Flooding in Thailand

The images are pretty heart breaking.

We Out

Peace out Baghdad! Peace out Fallujah! This occupation is over!

Rick Perry's Flat Tax Hail Mary

Rick Perry finally introduced his tax plan, a couple days after promising to have a plan ready for us in the CNN debate. Perry wants to simplify:

"It starts with scrapping the three million words of the current tax code, and starting over with something much simpler: a flat tax," Perry said.

This isn't the first time that someone has proposed a flat tax; Steve Forbes, Phil Gramm, and Jerry Brown have all run on it in the past. The problem with the flat tax is that it doesn't stick:

The allure of the flat tax is that it promises to wipe clean the complicated tax code. But it does this by throwing out some popular tax deductions, including breaks for mortgage interest payments, charitable giving and employer-paid health care.

We're talking about its popularity, not its viability. The rich would rather pay money to charity and get deductions than give money to the government. There's still the matter of burdening the poor:

The details of each flat tax proposal differ — the overall rate, whether some low-income families will be exempt and which deductions might be spared on the chopping block. But experts say they invariably increase taxes on lower-income households and cut them for the rich, a potentially dicey proposition for voters worried about the country’s decades-long trend of growing income inequality.

There's also the difficulty that goes with passing it:

“At least, in theory, it’s a simple plan, but getting from here to there would be enormously complex,” Bartlett said.

Others believe that the flat tax is a winner:

After all, tax simplification is both needed and polls well, and the flat tax promises a simpler approach to paying taxes. And at a time when President Obama is campaigning against the fact that Warren Buffett and his secretary pay different rates, the flat tax idea might just have met its moment for broader-based appeal.

Given the "class warfare" battles over taxes and spending and everything else, now might actually be a time when the flat tax has its breakthrough on the national stage.

Others believe that it is a joke:

Just because a tax is flat doesn't mean it can't go up. And if Perry's team designs a plan that maintains popular items such as the charitable deduction it's not a flat tax and pretty soon it looks like the same complicated mess we have now.

Th rich will want the ability to deduct no matter what. If he includes that, then the tax isn't exactly flat. In fact, it would skew it the other way.

The tax might help Perry with the Tea Partiers though:

FreedomWorks Chairman Dick Armey thinks this could revive Mr. Perry’s campaign. “The flat tax does more for Perry’s candidacy than anything else he could have done,” the former House majority leader told The Washington Times in an interview. “If Perry really means it, and he gets elected and makes it the top priority of his presidency, it would be the single best thing that could be done to spur economic growth and job creation in public policy today.”

I'm not so high on it because I don't think it will pass. I think it's very gimmicky. There are going to be questions about whether the poor will be exempt from the tax and what that line will be. There will also be other questions like deducations and things like that. Regarding conservatives, I think Perry is going to win over voters with this. The question is will he stand tall in defending it. There are a lot of things about it that raise questions and to really make a stand, he'll have to start doing well in debates, which, if you've seen the other debates, is as tall a task as Perry can face.

At the end of the day, it's a novel attempt to try and get back in the race. This could be his prayer at the buzzer.

Gadhafi: Dead

Another world leader falls. There's not much that needs to be said.

Greece: Austerity as Athens Burns

There was another round of Greek protests as the government met to pass an austerity bill:

Greece definitely needs to make progress in reducing their debt and getting their budget in order. The economy is suffering and people are going nuts over it. There's been an immense brain drain because of this. The whole country is unhappy:

Although the demonstration was organized by leading labor unions, everyone from trash collectors, teachers, retired army officers, lawyers and even judges walked off the job to protest the government-imposed wage cuts and tax increases that they say are squeezing the debt-ridden country into penury.

“There’s no precedent for this,” said Anastasia Dotsi, 70, a retired bank worker who said anger had driven her out to protest. After two years of austerity measures, “we have been crushed as a people,” she said.

The bill is harsh in that it will include wage cuts and job cuts, but it might be a necessary measure:

The controversial bill includes cuts in wages and pensions as well as thousands of layoffs in the public sector — once a political third rail in Greece’s welfare state. It also changes collective bargaining rules to make it easier to hire and fire workers, a highly unpopular action that economists say is crucial to liberalizing Greece’s economy but that has little popular support.

