Tom Delay"Did we [Republicans] change Washington or did Washington change us?"
The question came from Rep. John Shadegg (R-AZ) this weekend, as he was interviewed by news anchor Chris Wallace on Fox News Sunday. Wallace was interviewing each of the potential replacements for former House Majority Leader Tom DeLay (R-TX).
Rep. John ShadeggShadegg’s question is a good one. He may be the only candidate in the race for Majority Leader who has not only the courage, but also the desire, to tackle the issue seriously.
Many Dallasites probably have not heard of Shadegg, a congressman from Arizona’s 3rd congressional district. Shadegg was first elected during the Republican takeover of Congress in 1994, and he is well known among fiscal conservatives for his commitment to restrained spending, low tax, and small government principles. Although many in Washington have since lost their stomach for the revolutionary principles espoused in the Republicans’ 1994 Contract with America, Shadegg never did. Indeed, from 2000 to 2002, he served as chairman of the Republican Study Committee, a group of the House’s most conservative Republican congressmen.
But why would a relatively low-profile congressman from Arizona suddenly find himself thrust into the race for House Majority Leader?
Simple. Many perceive that the other contenders in the contest, Rep. Roy Blunt (R-MO) and Rep. John Boehner (R-OH), will not offer the Republican Party the fresh start that it needs in the face of recent bribery and lobbying scandals.
The election of Roy Blunt as Majority Leader would not—could not—be a true departure from DeLay’s leadership of the House. To the contrary, Blunt is a protégé of DeLay. He was appointed to the position of chief deputy whip, then Majority Whip, at the urging of DeLay. He achieved the former in 1999, despite the fact that other congressmen then had more seniority and more experience. A May 2005 Washington Postarticle suggests that Blunt’s quick ascent in the chain of Republican leadership was the result of his ability to reach out to D.C. area lobbyists.
Further confirmation of Blunt’s close association with the tactics of the DeLay era was heard last September. When Blunt was chosen to serve as acting House Majority Leader pending resolution of DeLay’s legal woes, Rep. Dana Rohrabacher (R-CA) described the selection process as "very similar to a battlefield situation where a leader has been wounded and taken out of battle." The party, Rohrabacher concluded, decided to "stick with the chain of command." What makes some Republicans think that Blunt can now abandon the status quo and overcome recent Republican shortcomings?
He is unlikely to do so.
Similarly, John Boehner is an establishment candidate who will be unable to give Republicans the fresh start that they need. Boehner currently serves alongside Blunt as assistant Majority Whip. Boehner, too, finds himself mired in relationships with lobbyists. Consider an action that he took in 1995. As the House debated the possibility of ending subsidies to the tobacco industry, Boehner distributed checks from tobacco lobbyists to congressmen on the House floor. Boehner has subsequently labeled this action "a mistake," but shouldn’t we be disturbed that he considered such an act acceptable in the first place?
Additionally, Boehner takes more privately financed trips than most federal legislators. In the past five years, Forbesreports, Boehner has traveled on 31 trips financed by special interest groups. His wife accompanied him on 22 of these trips. Moreover, Boehner’s campaign coffers have benefited from the generous contributions of student-loan companies, such as Sallie Mae. Some allege that Boehner has returned the favor by protecting these lenders from the ramifications of proposed spending cuts. Boehner’s office denies any relation between contributions and legislative action.
Perhaps the two are unrelated. But, if so, why did Boehner tell an annual meeting of the Consumer Bankers Association, "Know that I have all of you in my trusted hands. I’ve got enough rabbits up my sleeve"?
The differences among Blunt, Boehner, and Shadegg are stark, indeed. Blunt and Boehner have been intimately involved in recent failures of congressional Republicans: The massive new prescription drug entitlement, out-of-control spending and earmarks, and close ties with ethically challenged lobbyists such as Jack Abramoff. By contrast, Shadegg’s connections to lobbyists are limited, and he was one of a handful of Republicans to vote against the massive prescription drug entitlement. Impressively, he refused to earmark funds for his district in last year’s federal highway appropriations bill.
