UW-Roosevelt Institution Blog

The 700 Billion dollar bailout makes me cringe. I don’t like the idea of it, for basically two reasons. First, it represents the most severe manipulation of the free market since FDR. Companies that took excessive risk, should be allowed to fail, and negligent credit and equity holders should be punished for not reigning in the management of the companies. Letting them survive, sends a dangerous signal to the market, and will promote overly risky behavior in the future. Second, this is a lot of money. As a college student, it will be my future taxes that will be raised and future benefits that will be cut to pay for this monstrosity.

With all that said, there are a few superseding issues that lead me to support the TARP. First, giving banks (particularity midsize thrifts) equity injections, may actually lower the federal governments liabilities. Why? Simply because the FDIC guaranties deposits and if a lot of banks fail, then there would have to huge outlays from the federal government that would probably exceed the equity injections. Second, while there are certainly some market distorting properties of the bailout (ie moral hazard), this will probably help unfreeze the credit market and potentially prevent a severe recession. Sure, 700 billion sounds like a lot of money (and it is), but what the FDIC would have to spend if a lot of banks failed, would at the very least come close to that number, without any of the benefits.

I have serious problems with the way the bailout has been run thus far (we’re buying ABS’s, no wait only equity injections, no wait troubled assets and equity injections, no wait we’re helping home owners too, no wait…), but on net I think it is a good idea, given the other choices.

Wow what firepower! As someone whose to the right of the President-Elect on pretty much all things economics, it is refreshing to see he is taking somewhat a more moderate stance than he did in the election.

• Tim Geithner - Treasury Secretary: He is currently the President of the New York Fed, and has basically been Paulson and Ben’s go to guy on the bailouts. He was a fundamental part discussions and resulting action with AIG, Merril, Bear Stearns, and others. Additionally, the chattering class seems to think he would not have let Lehman go down. He will be able to provide a lot continuity in the transition between the two administrations, and is widely regarded by both parties as a pragmatist and highly capable. Based on his experience in the Clinton Treasury, I’d assume he’s pro-trade, but I really have no basis for that other than his association with Rubin and Summers and what others have been saying. He has limited experience in taxes or other domestic policies, but managing the bailouts and economic crisis are by far the most pressing matter, and he literally seems the most qualified person for Treasury Secretary right now.
• Larry Summers - National Economics Head: Given Geithner’s lack of experience in regards to traditional economic policy, Summers will likely fill that void in a major way. He was Treasury Secretary for the last year or so of the Clinton administration, and is know as extraordinarily brilliant. He is a huge personality, and will likely dominate almost every economic debate within the Obama administration. Ideologically, he’s a pragmatist who very much exemplifies the center-left policies of Clinton. With Geithner serving as somewhat of a fireman for the economic crisis, Summers is probably going to be the single most important figure in the Obama administration in terms of conventional economic policy. (he’ll also have his hand in whatever Treasury does with the TARP)
• Christina Romer – Council of Economic Advisors Chair: Before her name was being thrown around on Friday as a possibility, I must admit I did not know too much about her. However, based on what I’ve read since then, she seems to be extremely qualified. She is currently a professor at Cal, and has written extensively on macroeconomic history and taxes. While certainly liberal, she has earned a lot of praise from the right based on her work on the large negative effects on investment and economic wellbeing of increased taxes. It will be interesting to see how she holds up sheer power of Summers domineering personality, but I think she’s probably up to it, and this looks like a really good appointment as well.

It’s amazing, the feeling that has resonated with many of us after the first week of November.  Jon Stewart described it best by his exasperation that New Yorkers actually looked each other in the eyes on the street as they walked by the day after the election.  But in all of our ecstasy, it’s almost easy to forget the critical time in our lives that Obama is about to affect.  In this waiting period before inauguration, I think it’s best to realistically assess our expectations, and recognize which battles we want this administration to fight.

