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On today’s edition of Coffee and Markets, Brad Jackson and Elizabeth Blackney are joined by Philip Klein from the Washington Examiner to discuss the latest on the Solyndra scandal and how it perfectly illustrates the crony capitalism and back room deal culture of the Obama administration. Then, we’ll discuss Obama’s plan to reduce the deficit through phantom cuts and trillions in tax hikes.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

OMB had warned Solyndra “NOT ready for prime time”
Obama Rejects Obamaism
Day No. 972: President Obama unveils a deficit reduction plan
Obama reaches out to liberals with budget plan
Philip Klein at the Washington Examiner

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The hosts and guests of Coffee and Markets speak only for ourselves, not any clients or employers.

From The Washington Post:

The latest Obama plan “doesn’t produce any more in realistic savings than the plan they offered in April,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. “They’ve filled in details, repackaged it and replaced one gimmick with another. They don’t even stabilize the debt. This is just not enough.”

The most disheartening development, MacGuineas and others said, is Obama’s decision to count $1.1 trillion in savings from the drawdown of troops in Iraq and Afghanistan toward his debt-reduction total. Because Obama has no intention of continuing war spending at last year’s elevated levels, that $1.1 trillion would never have been spent.

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President Obama called for tax hikes worth $1.5 trillion on Monday, but in a less remarked-upon move, members of Democratic leadership in the U.S. Senate have also been pushing for tax increases of their own.  However, unlike Obama’s proposal, which is squarely focused on enhancing the revenue that upper-income taxpayers are required to pay out, the proposal being pushed by Sens. Durbin, Murray and Begich (respectively, the Assistant Majority Leader, the Secretary of the Conference and the Chair of the Steering and Outreach Committee) aims to raise taxes significantly on some of the poorest Americans.

Via the Winston-Salem Journal:

A group of 14 U.S. senators — all Democrats — are using a familiar strategy as they try to raise the federal excise tax on tobacco products.

Senate Bill 1403 would provide annual funding to the Individuals with Disabilities Education Act by essentially doubling the excise tax on cigarettes and small cigars.

[...]

For example, the federal excise tax for cigarettes would go from $1.006 a pack to $2.01.

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Obama likes Golf, round ball aka Basketball, and hanging out with the guys having a beer summit. Is there what one might call a jock mentality in the White House?

Friction about the roles of women in the Obama White House grew so intense during the first two years of the president’s tenure that he was forced to take steps to reassure senior women on his staff that he valued their presence and their input.

House Dems outraised Republicans in August. Hey GOP, go big or go home.

After all, Obama just gave the GOP and independents 1.5 trillion reasons to be energized this election. Obama has staked his fortunes on a full-throated, tax-the-rich populism. Of course, it isn’t a serious proposal, but more a love poem to his leftist base.

Ross Douthat calls it the ‘running for reelection as Nancy Pelosi’ strategy.

After the November mid-terms, there was talk that Obama may pull a “Clinton” and tact to the center. That bet was a sure loser. Tim Cavanaugh says, yeah its only been three years, but Obama’s presidency has already run out of steam.

David Bernstein at the Volokh Conspiracy blog, written mostly by law professors, was challenged by Media Matters regarding their stance on a George Will column. You can read a brief history of posts at the above link. While claiming to be monitoring the media, somehow – what Media Matters is actually trying to argue – and being wrong by the way – is a point of law. Along with being outgunned in this instance, the ultimate goal of MMfA’s work here appears to be trying to impact policy and law, more so than opinion.

When we last encountered the Media Matters blog, its authors reacted to a George Will column on Rehabiltating Lochner by declaring that Lochner v. New York is “in no way a liberal bogeyman.”

Today, reacting to a blog post of mine suggesting that the idea that federal power does not constitutionally extend to broad child labor laws is not all that shocking given that the states could and did regulate child labor before the feds stepped in, the MM blogger chimes in: “Is George Will on board with dismantling federal child labor laws, or did he not know what he was getting into when he endorsed Lochner?”

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It’s hard to keep track of all the tax hikes that President Obama is proposing, but it’s very simple to recognize his main target – the evil, nasty, awful people known as the rich.

Or, as Obama identifies them, the “millionaires and billionaires” who happen to have yearly incomes of more than $200,000.

