Roberts' Switch No Mystery As Repubs Have No Program, Greece Deserves Kicking? Low Tax Blackmail? We Learn So Much On the Financial Front These Days & Driftglass RULES! (Andy Griffith Dies In NC)

Andy Griffith Dies At Home in Manteo, North Carolina

Beloved TV star Andy Griffith died at his home in Manteo, North Carolina, on Tuesday morning. He was 86.

Former University of North Carolina President Bill Friday confirmed the passing of his close friend.

And on the financial fronts:

Marc Faber Would’ve Kicked Greece’s Sorry Ass Out Of His House YEARS Ago

So This Exists

Our friends at Lawyers, Guns and Money chime in on our most current news concerns:

The Wages of the Medicaid Expansion Holding

July 3, 2012

Scott Lemieux

Too much attention has been paid to John Roberts’s alleged doctrinal victories on the commerce clause, which will have essentially no effect going forward. On the other hand, the one substantive victory he handed the Tea Party deserves more attention. The brand-new doctrine Roberts invented, which arbitrarily prevented Congress from withdrawing existing Medicaid funds if states do not participate in the expansion created by the PPACA, will have a disastrous short-term impact in many states. And what’s worse is that the argument doesn’t actually make any sense in the variants offered by either the Roberts opinion or the neoconfederate dissent. Ginsburg’s opinion, as on so much else, was very good on this point:

The Chief Justice acknowledges that Congress may “condition the receipt of [federal] funds on the States’ complying with restrictions on the use of those funds,” ante, at 50, but nevertheless concludes that the 2010 expansion is unduly coercive. His conclusion rests on three premises, each of them essential to his theory. First, the Medicaid expansion is, in The Chief Justice’s view, a new grant program, not an addition to the Medicaid program existing before the ACA’s enactment. Congress, The Chief Justice maintains, has threatened States with the loss of funds from an old program in an effort to get them to adopt a new one. Second, the expansion was unforeseeable by the States when they first signed on to Medicaid. Third, the threatened loss of funding is so large that the States have no real choice but to participate in the Medicaid expansion. The Chief Justice therefore — for the first time ever — finds an exercise of Congress’ spending power unconstitutionally coercive.

Medicaid, as amended by the ACA, however, is not two spending programs; it is a single program with a constant aim — to enable poor persons to receive basic health care when they need it. Given past expansions, plus express statutory warning that Congress may change the requirements participating States must meet, there can be no tenable claim that the ACA fails for lack of notice. Moreover, States have no entitlement to receive any Medicaid funds; they enjoy only the opportunity to accept funds on Congress’ terms. Future Congresses are not bound by their predecessors’ dispositions; they have authority to spend federal revenue as they see fit. The Federal Government, therefore, is not, as The Chief Justice charges, threatening States with the loss of “existing” funds from one spending program in order to induce them to opt into another program. Congress is simply requiring States to do what States have long been required to do to receive Medicaid funding: comply with the conditions Congress prescribes for participation.

The fact that Roberts at least allowed conditions to be placed on new spending will probably mean that every state joins eventually. But in the short-term, a lot of pain will be created by a newly-minted reasoning that is also transparently wrong. And, of course, we shouldn’t just blame the Supreme Court, which after all doesn’t require any state to turn down the money to insure more of its vulnerable decisions. The Republican governors who are willing to allow many vulnerable people to suffer from needless illness or death to score political points or to demonstrate their fealty to neoconfederate political principles are behaving in a grotesquely immoral manner.

And, also from the wizards at L,G&M . . . we learn again what we've known for decades (centuries?) . . .

There Is No Republican Plan

July 3, 2012 | Scott Lemieux

For reasons Dean Baker explains, the plan David Brooks touts as an alternative to the ACA is utter crap, a combination of stuff that’s already in the ACA (“skin in the game”) and really, really horrible ideas that will brutalize poor people while making the system less efficient (privatizing Medicaid.) There’s also a whole mess of federalist nonsense, which is particularly appalling given the vivid demonstration we’re getting that the “flexibility” many of our glorious laboratories of democracy want is the “flexibility” to deny the non-affluent access to medical care.

But there’s another con Brooks is running — describing the awful plan he finds “compelling” as a “coherent Republican plan.” Omitted are the names of any Republican legislator who supports the Republican alternative, for the obvious reason that the actual Republican alternative is “nothing.” Republicans have, of course, been engaging in this con for decades. And, pathetically, the only people more likely to fall for the scam than conservative pundits are leftier-than-thou ACA critics. I don’t know how many times I’ve seen the ACA referred to as a “Republican plan” or a “Heritage Foundation plan,” although 1)no national Republican has ever made any effort to implement this “Republican plan” including during the extensive times when they’ve controlled both houses of Congress, and 2)the Heritage Foundation fellow I debated argued that the “Heritage Foundation plan” was both horrible policy and completely unconstitutional. But I’m sure he’s been fired for insubordination!

