When The Official Narrative Trumps The Facts

It seems that the world is full these days of examples of official -- some might say "politically correct" -- narrative trumping the truth.  And thus when certain facts seem to be established beyond any possible ability to deny them any more, many people continue proclaiming exactly the opposite as the truth.  Having spent a career in the trial business, I'm fully aware of the slippery nature of the truth, and indeed that at some level it is actually impossible to establish the absolute truth of any particular facts.  I mean, how do we really know that somebody didn't come through in our sleep last night and transplant everybody's brain with a new brain having new memories?  As that example illustrates, at some point the possibilities for continuing to argue "not so" become so implausible that you would think no one would continue to soldier on.

But not only are there plenty of examples where the advocates of alternative reality don't give up, there are many cases where the alternative reality achieves broad acceptance right in the face of the overwhelming evidence against it.  Now here's what's odd:  In every good example of this phenomenon that I can come up with, the evidence-trumping narrative is somehow an icon of the Left, drawing support from widespread acceptance among certain circles of journalists, academics, Manhattanites, Hollywood stars and moguls, and other cool left-leaners.  I'm going to lay out a few examples here.  If anyone can give me an example of a right-side narrative that has achieved comparable widespread acceptance despite overwhelming evidence against it, I'll be very interested to hear about it.  But I really can't think of one, despite some effort.

Alger Hiss.  I'll start with a truly classic example of the genre, one that is native to my Greenwich Village home.  One of my daughters attended a high school in lower Manhattan called the Friends Seminary.  A couple of years behind her at that school was a kid named Jacob Hiss.  Turns out that Jacob was Alger's grandson.  Around the time my daughter was a senior (2007), the school invited Jacob's father Tony, an alum of the school and Alger's son, to give a talk on the Hiss case.  (Apparently Friends was the Hiss family school.)  Of course the talk was all about why Alger was innocent and had been framed.  And in this context I came to learn that the official Greenwich Village belief is indeed that Alger was framed.  Even as late as 2007!  I haven't checked around recently, but I have little doubt that most Villagers today who remember anything about this case will still believe that Hiss was framed.  After all, he was one of us -- Village resident, supporter of high-minded progressive causes, graduate of Harvard Law School.  (Wait a minute -- now we're getting a little too close for comfort!)

But what about the evidence?  Hiss was a high-ranking State Department official who was accused in the late 40s by a guy named Whittaker Chambers of having been a co-member of a Soviet cell in the 30s and early 40s, and of having passed State Department secrets to Soviet agents.  Hiss strenuously denied it, including in testimony before Congress.  It was all just "he said, she said" until Chambers came up with some papers that he claimed Hiss had given him for transmission to the Russkies.  The papers had been retyped on a manual typewriter of the day.  The FBI got hold of a Hiss family typewriter and established that every quirk of that device was reflected in the retyped documents produced by Chambers.  At that point the Hiss story became that the FBI had elaborately created a "forged typewriter" to mimic the physical characteristics of the Hiss typewriter.

Now, I above all others am prepared to believe just about anything about the FBI; and this was the J. Edgar Hoover FBI of the late 40s, which I'm prepared to believe was even worse than today's edition.  But, really?  Based largely on the typewriter evidence, Hiss was convicted of perjury for his testimony before Congress denying his involvement in Soviet spying.

Then in the 90s lots of information got released from former Soviet archives, and many who have reviewed decrypted communications have concluded that a certain agent identified as "Ales" could only be Hiss.  A Commission on government secrecy in the late 90s chaired by then-Senator Daniel Patrick Moynihan concluded that the case for complicity of Hiss was "settled".

Anyway, for those with any interest in this case, here is a website called the Alger HIss Story, maintained by a long-time colleague of Alger, and continuing to soldier on with making the case for Alger's innocence.  And yes, the "forged typewriter" bit is a key element of the defense.

