The Wonk Room

Cable News Networks Help Spread Republicans’ ‘Highly Misleading’ Stimulus Math

Back in January, the Republicans staked out their opposition to the administration’s economic stimulus package by claiming that it would cost $275,000 for every job created. “All told, the plan would spend a whopping $275,000 in taxpayer dollars for every new job it aims to create, saddling each and every household with $6,700 in additional debt,” said Rep. John Boehner (R-OH).

This number was derived by taking the entire cost of the stimulus package and dividing it by the number of jobs created in just one year, obviously inflating the per job cost a few times over. At the time, Paul Krugman called the Republicans’ number a “bogus talking point,” while Joe Klein dubbed it “phony-baloney propaganda.”

With the White House’s announcement last week that the stimulus package has thus far created 640,000 to 1 million jobs, the GOP is at it again. Don Stewart, spokesman for Sen. Mitch McConnell (R-KY), told reporters on Friday to “get out your calculators” and divide the spending by the jobs, ending with a figure of $230,769 per job. In addition to Republican lawmakers, Fox News, CNN, and CNBC have all repeated some variation of the number (using slightly different estimates) in the last few days. Watch a compilation:

The Associated Press’ Calvin Woodward, however, was not fooled, and today released a piece telling readers to “beware the math” coming from the Republicans:

Some Republican lawmakers critical of President Barack Obama’s stimulus package are using grade-school arithmetic to size up costs and consequences of all that spending. The math is satisfyingly simple but highly misleading…First, the naysayers’ calculations ignore the value of the work produced. Any cost-per-job figure pays not just for the worker, but for material, supplies and that worker’s output — a portion of a road paved, patients treated in a health clinic, goods shipped from a factory floor, railroad tracks laid. Second, critics are counting the total cost of contracts that will fuel work for months or years and dividing that by the number of jobs produced only to date.

As Woodward wrote, “dividing apples by oranges won’t settle” whether or not the stimulus package has been a success. But it seems to be good enough for the Republicans and all of the cable news hosts that they can get to listen.

CNBC: Paymaster Must Make Pay Comparable ‘Across The Industry’ Or Bankers Will Go Work At The DMV

Today, Kenneth Feinberg, the administration’s special master for compensation, plans to announce that the seven companies under his office’s watch must cut pay packages for their top 25 executives by about 50 percent, including a 90 percent reduction in cash salary. Feinberg also plans to “curtail many corporate perks, including the use of corporate jets for personal travel, chauffeured drivers and country club fee reimbursement.”

An executive at one of the seven companies told the Wall Street Journal that “the terms came as a shock,” and that the restrictions “were clearly much worse than what had been anticipated.” And of course, CNBC, which never hesitates to defend bailed-out bankers and their sky-high bonuses, went to bat for the banks once again, arguing that Feinberg should make pay comparable “across the industry,” lest some bankers take such exception to their pay cuts that they go work at the DMV. Watch it:

CNBC also managed to blame the falling value of the dollar on Feinberg’s decision. But if Feinberg really applied compensation levels comparable to other Wall Street banks, his restrictions would be rendered moot, as Wall Street pay is headed for a record high this year, eclipsing the previous highs from 2007. (For the record, the average DMV employee makes $35,000 per year.) Goldman Sachs alone has already set aside $16.7 billion for compensation.

And this gets at the limitations of the administration’s action. While I think it is entirely appropriate that Feinberg crackdown on the pay at these seven companies, they represent only the tip of the iceberg when it comes to problems with Wall Street’s pay structures.

As Nomi Prins wrote, “by simply tying compensation caps to the TARP program (a year late), Feinberg and the Obama administration are completely ignoring the rest of the $14.6 trillion federal bailout and subsidization of the banking industry, which has helped propel many key banks to 2007 levels of compensation, unfettered.” And as evidenced by Goldman Sachs analyst Brian Griffiths’ comment yesterday that we must “tolerate” income inequality “as a way to achieve greater prosperity and opportunity for all,” Wall Street doesn’t seem too interested in changing things on its own.

The Fed took a step towards reform today, seeking comment on compensation formulas that would defer payment over a longer-term. Indeed, what has to happen — by regulation if necessary — is that a large percentage of any particular pay package needs to be tied to the long-term performance of the firm. This, along with a resolution authority that ensures that banks can fail without bringing down the rest of the economy, will correctly align incentives going forward, and hopefully help to prevent another situation in which Wall Street bankers run to the federal government for aid and then use that aid to line their own pockets.