Whether the President is talking about higher income tax rates, higher payroll tax rates, an expanded alternative minimum tax, a renewed death tax, a higher capital gains tax, more double taxation of dividends, or some other way of extracting money, the goal is to have these people foot the bill for a never-ending expansion of the welfare state.

This sounds like a pretty good scam, at least if you’re a vote-buying politician, but there is one little detail that sometimes gets forgotten. Raising the tax burden is not the same as raising revenue.

That may not matter if you’re trying to win an election by stoking resentment with the politics of hate and envy. But it is a problem if you actually want to collect more money to finance a growing welfare state.

Unfortunately (at least from the perspective of the class-warfare crowd), the rich are not some sort of helpless pinata that can be pilfered at will.

The most important thing to understand is that the rich are different from the rest of us (or at least they’re unlike me, but feel free to send me a check if you’re in that category).

Ordinary slobs like me get the overwhelming share of our income from wages and salaries. The means we are somewhat easy victims when the politicians feel like raping and plundering. If my tax rate goes up, I don’t really have much opportunity to protect myself by altering my income.

Sure, I can choose not to give a speech in the middle of nowhere for $500 because the after-tax benefit shrinks. Or I can decide not to write an article for some magazine because the $300 payment shrinks to less than $200 after tax. But my “supply-side” responses don’t have much of an effect.

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It was announced today that Columnist Connie Schultz has resigned from the Cleveland Plain Dealer, Ohio’s largest newspaper.

Recall that we posted a story a couple of weeks ago, with video of her filming Ohio Treasurer Josh Mandel at a tea party event, apparently conducting opposition research. Mandel is the likely opponent for US Senator Sherrod Brown, who is also Schultz’s husband.  Brown is up for re-election next year.  Mandel, a former US Marine who has served two tours in Iraq, will be a formidable opponent.  Schultz was at the event to write a story about the tea party for the Plain Dealer, when she put her employer into an awkward situation by creating a clear conflict of interest when she filmed Mandel.

More often than not, we disagree strongly with her, but let’s give credit to Connie Schultz for doing the right thing here. She clearly recognized the situation she was creating for the Plain Dealer.  In her letter to readers, she explains why she is leaving the paper.

In recent weeks, it has become painfully clear that my independence, professionally and personally, is possible only if I’m no longer writing for the newspaper that covers my husband’s senate race on a daily basis. It’s time for me to move on.

Or did she only apologize, and then later resign, because she was caught?  You be the judge.  Click here to view the video that started it all.

We also have obtained a copy of a letter from the Ohio Republican Party to the Plain Dealer. Last week, they wrote and asked the PD not to let Connie Schultz write any more stories of a political nature, due to the obvious conflict of interest. They agreed to meet about the matter this week, but with today’s resignation, it appears that the matter is settled. Here is the letter:

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There are two things we know for sure about the European financial meltdown: Its cause and its potential ramifications for America.  No one should lull themselves into thinking we are mere spectators to those European economies that are collapsing of the weight of their own misguided policies when what is unfolding is a gathering storm which exacerbates the risks to our own very uncertain economy.

Understanding what is at stake for America as the European banking system faces collapse takes neither rocket science nor an advanced degree in economics.  Common sense will do just fine.  Some Euro Zone countries have lavished on their countrymen a largess they can’t afford, with money they have borrowed, that they can’t afford to pay back.  In other words, they have run up large deficits funded with debt their economies may not be able to retire.  Greece’s debt is 152% of GDP, Italy’s debt is at 121% of GDP and Ireland is at 114% of GDP.  These debt to GDP ratios generally signal serious economic decline.

Greece has turned to the European Central Bank (ECB) for additional installments on the bailout loans the ECB had previously provided under terms that Greece has failed to meet.  The ECB is the Euro Zone’s equivalent of our Federal Reserve.  And like our Federal Reserve, the ECB has also been buying the debt of its member nations to keep their borrowing costs artificially low.

Several European countries, among them Greece, Spain, Portugal, Italy and Ireland, have tied their destinies (that is, their ability to finance their deficits) to the European Community, and the citizens of the stronger Euro nations that have pursued saner, and more responsible pro-growth economic policies appear to have reached the limits of their patience.

Tiny Finland is demanding collateral before any more bailout money is loaned to Greece (the sickest of the patients in the hemorrhage ward), while mighty Germany is seeking veto power over ECU lending decisions.

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Today, in 1881, Chester A. Arthur is sworn in as President, following the assassination of James Garfield.