Some of this is a necessary for Greece's EU position:

“The vote will boost our negotiating position; it will give us strength for the E.U. summit,” Mr. Papandreou said this week. The main goal for Greece, he added, is “to stay in the euro zone.”

The situation is bad. There's no other way to describe it. Any decision that the government makes seems like a poison pill. I have no idea how Greece is going to get through this in the short term, but in the long term, moving towards a strengthen private sector makes sense. The government is stuck between a rock and a hard place though.

Arthur Laffer: Defending the 9-9-9 Plan

Herman Cain came under fire for his 9-9-9 plan at yesterday's debate. Cain did an extremely poor job defending the plan and I think Romney did the best job of dissembling it (at the end):

This morning, Arthur Laffer, one of the architects of the 9-9-9 plan, had an editorial defense in the Wall Street Journal:

By contrast, the three tax bases for Mr. Cain's 9-9-9 plan add up to about $33 trillion. But the plan exempts from any tax people below the poverty line. Using poverty tables, this exemption reduces each tax base by roughly $2.5 trillion. Thus, Mr. Cain's 9-9-9 tax base for his business tax is $9.5 trillion, for his income tax $7.7 trillion, and for his sales tax $8.3 trillion. And there you have it! Three federal taxes at 9% that would raise roughly $2.3 trillion and replace the current income tax, corporate tax, payroll tax (employer and employee), capital gains tax and estate tax.

While this does address the math behind the plan, it doesn't address the concerns that the sales tax will be burdensome on the poor. It's a regressive tax, meaning it's going to have less impact on you the more money you make. It will affect the poor the most because their consume a higher percentage of their income.

Laffer does have the best argument for the plan though:

The whole purpose of a flat tax, à la 9-9-9, is to lower marginal tax rates and simplify the tax code. With lower marginal tax rates (and boy will marginal tax rates be lower with the 9-9-9 plan), both the demand for and the supply of labor and capital will increase. Output will soar, as will jobs. Tax revenues will also increase enormously—not because tax rates have increased, but because marginal tax rates have decreased.

He believes that will stimulate upward mobility:

A static revenue-neutral tax change requires static winners and losers. And this 9-9-9 plan has made certain that even on static terms those below the poverty line will be better off—period. Once the dynamics take hold, many of those below the poverty line will find good jobs and thus will rise above the poverty line and start paying taxes.

I do believe he falls short on the sales tax:

Still, a number of my fellow economists don't like the retail sales component of the 9-9-9 plan. They argue that, once in place, the retail rate could be raised to the moon. They are correct, but what they miss is that any tax could be instituted in the future at a higher rate. If I could figure a way to stop future Congresses from ever raising taxes I'd do it every day of the week and twice on Sunday. Until then, let's not make the perfect the enemy of the good.

He's deflecting the focus of the argument. It's not about raising taxes. It's about creating the tax in the first place. While it may make up for the revenue, it also creates a new tax source which can be raised. Saying other taxes can be raised just as easily isn't a defense of the new tax plan.

After reading Laffer's defense of the 9-9-9, I feel better about the plan as a whole. However, I still have some very strong, lingering doubts. The sales tax is a huge concern because it's a new tax, a regressive tax, and a double tax. People often complain that capital gains are taxed twice by capital gains and by income tax. This is essentially what it's going to feel like when you have both state and federal sales tax when you buy something.

Quite frankly, I think the negatives still outweigh the positives. The sales tax being the most worrisome aspect, why doesn't Cain just ditch it and tax business and income at a higher rate (13.4%, using the numbers provided in the op-ed). It doesn't have the same ring as the 9-9-9 plan, but it certainly doesn't threaten the people's ability to consume. I expect that Cain will be further pushed on this in future debates. He's going to need a stronger defense on his own. Otherwise, he's just dust in the wind.

Quick Hits: Ohio, Greece, Israel-Palestine

This will be a new way for me to quickly introduce things that are going on in the news that I don't feel I can write full entries for. I used to post a lot of videos and it has become less frequent.

