So much for GM’s self-imposed ban on political contributions. According to The Washington Post:

General Motors reported making $47,000 in contributions to lawmakers and congressional candidates in July, the first it has made since November 2008. The company stopped giving through its political action committee just as it began to seek government assistance to stay in business.

The U.S. government provided support but also steered the company through bankruptcy. Today, the Treasury owns a 60 percent stake in the company, which recently announced plans to go public with a stock sale.

GM earlier gave $41,000 to groups and causes associated with lawmakers. The latest contributions were made directly to lawmakers’ campaigns.

The Post notes the fact that GM is spreading the wealth around to both political parties: $26,000 to Republicans and $21,000 to Democrats. Below is the list of GM PAC recipients from the Federal Election Commission:

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The indiscreet voicemail, left by Delegate Eleanor Holmes Norton (D-DC) for a lobbyist, sounded a bit like a “shakedown”, which is no big surprise.

I know from first-hand experience that Ms. Norton can use veiled threats and thuggish behavior when she wants to have her way.

During my time as the Administrator of the U.S. General Services Administration (GSA), I was the recipient of late night phone calls at my home, during which Holmes wanted to “discuss” why GSA wasn’t doing more to house government agencies in certain parts of the District of Columbia, in particular, in areas where gentrification was occurring slowly.

Norton’s voracious appetite for “more” often led her to raise her voice and make veiled threats.  Once, she even trumped up a meeting where she advocated for more business on behalf of a real estate organization that I later learned had donated to her campaign.  When I protested these tactics and refused to attend further such meetings, the political pressure was cranked up and political unpleasantness became the norm.  Norton always claimed she was just doing her job.

Many Americans may be shocked to hear Holmes’ indiscreet voicemail, but, from my experiences in Washington, it seems that Holmes may have learned these tactics from the top leadership of her party.  Senator Dick Durbin (D-IL), the Majority Whip, has been especially thuggish in the past, screaming and issuing threats at the homes of federal agency leaders, should one of his pork projects be questioned.

The “gimme”, as practiced by some Democrat legislators, can range from subtle and respectful, as is probably appropriate for any request, to disrespectful and threatening.  It seems as if there are some legislators who want to make sure there is no doubt in your mind that if you don’t cough up the goods during the shakedown, then negative consequences will occur.

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If something stays the same, has it been cut?  The answer is a resounding YES in the Alice-in-Wonderland world of Demo-nomics.  Of course, I am speaking of the Democrats’ claims that Republicans are holding middle class tax cuts hostage when the issue really is whether certain tax rates will remain the same or go up.  Such folly is, to be generous, not the only upside down element of Demo-nomics under which we vassals must toil.  Here is your guide to some of the more prevalent illusions . . .

1. Extending the current rates = a Tax Cut.   It is not so much a subtle tactic by the Democrats to frame the discussion by claiming that the Republicans are holding middle class tax cuts hostage.  Remember that he who frames the argument often wins the argument.   The literal and basic premise of this Demo-nomics subtlety is that the rates, by all rights, should be higher.  By pedaling their line of argument, however, the status quo becomes change - and it is they who are heroes for cutting them again from where they think ”should” be.

In truth, who is to say tax rates should be this high?  After all, when the income tax was ushered in by Democrat Woodrow Wilson the top rate was only 7%.  Shouldn’t the question be:  Why are we keeping rates so very high?  Obviously not in the world of Demo-nomics.

2.  Tax Cuts Are A “Windfall” for the Rich.   This too is a brilliant job by the Democrats of framing the issue.  According to Merriam-Webster’s online dictionary, “windfall” is defined as “an unexpected, unearned, or sudden gain or advantage.” Incredibly, so pervasive is this canard that one of the examples Websters uses for the word windfall is: “They received a windfall because of the tax cuts.”  Of course, in 99%.9 of the cases, a tax is a government taking of money you have earned and probably not so suddenly but after a year of hard work.  A tax rate cut, therefore, does not result in a gain – what it really represents a smaller loss for you – just not in the world of Demo-nomics.