In politics you can tell a lot about someone by the donations they accept. As far as my Congressman (and chairman of the NDCC) Steve Israel he is accepting donations from a man convicted of illegally selling arms to Iran. His name is Parviz Lavi and According to campaign finance reports filed with the Federal Election Commission (FEC), Rep. Steve Israel (D-N.Y.) has taken $6,500 from Parviz Lavi since 2006.

In 1998 Parviz Lavi was arrested by federal agents for conspiring to illegally smuggle fighter jet engines and their parts for Iran (yes the same Iran that wants to blow Israel to smithereens).

According to a March 4, 1998, Newsday article,

“The Iranian-born owner of a Hicksville firm was arrested by federal agents yesterday on charges of conspiring to illegally smuggle fighter jet engines and their parts into Iran, according to officials.

“Parviz Lavi, 62, the owner of Omega Turbine Corp., 150 Express St., had been under investigation since 1991 by customs agents in Norfolk, Va., for a scheme to smuggle at least six turbine engines for the F-14 jet fighter and thousands of engine parts, according to Assistant U.S. Attorney Burton Ryan.

According to court papers, Lavi had been wiretapped since 1992 discussing various schemes to sell the F-14 engines and their parts to Iran by shipping them first to associates in Rotterdam, Holland. At one point Lavi discussed paying between $125,000 and $150,000 for six of the TF-30 jet engines, the court papers said

“The engine is used only on U.S. and Iranian F-14 fighters. The U.S. government sold 80 of the F-14s to the shah’s government before the revolution in Iran in 1979 but since then has barred the export of military equipment to Iran.”

(Source: “Man Held In Plot To Sell F-14 Parts,” Newsday, March 4, 1998)

The NY Times corroborated the Newsday story and took it even further:

According a March 5, 1998, New York Times article, “Mr. Lavi went to Norfolk several times with a shopping list of prohibited parts, officials said. Undercover agents from the Naval Criminal Investigative Service and businessmen involved in the arms trade who were cooperating with the Government agreed to sell him what he wanted: 500 metal vanes, or blades, for the powerful TF-30 engines on the F-14’s that were made to stringent specifications by Pratt & Whitney, a unit of United Technologies, in North Haven, Conn.

“The sale price was $25,000, but the authorities said the value of the parts to Iran’s military was inestimable.”

(Source: “L.I. Man Is Seized in Scheme To Smuggle Jet Parts to Iran,” The New York Times,March 5, 1998)

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The left is trying to find a way to avoid talking about the Solyndra scandal. For example, Kevin Drum at Mother Jones advises his readers to spin Solyndra as just another free market failure: “There was no scandal in the loan process, and there’s nothing unusual about having a certain fraction of speculative programs like this fail. It’s all part of the way the free market works.”

Drum’s excuse is laughable. But it’s also bad for the cause he wants to advance. If you still believe, as most on the left do, that we need government spending to create jobs, your only fallback thus far in the face of the failed stimulus has been the Paul Krugman line: that we ought to have spent more. That argument itself has failed because of our increasingly urgent debt problem.

Solyndra could provide the left with an alternative: the argument that Obama was right to spend, but he spent corruptly, and therefore unwisely. That’s a line that would let Keynesians separate the theory of the stimulus from its execution. It also would allow the left to attack corporate special interests–something it is quite eager to do, rightly or wrongly, when a Republican is in power.

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From The Washington Times:

President Obama’s smooth path to the Democratic nomination may have gotten rockier Monday, after a group of liberal leaders, including former presidential candidate Ralph Nader, announced plans to challenge the incumbent in primaries next year.

The group said the goal is to offer up a handful of candidates from various fields and areas where the president either has failed to stake out a “progressive” position or where he has “drifted toward the corporatist right.”

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Demanding higher taxes on the “wealthy” and condemning Republican plans to reform entitlements, a crowd of protesting loudly gathered in the Cannon House Office Building on Capitol Hill this afternoon.   Protesters then streamed into Representative Dave Camp’s office.

As chants of “My Medicaid matters” echoed through the typically peaceful congressional halls, police officers warned the protesters such conduct fell outside the bounds of acceptable conduct and stood guard at the congressman’s door to prevent a security problem from developing.

Who organized this group of people to engage is such poor behavior?

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It could almost make your head spin. With an economy on the front end of another recession, President Obama’s tax attack on the folks who are most likely to succeed, invest, start new businesses, and create jobs is nothing short of staggering. Only liberal-left class-warfare ideology can explain this.

