Last week, a friend, outraged by S&P’s downgrade of US debt, demanded “who are these guys -- 5 guys sitting around a table somewhere?” I set out to answer his question. Here's what I've learned about how “these guys” make their judgments and their money, and whether I am comfortable with their ratings of US debt.
Who are these guys?
S& P is one of ten NRSROs, Nationally Recognized Statistical Rating Organizations, credit rating agencies which the SEC permits financial firms to use to qualify their net capital reserve requirements, i.e., the amount of readily available cash they have to keep on hand to pay depositors withdrawals. The question is how safe and how liquid the reserves are. Degree of safety is reflected in their credit ratings, as determined by a rating agency that, in turn, must be accredited by the SEC.
As you know, the three majors are S&P, Moody’s and Fitch.
Standard and Poors has been a division of McGraw Hill since 1966. Roughly 5,000 people in offices in 23 countries. They racked up sales last year of $1,695 million, and operating profits were $762 million, or 45%! They make up 27% of McG-H’s sales but 48% of its profits. Their roots go back 150 years to Poor’s review of railroad and canal companies, published in 1860.
Fitch is the smallest of the three. It is a subsidiary of a London rating agency which in turn is owned by a French holding company, so data on Fitch are harder to come by. Though smaller, Fitch frequently positions itself as the "tie-breaker" when the other two agencies have dissimilar ratings.
S&P gets the headlines (and is getting even more for their role in the financial crises of 2008), but the biggest of the three is Moody’s. And it is the only independent; Moody’s Corp. is traded on the NYSE. They generated $2.032 billion in revenues last year and produced an operating margin of 41%. John Moody, 1909, invented the rating scale Aaa to C, and now all three use a variation of that scale. Last year Moody’s Rated debts of 12,000 corporations, 25,000 public issuers, and 106,000 structured financial obligations.
This is a profitable business. S&P: 45% operating profit; Moody’s: 41%. By comparison, Boeing’s operating profit margin was 22% last year. And these agencies have relatively little capital invested – office leases and computers -- compared to the capital assets Boeing needs to generate that 22%. Little wonder that Warren Buffet owns 12% of Moody’s and Hedge funds own another 36%.
Where does the money come from and what do they do to earn it?
The bulk of their revenues come from the issuers of the bonds being rated. (But the US Treasury does not pay for ratings.) In the case of corporations and municipalities, this raises conflict of interest potential since the bond issuer has an incentive to hire the agency most likely to give it a good rating. The agencies argue that in this age of easy sharing data via emails and texting, a subscription-based model would not be profitable. Further, a rating agency often learns non-public information and, under an SEC rule, such information may only be used if ratings are made available to the public for free. So issuers pay, like it or not.
What do the ratings mean? What is the difference between a Triple A and a Double AA?
AAA: Obligations judged to be of the highest quality, with minimal credit risk.
AA: Obligations judged to be of high quality and subject to very low credit risk. And so on down the line.
Then, to further slice the cake, Moody’s adds numerical modifiers 1, 2, and 3 to each rating classification. AA 1 indicates that the obligation ranks in the higher end of its group of AAs; a 2 indicates a mid-range ranking; and a 3 indicates a ranking in the lower end of the AAs. S&P uses a plus, as in AA+; a neutral, AA; and a minus, AA-, rather than numbers.
In all, there are 21 rating categories, with angel-on-head-of-pin distinctions between them.
Note how indefinite are the words: indicates, very low, higher end, minimal, highest – all quotes from Moody’s materials.
How do they determine a rating?
They have armies of analysts, industry and country experts who basically follow a three step process. Here's Moody’s description of how they rate sovereign debt:
“Step 1: Country economic resiliency
The first step consists in determining the shock-absorption capacity of the country, based on the combination of two key factors:
Factor 1: the country’s economic strength, in particular the GDP per capita -- the single best indicator of economic robustness ....
Factor 2: the institutional strength of the country, the key question being whether or not the quality of a country’s framework and governance – such as respect of property rights, transparency, the efficiency and predictability of government action, the degree of consensus on the key goals of political action – is conducive to respect for contractual obligations.
“Combining these two indicators helps determine the degree of resiliency, and positions the country in the rating scale: very high, high, moderate, low or very low.
“Step 2: Government financial robustness The second step focuses directly on debt itself, a combination of
Factor 3: the financial strength of the government. The question is to determine what must be repaid ... and the ability of the government to mobilize resources: raise taxes, cut spending, sell assets, ...
And factor 4: the susceptibility to adverse economic, financial or political events....
“Step 3: Determining the rating
The third stage consists in adjusting the degree of resiliency to the degree of financial robustness. This results in the identification of a rating range.
“The determination of the exact rating is done on the basis of a peer comparison, in other words, relative to whom, and weighting additional factors that may not have been adequately captured earlier.”
(Does this not begin to sound rather fuzzy?)
The findings and recommendations then go to a rating committee. In Fitch’s case, it is 13 senior executives chaired by Stephen Joynt, Chief Executive Officer. So, not five guys sitting around the table, but 13.
Well, what do I conclude?
About ratings: They are imprecise judgments. In the words of Stephen Joynt CEO of Fitch,”Simply put, ratings are a credit opinion.”
And note that ratings are relative, not absolute. While they don’t say it in so many words, their “peer review” logic leads to this conclusion: if all nations were shaky and at risk, the least shaky bond of the bunch, no matter how risky, would still be rated AAA.