CNBC Cites Glenn Beck As A New Economic Indicator

Last night, Fox News’ Glenn Beck spent a segment decrying the demise of the dollar — which he sees as imminent — and continually citing the threat of hyperinflation. Beck is so worried, in fact, that he advocated that the American people turn to gold as a sound investment against their government’s fiscal misdeeds.

Back in reality, the International Monetary Fund has actually warned that the United States “should have a second stimulus package ready just in case deflation becomes more evident,” while the percent change in the Consumer Price Index isn’t consistently above zero. But instead of relaying that information, CNBC’s Michelle Caruso-Cabrera — the same anchor who thinks tax havens prevent tyranny — took Beck’s tirade as the true indicator that the dollar’s six month slide in value is effectively over:

We’ve been talking about it ad nauseum here on CNBC, but, last night, Glenn Beck, the first eight minutes of his show — roll the tape — he spent decrying the demise of the dollar…Whenever we see any kind of economic trend permeate into the general media, doesn’t that almost tell you that it’s over?…Glenn Beck, contrary indicator!

Watch it:

On one hand, good for CNBC for calling out hyperinflation fearmongering. But is citing Glenn Beck really the best way to make that point? After all, Beck may have an ulterior motive for pumping inflation fears. A Color of Change-driven boycott has lost Beck’s show 80 advertisers, but one of the few sticking with him is Rosland Capital, a company that specializes in selling gold. And as Ryan Witt pointed out, Beck never notes his conflict of interest:

So Beck essentially scares his audience into believing that hyperinflation and economic collapse is a near sure thing and then advises them to buy gold to protect themselves. All along Beck never mentions that a gold-buying company happens to be one of his few remaining sponsors. Beck also never interviews other economists who believe that we are nowhere near the economic conditions necessary to see hyperinflation. Finally Beck also never informs his audience of the risks involved in buying gold. Gold has seen its price skyrocket with the economic troubles of the last few years and there is a real danger that the price of gold may actually decrease if the economy improves in the coming years. Quite simply if one buys gold high right now they may be forced to sell low later.

Witt added that “usually Glenn Beck’s show simply misinforms his audience on political grounds which is dangerous enough. Now however Beck is actually guiding his followers down a financial path that may cost them dearly.” Incidentally, Beck himself is a spokesman for Goldline International, another company that specializes in selling gold.

CNBC: ‘Is There A Case For Regulation When We Have Recovered Without It?’

Today, President Obama spoke at Federal Hall in New York “to try to breathe new life into efforts to overhaul the financial regulatory system.” One year after the collapse of Lehman Brothers revealed the true extent of Wall Street’s meltdown, the regulatory reform effort has bogged down on Capitol Hill (though both House Financial Services Chairman Barney Frank (D-MA) and Senate Banking Committee Chairman Chris Dodd (D-CT) seem intent on beginning to move legislation).

As the Washington Post noted, “while the health-care debate has raged nationwide throughout the summer, financial reform virtually vanished from the public radar, even as an army of lobbyists worked on Capitol Hill to reshape the president’s agenda.” And as Wall Street has started to rake in profits again, the urgency to reform the system has faded. In fact, CNBC’s Melissa Lee wondered today if the case for regulatory reform can even be made “when we have recovered without it”:

It is business as usual on Wall Street, and Wall Street has recovered and adopted a lot of their own sort of standards these days. For instance, not many CEO’s on Wall Street say 30-1 leverage is a good idea any more. 15-1 is more the way they like it these days, as John Mack told our own Maria Bartiromo over the weekend. So therefore, is there a need, is there a case for regulation when we have recovered without it?

Watch it:

As we’ve seen with an increasing unemployment and mounting mortgage troubles, Wall Street profits don’t in any way mean that “we have recovered,” if “we” is inclusive of anything other than Wall Street banks. And even Wall Street’s profits are mostly the result of government guarantees, bookkeeping tricks, and relaxed accounting standards.

While Lee seems content to trust that the banks have learned their lesson and will regulate themselves appropriately, as the New York Times pointed out, “the biggest banks have restructured only around the edges”:

Only a handful of big hedge funds have closed. Pay is already returning to precrash levels, topped by the 30,000 employees of Goldman Sachs, who are on track to earn an average of $700,000 this year. Nor are major pay cuts likely, according to a report last week from J.P. Morgan Securities. Executives at most big banks have kept their jobs…For now, banks still sell and trade unregulated derivatives, despite their role in last fall’s chaos.

