate.”

“A health care expenditure is any amount paid by a covered employer to its covered employees or to a third party on behalf of its covered employees for the purpose of providing health care services for covered employees or reimbursing the cost of such services for its covered employees.” A “covered employer has discretion as to the type of health care expenditure it chooses to make for its covered employees.” [T]he Ordinance specifies that the definition of health care expenditure includ[es], but [is] not limited to:

(a) contributions by [a covered] employer on behalf of its covered employees to a health savings account as defined under section 223 of the United States Internal Revenue Code or to any other account having substantially the same purpose or effect without regard to whether such contributions qualify for a tax deduction or are excludable from employee income;

(b) reimbursement by such covered employer to its covered employees for expenses incurred in the purchase of health care services;

(c) payments by a covered employer to a third party for the purpose of providing health care services for covered employees;

(d) costs incurred by a covered employer in the direct delivery of health care services to its covered employees; and

(e) payments by a covered employer to the City to be used on behalf of covered employees. The City may use these payments to: (i) fund membership in the Health Access Program for uninsured San Francisco residents; and (ii) establish and maintain reimbursement accounts for covered employees, whether or not those covered employees are San Francisco residents.

If an employer does not make required health care expenditures on behalf of employees in some other way, it may meet its spending requirement by making payments directly to the City. We refer to this option as the City-payment option. If an employer elects the City-payment option, its covered employees who satisfy age and income requirements and are “uninsured San Francisco residents” may enroll in the HAP, and its other covered employees will be eligible for medical reimbursement accounts with the City. Covered employees may enroll in the HAP free of charge or at reduced rates. The HAP provides enrollees with “medical services with an emphasis on wellness, preventive care and innovative service delivery.” A primary care provider at the enrollee’s “medical home” “develop[s] and direct[s] a plan of care for each [HAP] participant.” Enrollees pay income-based “participation fees” and “point-of-service fees.”

An employer is exempt from making payments to the City if it makes health care expenditures of at least $1.17 or $1.76 per hour (depending on the nonprofit or for-profit status of the employer, and on the number of employees), and it is partially exempt to the extent that it makes lesser expenditures.

The Ordinance requires covered employers to “maintain accurate records of health care expenditures, required health care expenditures, and proof of such expenditures made each quarter each year,” but it does not require them “to maintain such records in any particular form.” Employers must provide the City with “reasonable access to such records.” If an employer fails to comply with these requirements, the City will “presume[ ] that the employer did not make the required health expenditures for the quarter for which records are lacking, absent clear and convincing evidence otherwise.”

The Ordinance includes a special provision for employers with self-insured health plans. An employer providing “health coverage to some or all of its covered employees through a self-funded/self-insured plan” will “comply with the spending requirement . . . if the preceding year’s average expenditure rate per employee meets or exceeds the applicable expendi ture rate” for the employer. Such employers do not need to keep track of their actual expenditures for each employee. . . .

[T]here are five categories of employers under the Ordinance. First are employers that have no ERISA plans (“No Coverage Employers”). Second are employers that have ERISA plans for all employees, and that spend at least as much as the Ordinance’s required health care expenditure per employee (“Full High Coverage Employers”). Third are employers that have ERISA plans for some, but not all, employees, and that spend at least as much as the Ordinance’s required health care expenditure per employee for employees under the ERISA plan (“Selective High Coverage Employers”). Fourth are employers that have ERISA plans for all employees, but that spend less than the Ordinance’s required health care expenditure per employee (“Full Low Coverage Employers”). Fifth are employers that have ERISA plans for some, but not all, employees, and that spend less than the Ordinance’s required health care expenditure per employee for employees under the ERISA plan (“Selective Low Coverage Employers”).

No Coverage Employers may choose to continue without any ERISA plans. In that event, they can make their required health care expenditures directly to the City. If these employers choose, instead, to establish an ERISA plan, the Ordinance requires only that they make the required level of health care expenditures. They can do so by paying the full amount to the plan, or by paying part to the plan and part to the City. The Ordinance does not dictate which employees must be eligible for the plan, or what benefits a plan must provide. Full High Coverage Employers may choose to leave their ERISA plans intact and unaltered. So long as they maintain records to show that they are making the required health care expenditures, they comply with the Ordinance.

Selective High Coverage Employers may choose to leave their ERISA plans intact and unaltered. In that event, for employees not covered by their ERISA plans, they can comply with the Ordinance by making the required health care expenditures to the City. “An employer may . . . choose to purchase health insurance for its full-time employees, but make payment to the City to fund part-time employees’ membership in the Health Access Program[.]”