About their ratings of US debt: As you know, Fitch and Moody’s have reaffirmed their AAA rating on US Debt, S&P has downgraded to AA+. I’d bore the hell out of you, if I haven’t already, to go into all the detail of their judgments. Just let me say that if you’re a long-range optimist, Fitch and Moody are right. But if you’re a pessimist about the medium term, S&P also is right. And I agree, both mid-term and long-term. In the mid-term, until January of 2013, we will have a Washington mess on our hands and that does increase the risk of a stupid – read tea party highjacking of the GOP – default because of Congress’ inability to reach a balanced compromise.
About the rating industry: If you intend to issue debt and want to have insurance companies, pension funds, and banks buy your notes and bonds, you have to use, i.e., to pay, a rating service; the few services available to you are a government-sanctioned and protected oligopoly; like all oligopolies, they have pricing power to set rates without having to break any laws about price-fixing.
So, they make huge profits on minimal investment.
In other words, the rating agency business is one sweet racket.
Friday, August 19, 2011
Tuesday, August 9, 2011
Oh, Hillary, How I Wish...
…you were President.
That thought’s been haunting me all night and today – after the deal which isn’t a deal; the downgrade (deserved despite its irresponsible source); Drew Westen’s must-read article in the Sunday NYT, “What Happened to Obama?”*; the market gyrations and gold bugs’ delight; and, last night at the Seattle Chamber Festival, sitting through the agonized anger and sweet grief of Elgar’s Quintet for Piano and Strings in A Minor.
At the 2008 Democratic caucuses, Ann was the Obama delegate; I was for Clinton, but later came round to Obama. Would Hillary have proved tougher, more directive, more capable of striking a true deal, more willing to face down Petraeus, and more able to sell the public? I don’t know of course -- but just think, with Bill whispering in her ear and if she channeled the Hillary of the 1995 Beijing Woman’s Conference or the 1998 Davos Conference, wouldn’t that be better? With Biden at State? Gates at Defense. Obama learning how the Senate really works under his mentor (soon to be?) Majority Leader Dick Durbin? Would we have surged Afghanistan? Or be flirting with staying in Iraq?
Sure, the Obama haters hate her, too. But if she could win over no-nonsense New Yorkers as the carpetbagger, wouldn’t she likely win over the rest of us reasonable skeptics? Surely.
Oh, how I wish….
(Here’s a link to that must-read Westen article: http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html?scp=1&sq=what%20Happened%20to%20Obama?&st=cse.)
Sunday, July 24, 2011
Public Policy Becomes Personal
I haven't blogged since late May because, as many of you know, I suffered sudden, life-threatening diverticular bleeding in Moab, Utah, at the start of what was to be two-plus weeks of visits to and hikes in the national parks and monuments of southern Utah, Death Valley, Yosemite, and the Northern California/Oregon coast. I was lucky -- doubly lucky. First, it happened in town as we finished a nice, late dinner. Had it been 15 hours later, I would have been out on the back-country trails of Arches or Canyonlands, and who knows how quickly I might have gotten aid. As it was, we were 5 minutes from the Moab Hosp
ital ER. Second lucky? They airlifted me out to Grand Junction, CO. Grand Junction?!? What the hell is there? Just St. Mary's Regional Medical Center, top ranked in the Dartmouth Health Atlas study of 2008, a simply superb center of caring, exacting professionals supported by terrific staff. We all should be so lucky as to fall into the hands of such people when in need.
What did they do? Medivac'd, stabilized, transfused (10 times!), tested and probed, found the leak, removed 3/4ths of my colon, put me back together, watched over me and finally allowed me to fly home. What did that cost, to restore me to health? $145,000. And I seem to be restored, save for the oddities of my new plumbing; I finally got back into the boats last Friday and felt great after 1hr, 40mins of sculling.
How does one rack up $145,000? (And the bills are still trickling in.)
ER Moab - $ 1,353
Medivac flight to Grand Junction - $18,801
ER Grand Junction - $3,870
Medical, Surgical, ICU Rooms and Board - $24,537
Pharmacy - $3,501
Supplies - $2,014
Lab and pathology - $4,030
Radiology - $19,513
Nuclear Medicine - $2,202
Surgical - $43,611
Blood Bank - $7,155
Attending physicians - $1,951
Gastroenterologists - $3,225
Radiologists - $1,006
Anesthesiologist - $4,485
Surgeons - $4,382
Through Ann's employer, we are among the 85% of Americans that are insured -- first tier, United Health Care; second tier, Medicare. But what if I had been only on Medicare? Would the hospital, the physicians and the specialists have lavished such care on me? And what if I were in that benighted, uninsured 15%? I don't know the answers; I'd like to think the Sisters of Charity would treat all equally -- the privately insured, those on medicare or medicaid, the uninsured. But would a for-profit hospital?
I'm fairly fit for an old fart. In part, again, because we are insured. We take full advantage of check-ups and preventative medicine; we don't let little ills grow into crises. What are the odds that my uninsured 76 year old doppelganger has taken such care of himself?
What is a fit 76 year-old worth? $145,000? $250,000? $750,000? Others in the ICU were two obese patients, 300-plus pounds , one a smoker to boot, and a very audibly ill 90 year old woman more fit for hospice it sounded like than hospital. Did those three receive the same batteries of tests, transfusions, probes? Or did I get special attention? (I overheard one staffer saying to another, "...oh, he's an executive of some sort.") Again, I don't know.
What should society ask of its health care givers? Is the Hippocratic Oath absolute or relative to physical condition, financial condition, age, odds or role in society? How do "they" -- the ER staff, physicians, specialists, administrators, those on the front line -- how do they make those calls?