Plus, as Nobel Prize-winning economist Joseph Stiglitz pointed out, the problems inherent with having banks that are “too big to fail” are “worse than they were in 2007 before the crisis.”

In his speech, Obama said that “there are some in the financial industry who are misreading this moment…We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses.” But in some ways, we are already there, and it will take a concerted effort at enacting regulatory reform over the objections of the financial industry to stop the slide back to 2007.

CNBC: Unemployment Benefits Are A ‘Fraud,’ We’re ‘Paying People Not To Work’

When Congress returns after the August recess, it plans to consider an extension of unemployment benefits for the 1.5 million Americans whose benefits will run out by the end of the year (a half million of those will run out by the end of September). Last night, CNBC’s Larry Kudlow hosted University of Chicago Professor Casey Mulligan and former Secretary of Labor Robert Reich to discuss, among other things, the effectiveness of benefits as stimulus and a social safety net. Prompted by Kudlow asking Reich if “the thrust of the stimulus plan” constitues “paying people not to work,” Mulligan said:

This is the same fraud coming from the other party. When Republicans did it they called it trickle-down. You do this, you benefit one guy, he goes and spends it and it benefits another guy. The Democrats got their own version now, it’s called Keynesian or whatever, but they’re saying if I give an unemployment check to somebody who’s not working, he’s going to go spend it and create more jobs. It’s just another version of the trickle-down fraud and it’s a fraud.

Watch it:

Reich correctly characterized the dispute as a “ridiculous argument.” But the same ridiculousness was also put forth by conservative columnist Michelle Malkin, who claimed on ABC’s This Week that the unemployed have stopped looking for jobs because “if you put enough government cheese in front of people, they are just going to keep eating it.”

The truth is that unemployment benefits provide a vital lifeline to 9 million Americans who have lost their jobs, and keep those families going in an environment where jobs are scare. As Lawrence Katz, a labor economist at Harvard, explained, “for every job that becomes available, about six people are looking.” “Unemployment insurance gives income to families who are really suffering and can’t find work even if they are hustling to look,” he said.

And unlike trickle-down tax cuts, unemployment benefits are one of the best ways to provide fiscal stimulus, as they are almost certain to be spent quickly. One dollar put towards unemployment benefits contributes about $2.15 to economic growth.

As Maurice Emsellem, a policy director at the National Employment Law Project, said, “if more help is not on the way, by September a huge wave of workers will start running out of their critical extended benefits, and many will have nothing left to get by on even as work keeps getting harder to find.” Indeed, even if job losses have slowed, it’s likely to be some time before employment picks up again, and thus extending benefits is a prudent move.

CNBC Doesn’t Question Camp’s False Small Business Stat, Casts Doubt On Van Hollen’s More Accurate One

Today, House Democrats unveiled health care legislation that proposes a surtax on wealthy individuals in order to finance a portion of the $1.5 trillion cost of health reform. The surtax rates would be 5.4 percent for couples earning more than $1 million, 1.5 percent on couples with incomes between $500,000 and $1 million, and 1 percent on incomes over $350,000.

Before the unveiling, Reps. Chris Van Hollen (D-MD) and Dave Camp (R-MI) appeared on CNBC to discuss the bill, and when asked about the surtax, Van Hollen approved while Camp did not. The CNBC anchors, however, didn’t question Camp’s incorrect statistic that half of small businesses would face the tax, while casting considerable doubt on Van Hollen’s much more accurate number of businesses that would be affected:

CAMP: This is going to be a massive tax increase, half of which will be paid by small business. We expect that as many as 2 out of 3 manufacturers could pay significantly higher taxes under this. [...]

CNBC: Rep. Camp, give some details of the alternative [Republican] proposal.
———————————————

VAN HOLLEN: 98 percent of small businesses are not going to feel anything with respect to the surcharge and 99 percent of American citizens are not going to feel anything with respect to the surcharge. These are very high-income individuals who did very well under the Bush tax cuts.

CNBC: It’s difficult for viewers to just hear those numbers and assume that they’re true, so we can’t go into the details of whether it’s accurate or not.

Watch it:

As Igor Volsky noted yesterday, the overwhelming majority of small business owners earn far less than $350,000, and thus will not be affected by the tax. Of people who earn most of their income from their own business, only 98 percent make less than $250,000, while “more than half have income below $30,000 and 80 percent make less than $100,000.”

