Tax dodging by the super rich

http://www.thetakeaway.org/story/two-tiered-taxes-one-system-rich-one-everyone-else/

This is a "no duh" story to end 2015, but the explicit details are interesting (more so than the typical corporate inversions we've recently heard about). During the Clinton years, the 400 highest income American households paid an effective rate of 27%. Now it's 17%. And because payroll taxes hit the less wealthy harder, that 17% rate means that the highest-income Americans are paying about the same tax rate as a family with $100K household income (80th percentile in the US). How can that be democratic and just?

Like their gated communities and hedge funds, there is an exclusive-access world of private tax dodging infrastructure that the super-rich pay millions in fees to access (including political contributions), but it saves them tens or hundreds of millions in taxes per household. These families span the political landscape, which is especially dismaying for the supposed "progressive rich." If they adopt the same practices as the Kochs, then they are just adding to the problem instead of fighting it.

Their biggest source of tax savings is of course that schlubs like us earn wages as income, while they earn the bulk of their money through complex investment vehicles, shell corporations, and trusts - and those barely get taxed. They need pricey lawyers and bankers to set up, but it pays off. The NYT article said that the rich treat it like a fun game - like an easter egg hunt to find all the possible loopholes to screw Uncle Sam and the 99%. But I'm sure they don't think of the impact that way - they "deserve" the rewards because they're just more clever/influential than the rest of us. Some of the arrangements are so complex that the underfunded and maligned IRS can't even keep track, and they are supposedly the custodians of the rulebook. But they don't craft the tax policy, they just do their best to interpret and enforce it.

The NYT article failed to state what the total tax losses are to the US due to these practices by the super rich. But I wouldn't be surprised if it numbers in the tens of billions. Maybe that is not a huge # vs. the total US income tax revenue (over a trillion per year), but it could buy a lot of road repairs and school programs. And besides the actual revenue, cracking down should send the message that the rich do not get to play by a different set of rules. They already enjoy vast socioeconomic advantages that enable them to grow their wealth, and maybe some of those advantages should be reduced too, but at least they should not weasel their way out of their patriotic and civic obligations.

Otherwise IMO they are more damaging to the country than all the deranged mass shooters and ISIS-inspired amateur terrorists, because the cheating rich are undermining US principles of equality, justice, and community, which hurts us all. Remember the old saying (paraphrase), an accepted injustice anywhere diminishes justice everywhere.

Can money buy environmental and social harm?

Rich Californians don't think they should have to cut back on water (their golf courses, lawns, and pools need it): http://www.washingtonpost.com/national/rich-californians-youll-have-to-pry-the-hoses-from-our-cold-dead-hands/2015/06/13/fac6f998-0e39-11e5-9726-49d6fa26a8c6_story.html

And of course everyone's favorite dentist to hate allegedly paid locals $55K to get him special access to kill Cecil the lion: http://heavy.com/news/2015/07/walter-palmer-federal-international-zimbabwe-charges-charged-crimes-federal-corrupt-practices-act-laws-zimbabwe-united-states-extradition-treaty-info/

Power is corrupting, and money is a major form of power, so stuff like this has been going on for millennia. But do you think new laws are in order, or we just have to accept money as speech and tolerate that some wealthy folks can afford to commit socially harmful actions? Surely it isn't absolute, as some laws prevent people from buying other human beings, or WMDs, or using their money for coercion (the dentist may have violated the Foreign Corrupt Practices Act, even if the actual act of killing the lion off the preserve was "legal").

Some laws are already in place, as CA households that don't cut back on water sufficiently may need to pay fines/higher rates on a sliding scale (ostensibly to offset the social harm of their resource usage). But is that enough of a deterrent? Probably not considering some people's net worth - do they need to be cut off instead? They can water their lawns with Evian. That is why market pricing for water won't fully "solve" the issue for price insensitive people (it might affect businesses and farms though, which is the lion's share - no pun intended - of usage). But since water shouldn't be a luxury good like a Vuitton bag, affordability can't solely determine access.

But in the end, stricter punishments for "bad rich people behavior" are unlikely because the politicians who write the laws are rich and disproportionately represent the interests of the rich. America has ~150MM eligible voters, yet so far 400 families have accounted for 50% of the 2016 presidential campaign funding (according to Bill Maher today).

PS - environmental rant: I don't buy the BS from hunting proponents to justify killing animals - it's actually pro-environment as population control (and some species can withstand "culling" more than others). Maybe it's even pro-conservation because the $ that some hunters spend to kill a few big game are used to protect the other specimens (for future kills?). First of all, nature doesn't need us egotistical humans to control a species' population. There are natural limiting factors like food, habitat, etc. Humanity's only impacts on nature are negative, and in a huge way. Yeah we do a good thing now and then by relocating or repopulating a species under stress, but those well-intended moves can backfire too. The best we can do is have as little impact as possible, like some untouched areas of Siberia probably have the healthiest ecosystems because we don't have a footprint (apart from climate change and air pollution diffusing over). And re: the $ argument, I bet for every dollar spent on big game hunting/fishing, maybe at best 20% actually benefits the animals and the rest are just paid to various parties in the supply chain, so that claim is specious. If we love nature then we should leave it alone.

Another heartbreaking example: birds in the extreme north. Because of climate change (and humans' acceleration of it), arctic ice has receded drastically since 1980, and snows have turned to rains. Excessive rain causes fatal hypothermia for some birds, and the weather trends are too rapid/drastic for them to evolve and adapt in time. Ice gives access for birds to fish for food, and chicks are starving to death with less available ice per family (it's as if all our farms permanently lost 80% of their acreage in a generation - could we sustain our population under such conditions?). Species will naturally wax and wane (or disappear) over time, we don't have to "fix" that, but highly successful and evolved creatures like these birds and polar bears, who used to be flourishing, are now rapidly dying out because of us. If our species makes it to the 22nd-23rd Centuries, I am sure they will look back at our (in)actions and think that we were really a bunch of assholes.

All those birds wanted to do is live, and they never did us any harm (they don't even compete for resources with us, as that land is uninhabited and the fish they eat are not commercial). Yet because people want comforts and money (enabled by fossil fuel burning), benign living things have to die. And for those who don't value other species as much as humans, the same can be said of the ~3B folks who by chance were born into poverty and/or environmentally sensitive areas of the planet.

Money troubles and humble living according to Ann Romney

You know what's annoying... when people who want for nothing try to make it sound like they struggled through money problems. Some rich people are so greedy, they want your sympathy too! Case and point Ann Romney: Marie Antoinette thinks she's Cossette! These quotes were taken from a Boston Globe article from 1994, when Mitt was making his US Senate run vs. Teddy K. The Romneys were not well known in MA at the time, so I guess this was Ann's attempt to endear themselves to the working-class New Englanders?

http://www.dailykos.com/story/2012/04/16/1083802/-Ann-Romney-s-tale-of-struggling-We-learned-hard-lessons-living-off-our-stock-portfolio

I'm sorry for harping on poorly chosen words uttered decades ago, but stuff like this is ignorant and disrespectful to the people who actually do have to live with hardships. That's one thing that money can't buy (in America at least) - no matter how much you exaggerate, lie, and reframe your own narrative, you can't pretend to be a self-made man if you're not. They could have given away all their assets and tried to make something from nothing to see what they were really made of. But that is just too hard and risky (though it's knows as "reality" for most humans). It must chafe them so much to have to campaign against an actual self-made man who is a better communicator to everyday Americans and is generally better liked by them (and he is the POTUS). That is the difference between a real rags-to-riches story and a poser. The real deal doesn't feel the need to shove his/her story down our throats until we shower them with admiration (we may forgive Obama's self-promoting books because he was trying to launch a national political career at the time). The real deal is grateful for his/her success, and wants to give back so others can have it too. Conversely, a poser feels entitled, egocentric, and superior. The rich love judging and psychoanalyzing the poor to make themselves feel better, so I am just trying to return the favor (not that I am or speak for the poor). I know I haven't struggled much financially in my life, so I don't act like I did.  It's not a difficult concept to grasp. And for one's biggest struggles, or triumphs for that matter, there is a certain dignity in keeping it private unless there is some edifying, inspirational purpose - and winning a campaign to "save America" (i.e. help rich people) probably isn't a valid reason.