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He was hired by the Obama administration to slash executive compensation at companies bailed out by the federal government. But now he’s involved in a salary controversy of his own. In a Washington corruption chronicles classic, the Obama administration can’t even shoot straight on the pay of its pay czar!

I’m speaking of Kenneth Feinberg, President Obama’s “Special Master for TARP Executive Compensation.” Judicial Watch recently received documents from the Treasury Department indicating that Feinberg received a $120,830 annual salary to establish executive compensation levels at companies bailed out by the federal government. We got hold of these documents pursuant to a Freedom of Information Act (FOIA) request we filed on July 20, 2010.

Now there’s nothing necessarily unusual about a federal appointee hauling in six figures. But here’s the problem: These documents contradict multiple press reports that Feinberg would not be compensated for this work for the Treasury Department at all.

When President Obama appointed Washington lawyer Feinberg “Pay Czar” in 2009, the press reported that he would perform his duties pro bono. Dozens of mainstream media stories confirmed that Feinberg, founder and managing partner of the Washington, D.C., firm Feinberg, Rozen, LLP, would not receive a salary to set pay limits for more than two dozen executives at companies receiving government bailouts.

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Shocking story from the Poughkeepsie Journal:

State institutions for the developmentally disabled generate so much federal Medicaid money that New York’s other programs for people with intellectual disabilities would be threatened without them, state officials acknowledge in an internal document obtained by the Poughkeepsie Journal.

The document, labeled “Confidential — Policy Advice,” raises questions about the state’s decision to keep 1,100 institutional beds at eight centers that were once slated to close. The goal of the five-page paper, an undated PowerPoint presentation with recent statistical data, was to “preserve [the] status quo” by heading off potential regulatory reforms such as the federal government’s 2008 attempt to curb Medicaid payments.

“Without continuation of this system,” the presentation states, “roughly $1.4 billion in annual federal funding that is currently used to support vital community and other services … would be lost.”

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White House Press Secretary Robert Gibbs spent much of his day yesterday tripping over his shorts about a NY Times hit piece on John Boehner.

White House Press Secretary Robert Gibbs took such a liking to this weekend’s NY Times story on House Minority Leader John Boehner and his lobbyist friends that Gibbs has posted about it on Twitter four times, beginning with one saying, “Headline says it all…A G.O.P. Leader Tightly Bound to Lobbyists.”

Maybe Mr. Gibbs should think twice before he makes that argument. He should at least look at how his party fares in a discussion of lobbyist influence.

If you look at the top Members of Congress who receive the most money from lobbyists this campaign season, 15 out of the 20 are Democrats. None of the 20 were named John Boehner.

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Each summer, Wall Street strategist Byron Wien convenes a meeting of high rollers to discuss the outlook for investment. This year’s meeting brought together fifty individuals, including more than ten billionaires.

Their expectations, as reported by CNBC, are gloomy:

“They saw the United States in a long-term slow growth environment with the near-term risk of recession quite real,” said Wien, in a commentary to Blackstone clients. “The Obama administration was viewed as hostile to business and that discouraged both hiring and investment. Companies and entrepreneurs were reluctant to add workers because they didn’t know what their healthcare costs or taxes were going to be.”

Add this report to the many similar ones to which my colleagues and I have called attention over the past two years.

Of course, for mainstream macroeconomists, such evidence means nothing. In fact, they hold it in complete contempt because (1) their formal mathematical models do not have a variable called “regime uncertainty,” and (2) even if they could be persuaded to take this factor into account, the canned data on which they rely—the product of the Commerce Department’s Bureau of Economic Analysis, for the most part—do not supply them with an “official” data set for their analysis. What you can’t measure, according to their “scientific” credo, does not exist. Their de facto motto (of which I have more than once been on the receiving end) is: you’ve got no formal model; you’ve got nothing.

