"The Rich" Figure Out That The Tax Bill Is Not A Big Giveaway To Them

The famous Central Newsroom of Progressive Groupthink, located beneath Times Square, has been hard at work the past few months coming up with the official party line and talking point to deal with the tax bill making its way through the Republican-controlled Congress.  And, if you have been even close to awake during this time, you know what the officially-issued line and talking point is: This is a "massive giveaway to the rich."

You know that that is the officially-issued line and talking point because you can find it in literally every progressive or mainstream source that discusses the subject.  Examples:

• Washington Post, October 3: "The Trump tax cuts would be the most insane giveaway to the rich ever."  Yes, minor variations from the official talking points are allowed, such as the substitution of "insane giveaway to the rich" for "massive giveaway to the rich."
• Huffington Post, December 2:  "Senate Passes Massive Tax Cuts For The Rich In Middle Of The Night."
• New York Times, November 27:  "Senators Scramble to Advance Tax Bill That Increasingly Rewards Wealthy."
• The Hill, November 29:  "The current Republican tax bill would mostly benefit billionaires and millionaires like Trump, as well as wealthy corporations, all on the backs of middle-class and working-class Americans."     

But the question is, has anyone done any real analysis here?  Or is this just a line that sounds good to stoke up some resentment among the ignorant and thus help the progressives gain and hold onto political power?

It sure looks like the latter to me.  Consider the world of high-earning professionals from which I come.  These people are the archetypes of "the rich" in the usual caricature.  Suppose you are such a professional in Manhattan in the seriously "rich" category, earning $2 million per year.  You are currently paying around $700,000 per year in federal income tax.  Under the Senate bill, your marginal tax rate will go down from 39.6% to 38.5%.  Under the house bill, your marginal tax rate does not go down at all.  The marginal rate change will thus save you either about $20,000 per year, or nothing, depending on which version prevails.  You are currently paying in excess of $200,000 per year in New York State and City income tax.  Loss of that deduction will cost you about $80,000 per year.  If you own a house or apartment, it won't be a cheap one, and you likely pay around $50,000 or more in property tax.  Loss of that deduction (above a $10,000 cap) will cost you around another $15,000 or more per year.  Net, this is going to cost you $100,000 or more per year on your income tax bill.  The value of your home could also suffer some serious negative impact from the loss of the interest and income and property tax deductions.  

How again is this a "giveaway to the rich"?

I acknowledge that there are many other moving pieces in these tax bills, and there are certainly a good number of affluent people who will benefit, particularly in the category of business owners.  But people who just earn high amounts of ordinary income -- which includes not just professionals, but also most corporate executives -- look to be almost entirely big losers.  There could be a handful of such who live in no-income-tax states and rent their homes who could show a small gain.

So over at the New York Times, after parroting the official talking point for several weeks, they suddenly decided yesterday to take a look at how the House and Senate bills would affect the affluent people living in their own locality, and now they discover that it's the opposite of what they have been saying.  The headline is "How New Yorkers Would Lose Under the Republican Tax Bill."  By the way, it's not just any New Yorkers who would lose; it's predominantly the high income New Yorkers.

The article leads off with this picture of a row of townhouses on the Upper West Side of Manhattan:

Their caption is "Brownstones on the Upper West Side of Manhattan. New York’s homeowners could suffer disproportionately from changes in deductions for state and local taxes."  Does it bring a tear to your eye?  For those unfamiliar with our Manhattan real estate market, the houses pictured have market values in the range of $5 - 10 million (and in some cases even more), depending on condition and whether they are burdened with rent-regulated tenants.  You really have to feel for their owners' "suffering."

So what is the real impact here?

The tax plan would probably cut taxes for most New Yorkers, at least in the short term. But it has several provisions that local leaders said could pose long-term problems for New York and other urban areas. Mayor Bill de Blasio, in an interview on Monday, estimated that 700,000 New Yorkers would pay more in taxes in the near term.

De Blasio doesn't say who those 700,000 are, but the obvious inference is that they are the higher-income part of the population, who are losing the deductions for state and local income and property taxes and mortgage interest.  Could this be a backhanded acknowledgement that the lower and middle income mostly gain and the upper income mostly lose?  

And wait!  I thought that higher taxes on "the rich" were a good thing!  Actually, we now find out that higher taxes on "the rich" are only a good thing if we get the money, and they are a terrible thing if you get the money:

“The human impact is huge,” Mr. de Blasio said, referring both to the higher taxes some residents would pay and to the services that could be cut as a result of the tax plan. He said his administration had tried for four years to make one of the world’s most expensive cities more affordable by providing public prekindergarten and paid sick leave. “And then along comes the federal government and makes the situation worse,” he said.

All I can say is, it's time for the people in the Central Newsroom beneath Times Square to work some overtime to come up with the new official party line and talking points.