I know that millions of poor people will end up voting for Mitt in November, but I hope not a single one of them votes because they truly believe that the Romneys care about their plight and will make their lives better. Well to be fair, I don't think the Romneys are cruel a-holes, and they probably do care about the suffering of the poor - to the extent that most Americans care about Darfur. We feel bad, but not enough to lift a finger about it, because we have higher priorities (like shopping and dressage). Also if you don't understand a problem, it's hard to truly care about it.  

So getting back to Ann's speech about their student days at BYU... I think most students are short on cash (plus it's not like the cost of tuition and living in UT back then was terrible). There's a certain romance to being a "starving student", and it can be liberating. But for millions of students now facing much more daunting costs, family constraints, and uncertain futures, it's a big deal. They take out loans with crappy terms or work several part-time jobs, but not the Romneys. They were so poor in their youth that Mitt needed to sell his American Motors stocks (gifts from daddy, probably bought at employee discount) to pay the bills! Ann recounted the story like a true out-of-touch aristocrat. And for the record, Ann is the daughter of a Michigan industrialist turned mayor. She first met Mitt at an exclusive private school. Les Miserables indeed!

Some highlights from the article:

- Neither one of us had a job, because Mitt had [stocks]. (Ah, so they didn't work because they didn't NEED to, not because they couldn't find a job like many of the 25M unemployed today whom Mitt claims to fight for)

- [Mitt's dad] invested Mitt’s birthday money year to year — it wasn’t much, a few thousand... (Aw what a meager bday gift, especially in 1960's dollars)

- Five years later, stock that had been $6 a share was $96 and Mitt cashed it. (I thought this was supposed to be a sob story! She just couldn't resist bragging about their capital gains - of course in those days they had to pay a 35% tax rate for long term)

- We were living on the edge, not entertaining. (They were so poor that Ann was too ashamed to host dressage parties)

- Right after Mitt graduated in 1975, we had our third boy and it was about the time Mitt’s first paycheck came along. So, we were married a long time before we had any income, about five years as struggling students. (Hm, 3 kids with no steady paycheck - is Ann a "welfare mom" who needs to learn, as Mitt said, "the dignity of work"?)

- ...I don’t even consider myself wealthy, which is an interesting thing, it can be here today and gone tomorrow. (this quote was uttered more recently. So how much net worth does it take to be wealthy then, a billion? And "interesting" is not the first word I would use to describe that comment)

------

In the current campaign season she's changed her tone a bit:

"Look, maybe I haven't struggled as much financially as some people have," she said recently on Fox News. "[But] I can tell you — and promise you — that I've had struggles in my life, and Mitt and I have compassion for people that are struggling." -NPR

Does compassion for struggling people entail endorsing the most draconian budget in modern US history that slashes social services spending (that millions literally depend on for survival and social mobility) in order to fund tax breaks for the wealthy and big businesses? Yes, their humble roots at BYU certainly shaped their future values.

Jerks make more money, nice guys finish last?

http://www.huffingtonpost.com/2011/08/16/nice-women-finish-last-work_n_928207.html


http://www.kqed.org/a/forum/R201108190900



Most of us implicitly feel or observe this, but a team of business professors recent published a paper showing data that being more disagreeable at work is correlated with higher pay (especially for males, supposedly in order to fit the dominant, aggressive gender role), when controlling for industry, worker age, timing, and job level. "Agreeable" people are characterized by 6 facets: trust, compliance, altruism, straightforwardness, modesty, tender-mindedness, so I guess disagreeble would be opposite. A person 1 SD more disagreeable than the mean of their data set made on average $10K/18% more than a person 1 SD more agreeable than the mean. I believe the data was collected by self and peer reported surveys, so they're not fully objective and quantitative.



But this type of disagreeable personality is also correlated with less success in relationships, more stress, and generally less life satisfaction. And as you would expect, the "jerks" are less likely to manage others and receive promotions they are qualified for; they only seem good at negotiating raises. They are also fired more often, but find new jobs quicker. We know that women and minorities unfairly trail white men in terms of compensation, and the "advantage" for being disagreeable is diminished for them (probably due to backlash over the stereotypes of being a bitch or an uppity minority).



But this is a paradox. Jerks only succeed if they can differentiate themselves from and take advantage of nicer, more submissive coworkers. A company entirely staffed by jerks would likely fail. And if a nice guy reads this study and wants to get meaner in order to make more money, the rapid temperament change would probably be met with negative reactions. That person would lose the capital he has accumulated from being nice, and his "forced jerkiness" would probably be interpreted as phony or weak by his true jerk peers. And of course there are many other ways to try to get recognized and make more money at work besides being meaner. Though there's no guarantee that any of these measures will bear fruit; it depends on your org, bosses, economy, etc.



One hybrid solution is to be a jerk at work and nice in your personal life, but most of us know that it's hard to wear multiple hats and keep separate personalities totally separate. Plus salary is not the only measure of a person's worth and life satisfaction. We would probably agree that the most talented actors and artists are not the highest paid, and being a jerk and "winning" all the time isn't the last word for life (and clearly it costs you in other areas). Or if that is all you need to be happy, you probably have bigger problems.



Of course this stuff is just the tip of the iceberg and it's an age-old labor issue, or human social issue in general. We know that the workplace is generally a harsh, soul-crushing hell, and getting more so with time and economic pressures. We have to get mean at times to avoid being a doormat. Maybe it's all about picking our spots, and fighting when it will pay off most.

How much does it cost to become president?

I guess the going rate is around half a billion dollars...

Disclaimer: GOP fundraising/campaigning has set new records for sleaze in the last decade, but the Dems are not far behind. Yet another reason to justify more choice of political parties and more campaign oversight/transparency. I could have wrote another email investigating questionable practices by the McCain campaign (and I'm sure they're many, such as: http://online.wsj.com/article/SB120873412746529713.html?mod=googlenews_wsj), but more and more it's looking like he should not and will not be our new president. Actually considering Obama's sound, moderate positions on many issues, consistently poor decision making by the McCain-Palin camp, and the turbulent economic climate, it's a shock to me that the race is even this close (media spin, and/or voter prejudice?).

So I chose to focus on Obama instead, not only because he is the presumptive winner, but also because he has made a point to convince people that he is above the typical Washington money game, and his heavy small-donor support suggests a truly populist, democratic effort to get him elected. He calls his campaign a "movement" actually, which is a really big word. I want to determine if it's true that his campaign has held itself to higher standards. Because if it turns out to be dubious or false, that may shed light on what to expect or not to expect from an Obama administration.