Republicans come up with their 50 percent number by categorizing everyone that earns any money from a business or investment as a “small business owner.” But Citizens for Tax Justice ran the numbers on the House proposal today and found that about 5 percent of actual small businesses would be affected by the surtax, and that “even for those who must pay it, the surcharge would usually not affect their ability or incentive to hire workers or expand their operations.” But CNBC’s talking heads have never let the facts get in the way of their opinions.

CNBC Very Worried About ‘Extremely Elitist’ Consumer Protection Agency

CNBC — the same network that tirelessly defended bonuses for bailed-out bankers, claimed that only “suckers” and “idiots” were victims of predatory lending, and called struggling homeowners “losers” — is suddenly very concerned with the plight of low- and moderate-income Americans. However, it’s not because of massive job loss or rising foreclosure rates.

Instead, network anchors Larry Kudlow and Melissa Francis, along with CNBC contributor James Pethokoukis, spent a segment today claiming that the Obama administration’s proposed Consumer Financial Protection Agency (CFPA) is a terrible idea because it will inevitably be “extremely elitist” and its creation will result in only rich people having access to financial products. Watch it:

Fortunately, Connecticut Attorney General Richard Blumenthal was there to characterize the CNBC position as “unreal.” But CNBC is not the only one using this argument to try and deride the proposed agency. Here’s the American Enterprise Institute’s Peter Wallison in today’s Washington Post:

Conservatives have always argued that liberals are elitists who do not respect ordinary Americans; this legislation seems to prove it. For example, the administration’s plan would allow the educated and sophisticated elites to have access to whatever financial services they want but limit the range of products available to ordinary Americans.

Now, any regulation is bound to carry some cost increase and reduce some choice. For instance, mandatory seat belts and air bags make new cars slightly less affordable to some consumers. Do they make it such that only the wealthy can afford cars? No, of course not. This line of reasoning from CNBC and Wallison is simply a disingenuous distraction from those who fear any kind of regulation.

The point of the new agency is to ensure that consumers have to actively make the choice to purchase a riskier financial product. Consumers would have to opt-in to a non-standard financial product, and the firm offering the product would have to fully disclose that product’s risks. The agency would also be able to ban some of the worst practices of lenders, but as Tim Fernholz put it, “the loans the CFPA [is] designed to ban were premised on the idea that they were risky and consumers didn’t understand them, since that was a better way for banks to make money.”

The reality is that exploitative and predatory lending is often quite profitable for a financial institution, creating an incentive to push consumers toward riskier products, even when a standard product will suffice. This is what the new agency is meant to address. CNBC’s professed concern for the little guy is simply the same Wall Street-centric nonsense that the network always engages in, dressed up in different clothing.

CNBC Talking Heads: Only ‘Naive,’ ‘Stupid’ ‘Suckers’ And ‘Idiots’ Were Victims Of Predatory Lending

Yesterday, the Obama administration announced that, as part of its regulatory reform package, it wants to create a new consumer protection agency, charged with overseeing financial products on the ground level. The banking lobby and the Chamber of Commerce both made their opposition to the new agency known, and in the last day have found another strong ally in CNBC.

A host of CNBC talking heads — from Dennis Kneale and Joe Watkins to Larry Kudlow — said that the new agency is actually meant to advance an insidious liberal plot to force banks into making loans to poor people that can’t pay them back. And anyway, the very notion of consumer protection is unnecessary because only “stupid,” “naive,” “suckers” and “idiots” wound up with a subprime mortgage or unfair credit card contract. Watch a compilation:

Nevermind that this whole premise of CNBC’s attack is based on the crackpot conservative theory that forced lending to the poor and minorities, mandated by the Community Reinvestment Act (CRA), caused the economic crisis. This response shows, yet again, how out of touch CNBC is with the real world.

Just this month, Wells Fargo was accused of spending a decade “systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages.” Loan officers actually pushed customers who would have qualified for a prime loan into a subprime. Employees reportedly referred to blacks as “mud people” and to the loans they were offering as “ghetto loans.” As Professor Elizabeth Warren said, “all these lousy mortgages got sold, one family at a time. These were crummy mortgages, like selling plastic spoons that have carcinogens in them or toys that put out little children’s eyes.”

