John Cassidy's Blog, page 70

Obama’s Corporate-Tax-Cut Proposal Is Clever, But Is It Wise?

My first reaction on reading about President Obama’s proposal to cut the corporate tax rate to twenty-eight per cent, which he unveiled in Chattanooga, Tennessee, on Tuesday, was that it sounded vaguely familiar. And, indeed, it was. Looking back through the clippings, I came across a news story by Jackie Calmes, a White House reporter at the Times:

President Obama will ask Congress to scrub the corporate tax code of dozens of loopholes and subsidies to reduce the top rate to 28 percent, down from 35 percent, while giving preferences to manufacturers that would set their maximum effective rate at 25 percent, a senior administration official said on Tuesday.

Mr. Obama also would establish a minimum tax on multinational corporations’ foreign earnings, the official said, “to discourage accounting games to shift profits abroad” or actual relocation of production overseas.

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Where Larry Summers Went Wrong

If I were Lawrence Summers, I’d feel free to start planning my winter vacation for 2014, and my summer one as well. With today’s stinging lead editorial in the Times calling on President Obama to pick Janet Yellen as the next chair of the Federal Reserve, the chances of Big Larry heading down to Foggy Bottom next February, after Ben Bernanke retires, are fast diminishing.

Just a week after Wonkblog’s Ezra Klein reported that Summers had emerged as the favorite for the Fed job, three key elements in the Obama coalition—progressive Democrats in the Senate, the women’s movement, and the liberal media—have lined up squarely against Summers and in favor of Yellen, who would be the first woman to head the Fed. As the objections to Summers have multiplied, the White House has appeared to backtrack. Late last week, it put out word that no decision had been made on the Fed nomination, and that there wouldn’t be one until the fall, which probably means mid-September. Of course, Obama may still defy the liberals and progressives to appoint Summers, who served as his top economic adviser during his first two years in office, but I wouldn’t even bet Monopoly money on it.

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How Strong Are the Cases Against Steve Cohen and SAC?

In a federal court on Friday morning, a lawyer for SAC Capital, the big hedge fund owned by Steve Cohen, entered on the firm’s behalf pleas of not guilty to five counts of securities fraud related to alleged insider dealing. Preet Bharara, the U.S. Attorney for the Southern District of New York, unveiled the charges on Thursday, and Antonia Apps, a prosecutor in Bharara’s office, told the court that there was “a tremendous volume of evidence” against the firm, including court-authorized wiretaps, e-mails, and instant messages.

Still, the government didn’t file any criminal charges against Cohen himself. He founded the firm, remains its sole owner, and is widely believed to be the ultimate target of an investigation that has been going on for more than a decade. It’s perfectly possible that more charges could be brought at a later date, but, if there were an open-and-shut case, Cohen would already be in the dock. Instead, it is his firm that has been indicted. Should it be found guilty, Cohen would obviously be affected by the cost of any fines, but he wouldn’t face jail time.

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Obama, Trayvon, and the “American Dilemma”

Four days after President Obama took to the White House podium to talk about the outcome of the Trayvon Martin case, many people are still discussing what he said, which isn’t surprising. In some ways, it was a bravura performance.

In explaining how history shapes the way many African-Americans view the criminal-justice system, and in personalizing some of the trivial but humiliating slights experienced by young black men, even college-educated ones like himself, the President gave voice to realities that are too often ignored. In pointing to high crime rates among African-American youths, and the problem of black-on-black crime, he acknowledged another reality, one that shapes how many non-whites perceive blacks. And in taking a few well-aimed jabs at Florida’s Stand Your Ground laws, he highlighted the one indisputable message of the Martin case: guns do, indeed, kill people. (Had George Zimmerman been unarmed when he came across Martin, we almost certainly wouldn’t have heard of either of them.)

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Detroit Bankruptcy Filing Raises Big Questions

Detroit has long been a watchword for urban decay, with vacant lots, high crime rates, and serious financial problems defining the city’s image. But Thursday’s bankruptcy filing raises many questions, beginning with its legitimacy. Many people in the Democratic city, where more than eighty per cent of the residents are black, believe that it represents an undemocratic political gambit by a Republican-controlled state government.

