Tag: news

Why Biden’s $3.5 Trillion Spending Plan Would Be Worse for the Economy Than Manchin’s $1.5 Trillion Proposal


andy-feliciotti-8cvjI48SFtY-unsplash

Here’s a novel idea: if the government engages in less taxing, spending, and borrowing, the negative consequences of all that taxing, spending, and borrowing will be limited.

That’s the bottom line from a pair of recent studies that project the long-term economic consequences of the proposed $3.5 trillion reconciliation bill and a more hypothetical $1.5 trillion spending plan offered by Sen. Joe Manchin (D-W.Va). Manchin, who remains a key holdout in Democrats’ plans to pass the larger package through Congress, says he won’t support the $3.5 trillion bill because he’s concerned that adding to the national debt will constrain America’s future economic growth. The two studies, both completed by the Penn Wharton Budget Model (PWBM), an economic policy think tank housed at the University of Pennsylvania, support Manchin’s caution is warranted.

As I wrote last month, when the PWBM published its analysis of the reconciliation bill, the $3.5 trillion spending package will leave America poorer in the long run. The PWBM analysis projects a decrease in private wealth, wages, and America’s gross domestic product (GDP) over the next three decades relative to a projection in which the bill is not passed. The larger spending package would increase government debt at a faster rate, which would increase the amount the government has to pay in interest. In the $3.5 trillion scenario, higher levels of spending and higher amounts of government debt “crowds out investment in productive private capital. Less private capital leads to lower wages as workers become less well-equipped to do their jobs effectively,” the report states.

Now, the PWBM has completed an analysis of the $1.5 trillion framework that Manchin reportedly offered as an alternative. In order to do the estimate, PWBM analysts assumed that Manchin’s proposal would increase spending by about $540 billion for means-tested childcare programs, like universal pre-K; $439 billion for a five-year extension of the expanded Child Tax Credit; $260 billion for public infrastructure; and $260 billion for other assorted government spending.

That’s still a lot of money, and there are still some negative long-term consequences—but the most important part of Manchin’s proposal is that it does not require additional borrowing, and relies on smaller tax increases than what President Joe Biden has proposed. As a result, government debt would actually fall slightly over the next 30 years. The tax increases would reduce private capital by less than 1 percent by 2050—as opposed to the 6.1 percent drop that would come with the passage of the larger reconciliation package. Wages and national GDP would remain flat under the $1.5 trillion plan, instead of the projected decline under the $3.5 trillion plan.

What the report essentially says is that Manchin’s proposal would be less bad than the $3.5 trillion proposal. But it would still be a progressive scheme to redistribute wealth. “We estimate that the average 30-year-old in the lowest 20 percent income group is about $3,200 better off under the Manchin memo,” the PWBM analysts conclude. “In contrast, the average 30-year-old in the top 20 percent of income distribution is about $6,800 worse off.”

But, by limiting how much new taxing and borrowing is necessary to finance all that redistribution, Manchin’s proposal limits the damage done to the wider economy “as productivity effects of the new spending offset the distortions produced by higher taxes,” the PWBM concludes.

It is a little bit crazy that everyone in Washington is talking about $1.5 trillion as a small sum of money. What Manchin is willing to support would cost about $500 billion more than the Obama stimulus, even after adjusting for inflation. And this isn’t an emergency spending plan meant to float the country through a recession—it’s a massive increase in government spending at a time when the economy is growing significantly (despite the weirdness in labor markets and supply chains).

The potential costs of an even bigger spending plan should be front and center in lawmakers’ minds. Higher levels of debt—even if it doesn’t cause runaway inflation and even if higher interest rates don’t trigger a major crisis—will be a major drag on future economic growth.

What Manchin is proposing is a still-risky but ultimately safer plan that still gives progressives much of what they want—higher taxes on the rich and corporations, an extension of the child tax credit, and much more redistribution of economic gains—and delivers a big political win for Biden in the form of the infrastructure package. It is in no way a win for limited government, but it’s less of a win for people who think the government can buy utopia on credit.

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Why Biden’s $3.5 Trillion Spending Plan Would Be Worse for the Economy Than Manchin’s $1.5 Trillion Proposal


andy-feliciotti-8cvjI48SFtY-unsplash

Here’s a novel idea: if the government engages in less taxing, spending, and borrowing, the negative consequences of all that taxing, spending, and borrowing will be limited.

That’s the bottom line from a pair of recent studies that project the long-term economic consequences of the proposed $3.5 trillion reconciliation bill and a more hypothetical $1.5 trillion spending plan offered by Sen. Joe Manchin (D-W.Va). Manchin, who remains a key holdout in Democrats’ plans to pass the larger package through Congress, says he won’t support the $3.5 trillion bill because he’s concerned that adding to the national debt will constrain America’s future economic growth. The two studies, both completed by the Penn Wharton Budget Model (PWBM), an economic policy think tank housed at the University of Pennsylvania, support Manchin’s caution is warranted.

As I wrote last month, when the PWBM published its analysis of the reconciliation bill, the $3.5 trillion spending package will leave America poorer in the long run. The PWBM analysis projects a decrease in private wealth, wages, and America’s gross domestic product (GDP) over the next three decades relative to a projection in which the bill is not passed. The larger spending package would increase government debt at a faster rate, which would increase the amount the government has to pay in interest. In the $3.5 trillion scenario, higher levels of spending and higher amounts of government debt “crowds out investment in productive private capital. Less private capital leads to lower wages as workers become less well-equipped to do their jobs effectively,” the report states.

Now, the PWBM has completed an analysis of the $1.5 trillion framework that Manchin reportedly offered as an alternative. In order to do the estimate, PWBM analysts assumed that Manchin’s proposal would increase spending by about $540 billion for means-tested childcare programs, like universal pre-K; $439 billion for a five-year extension of the expanded Child Tax Credit; $260 billion for public infrastructure; and $260 billion for other assorted government spending.