Here's how the low tax gambit works out (and many are quite envious).

Chesapeake Is Making It Uncomfortable For Other Oil Companies To Pay Low Taxes Just Because They Take In Negative Money

Matt Levine

02 Jul 2012



If you were at, say, Range Resources, wouldn’t you be SO PISSED at Chesapeake? Uniquely in modern memory, every media report during Chesapeake’s meltdown has had immediate and dire results. Aubrey’s a bit of a scoundrel? Strip him of his chairmanship. His founder participation program creates conflicts of interest? Terminate it. There was maybe a bit of collusion in bidding on some mineral leases? Why hello DOJ antitrust probe.

Bloomberg dug up another mini outrage today with its discovery that Chesapeake doesn’t pay taxes much, mostly because it spends much much more money than it takes in:

Chesapeake Energy Corp. (CHK) made $5.5 billion in pretax profits since its founding more than two decades ago. So far, the second-largest U.S. natural-gas producer has paid income taxes on almost none of it.

Chesapeake paid $53 million over its 23-year history, or about 1 percent of the cumulative pretax profits during that period, data compiled by Bloomberg show. … The biggest tax break, for Chesapeake and other independent U.S. oil and gas companies, is a rule that’s been around since at least 1916 that allows some producers to expense “intangible drilling costs.” Companies can count most of the cost of boring a new well against their taxes at the time the money’s spent, rather than recognizing it over several years. That allows them to effectively put off tax payments, even during years when they turn a profit.

This is a story about the mismatch between tax and GAAP accounting, which is a story that is as old as time; one question you could ask is, which is right? If you spend $100 to drill a well and it will return $15 a year for 10 years, is your profit in the first year $5 (like, $15 revenue minus $10 straight-line amortization of costs), or is it an ($85) loss? GAAP thinks it’s a $5 profit and there are good accounting and economic reasons behind that. Here for instance are some tax-policy folks who think that capitalizing the cost of drilling successful wells “is consistent with economic theory and accounting principles.”* And if you believe that, as Bloomberg seems to, then Chesapeake is ripping off the treasury (legally . . .) by taking huge tax deductions even though it’s profitable.

On the other hand you can’t eat GAAP profits, or even pay off your massive liabilities with them, if you happen to have massive liabilities, as some independent oil and gas producers do, not naming any names. For that you need money, which is something that for all its $5.5 billion in pretax profits Chesapeake is strangely lacking.

As are its peers. Here is Bloomberg again:

While Oklahoma City-based Chesapeake is the biggest U.S. oil and gas producer with such low tax payments, it’s far from alone, according to the data that calculated several companies’ so-called long-run cash effective tax rates. Range Resources Corp. (RRC) paid income taxes of about 0.4 percent of pretax income over the past decade, the data show. Southwestern Energy Co. (SWN) paid 2.1 percent and EQT Corp. (EQT) paid 5.3 percent, the data show. …

Other companies whose tax strategies have attracted scrutiny in recent years have much higher rates than the oil and gas producers. Google Inc., which has used tax strategies with names like the “Double Irish” and “Dutch Sandwich” to minimize its tax bill, had a cash effective rate of 18 percent over the past 10 years, according to data compiled by Bloomberg. General Electric Co., whose tax strategy the New York Times termed “aggressive” in a front-page article in 2010, paid 12 percent.

And here is a really wretched graph I made for you:



You’ll notice the enormous but still not to scale bar for Chesapeake’s negative forty-nine billion dollars in free cash flow over the last ten years. That’s its choice, of course – basically that is “money comes in from selling gas and goes out to drill new wells” – and taxes aren’t charged based on free cash flow. But nor are they charged based on GAAP income – and at least for me this chart makes it a little easier to understand why Chesapeake writes actual checks to the government for a lower percentage of its GAAP income than GE does.

As do Range, Southwestern, EQT, etc. But judging by the track record of Chesapeake stories turning swiftly into action, what do you think the odds are that this loophole gets closed?

Justice Dept. probes Chesapeake over possible collusion [Reuters]

Chesapeake’s 1% Tax Rate Shows Cost Of Drilling Subsidy [Bloomberg]

* Also, food for thought, about the fact that even if you capitalize drilling costs on successful wells you still get subsidized by being able to write off unsuccessful wells, which viewed in a certain light are part of your costs of finding the successful ones:

The revenue loss estimate excludes the benefit of expensing costs of dry tracts and dry holes, which includes expensing some things that would otherwise be capitalized. This is a normal feature of the tax code but confers special benefits on an industry where the cost of finding producing wells includes spending money on a lot that turn out dry. This is probably more important than [actual "loopholes" like intangible drilling costs, or] IDCs or percentage depletion.

Not relevant to CHK, though: what with being onshore and having good geologists, Bloomberg points out they basically never drill dry holes.

Driftglass screwtinizes the Aspenites better than anyone else I've ever read (get ready to ROTFL!!). (Click on the link for the full treatment.)

