Financing more than just homes

Freddie Mac and Fannie Mae

What did the bribes buy?

We’ll probably never find the end to the corruption that was Fannie Mae and Freddie Mac.  I am convinced we have not seen the full extent of it.  I am convinced, though, that Democrats full in control of the government will make it a high priority to rewrite the story in their favor and pin the blame on G.W. Bush and the Republican party.

Ah but you are thinking, “but the cat’s out of the bag, YouTube has video of the Republicans pointing out the problems and Democrats denying there was anything to be concerned about.”  Problem is the Democrats control both the mainstream media and the federal government.  They can repeat a lie so often the majority of the herd is convinced and no amount of alternative media will convince them.  Why?  Because the majority of liberal voters and the uninformed masses do not acknowledge alternative media.  There are 3 possible reasons for this; they are ignorant of it, have a closed mind to it, or have been convinced the Right always lies.

The AP released this Freddie Mac story today.  It seems to be a fair coverage of what went on, however, there is a high emphasis on the bribes lobbyists paid to both Republican and Democrat lawmakers but especially Republicans.  I don’t think this was a concerted build up to a conspiracy, but I do think it’s just a liberal need to say, “they did it more than we did.”  Downplayed are the Senate hearings where indignant Democrats hailed the lenders as saints and accussed Republicans of being on a witch hunt.

Read the AP story and give me your take on it.  I think the focus will quickly shift toward trying to nail Republicans like Newt Gingrich with the full blame for the problems at these lending institutions.  Little if any attention will ever be paid to those Democrats who sheilded Freddie and Fannie or worse profited from the practices there.


So What? Are we really this thin-skinned?

Governor Ed Rendell (D) of Pennsylvania

Governor Ed Rendell (D) of Pennsylvania

So Governor Ed Rendell (D) of PA commented on the suitability of Janet Napolitano as Homeland Security Secretary.  His exact comments were as follows:  “Janet’s perfect for that job. Because for that job, you have to have no life. Janet has no family. Perfect. She can devote, literally, 19-20 hours a day to it.”  I have to ask, what is wrong with these comments?  He is correct and the same would apply even if the selection had been a man.  Had the governor made this comment about a male nominee, no one would have noticed.  If five minutes later, he made the same comments about a female nominee the reaction would have been the same.  No one would have dismissed the second comment based on the first nor would his first comments have even been recorded or noticed.  What am I saying?  I believe some people enjoy being offended and love the attention and publicity they receive in doing so in the press.

(Later, I want to point out how the press neglected to note Rendell’s political affiliation in their reports.  I suspect the stories would have been written very differently had Rendell been a Republican rather than a Democrat.  More on that later.)

Campbell Brown of CNN's No Bias, No Bull

Campbell Brown of CNN's No Bias, No Bull

CNN’s lovely Campbell Brown nearly coughed up a hairball in her reaction.  (Believe me I have 5 cats and I know the reaction to which I am referring.)  Her reaction was echoed around newsrooms across the nation.  The Governor’s comments were accepted as “insulting” without question or any application of common sense.  Ms. Brown brings up 3 points to support her claim of sexism.  I will try to address each of those points.

1-Brown: No one would make this comment regarding a man because for a man there is always a woman to fill in during his absence.

Idiot: False.  I have been told during interviews, “This job requires extensive hours (or extensive travel).  Are you prepared to be separated from your family for extended periods of time?”  This has actually been said to me in at least 2 interviews.  I had a wife at home and three children.  Extended hours and travel stress marriages and often result in divorce.  I think such stress is distracting for anyone but women tend, as a whole to be less compartmentalized than men and more attached to their children.  To illustrate this point, (because I know many people will roll their eyes and claim I am being sexist here), within 3 years of divorce 20% of father cease regular contact with their children, while mother have more frequent contact and are much less likely to discontinue contact, (Robert Hughes, Jr., Ph.D.)

2-Brown: As a woman, Brown wonders if women are not excluded from certain jobs due to family concerns.

Idiot: I don’t think this point really justifies offense but it is a reasonable concern.  However, women are no more excluded than anyone with a family.  In government work, especially at the level of a cabinet position, any family concerns have already been demonstrated.  More simply put, you don’t get to the point of being considered for a cabinet position or running for governor or president without having already made this sacrifice.  It’s not like this is going to be a huge lifestyle change.