In his speech on Monday, Obama laid out $1.5 trillion in tax hikes over ten years, aimed almost entirely at America’s well-to-do. This includes $800 billion from rolling back the top rates in the Bush tax-cut plan, $470 some-odd billion to reduce itemized deductions for upper-bracket payers, and — oh yes — a millionaire’s tax called the “Buffett Rule.”

Pause a moment on the Buffett Rule. Almost all of Warren Buffett’s income comes from capital gains taxed at 15 percent. He only pays himself $100,000 a year, which would be taxed at the top rate. Most of his wealth is untaxed as unrealized capital gains. So his effective income-tax rate is lower than his secretary’s.

So what?

The vast majority of millionaires pay a 35 percent current tax rate on personal income from salaries, bonuses, and small-business income. Their effective tax rate is around 30 percent, much higher than the roughly 20 percent effective rate for the so-called middle class (depending, of course, on how you define the middle class).

Remember that the top 1 percent of income-tax payers shoulders 40 percent of all income taxes. They are paying their fair share. Then remember that 50 percent of income-tax filers don’t pay any income tax at all.

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From BusinessWeek:

There’s no hotter name in politics right now than the Tea Party. But anyone seized with a desire for smaller government who visits teaparty.com won’t find angry activists in tricorn hats spouting Thomas Jefferson. Instead, they’ll land on the website of a Canadian rock band of the same name that pioneered a style of Middle Eastern fusion known as “Moroccan roll” and broke up six years ago. This causes endless confusion for the millions of people who Google “Tea Party” each month. It’s no picnic for the band members, either. “So much damage has been done to our name by the political movement that we’re considering selling,” says Stuart Chatwood, The Tea Party’s bassist.

He and his band mates may feel a little better about the rise of the right wing if they put the domain name up for auction. With so many Presidential candidates, political operatives, and interest groups vying to capitalize on the Tea Party brand, there could be a bidding war. “Last cycle, Barack Obama raised $500 million online,” says Warren Adelman, president of GoDaddy.com, the domain registrar and Web hosting company. “If you look at the money being talked about this time around—campaigns raising $1 billion—it’s easy to expect teaparty.com to go for well over $1 million.”

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The White House’s Solyndra game plan and that of its talking head and media enablers is now apparent and requires correction.

First, the notion that Solyndra failed because China subsidized their own solar companies is absurd: these companies only exist where their host governments are propping them up. Period.

Next, it is clear from administration emails that the White House’s message was not, as Dem talking heads and other apologists are now offering, ’since you are approving this, we will schedule the visit’; it is instead, ’since we are scheduling the visit, this will be approved.’

Although this is apparent throughout, one message particularly captures it:

“We have ended up with a situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week).  We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around.”  August 31, 2009, email between OMB and Terrell McSweeny of the Office of the Vice President, regarding “DOE Announcement.

This running governmental contracting scam makes the $600 toilet seat of the 1980s — which was bad, because, uh, it was the military — look pathetic. Obama’s green temporary jobs, by its own varying estimates, range in cost to the taxpayer from $355,555 (overall) to $479,000 (Solyndra) to $4.8 million if you remove the really temporary installation gigs. But that’s, um, ‘green’, so it’s not like the $600 toilet seat, at all.

Worse, after having shown the due diligence of the average Bernie Madoff investor desperate to leap on to a trendy ride their associates assured them was hot, the Obama administration is now rushing to emulate Madoff himself. The only twist on the analogy is that they are using you, the scheme’s old entrants — who in this version of Mr. Ponzi’s construct, never actually get paid off, but only his non-contributing buddies do — as its new, involuntary entrants .

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Just when the world financial markets had seemed to stabilize after five weeks of the violent convulsions caused by the first credit downgrade in the history of the U.S.; Standard & Poors announced the United States remains on negative credit watch and there is now a one-in-three chance of another U.S. credit downgrade. S&P understands that the President has been politically successful when he refused to cut spending and let the world suffer massive financial losses when S&P downgraded. It appears to be in President Obama’s political interest for America to suffer another credit downgrade crisis.

The new S&P warning follows President Obama’s efforts to sabotage bipartisan cooperation on the “Supercommittee” deficit reduction panel by making confrontational demands for half of a trillion dollars more in stimulus spending and trillions of dollars of new class warfare tax increases on investment and charity.