In retrospect, I was three times lucky -- the right time, the right place and insured. But now those public policy abstractions of health care reform -- single payer, universal coverage, medicare cuts, advisory councils, all that stuff -- have suddenly become quite personal since that balmy spring evening in Moab.
ital ER. Second lucky? They airlifted me out to Grand Junction, CO. Grand Junction?!? What the hell is there? Just St. Mary's Regional Medical Center, top ranked in the Dartmouth Health Atlas study of 2008, a simply superb center of caring, exacting professionals supported by terrific staff. We all should be so lucky as to fall into the hands of such people when in need.What did they do? Medivac'd, stabilized, transfused (10 times!), tested and probed, found the leak, removed 3/4ths of my colon, put me back together, watched over me and finally allowed me to fly home. What did that cost, to restore me to health? $145,000. And I seem to be restored, save for the oddities of my new plumbing; I finally got back into the boats last Friday and felt great after 1hr, 40mins of sculling.
How does one rack up $145,000? (And the bills are still trickling in.)
ER Moab - $ 1,353
Medivac flight to Grand Junction - $18,801
ER Grand Junction - $3,870
Medical, Surgical, ICU Rooms and Board - $24,537
Pharmacy - $3,501
Supplies - $2,014
Lab and pathology - $4,030
Radiology - $19,513
Nuclear Medicine - $2,202
Surgical - $43,611
Blood Bank - $7,155
Attending physicians - $1,951
Gastroenterologists - $3,225
Radiologists - $1,006
Anesthesiologist - $4,485
Surgeons - $4,382
Through Ann's employer, we are among the 85% of Americans that are insured -- first tier, United Health Care; second tier, Medicare. But what if I had been only on Medicare? Would the hospital, the physicians and the specialists have lavished such care on me? And what if I were in that benighted, uninsured 15%? I don't know the answers; I'd like to think the Sisters of Charity would treat all equally -- the privately insured, those on medicare or medicaid, the uninsured. But would a for-profit hospital?
I'm fairly fit for an old fart. In part, again, because we are insured. We take full advantage of check-ups and preventative medicine; we don't let little ills grow into crises. What are the odds that my uninsured 76 year old doppelganger has taken such care of himself?
What is a fit 76 year-old worth? $145,000? $250,000? $750,000? Others in the ICU were two obese patients, 300-plus pounds , one a smoker to boot, and a very audibly ill 90 year old woman more fit for hospice it sounded like than hospital. Did those three receive the same batteries of tests, transfusions, probes? Or did I get special attention? (I overheard one staffer saying to another, "...oh, he's an executive of some sort.") Again, I don't know.
What should society ask of its health care givers? Is the Hippocratic Oath absolute or relative to physical condition, financial condition, age, odds or role in society? How do "they" -- the ER staff, physicians, specialists, administrators, those on the front line -- how do they make those calls?
In retrospect, I was three times lucky -- the right time, the right place and insured. But now those public policy abstractions of health care reform -- single payer, universal coverage, medicare cuts, advisory councils, all that stuff -- have suddenly become quite personal since that balmy spring evening in Moab.
Friday, May 20, 2011
Grading Our Democracy
The other night at the New Orleans Cafe in Pioneer Square, my friend Jerry Carlson asked me -- out of the blue -- "what grade would you give our democracy?" Non-plussed and stalling for time, I protested that we shouldn't and couldn't talk over the wonderful music of Clarence Acox's Legacy Quartet. But the question fermented, and the more I've thought, the more disillusioned I've become, having started out at a C+ and steadily worked down to a solid D. I'd have given us a C+ in 1960, a B- in 1950, a B+ in 1935, an A- on August 18th, 1920.
First, what would constitute an “A” democracy?
- A balance between individual citizens and institutions – unions, corporations, churches, universities, hospitals, and professional organizations;
- legislators (local, state and federal) who represent their constituents --all their constituents -- not just those who voted for them and not just donors to their campaigns;
- legislators who balance civic good with partisan interests;
- equality of responsibility and accountability between legislative, executive and judicial branches of government;
- an elastic constitution that establishes a respected rule of law and an even playing field for all;
- external policies that do not seek to impose its norms and beliefs on others;
- and citizens that are educated and energized to seek civic as well as personal well-being.
So how are we doing?
- Our youngest generation of voters are less well educated than their elders, and the generation to come even more poorly so.
- We have become more interested in “me” than in “us”, a result of cultural and economic pressures.
- Through states of constant crisis (depression, WWII, cold war, Korea, Viet Nam, civil rights turmoil, Latin American instabilities, oil crises, Iranian hostage taking, runaway inflation, Desert Storm, 9/11, the bogus "war on terror", Afghanistan, Iraq, and Afghanistan again) power and policy initiatives have become centralized in the executive branch. Madison said (1795) “No nation can preserve its freedom in the midst of continual warfare."
- Congress has abdicated its responsibility and sunk into ideological bickering.
- The courts have strengthened the power of institutions vis-à-vis individuals.
- Legislators, especially in Congress, more often than not put donors ahead of constituents, and more often than not those donors are neither voters nor residents in the representative’s district or state.
- Our constitution has not yet dealt with concentrations of wealth and power in institutions; corporations, in particular, were not a factor in the thinking of our founders.
I hadn't realized that I saw through such negative prisms. But I am not pessimistic. We muddle through. The American dream still unifies us. We will awaken to these realities, agree they are unacceptable, and determine to reform, reallocate our resources, and earn higher grades once again. I only hope to see it and play my small part in what time I have left.
Saturday, May 7, 2011
What Would Jesus Cut?
A church in my neighborhood on the Island posted that question on its message board last week: What would Jesus cut?
You’ve seen the like before: bumper stickers “what would Jesus say?” or “what would Jesus bomb?” A homemade billboard on some country road: “Jesus is coming and he is pissed!”