And it wasn’t just in mortgages that predatory lending occurred. Credit cards, particularly those marketed to young people, had all sorts of hidden fees, with rates that could be raised at any time, for any reason, causing boatloads of debt.

The point of the new agency is to keep an eye on financial products on the ground, which is an area traditional regulators have ignored, with severe implications. And yes, the new agency will be responsible for enforcing fair lending laws and the CRA, which as Federal Reserve Board Governor Randall S. Kroszner said, have “been helpful in alleviating the financial isolation of many areas of concentrated poverty.” CNBC’s wholesale dismissal of all of this is a pretty blatant example of what the network really cares about.

CNBC: TARP ‘Slush Fund’ Will Be Used To Bail Out ‘The Boston Globe’ And ‘The Guys That Make Chia Pets’

Yesterday, the Treasury Department announced that it’s allowing ten banks to repay $68 billion in TARP money. McClatchy added today that the federal government actually saw a profit on this $68 billion, albeit a small one:

In addition to returning the $68 billion, the 10 banks paid the government $1.8 billion in dividends on the preferred shares of stock the government owned. That translates to an annualized rate of return of about 4.64 percent on the $68 billion. In all, the government has received $4.5 billion from all bailout recipients, who’ve received $200 billion, for an annualized rate of return since Nov. 12, 2008, when the money was lent out, of 3.94 percent.

As Matthew Yglesias pointed out, this seems to show that “for all the complaining from both the right and the populist left about spending $700 billion on bailouts, the net fiscal cost of the $700 billion TARP program is likely to be dramatically lower.” However, CNBC’s crack economic team isn’t buying it, and spent a segment today discussing how the Treasury is clearly going to put the repaid TARP funds into a government slush fund to bail out “the Boston Globe” and “the guys that make Chia pets,” and thus taxpayers will never see the money again. Watch it:

CNBC contributor Steve Leisman provided a nice moment of sanity during the segment, reminding his co-contributor Stephen Moore that “you were the one arguing that the taxpayers would never see a dime from this, the banks would never pay it back, and now you want us to believe your next new warning?”

There are real questions about where the money repaid from TARP should go, and one of the options is having Treasury hold onto it in case of another economic free fall. This is what Herb Allison, who the Obama administration has tapped to run the program, thinks we should do. Other options include paying down debt or using the funds to aid smaller, community banks.

There is also some ambiguity about Treasury’s plan for winding down its interest in institutions like Citigroup and GMAC, from which there will likely be no repayment anytime soon. But CNBC couldn’t be bothered with a serious discussion, and decided that it would be more entertaining to laugh about the federal government buying Chia pets.

CNBC Mocks Elizabeth Warren, Tells Her To Stop ‘Breathing Down The Necks Of The Banks’

The Wall Street Journal reported today that the TARP’s Congressional Oversight Panel, chaired by Harvard Law Professor Elizabeth Warren, “is investigating the lending practices of institutions that received public funds, following a rash of complaints about increases in interest rates and fees.”

Reportedly, bailed-out banks like Citigroup and Bank of America are jacking up credit-card interest rates and fees on transactions. “The people who are subsidizing the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending,” Warren said. “In a sense, we’re asking taxpayers to pay twice.”

While discussing the story, CNBC’s Dennis Kneale saw fit to mock Warren’s concern for taxpayers, and then tell her to stop “breathing down the necks of the banks” and “let these guys do what they need to do”:

My real problem is with Elizabeth Warren…She has been crusading against credit card companies for years. She thinks they’re evil…Don’t we already know that credit card companies charge you a ridiculous amount of money? I didn’t need contract legalese to tell me that. I already know that [...] This oversight committee breathing down the necks of the banks…Government ought to get out of the banking business and let these guys do what they need to do to raise the money they need to raise.

Watch it:

Of course, Warren’s panel is tasked with overseeing the TARP, and verifying that taxpayers don’t get gamed by the very banks that they are bailing out. CNBC, meanwhile, has made a habit of defending oil speculators, outlandish bonuses for bailed-out Wall St. executives, and huge tax giveaways for the rich, so it’s not surprising that they’re siding with the banks on this one.

On another level, this whole episode is symbolic of the trouble with effectively nationalizing the banks without taking the requisite control. Now, the government is awkwardly positioned between an action that is good for the banks, but bad for taxpayers. As Aaron Task at Tech Ticker wrote:

This fee-issue speaks to the folly of having banks that are quasi-nationalized vs. either fully private or totally under government control.…[T]hey should be dealt with as insolvent banks have been for generations — put into FDIC receivership — rather than continuing this charade that certain banks haven’t already been nationalized.