We'll start in Ohio, where the owner of an animal reserve released his animals, including lions, and killed himself shortly afterwards:

Police have had to kill some of the animals, which seems necessary to keep the people of that area safe.

In Greece. there are protests as the government tries to pass an austerity bill:

One of the main problems with Greece is that there are too many people with government jobs, which has made it unsustainable for the government to operate. With the debt, there is a need to make cuts. The people are understandably unhappy about losing jobs when ends have become hard to be met. A quote on the need for austerity:

“If Greece can dramatically reduce its debt burden and interest payments, that may well mean that it needs to implement slightly less austerity in the near term,” Ben May, an economist at Capital Economics Ltd. in London, said in a Bloomberg Television interview. “It certainly won’t solve all of Greece’s problems and it will have to continue to reduce its deficit over time, but it might make that process a bit more manageable and less painful.”

Zero Hedge is reporting that a deal is done. Things are going violent, I'm sure I'll talk about this as it further develops.

Israel and Palestine had a prisoner swap, including an Israeli soldier:

Is this a sign of better relations or just another chapter in the tensions?

Google and Samsung Bring It

As I said yesterday, Google and Samsung introduced the Google Galaxy Nexus phone. It's a technical doozy:

Samsung started the press event by unveiling the Galaxy Nexus, an impressive new smartphone that the consumer electronics company codeveloped with Google to serve as the ICS launch device. Rumors about the device's lofty specs have been circulating for months. The highlight is its 4.65-inch Super AMOLED display with an impressive 1280x720 resolution. The device has a curved form factor that is said to give it a natural feel despite its large size.

The device also has a 1.2GHz dual-core TI OMAP4 CPU, front and rear-facing cameras and 1GB of RAM. Samsung says that there will be separate models with HSPA+ and LTE connectivity available depending on region. Other connectivity features include Bluetooth, WiFi, and NFC. It also has the full array of sensors, including a built-in gyroscope and barometer. The device is scheduled to ship in November with Android 4 on board.

That'll be with the Android 4.0 Ice Cream Sandwich software:

Android 4.0 Ice Cream Sandwich – taking cues from the Honeycomb tablet OS – uses the entire screen for navigation, with the usual Android buttons appearing on the interface itself as opposed to existing as physical hardware components. ICS introduces a smorgasbord of new features to the platform, including face recognition for unlocking, advanced voice integration, and an improved notification system.

It's a technological beast:
Sleek looking devices with technological advancements should up the cool factor but are people actually going to appreciate these features? How will it compare to the RAZR and the iPhone:

In the multimedia department, you won’t run out of options with either of these phones. The Droid RAZR and the iPhone 4S have 8-megapixel cameras at the back that can record full HD 1080p video. The Galaxy Nexus can also record 1080p video, but, surprisingly, Samsung put only a 5-megapixel shooter on Google’s phone, which is less than what we have seen on other phones from the manufacturer, such as the Galaxy SII. All three phones also have video chat cameras on the front.

I'm personally a multimedia guy and like to take pictures of my surroundings. The Nexus falls short, but not by much. It has tricks though:

If you’re looking for extra tricks from your phone, the Galaxy Nexus might be what you’re looking for. Out of the three phones, the Nexus is the only device with Near Field Communication support, which allows you to make wireless payments (at a small, but growing list of retailers), as well as to beam contacts, websites, apps or maps to other NFC-enabled devices by just bringing the phones together and making them touch.

So the Nexus has a lot of potential as a phone. We now have information as to when these phones come out:

Anyway, without any further adieu, a Verizon Wireless screen capture has surfaced online and is showing the “tentative” launch date for the HTC Rezound as well as the Samsung Galaxy Nexus and the Droid HD (aka Droid RAZR). According to the image, all three of these handsets will be available on November 10th.

I expect these phones to be huge hits amongst the tech geeks of our generation, but I don't know how well it's going to do against the iPhone. The iPhone still is the most popular and "coolest" phone on the market. A lot of people own Androids, but I don't think the technological capabilities of the phone are tapped. It's hard for the general public to get excited about that.