3-Brown: The comments make her wonder if single childless women might be more inclined to get the less desirable shift/jobs.

Idiot: Ah single women and single men.  I have witnessed managers weighing who will work on Christmas day.  They rule out family men and women right away.  Then men and women in relationships are accommodated.  If there are any single unattached employees, yes they get, er for lack of a better word, screwed.

Rather than making a sexist demeaning comment, I believe, Rendell was simply making the same off-the-cuff observation I have heard applied to supervisors, GMs, and CEOs.  I’m defending Rendell as a fellow man.  It seems to me, men are under seige by women looking to be offended.  The same is true of whites and Christians, (although the offended are not exclusively women.)  Our nation has developed an annoyingly ultra thin skin.  I, for one, am tired of it and think it’s pure idiocy.  When men, Christians, or caucasians are offended there are no apologies or for that matter there is no news coverage at all.

I want to end with a related aside.  Why is it that when Republican politicians make a faux pas the headline or first sentence, nearly always include the offender’s party information, such as this LA Times article on Ted Stevens.  The very first sentence reads, “Sen. Ted Stevens, Republican of Alaska…”  Or this AP story’s opening sentence, ” ‘Uncle Ted’ Stevens, an old-style Senate giant and the chamber’s longest-serving Republican…”

What happens when it is a Democrat who utters the faux pas.  In the LA Times the story appears for a few hours and quickly cannot be found.  For example, the Gov. Rendell story is nearly impossible to find today.  I searched extensively for the story and while I could pull up the description; the actual story cannot be found.  Instead, all I could find was a link to an blog.  In this blog, the word “Democrat” only appears in the tag, it does not appear in the blog article itself.  Similarly, the Associated Press has no available articles on Rendell’s comments.  CBS news covered the story, only identifying Rendell as a Democrat when his name super appears during his apology/explanation.

I could be wrong, but I never fail to notice that prominate “Republican” label anytime the story is negative for a Republican.  Conversely, I never or rarely, see that “Democrat” label when the story is negative for a Democrat.

I’m offended!

How Much Free Trade is Free?

Getting Fat on Free TradeLet me preface this by explaining, I believe in lowering taxes everywhere we can. It just makes good sense. Without exception when taxes are lowered business increases and government receipts increase. What about import tariffs? Tariffs are taxes and lowering or eliminating them stimulates trade, more economic activity, and thus more taxes through greater income and sales. Prior to the 16th Amendment, legalizing the income tax, the bulk of federal receipts came in the form of tariffs. As the proliferation of free trade agreements has grown revenue from tariffs has been on a decline while income taxes have grown in importance as a source of replacement income for the government.

When we discuss tariffs, it is important to understand who benefits and who does not. Naturally, the federal government benefits as tariffs increase the revenues, domestic producers benefit as they are afforded a degree of protection against cheap foreign competition, and domestic workers benefit by virtue of the protection afforded their companies. The losers in the tariff game are consumers who must pay higher prices for imports and domestic products that are unable to reduce their costs due to the tariffs.

I wish trade policy were only this simple. Unfortunately, as Free Trade proponents will correctly point out, no tariff lives in a vacuum. When the U.S. imposes a tariff on say Japanese automakers to protect U.S. automakers, the Japanese government will in turn impose its own tariff on a U.S. import, like beef. Soon a trade war begins and the world economy is negatively impacted. As this chart from Pitzer College illustrates tariffs artificially increase price and potentially decrease supply (should domestic suppliers not adequately fill the void.)

Earlier I mentioned that domestic businesses were aided by import tariffs but interestingly domestic businesses also benefit by removing import tariffs. When import tariffs are removed, U.S. companies are free to outsource. Businesses can move various parts of their processes to locations abroad that offer the lowest cost. Thus, the overall world economy is made more efficient by the lowering of trade barriers. The economic theory says that each country will produce those products it can produce most efficiently. This is a great benefit for multinational companies that can take advantage of it. In turn, it is a great advantage to consumers, as nearly all studies have concluded import tariffs significantly raise consumer costs through higher prices. A no-brainer, really.