Full Low Coverage Employers may choose to leave their ERISA plans intact and unaltered. In that event, they can comply with the Ordinance by making payments to the City in an amount equal to the difference between their expenditures for the ERISA plans and the required health care expenditures under the Ordinance. “[A]n employer who purchases a health insurance program with premiums that are less than the required expenditure . . . may choose to pay the remainder to the City to establish and maintain medical reimbursement accounts for such employees.”

Selective Low Coverage Employers may choose to leave their ERISA plans intact and unaltered. In that event, they can comply with the Ordinance for employees enrolled in their ERISA plans by paying to the City the difference between their expenditures for the plans and the required health care expenditures under the Ordinance, and for employees not enrolled in their ERISA plans by paying to the City the full amount of the required health care expenditures.

I include the details of the plan at length, because I think it is a good interim model for achieving near universal health care.

This plan is also notable because it is economically sustainable even though it only applies in San Francisco. Many critics of state and local approaches to universal health care have assumed that only a national single payer plan can avoid race to the bottom pressures in a national economy. This plan, which is conceptually similar to a minimum wage requirement from a distributive perspective, works notwithstanding the fact that it is exceptional (as do different plans in several other states like Massachusetts, Hawaii and Vermont). Admittedly, however, San Francisco has long had a high wage economy (where most high wage employees already have health insurance and are unaffected), wedded to a low wage local service economy, so it doesn't have to worry too much about losing jobs as employers consider operating elsewhere. It simply has to prevent local services businesses that don't provide health insurance from undercutting their local competition from a cost perspective.

Of course, the San Francisco plan does not achieve the focus on preventative care as a cost saving measure, plan bargaining power vis-a-vis drug companies and providers, or administrative simplifications that a single payer system would provide. It also only guarantees some benefits, not necessarily sufficient ones. But, it should dramatically reduce the bad debt incurred to treat uninsured patients that local providers must indirectly pass on to insurance companies that drive up premiums, and it should reduce the number of cases where problems get more expensive as a result of the unavailability of preventative care.

Assuming that employers make sensible choices about how to make the health care expenditures that they must under the plan, the San Francisco plan moves the discussion from who should care health care, to how can we reduce health care costs through provider and insurer efficiencies.

The Court's Analysis

Some key observations that went into the 9th Circuit decision were the following:

We make two observations about the Ordinance. First, the Ordinance does not require employers to establish their own ERISA plans or to make any changes to any existing ERISA plans. Employers may choose to make up the difference between their existing health care expenditures and the minimum expenditures required by the Ordinance either by altering existing ERISA plans or by establishing new ERISA plans. However, they need not do so. The City-payment option allows employers to make payments directly to the City, if they so choose, without requiring them to establish, or to alter existing, ERISA plans. If employers choose to pay the City, the employees for whom those payments are made are entitled to receive either discounted enrollment in the HAP or medical reimbursement accounts with the City.

Second, the Ordinance is not concerned with the nature of the health care benefits an employer provides its employees. It is only concerned with the dollar amount of the payments an employer makes toward the provision of such benefits. An employer can satisfy its spending requirements by paying the City; it can satisfy those requirements by funding exclusively preventive care; it can satisfy those requirements by setting up an on-site clinic and reimbursing employees for the purchase of over-the-counter medications; or it can satisfy those requirements in some other manner, such as funding a traditional ERISA plan. The Ordinance does not look beyond the dollar amount spent, and it does not evaluate benefits derived from those dollars. . . .

The HAP, administered by the City, is not an ERISA plan. Rather, the HAP is a government entitlement program available to low- and moderate-income residents of San Francisco, regardless of employment status. It is funded primarily by taxpayer dollars. Employer payments under the Ordinance provide only a small portion of the HAP’s funding, and, although we do not know the precise numbers, employees covered under the Ordinance comprise substantially less than half of all HAP enrollees. The fact that a minority of HAP enrollees pay a discounted enrollment fee because their employers participate in the City-payment option is not enough to make the HAP a “plan, fund or program” within the meaning of ERISA.

The core observation driving the 9th Circuit decision to validate the San Francisco Ordinance in the face of an ERISA pre-emption claim is that the "Supreme Court has emphasized that ERISA is concerned with “benefit plans,” rather than simply “benefits,” because “[o]nly ‘plans’ involve administrative activity potentially subject to employer abuse.” Since San Francisco's Ordinance governs how much is spent on employee benefits, rather than how the benefits are provided, it survives the ERISA challenge. The U.S. Supreme Court cases relied upon by the 9th Circuit are Fort Halifax which upheld a Maine statute requiring that employers pay severance benefits to laid off employees, and Massachusetts v. Morash which upheld a Massachusetts statute requiring employers to pay discharged employees for unused vacation days.

