Friday, October 31, 2008
Warning: I use a bad word in this post.
Apparently I am selfish because I do not want to pay more taxes. Accordingly to Barack Obama, I should want to pay more than the large proportion of my income that already goes to the government.
To recap prior posts, the United States has a more progressive system of income taxation than most other OECD countries. Affluent Americans who live in states run by Democrats, especially those who work for a living, pay more than 40% of their income in direct taxes now, and close to 50% when you throw on other typical taxes. As previously reported, our income taxes, payroll taxes, and residential property taxes amounted to 41% of our income in 2007. Add to that consumption taxes, payroll taxes paid on our behalf by our employers, and our share of corporate taxes, and we paid about half of our income to the government. If you add in our charitable contributions -- Obama seems to believe that gifts are just another form of tax -- then we were definitely over 50%. We further note -- for the record -- that we pay a substantially larger percentage of our income in taxes than Barack Obama has done, and have given more to charity even in years when our income was comparable. Yet we are supposed to want to pay still more, and if we do not we are "selfish."
MORE: A classier and more analytical version of essentially the same sentiment.
Yep ... fuck Obama, and that fucking fuck with the hair plugs, aka Trig Biden, who disses people and hasn't given jack shit to charity, in basically, his life.
Boost the rates, increase the grey economy, decrease tax revenue. Pretty straight formula, unless you have no experience in the Senate. And this clown is on the verge of sitting at the Resolute Desk.
Let's not go all Kos-like here, big guy.
Sure, the self-righteous pronouncements of a guy with limited experience, a thin resume, a history of questionable aquaintences, and using his family as stage props, about to be elected President of These United States is something a little hard to swallow these days, but it wasn't that long ago that you defended Christopher Chambers on this very blogsite for praising Obama.
Was this not the Obama that we knew in those more golden days? :)
Sure, this election has been one long interview process, with an applicant who is unusually clever and evasive, but of course, we are all looking for change, aren't we?
It just appears this is not the change that we (and you) were look for. BOHICA. We are all about to get pretty badly hosed.
I am a retired 65 yr old who has worked hard all my life, starting at the age of about 10yr. (Shined shoes) due to a broken home. Served my country in the U.S.N. Always paid my taxes, never asked for or expected the goverment or any one else to give me handouts.I'm not rich but we're doing okay at least untill wall street took a dump. I'm also pretty hard headed and have been considering not paying any more Federal tax... if they want to come get me so be it. I enjoy reading and watching T.V.Would be content doing that for the rest of my life if necessary.
I'm one of those business owners Obama is especially targeting. As I've said before, every dollar the government takes is a dollar not invested in my company. But obviously Obama doesn't really give a shit- he's all about expanding the role of mother government, and jobs are a necessary sacrifice. The majority of the electorate don't seem to get it- this campaign is all about building bigger government, fewer jobs and reduced prosperity, more talk about rights and less actual liberty. This is the price we will be expected to pay for the privilege of an Obama victory. Sure, the poor will suffer most but we all will deeply regret this election.
I commend Senator Obama for his honesty.
But I don't see how anyone could possibly be surprised that he said this, except that it's politically unwise to do so 5 days before the vote. The nature of the beast has been clear for months.
Americans who have earned more money because they have directly benefitted from living in this country. Without this country, they would either 1) not have made the money or 2) would have a very difficult time keeping the money they have earned.
The United States provides us regulated markets, that attempt to keep things fair. The government provides a legal system to provide a forum for your grievances. They provide protection to keep you safe, along with an infrastructure that helps the flow of goods and services.
How do you suggest all of these things are paid for?
And for the man who is considering not paying his taxes. If you want to end with cellmates with Wesley Snipes, then I would suggest paying the IRS.
Everyone loves the United States of America right? Then pony up the cash to keep this thing going.
mj, I have no problem with paying taxes. I might even be willing to pay more taxes, at least if I had some comfort that they would go to some useful purpose instead of lining the pocket of some connected construction company or union boss, which seems to be a main use of tax dollars either raised or sent to New Jersey and other Northeastern states controlled by the Democrats. My objection is the attitude of entitlement, and the idea that the productive people are the selfish ones. I understand that there are legitimately helpless people. But what about all the people who have chosen through many choices they have made over the years to consume more than they produce? Should they not be grateful to me for producing more than I consume, and should we not regard them as the "selfish" ones?
I don't think you get it. We don't have a problem paying the tab required to keep the looters and capital one barbarians at bay. We just don't want to be on hook for a vast array of ever expanding Fed entitlement programs and redistribution schemes that are going to go bust sometime after the baby boomers exit stage left. As tax payers we have every right to get angry and if you read the Declaration of Independence again, we have every right to go beyond words if required.
My dad died when I was 12 and left us with very little. I've been a library page, factory worker, gravedigger, truck driver and a musician while working thru college and medical school. Then on to a total of six years of internship, residency and fellowship. I emerged at age 32 as a general and vascular surgeon.
I'm one of those people who are in the 1% that pays 40% of the tax burden.
Although there are times when it REALLY pisses me off that we cant all come to an equitable way for EVERYBODY to support his government, I understand why I am called upon to do it.
A simple "Thank You" from the people who benefit from the largesse would be nice.
Instead, we get told we are "lucky in life's lottery" or we "don't pay our fair share" or we are "greedy" and "unpatriotic".
I agree with TH...fuck them all AND the horse they rode in on!!!
No revolutionary plotting,and I hate sounding off like Ron Paulian as much as I hate listening to people like Obama and Barney Frank lecture me about selfishness and greed. These are people who spend their whole lives joking for political power, but lack the competence to govern or manage anything other than their own election campaigns.
I second that emotion, JPMcT.