Nevertheless, and yes this is where I get into trouble, is this good for the U.S. consumers in the long-term? I agree that in the shorter term, (meaning 0-15 years), free trade is a “nothing-but-net” slam-dunk win. I have my doubt about its long-term benefits. Liberals argue stockholders and business executives win while workers see their jobs whisked away to far off pockets of impoverished slave labor factories. They will lament the poor living conditions of those workers and point out how Americans are profiting from their misery. They may even complain that U.S. factory workers once making $20 an hour are reduced to working minimum wage jobs or worse standing in unemployment lines. (But you probably won’t find them lining up for a more expensive American made car.)  I decided to research the wage issue and I found that since 1980 there has been very little change in the inflation-adjusted wages of Americans. However, this chart shows an average wage, which includes executives and janitors. So while executives expand their income through higher profit (and I don’t begrudge them earning more), nonfarm, nonsupervisory wages are decreasing. However, we all know we’re in the midst of a global recession.

So far, my argument has been pro-free trade, but I have serious concerns over free trade as a long-term policy. The obvious benefits of adopting a free trade regime is the lower cost of goods and the freeing of resources to produce items in which our country has a comparative advantage. However, my concern is not about the advantage but rather the costs. The one cost nearly everyone recognizes is the loss of American jobs. I would like to add another, the loss of knowledge and innovation.

As we ship technical and manufacturing jobs overseas in search of ever-cheaper labor we are losing the ability not only to manufacture goods efficiently here but we are losing the ability to innovate new product ideas. U.S. companies not only export low-tech factory jobs but also have begun exporting knowledge-based jobs, such as recruiting R&D engineers in Asia. These engineers cost less and have economical access to production plants.

Excessive dependence on too few exports is another risk presented by free trade agreements. If a nation reduces the diversification of its industries to only those in which it has a comparative advantage, there is risk to the economy if global demand should drop for those products. This is closely related to another risk, the risk that an industry might be permitted to die and this could come at a cost to national security; such as losing the ability to produce aircraft, automobiles (thus tanks), or shipbuilding. Yet another risk is losing an historic industry, such as the auto industry. What happens if we find ourselves the victim of an economic embargo? Probably not much today but in 20 years it might be a different story.

Lowering tariffs naturally leads to outsourcing, as we have seen. This results in workforce reductions. Companies are freed to provide lower priced products but the discretionary spending of consumers is lower slightly, (through higher unemployment and lower income), which produces an increased demand for lower prices. This precipitates more outsourcing, automation, and/or other job reductions to facilitate still lower prices. This again lowers aggregate income slightly, thus discretionary spending and so the cycle repeats. Corporations benefit, stockholders benefit, host nations benefit (for a while), but we ultimately pay a long-term economic cost in the form of a reduced standard of living.

It is a very slow turning wheel because people find new sources of employment as technology changes and these new jobs come and go. Simple logic should tell us that you couldn’t put a hole in a bucket and expect the rain to keep it full. Alright, not the best analogy, my point is resources are flowing away from our country faster than they are flowing in. How long can this go on? I would argue until the standard of living is obviously impacted, then the people revolt.

Finally, many trade agreements are lopsided benefiting one partner more than the other. For example, The 2007 KORUS free trade agreement with Korea lowered nearly all restrictions on South Korean imports to the U.S. yet permitted South Korea to maintain nearly all of its barriers against U.S. auto imports. I keep hearing people say, “Let it die” – these people are not strategic thinkers. We need the auto industry, it is the backbone of what makes our nation strong, and it is a historically American product. Granted we need to address problems associated with bad management and poor labor arrangements. Part of the labor problem is the American standard of living. No American factory worker would tolerate living in a small hut and unable to purchase a car him or herself, yet in some countries, this is normal. I say forcing the auto industry to redesign its business model, coupled with a loan, and a modest import tariff on imported automobiles would be a reasonable bailout. Letting it die would be reckless. Do you really want to displace so many additional American workers?  My opinion is that the use of tariffs and subsidies is justified here.  Using tariffs in this sort of bailout makes far more sense than throwing money at the big 3.

We have being giving the house away in free trade agreements that do not benefit the long-term economic or strategic interest of America as a whole. We have getting fat off cheap stuff from China while throwing our own jobs under the container ship without realizing there is a price to pay. What will the American economy look like in 40 years? Can a purely service-oriented economy maintain our current standard of living?

