"If you and I had done the back room deals and the payoffs that this bill took to get passed for every one of those votes, you and I would be guilty of corruption. We would have been arrested for corruption," the governor of Nevada, Jim Gibbons, tells Fox News. "The state of Nevada is no different than many states who believe that this is an unconstitutional law created by the federal government in the back room."

I'm sympathetic to the Nevadans whose tax dollars are going to be taken by force to pay extra for the health care of Nebraskans who were lucky enough to have a senator who was a swing vote on the bill. On the other hand, special deals to accomodate the interests of certain states are a feature of American democracy going back to the Constitutional Convention, which itself was a closed-door meeting, "with armed sentinels posted outside convention doors."

The Obama administration is set to put another $3.5 billion of taxpayer dollars into GMAC Financial Services, the Wall Street Journal reports. So if you are a shareholder or employee of Ford, Toyota, Fisker or Tesla, the government is going to take your tax dollars and turn them over to GMAC so it can loan people money to buy cars from your competitors. Not that any of these automakers are exactly pure when it comes to avoiding taxpayer subsidies. James Stewart's column in today's Journal says that Ford's "gamble to reject government aid and maintain its independence gave it an opportunity to transform its brand." Mr. Stewart doesn't mention Ford's $5.9 billion federal loan. Only amid the current craziness can the Wall Street Journal describe a company that accepted a $5.9 billion loan from the federal government as having rejected government aid. The print edition of the Journal usually includes a disclosure stating that Mr. Stewart sometimes owns stock in the companies he writes about, but the disclosure is missing in the online Journal. The article suggests that Mr. Stewart is a Ford shareholder, but it doesn't state that outright. If Mr. Stewart is a Ford shareholder, you can understand his motivation to portray the company as having rejected government aid. It's better from the standpoint of marketing the cars to potential buyers. But the Journal is supposed to look at matters from the point of view of being accurate with its readers, not from the point of view of what's best for Ford's stock price.

Your view of the economy depends on whether you work in government or the private sector, according to a Rasmussen poll: "Today, 46% of government employees say the economy is getting better while just 31% say it's getting worse. Among those who work in the private sector, the numbers are reversed: 32% say better and 49% worse. Twenty-four percent (24%) of government employees rate the economy as good or excellent while just nine percent (9%) of those in the private sector are so upbeat."

An article in today's New York Times quotes Robert Crandall, the former chairman of American Airlines, as saying, "The United States doesn't really have an integrated transportation plan...What is needed is some kind of overall plan, and it has to be done by the government." Here, by contrast, is Mr. Crandall in January 1998: "it is clear that our customers -- who tell us daily where to fly, when to fly, what kind of service to offer and what to charge -- are wiser than any government is likely to be. History has shown that the market is almost always wiser, and vastly more efficient, than even the most enlightened government. We'll be better off by far when governments everywhere discover that truth." Said Mr. Crandall back then, "Increasingly, almost anyone aggrieved by almost any aspect of life -- whether social or economic -- seems to feel that government should 'do something' about the presumed wrong...Governments, it seems to me, are all too willing to develop and implement poorly thought out and hastily adopted 'solutions' to problems which would be better left to the wisdom of free markets." The Times article doesn't note the apparent contradiction.

In the New York Times, Bob Herbert has a column criticizing the health care bill passed by the Senate for including what he calls "a confiscatory 40 percent excise tax on so-called Cadillac health plans, which are popularly viewed as over-the-top plans held only by the very wealthy. In fact, it's a tax that in a few years will hammer millions of middle-class policyholders, forcing them to scale back their access to medical care." If 40% is "confiscatory," how about 49%, which is where the Wall Street Journal editorial page says the top federal income tax rate is headed if the Democrats have their way? Add state and local taxes to the tab and the burden on the top taxpayers who pay a big share of the taxes starts looking staggering. As the Journal also points out, Democrats are hoping to avoid the political fallout of this tax increase by means of a bipartisan "deficit reduction commission." At least the 49% level is still short of the 50% recommended by David Brooks.