The 9th Circuit concludes by stating:

We are asked only to decide whether § 514(a) of ERISA preempts the employer spending requirements of the Ordinance. We hold that it does not. The spending requirements do not establish an ERISA plan; nor do they have an impermissible connection with employers’ ERISA plans, or make an impermissible reference to such plans.

The Bush Administration's Secretary of Labor filed an amicus brief seeking to have the law declared pre-empted by ERISA.

Colorado Impact

While the precedent is not directly binding on Colorado, which is in the 10th Circuit, the unanimous decision addressing similar legal issues would be important persausive authority in determining the validity of a Colorado plan. A trial court in the San Francisco case has invalidated the local ordinance, a decision which, if it had been upheld, would have provided a strong argument invalidating Colorado Amendment 56, if it passed, as well.

I'll more careful examine the ERISA pre-emption issue when I evaluate Amendment 56 in detail. Even if Amendment 56 didn't pass muster, the San Francisco case provides a model that allows for state and local mandates of universal health care.

Dow Down For Bush Presidency

The Dow closed today at 10,609.66. finishing not far off its lows of the session. It has fallen more than 25 percent since reaching a record close of 14,164.53 on Oct. 9 last year.

The Dow when President Bush took office (January 20, 2001) was 10,732.

The Dow has fallen 122.34 points (a bit more than 1%) in the seven years, seven months, and four weeks since President Bush took office.

When Bush took office the exchange rates with the U.S. dollar and the following currencies were (compared to their current values in parenthesis)

Canadian Dollar 1.5072 (1.0788) Down 28%
Euro 0.9374 (1.4215) Down 34%
British Pound 1.465 (1.7855) Down 18%
Yen 116.44 (109.71) Down 6%

Consumer Price Index (CPI-U) January 2001 175.1; August 2008 219.086; Inflation 25.1%

Thus, the inflation adjusted return on the stock market is about -26% during the Bush Presidency. The slide of the U.S. dollar against major foreign currencies confirms the slide in its value during the Bush Presidency.

Dividend yields as a percentage of share price have been in the 1% per annum to 2% per annum rate for the S&P 500 during the Bush Administration. Dividend yield were higher every single year from 1871-1997, although they bottomed out at 1.1% in August 2000, shortly before Bush was elected.

Total dividend yields during the Bush Presidency have been less than the amount that share prices have lost due to inflation, even before accounting for income taxes on dividend income.

Thus, even when considering total real return, rather than merely nominal stock index change, the stock market has been a losing proposition during the Bush Administration.

Dow Tanks On Financial Industry Worries

The Dow when Bush took office (January 20, 2001) was 10,732.

The Dow closed today at 10,917.51, a gain of just 185.51 points (less than 2%) over the past seven and a half years. If the market sees another bad day tomorrow, the Dow could drop below the level it was at when Bush took office.

Dow Still Down

Two months from the last time I looked at the subject the Dow Jones Industrial Index remains in bear territory, falling a bit since then to 11,188.23 yesterday, a slightly down from where it was two months ago. The high in October was 14,189.09. Needless to say, a collapse since October 2007 can't be attributed to the Clinton administration's economic policies.

Meanwhile, according to the Denver Post, citing the ADP National Employment report, private sector emplyment decreased in August by 33,000 jobs, an eight straight decline in monthly payrolls, accompanied by a rise in unemployment.

In addition to a stagnant stock market during the Bush Administration:

* wages have been stagnant for all but the highest income people during the Bush Administration (as I noted in a post earlier this week),
* energy prices have risen,
* oil company profits have soared,
* real health insurance premiums have risen significantly,
* real estate values have fallen,
* the mortgage industry has melted down in hte face of record foreclosure rates,
* a major investment bank vanished in a weekend,
* bank failures are at record highs,
* the American automobile industry is in crisis,
* the federal budget deficit has soared, inflation is creeping up, and
* despite a weakening dollar, one in five American manufacturing jobs have disappeared during the Bush Administration and we are still running trade deficits.

Wal-Mart, which may as well be Chinese Imports, Inc., is the only company in the economy other than energy companies that are thriving at the moment (although more ethical discount retailer Costco is also doing well enough). And, why shouldn't it? Wal-Mart's prices a significantly lower than many of its competitors for many products. Times are tough, and prices matter.

Bush's Economic Legacy

The Bush Legacy In The Stock Market

On Wednesday, the Dow Jones industrial average and the Nasdaq composite index closed more than 20 percent below the peaks they reached in October. The S&P 500 is close to a 20 percent decline, the threshold of a bear market.