It's amazing how Obama, a reformer who claims to reject Washington lobbyists, was also able to out-raise George W. Bush, a lobbyist's wet dream. An LA Times article from last year that I've already forwarded described how Obama's campaign has evaded the spirit of this chastity: instead of taking registered federal lobbyists' money directly, he takes from corporate "consultants" or state lobbyists instead, and lobbyists also offer to corral private donors on Obama's behalf. Amidst their terrible business troubles and threat of layoffs/buyouts, can we really believe that Lehman/Merrill Lynch employees just decided to give $10M to Obama and $7M to McCain out of generous patriotism? In fact, the financial sector is the top corporate donor group for both campaigns, which may have contributed to their Senate voting to get those charitable but controversial bailout packages passed quickly.

But it is also true that Obama has been amazingly popular for small donations from students, overseas/enlisted Americans, and first-time campaign contributors. Hence his campaign statement that "the average donation is under $100". Though averages can be a deceptive statistic, and over half his money comes from donations exceeding $1,000. One side of him is quite populist, though the other side is big money politics-as-usual. It's true that an unprecedented number of donors (over a million) have contributed to Obama, maybe because they really believe in his message and want him in the White House to make change, or maybe for other reasons. But Obama's impressive army of small online donors might be misleading, as this statement from Paul Lukasiak on a Time.com blog describes:

It turns out that Obama's contributor numbers were WAY inflated, because they included anyone who bought a bumper sticker, or a keychain with his name on it, or paid $5 to hear him talk. Yet he represented these people as if they had simply handed over cash for nothing in return, and the media went all ga-ga over his "stunning" ( the word one reporter used to describe it) contributor base. Basically, he made the mainstream media look like idiots.

As the NYT put it, Obama seeks to "transform grass-roots enthusiasm into more useful forms of support", like bragging about how many donors he has. He is technically correct in doing this, but it's convenient compliance. The Obama camp defended its inclusion of these customers as "donors" because it's the law; they run their merchandising operations internally, and most other candidates outsource them to private vendors. They have to declare a $15 shirt buy as a $15 campaign contribution, even if it cost them $5. Obama's website makes this explicit: "All purchases made on the Obama Store are 100% contributions to the campaign and count toward your overall contribution limit." It's a clever, legal, but somewhat manipulative strategy. I guess that's politics.

Though it's sad that the Obama campaign even charges $5-25 for people to attend his rallies. Not the black-tie dinners with VIPs, but just the informal public gatherings we see on TV. I guess most candidates might do the same, but isn't he supposed to be working for us? He claims to understand the economic struggles of America's middle class, so why would he add to them? Also, this new wave of "small donations" under $200 may open up the door to creative fraud, because they don't have to be reported to the FEC unless requested. I know in a huge national campaign you can't verify every penny real-time, so some irregularities will occur, even to the most conscientious candidate. A recent audit found that seemingly imaginary people had given over $10,000 to the Obama campaign (they have since returned the money). This is well above the $2,300 personal spending limit for the general elections, but they gave it in many increments of $10-25 (the much-celebrated small online donation), and apparently Obama's website lacks even the simplest controls that cut off donors after they've reached their legal maximum.

To critics, though, [the small donation] can be an invitation for fraud and illegal foreign cash because donors giving individual sums of $200 or less don't have to be publicly reported. Consider the cases of Obama donors "Doodad Pro" of Nunda, N.Y., who gave $17,130, and "Good Will" of Austin, Texas, who gave more than $11,000—both in excess of the $2,300-per-person federal limit. In two recent letters to the Obama campaign, Federal Election Commission auditors flagged those (and other) donors and informed the campaign that the sums had to be returned. Neither name had ever been publicly reported because both individuals made online donations in $10 and $25 increments. "Good Will" listed his employer as "Loving" and his occupation as "You," while supplying as his address 1015 Norwood Park Boulevard, which is shared by the Austin nonprofit Goodwill Industries. Suzanha Burmeister, marketing director for Goodwill, said the group had "no clue" who the donor was. She added, however, that the group had received five puzzling thank-you letters from the Obama campaign this year, prompting it to send the campaign an e-mail in September pointing out the apparent fraudulent use of its name.

"Doodad Pro" listed no occupation or employer; the contributor's listed address is shared by Lloyd and Lynn's Liquor Store in Nunda. "I have never heard of such an individual," says Diane Beardsley, who works at the store and is the mother of one of the owners. "Nobody at this store has that much money to contribute."

This summer, watchdog groups asked both campaigns to share more information about its small donors. The McCain campaign agreed; the Obama campaign did not. -Newsweek (emphasis was mine)

So now what is their clever excuse and legal loophole to justify the refusal?


http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2008/06/20/MNPH11C2CD.DTL
http://www.nytimes.com/2008/06/20/opinion/20fri1.html?ex=1371614400&en=d7529a3544511a83&ei=5124&partner=permalink&exprod=permalink

The articles above are old, but it said that through April, Obama already raised $265M (Newsweek says he has reached $458M by this month, NPR gives $605M), which contributed to his decision to break his agreement with McCain and forgo federal public financing for the general election. That money pool comes from the $3 donations that we have the option of making when we file our federal tax returns. Public financing caps spending at $84.1M per candidate for the general election, though at the time, Obama's camp predicted that they could raise 3-4X that amount, and they were right with $100M to spare. Obama is the first Dem candidate to do this since the program's inception in 1976 (enacted in response to Watergate and the huge amount of corporate cash secretly funneled to Nixon's campaign). Bush, Kerry, and Dean have declined public financing during the primaries, but not in the general election.

Obama's official justification for this move is that the public financing system is "broken", and that he needs much more cash than that to defeat the GOP-perfected, 527-led smear and misinformation against him. While that may be partially true, if he wins the presidency on this strategy, it may signify the end of public financing and even more uncontrolled spending than the 2008 cycle in the future. Is that a good thing for America and the change we need? Public financing does seem to leave a candidate at a disadvantage against an opponent who opts out, but McCain didn't, and Obama didn't bother trying to reform the system during his time in the Senate. Several attempts at overhaul have failed in Congress, possibly blocked by public financing opponents who want to render the system obsolete and ripe for termination.

http://www.clcblog.org/blog_item-57.html (a detailed analysis of public financing and how it could be improved)

Anything to win, right? When you are fighting a dirty opponent, some people think that you also have to get a little dirty, or your opponent will eat you alive. Just a few compromises to your principles here and there, when absolutely necessary, won't hurt anyone, right? In a general election, viable candidates have to move towards the center and amass the big bucks anyway. Win first, and then you atone by doing extra good when in office. But history has shown time and again that it doesn't work that way. Once you start to compromise, deceive, and rationalize, it just snowballs from there. President 44 will have to deal with a number of complex problems where consensus will be difficult, if not impossible, to achieve. Sometimes compromise may be the only solution, but other times it's just a convenient, tempting way to get faster results by circumventing your conscience.

"I'm afraid he learned to go along," says [Alan] Dobry, the Hyde Park political activist. "There's a fellow I know, another committeeman, 'Bull Jive' Taylor. [He] used to say to me, 'Alan, why don't you go along? Everything would be so much easier. Everything would be so much smoother.' And I think Barack learned to go along. It may get him elected president, but it doesn't make me happy." -NPR story on Obama's experiences in Chicago politics

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Barack Obama's campaign is trying to further pad its fundraising lead in the closing weeks of the election, asking supporters Monday for their help in adding 100,000 new donors to the campaign [during the week of Oct. 13]. In a fundraising e-mail from Obama, the Illinois Democrat says the cash infusion is needed to combat Republican efforts to "distract voters and distort the truth." - TheHill.com

Obama recently announced that he pulled in another whopping $150M from Sept. donations (632,000 new donors, though I don't know how many of those are Doodad Pros). That's $5M/day. Heck, his campaigners should work in Las Vegas or Madison Avenue with such skills in getting people to part with their money for nothing in return. His one-month haul (of course a campaign record, blowing away his previous Aug. record of $63M) is almost double the public financing maximum. He's blowing McCain away, though of course the GOP nominee gets more cash from party fundraising too.