Just because we can does not mean we should. Are protectionist tariffs the answer? Should we use tariffs to protect American industries like the auto industry?  Should we demand workers in other countries make competitive wages? (I made myself chuckle) Do we tax the crap out of business that ship jobs overseas? Do we force American companies to just finish the job and move completely offshore? How far do we go in job creation and what types of jobs do we want?

US flag Made in ChinaI’ll leave you with this interesting thought; I am a history buff and a few years ago, I was reading a book containing a letter from a British soldier stationed in the American colonies just prior to the Revolution. A paraphrase from memory goes something like this, “These colonists would procure their flags from the enemy if they could save a farthing.”* Last year, on the 4th of July, my daughter commented that our Walmart-purchased flags were made in China.  Guess it’s true.

* Farthing: Smallest British Imperial currency measure. 4 farthings made 1 penny.

Thanksgiving in America

When we think of Thanksgiving, we all think of the Mayflower and the Pilgrims.  This might surprise you, but Thanksgiving is not about remembering the Pilgrims.  Thanksgiving is a day to thank God for the good things He has given us over the past year.  Why is Thanksgiving special?  People have been thanking God for things since Adam and Eve. Our yearly tradition is special for several reasons but there is one reason you probably don’t know about.

The holiday we know as Thanksgiving has only been around since 1863.  Abraham Lincoln declared the last Thursday of November as a national day of thanks.  This is amazing and very special.  Why, you may wonder.  In 1863, America was in the middle of one of the worst wars in American history.  The north had lost nearly every battle to that point.  Hundreds of thousands of teenage boys had died in the war.  Just three months earlier, a single battle, Gettysburg, had claimed the lives of 60,000 young men.  If ever there was a time not to be thankful, it was then.  The war was being lost, everyone had lost people they loved in that miserable war, food was in short supply, and homelessness was a serious problem for millions as they were losing their homes to the war.

Yet in the midst of misery and sadness, Abraham Lincoln declared:

The year that is drawing toward its close has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the Source from which they come, others have been added which are of so extraordinary a nature that they can not fail to penetrate and soften even the heart which is habitually insensible to the ever-watchful providence of Almighty God . . . No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, Who, while dealing with us in anger for our sins, hath nevertheless remembered mercy.

1863 was not our first Thanksgiving but it was the beginning of our yearly celebration.  It is interesting to see the circumstances surrounding these earlier Thanksgiving celebrations.  In 1621, the Pilgrims were getting ready to face their second winter, their first winter had brought them starvation, sickness, and death.  Of the 121 original passengers on the Mayflower, only 47 survived to see that first Thanksgiving.  These people could have been sad but they were Thankful for surviving and for the harvest, they had just made.

In 1777, in the midst of the American Revolution and facing what must have appeared to be certain defeat, Samuel Adams and Richard Henry Lee (signers of the Declaration of Independence), called for a day of Thanksgiving.  It is truly amazing and worth noticing that these three celebrations occurred in the face of negative circumstances.

There have been many happy thanksgivings in the history of our country but it is a lesson in strength and faith that in the face of great adversity you can always find something to be thankful for if you look at the positive things in life rather than always focusing on the negatives.

Most folks are about as happy as they make up their minds to be.
-Abraham Lincoln

Too Little, Too Late

It was inevidible

Ok guys, the election is OVER.  Republicans lost and lost for good reason.  The economy tanked, the leadership failed, and the Republican party lost its vision.  Losing sucks.  Being a conservative, but not a blind Republican, I lack the personal pain so many Republicans are now experiencing.  As I mentioned elsewhere I am somewhat relieved McCain lost.  Now we will see exactly where the Democrats will take the country and they can bare the blame.  (I know, we’ll be hearing “it’s George Bush’s fault” for as long as they can milk it.)

However, Republicans, especially rank and file Republicans, are demonstrating just how intellectually bankrupt they have become.  Rather than return to their core values, those that traditionally have defined the party and made it strong, some have turned to hurling poop just like Democrats have been doing for the past 8 years.