The immediate question is whether a judge will block the bankruptcy petition, which was filed in federal court by Kevyn Orr, the city’s “emergency financial manager,” who earlier this year was appointed by Michigan’s Republican governor, Rick Snyder. Orr had been threatening this move for months, and, after negotiations with the city’s pension funds and bondholders broke down, he followed through. According to an account in the Detroit News, at the very moment that Orr filed his petition for Chapter 9 bankruptcy protection, a judge in a Michigan state court was preparing to issue an order preventing him from doing any such thing. Lawyers for the city’s employee-pension funds, from which Orr is demanding huge givebacks and cuts in benefits, are expected to return to court and seek to force Orr to withdraw the bankruptcy petition.

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Six Things We Learned from Bernanke’s Testimony

Years ago, while attending an economics conference, I heard someone—I think it was Richard Freeman, of Harvard, but I couldn’t swear to it—respond to a presentation by saying that it hadn’t cleared up the issue at hand but that it had improved the quality of our ignorance. Two days of testimony on Capitol Hill from Ben Bernanke, the Fed chairman, has accomplished something similar. At the end of it, we still don’t know for sure where Fed policy, and the global markets that depend upon it, will go from here. But we have learned some valuable things. Here are six of them:

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Obamacare in New York: Some Good News

Politically, these are rocky days for Obamacare. A couple of weeks ago, the Administration announced that it was suspending for a year the employer mandate that will oblige businesses with fifty or more employees to offer health coverage or pay a fine. Instead of going into effect next January, as was originally planned, the mandate will apply beginning January 1, 2015. In seemingly trying to bury the news by putting it out just before the July 4th holiday, the Administration only made things worse. In Congress, gleeful Republicans seized upon their opponents’ discomfort, calling for the individual mandate to be postponed as well.

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The Problem with Record Bank Profits

What do these large dollar numbers have in common: $6.5 billion, $5.5 billion, $4.2 billion, and $1.9 billion? They represent the latest quarterly net profits made by too-big-to-fail banks—in order, JPMorgan Chase, Wells Fargo, Citigroup, and Goldman Sachs, the last of which reported its second-quarter figures before the market opened on Tuesday.

Five years after being bailed out by the federal government, the U.S. banking system hasn’t merely recovered from the financial crisis that brought it to the brink of collapse. It is generating record profits—the sorts of figures usually associated with oil giants like ExxonMobil and Royal Dutch Shell. During the past twelve months, for example, JPMorgan, the country’s biggest bank, has earned $24.4 billion in net income.

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Why the G.O.P. Needs to Lose For a Third Time

Morsi’s out, Zimmerman’s free, Spitzer’s back, Snowden’s still in Moscow, and the G.O.P. is still dominated by right-wing true believers. Those were the headlines during my two weeks off, and, in the interest of maintaining the holiday spirit for another day or two, I’m going to focus on the last one. (Note: if you haven’t read Jelani Cobb’s moving post on the Zimmerman acquittal, read that first.)

If you are anything like me, I suspect that part of you—the dark, cynical part you’d rather not acknowledge—has rather enjoyed the Republican Party’s two-decade-long descent into wacky, quasi-religious, know-nothing nativism. From Pat Robertson and Pat Buchanan to Sarah Palin and Michele Bachmann to Rick Perry and Rick Santorum, let’s be honest—the Party’s recent history has resembled a dark comedy scripted by Aaron Sorkin and designed to insure a Democratic hegemony in the Oval Office. Who knows? If it hadn’t been for the intervention of the Supreme Court in 2000, the G.O.P. could conceivably have lost six Presidential elections in a row, instead of four out of six.

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Spitzer’s Back, and Good Luck to Him

Give one thing to Eliot Spitzer: he hasn’t lost his ability to grab the headlines. By announcing his return to politics on the Sunday evening after July 4th, one of the quietest news days of the year, he guaranteed himself a burst of publicity. And, sure enough, when I went down to the local supermarket this morning to pick up the papers (I’m still out on Long Island, taking a break) there was his unmistakable mug staring out from the front pages of the Post and the News. And on the coveted right-hand column of the Times front page, the headline: “SPITZER REJOINS POLITICS, ASKING FOR FORGIVENESS.”

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