How many headaches — from bonuses to hiked up interest rates — could have been avoided if the government had just exercised some control over the banks that it effectively owns?

CNBC Host: Rep. Ryan’s Alternative Budget ‘Gives Me A Lot Of Confidence’

Today, both the House and Senate budget committees are marking up their respective budget documents. In advance of the House meeting, Rep. Paul Ryan (R-WI) appeared on CNBC to talk up his “alternative budget,” which he has previewed in the Wall Street Journal and plans to release next week. CNBC guest-host Fred Malek said that Ryan’s plan “gives me a lot of confidence,” and is “going in the right direction”:

RYAN: We’re not going to do cap and trade, we’re not going to do any tax increases. [...] We’re going to go in a completely different direction and show the American people how we would do things much much differently to restore growth and confidence to our economy, keep the American economy growing, and not switch over to a Europeanized type of economy.

MALEK: Paul that gives me a lot of confidence what you just said. I think you’re absolutely going in the right direction.

Watch it:

Ryan never explained on-air what his budget entailed, but a look at the details explains CNBC’s wholehearted support. Ryan’s plan, as it is, consists almost entirely of massive tax cuts for corporations and the rich, including:

- Lowering the top marginal tax rate to 25 percent

- Lowering the corporate tax rate to 25 percent

- Completely eliminating the capital gains tax

As Ben Furnas pointed out yesterday, this budget plan gives the average CEO a $1.5 million tax break, while doing precisely nothing for minimum wage workers. As Office of Management and Budget Director Peter Orszag said during a conference call today, “in terms of an alternative vision, and to my understanding that’s the only thing out there, the flaws in it are pretty clear.”

Lacking from Ryan’s budget is any effort to deal with the pressing issues that Obama’s budget tackles: health care, energy independence, and education reform. Essentially, CNBC is confident that the “right direction” is further enriching the rich while ignoring all of the problems that are crippling the economy.

CNBC’s Haines Does It Again: ‘Do You Have Any Idea What Wall St. Would Look Like’ With $100,000 Salaries?

CNBC’s Mark Haines — who yesterday made waves by suggesting that Wall Street companies can’t “be run well” by those making under $250,000 and compared Wall Street executives to Nazis and Baathists while defending their bonuses — was at it again today.

While debating Rep. Brad Sherman (D-CA), Haines said those who think bailed-out executives shouldn’t receive bonuses are engaged in “witch-huntery.” He also expressed dismay at the thought of Wall Streeters working for a $100,000 salary:

This is witch-huntery. I’ll be perfectly honest with you. You and people who share your opinion seem to feel that, you know, let’s hold salaries on Wall Street to $100,000. Do you have any idea what Wall Street would look like if you did that?

Watch it:

As Sherman pointed out, it’s not the idea of bonuses and the salaries that’s the problem — it’s that the people receiving the bonuses and salaries are working for federally bailed-out enterprises. These are exceptional circumstances that call for a change in Wall Street’s standard operating procedure.

But this is not a zero-sum game. Here’s an suggestion from Brad DeLong on how to handle compensation for traders and executives, if they stick around and actually nurse the financial system back to health:

Traders and financial executives who are willing to work very hard for what are now government-owned enterprises should be offered the carrot of long-term restricted equity stakes: that if they do their jobs well and if the government makes a healthy return because of their skill, forethought, and diligence, they should make healthy returns as well.

Sounds reasonable.

CNBC Host Compares Wall St. To Iraq And Nazi Germany While Defending Bonuses

The House and Senate are moving today to pass legislation that would “impose a hefty tax on retention bonuses paid to executives of companies that received federal bailout money.” Of course, this compelled CNBC to come running to Wall Street’s defense.

During a discussion with Financial Services Roundtable CEO Steve Bartlett, CNBC anchor Mark Haines came at the executive compensation issue from a foreign policy perspective. He argued that the examples set by Nazi Germany and the Iraq War make it clear that Wall Street employees should have their bonuses:

It’s just like when the Allies were victorious over Nazi Germany in World War II, when we occupied the country, we left a lot of Nazis in place because they were the ones who made the trains run on time and the bureaucracy function properly, etc. And it was distasteful, but you needed them. And in fact, our experience in Iraq kind of demonstrates the wisdom of that, because in Iraq we replaced the Baathist bureaucrats and the result was chaos. Not to compare Wall Street to Iraq or Nazi Germany, but the point is you need people who know what they’re doing.