The Reputation Of The FBI -- And Of The Justice Department -- In Tatters

A few days ago in one of his famous tweets, President Trump asserted that the reputation of the FBI was "in tatters."  This followed recent revelations that a top agent involved in both the Mueller investigations and the Hillary Clinton email investigations was an anti-Trump partisan who had exchanged inflammatory political text messages with his mistress.

So, is the reputation of the FBI -- and, for that matter, of the Justice Department -- in "tatters" as President Trump claims?  And, if so, what difference does it make?

My answer to the first question is definitely yes as to both institutions, although for me the shredding of their reputations has only been accentuated by the events of the past few weeks, and had previously been going on for a good nine years, ever since Obama and Holder got their hands on the reins of power.  And the difference it makes?  To put it simply, you would be out of your mind ever to cooperate in any way with these guys.  And so would everybody else in this country.  And thus, the FBI and Justice are totally undermining their own effectiveness as law enforcement institutions.  It's a fair bet that whatever they are up to at any given point in time has little to nothing to do with enforcing the law in an even-handed way, and much or everything to do with advantaging Democrats over Republicans.  (It doesn't matter who controls the Presidency and Attorney Generalship at any given point in time.  The staff of the Justice Department and FBI are partisan Democrats until definitively proven otherwise.)  If they want to get you (e.g., you are a Republican, although there could be many other reasons having just as little to do with whether you have committed a crime) they are entirely likely to create an entrapment scheme to manufacture a crime to nail you, such as (to take a random example) asking you in detail about some conversation you had that they happen to have recorded, and then charging you with "lying to the FBI" for any instance where your memory differs from their transcript.  If I can accomplish one useful thing with this blog, it will be making sure that none of my readers ever makes the ridiculous mistake of talking to the FBI.

Before getting to the most recent events, let's review just a few of the other politicized and/or corrupt activities of Justice and the FBI under the Obama/Holder/Lynch/Bharara regime (some of which activities continue under holdovers to this day).  Probably, you once heard of at least some of these things, but only when they are put together in one place do you suddenly realize the magnitude:

• When I started this blog, one of the first things I covered was the endless series of what I deemed "phony prosecutions" of major financial institutions for allegedly causing the financial crisis.  There was one after another of what could only be called shakedowns.  In this post on July 1, 2013, I discussed a settlement by Citi with Fannie and Freddie for $968 million for losses in the financial crisis, even though it was F&F that had set the terms of the loans; and another settlement by BofA for $2.8 billion for essentially the same thing; and a settlement of those two plus five other banks for $8.5 billion with OCC for alleged improper documenting of mortgages ("robosigning"); and then ten settlements by JPMC with various federal agencies between 2011 and 2013, all of them over $50 million (and some over a billion).  In September 2013 it was a $920 million settlement with JPMC over trading losses that should have been none of the government's business.  In August 2014 it was a settlement with BofA of $17 billion (!) for, supposedly, "failing to have third party loan level due diligence" as to loans going into securitization deals.  There were many, many more.
• And then it turned out that Justice had created a slush fund in which to put big chunks of the bank settlements, to be passed out to favored left-leaning groups to advance the Obama/Holder political agenda, all unconstitutionally outside the appropriations process.  From Kimberly Strassel in the Wall Street Journal, December 2015, quoted by me here:  "The [Justice] department is in the process of funneling more than half-a-billion dollars to liberal activist groups, at least some of which will actively support Democrats in the coming election.  It works likes this: The Justice Department prosecutes cases against supposed corporate bad actors. Those companies agree to settlements that include financial penalties. Then Justice mandates that at least some of that penalty money be paid in the form of “donations” to nonprofits that supposedly aid consumers and bolster neighborhoods.  The Justice Department maintains a list of government-approved nonprofit beneficiaries. And surprise, surprise: Many of them are liberal activist groups. The National Council of La Raza. The National Urban League. The National Community Reinvestment Coalition. NeighborWorks America . . . . " 
• Who can forget the endless phony prosecutions by New York U.S. Attorney Preet Bharara for the non-crime of "insider trading" by non-insiders?  As pointed out by me in many posts, there never was a statute that made this illegal.  It was all about ginning up political resentment against people who could be painted as having made too much money too easily.  At one time Bharara claimed a string of some 80 consecutive "convictions," but nearly all of them were guilty pleas.  Of the seven insider trading cases he took to trial, one resulted in an acquittal, and three of the six convictions, which involved non-insiders, were reversed on appeal; many of the guilty pleas were also vacated.  After the Newman/Chiasson reversal in October 2015, Bharara used the occasion to stoke resentment for political advantage:   "You can think of this as a potential bonanza for friends and family of rich people with access to material non-public information."
• The Obama/Holder Justice Department ramped up the civil asset forfeiture shakedown to such an extent that by 2014 civil assets seized by Justice annually exceeded all proceeds of burglary in the United States.  Do you recall the scandal over the mass seizures by prosecutors of luxury cars being exported to China?  On the thinnest of pretexts, Justice Department prosecutors claimed that the exports were illegal and seized hundreds of cars; and then offered to "settle" by giving half the cars back to the rightful owners while keeping the rest.  Proceeds went into another of those extra-constitutional Justice slush funds.  When a target of the scam finally took one of the cases to trial in February 2017 (during Bharara's last days in office) it took a jury just three hours to rule for the defendant.
• How about "Operation Choke Point" -- an Obama/Holder initiative that used the Justice Department to put pressure on legal but politically-disfavored businesses (examples:  gun dealers, payday lenders) by seeking to cut off their access to the banking system?  The Trump administration finally announced an end to that one in August 2017, although I would not be so sure that deep state operatives somewhere in the Justice Department are not still carrying on.
• Then there was the bringing of dubious cases of "bribery" or "corruption" against various state and local pols.  Somehow, when a Democratic pol drew the attention of the prosecutors, it involved a situation where the Dems held a huge majority in the relevant body and political control was not at issue.  Example:  Sheldon Silver, Speaker of the New York Assembly, where the Dems hold about a 2 - 1 majority.  But when the target was a Republican, it would be a swing situation with potential for a conviction to shift control to the Democrats.  Examples:  Bob McDonnell as Governor of Virginia, Dean Skelos (of the New York State Senate, where the Republicans held a one seat majority).  All three of those convictions have been reversed, by the way.
• And, finally for this review (really, I could just be getting started) we have the Justice Department in the ultimate corruption attempting to declare independence from the President and the Constitution under the leadership of Sally Yates.  Obama holdover Yates was the Acting Attorney General briefly before Jeff Sessions was confirmed earlier this year, and used that position to attempt to defy President Trump when he issued his first "travel ban."  A few months later she tried to justify her action in a New York Times op-ed:  "The president is attempting to dismantle the rule of law, destroy the time-honored independence of the Justice Department, and undermine the career men and women who are devoted to seeking justice day in and day out, regardless of which political party is in power. . . ."   In Yates-world, oaths of office are for the flouting.