Still A Little Loopy From The Meds

So I will assume that some of what I saw on MSNBC this morning was a side-effect of a bad drug interaction.

Or perhaps it was a fragment of some fleck of extra-legal fun dislodging itself from the fatty tissue where had been hiding since the 80s and finally crossed the blood-brain barrier.

Or maybe an undigested bit of beef, a blot of mustard, a crumb of cheese, a fragment of underdone potato.

Because what I saw was Andrea Mitchell, Walter Isaacson and Jeffrey Goldberg -- apparently misunderstanding that they were at "Aspen Ideas Festival" and not the "AIPAC Ideas festival -- fawning all over each other while simultaneously trying to outflank each other by cutting each other off with passionate divination of what "[Ehud] Barack]" and "the Israeli government" really thinks/feels/knows/senses/suspects/aspires to/fears/wishes/hopes (as if the point hadn't been underscored deeply enough, Mrs. Alan Greenspan completes the circle of life by mention(ing) at one point that such-and-so was [Ehud] Barack's "direct answer" to "a question asked by Thomas Friedman.")

If they had been sporting Hunter Thompson lizard heads and copulating frantically in a pool of their own sick, I would have only been marginally more horrifically entertained and, may I add, that it is a triumph of the art of microminiaturization that you could barely see the tiny Likud Party ear-buds each of them apparently had jammed into their listening holes.

This was followed by Mike Allen [Politico] explaining that the "Aspen Ideas Festival" is really just Wally World for the same Beltway Idiots who screw up your news every other day of the year -- that every year they decamp from their rat-holes along the Potomac to go to Aspen to discuss, among other things, why the press is so fucked up. In fact, the subject of Mr. Allen's panel or trust-fall or sweat lodge was, loosely, "Why does the press get so much stuff so wrong?"

Apparently no one in the elite Beltway press corps has an answer to that question, but figuring it out involves giving up for one week the fast-paced, 24/7 navel-gazing they are forced to pass off as news the rest of the year,  stepping back, reassessing, and take a few, serious, deep-dives into the pool of their collective narcissism. This searching moral inventory is taken between gourmet meals, hot oils massages and dividing up into "Liberal" and "Conservative" flag-teams so that David Brooks can ask them the few perfunctory "questions" he needs "answered" to pad out his latest "Both sides doin' it!" 800-word embarrassment.

(Wanna bet that that neither Marie Burns' wonderful vivisection of the Sulzberger family's peculiar hiring practices at the New York Times

Where the Buck Stops...Sulzberger hired Andrew Rosenthal, the paper’s current editorial page editor, to replace Collins, who went on book leave before returning as a columnist. Sulzberger’s glowing description of Rosenthal did not include mention of the fact that Andy’s father, A. M. Rosenthal, had worked for the Times for 56 years, including long stints as executive editor and op-ed writer. As a Gawker writer remarked contemporaneously, “We’d make some joke about how these kind(s) of dynastic successions at the Times are almost never a good idea, but let’s be honest, it’s the editorial page, who gives a shit? Also, we’re pretty sure that David Brooks’ kids are writing his columns right now, so there’s plenty of precedent.”... In 2008, Sulzberger and Rosenthal made the disastrous decision, “after a long and thoughtful search,” to hire conservative Bill Kristol to write a weekly column for the Times. The relationship didn’t last any longer than Kristol’s one-year contract. Other less-than-stellar new hires to the op-ed page: Frank Bruni and Joe Nocera, who come respectively from the foods and business pages of the paper. ...

So there’s all that ...

nor Paul Krugman's latest hamming of the "Centrist dodge"

... If this sounds familiar, if it reminds you of the problem of partisanship in U.S. politics, it should. There are close parallels, as well there might be, since the trouble in macro is in effect a symptom of this wider political war. And there’s another parallel: many of those decrying the conflict within macro without facing up to the real sources of that conflict are playing the same unhelpful role being played by fanatical centrists within the punditocracy. (And no, “fanatical centrist” is not an oxymoron).

By now, the centrist dodge ought to be familiar. A Very Serious, chin-stroking pundit argues that what we really need is a political leader willing to concede that while the economy needs short-run stimulus, we also need to address long-term deficits, and that addressing those long-term deficits will require both spending cuts and revenue increases. And then the pundit asserts that both parties are to blame for the absence of such leaders. What he absolutely won’t do is endanger his centrist credentials by admitting that the position he’s just outlined is exactly, exact"ly, the position of Barack Obama.

made it onto Mr. Allen's agenda?)

Mr. Allen concluded his presence on my teevee by excitedly explain -- completely without irony -- that later on he plans to go down to Woody Creek Tavern and "sit where Hunter Thompson once sat".

And I just sat there for a moment, feeling the dull aches of recent surgery playing a little symphony across my body and wondering just how big a trebuchet I would need to fling a Coupe de Ville packed with dog shit and napalm all the way to Aspen, Colorado.

July 2, 2012

Wow!

Now, isn't he doing HST proud?