Watch it:

Haines said that his point was “not to compare” Wall Street to Iraq or Nazi Germany, but it sure seems like that’s what he did. Bartlett wanted no part of it, saying “I’m not even going to touch your analogy.”

Crazy framing aside, Haines was trying to make the same argument that the New York Times’ Andrew Sorkin made this week: “A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.” Rep. Barney Frank (D-MA) called this idea “nonsensical” in an interview with ThinkProgress:

If they really understood what they did in the first place, seriously, they probably wouldn’t have done much of it. Secondly, when you are trying to undo something, it is often not the case that the people who did it are the ones to put in place.

Haines also missed an opportunity to ask Bartlett about the Financial Services Rountable’s ongoing lobbying effort to blunt the bonus legislation. According to Roll Call, the Financial Services Roundtable is one of the entities that has “moved into hyperdrive, engaging in a behind-the-scenes counterattack after lawmakers trained their eyes on all bonuses paid out by struggling banks.”

Rep. Garrett And CNBC Peddle Misinformation About Taxes, Productivity, And Business Investment

Last night, CNBC hosted a spirited discussion with Rep. Scott Garrett (R-NJ) regarding the proposed tax increases in the Obama administration’s budget. When CNBC’s Donny Deutsch expressed skepticism that the increases will really “bring business to our knees,” the rest of the CNBC crew jumped all over him. “That will discourage investment, yes, yes,” they said.

Garrett then issued a challenge, asking Deutsch to “give me an example of once during the history of this country where raising the taxes actually increased productivity, increased business investment.” Watch it:

Deutsch tried to respond with “the Clinton years,” and was shouted down by the rest of the CNBC gang. But he was exactly right! As CAP’s Michael Ettlinger found:

When examined at equivalent points in the business cycle, productivity growth was greater after 1993 than during either of the supply-side eras [1981 and 2001]…Overall for these periods the average annual productivity growth was 1.9 percent during the expansion following the 1993 legislation, and 1.7 percent for both supply-side eras.

And as for business investment:

In the two supply-side eras the average growth rate in real investment was unimpressive: It was 2.8 percent in the seven-year period beginning in 1981 and 2.7 percent in the period beginning in 2001. In the period with higher taxes beginning in 1993, the growth rate was 10.2 percent.

The Bush tax cuts “were actually followed by a pronounced decrease in the fraction of G.D.P. devoted to business investment.” Here’s a graph, courtesy of Princeton professor Uwe Reinhardt, showing business investment falling during the Reagan and Bush eras, but rising during the Clinton years:

It appears that productivity, business investment, and taxes don’t have the relationship that Garrett and Deutsch’s co-hosts think they do.

CNBC On Speculators Gone Wild: ‘So What?’

Yesterday, the Center for American Progress Action Fund’s Dan Weiss stood up for working American families as CNBC host Trish Regan and two other guests defended unlimited oil speculators. They dismissed any notion that the wild price swings in the oil market harmed anyone, and scoffed at the idea that the oil markets need reform. Regan scorned an independent report that found unrestrained speculation by investors uninvolved in the oil market caused the 2008 bubble:

Guys, welcome to all of you. According to this report, in the five months from January to May traders poured $60 billion into the commodities market and basically per the report they caused a big spike in oil prices. My question to you is, Dennis, well, so what? So what? They invested in oil, oil went up. What’s wrong with that?

Futures speculator and promoter Dennis Gartman replied, “Well, there’s nothing wrong with it.” Infectious Greed blogger Paul Kedrosky called market reform “insidious.”

Watch it:

As Weiss tried to explain over the rolled eyes and scoffing laughs of the other guests, the oil price spike caused real harm to American families, especially as health, education, housing, and food costs simultaneously rose — also in part due to speculators gone wild in those markets — while incomes declined and jobs were lost.

Today, the Commodity Futures Trading Commission released a report recommending specific improvements to commodities markets to eliminate the swaps loophole that encourages risky bets that inflate speculative bubbles. The report also found that trades involving outside speculators (”noncommercial traders”) surged from 10 percent in 2000 to 40 percent by 2008. Sen. Dianne Feinstein (D-CA) said all of the commission’s recommendations “should be implemented immediately.”