So believe me, around here, the Justice Department and FBI did not have any remaining unshredded reputation to be preserved by the time the Comey and Mueller got going investigating Trump.  So how shocked are you that they:

• Used a piece of preposterous opposition research funded by the Clinton campaign and the DNC as a pretext to obtain a FISA warrant to spy on the Republican candidate's campaign while it was ongoing?  That link, by the way, is not to some right-wing conspiracy theorist, but rather to CNN back in April.
• Put a highly partisan pro-Clinton senior FBI agent (Strzok) on the Clinton email investigation, and allowed him to change the words Comey used to describe Hillary's conduct from "gross negligence" (a crime) to "extremely careless"?
• Hired a team of some fifteen prosecutors to pursue the investigation of the Trump campaign, at least half of whom are highly partisan Democrats who have contributed to Obama, Clinton and the DNC, and none of whom have contributed to Republicans?
• Put the same highly partisan senior FBI agent on the job of tricking Flynn into an interview about a conversation that had previously been recorded by the FBI, so that they could manufacture a previously non-existent crime by characterizing any slip by Flynn in remembering the conversation as "lying to the FBI," even if everything about the underlying conversation itself was perfectly legal?
• Refused to turn over to Congress the Strzok texts and other documents that would embarrass and/or incriminate the FBI and/or Justice itself -- and continue the stonewall to the point of getting held in contempt of Congress?

Me, I'm not surprised at all.  Readers, please do not ever, ever talk to these people.  Remember this:  Everybody who has been at Justice and the FBI through the Obama/Holder/Lynch era knows about all of the things listed above and decided to stay on nonetheless.  People of integrity would have resigned long ago.

During my legal career, it has been the norm that prominent politicians and business leaders could not afford to refuse to cooperate with the FBI and Justice Department.  The reason was that the respect for these institutions was such that failure to cooperate carried a reputational stain for the non-cooperator.  Corporations would almost always fire those who refused to cooperate.  Today?  I'd like to see some corporations stand up to the creeps.  Among politicians, I wouldn't be surprised at all to see Trump and some of his people stand up.