My dad died when I was 19. My mother worked hard to help the 3 of us kids to get our basic undergrad and then I put myself into debt for law school. I am now a member of the "selfish" group that Obama and Biden are targeting, as did Al Gore before them. I am tired of being castigated for being successful -- of being told that I don't "deserve" what I've worked for.
This country offers everyone opportunity. Indeed, some are offered all sorts of additional help (does anyone doubt that Barack managed to transfer into Columbia and then attend Harvard in no small part due to affirmative action policies?). If people are too darn lazy to get off their butt and work to better themselves, then Eff-em.
Every branch of my ancestry was here before 1650. My ancestors fought in the Revolution and all the wars from then to Vietnam. As a 70 year old retiree who worked hard for every penny needed to sustain life after age 16, worked through college, Army during Vietnam, built a home, raised a family, put 3 kids through private college and saved hundreds of clients hundreds of millions doing it I am about as angry as a person can be without going postal. If the Marxist wins this election I will sell every investment I own and put it in tax exempts. That bastard can send me my SS check and I will draw down on the tax exempts. I will Alinsky him. I will not contribute to his Marxist program. I will not invest while he is in office. I have paid taxes for over 50 years without complaint but I am clamming up. Sorry about that guys and gals but it my only defense, all I can do. Let's just vote and and pray that Sarah wins.
Selfish, yeah, "selfish".
Sen. Obama is not a smart as the Democrats say he is.
And we are not as stupid as he thinks we are.
My father used to get a lot of grief from the leftists because of the size of our family. They would make snide comments and remarks when they saw us walking into a restaurant for dinner. One time some jerk asked him why he impoverishing himself by having so many children. He said, if I remember correctly, "Young man, I am a Doctor, and can easily afford to take my family out to dinner whenever I wish. What I can't afford, is a government that takes from my children so they can give the money to rude people like yourself."
Mandatory wealth redistribution is just about the same thing as robbery, which is probably why Obama likes the idea so much.
mj said: "Without this country, they would either 1) not have made the money or 2) would have a very difficult time keeping the money they have earned."
This is the essential liberal fallacy, the through-the-looking-glass view. I made my money opposed at every step by the market and the government. You have no idea how incredibly intrusive the various states are, forgetting for a moment about the feds. You can't imagine how stupid the existing tax policy is, from the perspective of someone trying to grow a great business.
This country is prosperous precisely because of small business owners like me and the millions like me. I owe America my patriotism, but when the government departs from the Constitution, as it does so often, I am free to sell out, watch my business disappear into the maw of a bigger company, the jobs cut, and I can invest my money in ways that reduce my taxes. That is what I am doing. My employees will need to find other jobs, and most probably will. The least able, the ones I've kept employed because they add something special to my company that other business owners might not see all too readily, well, they'll have trouble. Screw the government: Obama will raise the rates, but I'll pay lower taxes. When the rainstorm passes, I'll be ready to reinvest in America. If it doesn't I'll invest elsewhere.
Either way, mj, I'd suggest that you lose the naivete. The government and the country don't create jobs, and don't make money, people do. Hard-working people.
Of course, mj's point of view is correct in a sort of over-inclusive sense: Yes, it is the American system, including its system of government, that makes our wealth possible. The wealth-generating aspects of the system, however, are far cheaper to sustain than either the federal government or the government of New Jersey believes. A huge proportion of our tax and regulatory burden does not help us even in a direct sense, but rather subsidizes people who consume more than they produce.
Of course, a lot of this depends on whether you believe that people who consume more than they produce, over the course of their lives, are failures or not. My own view is that they are failures. In some cases it may not be their fault, but that does not make it any less so. If, however, you believe that one can consume more than one produces and still be successful according to some less rigorous yardstick, then you are almost certainly going to vote for Barack Obama.
Well, perhaps if the Party you keep had cared just a little more about the middle and lower class you wouldn't find yourself in this position. It is an American's patriotic duty, in part, to vote for the person that best represents their interests. In TH's case, that would probably be McCain, and I don't begrudge him for that. However, there are quite a few people out there who believe Obama and his tax plan better represent their interests, and they are probably right.
Whatever the case, everyone on this board knows the tax plan that will actually emerge from Congress in the new term will have little relationship to the campaign rhetoric of today. In fact, I have utter contempt for the current system of taxation, but neither Obama or McCain seem willing to attack its fundamental problems. Whether my taxes rise or fall a few percent either way really doesn't matter in my opinion.
Just for the record, the actual quote was "You know I don't know when, when they decided they wanted to make a virtue out of selfishness."
Well, Squealer, more Americans pay no income tax today than at the start of the Bush administration, and they are all well down the income curve from me. Perhaps the problem is that so many people (around 45% of the population) now pay no federal income tax. The result is that there is a huge built-in vote for tax increases on those who do. That system will not work well for long.
I couldn't disagree more: American prosperity exists because of it's people, and their willingness to fight for their own rights and property. No amount of "inclusiveness", whatever that shlock is intended to mean, will make a person depending upon America to make them materially successful find their dream fulfilled.
Hey Obama want it ALL he doesn't care if you are rich or poor
I Don't Care How Poor You Are, You've Got 5 Dollars
The essay below, which I finished writing a couple of days ago, pretty much sums up what I have to say on the subject. God bless you all.
“Facts are stubborn things…”
That I am starting with the Economy needs no further explanation. Not only has it become the permanent subject in the news; but also the source of deep worries to most American families. Feelings of insecurity and outright fear are gripping us, and with good reason.
The last five to six weeks have seen an unprecedented meltdown of the financial sector, and an equally unprecedented government rescue plan, put together in record time _at least, legislatively speaking_. Close to double the current worth of the war effort in Iraq vanished in the turmoil of the last three weeks alone. The loud bang of the subprime mortgage bubble, the credit dry up, and the prospect of a repeat of some of the vicissitudes of the Great Depression sent shockwaves in every direction, and posed new urging questions to the two presidential candidates; whose understanding and involvement in the crisis origins, and proposed fixes, couldn’t be more different.