The New York Times has an editorial this morning criticizing Goldman Sachs for selling mortgage-related investments to clients while betting that the investments would decline in value. "Wall Street continues to defend what looks to us as rank financial speculation," the Times says. "What goals, other than lining it [sic] pockets, were served by the deals?" "Lining pockets" is a term the Times editorialists use to convey their contempt for the profit motive, which is a pretty basic element of capitalism. That is the goal of Goldman Sachs; to make money for its shareholders, including its employee-shareholders. This isn't any kind of deep, dark, scandalous secret; the firm is quite up front about it, publishing the "Goldman Sachs Business Principles" right there on its Web site, with principle number three being "Our goal is to provide superior returns to our shareholders. Profitability is critical to achieving superior returns, building our capital and attracting and keeping our best people." As for "speculation," it's a part of capitalism, too; one explanation is Victor Niederhoffer's 1989 Wall Street Journal article, "The Speculator as Hero." We're not here to defend Goldman Sachs; the firm itself has apologized for some of its behavior. For our overall view of the firm, see the long Goldman post. At the same time, a lot of Goldman's customers were sophisticated investors themselves who consented freely to purchasing what Goldman was selling them. When it gets to the point where Wall Street bankers are being criticized for making money and for speculating, one starts to wonder whether the anti-Wall Street backlash is going a bit far. Meanwhile, if the Times is so down on Goldman Sachs, one wonders why it hired the firm to sell its stake in the Boston Red Sox. Eleven months since Goldman was hired, no sale has been announced.

The New York Times finally finds a tax it doesn't like: the capital gains tax imposed in 2010 instead of an estate tax on inherited gains of more than $1.3 million. As The New York Sun pointed out in an editorial, the family that owns the New York Times has used elaborate trusts and two tiers of voting stock to mitigate the effects of the estate tax on its own family business. Under the tax system the Times editorialists support, families had incentives to keep investments locked in place to achieve the step-up in basis at death. The new system makes it worthwhile for families to reallocate capital to more productive uses regardless of the age or health status of the family patriarch or matriarch. Or at least, it reduces the role that tax considerations play in those decisions. As another New York Sun editorial on the same point put it, "the current step-up regime creates perverse incentives for investors. The older they get, the more incentive they have to hang on to assets they might otherwise be well advised to sell off, simply because the step-up system will reward them for holding by providing a way to avoid capital gains taxes." It's another example of how investments and business decisions are sometimes driven by government policies or tax laws rather than the underlying merits. Meanwhile, it's hard to fathom why the Times is so worked up against capital gains taxes applying to inheritances of more than $1.3 million when it favors the Pelosi tax on individuals with earned income of more than $500,000, as well as increases in the payroll tax on those with income above $97,500 and on the income tax of individuals with income above $100,000. If you earn more than $100,000, you should have to pay more tax, but if you inherit $1.3 million, you shouldn't have to pay any tax? You'd think the Times was starting to buy into the logic against double taxation, but then again, the whole editorial is an argument for bringing back the estate tax instead of the capital gains tax, so it's really hard to understand what logic or underlying principle there is here at all.

One question that lingers, often unanswered, in accounts of bankers seeking direction from Washington or yielding to government dictate not backed by any law is, "why?" In some case the answer is intimidation or fear, the sense that one would be fighting a superior power. An example of this was the Fannie Mae executives, about to have their company seized, who reportedly got the message in a meeting with Treasury Secretary Paulson: "If you oppose us, we will fight publicly and fight hard, and do not think that your share price will do well with all of the forces of the government arrayed against you." But there are other, more complicated dynamics that are also coming into play. Bloomberg News has an interview with a lawyer who represents a lot of banks, H. Rodgin Cohen, chairman of Sullivan & Cromwell LLP. "Rather than split up banks, regulators should provide better supervision and require tougher capital requirements," Bloomberg paraphrases Mr. Cohen as saying. When you think about it, this is an unusual thing for a lawyer to say on behalf of his clients: "Please, Mr. Government, supervise me more closely, allow me to borrow less money, and force me to take less risk." He sounds like a lawyer for a convicted criminal asking a judge to mandate more frequent meetings with a parole officer. After all, nothing is stopping the banks from increasing their capital requirements or upping risk controls internally on their own, without a government mandate, other than maybe the pressure from shareholders who know that doing that might decrease short-term returns.