Dan Rather/Memogate.   And now we have opening today in theaters a movie called "Truth."  As with the Hiss story, to believe the narrative peddled in "Truth" you need to believe completely implausible things about how certain documents were created.  And yet it seems that formerly respected newsman Dan Rather, his producer Mary Mapes, actor Robert Redford, director and screenwriter James Vanderbilt, and zillions more of the leftist persuasion, are more than prepared to go with the narrative over the evidence.

Some brief background:  In September 2004, two months before the Bush-Kerry presidential election, the CBS news show 60 Minutes II ran a story touting some newly discovered documents as establishing that then-President Bush, while serving in the Texas Air National Guard in the early 70s, basically went AWOL by failing to show up for a required physical exam because he was working on someone's Senate campaign in Alabama, and then exerted pressure from above on his commanding officer to avoid a bad report.  The story was produced by CBS producer Mary Mapes and presented on air by Dan Rather.  It rapidly fell apart.  It seems that the documents, supposedly generated by Bush's commanding officer Jerry Killian in the early 70s, bore none of the physical characteristics of documents generated on typewriters of the day, and instead appeared to have been generated by a 2003 version of Microsoft Word.  For example, 70s typewriters gave all letters equal amounts of space, whereas Word gave more space to a "w" than to an "l"; and Word would automatically superscript the "th" in 5th, something that is very tricky to do on one of those old typewriters.  Here is Megan McArdle of Bloomberg, rehashing the story on July 15:

The documents that backed this story up were probably forgeries.  Now, I say "probably," because I can't exclude the very remote possibility that in the early 1970s Bush's commanding officer, for reasons lost to history, decided to type up these memos himself (even though his wife said he couldn't type) rather than getting his secretary to do it.  I can't prove that he never got his hands on a rather exotic typewriter instead of using the ones that were in his office, spent some time working on it with a soldering gun, and managed to coincidentally produce a document that looked exactly like what you would get if you opened up Microsoft Word 2003 and started typing.

You quickly get the picture of how completely implausible this would be.  To the credit of CBS, Rather and Mapes were quickly dispatched.  You would think that those two would have quietly gone into another line of work and hoped nobody remembered this embarrassment, but no.  Mapes strenuously asserted in multiple interviews that it had never been "proved" that the documents were forgeries, and then in 2005 came out with a book, "Truth and Duty," presenting her side of the case (with herself of course in the role of heroine standing up to the corrupt President Bush).  Ten years on, it's now a movie.

So given the evidence out there at this point could anyone possibly give this the time of day?  Here is the New York Times on October 14 reporting on a preview showing of the film that took place last week at the Museum of Modern Art -- literally one block from my office:

Last week, the former CBS News producer Mary Mapes was back on West 53rd Street at the Museum of Modern Art for the premiere of the movie “Truth.” Ms. Mapes, the author of the book that inspired this movie, got a Hollywood welcome from an adoring crowd and blew a kiss to the film’s director and screenwriter, James Vanderbilt

Yes, it was a "Hollywood welcome from an adoring crowd."  That bit of publicity was followed by the rave review for the film that appeared in yesterday's Pravda, calling it "a gripping, beautifully executed journalistic thriller about the events that ended Dan Rather’s career as a CBS anchorman . . . ."   The review studiously avoids taking any position on whether the 60 Minutes II story was true or the journalists performed their jobs with any semblance of competence, versus getting taken in by an obvious hoax that they failed to question because the story helped their side in the heat of a presidential campaign.  After all, of what relevance is it to a movie going by the title "Truth" whether the story it is peddling is true or not?  That's not what this is about at all!:

“Truth” doesn’t try to resolve mysteries that may never be solved or to drum up paranoia for the sake of extra heartbeats. But it still casts a pall of dread, an ominous sense that people in high places, whether in government or the news media, will stop at almost nothing to protect themselves and their interests

Sure.  I've got news for you, Pravda:  this one is not a mystery.  At PowerLine today, Scott Johnson also points out with serious understatement that "[Times reviewer] Holden’s thick clichés about people in high places apply perfectly to Mapes herself rather than to the putative villains of Mapes’s piece." 