But the question nagged at me. With the budget battle heating up between Rep. Ryan’s and Pres. Obama’s quite opposing budget visions, between John Boehner’s bobble-heads and Senator Reids rummies; and since they all agree that we need to make cuts ... and since Ryan and Obama, Boehner and Reid oft proclaim their rock-solid Christianity ...it seems to me that the church’s question merits serious consideration, some reflection, and in my case (since I am not a practicing Christian)some research.
Well, here is what I found in reviewing several collections of Christ’s statements, sermons, and parables:
Put up again thy sword into its place (Mth 26)…. Blessed are the peacemakers: for they shall be called the children of God. (Mth 5.)
This and His many statements throughout the four Gospels and Book of Acts … loving one’s enemies, turning the other cheek and so on … suggest strongly to me that considering his values, and its size, the Defense Dept. would be the center of His budget-cutting bull’s eye. No way would Defense be "off the table."
Hand-in-hand with the growth of our War Dept. plus the cost of our dual wars since 9/11 has been an explosive growth in intelligence services and security contracts. The Washington post documented that no one knows how much we are spending on this Gargantua of secrecy and security. His view?
For there is nothing covered that shall not be revealed: nor hidden that shall not be known. For whatsoever things you have spoken in darkness shall be published in the light: and that which you have spoken in the ear in the chambers shall be preached on the housetops. (Lk 12)
Christ would dismantle much of the security apparatus as waste and reap major savings in the process. And He’d cheer on Wikkileaks.
What of Education, the Department which tea-party types love to hate? Jesus, even as a child, was drawn to the rabbis.
But he that shall do and teach, he shall be called great in the kingdom of heaven (Mth 5)… Suffer the little children to come unto me (Lk 18)…. Go therefore, teach ye. (Mth 28) …We adore that which we know. (Jhn 4)
No, He would not cut education. If anything, He’d reinvest some of His Defense and Security savings into Education.
That hot button, Healthcare?
I will come and heal him… (Mth 8; really, we need Him to come and heal the politicians.) They that are in health need not a physician, but they that are ill…. (Lk 2, Mth 5) Heal the sick, raise the dead, cleanse the lepers…. (Mth 10) And heal the sick. (Lk 9)
Now, I can’t tell from this that He would or would not favor federally mandated health insurance nor what his attitude might be about death panels. I daresay, the healthcare conundrum might perplex even Jesus.
But … it doesn’t seem likely that he would welcome waste nor deny anyone needing health care.
One part of the health cost puzzle might become clear: malpractice awards:
Woe to you, lawyers…. You yourselves have not entered in: and those that were entering in, you have hindered. Woe to you lawyers, also, because you load men with burdens which they cannot bear. (Lk 11)
Ouch!
The US is becoming an agricultural export economy. What of agricultural subsidies?
No man putting his hand to the plough and looking back is fit for the kingdom of God. (Lk 9)
I take this to mean looking back over his shoulder for a hand-out; He’d cut subsidies.
But how do we bring in the crops? Where might He stand on immigration and the burgeoning budget of the Immigration and Naturalization Service?
The harvest indeed is great, but the labourers are few. (Mth 9) It is one man that soweth, and it is another that reapeth. (Jhn 4) Pray ye therefore the Lord of the harvest that he send labourers into his harvest, that both he that soweth and he that reapeth may rejoice together. (Lk 10, Jhn 4)
Foreign Aid?: Oh my, His views here are crystal clear: aid even to those who resent us.
Go sell what thou hast, and give to the poor. (Mk 10) But I say to you, Love your enemies: do good to them that hate you. (Mth 5, Lk 6)
Now, when it comes to wealth, His views are a bit confusing. On the one hand…
Lay not up to yourselves treasures on earth….(Mth 6) Do not possess gold, nor silver, nor money in your purse….(Mth 10) A rich man shall hardly enter into the kingdom. (Mth 19)
But on the other hand, Jesus clearly wanted capital to be put to work. He relates in Mathew (25) and Luke (19) a long parable of the master who blessed and richly rewarded the servants who doubled the talents he left in their care and punished the servant who did not invest wisely on the master’s behalf. He applauds capital gains.
Yet He wants those gains to be used for others. How? Individually, of course, through charity, and, in the case of foreign aid or health care systems, through our communal government.
Render therefore unto Caesar the things that are Caesar's. (Lk 20, Mk 12)
Inheritance tax?:
a man's life doth not consist in the abundance of things which he possesseth. (Lk 12)
I can only surmise that he would not remove the charitable deduction, nor cut inheritance taxes, nor capital gains taxes, nor eschew a tax on the wealthy … if … if he could re-invest those taxes in education, health care, foreign aid...
And in debt-reduction. He would seek to pay down the debt.
Amen I say to thee, thou shalt not go out from thence till thou repay the last farthing. (Mth 5)
Well, to be sure, the Bible is a book of ambiguities. No doubt Michele Bachman or Mike Huckabee would find Old Testament quotes to lead them to quite different conclusions than these. But if one scans over Jesus’ own words, if one reflects on the New Testament of His life, it’s hard not to come to the conclusions I have drawn.
I hope Obama, Ryan, Boehner and Reid really mean it when they profess to honor the values and lessons of this great teacher. I hope they ask themselves
What Would Jesus Cut?
You’ve seen the like before: bumper stickers “what would Jesus say?” or “what would Jesus bomb?” A homemade billboard on some country road: “Jesus is coming and he is pissed!”
But the question nagged at me. With the budget battle heating up between Rep. Ryan’s and Pres. Obama’s quite opposing budget visions, between John Boehner’s bobble-heads and Senator Reids rummies; and since they all agree that we need to make cuts ... and since Ryan and Obama, Boehner and Reid oft proclaim their rock-solid Christianity ...it seems to me that the church’s question merits serious consideration, some reflection, and in my case (since I am not a practicing Christian)some research.