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Illinois, like many states, is broke. Its credit is even worse than that of California and its highly publicized financial quagmire.  In such a fiscal environment, taxpayers are rightfully demanding that governments tighten up and are increasingly zealous about ensuring that money is spent productively. One way in which they may be surprised to find that local Illinois governments, along with those all over the country, collectively waste millions of dollars is by lobbying other governments for handouts.

Thanks to a recent report conducted by Diana Lopez of Sunshine Review, we know that local governments in Illinois have spent at least $6.2 million since 2005 on the lobbying of other governments. I say “at least” because local officials don’t like to disclose this information in a systematic and open way. The report, furthermore, only looked at the state’s 10 most populous counties, and also didn’t capture state government expenditures. So you can bet the actually numbers are much, much higher.

Individually it might be hard to blame these governments. They shouldn’t ever be spending taxpayer money lobbying for specific policies at higher levels of government, as many are, but in the case of begging for state and federal funds, they might be bringing in more money to the district than they are spending. They are therefore acting in their interests, as would be expected.  The problem is the offering of these funds in the first place, because it’s unequivocally bad for taxpayers and serves as a barrier to good governance.

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Under pressure from a barrage of bad midterm-election polls, President Obama has gone on the campaign trail to blame Pres. George W. Bush for all our economic problems, and to bash House Republican leader John Boehner as nothing more than a Bush retread.

In Friday’s dreary news conference, Obama acknowledged that economic progress is “painfully slow,” and that voters may blame him for the economy. Yet he nonetheless continued to finger Bush “for policies that cut taxes, especially for millionaires and billionaires, cut regulations for corporations and for special interests, and left everyone else pretty much fending for themselves.”

“Millionaires and billionaires” has become Obama’s favorite phrase as he calls for tax hikes on the wealthy and renews his attacks on Bush. In Cleveland last week, Obama actually blamed the Bush tax cuts for the financial meltdown and severe recession. Now that’s a reach. A big reach.

While Mr. Bush made plenty of economic mistakes, his 2003 reductions of marginal tax rates led to more than 8 million new jobs in the next four and a half years. Under Bush, the unemployment rate dropped to 4.6 percent.

And almost all economists agree that the 2007-08 financial meltdown was a housing-bubble and credit event. It had nothing at all to do with cutting taxes.

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Now that they’ve passed ObamaCare, can we see what’s in it?

Sally Pipes, president and CEO of the Pacific Research Institute and author of The Truth About ObamaCare sits down with Ted Balaker to discuss what’s really on the way courtesy of the recent health care overhaul: higher costs, decreased access to care, and the looming spectre of a single-payer system in America.

Pipes, who hails from Canada, worries that ObamaCare has set the U.S. on a path toward a Canadian-style system. She weighs in on if and how ObamaCare could be repealed and what should replace it.

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This week brought more Subprime Stimulus from an administration attempting to ignite the economy with a burnt-out match.  The Obama proposal to allow the expensing 100 percent of investment in plant and equipment is fine, but something that might’ve occurred to the administration years ago as an obvious first step, in the sense of, you know, just walking through a door before breaking a wall down instead.

Apart from this belated revelation regarding enterprise and the calculus behind why some people might wake up one day and decide to hire other people, Obama’s economic program fundamentally consists of fostering a compulsory “Declaration of Dependence” on the part of America’s wealth-creating sector. Washington is all about the institutionalization of Government Steering While the Market Rows.

Despite bad economic news and Obama’s policy of talking about business like a dog, it’s only 2010, and America’s real wealth is yet to be created if we correct course.

However if policymakers don’t confront regulation as well as spending, they are missing most of the story behind today’s expanding state.

Congressional reformers need to institute massive, unprecedented doses of economic liberalization. America requires massive deregulation in sectors like basic manufacturing, telecommunications, electricity, frontier science, and energy and the elimination of policymakers that stand in the way, regardless of party.  We have to re-appreciate how it was that the U.S.—now only 235 years old—became richer than the rest of the world in a historical eye-blink, and how that remarkable achievement can be recaptured.