I was planning to cover several more examples of this genre, including the cases of executed Soviet spies Julius and Ethel Rosenberg, as well as the "Hands Up Don't Shoot" narrative that came out of the killing of Michael Brown in Ferguson, Missouri.  But this is getting way too long.   So let me close with what is undoubtedly the most extraordinary case today of mass groupthink acceptance of a politically-correct narrative over seemingly definitive evidence disproving the narrative.  I am referring, of course, to global warming.

Global warming.  Those who follow this issue at all know that in 1979 the U.S. put up sophisticated satellites to measure global temperatures.  The satellites were intended to resolve many thorny issues arising out of trying to measure global temperature by scattered thermometers located at surface weather stations.  Those issues include that large parts of the earth's surface (e.g., oceans, poles, Amazonia, sub-Saharan Africa) have no or few weather stations, that stations move, that cities grow around stations, that instruments get changed, and so forth.  So from 1979 forward we have satellites that measure nearly everywhere in the world equally, with far greater accuracy than the prior thermometer networks, and with none of these old issues.  Two different and independent scientific groups, known as UAH and RSS, were retained to analyze and publish the satellite temperature data.  So now we would really know whether global warming was occurring or not.

The latest monthly report on the satellite data covering September came out at the beginning of this month.  The basic story of the satellite data is that during the first 18 years (1979 - 1997) they showed some warming, but since early 1997 -- a period of now 18 years and 8 months -- there has been no warming at all.  Zero, zilch, nada.  Here is the chart of the RSS temperatures since early 1997, with the calculated slope line going through the middle (from Watts Up With That here):

It's important to note that the slope line shown is not some kind of estimate, but rather is calculated from the data points.  As indicated on the chart, these 224 months have seen a tremendous increase of human production of CO2, particularly with the growth of the economies of China and India, such that fully one-third of all human-produced CO2 has been in this period -- with no warming at all to show for it.

So what is the reaction over at the New York Times?  They actually had an editorial on this subject just last week (October 10), titled "Teaching The Truth About Climate Change," and  advocating that children as young as middle-school be taught that “human activities, such as the release of greenhouse gases from burning fossil fuels, are major factors in the current rise in Earth’s mean surface temperature.”   

Misinformation about climate change is distressingly common in the United States — a 2014 Yale study found that 35 percent of Americans believe that global warming is caused mostly by natural phenomena rather than human activity, and 34 percent think there is a lot of disagreement among scientists about whether global warming is even happening. (In fact, an overwhelming majority of scientists agree that climate change is here and that it is caused by humans.) One way to stop the spread of this misinformation is to teach children about climate change.     

Well then!  "An overwhelming majority of scientists agree that climate change is here".  I guess that sure trumps the facts!  Time to teach all the pre-teens how to groupthink!

 

 

 

 

 

Why Is Vladimir Pozner OK?

I'm not much of a sports fan, but last night I thought I would check out some of the winter Olympics.  And who was on there commenting for NBC but Vladimir Pozner.  VLADIMIR POZNER!!!  Am I the only one who remembers this guy?

It's now well over 20 years ago, but in the 1980s Vladimir Pozner was the official spokesperson for the Soviet Union on American television.  In those days ABC had a late-night news/public affairs program called Nightline, hosted by a guy named Ted Koppel.  Pozner was a regular guest.  They had him on whenever they wanted someone to deliver the official Soviet line on anything.  And to be fair to him, the guy was quite skilled.  He had a truly remarkable ability to make the most brutal repression, murder and torture sound reasonable.  But really, there was no mistaking what the guy was about.

I thought they gave Pozner way too much airtime at the time, but at least in the 1980s there was a legitimate reason to seek out the Soviet viewpoint on current events, however preposterous that viewpoint might be.  But there's no reason to be respectful to this guy today.  I can't think of why he is not completely reviled by every civilized person.  Instead, he's sitting there giving the "Russian perspective" on ice skating and such, with nobody being so impolite as to mention that he made his name as the apologist for the killing, repression and imprisonment of his own people by one of history's most brutal regimes.