The Obama gang are hoarding and celebrating when I think they should be giving the money back. Hasn't Obama been the one saying for the past few months that families are hurting and the economy is in trouble? He has enough money to run 3 presidential campaigns! He should tell all those well-meaning families to keep their hard-earned money and use it to pay the bills or save for the uncertain future. Isn't that better for America? Obama has legitimately complained about, blamed Bush-McCain for, and vowed to fix the sad state of neglected schools, the high costs of gas/food/college/health care, home foreclosures, decaying infrastructure, not enough armor for our troops, etc. Some of his money can be legally given to such causes, as long as he or his family are not salaried employees of the recipient organizations. If he cares about America and the suffering of the needy, then he should give some of his war chest away, which actually helps people, instead of yet more silly ads and merchandise (well, I guess those expenditures do help our economy too, but it's redistribution instead of new wealth creation). Shouldn't he "spread" his wealth around if he expects us to? Wouldn't that be good PR as well?

But he's keeping it, and actually has the gall to ask us for more, which really bothers me. He has more money than he could possibly spend by Nov. 4, unless he plans to finance the Iraq War. And what happens with the leftovers? It is legal for him to refund the donors (the Obama economic stimulus package), pay off outstanding bills, or give to a registered charity or political party. It's also permissible for him to contribute to a few other campaigns (and I'm sure he will, to try to increase the Dem majority in Congress), under certain constraints of course. What is totally illegal since 1989 is using the money for a candidate's personal expenses, though as you would expect, abuses have happened.

http://wiki.answers.com/Q/What_happens_to_campaign_contributions_if_the_candidate_quits
http://www.nytimes.com/2007/02/24/nyregion/24retire.html?_r=1&oref=slogin

But it looks like Obama is planning to spend most of it on himself. And where is the money going? TV ads of course. Excluding the huge 30-minute prime time chunk he purchased on 3 major networks (FOX, NBC, CBS) for Oct. 29, important enough to reschedule the World Series baseball championship (America's so-called past-time) on that night, Obama is also rich enough to compete in some red states that previous Dems had written off, like North Carolina, Missouri, and Indiana. He is outspending McCain 2-to-1 on ads in those and other battleground states like OH an FL. In just 24 hours, he spent $3.3M on TV ads (what some primary candidates raise in a month), and is projected to, or already has, broken Bush's record of $188M spent overall. So far he has outspent McCain 4-to-1, according to the NY Daily News (http://www.nydailynews.com/news/politics/2008/10/20/2008-10-20_obamas_allout_blitz_drowns_out_mccain_wi.html). David versus Goliath? The often victimized and down-and-out Dems are now looking like the GOP: bullies with deep pockets. I know that Obama's collective ads are much less negative than McCain's (which the front-runner can afford to do), but really I feel scared for America if simplistic, manipulative content like this actually affects voting decisions:

http://www.youtube.com/watch?v=H-ae409tJEI (even Joe Biden denounced this now-infamous ad, but Obama defended it on national TV)

The aggressive fundraising and spending would seem more reasonable if he is down or the polls are neck-and-neck, but in terms of electoral votes, he has quite an impressive lead on McCain! This is like the dominant 2007 Patriots running up the score on the Dolphins. I know that history is not on Obama's side and he can't afford to be complacent, but so much of his campaign strategy is based on trust in polling, so why the paranoia now? I think he should do everything that is reasonably possible to try to win, but not go overboard. $200M spent on TV time is way overboard. Are voters really that cheaply persuaded? What does that say about our democracy and politicians like Obama if they think that some robo-calls, junk mail, and 30-second TV pitches will move a state from red to blue? One can make the argument that mass-media campaigning is deleterious to the electoral process. It's just repetition, message control, and sensory overload to the point of psych warfare to me. I am sure some worn-down voters in battleground states are downright sick of all this bombardment, and can't wait to be left alone after election day.

It all comes back to the whole "buying elections" cliche: in 75% of open-seat Congressional races, the bigger spender won. I can only imagine a similar trend holds for presidents, but it's not that simple. As the papers below describe, money alone doesn't win elections, and there is definitely diminishing returns when it comes to campaign spending. As long as Congressional candidates pass a certain funding threshold ($1M for challengers, $0.5M for open-seat races), additional spending hardly affects their prospects of winning. For presidential hopefuls, the first million spent is much more important than the 50th, mainly because of the front-loaded primary process and the need for candidates to quickly get known nationally. So the data suggest it might not even help Obama to spend another few million this month. I guess David Axelrod didn't read that paper or doesn't care. Plus for a candidate committed to fighting climate change and irresponsible consumption, I can't begin to imagine the carbon footprint and trash amassed by his campaign. Well, win first and do good later, right?


http://www.scribd.com/doc/2383850/Does-Money-Buy-Elections
http://www.fairvote.org/reports/monopoly/richie2.html

Other resources:

http://www.sourcewatch.org/index.php?title=Barack_Obama/Campaign_Financing#_note-52

The Wall Street rescue, through the eyes of an economics novice

I guess by now our leaders have done a decent job explaining to us why the bailout package is a "necessary evil". It's not just a blank check to Wall Street at the expense of Main Street. For better or worse, we're like symbiotic organisms; our fates are tied and Wall Street credit is the lifeblood that sustains Main Street activity. Though many times (including now), it seems that Wall Street calls the shots and we are just along for the ride. They tell us it's all about credit availability. Small businesses and local governments need loans to buy raw materials or even pay their workers, not to mention the private citizens that seek car/college/home loans. But is credit the answer for everything, and does it have to play such a crucial role in modern economies? Must we do "whatever it takes" to insure a free flow of credit forever, or face worldwide panic and recession like we see now?

Despite the uproar from some GOP leaders and talk radio of all stripes, America is not "dead set" against this bill, and I bet the House will approve version 2 today (oh, I just now see on BBC that they did), especially with time running out in this Congressional session. All 535 of their asses are up for re-election on November 4 (but only a few incumbents are ever really challenged), and voters/investors are running out of patience for political posturing as the Dow sinks to 10,000. I guess the new bill is 90% similar to the previous version, except for the FDIC insurance limit is increased from $100k to $250k (that's really great news, since most of us have like $240k in our savings accounts and were getting nervous), and about $100B in new tax breaks were included to persuade the holdout Republicans, with no mention how debt-laden Washington will recover that revenue of course. Clearly Main Street, Wall Street, and Washington have problems with borrowing responsibly.

Some of the included tax breaks are pure pork and quite laughable: http://www.taxpayer.net/resources.php?category=&type=Project&proj_id=1429&action=Headlines%20By%20TCS.

Many gripes about the bailout are justified and it won't be a panacea, but unfortunately there's not much room left for further debate. If asked, "Would you risk half a trillion in tax dollars to help Wall Street recover from its mistakes?", most people would instinctively answer "no" without the benefit of additional context. So one can understand why our initial reaction to Bush's plan was skeptical at best. But recent Pew Research poll suggests America is now split roughly 50-50 over the plan, though few Americans are well versed in macroeconomics and fiscal policy to really understand the repercussions either way. If geniuses like Bernanke and Greenspan are grasping at straws, that doesn't bode well for the rest of us. People might not want to throw their tax billions at Wall Street, but they also don't want to see their investments evaporate and commerce dry up around them (and in many cases it already has). When push comes to shove, we'll go to bed with the devil to save ourselves.

