If there’s one thing New York Times columnist Tom Friedman likes more than name-dropping, it’s churning out puzzling metaphors.  Two of his book titles, The Lexus and the Olive Tree and The World is Flat, illustrate this pastime of his— the former book comparing financial regulatory frameworks to computer software.  We doubt how helpful it is, though, to compare one complicated abstraction to another and expect the general reader to better understand global finance, but his books sell well.

After many rhetorical misses, Friedman finally makes a hit in contrasting today’s geopolitical problem children (Iran, Afghanistan, Pakistan, North Korea).  Using a metaphor of pulleys and levers, Friedman divides these four countries into two groups: those who promise to “pull levers”, only to find the levers breaking off the wall (Afghanistan, Pakistan), and those who grope around with much fanfare only pretending to pull levers (Iran, North Korea).

Candidate Obama rightly criticized President Bush for hiding the costs of the Iraq War through supplemental appropriations bills, rather than including the costs in the normal budget.  Alas, Mr. Obama is pulling yet another page from Bush book: though Mr. Obama recently included Iraq spending costs in his latest $410 billion budget, he has quickly come back for more, proposing his own $83.4 billion supplemental to fund operations in Iraq and Afghanistan as well as a few international aid programs.

Though there’s nothing necessarily wrong with requesting supplemental funding, the president’s request raises two concerns.  For one, requesting this money a mere month after Congress passed his buget makes one wonder why his budget analysts didn’t foresee these new costs and just include them in the original budget.  What’s more likely is that the president just wanted to send to Congress a bill with a lower bottom line so as to appeal to moderate Democrats and GOP deficit hawks (who only now have found fiscal religion).

Secondly, it’s hypocritical for the president to critcize his predecessor for a practice that he, himself, readily adopts once in office.

Photo: Susan Walsh, AP

The revelation of AIG’s extravagant bonuses is renewing calls for the Treasury to replace the leadership of bailed-out firms.  If these people brought their banks to such dire circumstances in the first place, so the thinking goes, they have proven their incompetence.  Fire them all, many say.

Though Monumentality hardly defends failed enterprises, one must wonder if the latest calls for executive firings would bring about the same calamity as de-Baathification did in Iraq.

When in 2003 the Coalition Provisional Authority, under L. Paul Bremmer, dismissed all senior officials of Saddam Hussein’s government, the result was a national Iraqi government devoid of leadership.  By categorically branding former officials as tainted, their replacements— a melange of political hacks, amateurs, and empty seats— ran the new Iraqi government FEMA-style.  We all know how that turned out.

Similarly, in the frenzy for well-deserved executive accountability at AIG and other firms, the Treasury should avoid repeating the mistakes of Baghdad.  Though executive boards and management (and the rank-and-file, too, to some extent) oversaw dodgy deals, they are ipso facto the people with the most knowledge of what deals need undoing.

Certainly it is possible for new-hires to gain the necessary institutional knowledge to lead these firm to a recovery, but it takes time.  Though the President is fond of solving all problems all at once, retribution and recovery are best served in separate courses.

The Treasury must not damage the viability of its (well, our) investments tomorrow for the sake of exacting a pound of flesh today.

Many small businesses such as shops and doctors’ offices are sole-proprietorships, meaning the income of the store is counted on the owner’s tax return as his own personal income. As a result, many small business owners are grossing more than $250,000 annually in income, even though they must pay rent, insurance, and employees’ salaries from this income, leaving only a modest sum to remain for the owner.

These business owners, because their personal income is combined with their business income, may face higher taxes under Pres. Obama’s tax proposals. What makes this coming tax debate interesting is that tax increases will heavily fall on people who voted for the President in the first place. Is this an instance of betrayal or an instance of you get what you vote for?

Victor Davis Hanson at RealClearPolitics, addressing the new President, discusses the implications of classifying small-business owners as “the rich”. He very smartly identifies the Democratic constituencies that will face higher tax bills under the President:

In fact, for your [spending programs] to succeed, you must go after the upper, upper middle-class, those making between $250,000 and $600,000 who are restaurant owners, home builders, labor contactors, architects, surgeons, engineers, hospital executives, college administrators, Ivy-League law professors, and many dentists.