Well, Pozner is just one example.  The past week saw an outpouring of astoundingly uncritical obituaries of Pete Seeger, the folk singer who died on January 27.  Seeger was a long-time unhidden communist, supporter of and sometime apologist for Stalin and his successors.  Some of the obituaries I read on Seeger never even mentioned the Communist association at all.  The rest barely touched on it.   Here's the New York Times obit, headlined "Pete Seeger, Champion of Folk Music and Social Change . . ."    Social change?  Read half way through the article and you'll come to one little line that says he joined the Young Communist League in the 30s, "but after two years he dropped out and moved to New York City."  That's it?  A somewhat more honest write-up can be found in the Atlantic here.  Excerpt:

As late as the 1970s, in his column in the left-wing folk magazine Sing Out!, Seeger was giving space to horrifying ideas. Dealing with the case of Wolf Biermann, a socialist singer expelled from East Germany for dissidence, he gave space to correspondents arguing that there might appropriately be limits on what artists should say in an ideal Marxist regime. In 1999, he accepted an award from Fidel Castro’s regime. 

And are we allowed to mention that he gave concerts supporting the Eastern European Communist regimes as late as the 80s?  From John Fund in National Review Online:

I recall interviewing East German dissidents in 1989 who were still angry at Seeger and Kris Kristofferson for the concerts they did on behalf of the Communist regime that built the Berlin Wall. He was hailed in the pages of Neues Deutschland, the Communist-party newspaper in East Berlin, as “the Karl Marx of the teenagers.”

So what if those guys killed 25 million (or maybe 50 million) people.  Seeger's OK because he was "one of us" and he was for "social justice."   For endless effusive praise of Seeger, read the NYT piece, or maybe the obit in The Villager here.

Supporting mass murderers may be quite OK, but on the other hand, advocating a 5% cut in the food stamp program because it fosters unnecessary dependency and is infected by massive fraud?  That's "devastating," "sheer meanness," "repugnant," "repulsive," "cruel," and "disastrous."  I hope you're starting to get a little understanding of how this works.

 

 

 

 

 

 

 

How To Forget The Lessons Of History

Here is a report in today's Crain's New York Business on the Brooklyn renaissance, and supposedly giving reasons for it.  The author is John Sodaro, identified as a graduate student at CUNY.  He reports on comments made at a panel discussion on the topic.  Undoubtedly, Mr. Sodaro is not old enough to have personal memory of what brought Brooklyn so far down, or what enabled it to start getting back up.

A guy named Alan Fishman of Ladder Capital Finance offered this remark:

much of the recent progress in Brooklyn can be credited to reducing crime and concentrating development in “dead” and underutilized areas. Repairing blighted neighborhoods encouraged people to move into those areas, boosting the local economy, he said

Not to denigrate Mr. Fishman, but how did Brooklyn come to have vast "dead and underutilized areas"?  Easy:  In the 1960s and 70s New York's top state and local income tax rates pushed up to a combined total of nearly 20%, at a time when New Jersey and Connecticut had no income taxes at all.  That's the era when the Jersey City waterfront, right across from the Lower West Side of Manhattan, had one new skyscraper after another and the Brooklyn waterfront, right across from the Lower East Side of Manhattan (and with much better transportation access) had not one single new building built for decades.

E.J. McMahon of the Manhattan Institute here has the history of New York's income tax rates, up to a peak of 15.375% state and 4.3% city in the mid-70s.  Then came the declines:  at the state, from 15% to 10% under Governor Hugh Carey by 1982, then down to 7% under Governor Mario Cuomo by 1987, and finally under 7% under Governor George Pataki in the 1990s.  That brings us to the last decade, and voila! a renaissance.

I'm not saying that public safety and government support of infrastructure had nothing to do with it.  But were they really the major factors?  Is this really sinking into a memory hole?

And by the way, also in Mr. Sodaro's article we have Deborah Wright of Carver Bancorp at the same panel discussion citing some figures:

Our poverty rate is over 20%, highest since 2000. And in the Bronx, the poverty rate is the highest of any urban area in the entire country.