A lot of finger pointing has taken place as of lately. In the end, Senator Barack Obama, his campaign and sympathizers have synchronized their voices to find a new bogey man: deregulation. They sell an explanation in which fat cats in Wall Street, moved by shameless greed, were able to reap their obscene profits, tap into banks’ irresponsible lending practices _banks would issue their loans because they could sell them to hungry investors_, so they could get high yields through securities that packed those subprime mortgages, and ultimately bring about the present day disaster, as too many borrowers found themselves with negative equity once the real estate bubble burst; everything due to the little and poor regulation and oversight exerted by Washington. Once more, they say, the blind forces of the free market fail to live up to the expectations… Those are only half truths… at best.
The main problem with having the free market regulate and balance itself _in such a way that increasing prosperity is assured_, is that the market is rarely free. A minimum of government intervention is always unavoidable _and desirable_ to create the legal conditions for markets to thrive, in an atmosphere of law, order, freedom and peace. The amount of public officeholders employed towards that end should equal those strictly necessary firemen, policemen, street cleaners, health officers, judges, legislators and executives, whose services are _or should be_ as productive and important as those of anyone in private industries. However, any government intervention beyond that is almost sure to stir trouble, sooner or later, and no matter how noble the intentions. The current crisis is no exception.
Let’s make a little bit of history to see why.
Back in 1977, President Carter signed the Community Reinvestment Act (CRA), which had been drafted by the overwhelmingly Democratic 95th Congress. Carter _being the very decent man he is_ and the legislators were moved by the best and purest reasons: to eliminate the practice of “red lining” by lending institutions, and address the deteriorating conditions of American cities, especially lower-income and minority neighborhoods, as well as many decaying downtowns. Red lining consisted in the practice by many commercial banks to avoid lending, blanket refusals it was called, in particular areas. These institutions would set shop in those low income, mostly black neighborhoods, and carry out most normal banking activities, including taking deposits; but would refrain themselves from extending loans there. When granted, those mortgages or other loans to African-American borrowers would require higher down payments, and faster repayment schedules. All of this had been documented since a 1961 report by the U.S. Commission on Civil Rights. Besides sheer discrimination, the existence of only a limited secondary market for mortgages, the lack of coordination among credit agencies, and the lack of credit evaluation for poor income borrowers at the time, made the latter credible suspects of easily defaulting on loans; further discouraging banks to take the risk of extending them mortgages.
The CRA demanded all banking institutions that receive FDIC insurance to be evaluated by the relevant federal regulatory agencies, to determine if the institutions met the credit needs of the entire community. When first passed, the CRA contained language intended to ensure that banks and savings associations served the credit needs of their local communities in a “safe and sound manner”, though it offered little prescriptive detail on how those potentially conflicting goals could be achieved.
During the 1980s, the CRA was slowly implemented, and it proved useful to lure banks into the underserved secondary mortgage market (where mortgage loans and servicing rights would be sold by their originators, bought by securitizers and ultimately by investors), thus making credit available to all borrowers across geographical locations, and putting homeownership within closer reach for minorities.
During the 1990s, the urge to extend access to homeownership to increasing numbers of low income families caused the arm-twisting of banks to reach new heights: lending institutions were required to keep extensive records of their minority lending practices; those that didn’t pass muster would face many obstacles _and sometimes outright denial_ to expand their branches, merge with other banks, or access new lending markets. By that time, not only the government had tightened their operation requirements (including those for record keeping and CRA ratings of compliance), but also many community groups, like ACORN, were policing financial institutions, to make sure they extended mortgages to minorities in the towns and neighborhoods were they operated. Failure to comply would prompt these groups to advocate against the specific financial institution before the government; affecting their CRA rating. In many cases, these community groups provided financial counseling, booking fees when connecting the interested individual with the desired mortgage, tailored to their needs. Intimidation, political favoritism, and micromanagement by regulators mushroomed.
As a result, commercial banks became pliable, easy targets to pressures to extend those loans. No bank CEO wanted to be labeled an “enemy of the poor”. Most financial institutions developed community affairs or relations departments, with the main purpose of dealing with such groups. Chase Manhattan and J.P. Morgan paid hundreds of thousands of dollars to ACORN around the time they applied for permission to merge, to avoid poor reviews and delays in approval of merge talks, which could result from bad input from this and other community groups in the yearly bank reviews, capable of frustrating those merger plans, or even bringing about legal challenges by the Justice Department, on the ground of alleged discrimination practices through lending. In due fairness, it must be said that some of these community groups played a very positive role, even raising early concerns about the potential effect of lower credit standards and the resulting untenable increase in real estate values, which were gentrifying some low to moderate income communities.
In 1993, the new Clinton administration implemented the Federal Housing Enterprises Financial Safety and Soundness Act, which was intended to achieve similar aims as those of the CRA. This time, the two privately owned, publicly run companies _or Government Sponsored Enterprises (GSEs), as they are also called _, Fannie Mae and Freddie Mac, were pushed to increase their purchases of mortgages going to low and moderate income borrowers. For 1996, for example, the Department of Housing and Urban Development (HUD) gave both companies a specific target: 42% of their mortgage financing had to go to borrowers with income below the median in their area. The target later increased to 50% in 2000, and 52% in 2005, as the boom was riding the crest of the wave.
