In my personal opinion, this is great.  The Director of the NEC is the top Economic advisory position to the President, and it’s responsible for interpreting all the information coming from elsewhere in the administration.

Larry Summers may be a genius, but he’s not known as the diplomatic type – one had to wonder whether the President was hearing opinions from people that Summers disagreed with.  When Sperling was head of the NEC under Clinton, he could filter people like Summers (who was Secretary of the Treasury) while making sure that other, less vocal advisors got a word in.  Also, he’s got a reputation as being a true believer, and his pet issues are poverty and “public investment”.  Sounds good to me!  Maybe we can get some infrastructure project and investments in education for NYC.

I just read a really interesting profile of him written at the end of the Clinton administration… worth taking a look at.   Full text here and encouraging quote here:

Known to colleagues, as former White House press secretary Michael McCurry puts it, as the embodiment of “the pure, idealistic, best side of Bill Clinton,” Sperling has given seven years of hundred hour weeks largely out of a desire to help poor people.

When GM was about to liquidate and fire hundreds of thousands in the middle of the worst recession since the 1930s, Obama chose to purchase their stock for $49B. Over the howl of free-market fundamentalists and disingenuous pundits shouting socialism, Obama used the government’s controlling share to force a change in management and let the free market take it’s course. There was no nationalization, there was no subsidization and the the moral-hazard question was resolved by the severe removal of ineffective managers.

Today, GM has, for the first time in a decade, turned a profit. It’s expanding production and hiring new people in addition to the hundreds of thousands it didn’t have to lay off. It’s recent IPO for new shares put’s valuation above 1999 levels and its rise in stock value has turned a profit for the American tax payer as the US Government now willingly divests and returns the shares of the company it helped turn around to individual citizens who are free to make individual profit.

This is how it works in a fantastic piece that I hope inspires more fact-driven, reality-inducing presentations by a real expert in the field.

But that’s not why the SEC is going after them… it’s actually much worse:

A Collateralized Debt Obligation, or CDO, is advertised as something very specific: whether its Mortgage backed or Car Loan backed or Credit Card backed or whatever,  it’s designed to distribute the risk of all it’s individual components so if some of the components go bad, the CDO will retain it’s value.  That’s what people think they’re getting when they buy a CDO, and thats what Goldman told them they were getting when they bought Abacus 2007-AC1, the CDO in question.

The whole problem is that Wall Street was creating CDOs composed of the exact same crap all the way through – subprime mortgages; many of which had teaser rates that made them very likely to all go bad at the exact same time.  We know that Goldman thought these CDOs were full of crap, which is bad, but no different than the rest of Wall Street when the #$@& started hitting the fan.   But that’s not exactly what the SEC has a problem with:  Goldman is in trouble because they allegedly let a hedge fund called Paulson & Co. select the crappiest crap and put it in this Abacus CDO and then Goldman turned around and sold it to the highest bidder.

It’s like a baseball card store owner letting one of their friends open all the baseball card packs and pull out the good players.   Goldman not only knowingly sold kids packs filled with Pittsburgh Pirates, but then they let that same friend make millions of dollars betting that the kids wouldn’t get a Derek Jeter.

That’s just called Fraud.

For some reason, Saturdays on C-Span seem to be Tea-Party day.  Over the last few months, I’ve been idling flipping channels and suddenly Sarah Palin or Ron Paul will pop up on my screen and I’ll find myself dragged in for an hour of morbid fascination.  Last week, I ran across a Tax Day protest on the mall in DC…  I didn’t catch anyone particularly compelling, although I did enjoy watching former Saturday Night Live star Victoria Jackson crash and burn with a totally nonsensical Obama bashing song (video here).  Who woulda thought that she’d end up a crazy TPer?  And at this point, can she even be defined as B list or C list?  Seems like they were really stretching in the celebrity speaker category.

Another thing popped out, though:  The Value Added Tax (or VAT).  At some point, the moderator was warming up the crowd by accusing Obama of wanting to institute a Value Added Tax like all those commies on the other side of the Atlantic (heh paraphrasing there).  Well, I’d heard the term before, but I had no idea what the tax does, and it was not clear that they knew either.  So I decided to check it out.  One of my general principals is that when a rabble rousing Republican starts using European associations to trash something obscure and wonky, it probably means that someone with a lot of money is afraid.