Most investors prior to August 5, 2011 assumed that the President would be so afraid of voter wrath if the U.S. credit rating was downgraded; that he would wait until the last moment possible before agreeing to just enough Republican spending cuts to save the AAA rating. Those assumptions turned out to be very expensively wrong.

President Obama refused to make any last minute cuts; then calmly left the Capitol for a family vacation on Martha’s Vineyard. On the next trading day, markets around the world suffered $2.5 trillion in losses. The New York Stock Exchange is off 11% from its recent highs; but China’s Shanghai Exchange is down 28% and Germany’s DAX exchange is down 26% from their highs:

Investors mistakenly was assumed President Obama’s opinion polls would suffer from a downgrade. According to the Gallup Poll; President Obama maintains the same 43% voter approval level he held from before the crisis, as he does today. But Congress hit a new all-time low approval rating of 13% during the crisis.

On the eve of the first meeting of Congressional Supercommittee, the Obama Administration leaked to the New York Times their demands for millionaires to lose the favorable tax treatment on capital gains, municipal bonds and charitable donations. This political poison pill to bipartisan cooperation is affectionately referred to as the “Buffett Rule”; in a honor of Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.

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When President Obama was elected he promised to usher in a new way of doing business in Washington.  Well past the half way point of his administration, it is clear that much like his promises of “Hope” and “Change” – a new Washington was little more than empty rhetoric.

Obama pledged to ban lobbyists from serving in his administration, but granted waivers to the lobbyists he wanted on his team.  He pledged to make the White House more transparent, by placing its visitor logs on the internet, but his clever staff hosted meetings with lobbyists at local coffee shops, free from the burdens of disclosure.  His reform rhetoric has masked the fact that his administration is actively doling out favors to entrenched special interests and his political supporters.

The most glaring example of President Obama’s “reformed” Washington, is how his political staff over stepped its boundaries to secure government support for a green energy startup funded by one of Obama’s biggest financial backers.  The startup was named Solyndra.  Financed by Obama funder George Kaiser, Solyndra produced solar panels for mounting on rooftops.  They sold a dream – that you could transform the large empty rooftop square footage into a lean, mean, energy producing machine.  This dream, much like Obama’s promises of hope and change, was never realized.

While the promise of Solyndra warms the hearts of the Al Gore’s of the world, the reality is that the business was flawed.  This was clear to Wall Street, this was clear to senior government officials, but this was not clear to the White House.

Solyndra sought funding to build a plant to produce its unique brand of solar panels.  It went to Wall Street, but was largely rebuffed.  The most optimistic response Solyndra received was from Dun & Bradstreet which rated the company as “fair.”  The ratings agency Fitch, rated Solyndra a B+, one of its most speculative ratings.  One distinct problem for Solyndra was the excessive cost of its unique solar panels.

Absent broad Wall Street support, Solyndra looked to the government for assistance.  During the Bush Administration Solyndra was denied loans by the Energy Department.  The Office of Management and Budget recognized that Solyndra was too high a risk to move forward.

Once the Obama Administration ushered in its new way of doing business in Washington, things started to look brighter for Solyndra.  Despite the Wall Street’s negative views of the company and its costly solar panels, Solyndra found support within Obama’s White House for its expansion plans.

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From the Associated Press:

Obama’s proposal comes amid Democratic demands that Obama take a tougher stance against Republicans. And while the plan stands little chance of passing Congress, its populist pitch is one that the White House believes the public can support.

The core of the president’s plan totals just over $2 trillion in deficit reduction over 10 years. It would let Bush-era tax cuts for upper income earners expire, limit deductions for wealthier filers and close loopholes and end some corporate tax breaks. It also would cut $580 billion from mandatory programs, including $248 billion from Medicare. It also targets subsidies to farmers and benefits programs for federal employees.

Under Obama’s plan, government spending would no longer add to the national debt starting in 2017.

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On Saturday morning, Illinois Democrat Congressman Mike Quigely made a surprise appearance at the American Islamic College Conference in Chicago. The unaccredited college is the first of its kind in the United States.

Quigley gave remarks to the primarily muslim audience. He rambled on about the typical racism and discrimination that the liberal left is so convinced America is rampantly infected with. As you can see in the video below, he proceeded in his congressional capacity to apologize on behalf of the country for discrimination against muslims’ faith.

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