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A major Internet company is under investigation by more than 30 state attorneys-general for alleged wiretapping violations.  In Europe and now Texas that same company faces anti-trust inquiries on whether it unfairly penalizes its competitors, and its operations face criminal wiretapping inquiries throughout Europe, as well as in Australia and South Korea.

Yet, inside the Beltway, it’s business as usual.  The Obama Administration plans to award the company a sweetheart, no-bid contract for satellite imagery and access to classified data.  After protests, the Administration backtracks, allowing other companies to bid, but still intends to award the contract to the company.  According to industry sources the total spending in that segment on intelligence outsourcing in 2009 was $161 billion.  This is no small contract.

Surprising? Then how about this: This same company’s executives were among the Obama campaign’s largest contributors. Its CEO stumped for candidate Obama, while he and other senior executives ponied up $150,000 to help pay for the inaugural celebration.

But, it gets even better: The CEO and another senior company official serve as technology advisors to the Administration on issues that directly impact their company.  The company’s senior lobbyist has had multiple secret meetings with senior officials at the National Security Council. Meanwhile, the company’s former top Washington lobbyist now works in the White House overseeing national policy over issues on which he used to lobby.

Is it Halliburton? Exxon? Boeing?  Nope.  The company is Google, the CEO is Eric Schmidt and the joke is on us.

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It must be a condition of employment that a journalist who writes about the current recession include in his article the statement, “consumption makes up more than two-thirds of the economy” or “consumption spending accounts for 70 percent of GDP.” This seemingly simple, factual statement, however, is nearly always intended to carry some explanatory weight, and on occasion the writer spells out this explanation by adding a statement such as, “unless consumers begin to open their wallets and spend more, recovery from the current recession will be impossible.”

At first glance, this journalistic commonplace appears to make sense. Anyone can understand that, say, a store at the mall will not hire additional employees unless its sales increase enough to justify the additional expense. Hence, would-be employees will remain unemployed; they will purchase fewer consumption goods than they would have purchased if they had jobs; and therefore the stores will not hire more workers; and so forth. The circle of a theory of income and employment seems to be closed, and thus an explanation provided for the lingering recession: consumers are not spending enough.

One does not need a Ph.D. in economics, however, to discover that something must be wrong with this way of thinking about prosperity and recession. Checking the national economic accounts produced by the Commerce Department’s Bureau of Economic Analysis (Table l.l.6), one finds, for example, that the most recent quarterly peak in real personal consumption expenditure occurred in the fourth quarter of 2007. This spending ($9,244 billion at an annual rate) equaled 69.2 percent of contemporary GDP ($13,364 billion at an annual rate)—where the data are expressed in dollars of 2005 purchasing power. Real GDP did not fall significantly until the third quarter of 2008. When it reached its trough in the second quarter of 2009, it had fallen to $12,810 billion, down about 4 percent. At that time, real personal consumption spending was $9,117 billion, down only 1.4 percent, and equal to about 71 percent of GDP. Thus, as usual over the course of a boom and bust, consumption spending varied proportionately less than GDP as a whole.

As every student of the business cycle learns early on, the most variable part of aggregate expenditure is private investment. When real gross private domestic investment peaked, in the first quarter of 2006, it was $2,265 billion, or 17.5 percent of GDP. When it hit bottom in the second quarter of 2009, it had fallen by 36 percent to $1,453 billion, or 11.3 percent of GDP. (Deducting investment expenditures aimed at compensating for depreciation of the private capital stock [Table 1.7.6], we find that real net private investment—the part that contributes to economic growth—in the most recent quarter was only one-third as great as it was at its peak in early 2006.) The ups and downs of the business cycle are obviously driven not by consumption spending, but by investment spending.

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On the surface you would think there is nothing in common between Las Vegas and Washington DC, other than sharing a Nation where The Jersey Shore is a top rated TV show. One city was built on the profits of lawlessness, the other from the profits of law. But the recently proposed $50 Billion dollar stimulus plan suggests they are more similar than Kardashian sisters.