This had a tremendous impact, by providing investors or purchasers of mortgage-backed security bonds (derivatives) with a tacit guarantee, as the mortgages, provided by commercial banks to those low income borrowers, would now be packaged into those derivatives by precisely the two companies that were understood to be backed up by the federal government (an assumption that had never been explicit, but which was proved completely right, as the Federal Reserve and the Department of the Treasury rushed themselves to put both companies into conservatorship, a few months ago). Those companies would then assume the credit risk, that is, the guarantee that the principal and interest on the underlying loan would be paid back, regardless of whether the borrower actually repays. If things got tough, the feds would fly to the rescue…
By doing so, some pressure was taken off the banks, as the potential risk of having borrowers default would no longer affect them, as long as the mortgages were packed into securities that could be sold in the secondary mortgage market. The risk was managed by Fannie Mae and Freddie Mac by only buying and securitizing loans that would conform to their own guidelines. Initial resistance by some of the private stockholders of both companies was quickly overrun when the secondary market grew up exponentially as a consequence; as did profits with every single derivative sold in it. More and more investment banks threw themselves to buy these, as they could be resold to second and third buyers in high risk-high yield operations, which would make sense as long as the value of the underlying assets securitized _a.k.a. houses_ kept on rising, (and therefore, mortgage default rates kept low). Bear Sterns did the first major securitization of CRA loans in 1997, a $384 million offering guaranteed by Freddie Mac. Within the next 10 months after that, Bear Stern issued $1.9 billion of CRA mortgages backed by either Freddie Mac or Fannie Mae.
With an expanding market, both Congress and the White House kept on pushing. Demanding that Fannie Mae and Freddie Mac did more to increase homeownership among poor people, looked like a sure way to subsidize low-income housing outside of the budget, at least for the time being. The positive impact those measurements would have among blacks and Hispanics was not an indifferent matter to the Democratic Party either; as it was trying to lock a bigger hold of both demographics.
In 1999, pressures from the government _exerted by Robert Rubin’s (a current Obama campaign economic advisor) Treasury Department_, as well as from stockholders used to the vertiginous growth of the company, prompted Fannie Mae to ease their guidelines to aid mortgage lending. The action, as correctly described by a New York Times article by Steven Holmes, published on September 30 of that year, lowered the standards for the kind of loans the company was willing to buy and pack into derivates, reducing _among other things_ down payment requirements. By expanding the types of loans it bought, Fannie Mae encouraged commercial banks to extend home mortgages to individuals whose credit wasn’t good enough to qualify for “conventional” loans. Avid investors (thrifts, hedge funds and accredited investors) were also ready to jump on those high yield derivatives backed by subprime mortgages; Freddie Mac and Fannie Mae among them, as they would also buy those very same securities, for their own portfolios.
This was all that was needed. By that time any remnant of conventional wisdom had been thrown out the window: Investors used billions and billions to buy and sell derivatives that went up in price every time they were re-packaged and changed hands, to the point that some of these reached up to 400% of the original value (buyers knew this, but still bought them with hopes to sell them out soon, and get some money for it. New buyers looking for the same opportunity would always show up, as long as the value of the underlying asset kept rising). Commercial banks like Washington Mutual, which had been allowed by the Gramm-Leach-Bliley Act signed by Pres. Clinton in 1999 to enter investment bank operations as well, got in the game too. Freddie Mac and Fannie Mae, as well as other private securitizers, kept on buying more subprime mortgages and packaging them into those derivatives, which would be sold to eager buyers instantly. Commercial banks would extend a home mortgage to almost anyone asking for it. To offset risks and allow the extension of 0 down payment (or low ones) to poor credit, low income borrowers, subprime loans were put together as balloon or adjustable rate mortgages (ARM) _loaded with fees and surcharges_, which would allow borrowers to get the loans at convenient terms they could (barely) afford _something that was greatly incentivized by low interest rates_ for an introductory period, normally 5 years. Afterwards, their monthly payments would simply adjust to the market interest rates at the time. Commission seeking brokers made sure mortgages like these were extended to as many people as they would come across with. Income statement forgeries and all kinds of predatory lending practices became commonplace. Consumers at large thought it was OK to buy real estate beyond their means, hoping to flip properties over before the end of the introductory period, and pocket the equity as they rose in value; or get second mortgages for frivolous spending. The time bomb was ticking…
To be entirely honest, the Bush administration did not tackle the problem as it was passed down. There were more urgent priorities after 9/11. The recession that had been brewing since the last years of the Clinton administration, and the economic havoc brought about in the aftermath of the terrorists attacks, were barely stopped by the aggressive tax cuts introduced by George Bush and the Republican Congress. At the same time, the continued growth of the construction industry kept on pushing the economy forward, and provided States with increasing revenues _particularly those in the Sunbelt and elsewhere, wherever growth was taking place_, thus relieving the federal government from supporting States with additional federal dollars, to offset potential budget deficits. The Federal reserve unwittingly made things worse, as well, by a continuous reduction of interest rates, which reached an all time low of 1.25% in 2003; thus postponing a necessary correction of the market, pushing the rates on adjustable mortgages to historic lows, and ultimately helping to fuel the housing boom.
On top of that, Franklin Raines and Jim Johnson, former Clinton White House staffers who in the late 1990s became CEOs of Fannie Mae and Freddie Mac, respectively, found themselves in a very privileged position, at the helm of two companies generating exponentially increasing profits with the rising bubble. They and their successors made sure all attempts to rein them in would be dealt with effectively. The fact the Office of Federal Housing Enterprise Oversight, which was supposed to be the regulator of both, depended on Congress for the approval of its yearly budget _and therefore, its very survival_, didn’t help much. Being highly politicized, both enterprises employed a wide arrange of well connected, former political insiders _from both major parties_ as executives. Many lobbying firms were hired at one time or another. The support of legislators in Congress was secured through major campaign donations to about 350 House Representatives and Senators from either the GOP or the Democratic Party. The top receivers were Sen. Christopher Dodd (D), Chairman of the Banking, Housing and Urban Affairs Committee, Sen. Barack Obama (D), junior member of the Federal Financial Management Subcommittee, Sen. Chuck Schumer (D), member of the Finance Committee, and Rep. Barney Frank (D), current Chairman of the House Financial Services Committee.