I hope that all readers of this blog can recognize this as ignorant parroting of the completely fraudulent Census Bureau figures.  There is undoubtedly some real poverty in Brooklyn and the Bronx, but the Census Bureau numbers contain no credible information on the subject, let alone any credible information on whether "poverty" in any sense has increased, decreased, or stayed the same over time.


New Greek Debt Deal: Why Again Is This A Good Idea?

Big news:  the Euro parties have reached yet another kind of sort of semi bailout deal for Greece, enough to avoid immediate default and calm the markets for  -- how long this time?  A few months?

Here is a report from the Wall Street Journal on the terms of the deal and reaction from various quarters.  The details ($51.7 billion of new money unlikely ever to be repaid; new "austerity" measures that Greece "really, really" promises to put into effect this time; a discounted exchange offer for certain outstanding Greek debt) are unimportant.  Supposedly, it's all about meeting some debt-to-GDP target in 2020.  Does anyone believe that that is real?  (By the way, these debt-to-GDP numbers are of the fraudulent cash in cash out variety, when of course the government of Greece is mostly in the pension/insurance business and has real liability numbers that are a large multiple of the published numbers and almost impossible to find.  See the previous post.)

But why are they doing this?  Is anything about it a good idea?  This is another one of those issues on which the conventional wisdom is completely unanimous and my view is just 180 degrees different.  And I think that my view is just so obviously, glaringly right that I can't even think of the counterargument.

The conventional wisdom:  The various Euro parties (Eurozone countries, ECB, IMF) need to do what is necessary to bail out Greece sufficient to avoid crisis and save the Euro.

My view:  The worst possible thing that the Euro parties can do is continue to provide tide-over bailouts to Greece and other irresponsible Euro countries.  This course of action only prolongs the crisis and makes each round of it worse than the previous one, while multiplying the cost for the paying parties and rewarding the bad actors in the irresponsible countries.  The best thing that could possibly happen would be for the other Euro parties to make a clear statement to the irresponsible parties that bailouts of any sort are not on the table, and you are welcome to stay or leave as you choose.

My starting proposition:  A sovereign who issues fiat currency and has the ability to borrow and pay his debts in his own fiat currency, will eventually (and in all likelihood, quickly) debase and destroy that currency and steal substantially all the wealth of the population.

Discussions of the economic success of the United States rarely even notice an aspect of the design of our Federal system that was probably unintentional but I believe of tremendous importance.  Namely:  the large majority of the functions of government were to be carried out by the states, but the control of the currency rested with the Federal government.  Thus, the main functions of government were provided by entities with no ability to issue their own currency, or borrow in their own currency. 

It didn't take very long for the states to try to behave irresponsibly.  Many of them overborrowed in the 1830s, and defaulted in the early 1840s.  The Federal government did not bail them out; did not even seriously consider it.  The states could only extricate themselves by getting spending under control and doing consensual deals with creditors.  They learned their lessons; many passed restrictions on incurring debt and balanced budget amendments.  And thus we had a settlement that made largely impossible the great plague of human history, that the sovereign overborrows and then debases and destroys the currency and with it the accumulated wealth of the population. 

That has worked extremely well all the way into my lifetime.  Today, it appears that the lessons of history have been forgotten.  At the state level, many politicians have figured out that they can evade debt restrictions and incur very long term debts in the form of pensions that are not recorded on balance sheets, whose magnitude can be effectively hidden from most voters, and that can be used to buy votes and political contributions from concentrated blocs of public employees.  The promises are far along toward bankrupting many of the states, but the politicians who put the promises in place will be long gone when the promises come due.

Meanwhile at the Federal level, the Federal government is no longer a small part of total government spending, but more like two-thirds of the total.  Constraints on printing money, mainly the so-called gold standard, were gradually weakened and then finally eliminated by the 1970s.  The "independence" of the Federal Reserve, never strong to begin with, has diminished into nothing.  And, of course, spending is exploding at Ponzi scheme growth rates.  Watch out!