Las Vegas has always astounded me. While I understand the allure of the big shows, bright lights, and wandering Elvis impersonators; I don’t understand the people who actually believe they’ll return from a Vegas vacation richer than they left.

Unfortunately, some look at Las Vegas as a career rather than a diversion; the ones who believe they have stumbled upon a system that will skew the odds in their favor. In turn they become unwilling contributors to an ever-growing spectacle of neon and debauchery.

The entire town was built on a foundation of these “systems.” All the marble waterfalls, the replicas of other cities, and the glass monoliths and pyramids; were financed by people who think they’re smarter than those who own the casinos.

Most of these systems are based on a nonsensical notion of justice in the cosmos. There is a belief in a mystical power that watches over us all, insuring that not everyone has a bad day. For every flat tire there is someone who was driving behind an armored car that forgot to shut it’s back door.  For every roasted dung beetle, there is an ice cream cone. For every Paris Hilton there is a Stephen Hawking.

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Seeking to bolster the sluggish economy, President Barack Obama is using a Labor Day appearance in Milwaukee to announce he will ask Congress for $50 billion to kick off a new infrastructure plan designed to expand and renew the nation’s roads, railways and runways. …The measures include the “establishment of an Infrastructure Bank to leverage federal dollars and focus on investments of national and regional significance that often fall through the cracks in the current siloed transportation programs,” and “the integration of high-speed rail on an equal footing into the surface transportation program.”

Under mounting pressure to intensify his focus on the economy ahead of the midterm elections, President Obama will call for a $100 billion business tax credit this week… The business proposal – what one aide called a key part of a limited economic package – would increase and permanently extend research and development tax credits for businesses, rewarding companies that develop new technologies domestically and preserve American jobs. It would be paid for by closing other corporate tax loopholes, said the official, speaking on condition of anonymity because the policy has not yet been unveiled.

If my experience with one U.S. Department of Justice agency is indicative of how the federal government operates in this new era of transparency, then I must conclude that transparency causes “blindness.”

Several times during the past 18 months, I’ve contacted people at the National Institute of Justice — the research, development and evaluation arm of the DoJ in Washington, D.C. — with seemingly-innocuous questions about a grant the agency awarded to a state mental health agency in Oklahoma almost five years ago. NIJ’s answers would better equip me to explain to my readers how NIJ works. Unfortunately, it seems NIJ officials prefer I remain “blind” to what’s going on inside the agency.

Some background: Curious to learn details about NIJ’s criteria for granting non-competitive awards, I forwarded several questions to Jolene Hernon July 28. After pointing out to my contact in the NIJ Office of Communications that less than one percent of the total amount of NIJ’s annual awards in 2009 was non-competitive, according to the Guidelines Regarding Non-Competitive Awards published on the NIJ web site, I asked several questions as follows:

• I asked Hernon to explain whether or not the guidelines used in granting non-competitive awards have changed since Jan. 1, 2005, and, if they have changed, asked her to explain those changes;

• Prefacing my request with “If the guidelines have not changed,” I asked her to explain the basis upon which a particular non-competitive award was granted; and

• Finally, I asked for a copy of the NIJ director’s “determination in writing,” as called for in the current guidelines, that the award in question was worthy of non-competitive status.

I asked the final question above after reading on the NIJ web site that the agency’s policy is to make non-competitive awards only under the following circumstances:

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You are probably familiar by now with this infamous graph published by the White House in January 2009 highlighting their expectations for the impact of the Recovery Act on the rate of unemployment. Far from leveling off at 8% and then declining, the actual unemployment rate ran up to 10% by the end of 2009 and has declined only slightly since to 9.5%, largely due to a decline in labor force participation. This in spite of the rapid passage of the massive $787 billion stimulus bill in February 2009. (Geoff at the Innocent Bystanders blog deserves everlasting credit for being the first to point out this disconnect.)