After Clinton’s second Secretary of the Treasury, Lawrence Summers, voiced his alarm at the oncoming crisis, he sent Undersecretary Gary Gensler to Congress in 2000, looking for an end to the companies’ special status, including the assumed guarantee of federal backing of their obligations, as a means to bring them to their senses, and more power allowing regulators to boost both companies’ minimum capital requirements. Gensler was received with a Democratic led riot, and the proposals went nowhere. A few years later, Rep. Paul Ryan (R), from Wisconsin, also voiced his concerns with Freddie Mac and Fannie Mae lending practices, only to find them actively lobbying against his reelection in his own congressional district. Florida Rep. Cliff Stearns (R), tried to hold hearings on both companies accounting practices in 2004, as Fannie Mae’s accounting scandal was starting to gain visibility, but was stripped of responsibility for their oversight by another Freddie Mac and Fannie Mae friend: House Speaker Dennis Hastert (R)…
In 2005, Sen. John McCain (R) and two other senators co-sponsored the Federal Housing Enterprise Regulatory Reform Act, pushed by Sen. Charles Hagel (R), which aimed to provide a stronger regulatory agency for both companies, as well as other sounder operation requirements. The attempt was denounced by Sen. Harry Reid (D) as one intending to “cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership”. The bill went nowhere either… John McCain warned at the time that “…if Congress does not act, Americans taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy, as a whole.” His was a voice claiming in the desert.
Finally, a 2006 letter written by twenty senators, John McCain among them, to Senate Majority Leader Bill Frist (R) equally prompted to action, but got no response that I know of. Any similar attempts from President Bush himself went nowhere as well, due to Congress resistance.
And that’s how we got to where we are…
In the end, the bubble burst when the real estate market became saturated with oversupply. Prices stalled, and then quickly started declining. Expired ARMs introductory periods and higher interest rates pushed many loans into default; thus driving thousands of homeowners _who were trapped into mortgages they could no longer afford_ into foreclosure. That pressed real estate prices further down in a self feeding cycle, and soon the value of all those mortgage-backed derivatives nose-dived as well; triggering the enormous deleverage and liquidity (cash) losses that brought down the big investment banks, and ultimately unleashing the whole financial meltdown.
Right now, the Bush administration and the Federal Reserve are fine tuning the massive government rescue plan, a revised version of which passed through Congress on Oct. 3, after a prior attempt failed a few days before _not many Representatives or Senators wanted to risk being labeled as “rescuers of greedy bankers” prior to re-election, and quite a few, mostly Republicans, were duly aware of the risks of passing such a $700 billion blank check to Government. Others felt little help was being set aside for direct aid to struggling homeowners_. So far, this rescue plan seems to have a good chance to stave off a second enactment of the Great Depression. After all, it was precisely the Federal reserve inaction then, together with the lack of liquidity and consumer confidence _which prompted a domino effect of bank collapses_, as well as the negative effects of the protectionist Smoot-Hawley Tariff Act _which strongly damaged our exports, produced an overstock of commodity supplies, and depressed real wages, all at once_, that played the largest role in the onset and aggravation of the Great Depression.
Today’s conditions are not the same as those of 1929-1939, either. The prompt government intervention has calmed fears down _to some extent_, lower oil prices have provided a relief and small boost to consumption, there is no excessive oversupply in store inventories, and exports are still holding strong _after being favored for a long while by a weaker dollar, as well as the existing free trade agreements_, especially to growing markets in China, India, Latin America and elsewhere.
Prior to the present day rescue plan, the federal government had been working to somewhat cushion the crisis. Placing Freddie Mac and Fannie Mae under conservatorship, rescuing AIG International, and helping the big bank mergers we have seen throughout the year were all part of the effort; and are linked in intricate ways that are beyond the scope of this writing.
In any case, the rescue plan is intended to achieve very specific goals. Namely: to provide investors in the markets with some predictability and a sense of relative security. A clear set of rules, for dealing with those banks that need to unload their “toxic portfolios” of devaluated derivatives, will calm the financial markets. In a situation where most banks are contaminated with them, the selective, case-by-case approach taken by the Federal Reserve to deal with troubled banks in normal times, produces insecurity (remember the frantic questioning of whether Lehman Brothers would be rescued or not), and with it, market volatility. The injection of liquidity and the increased backing of any bank account funds from $100 K to $250 K by the FDIC contribute to boost confidence and avoid walks on banks. Both measurements should favor a thaw of the credit dry-up, so that loans start flowing back to businesses and individuals. Finally, if we are to undertake the renegotiation of troubled homeowners’ mortgages that are about to face foreclosure, it should help _and not hamper_ the stabilization of the real estate market; something essential to keep the current recession from worsening.
The next administration shall be tasked with implementing the rescue plan. It shall also come up with a new financial architecture in which, besides making sure that undue government intervention does not distort markets anymore, new sets of rules are put together for the operations of the financial industry, bringing more transparency and simpler rules to inter-bank transactions, and sounder practices when it comes to extending loans. The meetings of heads of state of countries belonging to the G-8, scheduled for early next year, is already being framed as a Breton Woods II kind of conference. Another essential task for the new administration must be to aggressively push a pro-growth agenda that will keep the real economy (that in which tangible articles and services are produced and offered, versus the “surreal” one, where paper assets are traded based on subjective appreciations of value) from further contraction. That will be essential in the future climate of credit scarcity.