Well, here is what I found in reviewing several collections of Christ’s statements, sermons, and parables:
Put up again thy sword into its place (Mth 26)…. Blessed are the peacemakers: for they shall be called the children of God. (Mth 5.)
This and His many statements throughout the four Gospels and Book of Acts … loving one’s enemies, turning the other cheek and so on … suggest strongly to me that considering his values, and its size, the Defense Dept. would be the center of His budget-cutting bull’s eye. No way would Defense be "off the table."
Hand-in-hand with the growth of our War Dept. plus the cost of our dual wars since 9/11 has been an explosive growth in intelligence services and security contracts. The Washington post documented that no one knows how much we are spending on this Gargantua of secrecy and security. His view?
For there is nothing covered that shall not be revealed: nor hidden that shall not be known. For whatsoever things you have spoken in darkness shall be published in the light: and that which you have spoken in the ear in the chambers shall be preached on the housetops. (Lk 12)
Christ would dismantle much of the security apparatus as waste and reap major savings in the process. And He’d cheer on Wikkileaks.
What of Education, the Department which tea-party types love to hate? Jesus, even as a child, was drawn to the rabbis.
But he that shall do and teach, he shall be called great in the kingdom of heaven (Mth 5)… Suffer the little children to come unto me (Lk 18)…. Go therefore, teach ye. (Mth 28) …We adore that which we know. (Jhn 4)
No, He would not cut education. If anything, He’d reinvest some of His Defense and Security savings into Education.
That hot button, Healthcare?
I will come and heal him… (Mth 8; really, we need Him to come and heal the politicians.) They that are in health need not a physician, but they that are ill…. (Lk 2, Mth 5) Heal the sick, raise the dead, cleanse the lepers…. (Mth 10) And heal the sick. (Lk 9)
Now, I can’t tell from this that He would or would not favor federally mandated health insurance nor what his attitude might be about death panels. I daresay, the healthcare conundrum might perplex even Jesus.
But … it doesn’t seem likely that he would welcome waste nor deny anyone needing health care.
One part of the health cost puzzle might become clear: malpractice awards:
Woe to you, lawyers…. You yourselves have not entered in: and those that were entering in, you have hindered. Woe to you lawyers, also, because you load men with burdens which they cannot bear. (Lk 11)
Ouch!
The US is becoming an agricultural export economy. What of agricultural subsidies?
No man putting his hand to the plough and looking back is fit for the kingdom of God. (Lk 9)
I take this to mean looking back over his shoulder for a hand-out; He’d cut subsidies.
But how do we bring in the crops? Where might He stand on immigration and the burgeoning budget of the Immigration and Naturalization Service?
The harvest indeed is great, but the labourers are few. (Mth 9) It is one man that soweth, and it is another that reapeth. (Jhn 4) Pray ye therefore the Lord of the harvest that he send labourers into his harvest, that both he that soweth and he that reapeth may rejoice together. (Lk 10, Jhn 4)
Foreign Aid?: Oh my, His views here are crystal clear: aid even to those who resent us.
Go sell what thou hast, and give to the poor. (Mk 10) But I say to you, Love your enemies: do good to them that hate you. (Mth 5, Lk 6)
Now, when it comes to wealth, His views are a bit confusing. On the one hand…
Lay not up to yourselves treasures on earth….(Mth 6) Do not possess gold, nor silver, nor money in your purse….(Mth 10) A rich man shall hardly enter into the kingdom. (Mth 19)
But on the other hand, Jesus clearly wanted capital to be put to work. He relates in Mathew (25) and Luke (19) a long parable of the master who blessed and richly rewarded the servants who doubled the talents he left in their care and punished the servant who did not invest wisely on the master’s behalf. He applauds capital gains.
Yet He wants those gains to be used for others. How? Individually, of course, through charity, and, in the case of foreign aid or health care systems, through our communal government.
Render therefore unto Caesar the things that are Caesar's. (Lk 20, Mk 12)
Inheritance tax?:
a man's life doth not consist in the abundance of things which he possesseth. (Lk 12)
I can only surmise that he would not remove the charitable deduction, nor cut inheritance taxes, nor capital gains taxes, nor eschew a tax on the wealthy … if … if he could re-invest those taxes in education, health care, foreign aid...
And in debt-reduction. He would seek to pay down the debt.
Amen I say to thee, thou shalt not go out from thence till thou repay the last farthing. (Mth 5)
Well, to be sure, the Bible is a book of ambiguities. No doubt Michele Bachman or Mike Huckabee would find Old Testament quotes to lead them to quite different conclusions than these. But if one scans over Jesus’ own words, if one reflects on the New Testament of His life, it’s hard not to come to the conclusions I have drawn.
I hope Obama, Ryan, Boehner and Reid really mean it when they profess to honor the values and lessons of this great teacher. I hope they ask themselves
What Would Jesus Cut?
Friday, April 22, 2011
Reforming Congress -- but not like this
Some of you may have received, as I recently did, a chain e-mail letter addressing the need for reform of Congress. I have not passed it on, as requested, for it is ripe with bad ideas. Suffer me to comment on it point by point.
Congressional Reform Act of 2011
1. Term Limits: 12 years only, one of the possible options below.
A. Two Six-year Senate terms
B. Six Two-year House terms
C. One Six-year Senate term and three Two-Year House terms
I don’t agree with Congressional term limits. True, there are several living fossils that I would love to see retired (as well as some obnoxious new-bies) but it is up to their constituents to do the retiring, not you or me. Term limits impose arbitrary constraints and also imply that a representative or senator is expected to serve x years. There is no reason why their constituents should not retain them so long as they are contributing and effective; no reason not to turn them out immediately if not.