To illustrate my point let me digress for a few lines.  Have you ever found yourself debating politics with a liberal friend?  Ever notice that as soon as you begin to win the argument or you present too many facts they cease discussing the issue and begin hurling personal insults.  You know, such as, yeah well “Cheney is pulling the strings,” “he’s just evil,” or, “well Bush is an idiot.”  My personal fav is, “you don’t know what you’re talking about.”  For me the debate is over at that point, they lost and now they want to shift the discussion to a subjective point through an ad hominem attack.  We saw this happen on both sides in this election.  Palin was called stupid and Obama was all but called a terrorist.  But for the most part, Democrats, to their credit, kept their focus on the main issue, the economy.  Republicans knowing they could not win on this topic, very publicly shifted the discussion.

Had the economy not been in such a dire situation, perhaps a discussion of character might have been appropriate.  But as it was, the discussion should have been “oh by the way, he has these friends…” rather than offering nothing on the economy and focusing on the side show.  To McCain’s credit he stayed away from these side shows, I’m really criticizing the rank ‘n file, Palin, and talk radio personalities.

McCain’s single biggest failing was his big gamble.  He suspended his campaign to “help solve the financial crisis,” only to sit silently at the table and defer to ranking Republicans, while Obama showed off, speaking for ranking Democrats who knew more on the topic but who allowed him to represent them for the greater benefit of their party.  McCain should have been the “maverick” he claims to be by speaking for his party and presenting a bold proposal in a commanding way.  But that simply is not Mccain’s personality.  Obama is the bold charismatic leader and McCain is an understated pragmatist.  In a crisis, leaders needed to be charismatic.  The herd will only follow a strong leader.  This is why scary dictators rise so fast and so high – not that Obama is a scary dictator – I’m just pointing out a fact.

Obama birth certificate

Obama birth certificate

Returning to the point… now what was that pesky little point?  Oh yeah, the election over and McCain lost, but some Republicans can’t stop or for that matter take a break in their attacks against Obama.  The day after the election I was scanning talk radio and I swear, for these guys the election was still in the future.  The one issue that astounds me is the birth certificate.  If there is anything to this, why was this issue not raised before October?  I suspect because it’s bogus.  What purpose is there in pursuing this?  The birth certificate to the left appears authentic and matches those of other nature born Hawaiian residents.  But that would never even slow people with a point to prove.  What I see here is a last ditch desperate attempt to overthrow the rightfully elected President.

Ordinary Hawaiian Birth Certificate

Ordinary Hawaiian Birth Certificate

ADDENDUM: A reader challenges my take on this birth certificate by pointing back to the Grandmother’s claim.  I made a good reply so I won’t repeat that here.  Instead I want to post another birth certificate from Hawaii.  This one was found on Facebook so I blacked out the last names and certificate number.  The only thing lacking in Obama’s image is the seal.  I suppose we could blow that up into a big issue (and I saw someone has already done that) but what does it prove?  Could just be a scan done by the government rather than someone who first obtained a copy.  (A birth certificate is sealed when a copy is released.)  I stand by my contention that if there was anything to this we’d have had a Kenyan birth certificate a year ago.  In pursuing this, those involved look like complete idiots – or more accurately – like they are trying to steal an election.  Reminds me of the Democrat calls for impeachment we heard following the ’04 election.  AND NOW BACK TO THE ORIGINAL POST.

Have we learned nothing from the Clinton Presidency?  These kinds of political attacks only foster resentment and cost the taxpayers a whole lot of money.  I believe much of G.W. Bush’s hardships with Congress were the direct result of “payback” for the endless Whitewater investigations of the Clinton years.  It is time to stop fighting and start working on solutions to our very real problems.  Trying to overthrow Obama on a technicality is pointless now.  If there was anything to this don’t you think Hillary Clinton would have been all over this a year ago?  Come on people – STOP BEING IDIOTS!

In the end here is my bottom line point… As the minority party, (and a dwindling minority at that), work to become a real alternative with real workable solutions.  Keep your solutions in the press, on talk radio, on the INTERNET, on TV, heck get them on YouTube.  When the Democrats ram through their programs and those programs fail or are disappointments, the people will know you have solutions that were ignored.  Make your pitch directly to the American people, get your message out, let people know that when one party controls every branch of the government we get “Group Think”.