That's not say these phones won't sell. Familiarity with the RAZR name will bring interest. The recommendations for the Galaxy Nexus will help that phone. They will still sell. I'm not sure they'll sell as well as the iPhone.

The Razr's Return

This ain't the flip phone that you had in high school. This is a new phone that has the thin and sleek qualities of the old phone:

Motorola Mobility unveiled Tuesday the Droid Razr, an 7.1-millimeter thin handset that Chief Executive Sanjay Jha said is the world's thinnest smartphone. The Droid Razr is powered by Google's Android operating system and runs on Verizon Wireless' 4G LTE network. It will be available in early November and cost $299.99 with a two-year contract.

It's a technological juggernaut:

The device has as much processing power as a typical PC, allowing for faster Web browsing and multitasking, or running simultaneous applications. It also has a 4.3-inch touchscreen and a splashguard, which Jha described as nanotechnology that protects against water damage.

The problem for the Razr is that the new Samsung phone is supposed to be introduced in a couple hours and it's supposed to be better than this phone. I'm not saying this phone isn't great, it is exactly that. The Samsung is supposedly even better as far as the features are concerned. This looks like a very intriguing gadget though.

Ron Paul: The Cut Man

Ron Paul might not be talked about as a potential candidate for President, but he definitely has an important role as far as the conversation goes. No politician pushes small government and individual liberty like Ron Paul. He was on the forefront of the Tea Party movement, an epiphany that has had GOP candidates trying to find ways to appeal to this new segment of their electorate. Today, Ron Paul has pledged to drop a bomb on spending with $1 trillion in spending cuts:

Republican presidential candidate Ron Paul on Monday unveiled a plan to cut $1 trillion from the federal budget within one year by eliminating a handful of federal departments, including the Energy and Education departments.

He's the only one to propose a balanced budget:

"Ron Paul's plan is the only one that seriously addresses the economic and budgetary problems our nation faces," Jesse Benton, Paul's campaign chairman and a co-author of the plan, said in a statement. "It's the only plan offered by a presidential candidate that actually balances the budget and begins to pay down the debt."

I don't expect any other candidate to propose as drastic a change in government spending. Unfortunately, I don't expect him to get the attention he should get for this, at least in pushing the conversation forward in regards to spending cuts. I have no doubt that Paul would encourage positive discussion to getting the country back on track as far as the budget is concerned:

"The other candidates have not offered this," Paul said of his plan. "I don't believe they think it's very serious. They think they can just tinker around the edges, but the American people are ready for some honest thinking and some honest reforms ...

"Everything that's not explicitly in the Constitution should be up for grabs, and we should be able to cut it," Paul said.

The gauntlet has been thrown down.

As far as the viability of this proposal, I don't believe that he could make such drastic cuts. However, the extent of his cuts should push others to give more stringent proposals to cut spending. One of my main concerns is that he won't get enough airtime to actually make an impact. Clearly though, no one else is taking cutting government spending as seriously as Ron Paul.

Herman Cain: Questionable Character?

I already examined the key message of Herman Cain's campaign with the 9-9-9 plan, finding it to be unsustainable, unreasonable, and unfair. Now, the Pizzaman has come under fire for what seems to be his first blunder:

Cain, at a campaign event in Tennessee on Saturday, defended the idea of building a barbed-wire fence along the border, "electrified, with a sign on the other side that says it can kill you."

While he may claim to have been joking, what makes the incident worse is this follow up comment:

The Republican candidate then dismissed criticism that he's being "insensitive," saying "what's insensitive is when they come to the United States across our border and kill our citizens."

That just comes across as generalizing and ignorant. Hispanics are unhappy with his remarks:

"Whether or not he made his comments in jest, Mr. Cain's words show a lack of understanding of the immigration issues our country is facing and a staggering lack of sensitivity. Surely, Mr. Cain understands the duty that candidates have to offer responsible policy proposals," he said in a statement. "Leave the comic routines to the professional comedians."

I don't know how many Latino voters Cain has alienated, but this is a significant slip up. Whether you're Latino or not, you're going to have questions about Cain's character and ability to have diplomatic relationships with the Latin countries.