With the White House and other Democrats resolutely sticking to their claim that the stimulus bill “saved or created” 3-4 million jobs, I thought it might be worthwhile to point out that the very same January 2009 White House report also included an industry by industry forecast of where these 3-4 million jobs would come from. Here it is:

Thanks to the inclination of economists to model verifiable data (even when they are pulling numbers out of the sky), these industry categories happen to align perfectly with employment data tracked by the Bureau of Labor Statistics. Thus we can easily compare the actual changes in employment to the figures forecast by the White House. In the table below, I’ve calculated the net change in employment by industry from February 2009, when the stimulus bill was passed, to July 2010, using the latest data available from the BLS. (Click row headings for data source.)

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On August 24, I posted some data and analysis on yield curves for high-grade corporate bonds since the beginning of 2008, seeking to determine whether changes in these curves are consistent with the hypothesis that the current economic crisis has given rise to regime uncertainty. If it has done so, the yield curves should display increased spreads between the period immediately before the financial panic in the latter part of 2008 and the period since mid-2009, when the extraordinary volatility of the bond markets had ceased.

A reader of this post, Chris Lemens, commented: “I would imagine that, if the yield curves for both private and federal bonds moved similarly, that would mainly tell us about inflationary expectations, not regime uncertainty. (Well, inflation is a kind of regime uncertainty, but you know what I mean.)”

Here, I respond to Lemens’s comment, which raises an important issue, inasmuch as economists commonly interpret a steepening of the yield curve as indicative of increased inflationary expectations and nothing else.

First, one should appreciate, as Lemens does, that changes in expectations about future inflation may themselves reflect changes in regime uncertainty. If, for example, bond traders came to expect a transformation of government policies that would entail a substantial further attenuation of private property rights, they would also be likely to expect that in the future the rulers who preside over the new economic (dis)order will find themselves in serious economic trouble. (Economies without fairly firm private property rights do not work well.) Perhaps the most time-honored of all government actions to escape from such difficulties is the issuance of more and more new money, to be used sooner or later to pay the government’s bills; and the virtually inevitable consequence of such large-scale monetary effusion is a rising rate of general price inflation for newly produced goods and services, along with a diminished rate of real economic growth, perhaps even economic contraction.

So, increased regime uncertainty may give rise to increased inflationary expectations.

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Economists and pundits, who contend that the Federal Reserve System has little room to maneuver in using monetary policy to jump-start our anemic economy, often have claimed that America is mired in a Keynesian “liquidity trap”, a situation in which the demand for money is unresponsive to changes in market interest rates.

After all, those commentators emphasize, the Fed has adopted a target for the federal funds rate (the interest rate charged on overnight interbank loans) of between zero and 0.25 percent. The implication is that further reductions in that rate will have little or no effect on the incentives of businesses to invest in new plant and equipment or of consumers to borrow in order to finance the additional spending necessary to raise GDP growth above the (recently downwardly revised) estimate of 1.6 percent during the second quarter of 2010.

But those commentators overlook or ignore the easily verified reasoning of John Maynard Keynes, who defined a liquidity trap in terms of long-term rather than short–term interest rates. The long-term (ten- or 30-year) rate on Treasury securities now runs at about three percent, meaning that the Fed still has arrows in its quiver. Unfortunately, however, those arrows, the use of which would demand the central bank engage in further “quantitative easing”, requires it to purchase more under-performing, “toxic” assets from banks and other financial institutions that lent money to homeowners who could not repay their mortgages. Engaging in such transactions places more bad debts on the Fed’s balance sheet, constrains its ability to conduct monetary policy in the future and raises the specter of higher rates of future price inflation.

In his recent speech at Wood’s Hole, Wyoming, Fed Chairman Bernanke was right to say that economic recovery cannot depend solely on the policies of the central bank over which he presides. But the fiscal discipline (spending and tax cuts) required to achieve that goal is incompatible with the vote motives of incumbent politicians or their challengers for political office.

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