UPDATE, December 6:  Judicial Watch has released an email that it obtained via FOIA request from the Department of Justice.  The email is from Andrew Weissmann to Sally Yates dated January 30, 2017.  You will recognize Yates from above.  January 30 is the date that she sent a memo, in her capacity as Acting Attorney General of the United States, to everyone at the Justice Department instructing them not to implement the initial "travel ban" executive order that new President Trump had issued on January 27.  Weissmann is currently the senior Justice Department prosecutor working with Mueller on the investigation of the President.  Here is the text of Weissmann's January 30 email:

From: Weissmann, Andrew (CRM)
Sent: Monday, January 30, 2017 9:50 PM
To: Yates, Sally (ODAG) <sayates@jmd.usdoj.gov> Subject: I am so proud

And in awe. Thank you so much. All my deepest respects,
Andrew Weissmann 

So there it is.  Weissmann didn't just think it was OK for Yates to violate her oath of office and try to overturn the result of the recent lawfully-conducted election.  No, he went far beyond, asserting that he was "so proud" and "in awe."  He actively applauds defiance of the Constitution.

It is completely beyond me how a guy who thinks defiance of the oath of office is OK is allowed to work anywhere in the federal government, let alone on an investigation of the President he thinks it is OK to defy.

The contents of this email, and of the Strzok texts (when and if revealed), and of plenty more from the above, should appropriately be part of the closing argument of every defense lawyer in every case brought by the Justice Department.  That's the consequence of destroying your own credibility through politicization. 

The Quality Of Political Debate Reaches A New Low With The Tax Bill

As of today, the proposals of congressional Republicans to revise the tax code still have several steps to go before final enactment.  The House and Senate versions of the bill have some substantial differences, summarized here.  The news has been full of information on the various proposed provisions.  You would think that this would be the good time for a serious national debate about what makes for good tax policy.  You would be wrong.

Among some dozens of tweaks to the tax code in the new bills, a big one stands out:  the reduction in the top tax rate on corporate income from 35% to 20%.  That reduction is in both the House and Senate versions of the bill.  Somehow the Republicans have the idea that such a reduction will make investing in the United States more attractive and lead to the creation of jobs and to increased economic activity.  Is there anything to that idea?

Well, there is quite a bit of experience from other countries.  I won't try to do a comprehensive review, but consider the case of Ireland.  Ireland led the way among countries with big reductions in its corporate tax rate in the 1990s, thinking that that could lead to a surge of economic growth.  If you are as old as I am, you will remember Ireland as a relatively poor country.  In 1970, Ireland's GDP per capita was about half that of the U.S.:  $12,000 of Ireland v. about $24,000 for the U.S.  Starting about 1995, Ireland began dramatic cuts in its corporate tax rate, which went from 40% in 1995 all the way down to 12.5% in 2002, where it remains today.  How did that work out?  Today, the GDP of Ireland equals or exceeds that of the U.S., depending on what measure you look to.  The St. Louis Fed has a figure for U.S. per capita GDP as of 3Q 2017 as $52,685.  At Trading Economics they have a figure for Ireland for 2015 of $65, 249.  Whoa!  You are hard pressed to find any remaining pockets of poverty in Ireland today.

Is Ireland's current prosperity entirely attributable to its aggressive reductions in its corporate tax rate?  Certainly not.  There are way too many moving parts in economic policy to ever be able to attribute good or bad results to just one facet of policy.  Also, Ireland's economy had begun rapid growth before its big cuts in the corporate tax rate.  Perhaps its joining the EU in 1973 made a big contribution to its success, or maybe improvements in its education system.  But there is substantial anecdotal evidence that Ireland's low corporate tax rate has induced many corporations to locate there and grow there.  The prosperity has lifted the whole country, not just a wealthy few.  U.S companies that have chosen Ireland as a main base for their European or international operations include Google, Facebook, and Apple, as well as many large pharmaceutical companies.  I don't think this is a coincidence.  From Tim Worstall in Forbes, December 2015:

Ireland must actually be getting something right in its economic policy. And that thing they're getting right is exactly what we should all be doing too. Low tax rates on capital and corporate income, make up the revenue differences through higher taxation of consumption. No, not because we just want to stick it to the people and not the plutocrats, but because that's the efficient way to model a tax system. That efficiency being obvious in the manner that it produces these startling growth rates.    

Anyway, based on the experience of Ireland and other countries, the idea that lowering corporate tax rates can improve economic growth and prosperity for everyone is certainly not a fringe position.  Is there a good argument to the contrary?  Possibly, but not one that you can get from the current debate going on in the United States.  Tyler O'Neil at PJ Media on December 2 has compiled a roundup of arguments from the progressive side opposing the Republican tax reform. A few samples:

• Kurt Eichenwald of Newsweek and Vanity Fair in a December 2 tweet:  "America died tonight. Economic suicide adopted to feed the insatiable greed of donors, who have been refusing to dole out $ to GOP until they got their tax cuts. Voters fooled by propaganda and tribal hatred."
• Comedian and actor Patton Oswalt in a December 2 tweet:  "Is there any going back after this Tax Bill Scam? To America? Does it matter now if Trump is impeached? There's no America now.  Not the one we knew. Sorry, feeling real despair this morning."
• Economic analyst Bruce Bartlett (who actually worked in the Treasury in the George H.W. Bush administration) on MSNBC on December 2:  "It really defies comprehension. . . .  Maybe they think that the poor have it so easy that they need to have to pay more taxes to force them to go out and work more. . . .  It's really akin to rape."
• Liberal blogger Bill Palmer:  "Millions of Americans died tonight. . . .  So did the careers of every one of these psychotic drooling animals in the Republican Party who voted for it. This was mass murder."