2. No Tenure / No Pension: A Congressman collects a salary while in office and receives no pay when they are out of office.
This is harsh. People of talent in industry get some sort of retirement program. If we want good people in government, and most of them are bright, well intentioned, and could be working elsewhere, we ought to provide them a competitive income and a retirement program of some sort.
Currently, Senators and representatives earn $174,000/yr. The Speaker gets an additional $49,000; majority and minority leaders, an added $19,000. Not lavish by industrial and, certainly not, by financial standards. I was earning more than that 20 years ago, and I am not as capable as many of our representatives and senators.
3. Congress (past, present & future) participates in Social Security: All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people.
There is a lot of false mythology out there about retirement benefits and Social Security. For example, I believed, before researching this, that a Representative would receive a life pension of 100% of salary if only having served one two-year term. Wholly false, it turns out; an urban myth.
Since 1985, all members of congress regardless of when elected participate in Social Security, just as do all wage and salaried Americans. In addition, they have a contributory retirement system as do all Federal workers. Members of Congress are not eligible for a pension until they reach the age of 50, but only if they've completed 20 years of service. Members are eligible at any age after completing 25 years of service or after they reach the age of 62. Please also note that Members of Congress have to serve at least 5 years to qualify for any pension. The amount of a Member's pension depends on the years of service and the average of the highest 3 years of his or her salary. By law, the starting amount of a Member's retirement annuity may not exceed 80% of his or her final salary.
4. Congress can purchase their own retirement plan, just as all Americans do.
Well, of course, not all Americans purchase their own retirement plan. The ignorant assumptions underlying this statement defy response. Congress members can participate in IRA’s just as can you and I, if they choose.
5. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.
The 27th amendment of the Constitution mandates that Congressional pay raises go into effect after the end of their term. I understand the angst about self-rewarded pay raises, but dislike arbitrary ceilings or automatic raises.
6. Congress loses their current health care system and participates in the same health care system as the American people.
Good notion. But which one is that exactly? No question, there should be equity on this hot topic, and members of Congress should be in the same boat as most of us.
7. Congress must equally abide by all laws they impose on the American people.
What is this? Last I knew, the law applies to all. I don’t know from what laws they are exempt. This idea is driven either by an assumption or by some exemption of which I am unaware. Reader: educate me in comments below, please.
8. All contracts with past and present Congressmen are void effective 1/1/11: The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.
This “Reform Act” is an near-hysterical pitch based upon faulty premises. It ignores the complexity and challenge of legislating for 320 millions rather than the 4 million of 1790, for 50 states rather than the then 14, for an area that spans six time zones rather than the one that then extended only to the Ohio and Mississippi rivers. And the demands become more complex and confusing each year as the rest of the world’s 6 billions press upon us. Does not “go back to work” imply a deep disdain for what we ask them to deal with?
This “Reform Act” proposal focuses on the Members rather than on the system in which we have entrapped them. It is the system that needs to be reformed so that they can do "the work of the people” (an obnoxious phrase, coined by Clinton or “W” I think; it grates on me as arrogant and self-righteous.) But we do need reforms so that they can focus; have time to think, read and reflect; and work on national needs and concerns. The tar-babies that we and they can’t let go of: campaign costs and two-year terms.
Money: we must reform, constitutionally, the reliance on private and donated funds for waging a campaign. Santa Clara County v. The Santa Fe Railroad Company (1886) and Buckley v. Vallejo (1976), together have given corporations the rights of individuals to free speech and made money the equivalent of speech. This has turned congress into a sandbox in which corporations and associations can play to their hearts content. They ”play” through paid lobbyists and by writing checks. Members of Congress, especially representatives, have to dance to the tune of big money every day of their short terms if they are to be re-elected, which they want to be in order to achieve whatever drove them into public service in the first place.
Terms: not limits, but revision. The founders’ congressional terms were four months the first year and three months the second. Even as late as 1933, Roosevelt’s famous “first hundred days” were the product of a Congress that was in session for only 100 days. In these complex times, we need to give representatives at least three years, if not four, in which to learn their jobs and make a mark. Perhaps we should consider raising the President’s term to five years, if it takes more than one session of the House to get his or her ideas enacted.
The reforms we need should be aimed at facilitating good governance, not at punishing able people who (God knows why) are attracted to working in Congress to improve our society through law. Studies of representatives and senators show they are bright and well intentioned. Sure, they have huge egos (535 high school class presidents all talking in one building – OMG!) but nobody seeks that role for a mere $174,000 and all the grief and abuse they and their families can stomach. They really believe they can serve the country and its public.
Our challenge is to get the best out of them; this proposed “Reform Act” is not the way.
Congressional Reform Act of 2011
1. Term Limits: 12 years only, one of the possible options below.
A. Two Six-year Senate terms
B. Six Two-year House terms
C. One Six-year Senate term and three Two-Year House terms
I don’t agree with Congressional term limits. True, there are several living fossils that I would love to see retired (as well as some obnoxious new-bies) but it is up to their constituents to do the retiring, not you or me. Term limits impose arbitrary constraints and also imply that a representative or senator is expected to serve x years. There is no reason why their constituents should not retain them so long as they are contributing and effective; no reason not to turn them out immediately if not.
2. No Tenure / No Pension: A Congressman collects a salary while in office and receives no pay when they are out of office.
This is harsh. People of talent in industry get some sort of retirement program. If we want good people in government, and most of them are bright, well intentioned, and could be working elsewhere, we ought to provide them a competitive income and a retirement program of some sort.