That's what really frustrates me about this crisis - it demonstrates how easily Wall Street can manipulate us like a puppeteer. Big firms and private citizens alike made big bucks during the loose credit housing boom, but some got in too deep and hung around too long until they got burned. And all along, the Fed tried to prolong the binge instead of trying to cool off an obviously oversupplied and overvalued housing market. Many huge banks have seen their holdings lose over 50% of their value since 2007, causing financial panic or ruin to millions. So at every mention of a government rescue (despite many economists' concerns), the Dow surged, and when the House balked on the first bailout proposal, the tempermental Dow responded with a record point drop. Was that due to millions of Average Joes going on E*Trade in unison to cut their losses and sell their 50 shares of blue chips, or rather the high-rollers and big fund managers dumping their vast numbers of shares in favor of safer commodities like gold? It may not be deliberately punitive, but it's still blackmail.

Banks might be drowning in debt, scared to invest and lend to each other and us, but they are still sitting on billions of good, liquid assets. They could try to reverse the slide if they wanted, and some have, like the European Central Bank injecting billions into the credit market and Warren Buffet looking for some bargains. But instead they tighten up even further, because why should they risk their money when Washington might do it for them? It's like the "welfare mom with 6 kids" that Newt Gingrich types loved to villify. Why should she make an effort to get a job when Uncle Sam will cut her a check every month? Wall Street said, "OK Washington, if you don't give us the money, we're going to execute hostages until you do." Economic terrorism, right? Ordinary citizens saw the unlucky 777 point drop, and feared even more for their 401(k)'s and other investments. Maybe some who were previously opposed to the bailout changed their minds and started to lobby the bickering Congress to act. Anything to protect our money, right? Maybe I'm just full of crap and don't understand how the market works, but it sure seems like a scam to a simpleton like me.

The selective rescues or facilitated purchasing of some troubled GSEs and financial institutions by our government was huge economic news already. Maybe some people were already musing about a government repository for toxic securities as a potential next step, but the Bush-Paulson plan must have still taken America by surprise, as well as their demand for immediate implementation (hence the huge Dow swings in the last 2 weeks). I guess Congress and citizens had a right to be skeptical of a back-of-the-envelope plan crafted by Treasury, that gives Treasury god-like powers, and promoted by an administration with an unprecedented track record of augmenting executive powers (sometimes in defiance of the Constitution and common sense).

I am tired of hearing Harry Reid-type blowhards stressing the need to work together and pass this bill now, yet blame colleagues like John McCain for "interference", and proclaim that all 100 senators could have written a better bill. Then why didn't they? Don't give us a turd decorated with fancy wrapping paper and a $700B price tag, then expect us to congratulate you. I hate the fact that we have left the disease unchecked for so long that our best course of action left is to cut off our arm before the infection spreads. We've cornered ourselves. Many people in Washington and Wall Street seem very eager to get us to do a bad thing quickly, because the alternative is worse. I suppose that constitutes leadership these days. At least Lyndon Johnson had the dignity to not seek re-election after failing to deliver victory in Vietnam. If the Fed, Treasury, SEC, and Congress had an ounce of self-respect left, half of them should have resigned by now in shame. After Bush's speech to sell the plan to America, PBS had a couple chaps from the House Financial Services Committee on for analysis. At times they were actually smiling and joking about the situation to each other! Millions of Americans are in trouble and getting ulcers from worry, and they, who are in the eye of this storm and maybe contributed to the crisis, are hamming it up. Talk about out of touch; this is why revolutions happen.

A lot of people blame this credit crisis/housing bust on unbridaled personal and corporate greed and irresponsibility coupled with poor government oversight. While that may be partially true, greed and poor oversight have been and will always be a part of human civilization. There's no way around it unless we all become monks and peasants. But maybe the trick is to reduce the opportunities for reckless, greedy bastards to be reckless and greedy, and reduce the policing duties of the government to give them less chances to drop the ball. Yes, less regulation is fine as long as the credit markets and other financial systems are organized in ways where excess and fraud are not just illegal, but impossible. Maybe I'm just dreaming, but what are we paying all those PhD's for? Can commerce be free, but also with failsafe mechanisms? Can we create more ideal markets where human nature is less able to make a negative impact, without sacrificing productivity and efficiency too much? We all operate out of self-interest, and our behavior is affected by external carrots and sticks. Obviously the sticks weren't big enough to prevent even smart people from taking stupid risks in pursuit of very juicy carrots. But incentives and punishments only go so far, especially to powerful entities that think they can dodge accountability/consequences, and often they're right.

Maybe a good first step is reducing our dependence on credit. I know borrowing is necessary for some up-front costs of large investments like businesses and homes. But why can we not spend what we don't have? And do we have to exploit every last dime by loaning it out or investing in others? Can we reinvent economics with less emphasis on credit, because clearly the status quo has some pitfalls. I'm not saying we should bury our cash in the backyard, but there has to be some restraint and moderation. Otherwise, we'll keep getting market panics and crises like this one, except maybe worse and worse as financial institutions become "too big and interconnected to fail". It has gotten so complicated that we don't even know where the money in our savings account really goes, nor the true value of our investments. We are so dependent on large, predatory credit entities - it's too dangerous and unfair. They are the "landlords" and we are the "tennants". They dictate terms to us and only exist to take a piece of our labor and creativity. Microfinance has helped millions out of poverty in the Third World, even if it has its share of criticisms, such as very high interest rates to justify the investment risk. Maybe instead of relying on corporate America to keep our local economies going (where their interests may be quite different than ours), we can form more credit unions and municipal cooperatives. Share and spread the accountability and prosperity, with the goal being collective stability and security, not individual profit. People pay into and withdraw from a general fund based on their economic situations and financial preferences. Members vote on who gets loans and the conditions of those loans in a transparent, democratic fashion. But maybe that's just crazy socialist talk?

In closing, I find myself thinking about my few months as a student in Europe in 2000 (when the dollar was kicking the Euro's butt, so it was great timing). Obviously Paris is a modern metropolis with its share of problems too, but people from many walks of life were not obsessed with money, advancement, and acquisition, as we are. Of course there was plenty of greed and evil, though life was so different. It was a fast-paced, turbulent city, but somehow life seemed saner and more people-centric also. Maybe nostalgia is a rose-colored lens, but the differences were too large to be imagined. Every little neighborhood had several bakeries, convenience stores, and boutiques. Sometimes they would have no customers all day, yet they were still in business, paying the bills and providing for their familes. In America, it seems that all but the best small businesses are hanging on by a thread, while the rest of us whores have to attach ourselves to corporations for career development and financial survival. It is hard to get fired, and even harder to work more than 50 hours a week, yet unemployment was at 10% (though no one was starving to death). Companies weren't merging or going under left and right. Workers left their work at the office and could actually relax at home, often having two-hour long dinners together with the whole family. Maybe they didn't have a big home with a white picket fence, big screen, and station wagon, but they seemed quite happy and comfortable.