Obviously, this administration has no choice but to deal with the our economic despair.  Several theorists argue that the last administration, like other wars of the past, overextended itself by fighting in Afghanistan and Iraq.  To put it lightly, we’re broke.  The day after the election may have been blissful for someone like me, who was still wiping my puffy eyes from crying, but for the financial advisors and stock market analysts…not so much.  They had to watch the market dive another 400 + points, worse than it had in months.  According to articles in the New York Times and Wall Street Journal, this was expected no matter who was elected for a number of reasons.  People weren’t paying attention to the market in the days leading up to the election; they were paying attention to politics.  Investors would be selling their stock in fear of something drastic happen on either side of the political arena.    But my heart dropped as I realized, perhaps a Democratic President may not be the answer right now.

Now as we look forward in the fear that the worst for our economy may be ahead I’m looking to Congress and asking whether they will push forward Obama’s agenda before he takes his oath?  And before we can ask Congress to do this, I think the question on the Right still echos “are Obama’s proposals pushing us towards a socialist regime?” Sorry S. S. Palin, but increasing the taxes for the upper class is not exactly abolishing private property or religion. As much as I hate the idea of giving my hard earned money to a government I don’t necessarily trust, my fear of losing the middle and working class is worse. In the last century we’ve had two unquestionable staples in American policy: socialist influence and Communist fear. I say socialist influence in lieu of taxes, social security, Medicaid, Medicare, welfare and the basic concept of unalienable rights and equality. I say Communist fear when in retrospect of McCarthyism, the Vietnam War, the Cold War, etc. As the Conservative Right first called Hillary a Communist and then Obama’s economic and health care policy Socialist and then Communist, fear was again a part of American values. But that’s also just an election tactic. What I’m concerned about is our next step.

If Congress pushes towards Obama’s tax policies, will we repeat a tradition of Communist fear, or move towards a more moderate ideology? I’m okay with becoming a social democracy, but I’m not sure the rest of America is ready to make that change. If they do not make this change with Congress and Obama, then I fear we will again be an ideologically polarized America, and I can only forsee that negatively affecting legislation.

There are many partisan issues in this country.  From abortion to immigration to the war in Iraq, democrats and republicans constantly try to prove that their view is correct.  There are some issues, though, that are above this partisan banter; issues that we can all care about regardless of political affiliation.  One of those issues, I thought, was genocide.  I have recently discovered that the culture of partisan warfare in the United States has caused people to put partisan labels on very un-partisan issues.

I recently led an Amnesty International/Action in Sudan bake sale to raise money for the Machara Miracle Network, which works to advance reconstruction in Southern Sudan.  As I was asking somebody if they would like to buy a baked good to help the people of Sudan, a young woman responded, “Sorry-I’m voting for John McCain.”

I was shocked.  I happen to be a Democrat, but that is not why I am working to help the Sudanese.  My liberal values do not tell me to stop genocide; my human values tell me that.  Forgive me if I am generalizing but I do strongly believe that any breathing human being knows that genocide should be stopped.  They may disagree on how to go about it.  They may or may not want to send American troops.  They may or may not want to divest.  They may or may not want the International Criminal Court to charge Omar al-Bashir with genocide.  They even may or may not call it genocide. But I really cannot imagine anybody wanting this mass killing to continue.

To hear this woman say that she would not buy baked goods because she was a republican was truly shocking.  It motivated me to research John McCain’s position on Darfur.  In September of 2006 John McCain and Bob Dole wrote an op-ed in the Washington Post advocating action in Sudan. He spoke twice on the floor of the senate about Darfur. McCain voted in favor of seven pieces of legislation concerning action in Sudan, and co-sponsored a bill to enforce the no-fly zone.  This issue is not republican vs. democrat.  This is a pure matter of morals.  We must stop this constant partisan bickering if we want to come together and work on truly important issues, if we want to stop mass murder, and if we want say “never again” and mean it.

The Current Law

In 2004, The State of Wisconsin Legislature passed Act 255 and extended tax credits to angel investors and venture capital funds. Certified funds can claim an income credit of 25% on an investment with a cap on the amount of tax credits that are awarded each year. Angel investment skyrocketed after the implementation of the tax credits, with the cap being reached every year. However, venture capital has lagged in comparison. Each year, tax credits remain unclaimed, and overall venture capital activity has only seen a small improvement. For example, in 2007, over one million dollars worth of tax credits were left on the table. Recently, Wisconsin Governor Jim Doyle took an important step with his “Accelerate Wisconsin” initiative. However, we do not believe his plan provides sufficient incentives for venture capital. We recommend increasing the tax credit venture capital firms are eligible for from the current one quarter of funds invested to one third. If in future years the cap is reached, than it too should be increased. However, this can be done if the State gets to that point, and additional research needs to be done on how increasing the percentage of the credit affects the demand for it before a firm recommendation on the cap can be made.