Currently, Senators and representatives earn $174,000/yr. The Speaker gets an additional $49,000; majority and minority leaders, an added $19,000. Not lavish by industrial and, certainly not, by financial standards. I was earning more than that 20 years ago, and I am not as capable as many of our representatives and senators.
3. Congress (past, present & future) participates in Social Security: All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people.
There is a lot of false mythology out there about retirement benefits and Social Security. For example, I believed, before researching this, that a Representative would receive a life pension of 100% of salary if only having served one two-year term. Wholly false, it turns out; an urban myth.
Since 1985, all members of congress regardless of when elected participate in Social Security, just as do all wage and salaried Americans. In addition, they have a contributory retirement system as do all Federal workers. Members of Congress are not eligible for a pension until they reach the age of 50, but only if they've completed 20 years of service. Members are eligible at any age after completing 25 years of service or after they reach the age of 62. Please also note that Members of Congress have to serve at least 5 years to qualify for any pension. The amount of a Member's pension depends on the years of service and the average of the highest 3 years of his or her salary. By law, the starting amount of a Member's retirement annuity may not exceed 80% of his or her final salary.
4. Congress can purchase their own retirement plan, just as all Americans do.
Well, of course, not all Americans purchase their own retirement plan. The ignorant assumptions underlying this statement defy response. Congress members can participate in IRA’s just as can you and I, if they choose.
5. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.
The 27th amendment of the Constitution mandates that Congressional pay raises go into effect after the end of their term. I understand the angst about self-rewarded pay raises, but dislike arbitrary ceilings or automatic raises.
6. Congress loses their current health care system and participates in the same health care system as the American people.
Good notion. But which one is that exactly? No question, there should be equity on this hot topic, and members of Congress should be in the same boat as most of us.
7. Congress must equally abide by all laws they impose on the American people.
What is this? Last I knew, the law applies to all. I don’t know from what laws they are exempt. This idea is driven either by an assumption or by some exemption of which I am unaware. Reader: educate me in comments below, please.
8. All contracts with past and present Congressmen are void effective 1/1/11: The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.
This “Reform Act” is an near-hysterical pitch based upon faulty premises. It ignores the complexity and challenge of legislating for 320 millions rather than the 4 million of 1790, for 50 states rather than the then 14, for an area that spans six time zones rather than the one that then extended only to the Ohio and Mississippi rivers. And the demands become more complex and confusing each year as the rest of the world’s 6 billions press upon us. Does not “go back to work” imply a deep disdain for what we ask them to deal with?
This “Reform Act” proposal focuses on the Members rather than on the system in which we have entrapped them. It is the system that needs to be reformed so that they can do "the work of the people” (an obnoxious phrase, coined by Clinton or “W” I think; it grates on me as arrogant and self-righteous.) But we do need reforms so that they can focus; have time to think, read and reflect; and work on national needs and concerns. The tar-babies that we and they can’t let go of: campaign costs and two-year terms.
Money: we must reform, constitutionally, the reliance on private and donated funds for waging a campaign. Santa Clara County v. The Santa Fe Railroad Company (1886) and Buckley v. Vallejo (1976), together have given corporations the rights of individuals to free speech and made money the equivalent of speech. This has turned congress into a sandbox in which corporations and associations can play to their hearts content. They ”play” through paid lobbyists and by writing checks. Members of Congress, especially representatives, have to dance to the tune of big money every day of their short terms if they are to be re-elected, which they want to be in order to achieve whatever drove them into public service in the first place.
Terms: not limits, but revision. The founders’ congressional terms were four months the first year and three months the second. Even as late as 1933, Roosevelt’s famous “first hundred days” were the product of a Congress that was in session for only 100 days. In these complex times, we need to give representatives at least three years, if not four, in which to learn their jobs and make a mark. Perhaps we should consider raising the President’s term to five years, if it takes more than one session of the House to get his or her ideas enacted.
The reforms we need should be aimed at facilitating good governance, not at punishing able people who (God knows why) are attracted to working in Congress to improve our society through law. Studies of representatives and senators show they are bright and well intentioned. Sure, they have huge egos (535 high school class presidents all talking in one building – OMG!) but nobody seeks that role for a mere $174,000 and all the grief and abuse they and their families can stomach. They really believe they can serve the country and its public.
Our challenge is to get the best out of them; this proposed “Reform Act” is not the way.
Wednesday, March 23, 2011
Madison was right
While I await a letter from President Obama, he delivers Libya. I am appalled.
When I wrote President Ford (berating him for his pardon of Nixon – which in retrospect I think was prudent,) I received a direct and relevant response in less than two weeks. When I wrote President Reagan, after my trip to Nicaragua, I received a formatted, non-responsive acknowledgment in less than three weeks. I have yet to receive any White House response to this:
The Honorable Barack Obama
The White House
Dear Mr. President:
I have been with you for three years and still am though my enthusiasm waxes and wanes as you play out the lousy hand you have been dealt. But, I am not with you on Afghanistan. Afghans deserve not one more drop of American blood, not one more dollar, neither military nor civil; they have nothing to give us in return.
Their behavior amply justifies abandoning them:
• Karzai’s firing of public prosecutors who get too close
• Rampant election fraud on all sides
• Karzai’s suspension of election board investigations and attempted suspension of parliament
• Channeling of aid, military spending and drug revenues into private hands
• The looting of Kabulbank and siphoning off public funds to Dubai
• Government take-over of internationally supported women’s shelters and in so doing betrayal of the safety and anonymity of those sheltered
• Pressuring NATO to release detainees linked to the establishment despite the malfeasances uncovered
Afghans have no strategic assets to offer – the most illiterate, impoverished, underdeveloped nation in all of Islam. They are only a strategic burden for those who would embrace them as “ally.” Afghanistan is a tribal kleptocracy poised between the 14th and 21st centuries and unwilling to live solely in either.