I know the Republicans will be harshly censored in the years ahead, just as we witnessed when Nancy Pelosi turned off the lights on Republicans and REFUSED to work on the energy crisis last August.  Republicans need to regain the trust of American voters by not wasting our time and money on witch hunts, but rather by working on solid well-founded alternatives.  I would like to see a strong commanding conservative step up, take charge, and reestablish conservatism.  The party has tacked so far to the center they cross the center line more than they maintain the right.  When Democrats were defeated and embattled I expected they would tack right but instead they moved farther to the left.  It helped define them as an alternative to Republicans.  Now Republicans are defeated and embattled.  They should take a page from the Democrat playbook and move to the right and stop whining.

It is time to be patriots with answers not fear.  I swear I’ve never seen a more sorry crew of politicians than have taken Washington this year.  If one wants to highlight the awful condition of our American democracy today, I need only to mention one name — Al Franken.  Why?  If this guy can come close to or even steal an election it shows just how disgusted voters are with Republicans.

A House of Cards

moneymapThe economy isn’t showing signs of recovery yet.  Should we all panic and start buying guns and stocking up food?  I guess you can never be too safe but that seems a bit crazy right now — unless you feel you might be laid off.  Then it might not be such a bad idea, it could be a while before you are working again and it is unlikely you’ll fully recover your salary for years.

Think about this, companies are looking to lower their costs and they are doing so through lay offs and off shoring.  Obviously, this means higher unemployment as we have been observing.  The October numbers are very disturbing as unemployment has climbed to 6.5%.  (The last time unemployment peaked so high was March 1993.) As the supply of labor increases, salaries will float lower.  Its your basic law of S&D, but we have an additional kink in the works that was lacking when unemployment hit 7.8% in 1992 – off shoring.  Sure there were some jobs being shipped to Asia in ’92 but it was a tiny trickle.  Today there is a fire hose shooting jobs away from the U.S., not just low paying jobs but any job a business can move cost-effectively.  That good paying job you just lost could be your last for an extended period of time.  Not only are you now in a long line of applicants, but your job might no longer be required since someone, making 5% of your former salary in Malaysia or China, has replaced you.

But high unemployment alone is not what makes this recession different than 1992-93.  Geniuses in the government and in the financial sector have leveraged debt to a dizzying height.  In 1981 President Reagan pointed out that the U.S. debt, (not the deficit, but debt – the accumulation of all the deficits since the founding of the nation-sorry I had to explain it for the dunderheads who don’t know the difference), had reached one trillion dollars.  An astonishing number, he illustrated by explaining that,  “a trillion dollars would be a stack of $1000 bills 67 miles high.”  That was mind numbing at the time.* (Yes, Reagan left office having nearly tripled that number but that’s another blog.)  When W.J. Clinton took office the U.S. National debt was $4.1 trillion, when G.W. Bush was sworn in it had swollen to $5.7 trillion (notice how the surplus was never applied to paying down the debt.)  Now here is where our economy goes from very deep debt to insanely deep debt, On the day the stock market began its plummet, September 15, 2008 the debt had skyrocketed to $9.63 trillion, a number no one can understand.  Here is where I lose my mind, since September 15 the United States has increased its debt another $1 trillion dollars!  On November 14, 2008 the U.S. Treasury reported the national debt to be $10,617,806,584,635.27.

This number is meaningless to the human mind.  It is simply too big. Then we have derivatives, I have a BS in Business and yet I have to admit I don’t fully understand the concept completely.  Wikipedia notes that, “Derivatives massively leverage the debt in an economy, making it ever more difficult for the underlying real economy to service its debt obligations and curtailing real economic activity, which can cause a recession or even depression.”  The article goes on to point out that high federal debt contributed to the Great Depression.

Debt to GDP
Debt to GDP

You may hear Republican politicians and Talk Radio personalities talk about the debt in terms of GDP and growing our way out of the debt.  The current debt to GDP ratio has not been as high as it is now since Ike was paying down the cost of WWII.  Robert Bixby, director of the centrist Concord Coalition, says, “The [U.S.] economy would have to grow at an implausible rate forever,” in order to grow our way out of this debt.  Bixby goes on to say that in less than 20 years, Social Security, Medicare, Medicaid, and the interest on the national debt “will consume all the tax revenue the nation can expect by then.”  I suspect this has already begun to snowball and the process has accelerated out of control.  Perhaps we’ll fulfill this prophesy within the next four to six years.