That’s still a lot of money, and there are still some negative long-term consequences—but the most important part of Manchin’s proposal is that it does not require additional borrowing, and relies on smaller tax increases than what President Joe Biden has proposed. As a result, government debt would actually fall slightly over the next 30 years. The tax increases would reduce private capital by less than 1 percent by 2050—as opposed to the 6.1 percent drop that would come with the passage of the larger reconciliation package. Wages and national GDP would remain flat under the $1.5 trillion plan, instead of the projected decline under the $3.5 trillion plan.

What the report essentially says is that Manchin’s proposal would be less bad than the $3.5 trillion proposal. But it would still be a progressive scheme to redistribute wealth. “We estimate that the average 30-year-old in the lowest 20 percent income group is about $3,200 better off under the Manchin memo,” the PWBM analysts conclude. “In contrast, the average 30-year-old in the top 20 percent of income distribution is about $6,800 worse off.”

But, by limiting how much new taxing and borrowing is necessary to finance all that redistribution, Manchin’s proposal limits the damage done to the wider economy “as productivity effects of the new spending offset the distortions produced by higher taxes,” the PWBM concludes.

It is a little bit crazy that everyone in Washington is talking about $1.5 trillion as a small sum of money. What Manchin is willing to support would cost about $500 billion more than the Obama stimulus, even after adjusting for inflation. And this isn’t an emergency spending plan meant to float the country through a recession—it’s a massive increase in government spending at a time when the economy is growing significantly (despite the weirdness in labor markets and supply chains).

The potential costs of an even bigger spending plan should be front and center in lawmakers’ minds. Higher levels of debt—even if it doesn’t cause runaway inflation and even if higher interest rates don’t trigger a major crisis—will be a major drag on future economic growth.

What Manchin is proposing is a still-risky but ultimately safer plan that still gives progressives much of what they want—higher taxes on the rich and corporations, an extension of the child tax credit, and much more redistribution of economic gains—and delivers a big political win for Biden in the form of the infrastructure package. It is in no way a win for limited government, but it’s less of a win for people who think the government can buy utopia on credit.

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Goodbye Middle Class: 50% Of All US Workers Made $34,612.04 Or Less Last Year

Goodbye Middle Class: 50% Of All US Workers Made $34,612.04 Or Less Last Year

Authored by Michael Snyder via The Economic Collapse blog,

If we keep going down this path, soon we won’t have much of a “middle class” at all.  When I first started writing about the economy many years ago, I often wrote about the tens of millions of “working poor” Americans that were enduring so many hardships.  But at this point most of the nation now falls into the “working poor” category.  That isn’t because wages haven’t been going up.  Little by little, wages have been incrementally rising year after year, but meanwhile the cost of living has been absolutely soaring.  Paychecks have not even come close to keeping up with inflation, and this has been eviscerating the middle class.  Today, the majority of the country is in constant “survival mode” financially, and that isn’t going to change any time soon.

When I was growing up, retailers that catered to the middle class did exceptionally well. 

My mother was constantly taking me and my siblings to JCPenney and Sears, and it seemed like that was where virtually everyone shopped.

But now such retailers are rapidly going extinct.  Today, the retailers that are doing well are those that cater to the very bottom of the economic food chain (Walmart, dollar stores, etc.) or those that cater to the very top of the economic food chain.

And that is because there isn’t much in between those two extremes anymore.

The Social Security Administration has just released final wage statistics for 2020, and they are extremely alarming.  According to the figures that they have given to us, the median wage for 2020 was just $34,612.04…

By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $34,612.04 for 2020.

It is really depressing to think that half of all U.S. workers made $34,612.04 or less last year.

That is less than $3,000 a month, and that is before taxes.

Needless to say, trying to survive in a major U.S. city on that kind of income is not easy in today’s economic environment.

Of course $34,612.04 would have been a very nice yearly income back in 1960, because back then the cost of living was much lower.  The following comes from an article authored by MN Gordon…

In 1960, for example, a gallon of gas cost $0.31 per gallon. Similarly, in 1960 a gallon of milk cost $1.00 per gallon. Currently, the average price of gas and the average price of milk are $3.28 per gallon and $3.68 per gallon, respectively. That’s upwards of a 958 percent increase for gas and 268 percent increase for milk over the last 60 years.

Back in 1960, you could buy an entire house in a nice middle class neighborhood for $34,612.04.

Today, that would barely be a down payment on a dilapidated shack in many parts of the country.

In recent weeks, I have frequently pointed out that there are millions of jobs available in the U.S. right now.

But the vast majority of them are highly undesirable because they pay “working poor” wages.

So many people out there are working as hard as they can and they still can’t make ends meet.  In fact, one recent poll discovered that 59 percent of Americans that make less than $50,000 a year have experienced “serious financial problems in the past few months”…

The poll showed a sharp income divide, with 59% of those with annual incomes below $50,000 reporting serious financial problems in the past few months, compared with 18% of households with annual incomes of $50,000 or more.

As I have discussed so many times over the years, we have gotten to a point where most of the population is living paycheck to paycheck.

And when you are living paycheck to paycheck, all it takes is one bad break to push you into financial distress.

Sadly, things are going to get even worse for ordinary Americans in the coming months because inflation continues to rise very aggressively…

Inflation accelerated in September, with consumer price pressures across America showing no sign of easing ahead of the all-important holiday shopping season.

Consumer prices increased 5.4% from the year-ago period, slightly faster than their 5.3% increase the previous month and on par with the increases in June and July.

Needless to say, those numbers actually greatly understate what we are facing, because the way inflation is calculated by the government has changed dozens of times over the years.

As I am constantly reminding my readers, if inflation was still calculated the way that it was back in 1980, it would already be well into double digit territory.

In other words, the sort of inflation that we faced during the Jimmy Carter era is already here.

And CNN just admitted that prices “aren’t coming back to earth anytime soon”.

If prices continue to rise much faster than paychecks do, the middle class will just keep getting smaller and smaller and smaller.