So Europe, again without even seeming to notice that this was the essential benefit of the structure, set up a U.S.-like monetary system with the currency-issuer not controlled by any sovereign, and the sovereign countries giving up the right to issue their own currency and thus likely to be forced quickly into default and spending constraints if they behaved irresponsibly.  Within not too many years, a number of the participants behave irresponsibly, and the structure works exactly as it should, backing the irresponsible spenders right into a corner.

And the conventional wisdom unanimously agrees on the right thing to do:  Bail them out, bail them out, and bail them out again.  In other words, give the lowest common denominator sovereigns the ability to force the debasement of everyone's currency for the benefit of their own favored cronies.

So the history is:  On the one hand example after example of sovereigns who debased their currencies and destroyed the wealth of their citizens.  On the other hand, the sole example, as far as I know, of the United States, where a structural inability of the sovereigns to borrow in their own currency led to an initial sharp contraction, then a quick recovery, followed by nearly two centuries of economic boom. unprecedented in human history.  Which do you choose?  Perhaps the first may  seem to make sense if you believe that it is the government's moral duty to take on all downside economic risk to all citizens.

The Infinite Credit Card Just Got More Infinite

Hurricane Sandy is giving us a chance to see whether there is anyone left other than the Manhattan Contrarian to dare to mention the issue that the Federal fisc is not infinite.

A little history.  In the nineteenth century, there were plenty of hurricanes, let alone other destructive storms and natural events, like earthquakes and tornadoes.  In that era, it never seems to have occurred to anyone that restoration of the pre-disaster situation was even a permitted function of the Federal government., let alone a good idea.

As just one example from the very end of that century, here is a brief history from the Texas Almanac of the response of Galveston, Texas to the devastating hurricane that literally wiped out the city in 1900.  At the time, Galveston was the fourth largest city in Texas, with a population of 37,789 in the 1900 census.  The storm of September 8 killed an estimated 6000 - 8000 people and destroyed the large majority of the buildings in the town.  To recover, the city formed a Central Relief Committee to collect donations, both monetary and in-kind. 

Donations poured in from cities around the United States and several foreign countries.
Money came from millionaires in New York, from black churches in Georgia, and from a little girl in Chicago, who sent 10 cents. Donations came from religious groups, labor and fraternal organizations and thousands of individuals. Relief funds were raised by an organ recital in Scranton, Pa., and by a baseball game in Anaconda, Mont. Money was sent by the German Turnverein of St. Louis, Mo., and the Rough and Ready Fire Company of Montrose, Pa. Sunday school classes sent their collections of pennies, nickels and dimes.
In all, donations exceeded $1.25 million. By far the most generous state was New York ($228,055), followed by Texas ($66,790), Illinois ($55,544), Massachusetts ($53,350) and Missouri ($52,116). Donations also arrived from foreign countries – among them, Canada, Mexico, France, Germany, England and South Africa.

Missing from that list:  the Federal government.  The State of Texas also did not assume responsibility for replacing people's lost private property.

Galveston then undertook a project to protect the city by building a gigantic sea wall and also the elevation of all buildings onto stilts.  Who paid for that?

The county agreed to pay for the seawall through a bond issue. Initially reluctant, the Texas Legislature finally agreed to a combination of tax abatement and sales of bonds to finance the grade elevation.

No mention that the Federal government paid a dime.

Fast forward to the modern era, where Federal contributions to disaster relief started as modest grants and gradually escalated.  By the time of Katrina in New Orleans in 2005, all constraints had been lost.  According to this article from USA Today a year after the storm, the Federal government had spent $122 billion, and that wasn't necessarily the end.

And now Sandy.  We know from Katrina that if you just demand loud enough the Federal government will pay for everything you can think of.  In fact, now is the time to make your wish list of anything you would like, because if you can come up with even the slightest connection to the hurricane, you can get the Feds to pay, and probably double, because the last thing they will want to do is to be seen cross-examining some victim.