And don't forget the evergreen Paul Krugman (not included in O'Neil's roundup), from November 27, "The Biggest Tax Scam in History":  "The bill Republican leaders are trying to ram through this week without hearings, without time for even a basic analysis of its likely economic impact, is the biggest tax scam in history. It’s such a big scam that it’s not even clear who’s being scammed — middle-class taxpayers, people who care about budget deficits, or both."

Meanwhile, there's no doubt what the U.S. financial markets think about this prospective tax reform.  The stock market has been on a tear, interrupted with brief sharp declines each time the tax bills have seemed to stumble.  There's nothing terribly complicated about this.  A dollar of earnings remaining after a 35% tax bite suddenly becomes $1.23 when the tax bite is reduced to 20%.  Of course the stock market should go up 20% or so.  Raising capital for a business has just become dramatically cheaper.

We're about to get a real world test of who's got the better of economic policy.  I'm betting on an excellent 2018 for the U.S. economy.

They Don't Give Any Advance Notice When They Change The Narrative

Here's what I know about all the problems of the world:  they are your fault.  By your hard work and success (even if modest) you are the cause of the great suffering of others.  You wallow in your undeserved privilege.  You are guilty, guilty, guilty, and you need to feel it deeply and to grovel and beg forgiveness regularly.

For example, if you are affluent or white (or worse, both) you brought about the suffering of the poor and of minorities in America by moving to the suburbs.  You "left behind," or worse, "abandoned," the poor in the "inner cities," as you became part of the "suburban flight."  You "fortified" yourself in your "suburban enclave," leaving the "inner cities" without the resources they needed to lift the poor out of poverty, or even to provide basic government services.  How can you even look yourself in the mirror?  

If you are my age, or even half my age, you have heard or read some version of this narrative many thousands of times in your life -- so many times that undoubtedly by now it is just part of the background noise of your existence.  Of course you know all these things.  Everybody knows them!

But if you are the curious sort, you may have started to wonder in recent years whether this narrative was consistent with the more recent phenomenon of gentrification of urban neighborhoods.  Could somebody maybe take a few minutes to explain how these things fit together?

Which brings me to the big front page story in yesterday's New York Times, headline "Pushed to Fringes, Needy New Yorkers Face a Long Slog to Work."   Without anybody telling you it was coming, suddenly the narrative has completely shifted.  No longer are you causing the suffering of the poor by "abandoning" them and "fleeing" to the suburbs.  Now you are causing the suffering of the poor by moving into the inner cities and thereby "pushing" the poor to the "fringes."  Key quote:

“Commutes are lengthening for more and more people,” a study by the Pratt Center for Community Development and the Rockefeller Foundation reported in 2013. “Skyrocketing housing costs push low- and moderate-income families farther from Manhattan and the well-connected communities that surround it.”  The study found that 758,000 New York City residents now travel more than an hour each way to work, most of them to jobs that pay less than $35,000 per year. Black New Yorkers’ trips to work are 25 percent longer than whites, and Hispanics, 12 percent longer than whites, other research by the Pratt Center found. . . .  

These hardships built up over decades. . . .  Those long commutes mark a new boundary between lower-income people and those who are relatively affluent. . . .  

This being Pravda, don't go expecting any comprehensive data to back up the new narrative, let alone an honest rendering of the full picture.  Instead, what we get is a handful of anecdotes -- actually, it's only two -- of sympathetic low wage workers who endure lengthy daily commutes involving multiple bus and subway legs together with, in one of the cases, the Staten Island Ferry.  Why?  Undoubtedly to support a coming demand for some new government program or handout to cure the problem.  

But perhaps we should first apply a touch of critical thinking to what has been presented.  Consider this excerpt from the quote above:  "758,000 New York City residents now travel more than an hour each way to work, most of them to jobs that pay less than $35,000 per year. Black New Yorkers’ trips to work are 25 percent longer than whites."   Wait -- is this limited to "residents" of New York City?  One thing that is obvious about the New York City commuting situation is that the longest commutes are not within the City, but rather involve trips into the City from some distant suburb.  The commuters on those trips are predominantly (although far from entirely) white.  Could the Times possibly have left out that huge piece of the picture in order to skew the result?  And then not mention explicitly that they have made that omission?  Yes, that is exactly what they have done.  So, if all commutes in the New York Metropolitan Area were included in the statistics, which would have the longer average commutes, whites or blacks?  You won't find that answer here.  I guess that tells you what you need to know -- clearly, the answer would be reversed.