These households are wealthy, yes; but they don’t own or even fly on $50 million private jets or host private Super Bowl parties. Their income is all reported, and with such good salaries come high insurance and, in the case of business, constant reinvestment and expensive inventories. They are not greedy, but the bulwark of the United States’ productive classes who in aggregate pay over 40% of the collective income taxes, and provide most of the jobs in the country. Under your plan many in these high-tax states will pay nearly 70% of their incomes in FICA, Medicare, federal income, and state income taxes. Why gratuitously mislead the American people that those for whom you will lift FICA ceilings or up their IRS bites to 40% are in any way synonymous with the super-rich? Remember the very, very wealthy voted overwhelmingly in your favor precisely because their riches gave them immunity from high taxes, and in many cases they were far removed from the everyday risk and worry of owning a hardware store or trying to keep together a family-owned construction firm. George Clooney is a world away from a paving contractor, just as making $400,000 a year on call 24/7 is not quite making $40 million investing or $2 million for a cameo.

So please no more intellectual dishonesty, Mr. President. Those in great numbers who will pay your higher taxes are not really the rarer Warren Buffets, Bill Gateses, Diane Feinsteins, Teresa Heinz Kerrys, Sean Penns, George Soroses, Oprah Winfreys, or Tiger Woodses, whose mega-wealth really does result in private jet rides, and yet exempts them from worries that increased taxes might wreck their small businesses. (my emphasis)

Some business owners facing higher taxes may find it more economical to incorporate their businesses and file taxes separately for their respective businesses. If this is the case, the President’s plan to boost revenue to pay for all his programs may not collect as much as he anticipates.

(No worries, though, since we can always foist these financial burdens on the unborn. Since when do they vote?)

The President’s opponents highlight that his aim is to redistribute wealth downward à la Robin Hood, but the President himself prefers to highlight his aim to provide such necessities as universal health insurance coverage. However, if the President’s aim were merely to provide necessities, it’s only fair that he come clean with the true costs of these programs.

The Bush Administration, wanting to hide its deepening budget deficits, cynically and dishonestly refused to count Iraq spending as part of the normal budget, instead requesting the money as “emergency” appropriations. Though Pres. Obama is rightly including Iraq spending as part of the normal budget, he is underestimating the costs of his forthcoming health care plans, somehow imagining that taxing “the rich” (celebrities, hedgefund managers, as well as roofing company owners) can somehow finance the all-ages version of the most out-of-control government medical insurance program in the nation.

There is no such thing as free healthcare and the bill must be paid somehow, be it through escalating private premiums or through escalating tax rates.  The President is wisely persuing cost reductions through large-group bargaining of drug prices, digitization of medical records, and research into best practices to reduce mistakes.  These are worthy goals, no doubt, but like earmark reform, they will merely dent expenditures slightly, leaving hefty bills to be paid through the public treasury.

The super-rich can afford marginal increases in their tax bills, but sole-proprietors grossing more than $250,000 may find this President rather taxing.

The Pittsburgh Post-Gazette ran an article about men who had lost their jobs due to their failure to register with the Selective Service, the government registry of all adult men in the nation.  The registry’s aim is to compile a list of potentially combat-ready men in the event of a military draft.

Several men who failed to register in their youths have lost their government jobs for that fact alone and are now challenging the constitutionality of the Selective Service law.  The law is a clear form of sex discrimination in that it compels men, but not women, to register and can thus only deny federal employment to men on this account.

Furthermore, the law’s discrimination is unnecessary since women serve widely in the military and in fact more than one hundred women have died in the current Gulf War—evidence of their role, even if unintentional, in combat.  Though the Supreme Court in 1981 upheld the law (as did a Federal Court a few years ago), its premises and conclusion are rather flimsy.  The law’s basis is

1. That all young men are possibly suitable for combat, but no young women are (not true); and
2. That a draft should only include those who can serve in combat roles (not true);
3. Thus only men would need to be drafted in a military emergency. (not true)

Furthermore, the application of penalties to men, but not to women, is sex discrimination and the Feds lack strong arguments to justify a state interest in the continuation of this discrimination.  The law should be changed so that all young men and women are required to register or that nobody is required to register.