Sadly, politicians seem determined to hasten the demise of the middle class by pushing millions more Americans out of decent paying jobs in the months ahead.  But in the process, they will also be creating critical staff shortages.  For example, just consider what just happened at a hospital in Lewiston, Maine…

The administrators of Central Maine Healthcare in Lewiston, Maine, enacted a vax policy demanding all employees to take the vaccine. But more than 250 employees refused to comply before the deadline. These employees were subsequently fired.

Unfortunately for patients, about 170 of those employees were needed to staff the intensive care unit. Consequently, the hospital had to shut down its ICU because of the firings.

Because it lost so many employees, the hospital plans on cutting intensive care beds by 50% and reducing the number of medical surgical beds by 40%, the Bangor Daily News reported.

Isn’t that nuts?

Of course the same type of scenario is playing out at hospital after hospital all over the country right now.

And you can’t just hire random people off the streets to be doctors and nurses, because it takes many years of training to become a doctor or a nurse.

So let us hope that we don’t have to deal with any sort of a major health crisis this winter, because our medical system would become overwhelmed very rapidly.

These are such ominous times for our economy, and these are such ominous times for our nation as a whole.

In the months ahead, there will be more inflation, more shortages, and more questionable decisions by our leaders.

Events are truly beginning to spiral out of control, and America will never be quite the same ever again.

*  *  *

It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.

Tyler Durden
Wed, 10/20/2021 – 16:30

via ZeroHedge News https://ift.tt/3jnMKop Tyler Durden

San Francisco Wants To Sell the Air Rights Above City Hall for $45 Million. Why Not Give Them Away for Free?


reason-cityhall

San Francisco is considering a sale of the tradable air rights above City Hall, a move that would bring money into the public coffers without hitting up already overburdened taxpayers, and also opens up development opportunities downtown.

It’s a seemingly unobjectionable trade that’s only made possible by the city’s insane restrictions on new development.

This week, the San Francisco Board of Supervisors was set to vote on a resolution authorizing the city’s Director of Property to sell up to 1.2 million square feet of unused space above city hall for an estimated $45 million. The sold-off space could then be used by the owners of other parcels in the city’s downtown area to enlarge their own projects beyond what would otherwise be allowed by the zoning code.

The San Francisco Chronicle reports that there is $46.5 million worth of projects at the City Hall building that are currently unfunded, including “roof and dome leak repairs, dome revitalization, exterior stone refurbishments and interior preservation.”

Whether the sale actually will actually bring in enough money to fund those projects is an open question. The Chronicle notes that there’s a limited number of parcels that could actually make use of the additional development rights and that demand for new downtown development is still suffering from the depressing effects of the pandemic.

The bigger problem with the city’s air rights scheme is that it only seems like a pro-development policy in light of San Francisco’s insanely restrictive zoning laws.

After all, the only people ultimately interested in purchasing those unused air rights would be developers who have viable projects they’d already be building if existing density limits didn’t forbid it. The $45 million the city is hoping to earn on the sale, therefore, represents some of the value of the offices and shops lost to San Francisco’s overly restrictive zoning regulations.

The $45 million price tag is also a lot lower thanks to the limits of the program that is enabling the sale of the City Hall air rights. That program, which dates back to the 1980s, allows the owners of historic buildings to sell off square footage that the zoning code permits them, but which they haven’t used, to people looking to build bigger projects.

But those development rights can only be transferred to properties in the city’s downtown commercial district that are zoned for retail, office, and other related uses. And as mentioned, there’s not a lot of demand for those uses right now.

If, however, the program allowed development rights to be transferred to, say, residential properties citywide, you could imagine there would be a whole lot more bidders interested in snapping up square footage that they could then devote to enlarging much-needed housing projects.

That would push the price of those air rights far higher. It would also provide an even clearer window into how much physical space and shelter the city is costing itself with all the red tape and restrictions it puts on new development.

Better yet, the Board of Supervisors could amend the city’s zoning code to give out air rights to anyone who thinks they can put them to good use.

That wouldn’t directly raise money to spruce up City Hall, but it would enable the construction of new homes and businesses that would expand rental options at every price point, which would in turn draw new residents and eventually grow tax revenue, some of which can be used to repair and restore public buildings.

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In a New Survey, Victims of Philadelphia’s Forfeiture Racket Highlight the Hazards of Giving Cops a License To Steal


https://commons.wikimedia.org/wiki/File:Philadelphia_City_Hall_7.jpg

After “they came in,” Robert recalled, “they made me go down to the basement,” “put a gun to the back of my head,” and “said ‘open the safe.'” When Robert did not do so immediately, one of the men “poked me with the gun and said, ‘open the safe,’ then hit my head against the frame of the door,” Robert reported. “I really thought they were going to shoot me.”

That sounds like a robbery, because it was: Once the safe was open, the armed intruders, who were Philadelphia cops, took Robert’s legally registered gun. But that theft was perfectly legal under Pennsylvania law, which allows police and prosecutors to seize property they allege is connected to criminal activity, keep it unless the owner mounts a successful legal challenge, and use the proceeds to augment their budgets.

“Robert” is the pseudonym of a man who was caught up in Philadelphia’s notorious civil forfeiture program, which ended in 2018 as a result of a 2014 class action lawsuit filed by the Institute for Justice (I.J.). The organization, which frequently represents forfeiture victims, recently surveyed 407 of the 30,000 people whose property was seized under Philadelphia’s program. The results, summarized in a new report by I.J.’s Jennifer McDonald and Dick Carpenter, underline several glaring problems with civil forfeiture, which effectively gives law enforcement agencies a license to steal.

Policing for Profit

Under Pennsylvania law and the laws of most other states, police can seize property based on “probable cause,” which in practice may amount to nothing more than a bare allegation that it was somehow involved in criminal activity. When they seize cash, for example, cops often use boilerplate language vaguely suggesting that the money either came from the sale of illegal drugs or was intended to purchase them. Pennsylvania law enforcement agencies can keep 100 percent of forfeiture proceeds, which gives them a strong incentive to target people who are unlikely to fight back effectively.

Petty Seizures Predominate

In the I.J. survey, the median value of seized items, which included cash, cars, and other personal property, was just $600. More than two-thirds of seized items were valued at $1,800 or less. The median value of all property seized in a single case was $1,370.

