Paul M. Jones

In the first major disclosure of corruption in the $750-billion financial bailout program, federal investigators said Monday they have opened 20 criminal probes into possible securities fraud, tax violations, insider trading and other crimes.

The cases represent only the first wave of investigations, and the total fraud could ultimately reach into the tens of billions of dollars, according to Neil Barofsky, the special inspector general overseeing the bailout program.

via Crimes suspected in 20 bailout cases -- for starters - Los Angeles Times.

Can't blame Obama for this one -- the TARP debacle started under Bush. The Republicans have been almost as stupid in their reactions to the recession as anyone else.

So when DeLong, among others, says that government spending is as good as private in restoring employment, he is speaking against the whole thrust of the principle of efficient resource allocation. The essence of our recessionary problem is not the fall in aggregate demand and the lack of business confidence that accompanies it. First, it is the misallocation of resources produced by excessive risk-taking and by excessive expansion of interest-sensitive sectors. (These were generated by excessively low interest rates over the past several years.) Second, it is the uncertainty that is natural to the discovery of more appropriate combinations of resources. Third, it is the endogenous uncertainty created by the fits and starts of stimulus, bailout and unclear monetary policies.

When government adds to investment as a result of fiscal stimulus or directed monetary expansion (like buying mortgage-backed securities, student loans, etc) it does not act as a super-entrepreneur who is trying to determine the efficient and sustainable direction of resources, including the allocation of capital goods. It spends according to economically irrelevant criteria of job creation, propping up over-expanded sectors, and preventing politically painful adjustments.

Such spending is counterproductive in the medium to long term. It is also unsustainable (once the stimulus stops) since it is not consistent with the preferences of consumers-savers-investors.

via Is All Spending Created Equal? « ThinkMarkets.

It is tempting to romanticise the creation of Social Security, but it was not the result of a kind nation coming together and sacrificing to help the poor aged. The Depression-era government set up a Ponzi scheme that would not unravel until all nearly all their voters died. A 58-year-old in 1938 would only have to contribute for seven years before collecting benefits. He could expect more than a 30% internal rate of return on his tax dollars, compared to someone today who will get less than 2% (assuming benefits are not cut).

It is time to overhaul the system entirely. Social Security was meant as a national saving scheme that would prevent old-age poverty and ensure the middle class a reasonable retirement income. It would better achieve those objectives by addressing them separately. Ideally we would have a two-pronged system: one to provide explicit welfare, the other a transparent saving vehicle.

via Free exchange: our economics blog | The Economist.

I must say it's nice seeing someone at The (kind of left-leaning) Economist saying this.

We now have more poeple employed in government than manufacturing and construction.

via America passes a milestone! « Fabius Maximus.

Graph at the link; it's from January of this year. Yay for progress.

The FDA warned General Mills that it was, in effect, marketing its Cheerios breakfast cereal as a drug, because the cereal’s familiar yellow boxes carry unapproved claims about lowering cholesterol and reducing the risks of heart disease.

In a warning letter, the FDA cited the claim that “you can lower your cholesterol by 4 per cent in six weeks” by eating Cheerios regularly.

It objected to Cheerios’ assertion that “eating two 1½ cup servings daily of Cheerios cereal reduced bad cholesterol when eaten as part of a diet low in saturated fat and cholesterol”.

The claims – a central plank of Cheerios marketing for more than two years – go beyond the tightly defined health benefit claim for foods with soluble fibres, such as Cheerios, approved by the FDA for use in food marketing.

Dr Steven Sundloff, head of the FDA’s Center for Food Safety, said the action was “not to impugn Cheerios”, which he called “a product that can be part of a healthy diet”.

But he said: “The packaging clearly carries a drug claim.”

via FT.com / Companies / Food & Beverage - FDA warns Cheerios over health claims.

Your tax dollars at work.

Perhaps predictibly, someone showed up in the comments to my post on Medicare and Social Security to argue that liberal analysts have very serious plans to cut Medicare's costs, which is why we need universal coverage, so that we can implement those very serious plans.

I hear this argument quite often, and it's gibberish in a prom dress. Any cost savings you want to wring out of Medicare can be wrung out of Medicare right now: the program is large and powerful enough, and costly enough, that they are worth doing without adding a single new person to the mix. Conversely, if there is some political or institutional barrier which is preventing you from controlling Medicare cost inflation, than that barrier probably is not going away merely because the program covers more people. Indeed, to the extent that seniors themselves are the people blocking change (as they often are), adding more users makes it harder, not easier, to get things done.

via Medicare is going to bankrupt us, which is why we need universal health care - Megan McArdle.

In late April, Secretary of Defense Robert Gates announced during a Senate briefing that there are between 50 and 100 detainees at Guantanamo Bay whom the government would not transfer to other countries or prosecute in civilian or military tribunals. Last week, major media outlets, confirming previous "chatter," reported that the Obama administration would retool and revive the highly disparaged military courts.

And just when it seemed that all of these changes in anti-terrorism policy were too good to be true, today's Wall Street Journal reports that the Obama administration might indefinitely detain some Guantanamo Bay inmates in the United States following the closure of the facility. Presumably, the indefinitely detained individuals would include the 50-100 people Gates described in late April.

If Congress blocks the transfer of Guantanamo Bay detainees to the United States, will Obama stop the process of closing the facility? Was this the plan all along? How does the indefinite detention of terrorism suspects in the United States, as opposed to Guantanamo Bay, represent an improvement over the Bush administration's policies?

via DISSENTING JUSTICE: Change Alert: Indefinite Detention in the USA -- Not Guantanamo Bay.

Once again, hope and change!

The Washington Post leads with President Obama's decision to try to block the release of photographs showing the abuse of detainees by U.S. soldiers. Last month, the administration said it wouldn't fight a court order to release 44 photos by May 28, but Obama changed his mind after he saw some of the photographs and heard from top Pentagon officials that releasing the images could endanger troops in Iraq and Afghanistan. The Wall Street Journal leads its world-wide newsbox with word that the Obama administration is discussing ways to detain terror suspects. The administration is apparently considering a proposal to indefinitely hold some Guantanamo detainees inside the United Stats with the approval of a new national security court.

via Obama reverses on abuse photos; administration wants to regulate derivatives. - By Daniel Politi - Slate Magazine.

I don't know if this is the right thing to do, but I wonder if the people who railed against Bush for wanting to keep photos like this secret, will rail also against Obama for the same thing.

They must be registered voters.

This week, thousands of people are getting stimulus checks in the mail. The problem is that a lot of them are dead. A Long Island woman was shocked when she checked the mail and received a letter from the U.S. Treasury -- but it wasn't for her.

via 090514_Dead_People_Get_Stimulus_Checks.

The barrage of tax increases proposed in President Barack Obama's budget could, if enacted by Congress, kill any chance of an early and sustained recovery.

Historians and economists who've studied the 1930s conclude that the tax increases passed during that decade derailed the recovery and slowed the decline in unemployment. That was true of the 1935 tax on corporate earnings and of the 1937 introduction of the payroll tax. Japan did the same destructive thing by raising its value-added tax rate in 1997.

via Tax Increases Could Kill the Recovery - WSJ.com.