Abandonment as policy? Certainly it is rife with difficulty given the neighborhood, but isn’t it far better than wasting lives and treasure in a fruitless quest for some will-o-the-wisp stability and comity?
Please, please use their self-destructive behaviors to justify our turning about and focusing on useful, promising endeavors here at home and elsewhere in the world.
Sincerely,
And now Libya.
My brother-in-law, who has long advocated a Dept. of Peace, dredged up this quote from one of our most farsighted founding fathers:
“Of all enemies to public liberty, war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors and emoluments is multiplied; and all the means of seducing the minds are added to those of subduing the force of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes and the opportunities of fraud growing out of a state of war…. No nation can preserve its freedom in the midst of continual warfare."
James Madison, Political Observations, April 20, 1795
Madison would would be appalled at our military-industrial complex.
I have become very alarmed at our standing military with its “training” tentacles infiltrating standing armies throughout the world. It is we who trained and vouched for the Egyptian generals who now are cautiously protecting their self-interest and braking the move to representative government. It is our army who trained and armed the Saudi army now repressing Bahrainis. Pinochet’s boys, the Indonesian army that wreaked havoc on East Timor, the Korean army that slaughtered the people of Kwangju Island -- all trained by US Army counter-insurgency teams. And now Petraeus – Obama's counter-insurgency guru -- assures Congress that all is going well in Afghanistan.
But all is not going well. And even though the professionals were reluctant to embark on Libya, Madison’s warning is proven out once again: a powerful (by virtue of arms) Executive capitalizes on a continuous string of foreign turmoils, invokes “national interest” and “humanitarianism” and keeps his nation in thrall to debt, constraints in the name of security, and domestic turmoil.
Am I getting paranoid? Perhaps. But isn’t it time to close foreign bases, reel in and disband our secret JCET teams, and replace the 70-year old American Empire built on military assistance with one built on civil freedoms, competitive innovation, and exemplary representative democracy? Maybe my brother-in-law is right; maybe it is time for a new Dept. of Peace.
When I wrote President Ford (berating him for his pardon of Nixon – which in retrospect I think was prudent,) I received a direct and relevant response in less than two weeks. When I wrote President Reagan, after my trip to Nicaragua, I received a formatted, non-responsive acknowledgment in less than three weeks. I have yet to receive any White House response to this:
The Honorable Barack Obama
The White House
Dear Mr. President:
I have been with you for three years and still am though my enthusiasm waxes and wanes as you play out the lousy hand you have been dealt. But, I am not with you on Afghanistan. Afghans deserve not one more drop of American blood, not one more dollar, neither military nor civil; they have nothing to give us in return.
Their behavior amply justifies abandoning them:
• Karzai’s firing of public prosecutors who get too close
• Rampant election fraud on all sides
• Karzai’s suspension of election board investigations and attempted suspension of parliament
• Channeling of aid, military spending and drug revenues into private hands
• The looting of Kabulbank and siphoning off public funds to Dubai
• Government take-over of internationally supported women’s shelters and in so doing betrayal of the safety and anonymity of those sheltered
• Pressuring NATO to release detainees linked to the establishment despite the malfeasances uncovered
Afghans have no strategic assets to offer – the most illiterate, impoverished, underdeveloped nation in all of Islam. They are only a strategic burden for those who would embrace them as “ally.” Afghanistan is a tribal kleptocracy poised between the 14th and 21st centuries and unwilling to live solely in either.
Abandonment as policy? Certainly it is rife with difficulty given the neighborhood, but isn’t it far better than wasting lives and treasure in a fruitless quest for some will-o-the-wisp stability and comity?
Please, please use their self-destructive behaviors to justify our turning about and focusing on useful, promising endeavors here at home and elsewhere in the world.
Sincerely,
And now Libya.
My brother-in-law, who has long advocated a Dept. of Peace, dredged up this quote from one of our most farsighted founding fathers:
“Of all enemies to public liberty, war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors and emoluments is multiplied; and all the means of seducing the minds are added to those of subduing the force of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes and the opportunities of fraud growing out of a state of war…. No nation can preserve its freedom in the midst of continual warfare."
James Madison, Political Observations, April 20, 1795
Madison would would be appalled at our military-industrial complex.
I have become very alarmed at our standing military with its “training” tentacles infiltrating standing armies throughout the world. It is we who trained and vouched for the Egyptian generals who now are cautiously protecting their self-interest and braking the move to representative government. It is our army who trained and armed the Saudi army now repressing Bahrainis. Pinochet’s boys, the Indonesian army that wreaked havoc on East Timor, the Korean army that slaughtered the people of Kwangju Island -- all trained by US Army counter-insurgency teams. And now Petraeus – Obama's counter-insurgency guru -- assures Congress that all is going well in Afghanistan.
But all is not going well. And even though the professionals were reluctant to embark on Libya, Madison’s warning is proven out once again: a powerful (by virtue of arms) Executive capitalizes on a continuous string of foreign turmoils, invokes “national interest” and “humanitarianism” and keeps his nation in thrall to debt, constraints in the name of security, and domestic turmoil.
Am I getting paranoid? Perhaps. But isn’t it time to close foreign bases, reel in and disband our secret JCET teams, and replace the 70-year old American Empire built on military assistance with one built on civil freedoms, competitive innovation, and exemplary representative democracy? Maybe my brother-in-law is right; maybe it is time for a new Dept. of Peace.
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