Blunt, Boehner, and Shadegg each claim to recognize the need for reform in the House, but Shadegg is the one offering specific and numerous proposals to tighten lobbying rules, limit earmark spending, and change House procedures that have facilitated an out-of-control budget process. Most importantly, he is the one who practices what he preaches about spending restraint.
At least one Dallas-area congressman, Jeb Hensarling, has already endorsed Shadegg for Majority Leader. Hensarling is to be applauded for his initiative and bravery in endorsing Shadegg early, despite (I would imagine) much pressure from House leadership to stay with the status quo.
We should encourage our other area representatives to follow in Hensarling’s footsteps. The Republican Party will be put on the road to recovery if Shadegg is given the opportunity to serve as House Majority Leader.
Rep. Bill KefferIn a recent speech to folks gathered in support of the Austin Project, a program for at-risk youth, former Lieutenant Governor Bill Ratliff scolded Texas legislators for failing to raise more taxes in order to provide more funding for various government welfare programs and social services. He employed irony by suggesting that government indeed needs more, not less, religion and cited various biblical passages to support his proposition that a responsible Christian should always choose to raise taxes to fund government programs to help the poor.
Such a belief has been a common rationale for government welfare over the past several decades, with its first significant appearance in Franklin Roosevelt’s New Deal and later becoming even more expansive and institutionalized during Lyndon Johnson’s Great Society. It is a frequently repeated proposition by those who profess the Christian faith and has even formed the basis for an allegedly Christian movement referred to as the "social gospel." As Governor Ratliff demonstrated in his speech, biblical language is routinely cited as prooftexts for the political proposition that it is no less than a divine instruction from God that Christians should never question and always respond to the government’s insatiable appetite for more and more tax dollars, as long as they are for government programs designed to help the poor, infirm, and elderly. Simply put, such a belief is a political misapplication of biblical doctrine and a politically convenient distortion of what Jesus Christ described as the most fundamental rule by which we should live our lives.
This theological error occurs when one mistakenly equates Jesus Christ’s commandment for us to love others as ourselves (and the corollary biblical theme of our individual responsibility to be charitable to those who are less fortunate) with a demand by government that its citizens should surrender their money in taxes, so that poverty, hunger, and illness can be addressed through government programs. It should not be debatable that "coercive charity" or "forced philanthropy" are oxymorons.
True charity, which is what the Bible calls us to, is voluntary and offered with a willing and joyful heart and animates the adage that it is more fulfilling to give than to receive. Government-sponsored programs funded by money forcibly collected from its citizens are, in fact, true charity’s antithesis.
Given the political realities and the evolving desires of elected officials and the citizens they represent, it might very well be the case that present circumstances demand the existence and funding of various government welfare programs to provide for the poor, infirm, and elderly. In those cases, it then becomes the policymaker’s responsibility to vigilantly and constantly scrutinize those programs for maximum efficiency and effectiveness.
But it is emphatically inappropriate and just plain theologically wrong to invoke the Bible and Christian doctrine to support the imposition and collection of taxes to fund government welfare programs. The Bible never contemplates such a proposition, but rather only calls on the individual to practice true charity. So notwithstanding the righteous reproaches of the well-intentioned, it remains a theological impossibility – and misguided public policy - to be charitable with other people’s money.
In the minds of a great many Anglos who reside North of the Trinity, the notion that race is a factor in how the mass media covers events at city hall is ludicrous. But for the vast majority of us who live South of the Trinity, the belief that the white mass media and the Dallas Morning News in particular are in collusion with Mayor Laura Miller to demonize Black city council members is very real. Those of us who believe that also believe the ultimate goal here is to weaken the powers of 14-1.