It isn't just the Hispanics who are unhappy with Cain. African Americans are not fans, to say the least:

Largely located on the lower rungs of the American socioeconomic ladder, most black Americans appreciate sources of opportunity and power that Cain despises: unions, governmental support for the needy, a robust, government-supported full-employment policy, the public provision of health care. His worry, remarkably, is that America is too egalitarian. His signature policy -- the 9-9-9 tax reform proposal -- would institute a regressive consumption tax nationally and starve Social Security and Medicare. It would redistribute income upward. No wonder blacks overwhelmingly repudiate him and his tea party allies.

And he thinks he can win a third of the black vote. Doesn't this reek of ignorance? You can't just bank on anti-Obama sentiment. His policies and plans are going to be detrimental to that community. As a result, Cain seems out of touch.

If you dig into his past, there are more potential road bumps:

“The problem is not the responsible drinker,” Cain wrote in one letter to the editor.” It is the alcohol-abuser who gets behind the wheel of a car. In fact, according to the National Highway Traffic Safety Administration, two-thirds of all alcohol-related fatalities are caused by drivers with a BAC of 0.15 or higher.”

I'm sure there are plenty of families who have lost loved ones that would repudiate that statement.

Herman Cain has done a lot to emerge as a contender, but there are still many things that keep him from being a legitimate candidate for President. I think the number one thing is his electability and his complete alienation of certain segments of the voting public. This is an election that the GOP could easily win, especially with this struggling President. However, you can't take chances in being represented by a controversial candidate. To win this election, you need someone that will appeal to those that are frustrated with Obama. Herman Cain is not that guy.

Reenergizing America

Over the weekend, I described Rick Perry's jobs plan as unattainable. I still feel that that is the case. It will take a long time before the job numbers that he mentioned are actually realized, and he will be long out of office when that is the case. However, I do agree with Perry that the energy industry can create jobs:

We can create hundreds of thousands of jobs and increase our oil output by 25 percent if we fully develop oil and gas shale formations in the Northeast, mountain West and Southwest. I also support drilling in Alaska’s Arctic National Wildlife Refuge coastal plain (ANWR), offshore expansion in the Beaufort and Chukchi Seas, and development of the National Petroleum Reserve in Alaska, all of which would maintain the Trans-Alaska Pipeline System. This will create more than 185,000 U.S. jobs.

The numbers are ambitious, at least for the immediate future. In fact, some think the plan would take years to materialize jobs:

"It's not going to be overnight," said David Dismukes, associate executive director for the Center for Energy Studies at Louisiana State University. "These are big capital-oriented investments. People don't turn on a dime with these investments."

There's a lot of potential in energy though:

"I don't know any other industry that can bring this quantity of jobs to the market," she said. "We have the potential that's not being realized and it could be."

With the unemployment rate as high as it is, it makes sense to ease some of the restrictions in order to get some of these industries working. It's not just the drilling and mining that will create jobs, there's a trickle down effect:

With millions of Americans clamoring for employment opportunities, there is no excuse to delay. A study released last month by the Woods Mackenzie research firm found that 1.4 million jobs and $800 billion in new government revenue could be created over the next two decades by removing barriers to increased domestic oil and gas production. These are high-paying jobs, available now, and private industry—not the taxpayer—is making the investment.

The two main political talking points are jobs and balancing the budget. This would help both of those things. By enabling these projects, they can spur industry. It will help construction of plants and drilling sites. It will bring management, it will bring financial support. There's a lot of potential in spurring this industry.

Versus digging up and rebuilding perfectly fine roads, this is a much better solution. This actually creates new jobs that will last, rather than creating new work. This expands an industry that will not only provide jobs, but will also provide tax revenue from these new projects. It's really a no-brainer.

Rajaratnam Case: SEC Falls Short

Over the weekend, the cover headline of the Wall Street Journal read, "Trader Draws Record Sentence." If you hadn't heard, Raj Rajaratnam, the founder of the Galleon hedge fund, was charged with insider trading. The case has been going on for a couple years now and he finally was sentenced:

Raj Rajaratnam's remarkable journey from Sri Lanka to the heights of the hedge-fund world to felon ended Thursday when he was sentenced to 11 years in prison, the longest-ever term imposed in an insider-trading case.