No one worried about saving up for tuition, child care, or retirement, because the state assumes most of those burdens. In America, we get nickel and dimed into poverty with "maintenance fees" on our retirement investments and college loan scams. Same goes for medical insurance, obviously, as France's system perennially ranks in the top 5, while ours is about #30-40 near Estonia. Middle-class people went on month-long vacations and could afford it. My uncle was on unemployment insurance for years and no one accused him of being a deadbeat. Taxes run about 50%, but many consider it a patriotic duty in order to maintain their society and quality of life. Maybe that welfare state lifestyle is going the way of the dinosaurs, with an aging populace and rising costs of basic goods and services. There is plenty of evidence for that, with conservatives like Sarkozy coming to power. However, other socialist nations have rejected their Bush-allied conservative leaders in favor of leftists, like Australia, Spain, and Japan. Maybe there is a chance. There has to be an alternative to this insane, and I mean literally insane, American way of life and commerce. Oh yeah, and mainland Europe isn't saddled with war expenses and the accompanying political blowback either.

Some interesting links:

http://www.iht.com/articles/2008/10/01/opinion/edbuchanan.php (using computational models to better understand/predict economic activity)
http://news.bbc.co.uk/2/hi/business/7646863.stm (have banks share more information and maintain accountability for their lending)
http://www.newsweek.com/id/161199 (the menace of the booming 'credit default swap' market and how it could be regulated)
http://baltimorechronicle.com/2008/092908Lendman.shtml (a big economics rant that I haven't even finished reading yet)

This section in italics is pretty lame, so please skip it over unless you want to ridicule my ignorance:

[The market and the past decisions of financiers have left us little alternative. We need to restore confidence and flowing credit in the markets, or the whole machine grinds to a halt. Credit is the "lubricant" of our economy, but does it have to be so? Liberal capitalism is roughly defined as private ownership and exchange of products/services/investments/etc., with prices determined by a free market. Credit is not inherently essential to market economies, but of course in our current industrialized, globalized economy, it is. We already know the dangers of relying on or abusing available credit. Our government is in record debt to foreigners, which contributes to our weak dollar and makes some struggling companies ripe for the taking by offshore competitors. Hyper-consumers with little self control keep taking out new credit cards to cover spending beyond their means, as well as their previous accumulating debt. Yet some of those people were offered huge mortgages without having to provide evidence that they were able to afford them. And sadly, many vendors almost rely on and tailor their business models in expectation of customers over-spending. We know all this already.

But why does our economy need to revolve around credit? I know borrowing and lending are as old as the pyramids, but it's probably no coincidence that usury is a sin in most religions. Micro-finance aside (a relatively recent invention), very few of us possess the vast capital and/or means of production necessary to provide substantial credit to would-be borrowers. So instead, investments and assets are pooled into vast multinational corporate financial entities that become umbrella lending hubs. Millions of people entrust their savings to them, hoping it will grow, and millions others depend on loans from them for various large purchases. Heck, even non-finance related companies make a good portion of their revenues through lending (GE and insurance companies like State Farm to name a few). GE makes jet engines and toasters - why venture into financial services? I think it's because the money is easier. They have all this surplus cash lying around - why not lend it out for a higher return, even if it gets them in hot water at times? It's hard to provide a tangible, desirable product or service to the marketplace, such as a new software application, home appliance, medical therapy, or even a cup of coffee. You have huge development and production costs, may need to file for patents (which could take years), conduct extensive safety and reliability testing, study consumer tastes, and comply with government regulations. And if things go wrong, you had better have deep pockets and some good lawyers/lobbyists. With lending, all you need are a few PCs and MBAs. I know I'm being simplistic, but you can't deny that the infrastructure needs of a company like Citi are much less than ExxonMobil or Toyota.

I know economics is all about maximizing efficiency, so in a sense it rewards "easy money". I guess that is why we may never totally expunge financial "gimmicks" from our society, and it seems that regulators are always playing catch-up as new scams emerge just as the old ones are finally contained. I guess this is the price we pay for freedom and democratic capitalism. ExxonMobil has to search for new oil fields, build wells, pay royalties, and find ways to get the product to buyers in a safe, legal, and cost-effective manner. Investment banks just move numbers on a board, albeit through very ballsy, high-stakes, and heavily-researched transactions. Easy money? There must be a reason why the median salary at places like Goldman Sachs is higher than even highly respected, productive companies like Google or Amazon. A neurosurgeon or Silicon Valley engineer might make good money, but it pales in comparison to the next innovative investment vehicle or shady tax shelter conceived by Wall Street. Maybe that's why the financial sector is the most powerful in our economy, even though it doesn't really do anything tangible. Everyone wants more money, and to grow the money they have. Surely there is a large demand for their services, which is why they exist, but I don't know how we can justify the power they wield. No other industry can bring global commerce to a halt and billions of people to their knees with a simple error.]

Quality of Life

Now that we're all "adults" and have to fend for ourselves in the "real world", I was thinking about the American Dream and what opportunities are available for people like us. I address you guys since we had fairly similar upbringings.

As far as I can tell, all of us did what was expected of us by our parents, teachers, and mentors. We studied hard, mostly stayed out of trouble (or avoided Johnny Law at least), did fine in college, and maybe even pursued additional education/credentials. Growing up, I think there was the assumption that if we jumped through those hoops, we would be "entitled" to some job security, summer holidays, the picket fence, station wagon + 2.5 kids, and comfortable retirement. Maybe some of us expected to conquer the world and have the mansion, stock options, and Benz, but at minimum I think we considered ourselves middle class. But I guess that is really an antiquated myth and nothing is guaranteed. I mean... I know we weren't Paris Hilton, but we grew up mostly without want or worry. Our parents provided for us and we hit the real world with a lot of advantages vs. other people. It's not like we're recent immigrants having to battle culture shock, language barrier, green card paperwork, and support relatives back home.

But for most of us, rent is kicking our ass (and it's not like we live luxuriously; many of us in old, small apts or just renting a room) and saving is pretty hard considering the rising costs of basic living essentials, car/student loan payments, etc. Maybe we can move farther away for cheaper rent, but then commute is a killer. We come home fairly drained, maybe getting a simple meal together and watching TV for a bit before bed and repeating the cycle. Maybe some of us have to study at night or attend evening classes to try to better our situations. I can't imagine how much time proper parenting would require on top of our current commitments. I know we're lucky that we don't have to work 3 minimum-wage jobs to even hope to make ends meet, but that's what education supposedly bought us - though what has it really gotten us so far? I know we're still young and our earning power will increase with time, but really - do you expect your salaries to increase 10% annually and get promoted on a regular basis, without some major luck, achievements, or extra education? Some white-collar salaries aren't even keeping up with inflation, even though worker productivity and business efficiency have steadily climbed since the 1980's. Though operating costs and employee benefits have also become much more expensive.

Our career counselors in high school basically told us to find something we enjoy, study that in college, and we'll be fine. Great in theory. But if we don't have a medical degree, JD, software engineer, or MBA/finance, how the heck are we supposed to save up a nest egg for a small house or even a condo ($500,000+ in some parts of the US), and future tuition for our kids (probably will be 50% higher than our day)? Some of our high-achieving friends already have homes and nice cars, but it's not easy street for professionals either; they have huge school debt and may work grueling hours to earn the bucks (they don't throw money at you for nothing). And the extra time/stress you need for higher degrees takes away from your personal life, and you may not even be able to start thinking about spouse/family until you're balding and need Viagra. There isn't enough time for everything. Many scientists and engineers don't make great money either, unless they have 10 years experience or become managers (it also depends a lot on Wall St. and the company/institution you decide to peg your future to). I guess some of us may happen to excel in a niche talent (dunk a basketball, entertainment, art, etc.), so we can be well compensated for a more recreational career. Of course I'm being cynical, and plenty of people make a good living in other jobs like accounting or retail. Even less-educated folks can do well in construction, real estate, etc. But it's a riskier proposition, and many more fail than succeed.