Cash seizures, which happened in nearly two-thirds of the cases included in the survey, involved amounts as low as $25. The cops even took “a cologne gift set worth $20” and a pair of crutches. Such petty greed is par for the course with civil forfeiture, which in other states has led police to seize small sums of cash and decidedly nonluxurious possessions such as cellphones, ladders, weed cutters, leaf blowers, soccer equipment, and children’s car seats.

The details of Philadelphia’s seizures, which are similar to the results of prior research in other jurisdictions, show how absurd it is to maintain that civil forfeiture is primarily about confiscating the ill-gotten profits of drug “kingpins” or other big-time criminals. The I.J. survey indicates that forfeiture cases in Philadelphia generally involved people who either were entirely innocent or had committed minor offenses such as drug possession or traffic violations.

Challenging a Forfeiture Is Difficult and Expensive

In three-quarters of the cases covered by the survey, owners were either never arrested, never charged, or never convicted. Yet while most of the respondents (72 percent) tried to recover their property, only 43 percent of them succeeded. Overall, I.J. reports, “more than two-thirds (69%) of all Philadelphia forfeiture victims never got their property back.”

Defenders of this system argue that failing to challenge a forfeiture is an implicit admission of guilt. And since an “innocent owner” can seek the return of his assets, forfeiture fans maintain, unsuccessful challenges show police are taking property from the right people for the right reasons. But given the reality of the legal process, which is rigged against owners from beginning to end, those assumptions are unwarranted.

Forty-three percent of respondents said they had hired lawyers to help them get their property back, at a median cost of $3,500—two-and-half times the median forfeiture value. Owners of seized property, unlike criminal defendants, have no right to publicly funded representation, and in Philadelphia even owners who successfully challenged forfeitures were not compensated for their legal expenses. The cost of hiring an attorney therefore was a daunting barrier, especially for people of modest means who would have had to spend more on legal fees than their assets were worth.

Unsurprisingly, the people who hired lawyers were challenging forfeitures with unusually high values: a median of $4,765, compared to $1,700 for owners who tried to get their property back without professional assistance. Given the typical value of seized property, it often makes more sense to give up than to expend time, effort, and money on a challenge that is apt to fail, regardless of whether the owner actually committed a crime.

Owners who nevertheless tried to get their property back faced additional barriers.  “The police buried me in paperwork,” one respondent said. “I was so overwhelmed, and my lawyer told me that it would cost too much money to get anything resolved anyway.”

Two-thirds of respondents “did not receive any information from police about how to begin the process of getting their property back.” Fifty-eight percent of respondents said they were not even given a receipt for their property—a crucial piece of evidence that shows exactly what was taken, which is especially important when police seize cash. Owners who had receipts “were eight times more likely to get their property back than those who did not.”

One respondent said cops seized $5,000 in cash from his business but reported only a few hundred dollars. “There was no record,” he wrote. “We did tell a lawyer about it but figured forget it….It’s your word against their word. They took our cameras, too, so you have no proof….What they’re doing is like robbery. They took [our money] and didn’t report it and there’s no one to complain to.”

Even owners with better documentation had to press their claims in Courtroom 478 at Philadelphia City Hall, where the hearings were run by local prosecutors with a vested interest in keeping what cops took. “The Philadelphia District Attorney’s Office frequently spent the millions it garnered in forfeiture proceeds on the salaries of the prosecutors who ran Courtroom 478,” I.J. notes. “Between 2002 and 2014, Philadelphia’s spending from forfeiture funds on salaries was nearly twice that of all other Pennsylvania district attorneys combined.“

Owners who claimed they were not aware that their property had been used for illegal purposes had to prove their innocence—the opposite of the presumption that applies in criminal cases. “Civil forfeiture effectively puts the onus on property owners to prove their innocence and fight for the return of their property,” I.J. notes, “and this will inevitably deter valid claims and wind up victimizing innocents.” I.J. found that “innocent owner” claims “rarely succeeded.” When people’s property was seized while it was in someone else’s possession, they “were 92% less likely to win their property back compared to people who had property seized from them directly.”

Owners who challenged forfeitures typically had to manage multiple court appearances, which is especially difficult to arrange for hourly workers with inflexible schedules. I.J. found that employed owners “were 53% less likely to try to get their property back than those who were unemployed, retired, students, homemakers or unable to work.”

Prosecutors frequently made challenges more onerous by repeatedly rescheduling hearings. For respondents who managed to get their property back, the process took nine months on average. Some had to wait years. These delays, which could deprive innocent owners of much-needed cash or their primary means of transportation for extended periods of time, in themselves amounted to punishment of people who may have broken no law. “Of those respondents who ultimately lost their property to forfeiture,” I.J. reports, “more than half (56%) were never charged with a crime, and three-quarters were never found guilty of any wrongdoing.”

Forfeiture Victims Are Disproportionately Poor and Black

I.J. found that “just four ZIP codes in the city’s center” accounted for 57 percent of Philadelphia forfeitures. The median income in those neighborhoods ranged from $16,000 to $30,000, substantially lower than the citywide median of $45,000. Residents were mainly black or Hispanic. Black residents, who comprise about 43 percent of the city’s population, accounted for 67 percent of people whose property was seized.

Compared to Philadelphia’s general population, owners of seized property also were more likely to be unemployed and to earn less than $50,000 a year. They were less likely to have college degrees and less likely to own a home. I.J. reports that “survey respondents who earned less than $50,000 a year were 69% less likely to even try to get their property back than those who earned more,” while “people without a college degree were 82% less likely to get their property back than those with a degree.”

The finding that forfeiture disproportionately hurts members of disadvantaged groups, with is consistent with research in cities such as Chicago and Las Vegas, is not at all surprising. When cops steal people’s property, targeting owners who are ill-equipped to mount a successful legal challenge helps maximize their take. And even when the average value of forfeitures is small, they add up.