Lowest Income Tax Rate 1929-1940

Highest Tax Rates1925-1945

Democrats seem to bury their heads in the sand, trusting they can tax their way out of debt.  They fail to understand that taxes suppress economic growth, they do not encourage economies to grow and never have. The press loves to point to the FDR’s The New Deal and credit it with ending the Great Depression. In fact, it is likely that the The New Deal may have extended the depression rather than ending it. Certainly people benefited individually from jobs they would not have otherwise received but the required tax burdens slowed business and thus GDP growth.   Under The New Deal the top income tax increased from 25% to 79% and the bottom income tax multiplied eleven-times, (Graphs M.J. Perry, 2008.)  Unemployment jumped from 4% in 1929 to 25% in 1933. Had taxes not been so dramatically increased would the recovery have been faster?  I don’t know but I believe the answer is yes.  Was FDR’s New Deal necessary?  I think so but we must understand it is a bitter pill and the stage is set for a repeat performance.

I find it significant that the current debt load dwarfs the debt load in 1929.  I find it incredibly frightening who is holding that debt.  China holds the second highest amount at $541billion.** Oh just a minute, did China just announce an economic bailout plan?  They did, $586 billion. Would anyone like to speculate the best way to finance it?  Well, if this were my personal finance or my company’s, I would cash in some of the T-Bills I was holding.  I expect China has exactly that in mind.  So how will that affect our economy?  I’m not certain but it doesn’t look good to me. reported John Wilson, co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, as saying, “The market doesn’t really have a handle on the depth of the recession’s duration.”  I think that is an understatement.

I began this piece saying it might be premature to stock up on food.  Does that mean I think we should not be prepared for the worst depression this country has ever experienced?  No.  Just not sure the timing is right now.  I have felt for years that the mounting national debt and loss of manufacturing would eventually catch up to us.  We can blame Democrats, Republicans, bankers, stockbrokers, WalMart, or nearly anyone else.  We all contributed by electing politicians hell-bent on building power.  Some achieved this by helping to craft the laws and regulations to benefit business while others did the same to benefit special interest groups, and yet others did so to benefit themselves and their friends.  This should not surprise anyone.  The heart of democracy is the ability to vote for the guy who will give you the most stuff.  Unfortunately, that isn’t the recipe for a quick economic recovery.

The majority always votes for the candidate promising the most benefits from the public treasury with the result that the Democracy collapses [due to] loose fiscal policy.
--Earliest print appearance May 3, 1959, The New York Times Book Review
* If a thousand dollar bill is one tenth of a mm thick an actual stack equaling one trillion dollars should tower 100,000 km or 62,137.1 miles. (I don’t mean to quibble with the President but it looks like he may have lowered the number to make it more palatable.)  If my math is correct the current debt in one thousand dollar bills is 659,759.7 miles high.  That’s roughly twice the distance to the moon.  (Feel free to check my math, I’m no mathematician.)
** Look who holds the number 4 spot on this list.

Thanks George!

Presdient-elect Obama

President-elect Obama

It’s nearly cliché to note that the 2008 U.S. Presidential election made history.  While technically every election makes history, this one will always be specially noted in the history books.  On November 4th the country proved, to me if not everyone, that this country is able to look beyond race.  While I am convinced racism is not dead, I feel vindicated in my belief that racism among whites runs less than 20% in the U.S.

Does our partisan press corp believe that?  I doubt it.  Had McCain somehow been able to win this election, (something I thought impossible since the Bear Stearns collapse), we would have awaken Wednesday morning to endless analysis of “What went wrong?” and “Racism in America.”  Yet comparatively little has been written or reported about the vindication an Obama victory provides.  In fact, many pundits continue to insist America is a mean racist nation.  They focus on states where Obama suffered losses, such as Tennessee.  What did these people want, they wanted Obama to sweep all 50 states.  Anything short of this seems to support the mean racist America theory.  This is idiocy.

These people never pause to consider people, even African-Americans, may have voted for McCain because they thought he was a better choice, [gasp!].  Or God forbid, they voted against Obama because they feared his connections to anti-Semitic groups, shady political figures, or domestic terrorists.  These fears are labeled “code words for racism.” I’ve even heard blacks call other blacks bigots and racists for voting their conscience.  Apparently honest opposition is not allowed when race is a factor and this is idiocy.