From Crain's New York Business today, we have Governor Andrew Cuomo of New York putting forth his demand for Federal aid:  $40 billion.  "The governor said their estimates were conservative and may rise as the cost of recovery from Sandy continues to be tabulated."  And don't forget New Jersey.  Governor Christie there issued a number on Friday of $29.4 billion as what he will be seeking in Federal disaster aid.  Something tells me that that number is going to jump dramatically when he realizes that he has been topped in the bidding by New York.

And we thought it was a lot of money when the Federal government handed out a $20 billion blank check to New York for recovery from 9/11, plus the right to issue some tax exempt "Liberty Bonds" in excess of normal limits.  That money paid for such desperately-needed projects as a new $3 billion (!) station for the PATH subway to New Jersey, and the financing of new headquarters towers for Goldman Sachs and Bank of America.

So on Sandy, will the Obama administration or the Congress actually push back?  I'm dubious.  Is there anyone but me who thinks that this just can't continue?

People Start To Notice The State/Local Income Tax Deduction

Here at Manhattan Contrarian, we try to pay attention to where the big money is.  When the talk turns to raising Federal revenue and avoiding or minimizing increases in marginal tax rates, then that must mean limiting deductions; and as soon as you start to look at limiting deductions, you realize that the real money is in one place:  the state and local income tax deduction.

Today Charles Lane of  the Washington Post has the story, also linked by Instapundit.  (Manhattan Contrarian was first on this story back on November 6, although the post was originally written as an e-mail newsletter on October 9).  From Lane:

What’s the least defensible special break in the U.S. tax code? With so many distortions to choose from, it’s hard to name just one. If forced to pick, I might say the deduction for state and local taxes, which cost $67 billion in fiscal 2011, according to the congressional Joint Committee on Taxation.
This one overwhelmingly benefits upper-income households in a handful of upper-income states, while rendering the entire nation’s finances less transparent.

$67 billion per year is only about 7% of the current annual deficit; but it's the most you will find in any one place.  Also, as Lane points out, this one benefits the highest income people way disproportionately.

The interesting tension will arise from the fact that the benefits of this deduction go mostly to a very small number of states.  And those states are almost entirely the "big blue" states:  California, New York, New Jersey, Connecticut, Illinois, etc.  According to Lane, residents of "California and New York reaped almost 30 percent of the deduction's value in 2009."  If you don't have an income tax (Florida, Texas, Nevada, Washington, etc.) you won't even notice when they eliminate this deduction.

The Republicans in Congress have the potential with this one to corner the left-wing Democrat California and New York delegations as defenders of the rich, which they are.  That could be fun.

I have mixed feelings about what elimination of this deduction would mean for New York and for me.  When I first moved here (1975), New York, and particularly New York City, were wildly non-competitive in income tax relative to everybody else, although most notably New Jersey and Connecticut, which then had no income tax at all.  Combined New York State/City income tax at that time was 18%, starting at income as low as about $25,000.  As I have mentioned elsewhere, in the 70s New York City lost over 10% of its population in a decade; the Bronx was burning; businesses were leaving; and New Jersey and Connecticut were booming.  After that bad time, New York State and City struggled to regain tax competitiveness, and the City has returned to prosperity (although it could be far better if we could get taxes and spending further under control). 

The elimination of the state/local income tax deduction would greatly exacerbate the uncompetitiveness of our current tax levels, not so much as against the immediate neighbors, but definitely as against the large no-income-tax states like Texas and Florida.  Our high-income investment community is substantially more mobile today than it was in the 70s.  Erosion of this business base could happen with a speed that could surprise everyone.  That would be terrible for everyone in New York who lives off the wealth generated by these businesses.

On the other hand, New York needs a kick in the pants to move it toward competitiveness.  Right now we are wastefully way overspending on things that other states somehow provide for far less.  It can't go on forever, and it's actually well time to get started on getting our costs in line.

Oh, and did I mention that I'm one of the people paying the big state/local income taxes?  Well, not for too many more years.