“From 2002 to 2014,” the I.J. report says, “Philadelphia seized and forfeited over $50 million in cash, along with 1,248 homes and other real properties and 3,531 automobiles and other vehicles. Those figures do not include the countless personal items forfeited, such as cell phones, jewelry, clothing or legally registered firearms.”

Standard Practice

While Philadelphia’s forfeiture program was especially awful in several ways, the state law that authorized it remains largely unchanged. In 2017, Pennsylvania legislators raised the standard of proof for establishing that an asset is subject to forfeiture from “a preponderance of the evidence” to “clear and convincing evidence.” But they retained the key features that make civil forfeiture such a potent threat to property rights and due process, including a low standard for seizures, a profit motive for police and prosecutors, and a complicated appeal process with weak protections for innocent owners, who have the burden of proving they qualify for an exception.

The vast majority of states operate similar rackets. “Just six states and the District of Columbia direct forfeiture proceeds away from law enforcement, eliminating forfeiture’s perverse financial incentive,” I.J. notes. “The other 44 states direct some or all proceeds to law enforcement.” The federal government and most states “continue to enforce civil forfeiture laws that offer few due process protections and promote policing for profit.” Just four states—Maine, Nebraska, New Mexico and North Carolina—”do not permit civil forfeiture under state law,” instead requiring a criminal conviction, followed by a judicial determination that the property was connected to the crime.

A word cloud that I.J. produced based on the responses to its survey shows that owners of seized property frequently called the civil forfeiture system “unfair,” “frustrating,” and “corrupt.” Those characteristics, which aptly describe how civil forfeiture works in most of the country, are exactly what you would expect when legislators invite police and prosecutors to pursue profit instead of justice.

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San Francisco Wants To Sell the Air Rights Above City Hall for $45 Million. Why Not Give Them Away for Free?


reason-cityhall

San Francisco is considering a sale of the tradable air rights above City Hall, a move that would bring money into the public coffers without hitting up already overburdened taxpayers, and also opens up development opportunities downtown.

It’s a seemingly unobjectionable trade that’s only made possible by the city’s insane restrictions on new development.

This week, the San Francisco Board of Supervisors was set to vote on a resolution authorizing the city’s Director of Property to sell up to 1.2 million square feet of unused space above city hall for an estimated $45 million. The sold-off space could then be used by the owners of other parcels in the city’s downtown area to enlarge their own projects beyond what would otherwise be allowed by the zoning code.

The San Francisco Chronicle reports that there is $46.5 million worth of projects at the City Hall building that are currently unfunded, including “roof and dome leak repairs, dome revitalization, exterior stone refurbishments and interior preservation.”

Whether the sale actually will actually bring in enough money to fund those projects is an open question. The Chronicle notes that there’s a limited number of parcels that could actually make use of the additional development rights and that demand for new downtown development is still suffering from the depressing effects of the pandemic.

The bigger problem with the city’s air rights scheme is that it only seems like a pro-development policy in light of San Francisco’s insanely restrictive zoning laws.

After all, the only people ultimately interested in purchasing those unused air rights would be developers who have viable projects they’d already be building if existing density limits didn’t forbid it. The $45 million the city is hoping to earn on the sale, therefore, represents some of the value of the offices and shops lost to San Francisco’s overly restrictive zoning regulations.

The $45 million price tag is also a lot lower thanks to the limits of the program that is enabling the sale of the City Hall air rights. That program, which dates back to the 1980s, allows the owners of historic buildings to sell off square footage that the zoning code permits them, but which they haven’t used, to people looking to build bigger projects.

But those development rights can only be transferred to properties in the city’s downtown commercial district that are zoned for retail, office, and other related uses. And as mentioned, there’s not a lot of demand for those uses right now.

If, however, the program allowed development rights to be transferred to, say, residential properties citywide, you could imagine there would be a whole lot more bidders interested in snapping up square footage that they could then devote to enlarging much-needed housing projects.

That would push the price of those air rights far higher. It would also provide an even clearer window into how much physical space and shelter the city is costing itself with all the red tape and restrictions it puts on new development.

Better yet, the Board of Supervisors could amend the city’s zoning code to give out air rights to anyone who thinks they can put them to good use.

That wouldn’t directly raise money to spruce up City Hall, but it would enable the construction of new homes and businesses that would expand rental options at every price point, which would in turn draw new residents and eventually grow tax revenue, some of which can be used to repair and restore public buildings.

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Tesla Stock All Over The Place After Beating Margin, EPS Expectations But Missing On Sales

Tesla Stock All Over The Place After Beating Margin, EPS Expectations But Missing On Sales

Heading into Tesla’s Q3 earnings, sentiment is euphoric judging by the near-record stock price and the outlook for is pretty good because despite grappling with the chip shortage, surging input costs and the same shipping bottlenecks plaguing all global automakers right now, Tesla managed to set a record for vehicle deliveries in the third quarter: 241,300 cars.

As a result, Wall Street is expecting a strong report, with consensus expecting an EPS of $1.67 a share on revenue of $13.9 billion.

On the revenue side, expectations for 3Q rose just $131 million after the company topped the consensus delivery estimate by 20,000 units. At an average transaction price near $50,000 (2Q’s revenue per unit), those additional 20,000 units should have increased the revenue estimate by $1 billion. According to the math, the 20,000 units that topped consensus would sell for $6,550 each, he said.

In other words, Bloomberg notes that consensus baked in a sequential revenue advance of $1.956 billion and a $198 million net-income gain, meaning the new revenue gets the same 10% net margin as the first $12 billion — essentially ignoring fixed-cost absorption. Tesla bear Gordon Johnson of GLJ Research thinks that, based on Tesla’s comments about its ability to generate margin, those incremental units should be contributing to profit at about a 45% clip (it’s a tech company not an automaker, remember?). Even splitting the difference would move the net profit total by about $350 million more than where consensus stands, Bloomberg Intelligence’s Tynan said.

“This is another indication that analysts may have set a low profit bar for Tesla to clear and probably have ‘Another Home Run Quarter’ congratulatory notes pre-written,” he said.