And then, aside from a couple of anecdotes, can we actually find anything in government statistics to establish that poor and minorities are being "pushed out" of close-in neighborhoods in New York City by gentrification?  As I have previously reported, the statistics that I can find just don't indicate that at all.  Admittedly, statistics on income and poverty by county or neighborhood come out with substantial lags, and it is possible that more recent data, when they emerge, will show the phenomenon the Times says is occurring.  But then, the Times claims to base its article on a report from 2013.  

Here are the latest data on poverty in New York County (essentially the same thing as Manhattan), released in February 2017 and covering the year 2016.  The "poverty rate" is said to be 17.9%.  Even though New York County is by many measures the wealthiest county in the country, that rate is considerably higher than the national rate for the same year, which was 13.5%. The anomaly results from the large suite of government programs that we have in New York to subsidize poor people so that they can continue to live in this wealthy place -- programs like public housing, Section 8 vouchers, food stamps, clothing and energy assistance, and so forth.  If massive government programs are so large that they can keep the "poverty" population in this wealthy county well above the national norm, is it really fair to say that the poor have been "pushed out"?

Well, one thing remains clear, and that is that you are guilty.  When you moved to the suburbs you were guilty, and when you moved back to the city you became even more guilty.  In fact there is no place you could live that would make you any less guilty.  We'll figure out why you are even more guilty after your next move.  Better start groveling and begging for forgiveness!  

Late Stage Socialism At The New York City Housing Authority

Back in May 2016, I commented (in a post titled "New York's Ongoing Housing Madness") that the New York City Housing Authority (NYCHA) had "hit the inevitable terminal phase of the socialist death spiral."  As described in a big report put out by NYCHA itself, there was:

[an] "accelerating financial collapse" of New York's low income public housing: $2 billion annual shortfall of rent to cover operating expenses, only partially covered by HUD subsidies, leaving a multi-hundred million dollar and growing annual deficit; $16 billion of identified and unmet capital needs, with no source of funds to pay for them; zero property tax contribution to the City; [and] hundreds of thousand of residents living on some of the world's most valuable real estate and receiving massive subsidies, yet in "poverty" with no way to escape. 

But the funny thing about these socialist death spirals is that you never know how far they will have to go before they finally collapse and disappear onto the scrapheap of history.  I mean, who would have thought that a North Korea or a Venezuela could possibly have gone on as long as they have?  Yet there they are today, economies getting smaller every year unto the vanishing point, the people starving and desperate to escape -- and the strongmen still clinging successfully to power and undoubtedly squirreling away a few billions in European banks.

At NYCHA, another year-and-a-half on, they only sink lower and lower.  But a new crisis in the last couple of weeks has caused even the intentionally ignorant New York Times to take some notice.  The Times weighed in yesterday with a big editorial headlined "The City as Problem Landlord."

The recent crisis is that it has come to light via a Department of Investigations Report that the City has failed to carry out required lead paint inspections in the NYCHA apartments for at least the period 2012 to 2016.  Oh, and they lied about it, falsely certifying to the feds that the inspections had been conducted.

[I]t’s not surprising that the city Housing Authority would struggle to fulfill requirements under city and federal law to check for lead-paint dangers in thousands of apartments prone to them. Still, it’s stunning that authority officials not only failed to carry out those inspections from 2012 to 2016 but also falsely told the federal Department of Housing and Urban Development that it had done so, a city Department of Investigations report found.  The authority’s chairwoman, Shola Olatoye, was aware in the summer of 2016 that her agency’s certifications were false. She told Mayor Bill de Blasio at the time, but he did not make it public. It wasn’t until after the report — a year and a half after the mayor and Ms. Olatoye learned of the problem — that two executives were forced out and one demoted.

Can we maybe blame Donald Trump?  Oh, wait a minute -- this all took place before Trump was President, and most of it while progressive hero Bill de Blasio was Mayor.  Well, at least we can throw in a gratuitous swipe at Trump that has nothing to do with the current issue:

You might expect this from the administration in Washington, which appointed a former Trump party planner as the federal housing department’s regional supervisor, but not the administration of Mr. de Blasio (who held that regional position in the Clinton administration).

So, is this an isolated issue?  Or is NYCHA facing an accelerating decline in all areas?

This is not an isolated mistake. Last year, after two children died in a fire hours after a Housing Authority worker certified that their apartment had working smoke detectors when it did not, the investigations department found that such false reporting was a widespread practice. Two years ago, a frustrated federal judge decided to appoint a special master because of the authority’s delay in curbing mold. Last year, too, Investigations Commissioner Mark Peters said his department found “a wholesale breakdown in the basic management of the elevator division” of the authority after a defective elevator killed an 84-year-old Bronx tenant.