Make no mistake: besides finding ourselves in probably the most acute economic crisis since at least the 1970s, we are at a very vulnerable point of our history. How we get out of our present day predicament (and how fast) will shape our future, and either confirm our enemies’ hopes of American decline, or reassert our position as the beacon of freedom and most important economic, technological and political powerhouse of the world. The passed version of the economic rescue plan not only places an increased burden on American taxpayers, but also yields an enormous amount of power to the Executive; which can be used for the necessary corrective, regulatory intervention I have described, or otherwise abused to control and intervene the financial industry with political purposes. Ultimately, the questions to be asked are: what are the two presidential candidates concrete economic _and overall_ proposals? Whom do we trust at the helm in this time of crisis?
Sen. Obama is promising to enact a Windfall profits Tax to “provide a $1,000 Emergency Energy Rebate to American families”; to provide $50 billion to “jumpstart the economy and prevent 1 million Americans from losing their jobs”; and to provide a “tax cut for working families”, which “would completely eliminate income taxes for some 10 million Americans”. Massive new programs are detailed, which are aimed to rebuild the existing infrastructure, provide government sponsored healthcare, achieve energy independence and develop sources of alternative energy _all of that with strong government intervention_. Plenty of other policies are put together to either alleviate the situation of seniors _like his populist proposal to eliminate Income taxes for seniors making less than $50,000_, or raise protectionist barriers to trade; openly advocating to “amend the North American Free Trade Agreement”, and making evident his distaste for, and willingness to strike down new free trade agreements, using alleged “fair” labor and environmental standard deficits as excuses. Capital gains would be taxed at 28%, whereas Dividends would be so at 39.6%. Sen. Obama has also proposed to restore the Inheritance tax, as well as restore Income taxes to pre-Bush tax cut levels for many taxpayers; and to create new taxes on fossil fuel consumption, etc. All of that in addition to his repeated promise to reduce taxes for 95% of Americans, and raise them for those earning over $250 K a year.
What’s wrong with those proposals? A few of them sound even sweet to most ears… well, the truth is, a lot is wrong with them. I am sorry to break the news to Sen. Obama, but the middle class, whose interests he so loudly claims to defend, would be much worse off due to those very specific economic plans… Though I think he already knows that. In fact, those very proposals are nothing but a half veiled attempt to implement a clearly ideological, leftist agenda. They are part of a declared war on Capital; and its implementation would significantly alter the fabric of American society, as we have known it for decades. These policies would only deepen and prolong the recession.
Raising dividend and capital gain taxes would do a lot of damage to the economy, and many people would suffer because of it.
Doubling the tax on dividends would make people less likely to invest in companies that create jobs _especially start up businesses, or those trying to expand_, exactly when these companies need it the most: in the middle of a credit-scarce economic environment.
Doubling capital gain taxes would hit the real estate industry and the stock market, precisely when they are suffering a major depression. Actually, just the prospect of a win in the General Election by Sen. Barack Obama _as indicated by the polls of the last two weeks, when published by the mainstream media_ has been enough to strongly contribute to the major drops in the stock market we witnessed last week, as many stock holders try to get rid of their stock, while there is still time…
Those who hold no stock might think this is not too big a deal, and not see the connection between those seemingly unrelated events; but the truth is that if you have any money invested in IRAs, 401Ks, mutual funds, college funds, or anything that pays or reinvests dividends, it will certainly affect you, as you will loose almost 40% of that income. Around 52% of American adults own stock in some form (close to 20% of all existing stock is owned directly by individuals), and not less than 8.5 million people paid capital gain taxes in 2006. Sen. Obama’s increase in the capital gains tax rate would hit all those Americans pretty hard.
The 28% tax on capital gains would affect every single person selling a house. If you manage to close the sale, that percentage of your gain would be taken by the government. That would pose a serious problem for many seniors, who would like to downsize _or move into a retirement community_, and are counting with the income from their home sale as a big part of their retirement income.
Obama’s real motives and attitude towards the capital gains tax were exposed during a primary campaign debate, which took place in Philadelphia, on April 16, 2008. When Charles Gibson, of ABC News, asked him why he would raise the capital gains tax, in spite of historical evidence that suggested that such an increase would not just fail to augment government revenues, but actually reduce them (when capital gain taxes were cut in 1981, 1997 and 2003 government revenues rose by a 49%, 49% and 88%, respectively. When those very same taxes were raised in 1986, government revenues fell by 44%), Obama simply answered: “Well Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness…” That is, economical sense is irrelevant. To him, all that matters is “fairness”…
And what is exactly his understanding of fairness?
He means that we should increase taxes on investors simply so they pay more _ignoring the fact they had already paid their full taxes when they earned the money, before being invested_. This is class warfare at its best: Sen. Obama wants investors to pay more in taxes, not to generate revenue, but to soak them so that the rest of the country can feel better about their own taxes. That is his idea of “fairness”.
Sen. Obama is also proposing to restore the Inheritance tax, which had been repealed by President Bush. In the past, this very hefty tax had been the single reason why many families lost businesses, farms and ranches _which in many cases were the result of generations of hard work_, as they could not afford it.
And then there is the much hyped promise to lower Income taxes to low and middle income Americans, and raise them to those earning over $250 K. This proposal is very attractive and quite deceptive as well… While it is true that its implementation would provide a tax credit to low and middle income families, equal or in most cases more generous than the present Bush era tax cuts, taxing families earning more than $250 K would affect more people than what Sen. Obama pretends to make us believe. Most small business owners opt to file their articles of incorporation defining their companies as S-type corporations. For practical purposes, it means that all company revenues will not be taxed, but passed onto the stockholders _which in most small businesses are reduced to one, or at the most a handful of owners_, and then taxed as their personal income. This is done to avoid having income taxed twice, first at the corporation level, and then as personal income. As a result, it will be very easy to find millions of small business owners whose gross income is above that arbitrary $250 K threshold.