This is why a big focus for investors today will be Tesla’s gross margins, excluding sales of EV credits to other automakers. If they improved despite the chip crisis and port logistics headaches, and amid strong demand and pricing, that will be a big positive for Tesla.

To be sure, much if not all of this is already in the price: Tesla’s stock surged about 11% since it announced its 3Q deliveries on Oct. 2. What impressed investors was the fact that they posted record sales when the rest of the industry saw huge drops – especially in September – because of the chip crisis.

Why has Tesla been better at navigating the chip crisis? To be sure, Musk has been very vocal about what a struggle it is – not just chips, but also ships (port logistics) – he said earlier this month. According to Bloomberg, one factor may be that Tesla is big on vertical integration. Musk seeks control of the supply chain by doing as much as he can in-house. In 2019, Tesla dumped Nvidia and started designing its own self-driving chips, and partnered with Samsung to make them in its new home, Austin.

Another advantage Tesla has is that it is still relatively small (for now). While it’s market cap trumps every global automaker, it basically has four vehicle models. General Motors has four brands, and over thirty models–and that’s just looking a their U.S. sales. Then there’s different trims on different models. For automakers, complexity can bring higher profits, but it can also cripple you in a crisis like we are currently going through.

On the bearish side, questions as usual will swirl about the source of Tesla’s profitability: as noted last quarter, virtually all of the company’s profits in the past year have come from the sale of zero-emission regulatory credits which Tesla sells to other automakers (i.e., Jeep owner Stellantis). It basically equates to 100% margin and has been a significant contributor to net income. But, as Bloomberg notes, it can’t last forever.

For those who need a refresh, this is how much TSLA has sold in regulatory credits:

  • Q1 2020: $354MM
  • Q2 2020: $428MM
  • Q3 2020: $397MM
  • Q4 2020: $401MM
  • Q1 2021: $518MM
  • Q2 2021: $354MM

One thing to look for in today’s 530pm conference call is whether Musk will even be present: he previously said he may not longer join, but one controversy may lure him to speak in public: Yesterday, NHTSA (the National Highway and Traffic Safety Administration) said it’s hired Missy Cummings, a professor at UNC who studies automation and has been a very vocal critic of Tesla’s Autopilot feature. She’s joining the regulator as a “Senior Advisor for Safety.”

Musk may also be asked to comment on the company’s upcoming headquarters move from California to Austin, Texas.

With that in mind, here is how Tesla did in the third quarter as per the just released investor letter:

  • Revenue $13.76BN, missing the est $13.91B
  • Adjusted EPS $1.86, beating the est 1.67c
  • Free Cash Flow $1.328BN, missing the estimate of $1.38BN
  • Automotive gross margin 30.5%, beating the estimate of 28.4% and up Y/Y from 27.7%
    • GAAP automotive gross margin 28.8%, beating the estimate of Exp. 26.4%
  • CapEx $1.828BN, missing the estimate of $1.37BN
  • Cash and cash equivalents of $16.065BN, missing the estimate $16.88 billion

And visually:

Commenting on the quarter, Tesla said it had its “best-ever” net income, while it actually lowered prices in the third quarter.

“Our operating margin reached an all-time high as we continue to reduce cost at a higher rate than declines in ASP.”

Of note, unlike previous quarter when virtually all the profit came from the sale of regulatory credits, in Q3 the situation normalized somewhat with just $279MM from regulatory credits, a 30% drop Y/Y and a fraction of the GAAP Net Income of $1.618BN.

Amusingly, Tesla announced that in Q3 it suffered a Bitcoin-related impairment of $51M, which however we are confident has been fully reversed by now.

Some other highlights from the quarter, courtesy of Bloomberg:

  • Still Sees 50% Average Annual Growth in Deliveries
  • Continues to Ramp Gigafactory Shanghai
  • Says Gigafactory Texas Progressing as Planned
  • 3Q Free Cash Flow $1.33B, Est. $1.38B
  • Targets Model Y Production in Berlin Before Yr-End

The stock is volatille in kneejerk reaction, trading first higher, then lower, then unchanged and now appears to be drifting down.

Developing

Tyler Durden
Wed, 10/20/2021 – 16:17

via ZeroHedge News https://ift.tt/3pnlDgT Tyler Durden

Dollar Dumps, Gold Jumps, Bitcoin Pumps To Record High

Dollar Dumps, Gold Jumps, Bitcoin Pumps To Record High

This could be the start of a problem…

Overheard at The Treasury…

Stocks were mixed today with Nasdaq lagging and Small Caps leading. The usual chaos hit as the cash markets opened, Nasdaq decoupled (bearishly) as rate rose and then an ugly 20Y Auction spooked all stocks around 1300ET. There was no significant dip-buying off that dip and overall the market faded into the close…

The Dow and S&P pushed back up to their record highs but could not extend…

Value outperformed Growth today catching up on the week…

Once again, shorts were squeezed at the open but this time theu quickly ran out of steam…

Source: Bloomberg

Treasuries were mixed once again, extending yesterday’s trend with the short-end bid and long-end offered (2Y -2bps, 30Y +3bps)

Source: Bloomberg

The yield curve (5s30s) steepened further today, erasing Friday/Monday’s flattening (but seemed to stall at resistance there)…

Source: Bloomberg

The dollar continued its downward trajectory, falling to its lowest in a month…

Source: Bloomberg

But Cryptos were the headline-grabbers of the day as Bitcoin ripped to a new record high today…

Source: Bloomberg

…tagging $67,000 intraday…

Source: Bloomberg

Ethereum is back above $4000, taking out early Sept highs back to the highest since May…

Source: Bloomberg

BITO options volumes were dominated by short-dated deep OTM calls (gamma squeezing) with call volumes almost triple those of puts…

Source: Bloomberg

As BITO’s price soared and it achieved $1bn in AUM in 2 days – which has never been done before…

Source: Bloomberg

Gold was also bid today as the dollar dropped…

WTI ramped to new cycle highs today after yoyo-ing around after API and DOE inventory data…

Copper rebounded after yesterday’s efforts by LME to tamp down the backwardation…

Finally, Greed is back…

And Puts are hated…

Source: Bloomberg

“Probably nothing…”

Tyler Durden
Wed, 10/20/2021 – 16:01

via ZeroHedge News https://ift.tt/3aSBrA5 Tyler Durden

In a New Survey, Victims of Philadelphia’s Forfeiture Racket Highlight the Hazards of Giving Cops a License To Steal


https://commons.wikimedia.org/wiki/File:Philadelphia_City_Hall_7.jpg

After “they came in,” Robert recalled, “they made me go down to the basement,” “put a gun to the back of my head,” and “said ‘open the safe.'” When Robert did not do so immediately, one of the men “poked me with the gun and said, ‘open the safe,’ then hit my head against the frame of the door,” Robert reported. “I really thought they were going to shoot me.”