The latest example is the story of 3 African-American city council members who have been castigated for not spending their allotment of bond money on specific projects in their individual districts. Never mind the fact that the money is safe and sound still in the city’s coffers. Never mind the fact that the council members insisted they wanted to be cautious with the taxpayers’ monies and make sure they made the best decision. Never mind the council members in question were well within their rights and the law to not spend the money immediately. Don Hill, Leo Chaney, Jr., and Maxine Thornton-Reese were still vilified in the white mass media for not spending all of the $12 million as fast as they could! To once again chip away at the credibility of 14-1, those who lost both efforts to strengthen the mayor’s power now want to question the viability of the bond allotment program even though 12 out of 15 council members did spend their money and most consider the program a success.
The bond allotment program was created by the city manager’s office and the city council in order to give individual council members the ability to address specific needs in their districts. Each council member was given $4 million of bond money to be spent with the oversight of the city manager’s office on projects that particular council members deemed worthy. To this date, not one dime of that money has been the subject of any controversy. But that did not stop a Dallas Morning News editorial from falsely linking the successful bond allotment program to the FBI investigation going on at city hall.
As a matter of fact, throughout the much publicized FBI investigation of city hall, the bond allotment program has never come into question. I mean how could it? There is no lost money. The idea that Black elected city officials would have money allotted to them individually to fund projects in their districts conjures up images of corruption and private slush funds used to enrich shady characters South of the Trinity. Not only has that not happened, but in chasing this non-story, the white mass media has still neglected to follow-up on the Dallas Morning News’ own expose of Mayor Laura Miller and her relationship with some of the key targets in the ongoing FBI investigation of city hall.
Those of us South of the Trinity are convinced that the white mass media and its selective coverage of news events along racial lines have created an atmosphere of distrust. The 3 African-American council members who have not spent all of the money allotted to them have done nothing wrong. There was never a time frame put on when the money should be spent. But that fact did not stop the white mass media from vilifying them while at the same time giving Mayor Laura Miller a pass by not continuing to investigate her possible involvement in the FBI investigation of city hall. And that’s how we see it from South of The Trinity.
It all began when poor schools, which vote mostly Democratic, sued to equalize education funding. They believed the Texas Constitution mandated equal funding for school districts. The Texas Supreme Court agreed and ordered the legislature to change the state’s education funding mechanism. The then Democratic controlled legislature responded with a plan called “Robin Hood.” This scheme took from rich districts and gave to poor districts and capped what rich districts could spend.
Now a Republican controlled Texas Supreme Court has said that this scheme amounts to an unconstitutional statewide property tax and ordered the now GOP controlled legislature to change it.
All of this gets complicated by the desire of Republicans and some Democrats to offer property tax relief to Texas homeowners. Texas is a very high property tax state and most homeowners want relief. So do many businesses. But cutting one tax requires that the lost revenue be made up from another source. Needless to say those who will pay more don’t like any tax that hits them. Worse, property owners are relatively wealthy and almost any shift in tax burden from them to the general public means increasing the burden on the less well off.
The problem for districts with a low property tax base is that they have to impose a very high tax rate to squeeze out money for education. This usually means that poor people are paying dearly for an inferior education. Understandably they would like to see the state’s broader tax base subsidize their schools.
Rich school districts like that idea too. They would love to get more state dollars. They just want to be able to spend whatever the please on their schools whether their dollars go to Texas-class athletic structures or higher teacher pay. Indeed, much of the extra dollars rich districts spend do in fact go for something other than classroom instruction. After all, a modest tax rate produces a lot of dollars which are relatively easily paid by the well-to-do taxpayers. But when the spend more that creates greater inequality among districts.
There is another complicating factor. The Republicans are in control and they are not generally persuaded that spending more money (after a point) on education really does much to help. They are persuaded that high taxes are bad and that certain types of taxes – say personal income taxes – are really bad.