From here.

The Dow's close yesterday was 11,215.51.

The Dow when Bush took office (January 20, 2001) was 10,732.

The absolute increase in the Dow since Bush took office is 4.5%. The annualized increase in the Dow since Bush took office has been 0.5859%, which is about three-quarters of the going rate of passbook savings accounts at my local bank. Capital gains tax cuts don't matter very much when stock market prices aren't rising.

Despite the flat market, the nation's wealth has surged into the financial industry, causing the incomes of financial industry executives to dwarf those of executives in the real economy, and driving economic inequality with income and wealth concentrated in the rich at levels we haven't seen since the 1920s just before the Great Depression.

The Dow is the most politically important market indicator, even if it is not necessarily the broadest or most representative indicator.

Bush's Legacy Of Oil Prices

Oil prices yesterday crossed the $145 a barrel mark, another record high in both nominal and inflation adjusted terms. In January 2001, when President Bush took office, oil was $28.66 a barrel, less than a fifth of the current price.

Bush's Legacy For Manufacturing Jobs

When President Bush took office there were 12,236,000 production workers employed in the manufacturing indusry in the United States (on a seasonally adjusted basis). In June 2008, there were 9,761,000. Employment in the manufacturing sector has shrunk by 20.2% during the Bush Administration.

Bush's Legacy For The National Debt

The federal government's total debt is currently about $9.47 trillion, of which $5.70 trillion is held by the public, $2.29 trillion is held by the Social Security trust fund (from FICA taxes), and the $3.77 trillion balance is held by other government trust funds such as the Medicare trust fund (from FICA taxes) and highway maintenance trust fund (from gas taxes).

When Bush took office the federal government's total debt was about $5.63 trillion, of which $3.41 trillion was held by the public.

The portion of the national debt held by the public has increased by $2.29 trillion during the Bush Administration, which is about $7,633 per man, woman and child in the United States. About 40% of the federal debt has been accumulated during the Bush Administration.

We Have Met The Enemy And He Is Us.

We are the evil empire. The U.S. military, under color of law with orders flowing from an intentionally engaged President on down, detains people carelessly and with no due process and then senselessly abuses them. Congress, including Colorado Democrats like Ken Salazar and John Salazar have put their stamp of approval on these actions, enacting amnesty for the monsters who carried out this abuse in the Military Commissions Act. Our courts have checked the President a little, but not decisively.

Change cannot come soon enough.

Crime Without Punishment

The real war criminals of the Bush Administration are lawyers who will not be held accountable like Michael Mukasey, Alberto Gonzales, John Yoo and Mr. Bybee.

Jack Goldsmith's approach to the issues that these men screwed up, by the way, is merely a back pedaling effort to save a failed approach to terrorism that doesn't deserve serious consideration. It simply finds the closest matches for the same policy the Bush Administration has applied in circumstances where the Bush Administration approach is already doomed to be repealed.

Government Without Leaders

While agencies need budget authority from Congress to operate, they manage to carry out without much difficulty even without Presidentially nominated and Congressional approved leaders to run them. The New York Times has the scoop:

President Bush has left whole agencies of the executive branch to be run largely by acting or interim appointees — jobs that would normally be filled by people whose nominations would have been reviewed and confirmed by the Senate. In many cases, there is no obvious sign of movement at the White House to find permanent nominees, suggesting that many important jobs will not be filled by Senate-confirmed officials for the remainder of the Bush administration. That would effectively circumvent the Senate’s right to review and approve the appointments. . . . [T]he vacancy rate for senior jobs in the executive branch is far higher at the end of the Bush administration than it was at the same point in the terms of Mr. Bush’s recent predecessors in the White House. . . .

Under a 1998 law known as the Vacancies Reform Act, acting government officials can remain in their posts for 210 days with the full legal authority they would otherwise have with Senate confirmation, with the calendar reset to 210 days once a nominee’s name has been forwarded to the Senate. As of Monday, there are 462 days left in Mr. Bush’s term. . . .

“One of the things we know is that they just aren’t as effective as Senate-confirmed appointees. They just don’t have the standing in their agencies. Acting people are very shy about making decisions.”

