Author Danny Vinik

Harry Reid Off His Rocker

Danny Vinik 2 Comments

Can I just point how absurd Harry Reid’s comments have been the last few days? He’s been saying that Romney has not paid any taxes for ten years. Okay, I don’t think anyone possibly believes this, but Reid claims to have “extremely credible sources.” Uh huh, sure you do, Harry. It’s very unlikely that Romney did not pay anything in taxes the past decade.

Here’s Reid’s full statement:

“There is a controversy because the Republican presidential nominee, Governor Mitt Romney, refuses to release his tax returns. As I said before, I was told by an extremely credible source that Romney has not paid taxes for ten years. People who make as much money as Mitt Romney have many tricks at their disposal to avoid paying taxes. We already know that Romney has exploited many of these loopholes, stashing his money in secret, overseas accounts in places like Switzerland and the Cayman Islands.

“Last weekend, Governor Romney promised that he would check his tax returns and let the American people know whether he ever paid a rate lower than 13.9 percent.  One day later, his campaign raced to say he had no intention of putting out any further information.

“When it comes to answering the legitimate questions the American people have about whether he avoided paying his fair share in taxes or why he opened a Swiss bank account, Romney has shut up. But as a presidential candidate, it’s his obligation to put up, and release several years’ worth of tax returns just like nominees of both parties have done for decades.

“It’s clear Romney is hiding something, and the American people deserve to know what it is. Whatever Romney’s hiding probably speaks volumes about how he would approach issues that directly impact middle-class families, like tax reform and the economy. When you are running for president, you should be an open book.

“I understand Romney is concerned that many people, Democrats and Republicans, have been calling on him to release his tax returns. He has so far refused. There is only one thing he can do to clear this up, and that’s release his tax returns.”

Yes, Mitt Romney should release his tax returns. But Reid is taking an outlandish position for calling on him to do so. Not to mention, the Democratic Senate Majority leader calling on Romney to release his returns isn’t going to surprise anyone. Reid’s hyperbole just further reduces the (small) potential persuasiveness of his comments.

James Downie had a bit of a different take on this than me:

I know Greg isn’t sure how this helps, but I think it’s a smart play from Reid: It keeps Bain in the headlines. And ask yourself this: If there’s nothing damaging in his returns, Romney could now, in one stroke, annihilate Harry Reid’s reputation in Washington. So why hasn’t he released them?

Well, I think Reid made a (very) calculated play here. Just because Romney has the ability to “annihilate Harry Reid’s reputation in Washington” doesn’t mean it changes any of the calculations Romney made about the impact releasing his tax returns would have on his presidential chances. If it was a bad play to release them before Reid spoke, it’s still a bad play now. Harry Reid knew Romney wouldn’t call him on it. As for keeping Bain in the headlines, I still think the hyperbolic nature of his comments will cause many people to immediately disregard them, but we can agree to disagree there.

Glen Hubbard: Deliberately Misleading Readers

Danny Vinik 2 Comments

Romney economic advisor Glen Hubbard penned an op-ed today in the Wall Street Journal that is rather infuriating. Let’s look at Hubbard’s first assertion on policy uncertainty:

In response to the recession, the Obama administration chose to emphasize costly, short-term fixes—ineffective stimulus programs, myriad housing programs that went nowhere, and a rush to invest in “green” companies.

As a consequence, uncertainty over policy—particularly over tax and regulatory policy—slowed the recovery and limited job creation. One recent study by Scott Baker and Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago found that this uncertainty reduced GDP by 1.4% in 2011 alone, and that returning to pre-crisis levels of uncertainty would add about 2.3 million jobs in just 18 months.

To the study we go! Here’s the graph of economic policy uncertainty:

Uncertainty rose a bit during the stimulus debate, though that also coincided with the crisis as a whole and TARP occurred right as Lehman Brothers collapsed. It’s certainly not fair to say that those policies did not cause any uncertainty – any policy change is going to make things more uncertain. But look what is responsible for “this uncertainty [that] reduced GDP by 1.4% in 2011 alone.” It’s the debt ceiling dispute! And who was responsible for it? The Republicans! They held the economy hostage for months. That 1.4 percent reduction is exactly what Obama tried to avoid by repeatedly calling for a clean increase of the debt ceiling. Yet, Hubbard is trying to lay the blame on the President! (And by the way, can we stop with this “ineffective stimulus” idea already? It wasn’t.) Continue reading “Glen Hubbard: Deliberately Misleading Readers” →

DeMarco’s One Correct Point

Danny Vinik 1 Comment

Liberals have been jumping on Federal Housing Finance Agency (FHFA) leader Ed DeMarco for not allowing principal reduction for mortgages held by Fannie Mae and Freddie Mac. Such a policy would bring many homeowners above water and allow them to refinance at lower interest rates and afford their mortgages. Here’s Krugman:

In any case, however, deciding whether debt relief is a good policy for the nation as a whole is not DeMarco’s job. His job — as long as he keeps it, which I hope is a very short period of time — is to run his agency. If the Secretary of the Treasury, acting on behalf of the president, believes that it is in the national interest to spend some taxpayer funds on debt relief, in a way that actually improves the FHFA’s budget position, the agency’s director has no business deciding on his own that he prefers not to act.

I don’t know what DeMarco’s specific legal mandate is. But there is simply no way that it makes sense for an agency director to use his position to block implementation of the president’s economic policy, not because it would hurt his agency’s operations, but simply because he disagrees with that policy.

That’s 100% correct and it’s terrible that DeMarco is overstepping his bounds. However, DeMarco also made one good point:

Perhaps the greatest risk of the Enterprises’ allowing principal forgiveness is one with far more significant long-term consequences for mortgage credit availability. Fundamentally, principal forgiveness rewrites a contract in a way that other loan modification programs do not. Forgiving debt owed pursuant to a lawful, valid contract risks creating a longer-term view by investors that the mortgage contract is less secure than ever before. Longer-term, this view could lead to higher mortgage rates, a constriction in mortgage credit lending or both, outcomes that would be inconsistent with FHFA’s mandate to promote stability and liquidity in mortgage markets and access to mortgage credit.

I’ve talked about this before in using eminent domain for principal reduction. It’s a real issue that many economic bloggers are overlooking. Here’s Felix Salmon’s response: Continue reading “DeMarco’s One Correct Point” →