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John Fund warns about the coming VAT war.
Expect the coming debate over an American VAT to be especially nasty. Soaring spending and deficits have prompted Democrats from House Speaker Nancy Pelosi to Obama economic adviser Paul Volcker to suggest creating a European-style Value Added Tax. President Obama himself recently declined in an interview to rule out a VAT despite his campaign pledge not to raise taxes on those making less than $200,000.
The debate is already becoming bitter. …
Mort Zuckerman points out the role congress had in the financial crisis explains mortgage-backed securities.
Corn and hogs in the Midwest seem a long way from condos in Florida. There is, in fact, a direct link and it’s one worth contemplating in light of the pursuit of Goldman Sachs by Congress and the Securities and Exchange Commission. //
Derivatives—the new bad word—used to be called “futures.” They’ve existed since the Civil War, invented basically to protect farmers, traders, and merchandisers from ruin when they could not sell a crop to cover their costs because a bumper harvest created a glut, or, conversely, to protect buyers when a bad harvest led to price inflation. Hence the creation of contracts with third parties who agreed to buy or sell at a certain price, whatever the future might bring. This stabilized the market and freed farmers from looking around for a buyer in what might be a frantic market. …
…But we also need to understand how the housing market got as hot as it did. Why did it keep rising, generating more and more derivatives geared to a rising market? It turns out that Fannie Mae, Freddie Mac, and the Federal Housing Administration had financed a lot more subprime and Alt-A (alternative documentation) loans than anyone realized, mostly as a result of congressional mandates. Indeed, of their total outstanding mortgage portfolios of $10.6 trillion, roughly half turned out to be of low quality. Had this been known, it would have been clear that the American public’s capacity to assume this amount of housing debt was at great risk.
That is at the heart of the now-famous Goldman-Paulson saga. Hedge fund manager John Paulson judged that the housing market was a bubble, so he shorted the securities through Goldman Sachs and an insurer called ACA, which sold the package to a German bank. The buyers judged that it was safe to count on housing prices continuing to rise. They chose which mortgage securities would be bundled by Goldman. And they have paid a heavy price for their judgment.
The American public has hereby had a peek into the bewildering complexities of the world of finance. The natural instinct is for the public to blame the housing decline on those who shorted. But it is the other way around. They should be blaming those who let the market get pumped up, inviting a dramatic and painful correction that took most people by surprise. …
Jennifer Rubin looks for information on one possible Supreme Court nominee.
Elena Kagan is the prohibitive favorite for the Supreme Court. She has made it through one confirmation hearing for her current post as solicitor general and possesses academic credentials, a reputation for collegiality with conservatives, and a limited paper trail. Moreover, she is the closest we have to a stealth candidate among the front-runners. As Tom Goldstein notes, “I don’t know anyone who has had a conversation with her in which she expressed a personal conviction on a question of constitutional law in the past decade.”
Casual observers assume that a dean of Harvard Law School and a domestic-policy aide in the Clinton administration must have a sizable body of work reflecting her legal views. But not so. Paul Campos has read all there is to read — and it’s not much:
“Yesterday, I read everything Elena Kagan has ever published. It didn’t take long: in the nearly 20 years since Kagan became a law professor, she’s published very little academic scholarship—three law review articles, along with a couple of shorter essays and two brief book reviews. …”
There are lots of interesting Shorts from National Review. Here are three:
Amnesty International was founded in 1961 to work for the freedom of political prisoners. Over the years, it has expanded its activities to oppose capital punishment, torture, and detention without trial. Recently, however, AI has latched onto Moazzam Begg, a hard-core Taliban jihadist who peddles cockamamie tales of being tortured at Guantanamo. That decision was too much for one AI officer, who protested the incongruity of embracing as a human-rights defender a man who committed violent acts of terror in support of an ideology that subjugates millions of women. In return, she was suspended. AI’s secretary general, Claudio Cordone, explained that “jihad in self defence” is not “antithetical to human rights,” and that in any case, Begg is innocent until proven guilty (a principle Cordone does not apply to the U.S. military). While AI’s condemnations have often been questionable, it was always scrupulous about playing no favorites among the regimes it called oppressive. Now the organization seems to feel that some human-rights violators are more equal than others.
Andy Stern is leaving his $306,388-a-year position fighting against the nation’s fat cats on behalf of the working stiffs at the Service Employees International Union, an organization that shook enough change out of its sofa cushions to throw down $60 million to put Barack Obama in the White House. Among the candidates vying to replace Stern are Change to Win president Anna Burger ($252,724/year) and SEIU executive Mary Kay Henry ($231,348 per annum). SEIU executive and Democratic Socialists of America leader Eliseo Medina ($242,286) is strangely absent from the running. Maybe he is weary of the endless self-sacrifice that being a modern labor leader entails.
Jaime Escalante was the ultimate hero teacher. At Garfield High School in East Los Angeles, he taught calculus to poor Mexican Americans and achieved astonishing results: Scores of his students, written off by other educators, passed Advanced Placement exams. They were so successful that test administrators wrongly accused them of cheating. The Bolivian-born Escalante became the subject of Stand and Deliver, an inspirational film starring Edward James Olmos. Hollywood did not make a sequel, which is unfortunate — because what happened next is instructive. Escalante clashed with education-blob bureaucrats who resented his success. The teachers’ union cracked its whip because Escalante had violated a contract rule that restricted classes to 35 students — a rule that Escalante did not want to break, except when it meant putting his students in classrooms with teachers he considered inadequate. The frustration eventually overwhelmed him. Escalante left Garfield, and the program he had spent years to build, and moved to Sacramento, where he tried to replicate his earlier success with mixed results. He generated further controversy for his outspoken opposition to bilingual education. Dead at 79. R.I.P.
In the WSJ, Timothy Aeppel reports on the inroads being made by plastic corks.
…Cork was first adapted to close bottles of sparkling wine by a French Benedictine monk named Dom Perignon in the late 1600s. For the next four centuries, cork was considered the ultimate wine stopper: Its cellular structure makes it easy to compress into the neck of a bottle, where it expands to form a tight seal. Wine also benefits from “breathing,” which is facilitated by cork’s cell structure. An air-tight seal on a wine bottle can cause another set of problems and is one factor that limited the use of plastics and screw caps in the past. …
…Although it was long known that cork could sometimes ruin the taste of wine, the problem wasn’t well understood until the early 1980s. Then, chemists finally pinpointed the main cause of cork taint: The powerful chemical 2-4-6 Trichloroanisole or TCA. It can get into wine through contaminated cork, tainted barrels or pallets and render bottles undrinkable.
By the 1990s, retailers and wineries were clamoring for a solution to wine taint but the cork industry didn’t respond. “No industry with 95% to 97% market share is going to see its propensity to listen increase—and that’s what happened to us,” says Mr. de Jesus from Amorim. …