A Demonstrated Need

The world is experiencing an unprecedented boom. Over the past couple of decades, the United States and most of the rest of the world have grown at tremendous rates. Not too long ago, countries like China and India had very little hope of rising above perpetual poverty, but now their production is growing at or even above double digits. Unfortunately, this success has not affected all regions of the US equally. Two major factors in that growth, increased global competition and connectivity, hurt some manufacturing centric areas in the US. States like the industry heavy Michigan have even seen negative growth in recent years despite an nationwide economic boom. While Wisconsin’s prospects look far better, it faces some of the same problems. For example, the US has outperformed Wisconsin in each of the last four years, and since 1997, it has on average grown ¾ points faster than Wisconsin. Sadly, these trends are likely to continue. About 17 percent of Wisconsin jobs are in manufacturing. This ranks second in the US, and many residents are liable to lose their jobs in the coming years due to outsourcing and technological improvements. To demonstrate the need for diversification, one only needs to look at two of Wisconsin’s neighbors, Illinois and Minnesota. Both experienced a decline in manufacturing in recent years, but they have been more successful because they have a higher percentage of technical and service jobs. The state simply does not have the high-tech and service-sector jobs required for better growth. The state lacks the entrepreneurial activity necessary to diversify its economy, and become one of the major benefactors of the global economy. Additionally, Wisconsin does not keep the ideas its residents generate in the state. In 2006, roughly two percent of total US patents were in Wisconsin. Yet, the state only received three tenths of a percent of US venture capital. All too often, ideas are generated in Wisconsin, but the implementation of them moves out of state.

Why Our Plan Works

An increase in the tax credit available to venture capital firms would help alleviate some of the problems described above. It will help residents start new businesses because it will increase the availability of capital. The current law has not produced the desired results, and any increase in the percentage would only ­work to accomplish what was originally intended. This measure will increase venture capital activity, and thus lead to more entrepreneurial activity and greater diversification of the Wisconsin economy. Additionally, with more startups, there should be a greater opportunity for the state’s service-sector to prosper around the new higher-tech industries.

Wisconsin should be an ideal place to start a business. It is home to one of the best public universities in the country, the University of Wisconsin-Madison. Every year UW-Madison graduates hordes of students equipped with Bachelors, Masters, and PhDs from its highly ranked programs. Employers all over the country recruit students from various fields including finance, biomedical engineering, and computer science. Unfortunately, they all too often decide to move out of the state. The types of jobs Wisconsin graduates seek just do not exist in this state. If entrepreneurial activity does pick up because of our proposal, these graduates provide an important resource to anyone considering starting a new business in Wisconsin. Our plan will make capital more available to startups, and this will in turn create a larger incentive for the University’s graduates to stay in the state and therefore make a positive addition to Wisconsin’s human capital. Finally, our plan would also produce a multiplier effect: more graduates stay in the state due to job opportunities, then turn around and down the road use these credits to start their own companies.

By Robert Huston, Ryan Barlow, and Rocio Sanchez-Moyano

A capacity attendance was on hand this year at the second Yahara Lakes Conference in Madison Wisconsin.  The Nelson Institute for Environmental Studies and other organizations joined to discuss the future of the Yahara Lakes.  For one day local leaders and experts came together, representing interests across the table, to share and explore solutions to cleaning up the cities number one natural resource.  Panelists included elected officials, representatives from the farming industry, professors and researchers, and organizational leaders.

Madison’s lakes were receiving raw sewage with no little restrictions from the city for quite some time, till 1952 in Lake Monona.  Eventually it became obvious that something had to be done.  Over the years the lakes have improved, thanks to the elimination of sewage dumping, but new problems have surfaced preventing residents and visitors from enjoying the lakes.

Madison is surrounded by rich farmland and a thriving dairy industry.  Unfortunately the manure produced by the cows soaks into the groundwater and flows from north to south, which travels from the top of the Yahara Lake System (Lake Mondota) all the way to the bottom (Lake Kegonsa).  This manure is loaded with phosphorus and excessive levels in bodies of water stimulate algae growth, along with other sediments and nutrients. One key piece of information was that 75% of the runoff originates from rural sources and 25% from urban.