Among the higher profile "acting" officials:

Justice Department
* Attorney General (#1 job)
* Deputy Attorney General (#2 job)
* Associate Attorney General (#3 job)
* Director of Office of Legal Counsel
* Director of Office of Legal Policy
* Head of Civil Rights Division
* Head of Natural Resources Division
* Head of Tax Division.
* "More than a quarter of the department’s 93 United States attorneys"

Department of Agriculture
* Secretary of Agriculture

Department of Veterans Affairs
* Secretary of Veterans Affairs

Department of Homeland Security
* General Counsel
* Under Secretary for National Protection
* Assistant Secretary for Strategic Plans

Department of Health and Human Services
* Administrator for Medicare and Medicaid programs.

State Department (and related agencies)
* Under Secretary for Arms Control and International Security
* Director of the United States Agency for International Development

I personally favor significant reforms of the political appointment process. The number of positions which are Congressionally appointed should be thinned signficantly, to focus Congressional and Presidential attention on the top spots, while preventing the mere bureacratic task of getting more than 9,000 appointees approved from holding up the show. But, in exchange, the number of days that a non-Congressionally approved official should be able to fill a vacancy should be greatly reduced.

While it might take Constitutional change to achieve, I would favor eliminating the need for Congress to impeach underperforming Congressionally approved appointees, instead allowing Congress to withdraw their approval, by joint resolution, of any offical whom they had previously appointed. This would encourage executive branch officials to give more respect to Congressional intent in executing the laws.

I also favor ending the filibuster, in connection with a substantive requirement that judges (and perhaps anyone else with a term of office that extends beyond the current President and who cannot be fired by the President), be approved by a two-thirds majority on the merits, and an express elimination of the power to make recess appointments of judges.

PTO Deputy Director Unqualified

The President has appointed a deputy director of the patent and trademark office who doesn't have the qualifications required by law to do the job.

Somebody has brought suit to remove the appointee on this ground. There are real legal standing barriers to this, but it still doesn't reflect positively on the administration.

Do they not hire people to screen resumes for legal job requirements in this administration?

D.C. Circuit Ruling Blow To Bush Administration

The Detainee Treatment Act and Military Commissions Act give the United States Court of Appeals for the D.C. Circuit the power to review Combat Status Review Tribunal decisions in which Guantanamo Bay detainees are determined to be enemy combatants.

The government envisions these reviews basically as other court appeals that consider evidence actually presented by a military prosecutor to the tribunal in a hearing based on the transcript of the hearing. The D.C. Circuit disagreed. It is acting more like a habeas corpus trial court, permitting discovery far beyond the scope of what was actually presented to the tribunal, and instead, including matters that could have been presented to the tribunal, but were not.

The decision, written by the Chief Judge of the D.C. Circuit, is the right one. Essentially, the gross absence of due process protections in the tribunal process itself, means that meaningful review is possible only by looking beyond the matters presented to the tribunal so the reviewing court can determine if the government lived up to its pre-hearing obligation (within the rules of the Combat Status Review Tribunals) to make available exculpatory evidence.

Inquisitorial tribunals need to be reviewed differently from adversarial ones.

The decision is a huge blow to the government. It is an end run around a position it has taken consistently for five years that enemy combatant decisions are fundamentally a matter for the executive branch. Congress wouldn't let it out of ultimate review by an Article III court, and the judges on that court, while not usually a trial court, havve decided to do what is necessary for a first instance Article III court review process.

The number of people impacted by Guantanamo Bay proceedures is small, just a few hundred in the midst of wars that have killed tens of thousands of Iraqis and Afghanis. But, it is a signature policy of the administration's war and terrorism policy, and it is the most blatant example of administration abandonment of the rule of law, which has resulted in immense international pressure. For the government to fail to achieve its ends here is to declare its anti-terrorism policy to be fundamentally flawed.

Meanwhile, the U.S. Supreme Court, in a once in a generation move, has reconsidered its decision to deny certioriari to the D.C. Court determination that the Military Commission Act of 2006 constitutionally suspends the writ of habeas corpus in Guantanamo Bay. Given the Supreme Court's ruling on an almost identical issue, and dicta that went further which the D.C. Circuit ruling ignored, reversal of this decision and a finding that the Military Commission Act of 2006's jurisdiction stripping provisions are unconstitutional as applied in this case is writing on the wall.

In the face of this, the Bush Administration, by outside accounts, seems poised to shut down Guantanamo and move the detainees to facility on American soil, where jurisdiction stripping seems almost certain to be unconstitutional.

Essentially, the federal courts have allowed the administration five years to ignore the law with impunity to fight terrorism and seek Congressional backing, but the free pass has almost expired, now that, with hindsight, it is clear that neither Guantanamo Bay, nor enemy combatant detentions in the domestic United States, are necessary to national security.

The fight in the end game will be between the President and the courts and detainee litigants, over what precedents will remain on the books for the next war.