Like those "Rich Dad, Poor Dad" books, I guess we can't count on salary to provide for us and our loved ones. The theory goes that we should invest in real estate, bonds, and the market too, but when do we have the time to learn those skills or the capital necessary for substantial investing? Instead we have to place our money and trust with a corrupt mutual fund manager and pay the annual "account maintenance fee", even if we're losing money. Plus plenty of people lose their shirts playing with fire and not knowing what they're doing. Or others just get lucky with high-risk speculation, or being at Google at the right time (but how many other startups failed and their millions of options worth zilch?). Then there are those who were honest and worked hard, yet saw their 401(k)'s dissolve at Enron or Worldcom. The Baby Boomers in CA were so lucky and saw the Dow quadruple and home prices rise 3X during their mid-to-late careers when they actually had job security and money to invest. No wonder why all of our folks are getting their homes remodeled, buying luxury cars, and taking more vacations now. Well, they earned it. Though I doubt any of us are expecting the Dow to similarly reach 48,000 and homes to appreciate so much in our lifetimes.

The frustrating part is I hate thinking about all this money and job stuff, but we almost have no choice. If you're not improving, you're falling behind (or so it feels). I just want to be left alone and make an honest living not beholden to anything or anyone (isn't that freedom and liberty?). I was this close to living in a hut in Africa for F sakes. I still wear clothes from the '90s, and I LIKE it that way. I don't need much. Unfortunately I wasted a lot of money after my dad died, as an immature, self-destructive way of dealing with my grief, which I regret a lot. I also spent too much on my wedding, but my excuse was the missus had expensive tastes haha. However, now I would like a small, safe 2BR/2BA cottage a decent distance from work, with a small garden and a dog running around. So far, I can only afford that in East Palo Alto or the bad part of Oakland/Hayward (which are not close to work either). I would like to provide for my wife so maybe she doesn't have to work full time if she doesn't want to, or maybe can raise our kids instead of relying on the TV babysitter. I would like to pursue side interests and do other things with my life besides work, eat, and sleep. Most days I just put my head down and get through it, but I guess I felt like venting now. I know I am just being a whining baby and should sack it up like everyone else (plus I don't have it that bad), but I bet you guys feel similarly sometimes. Our lives have challenges, but it could be a lot worse. Though we supposedly did "everything right" in our childhoods and now we are supposed to reap the rewards of a more comfortable adult existence, right? But one challenge just seems to lead to a new, larger one.

So I really wish someone would have better prepared us for this reality. I guess there's no way a suburban parent or underpaid public employee could have predicted $5 gas and the effects of globalization when we were kids, but still. Or maybe you guys knew it all along and I was the only naive one? I almost wish someone told us to forget about finding a job that we like and just get proficient at boring, marketable skills. Now I understand why my doctor relatives force their kids to go to medical school (if they can get accepted), because they think it gives them a good shot at a better life over most other careers (though it takes a lot of sacrifice too). I guess it seems that we don't have access to the time or resources that we thought we would as part of the white-collar middle class existence. Our American existence is greedier, more expensive, more complicated, faster, and more unstable than when we were in high school, and the trend won't reverse any time soon. And we're not even at the point yet when a sibling may get in deep debt, we have to care for our kids AND aging parents, and we're always one car accident or medical crisis away from fiancial ruin. We also have our own retirements to worry about. Well, somehow in Western Europe most "common folk" like us get paid less in their jobs, yet enjoy free or very cheap health care/university/pension, more vacation and a higher quality of life. Their societies aren't falling apart and their companies aren't kaput either.

All in all, I'd hope that we're happy and comfortable with our living situations. I know many people have it much harder than us. But supposedly we did everything "right" in our youth and got a head start in the rat race. I am sure many of our parents were able to afford a mortgage for a small home after 5 years of working or so. I don't think that will be the case for us, though of course the world is very different now. Work sucks, but I guess there are some redeeming and enjoyable aspects of it. And once in a while, we can save up for a vacation or new toy. But is that all there is to it?

Police shaking down people in the war on drugs

Federal and state laws, in general, say that a law enforcement agency that seizes assets may not "supplant" its own budget with confiscated funds, nor should "the prospect of receiving forfeited funds … influence relative priorities of law enforcement agencies."
NPR has found examples, mainly in the South, in which both of these things have happened.

Ron Barroso, a longtime criminal defense attorney, says, "I believe a lot of these stops are fishing expeditions, nothing more. They figure they stop enough people out there that they can profile, for whatever reason, sooner or later they are going to hit on something."

"If a cop stops a car going north with a trunk full of cocaine, that makes great press coverage, makes a great photo. Then they destroy the cocaine," says Jack Fishman, an IRS special agent for 25 years who is now a criminal defense attorney in Atlanta. "If they catch 'em going south with a suitcase full of cash, the police department just paid for its budget for the year."

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I guess cops figure that if they can't stop the flow of drugs into the US, the might as well stop the flow of cash proceeds from those drugs from returning to Latin and South America. After 9/11, it's much harder for criminal outfits to launder dollars internationally, so increasingly drug gangs are relying on mules smuggling money through our southern border. So in principle, it's good for the police to try to crack down on one or both directions of the drug-money flow. Less money going south means fewer guns and bribes for the cartels, hopefully (maybe the horrible drug war in Mexico might be a future email topic). But giving law enforcement the green light to cavalierly seize private money on the mere "suspicion" of criminal activity, under the pretext of "keeping children safe from drug peddlers", could be a justice nightmare - and it has been in some cases (see NPR vignettes below). I guess for law-abiding citizens, it's just too dangerous to carry around large sums of cash. Maybe it's always been like that in history, but you don't expect the "good guys" to be gunning for your cash along with the criminals!

Some moron made a law allowing local law enforcement departments to keep 80% of seized currency from drug busts, traffic stops, etc., in order to incentivize aggressive crackdown on money trafficking. Heh, since when have cops ever needed a reason to confiscate other people's money? It goes all the way back to the Sheriff of Nottingham. For civil forfeiture, you don't even have to be charged with a crime, but the cops/Feds just have to be able to show a "preponderance of evidence" that the money impounded was "associated" with criminal activity. And unlike "innocent until proven guilty beyond a reasonable doubt", if we want our money back, the burden of proof is on the defendant to demonstrate the money is clean. Though it's hard for Average Joes to get their money back, since the legal costs to challenge the cops are often much larger than the amount seized by law enforcement (though many cases have gone to court, with victories awarded to the defendants).

Yes in many cases law enforcement has properly seized millions in veritably dirty money, which is a good thing for us (though it's debatable how much of an impact those busts have actually had on the overall drug trade). But some innocent citizens had their assets taken by police, often colored people in sparsely-populated areas of the Midwest and South, where police budgets are small and media coverage/legal services are less available to citizens. Granted that it may appear suspicious if blue-collar type minorities, who aren't well-spoken and presentable, are transporting large sums of cash, but that's not illegal (yet) and justice is supposed to be blind. Some immigrants and others come from "cash is king" cultures and don't believe in banks/investing. So what can they do when they need to transport their savings - just hope for the best? Eager cash-strapped cops and prosecutors, non-scrutinizing judges, and semi-defenseless motorists; that is a recipe for abuse if I ever heard one.

Who knows how much cops are keeping on the side, but officially: "Records with the Justice Department show that state law enforcement agencies seized $1.58 billion in 2007 alone, but that doesn't include the tens of millions of dollars that go through the state asset forfeiture programs — which are not tabulated in any central repository."