Now, as far as the sentence, I don't think he'll come close to doing the entire sentence. We have seen it in the past. The bigger joke to me is the "fine:"

In a defining moment for the government's campaign to stamp out what it describes as rampant illegal trading on Wall Street, U.S. District Judge Richard Holwell in New York said during sentencing that the billionaire investor's crimes "reflect a virus in our business culture that needs to be eradicated." The judge also ordered Mr. Rajaratnam, who was convicted of securities fraud and conspiracy in May, to pay a $10 million fine and forfeit $53.8 million. The defense plans an appeal.

To a man that was once worth $1 billion, those are paltry sums. Now, who knows how much money this guy made the company through insider trading? If the rewards of insider trading are greater than the punishment, then why wouldn't more people insider trade? I don't know if it is as rampant as it once was, but it definitely happens. In cases like this, you have to set an example. When Michael Milken was arrested on securities fraud, he was fined $600 million, even that was small by comparison to the money he had made. The SEC had a golden opportunity to lay down the law, but they swung and missed.

There are bargains for and against insider trading, but the bottom line is that it is illegal now. If you want to discourage it in the future, you have to make examples of the people you charge. The SEC has fallen short in doing that.

Mitt Romney: About Faith

When it comes to the presidential election, faith always seems to play a large part in the race. Christianity is the name of the game and outsiders are viewed through a wary eye. We saw this happen last election when Barack Obama's faith was called into question. For Mitt Romney, it's something has had plague him his entire career and something he has been forced to downplay.

While many misguidedly govern by faith, the main appeal of faith seems to be a person's character. I don't think that's exclusive to Christianity. You can tell a lot about a person's character by their devotion to their faith.

This has come to a head because Rick Perry's camp has been on the offensive:

The Daily Beast has obtained a series of e-mails that show an influential evangelical activist with close ties to the Perry campaign stressing the political importance of “juxtaposing traditional Christianity to the false God of Mormonism,” and calling for a “clarion call to Evangelical pastors and pews” that will be “the key to the primary” for Perry.

This would represent a low point in politics, but like I said, it's nothing we haven't seen before. Obama's faith was questioned last election. Romney is actually a mormon and there are a lot of misconceptions of the religion. Fortunately, there are other people, like Joe Lieberman, who have spoken out for him:

Now we have two Mormon candidates running for president, and one of them, Romney, may well be the Republican nominee. Once again the promise of religious freedom enshrined in our Declaration of Independence and in our Constitution will be tested, along with our Founders' dream that America would be a shining city on a hill where religious freedom, diversity and tolerance thrive. And once again, a barrier may be broken.

My experience in 2000 gives me great confidence that the American people will again reject any sectarian religious tests for office and show their strong character, instinctive fairness and steadfast belief in our Constitution. That truly is the American way.

That doesn't sound like a ringing endorsement of the man himself, but it does provide a sentiment that we judge our president by his character and not by his religion. Regardless, it seems like the Mormon Church has helped define Romney as a person:

“He told me that, as human beings, our work isn’t measured by taking the sum of our good deeds and the sum of our bad deeds and seeing how things even out,” recalled Mr. Clark, now 37, sober and working as a filmmaker in Utah. “He said, ‘The only thing you need to think about is: Are you trying to improve, are you trying to do better? And if you are, then you’re a saint.’ ”

Romney has long been a prominent figure in the Mormon Church and the biggest in the Boston community for so long. As a result, he has shown a lot of leadership and responsibility, even having a large part in the building of a church. For better or worse, he's taken it on himself to be a member of his community and support others:

If Mr. Romney, who no longer holds an official church title, seems overly polished or wooden on the campaign trail, his defenders say that is just how he is, reserved yet caring. “He’s always been that way, that’s his demeanor,” Mrs. Oparowski said.

While there may be many questions about Romney's religion, I don't think there should be questions about Romney. I do believe the "Mormon issue" will be played out in the coming weeks, but I don't think it will be what defines the election, though it may define Romney's campaign. While at times the man seem distant, Romney does care, and I believe he want dearly to help this country get back on track. Otherwise, why would he run again?