The Wall Street Journal has a news article with some detail on how some banks are looking to government for guidance even after they've repaid TARP money: "U.S. Bancorp has repaid its TARP money, but CEO Richard Davis nonetheless checked with Fed regulators in December to make sure it would be all right for the Minneapolis-based bank to raise its dividend. 'We are still awaiting this guidance,' Mr. Davis said in a statement announcing that the bank would retain its dividend level for now. Bank of America Corp. also has repaid its aid, freeing itself from the condition lenders hate most about the bailouts: Treasury oversight of executive pay. Even so, it sought the Treasury's advice on a pay package before hiring a new chief executive."

If a state has higher cigarette taxes, stores within the state will sell fewer cigarettes, in part because residents of the state will be more likely to order the cigarettes from other, lower-tax or no-tax jurisdictions over the Internet, a new paper from the National Bureau of Economic research finds. An author of the article is Austan Goolsbee, who is a member of President Obama's Council of Economic Advisers. Professor Goolsbee may want to keep this insight in mind when considering things like a transaction tax on stock and options trades, which, unless implemented globally, might send traders to overseas markets and exchanges in the same way that a cigarette tax in New York sends buyers to other locales.

Readers who consume FutureOfCapitalism.com primarily via the daily email may miss out on some of the fun of the comments area of the site. One recent example was the response to the query from a reader from abroad who wanted a suggestion of "a single, simple book explaining why capitalism is better than socialism." Seven readers have replied so far with a total of nine book suggestions: Friedrich Hayek's Road to Serfdom, Hernando de Soto's The Mystery of Capital, Ayn Rand's Capitalism, An Unknown Ideal, Andrew Bernstein's Capitalism Unbound; Hans-Hermann Hoppe's A Theory of Socialism and Capitalism; The Politically Incorrect Guide to Capitalism by Robert Murphy; Thomas Sowell's Basic Economics; Naked Economics by Charles Wheelan; and The Armchair Economist, by Steven Landsburg.

Click through and read them all, there are some real classics, as compiled by the Senate Republicans. My favorites are Senator Durbin, who was born in 1944, claiming to remember the establishment of Social Security in 1935; and Senator Landrieu: "The fact of the matter is, and I know people don't believe this, but I can't be bought."

The Financial Times has a long article on "faith and finance" that buys into the Obama-Paulson line about what I called yesterday the questionable assumption that "the 'financial system' is or was so fragile and in such bad shape that it was vulnerable to 'collapse.'" Here's the FT: "Amid all the doubt, one thing is clear: the fragility of financial capitalism, and the moral bankruptcy of some of it, have been exposed." The FT doesn't define how "financial capitalism" is different from plain old capitalism, and I don't agree that it is as fragile as the FT claims. The FT quotes the British financial regulator Lord Turner as saying that too much business over the past decade has been "socially useless," while at least acknowledging that "bankers, regulators and politicians find it hard to agree about where the borderline between usefulness and uselessness lies."

FutureOfCapitalism.com praises State Department for condemning China's treatment of Liu Xiaobo: December 23, 2009, 5:54 p.m.

Wall Street Journal editorial making the same point: December 24.

The State Department's Colonel P.J. Crowley had some sharp words for China today:

QUESTION: I have a question about Liu Xiaobo, the Chinese dissident (inaudible). I'm just wondering if you have any reaction to the fact that the government hasn't put him on trial despite (inaudible). And does this show in any way the limits on the usefulness of the Secretary's patient pragmatism or pragmatic patience or whatever the phrase is?

MR. CROWLEY: Well, I would say ultimately this is –