Matthew Yglesias on John Meriwether's new Hedge Fund

Yglesias notes the Financial Times article about John Meriwether, of Long-Term Capital Management infamy, setting up his third hedge fund and writes,

I’m not a huge believer in human rationality, so I totally understand how this scam worked once. That he was able to get a second fund off the ground is pretty amazing. If he finds investors for a third spin around the wheel I’m going to propose confiscating all the rich peoples’ money and giving it to capuchin monkeys.

Six Wasted Syllables (for Paul Price)

On the Atlantic's Business Channel, Chris Good posts about the return of Bobby Jindal, noting that, given his expertise in health care policy, Jindal has taken advantage of the current debate over President Obama's proposed health care reform to tiptoe back into the national spotlight, now that memories of his awful response to the President's speech have faded. Good also links to Jindal's op/ed about health care policy in today's Wall Street Journal, "How to Make Health-Care Reform Bipartisan". One paragraph from Jindal's op/ed prompted the title of this post:

•Refundable tax credits. Low-income working Americans without health insurance should get help in buying private coverage through a refundable tax credit. This is preferable to building a separate, government-run health-care plan.

What would William Strunk, Jr. have called "refundable tax credits", if such a thing existed in his time? I'm guessing he'd call them what they are: "grants". I'm not sure why Jindal and other conservatives persist in wasting an additional six syllables on the longer euphemism. Perhaps it's so they can characterize government spending on such grants as tax relief instead of government spending, but, if so, this bit of obfuscation just plays into liberals' rhetoric on progressive tax policy. Most liberals are happy to characterize transfer payments to low-income Americans as tax relief, and to characterize tax cuts for the wealthy as a form of government spending. There doesn't seem to be much benefit to conservatives in conceding the rhetorical and policy ground on this, particularly since, as some smart centrists (e.g., Clive Crook) and even at least one smart liberal (Matt Yglesias) acknowledge, we are approaching the point of diminishing returns when it comes to increasing the progressivity of our tax system.

As both men have noted, if American liberals want to expand the welfare state raising taxes on the rich, by itself, won't be enough to pay for it; they'll have to raise taxes (by at least a modest amount) on everyone else. Yglesias has noted that countries such as Sweden, which have social safety nets envied by American liberals, also have much more regressive taxes than we do.

Things to Come

A few things I'm considering posting on that I haven't gotten around to writing yet, due to time constraints:

- What the conservative NJ firebrand Steve Lonegan and the liberal D.C. blogger Matt Yglesias have in common.

- The challenges of predicting default for financial firms: why the Altman Z-Score model isn't recommended for financials and the limitations of alternative, market-based models.

- Looking at a couple of recent bankruptcies, e.g., that of Eddie Bauer: would the Altman Z-Score model have predicted bankruptcy two years ago?

Son of TARP

The Wall Street Journal explains the Obama Administration's new plan to buy bad assets off of the books of banks ("U.S. Sets Plan for Toxic Assets"). Economist and New York Times columnist Paul Krugman criticizes it ("Despair of Financial Policy"), and criticizes it again ("More on the bank plan"); economist Brad DeLong defends it ("The Geithner Plan FAQ" -- Hat Tip: Matt Yglesias), and Krugman responds to Brad DeLong's defense ("Brad DeLong's Defense of Geithner").

Since this new plan is, essentially, a return to the original, rejected, tack of the TARP plan last fall, it's also worth revisiting John Hussman's objections to the original TARP plan, ("You can't rescue the financial system if you can't read a balance sheet"). I suspect Dr. Hussman will reiterate some of those objections in his market commentary this week.