The conference began with several speakers outlining the context of the conference.  They went on to highlight the current condition of the lakes, while reinforcing the value they bring to the community. Following the morning speakers we broke into concurrent sessions covering Community Action Partnerships, Opportunities in Manure Management, Reducing Urban and Rural Sediment and Nutrient Run-off, and Investigating and Controlling Potential Pollution Sources.

During the Manure Management session many innovative ideas were presented.  Peter Nowak, a professor of Environmental Studies at UW–Madison, moderated the panel.  From the very beginning he challenged the audience to work with the panel to find specific solutions during our time. Among these solutions were introducing buffer zones into portions of farms to act as an additional filter of phosphorus.  Planting these buffer zones with alfalfa, which require lots of phosphorus to grow, would further aid the filtration.  One problem identified by a farmer on the panel was that no concrete incentive structure is in place to convince farmers to install these buffer zones.

Additionally the panel explored the prospect of manure digesters, or sometimes referred to as anaerobic digesters.  The basic concept involves breaking down the manure so as to extract methane and then burn it as a bio-fuel to produce electricity (Alliant Energy info on Anaerobic Digesters). It was noted that there are many smaller farms in the area to the north of Madison, at the top of Yahara Lake system. Since manure digesters are currently more efficient and practical for larger farms, interested farmers in Madison could enter into cooperatives or local digester partnerships.  Several pilot operations have been established and are at various stages of development and research. (Dane County Office Of Lakes and Watershed)

Several speakers stated that many future weather models point towards increased precipitation levels.  This translates into increases in sediment and nutrient runoff into the lakes.  A solution proposed by many and supported by Mayor Dave Cieslewicz was to encourage the development of urban rain gardens.  Rain gardens can be planted in people’s yards, ideally near gutters, especially yards located on the lakes.  A rain garden would hold the stormwater long enough to allow it to infiltrate the ground and prevent a majority of sediments and nutrients from making their way to the lakes.

The last panel featured local leaders sharing their vision and thoughts on improving the lakes.  One of the more notable comments came from Pat O’Brien, President of the Dane County Farm Bureau and fourth generation dairy farmer.  He stated that earlier in the summer he had attended a similar conference in which he learned the attendees were all to eager to blame the farmers.  A stark contrast he noted compared to this conference.  Mr. O’Brien went onto say that he had learned so much, and that most of what was being discussed throughout the day is unknown to the farming community.

This was a significant moment for the conference, whether known or not to those in attendance, it became obvious with Mr. O’Briens comments that the farming community needs to be equally apart of the process.  A major divide of access to information will hopefully be bridged after this conference.  Including farmers in the discussion is the least that should be done, especially when they are the ones who will be taking on these changes directly.

Take a look around Madison, Wisconsin and you’ll run into at least two Obama bumper sticker stands, three College Dems members, and an anti war rally.  Madison is undoubtedly a liberal city.  But it is a liberal city enclosed inside a much more conservative state.  All one has to do to discover this is look at a ballot initiative passed in November 2006.

On November 7, 2006 59% of Wisconsin citizens voted to pass an amendment to the state constitution defining marriage as between a man and a woman.  The law states, “Only a marriage between one man and one woman shall be valid or recognized as a marriage in this state. A legal status identical or substantially similar to that of marriage for unmarried individuals shall not be valid or recognized in this state.” The law not only prohibits same sex marriage, but also any civil union with rights similar to that of marriage.

The amendment could potentially be overturned in two ways.  The first option is a lawsuit.  This recently failed in Nebraska, and is unlikely to have any more luck in Wisconsin.  The other option is a constitutional amendment repealing the ban.  This, however, requires passage by 2/3 of the state legislature and approval by the same voters who enacted the bill in the first place.  Currently the Wisconsin State Assembly holds a Republican majority of 52-41, and the senate holds a slim Democratic majority of 17-14.  Until the Democrats gain a clearer majority in the legislature any amendment is likely to fail.