A little personal introspection here, my vote was against higher taxes, for supporting Israel, and for domestic energy.  I wanted to vote for Barack Obama but he talked me out of it.  Some may wonder how a conservative would “want” to vote for a Democrat.  The answer is simple, George W. Bush.  Democrats spoke ad nauseum about Bush’s failed policies and frankly it was a good line because in many instances they were correct.  Bush failed us by not keeping spending under control. His presidency saw the greatest expansion of government since the New Deal.  He turned a surplus into a deficit.  He betrayed capitalism by starting a major slide toward socialism.  He side-tracked his own agenda when he invaded Iraq.  (Side rant: Iraq was a third rate third-world nation that for 12 years had been continually pounded by G.H. Bush and W.J. Clinton.  The sources claiming Saddam had WMDs were highly motivated politic opponents of Hussein.  Finally, there was no credible connection between Saddam and the Al Qaeda attacks.  But I digress.)  I yearned for a choice I could vote for.  I really did not want a Republican because I didn’t want the Democratically controlled Congress to have a scapegoat for their failures or a President they felt obligated to undermine.

In the end, Obama talked me out of giving him the nod.  His insistence on negotiating with Iran (the most extremely evil regime on the planet-yeah people who advocate for genocide are evil), his passionate insistence on raising taxes on the people who provide jobs, his determination to grow the government, and his energy policy refused to include increasing domestic sources, new refineries or nuclear power.  I could have accepted any one of these failings but in the aggregate it was simply too much.  Then to add gravy to the reason NOT to vote for him was the issue of Israel.  Obama’s former Pastor of 20 years is an anti-Semite, Obama is closely associated with George Soros, who is anti-Israel, Hamas endorsed Obama, and to a much lesser degree, European enthusiasm, (when the Europeans are excited about a U.S. Presidential candidate it is not because they have U.S. interests in mind and their track record of support for Israel is quite poor. -Oh, and yes the last link was a joke.)  Ahmadinejad’s congratulations message was frightening confirmation of my fears on this issue.

Ironically, I feel like Ahmadinejad, Obama, and all the newly elected Democrats should be issuing flowery thank-you messages to outgoing President G.W. Bush.  After all, this is the man who made their success possible.  Oh sure we could blame ACORN and efforts to steal the election, we could blame the voters who voted in stampede-fashion for change without knowing what that meant, but at the end of the analysis things got screwed up and the man at the top was George W. Bush.  As the sign on President Truman’s desk said, “the buckstops here.” So all you loyal Democrats need to flood the White House with letters of appreciation.  A little part of me thinks John McCain will be sending his “thank-you” in four years.

All now is said and done and I can comfortably say, I wish Obama the best of luck.  Talk radio gurus such as Rush, Hannity, Bortz, et al. need to take a break from Obama bashing and wait to see what’s next.  I listened to Hannity in the days following the election as he continued to harp on about Tony Rezko and William Ayers as though the election had never occurred.  The time to rant and rave about Rezko, Wright, Ayers, Khalidi, and Lord knows what else has passed.  You cannot change the election results.  There are serious issues to turn our attention to.  The economy is destroyed, the U.S. debt is incomprehensible to most Americans, (that is why people don’t seem concerned about it), and the world is a dangerous place.  I hope President Obama surrounds himself with sound patriotic advisors rather than partisans.  So far he has not given me much to believe in but the journey has yet to begin.

Surely the incoming President understands his campaign rhetoric of “building the economy from the bottom up” is just that, rhetoric.  As Sean Hannity is so fond of pointing out, no one has ever applied to a homeless person for a job.  I suspect President-elect Obama knows raising taxes on businesses will further decimate the economy since these are where the jobs come from.  I hope he is a student of economic history and understands past failures.  Such as these:  by 1980 the Democrats had raised the top income tax to 70% and unemployment rates soared to 10.8%.  In 1994, India’s mixed economy, with its protectionist trade policies and 50% income tax, unemployment skyrockets 22.5%, and the government was bankrupt.  In each of these examples the economies were saved through massive tax cuts.  Reducing taxes encourages productivity, which means job creation.

I for one am giving President Obama the benefit of the doubt.  For now, I am trusting he is not an idiot, because only an idiot would raise taxes and damn the consequences.

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