That sounds like a robbery, because it was: Once the safe was open, the armed intruders, who were Philadelphia cops, took Robert’s legally registered gun. But that theft was perfectly legal under Pennsylvania law, which allows police and prosecutors to seize property they allege is connected to criminal activity, keep it unless the owner mounts a successful legal challenge, and use the proceeds to augment their budgets.

“Robert” is the pseudonym of a man who was caught up in Philadelphia’s notorious civil forfeiture program, which ended in 2018 as a result of a 2014 class action lawsuit filed by the Institute for Justice (I.J.). The organization, which frequently represents forfeiture victims, recently surveyed 407 of the 30,000 people whose property was seized under Philadelphia’s program. The results, summarized in a new report by I.J.’s Jennifer McDonald and Dick Carpenter, underline several glaring problems with civil forfeiture, which effectively gives law enforcement agencies a license to steal.

Policing for Profit

Under Pennsylvania law and the laws of most other states, police can seize property based on “probable cause,” which in practice may amount to nothing more than a bare allegation that it was somehow involved in criminal activity. When they seize cash, for example, cops often use boilerplate language vaguely suggesting that the money either came from the sale of illegal drugs or was intended to purchase them. Pennsylvania law enforcement agencies can keep 100 percent of forfeiture proceeds, which gives them a strong incentive to target people who are unlikely to fight back effectively.

Petty Seizures Predominate

In the I.J. survey, the median value of seized items, which included cash, cars, and other personal property, was just $600. More than two-thirds of seized items were valued at $1,800 or less. The median value of all property seized in a single case was $1,370.

Cash seizures, which happened in nearly two-thirds of the cases included in the survey, involved amounts as low as $25. The cops even took “a cologne gift set worth $20” and a pair of crutches. Such petty greed is par for the course with civil forfeiture, which in other states has led police to seize small sums of cash and decidedly nonluxurious possessions such as cellphones, ladders, weed cutters, leaf blowers, soccer equipment, and children’s car seats.

The details of Philadelphia’s seizures, which are similar to the results of prior research in other jurisdictions, show how absurd it is to maintain that civil forfeiture is primarily about confiscating the ill-gotten profits of drug “kingpins” or other big-time criminals. The I.J. survey indicates that forfeiture cases in Philadelphia generally involved people who either were entirely innocent or had committed minor offenses such as drug possession or traffic violations.

Challenging a Forfeiture Is Difficult and Expensive

In three-quarters of the cases covered by the survey, owners were either never arrested, never charged, or never convicted. Yet while most of the respondents (72 percent) tried to recover their property, only 43 percent of them succeeded. Overall, I.J. reports, “more than two-thirds (69%) of all Philadelphia forfeiture victims never got their property back.”

Defenders of this system argue that failing to challenge a forfeiture is an implicit admission of guilt. And since an “innocent owner” can seek the return of his assets, forfeiture fans maintain, unsuccessful challenges show police are taking property from the right people for the right reasons. But given the reality of the legal process, which is rigged against owners from beginning to end, those assumptions are unwarranted.

Forty-three percent of respondents said they had hired lawyers to help them get their property back, at a median cost of $3,500—two-and-half times the median forfeiture value. Owners of seized property, unlike criminal defendants, have no right to publicly funded representation, and in Philadelphia even owners who successfully challenged forfeitures were not compensated for their legal expenses. The cost of hiring an attorney therefore was a daunting barrier, especially for people of modest means who would have had to spend more on legal fees than their assets were worth.

Unsurprisingly, the people who hired lawyers were challenging forfeitures with unusually high values: a median of $4,765, compared to $1,700 for owners who tried to get their property back without professional assistance. Given the typical value of seized property, it often makes more sense to give up than to expend time, effort, and money on a challenge that is apt to fail, regardless of whether the owner actually committed a crime.

Owners who nevertheless tried to get their property back faced additional barriers.  “The police buried me in paperwork,” one respondent said. “I was so overwhelmed, and my lawyer told me that it would cost too much money to get anything resolved anyway.”

Two-thirds of respondents “did not receive any information from police about how to begin the process of getting their property back.” Fifty-eight percent of respondents said they were not even given a receipt for their property—a crucial piece of evidence that shows exactly what was taken, which is especially important when police seize cash. Owners who had receipts “were eight times more likely to get their property back than those who did not.”

One respondent said cops seized $5,000 in cash from his business but reported only a few hundred dollars. “There was no record,” he wrote. “We did tell a lawyer about it but figured forget it….It’s your word against their word. They took our cameras, too, so you have no proof….What they’re doing is like robbery. They took [our money] and didn’t report it and there’s no one to complain to.”

Even owners with better documentation had to press their claims in Courtroom 478 at Philadelphia City Hall, where the hearings were run by local prosecutors with a vested interest in keeping what cops took. “The Philadelphia District Attorney’s Office frequently spent the millions it garnered in forfeiture proceeds on the salaries of the prosecutors who ran Courtroom 478,” I.J. notes. “Between 2002 and 2014, Philadelphia’s spending from forfeiture funds on salaries was nearly twice that of all other Pennsylvania district attorneys combined.“

Owners who claimed they were not aware that their property had been used for illegal purposes had to prove their innocence—the opposite of the presumption that applies in criminal cases. “Civil forfeiture effectively puts the onus on property owners to prove their innocence and fight for the return of their property,” I.J. notes, “and this will inevitably deter valid claims and wind up victimizing innocents.” I.J. found that “innocent owner” claims “rarely succeeded.” When people’s property was seized while it was in someone else’s possession, they “were 92% less likely to win their property back compared to people who had property seized from them directly.”