The consequence of this policy, as well as the higher corporate tax rate Sen. Obama is proposing too, would be an undeserved punishment on small businesses, which generate the bulk of jobs in America. These small companies would be forced to send as much of their operations overseas as they can. Those in industries where this is not feasible _the vast majority_ would have to tighten their belts even more to survive. Employers would have to either lay workers off _and unload the additional workload on the remaining employees_, or otherwise keep themselves from hiring new employees and expanding. Research and development, as well as the introduction of new technologies and production systems, would be forced to slow down; and the increased burden higher taxes would add to businesses, already suffering from higher financing and credit costs, would drive some of them into bankruptcy. For most businesses, production costs would rise _especially if, on top of all that, energy prices go up again as a result of an oil market bounce and Obama’s taxing of fossil fuel consumption_, and be passed down to consumers as higher prices for gasoline, food, and everything else these small companies produce. In the end, living costs would rise, reducing real wages to those very same low and middle income families the proposal would be trying to help; thus rendering the tax credits useless.
Besides, as Joe _by now the most famous plumber in America_ would say when interviewed in ABC the morning after the last presidential debate, how can we be sure that, once elected and backed by a Democratic controlled Congress, a President Obama might not say “you know what, $250 K of income makes a person pretty rich, but so does $150 K, so let’s raise their tax rate as well…”? In fact, there is a similar historical precedent. Back in 1992, Bill Clinton was campaigning against a president who had failed to keep his promise not to raise taxes. To emphasize the difference, Clinton promised that he would not raise income taxes to those earning less than $40 K a year. However, once elected he found out that all the social programs he wanted to implement could not be funded without raising income taxes throughout all income brackets; and so he did within months of occupying the White House, supported by a Congress that was equally controlled by a Democratic majority.
That is very likely to happen were Sen. Obama to be elected President.
For one thing, all of his proposals for government provided healthcare coverage, injecting funds into several education programs _increasing federal government intervention, and bankrolling, of many less than efficient school boards_, granting a $4,000 tax credit for college tuition, 10% mortgage interest rate tax credit, and the many other handouts being promised _including massive increases in foreign aid, even bigger than the record-breaking ones of the Bush administration_, would put an enormous strain in a federal budget that is already running into a record deficit; a situation that has now been worsened by the $700 billion rescue plan, and a possible second stimulus plan that is looming over our heads. When all costs are added up, the Math does not quite match, especially if we take into account that, despite all promises, the Iraq war will take at least one to two years before it is completely over, regardless of who is elected president, thus still tying budget funds to its successful consecution _that is, unless a Pres. Obama managed to pull out a foreign policy disaster of his own and withdraw irresponsibly early: a quite believable scenario, given the lack of judgment he displayed by opposing the surge and counterinsurgency strategy at the Senate, back in 2007_. Among other things, Social Security funds could be also put at risk by increased spending.
The fact many of the tax credits being proposed are not precisely tax cuts, but actually “credits”, means that this is not money that the taxpayer would be keeping in his pocket. He would still have to pay increased taxes to the government, and then wait for a check that would be written by the latter, and sent to citizens, including some 60 million Americans of low or no income, who would have no income tax liability themselves, but still receive a rebate check, paid for with the taxes of income tax payers. It sounds complicated, but it is nothing more than a transfer of wealth from taxpayers to non-taxpayers, which can be further reduced to a single word: welfare.
Do not get me wrong here. I have absolutely no objection to having society at large, and the government in particular, be responsible for those who cannot be it by themselves: the infirm, the lone ailing senior citizen without resources, the addict who has a wrecked life and nowhere to turn to, the mentally ill, or the temporarily unemployed worker who has a family to care for, and keeps avidly seeking for a new opportunity to make a living with dignity. However, I strongly object to having able bodied people discouraged from succeeding, or in many cases, even from just getting a job; and that is precisely what happens when government steps in with its hands full of giveaways.
The “Making work pay” tax credit, for example, is aimed at low-wage workers, but it would be phased out at higher income levels. The resulting jump in tax rates in the “phase out zone” would actually give workers an incentive to work less and cap their income (or otherwise tempt them to forge their income declaration). Pair an incentive to stay at low wages or totally dependent from welfare, with heavier taxes on succeeding businesses, and obstructions to free trade, and we would all get a perfect recipe for loss of productivity _nationwide_, higher costs of living, a prolonged recession, and increasing social hostility between the haves and have-nots.
Amazingly, Sen. Obama would package his tax increases as a tax cut! Here is how:
As the situation stands now, Bush’s tax cuts of 2001 and 2003 are scheduled to expire in 2010, and all projections show that, unless we do something about it, we are in for a big tax increase when they do. However, that increase will remain only on the books, until Congress actually passes its budget for that fiscal year.
In addition to it, the Alternative Minimum Tax (AMT), which was originally enacted in 1969 to ensure that the wealthiest people pay at least some taxes _as an offset to all the deductions and tax shelters they could make use of to hide their income_, has never seen its threshold (minimum income amount necessary for this tax to kick in) raised ever since. As a consequence, all the economic cycles we have gone through, and inflation, have pushed nominal incomes higher each year, and the threshold that was originally only within reach of the very rich, now is posed to affect millions of middle class Americans _close to 23 million taxpayers_. However, this tax is not affecting us yet, for Pres. Bush kept pushing back its implementation, but since each fix or delay is effective for only a year, the tax keeps showing up for budget discussions every fiscal year, pending like a sword over taxpayers’ heads.