Many Republicans also like the idea of vouchers. They get big campaign contributions from people who believe that giving state tax dollars to individuals to spend on private school tuition is good. Many minorities agree with this, but many Republican voters don’t. They like their schools and don’t want to see their tax dollars siphoned off to fund private education. Rural Republicans often represent rather poor districts that have no private schools and they don’t like the idea of vouchers either. So you get a lot of people saying vouchers are good in public but privately don’t want the idea to become law.
The so-called “education lobby” believes that money is the answer and they want a good bit more of it for one and all and don’t want vouchers. The education lobby has a lot of political clout even among Republicans. On whole polls indicate that the people of Texas agree with them and want more funding for schools and don’t support vouchers.
So how does the legislature kill Robin Hood, replace a meaningful chunk of the property tax (the leadership thinks this is about a one third reduction; I think it would be more like half to two thirds for the people to care), adequately fund a subjective concept like “adequate”, allow wealthy districts to “enrich” above state minimums all they want, fund vouchers and not impose any new taxes on business or individuals? Answer: they can’t.
The only answer is new and higher taxes. This could be some form of business activity tax which will tax a lot of new business that support Republicans. Or it could be a state personal income tax that Republicans say will never happen on their watch. Or it could be a significant increase in the sales tax that will cut off revenue sources for almost anything else state and local governments want to do.
Republicans say they don’t like judges doing what legislatures should be doing. My guess is that right now there are a lot of GOP legislators reconsidering that idea.
February 1st marks the day that most hedge funds with over $30 million in assets have to register with the SEC. Given the explosive growth in hedge funds over the last decade, it is no surprise that regulators are attempting to extend their reach into these private partnerships. Regulatory agencies are staffing up as they are assuming the asset growth will continue. We think that the inaccuracy of this assumption will be the biggest surprise of 2006.
When one mentions the idea of hedge funds folding, thoughts of Long Term Capital Management or Bayou Group come to mind. In the case of Long Term Capital, the implosion was primarily caused by overleveraging and a lack of risk controls. Bayou, on the other hand, was outright fraud. While we think there are many managers who are up to their eyeballs in leverage, we do not expect this to be the initial catalyst for an implosion in hedge fund assets. Similarly, we expect to hear about more high profile frauds in the coming months, but we don’t think the impact will be widespread enough to affect the overall level of hedge fund assets under management.
The chief cause of the coming collapse in the hedge fund industry will be lackluster returns. We have already seen it over the last few years. 2004 and 2005 saw both absolute and relative returns hover around the "flat to up a handful of percent" levels. And in 2003, most investors would have been better off in a NASDAQ or S&P 500 mutual fund. Someone in the industry was recently quoted as saying something to the effect that investors are starting to wake up to the fact that there are just not that many smart 29-year olds around! We wholeheartedly agree and see it ourselves when attending industry conferences. With an atmosphere that is chillingly similar to the Internet boom of 1999, one can find the next young hotshot fund managers with fancy sports cars, custom-made monogrammed dress shirts, expensive cuff links, etc – and this is before they start managing or earning their investors a single nickel. If there was a way to do it, we’d go short high-priced office space in Greenwich, London, San Francisco, Dallas, and Manhattan.
Getting back to the idea that hedge fund asset growth may be in line for a sharp slowdown or reversal, let’s examine how such a scenario would affect the financial markets. While the classic definition of a hedge fund is a portfolio where market risk is largely hedged, this is no longer the case. A hedge fund today is simply a loosely regulated investment partnership where most managers tend to lean long with leverage in expensive stocks and bonds. As returns continue to remain lackluster (almost a guarantee due to the law of large numbers) investors will get tired of the exorbitant fees and start to withdraw their capital. As managers scale down their portfolios to raise the cash needed, this will have a negative effect on other hedge funds as well as the markets overall. At that time, we think the systemic risk of a meltdown increases sharply as fund mangers worried about capital redemptions begin to swing for the fences in greater numbers. And it will be precisely at that moment when the mouth-watering bargains return. Stay on the sidelines and be prepared.