Of course, this being the New York Times, the proposed solution is a call for more government money and an end to "cuts."  They claim that "the federal government has reduced its contribution to the city's Housing Authority by $2.7 billion since 2001," but I am completely unable to verify that figure, or anything like it.  What I find instead is that annual federal subsides to NYCHA have increase dramatically since the early 2000s.  (Of course, the Times does not identify the baseline against which what it calls a "cut" is measured -- are they talking about an absolute reduction, or a comparison to projected increases that then were not met?)  According to this report from New York's Independent Budget Office in 2003, the entire NYCHA operating budget in 2003 was only $1.4 billion, so the annual operating subsidy from HUD could not possibly have exceeded that figure.  Today the (enormous) HUD subsidy to NYCHA is around $2+ billion per year (out of a total annual operating budget of about $3.2 billion).  Obviously, the annual federal operating subsidy has gone up, not down, and by a lot.  This is the typical socialist death spiral:  more and more money buys less and less, and the problems get worse every year.  Meanwhile, the Trump budget outline released earlier this year called for a cut to NYCHA of only about $35 million per year, which would be less than 2% of the annual subsidy.  That set off anguished wailing all around New York subsidized housing circles.

What the Times editorial ultimately demonstrates is the poisonous incentives of socialist-model public housing.  With no one having an ownership interest in the properties, the residents and bureaucrats take a completely passive approach to dealing with the challenges they face.  An endless series of inevitable "crises" ensues, which are the perfect opportunity to demand more taxpayer money to cure the immediate crisis, even as the next one is inexorably developing in the shadows.  The perfect illustration of the attitude comes in the last two paragraphs of the Times editorial, obviously crafted to evoke your sympathy and even outrage:

Ricarda Solorzano, who has lived in the Mill Brook Houses in the Bronx for 18 years, has lost faith. For years there has been mold in the apartment she shares with her two daughters and their two young daughters.

“They only care if you pay your money on time,” she said of the authority. “They don’t care about people.”

No way would Ms. Solorzano or any of her offspring accept any personal responsibility for dealing with the problem of mold in her apartment, or for that matter lead paint or smoke detectors or anything else.  Why should she?  This is socialism!  

The Bureaucracy Declares Independence From The Constitution

In Friday's post I linked to an article by Deroy Murdock that listed some 36 accomplishments of the Trump administration for which we should be thankful at this season of Thanksgiving.  But there's one item that Deroy omitted that may be the most important of all:  the Trump administration has shone the light that makes it abundantly clear how anti-constitutional our federal government and its bureaucracy have become.

Let's face it, so long as a Barack Obama or a Bill Clinton was President -- or for that matter, a George H.W. or W. Bush -- it didn't really matter a whole lot what would happen if the President wanted to change the policy direction of the bureaucracy.  That was because on every (Obama, Clinton) or nearly every (Bush 41 and 43) issue, the President was perfectly happy to go along with whatever the bureaucracy wanted to do.   Now, with Trump, not so much.  So now we get to see what happens when the people elect a new President who wants the bureaucracy to change policy direction.  Does the election count?  Or do the bureaucrats get to continue to do whatever they want and tell the newly-elected President to get lost?

I already covered a few early skirmishes in this incipient war.  Back in February, in a post titled "The Bureaucrats Think That They Don't Answer To The President," it was Acting Attorney General Sally Yates (an Obama holdover still in office due to the delayed confirmation of Jeff Sessions) purporting to direct the Justice Department not to enforce President Trump's just-issued Executive Order on immigration.  Yates asserted that she was entitled to countermand a direct order from the President because an opinion from Justice's Office of Legal Counsel (finding the Executive Order to be presumptively legal) did "not address whether any policy choice embodied in an executive order is wise or just. . . ."  Deep constitutional thinking there, Sally!  However, Trump promptly fired Yates, and she left office.  In July, in a post titled "Government Employees Systematically Violating Their Oaths Of Office," it was a bureaucrat and climate change activist in the Interior Department named Joel Clement.  Clement found himself transferred to another section of Interior where he could not continue to carry on his climate change activism.  He then took to the press declaring himself to be a "whistleblower," and filed a "complaint" with something called the "U.S. Office of Special Counsel," because "[r]emoving a civil servant from his area of expertise and putting him in a job where he’s not needed and his experience is not relevant is a colossal waste of taxpayer dollars."  Even deeper constitutional thinking, Joel!  Once again, however, it appears that Clement accepted his transfer (although presumably his "complaint" continues to wend its way through the adjudication process).