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http://www.npr.org/templates/story/story.php?storyId=91490480#91495507
http://www.npr.org/templates/story/story.php?storyId=91555835

On Sept. 2, 2007, Hunt says he was driving south on I-75 through central Georgia on the way to see his mother in his hometown of Dublin. Hunt was wearing his hair in braids and driving a friend's orange Dodge Charger [profiling!?!], when two Lamar County sheriff's deputies pulled him over for speeding. ... But what really got their attention was the $5,581 Hunt had stuffed in his pockets, which he said was the weekend profits from his car-detailing business.

"They just told me it looked like drug money, that was all," Hunt says. The deputies found no drugs or alcohol in the car; Hunt was not arrested for any offense, nor was he written up for a traffic violation. The U.S. attorney's office in Macon, Ga., has now initiated proceedings to keep Hunt's money based on probable cause that it is "proceeds traceable" to "a controlled substance." Among their strongest evidence:

The deputy smelled burned marijuana.
The deputy observed "an untestable" amount of what appeared to be marijuana on the floorboard.
Drug dogs detected drug residue on the currency when it was brought back to the station. [what money doesn't have drug residue on it!?!]
Hunt has not been charged with any crime as a result of the traffic stop. So the question arises: Why is the government trying to take his $5,581?

Hunt concludes, "It was my hard-earned cash. They had guns and badges and they just took it. If I would have been a drug dealer, I would have just left them and let them have the money."

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On Oct. 20, 2005, Gonzalez says he was driving south on U.S. Highway 281 from Austin to Brownsville to look at a car and buy a gravestone for his dying aunt. Gonzalez, who owns a car lot, was carrying $10,032 in a briefcase. About 90 miles north of the Mexican border, two sheriff's deputies of the Jim Wells County Task Force pulled him over for driving without a front license plate.

"He asked me to get out of the car. I did," Gonzalez says. "He asked me for my driver's license and insurance. I gave it to him. He asked me if I had weapons, drugs or large amounts of money. I told him I did."

The police video shows Gonzalez with a shaved head, wearing baggy shorts, standing beside a Mazda [more profiling!?!]. The incident report states the deputies grew suspicious when Gonzalez and his passenger both appeared nervous, and a drug-sniffing dog signaled the presence of drugs. The deputies took them in for questioning and searched the car. They found no drugs or weapons. Though Gonzalez said he was a businessman and showed them a credit card printed with the name of his car lot, the officers didn't believe him.

The deputies handed Gonzalez a waiver: If he signed over the money and did not claim the currency, he could walk away free. If he did not sign the waiver, he would be arrested for money-laundering. Gonzalez signed the waiver and gave up rights to his money.

"So at that time we got in our car and we left, still trying to figure out what just happened. We got officers that took our cash. We got officers that told us we can't get an attorney. So I'm thinking, are these guys officers of law? Did I just get robbed of my money?"

Gonzalez hired an attorney, who filed a federal civil rights lawsuit. The county fought it, and lost. In April, the county returned his $10,032 and paid him $110,000 in damages, plus attorney's fees.

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On March 15, 2007, Michael Annan was driving his black Nissan Maxima south on I-95 through southeast Georgia. He had just gotten off his job on a dredging barge and was on his way home to Orlando, Fla., when he was pulled over for speeding by deputies in Camden County, just north of the Florida state line.

Annan, a 40-year-old immigrant from Ghana, was carrying $43,720 in hundreds and fifties rolled up in a sock in the pockets of his overalls — everything he had saved from nine years of work in Florida and Georgia. But because he did not trust banks, or his then-wife in Orlando, Annan was carrying his life savings in his pocket.

"They open my car engine and they try to find something," Annan said in an interview from Brunswick, Ga. "But I don't have nothing in my engine, and I don't know what they thinking. … After that, they said they would take me to the office."

At the sheriff's office, a drug dog was brought out to sniff his car, but it detected no narcotics. Annan says he showed them a pay slip from his employer, Great Lakes Dredging. Annan had no drug arrests. Undeterred, the officers confiscated the money anyway, explaining they needed to investigate whether it was drug money. They said he could call them back in two weeks.

Annan says he did call back, a half dozen times, but that no one would help him. So he took a day off from work to drive to the county seat of Woodbine, Ga., to visit the sheriff's office in person. He said they told him they were too busy to see him.

So he hired an attorney in Brunswick, who faxed Annan's work records and tax returns to the sheriff's office as proof he wasn't a drug dealer. Camden County then returned his money. The lawyer charged him $12,000 — more than a quarter of his savings.

"I think maybe they see money like that … maybe they thought I was dealing with the drugs … how can a black man have this much money in his pocket? I think they robbing me, I can't understand they can stop someone and take his money," he says in heavily accented English.

His attorney, Paula Crowe, who is familiar with Camden County, says that in her experience, she's sure Annan never would have seen his money again had he not hired a lawyer.

Lt. William Terrell, of the Camden County Sheriff's Office, said the highway interdiction team was just doing its job.

"The deputies, with all their training and experience, were acting in good faith as sworn officers doing their job. They were not trying to take Mr. Annan's hard-earned money, they were simply trying to verify that the $43,000 was not money made in a drug transaction."

Camden County has an aggressive highway interdiction program that has earned the sheriff's department more than $20 million over the past decade and a half. Sheriff Bill Smith — once considered one of the most successful sheriffs in the nation at confiscating drug money off the highways — is now the subject of a federal grand jury investigation into whether he misused the forfeiture funds.

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The bundles contained $1 million. According to the law, 80 percent of that will go to the Kingsville Police Department. So that one afternoon's work will boost the department's budget by 25 percent.

"Law enforcement has become a business, and where best to hit these narcotics organizations other than in the pocketbook? That's where it's going to hurt the most. And then to be able to turn around and use those same assets to benefit our department, that's a win-win situation as far as we're concerned," says Kingsville Police Chief Ricardo Torres.

In this sleepy city of 25,000 people, with its enviable low crime rate, police officers drive high-performance Dodge Chargers and use $40,000 digital ticket writers. They'll soon carry military-style assault rifles, and the SWAT team recently acquired sniper rifles.

When asked why the Kingsville Police Department needs sniper rifles, Torres says, "With homeland security, we all hear about where best to hit than … Middle America. This can be considered that sort of area. We have to be prepared."

Federal and state rules governing asset forfeiture explicitly discourage law enforcement agencies from supplementing their budgets with seized drug money or allowing the prospect of those funds to influence law enforcement decisions.

There is a law enforcement culture — particularly in the South — in which police agencies have grown, in the words of one state senator from South Texas, "addicted to drug money."

Part of the problem lies with governing bodies that count on the dirty money and, in essence, force public safety departments to freelance their own funding.

In Kleberg County, where Kingsville is the county seat, Sheriff Ed Mata drives a gleaming new police-package Ford Expedition bought with drug funds. This year, he went to his commissioners to ask for more new vehicles.

"They said, 'Well, there ain't no money, use your assets,' " he says. He says his office needs the money "to continue to operate on the magnitude we need."

Another county agency, the Kingsville Specialized Crimes and Narcotics Task Force, survives solely on seized cash. Said one neighboring lawman, "They eat what they kill." A review by NPR shows at least three other Texas task forces that also are funded exclusively by confiscated drug assets.

The concern here is that allowing sworn peace officers — who are entrusted with enormous powers — to make money off police work distorts criminal justice.