Owners who challenged forfeitures typically had to manage multiple court appearances, which is especially difficult to arrange for hourly workers with inflexible schedules. I.J. found that employed owners “were 53% less likely to try to get their property back than those who were unemployed, retired, students, homemakers or unable to work.”

Prosecutors frequently made challenges more onerous by repeatedly rescheduling hearings. For respondents who managed to get their property back, the process took nine months on average. Some had to wait years. These delays, which could deprive innocent owners of much-needed cash or their primary means of transportation for extended periods of time, in themselves amounted to punishment of people who may have broken no law. “Of those respondents who ultimately lost their property to forfeiture,” I.J. reports, “more than half (56%) were never charged with a crime, and three-quarters were never found guilty of any wrongdoing.”

Forfeiture Victims Are Disproportionately Poor and Black

I.J. found that “just four ZIP codes in the city’s center” accounted for 57 percent of Philadelphia forfeitures. The median income in those neighborhoods ranged from $16,000 to $30,000, substantially lower than the citywide median of $45,000. Residents were mainly black or Hispanic. Black residents, who comprise about 43 percent of the city’s population, accounted for 67 percent of people whose property was seized.

Compared to Philadelphia’s general population, owners of seized property also were more likely to be unemployed and to earn less than $50,000 a year. They were less likely to have college degrees and less likely to own a home. I.J. reports that “survey respondents who earned less than $50,000 a year were 69% less likely to even try to get their property back than those who earned more,” while “people without a college degree were 82% less likely to get their property back than those with a degree.”

The finding that forfeiture disproportionately hurts members of disadvantaged groups, with is consistent with research in cities such as Chicago and Las Vegas, is not at all surprising. When cops steal people’s property, targeting owners who are ill-equipped to mount a successful legal challenge helps maximize their take. And even when the average value of forfeitures is small, they add up.

“From 2002 to 2014,” the I.J. report says, “Philadelphia seized and forfeited over $50 million in cash, along with 1,248 homes and other real properties and 3,531 automobiles and other vehicles. Those figures do not include the countless personal items forfeited, such as cell phones, jewelry, clothing or legally registered firearms.”

Standard Practice

While Philadelphia’s forfeiture program was especially awful in several ways, the state law that authorized it remains largely unchanged. In 2017, Pennsylvania legislators raised the standard of proof for establishing that an asset is subject to forfeiture from “a preponderance of the evidence” to “clear and convincing evidence.” But they retained the key features that make civil forfeiture such a potent threat to property rights and due process, including a low standard for seizures, a profit motive for police and prosecutors, and a complicated appeal process with weak protections for innocent owners, who have the burden of proving they qualify for an exception.

The vast majority of states operate similar rackets. “Just six states and the District of Columbia direct forfeiture proceeds away from law enforcement, eliminating forfeiture’s perverse financial incentive,” I.J. notes. “The other 44 states direct some or all proceeds to law enforcement.” The federal government and most states “continue to enforce civil forfeiture laws that offer few due process protections and promote policing for profit.” Just four states—Maine, Nebraska, New Mexico and North Carolina—”do not permit civil forfeiture under state law,” instead requiring a criminal conviction, followed by a judicial determination that the property was connected to the crime.

A word cloud that I.J. produced based on the responses to its survey shows that owners of seized property frequently called the civil forfeiture system “unfair,” “frustrating,” and “corrupt.” Those characteristics, which aptly describe how civil forfeiture works in most of the country, are exactly what you would expect when legislators invite police and prosecutors to pursue profit instead of justice.

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Democrat Plans Fall Deeper Into Chaos After Sinema Opposes Tax Hikes; May Leave Top Rates Unchanged

Democrat Plans Fall Deeper Into Chaos After Sinema Opposes Tax Hikes; May Leave Top Rates Unchanged

Senate Democrats are starting to freak out over Sen. Kyrsten Sinema’s opposition to tax increases – a crucial component of their attempt to pass over $4.5 trillion between two spending packages.

Sinema is one of two moderate Democrats – the other being Sen. Joe Manchin (WV) holding up their party’s spending agenda over their refusal to support the massive spending legislation.

According to the Wall Street Journal, Sinema has told lobbyists that she won’t stand for significant increases in taxes on businesses, high-income individuals, or capital gains – pushing Democrats to ‘more seriously plan for a bill that doesn’t include those major revenue increases.”

While the Journal reports that Sinema is opposed to a wide swath of tax increases as described above, CNBC’s Kayla Tausche reports that the Arizona moderate has told ‘outside groups’ that her topline figures are 24% corporate taxes, no increase to the carried interest tax, and a ceiling of 39.6% as the top individual tax bracket.

It’s unclear exactly where Sinema stands, however Dow Jones reported a short while ago that congressional Democrats are now considering leaving top tax rates unchanged. That said, going after tax cheats with a beefed-up IRS, and tightening the net on US companies’ ability to earn money abroad, are still on the table.

Democrats had been hoping to pay for the entirety of their social policy and climate bill, now expected to cost around $2 trillion over a decade, with revenue from tax increases and government savings. In the House, Democrats have proposed raising the corporate tax rate to 26.5% from 21%, moving the top individual rate to 39.6% from 37% and increasing the top capital-gains rate to 28.8% from 23.8%. Their plan would also add a 3% surtax on income above $5 million. -WSJ

“I know some folks want to take away rate increases, it makes getting there using more interesting ideas—I want to get there but I’ve got a long way to go,” said Sen. Mark Warner (D-VA), a member of the Senate Finance Committee.

Tyler Durden
Wed, 10/20/2021 – 15:55

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