But these were only the warm-ups.  On Friday, we saw the ultimate maneuver of bureaucratic chutzpah.  Richard Cordray, head of the wildly unconstitutional Consumer Financial Protection Bureau, on the Friday after Thanksgiving, suddenly moved up his previously announced resignation from the agency.  Within hours, President Trump had announced an acting-director successor, Mick Mulvaney (also current head of OMB).  The President has the power under something called the Federal Vacancies Act to install as acting director of any agency anyone in the administration who has previously received Senate confirmation to any position.  But wait!  Just hours before, according to an excellent summary from Politico here, Cordray had purported to install the CFPB's chief of staff, one Leandra English, as "Deputy Director."  The Dodd-Frank Act of 2010 provides that the Deputy Director “serve[s] as acting Director in the absence or unavailability of the Director."   Whereupon Cordray sent a note to CFPB staff openly defying the President in his right to name the successor:  "Upon my departure, [English] will become the acting Director pursuant to section 1011(b)(5) of the Dodd-Frank Act."    

So the battle lines are clearly drawn.  Who is in charge at the CFPB:  Mulvaney or English?  Or to put it another way, does the President have any say or control over this particular corner of the bureaucracy, or is CFPB a self-perpetuating agency outside of the Constitution where the director can appoint his own successor without any input from anyone else?

To get the full scoop on what I just called the "wildly unconstitutional" CFPB, the best place to go is the October 2016 decision of the D.C. Circuit in PHH Corp. v. CFPB, written by Judge Brett Kavanaugh.  (Kavanaugh, by the way, is one of the guys on President Trump's list of potential Supreme Court nominees.)  Unfortunately, the decision is over 100 pages long, but I'm going to do my best to summarize it for you briefly.  The CFPB is the deformed brainchild of Massachusetts Senator Elizabeth Warren, who crafted an agency with a single unfirable director and funding outside of all normal budget procedures, thinking she would get the job of Director and could run her own completely independent fiefdom in the government; but then she didn't get the job and it went to Cordray.  The bottom line of the D.C. Circuit decision is that the CFPB was declared to be unconstitutional.  The remedy was that the CFPB Director was declared to be firable at will by the President.  However, on application for en banc review, the full D.C. Circuit stayed that remedy and granted further hearing.  The hearing was held in May.  Six months later, there has been no decision from the en banc Circuit.

Kavanaugh's opinion is essentially divided into two parts.  The first considers the constitutional problem of an "independent" agency, with a single Director, where the Director cannot be fired by the President except in narrowly-defined "for cause" circumstances.  This is by far the longer part of the opinion.  It includes detailed history of "independent" agencies in the federal government (that is, agencies whose directors or commissioners can only be fired "for cause"), and demonstrates respects in which the CFPB goes far beyond any of them.  It concludes that the agency is unconstitutional as structured, and provides the remedy described above -- the Director can be discharged "at will" by the President.

But the second part of the D.C. Circuit's opinion is even more interesting.  Here the court lays out the facts of the case before it.  This is about a seemingly obscure bit of federal regulatory arcana, namely whether under the Real Estate Settlement Procedures Act a lender can participate in a so-called "captive" reinsurance agreements.  It turns out that in 1997 -- under the Presidency of Bill Clinton and the HUD Secretaryship of Andrew Cuomo -- HUD issued a letter interpreting RESPA, and saying that this is perfectly OK for a lender to participate in captive reinsurance arrangements, as long as the mortgage insurers paid no more than reasonable market rates for the reinsurance.

After Dodd-Frank in 2010, CFPB got co-regulatory authority under this statute.  They sued PHH -- before their own "Administrative Law Judge."  And, lo and behold!, they ended up with a judgment against PHH for some $109 million -- for conduct that had been specifically blessed by HUD as the regulator under the very same statute.  Is this OK with you?  From Judge Kavanaugh's opinion:

In this action against PHH, however, the CFPB changed course and, for the first time, interpreted Section 8 [of RESPA] to prohibit captive reinsurance agreements even if the mortgage insurers pay no more than reasonable market value to the reinsurers. The CFPB then retroactively applied that new interpretation against PHH based on conduct that PHH engaged in before the CFPB issued its new interpretation.  . . .  The basic statutory question in this case is not a close call. The text of Section 8(c) permits captive reinsurance arrangements where mortgage insurers pay no more than reasonable market value for the reinsurance. . . .  The CFPB obviously believes that captive reinsurance arrangements are harmful and should be illegal. But the decision whether to adopt a new prohibition on captive reinsurance arrangements is for Congress and the President when exercising the legislative authority. 

Well, what do you expect when you have a completely unaccountable agency answering to no one?  I wouldn't be so sure that this one is going to get through the en banc D.C. Circuit, even as packed by Obama after elimination of the filibuster.  In the Supreme Court, it is dead.       

Anyway, who is going to defend the CFPB?  The Justice Department?  Don't count on it!