Well, since Obama  seems to actually be looking into the VAT, I thought I would do the same, and then tell people what I found out.

After the jump:  A quick primer…

Basically, it’s a different way of collecting sales tax – instead of taxing everything we buy at the cash register, you have businesses pay taxes on the value added at each stage of production… so a cabinet maker pays a tax on the wood and the furniture company pays a tax on the cabinet and so on.  Correctly implemented, the cost to the consumer doesn’t change – the tax is just factored into the price of the product rather than tacked on at the end.  The advantage is that tax collection becomes a lot more efficient for the government, since each business in the supply chain is in charge of collecting the tax from the last guy – if they don’t, they have to cover the difference.

And remember – more efficient means less of our tax money spent on the IRS!

There some disadvantages too – it creates more accounting work for businesses in the middle of supply chain, which could be dangerous in a down economy.  It has also been called a regressive tax – I couldn’t figure out exactly why, but apparently, it may dispraportionately effect lower and middle income consumers… something to do with the fact that it shifts more of the total tax burden to consumption, which effects low income people because the spend a higher percentage of their income on tangible goods.  But that can be dealt with in the implementation with offsets in other parts of the tax code.

Most importantly, though, it makes it easier to raise taxes on certain consumer goods - a good thing and a bad thing.  On one hand, it makes it easier for the government to impose taxes without people yelling and screaming about it, since the total tax is not as clearly visible to the consumer.  On the other hand, it makes taxes easier to manage on an individual product basis because it gives us more flexibility and prevents tax evasion.  One of the problems with our current system is that raising taxes past a certain point makes it really tempting to cheat the system:  if the risk of smuggling is less than the reward of your product being cheaper than everyone elses, people will tend to smuggle.  High taxes on things like cigarettes and liquor become progressively less useful because you have to spend all kinds of money keeping bodega owners from popping over to PA to buy a truckload of cartons.  If I’ve got it figured out correctly, the government could get a bunch of that money before the pack of cigarettes ever makes it to a store, so they wouldn’t have to spend all that money on little stamps and undercover cops.

Now, if you hate the government and want to hamstring any ability they have to tax people, or, if you like a really complicated, innefficient tax code because your a big corporation who likes all the fun loopholes (and lets not forget, the corporations and their lobbyists are the ones who have been writing our tax code for years), the VAT is a terrible idea.

However, if you care about how your tax dollars are spent and want to reduce the deficit, you should care the most about making our government more efficient  (I’m looking at you Tea Partiers!).  In that case, yes please, lets have a discussion about any and all ways that we can simplify the tax code and reduce the cost of enforcement.

There are pluses and minuses, but can we at least have an adult discussion about it?

Here are some links with more info:

Value Added Tax – Wikipedia
Value-Added Tax: What You Need to Know - The Atlantic
Value-Added Taxes: A Primer – The New York Times
A Value-Added Tax and the Poor – The New York Times

He then moves on to dissect the doctors’ argument by looking at other goods the public deems vital, specifically education, and asks how those goods would look if they were provided in the same way as heath care.

He writes:

Correctly viewed, a modern university is a prepaid, staff-model, pedagogic group practice – the educational analogue of a staff-model health maintenance organization, or H.M.O., like the Kaiser Permanente Health Plan.

Like H.M.O.’s, which are prepaid an annual capitation for all of an insured person’s medically needed services, universities are prepaid one annual tuition fee for all the pedagogic services going into the education of the student.

But suppose universities operated instead on a piece-rate compensation basis, like the current health system. They would then be merely a pastiche of different pedagogic profit centers, each with its own fee schedules and ownership patterns.

What he describes is not a particular reassuring backdrop to figuring out how to pay for college and although his post does not solve the health care debate, I think that when we apply the same reasoning to higher education that is currently applied to heath care we see how unreasonable it is to argue that we should not reform the way doctors and hospitals currently do business.