After Massachusetts and California passed laws allowing out of state couples to marry in their states, many gay Wisconsin couples planned to make the journey across the country to wed. They, however, are being prohibited by an antiquated law known as the “1915” law.  The law, which makes it a crime for a Wisconsin couple to marry in another state if that marriage would have been illegal in Wisconsin, was created during a period of fear of interracial marriage.  The Wisconsin Family Council is currently demanding that any gay couple who crosses state lines to wed face the full penalty of that law, which is a $10000 fine and/or up to 9 months in prison.

So the next time you walk around campus and feel that everyone here is a Democrat, remember the 59% of Wisconsin voters that decided to enforce one of the largest civil rights abuses of our generation.

The price of a good can be found by adding all the prices of the rights that comes with a good. For instance renting an apartment is cheaper that buying the  apartment  because by renting you don’t control all the rights of the apartment. You only have the rights to it for a finite amount of time (length of the lease), while the owner has the rights to it indefinitely. So the rent you pay each month is in exchange for the right to live in the apartment for one month.

The same principle can be used to parse out the values of rights that come with a Badger football ticket. A friend recently got ejected from a football game and therefor must be in the “Show and Blow” program, meaning she can’t drink before the rest of the games. This means she or anyone she sells her ticket to no longer has the right to drink before the games. This loss of the right to drink before the game was reflected in the price of her ticket, when she tried to sell it. She sold it for $30 which is $40 less than the going price ($70) for a ticket with full drinking rights. By simple subtraction we can find the right to drink at a game is worth $40 in this case 57% of the ticket’s value. This means the right to see the game is worth less than the right to drink before the game.

Dane County Executive Kathleen Falk recently unveiled her proposal for the 2009 budget.  Along with more money for prevention of underage drinking and never-ending Wisconsin road construction, Falk calls for a court funding plan that would unnecessarily and dangerously limit judges’ independence.

Falk threatened to cut funding for staff lawyers if judges failed to enroll 45 inmates in community service programs, instead of allowing the judges to sentence defenders at their discretion.  The move was apparently forced by the Clerk of Courts inability to find enough budget cuts for the next year.

Finding alternative means to punish defenders for their crimes is a good idea. It saves money when government does not have to pay to feed and house for inmates, and allows minor offenders to remain integrated in their communities, rather than being segregated from them.  Many ideas have been proposed and successfully implemented to keep offenders out of costly jails, such as electronic bracelets, drug treatment programs and the previously mentioned community service programs.

Despite the many alternatives to traditional incarceration that should be explored and implemented, judges should not be limited in their ability to send offenders to prison by a county budget. Precendence and the law guide judges in making their most informed and partisan-free decisions. Threatening to remove funding based on what a judge decides is in the best interest of the law and the community is not sound policy. The time-weathered Constitution provides for checks and balances of executive, legislative and judicial powers so that citizens need not fear their government. Falk should not get in the way of this process.

It’s clear that the economy is in rough shape.  While this is bad news for everybody, it seems especially dire for higher education systems in Wisconsin.  In the last budget, funding for both the University of Wisconsin and technical college got slashed.  While neither of these systems are entirely dependant on the state for operating funds, other sources are just as likely to dry up when the general economy seems poised to make a nose dive.

This means these institutions need to make cuts.  Somewhere in the University system, something has to go.  Tuition will almost certainly go up again next semester, but it is very unlikely even a big boost in revenues would allow the system to continue at its current level.  But what, or who, needs to change?

The Badger Herald reported on October 8th that UW custodial workers are picketing a change in their hours.  Responses from the administration say that the change was made in order to increase productivity.  While the attempt to improve efficiency was probably meant in good faith, the hours of the custodial workers have been consistent for many years.  These workers often have multiple jobs and other commitments.  The most distressing result of the situation has been the University’s relative disinterest in dealing with the union to help resolve the problem.

If efficiency needs to be improved, the place to start is not at the bottom.  Those jobs already offer marginal pay that is very likely to be essentially equal to the value of the work being done.  However, there are probably more than a few administrative positions pulling huge salaries that could be eliminated with no significant disruption in the operation of the University.  Combining these workloads or dispersing them to other workers with nothing to do would be a much more efficient way to cut costs and improve efficiency than unceremoniously altering the working conditions of the people who keep our university clean.