Now here is what many of us _like former Bill Clinton political consultant and NYT best-seller author Dick Morris_ believe Sen. Obama would do to disguise his tax increases: He would sell his tax package as a “cut” by reducing these two theoretical taxes _theoretical in the sense they are not currently existing_. First, he would renew or improve some of the Bush’s tax cuts on the middle class _though as tax credits, as we have seen. Therefore you would have to actually pay more, and then wait until you get a check back for whatever amount the government believes you need or deserve: the better off you are, the less you would be given back_; second, he would raise the threshold for the AMT or eliminate it entirely. Inside this generous gift of tax cuts _on taxes that have never been imposed_, he would hide the very real largest tax increases in America’s history.
This way, Sen. Obama could pose as a fiscally responsible politician, and display his sensibility for middle class concerns.
It is very interesting that, when he had a chance to repeal the AMT, Sen. Obama voted no. On March 23, 2008, Sen. Obama voted against an amendment sponsored by Sen. Charles Grassley (R) to repeal it. The only reason behind this is that Sen. Obama needs this problem to stick around until he comes into office. He wants to be the one to single-handedly repeal it, so he can announce it _together with his new income taxes_ as a middle class tax cut to mask his huge tax increases.
In any case, it is very hard to trust someone who promises to cut taxes, when his personal history is one of voting consistently to raise them, while being a state senator in Illinois.
Not everything is bad with Sen. Obama’s proposals. For one thing, his plan to address predatory credit card practices is very commendable.
Sen. Obama also has a valid point when it comes to the urgent need to achieve energy independence; and another one when he stresses the importance of diversifying our sources of energy. He is right when he states that “we cannot drill our way out of this problem”, and when he advocates for tapping the enormous potential of solar, geothermal, wind power, clean coal and other alternative sources of energy as a way not just to power our way of life, and reduce the influence of rogue regimes that do not like us much, but also to create plenty of new jobs in green industries. He is wrong when he supports corn-based ethanol, since ethanol subsidies have distorted the market for corn, raising the price of that staple by more than 200% _thus increasing food prices worldwide; a trend that affects the poorest people the most_. Instead, he should favor lifting trade barriers to Brazilian ethanol, which is produced out of sugar cane byproducts _which have no adverse impact on food prices_, even if he were to upset the powerful corn farming interest group. He is also wrong in his reticence to employ nuclear energy. Without off-shore drilling _which he reluctantly embraced recently, as opposition to it grew increasingly untenable due to popular demand_ and nuclear power, no credible goal of attaining energy independence is realistic any time soon. More efficient fuel engines and alternative sources are vital parts of any comprehensive strategy, but they do not suffice by themselves. More rational land uses through better planning and zoning is another important element, which so far has not been included by neither candidate in his energy policy tool kit.
In any case, my main concern with the economical impact of Sen. Obama’s energy proposals is that he puts the government in charge of shaping the nation’s energy profile. He is calling for fossil fuel consumption taxes, clean energy tax credits and subsidies, goals for fuel efficiency standards, windfall profit taxes on oil companies, and a “crack down on excessive energy speculation”.
Government never lends or gives anything to business that it has not already taken away from business. All government funds come from taxes. Even credits and bailouts rest on the assumption that their loans will ultimately be repaid out of the proceeds of taxes. When the government makes loans to, or subsidizes businesses, what it does is to tax successful private companies and individuals, in order to support those selected companies that will be at the receiving end of its largesse. These are the ones chosen by government bureaucrats, who lend monies which are not theirs _and therefore do not care much whether the investment will ultimately see a return or not_, and in many cases benefit unsuccessful private companies that otherwise would have not survived in a free market, were it not for the nanny state support. Such policies are a fertile ground for all kinds of evils. They lead to favoritism; to the making of loans to friends, or in return for bribes; and to the creation of interest groups that lobby and arm twist, to get an ever increasing share of public money diverted in their direction, regardless of whether it benefits or harms the whole nation’s well being. The continuous scandals brought about by revelations of those shoddy deals, and tax payer money lost in poor investments, then call for increased government oversight and participation of profits in those companies where public funds are invested. As a result, such companies become more and more inefficient, and extensive micromanagement is imposed through a maze of exasperating nanny state rules and regulations, further asphyxiating growth. Another certain result is that other companies rush to the specific industry where subsidies and handouts are given, wishing to join the party. In the end, consumers wind up stuck with oversupply. A case in point is exposed by the unraveled growth of the construction industry during the boom, which was made possible through a similar government intromission _as explained before_; thus deviating capital and resources from other more productive industries, where a free, non-distorted market would have allocated them.
Once again, and as Milton Friedman would say, “there is not such a thing as a free lunch…”
Now let’s see John McCain’s proposals…
First of all, there is his tax plan: John McCain is proposing to pretty much maintain Pres. Bush’s Income tax cuts as they currently are. Back in 2001 and 2003, McCain had opposed those tax reductions because they were not accompanied by corresponding spending cuts, which would keep deficits in check. That he was right needs no explanation. However, that was then, and this is now. In our dire economic conditions, the prospect of allowing those tax cuts to expire is the equivalent of a new tax raise when we can afford it the least. Keeping these cuts gives American families and business owners the necessary respite they need, while still allowing the government to bankroll the most important services it is supposed to provide.
This way, Sen. McCain’s Income Tax cuts would cover all income brackets, regardless of class. He would also raise the personal exemption for each dependent from $3,500 to $ 7,000 to help families, particularly those with more children or single parents. Under his presidency, the Alternative Minimum Tax (AMT) would be repealed once and for all.
Unlike Sen. Obama, Sen. McCain would maintain the existing 15% tax rate on capital gains and dividends, and cut the corporate tax rate from 35% to 25%.
By this time I think I have emphasized enough the importance of low taxes on businesses. Entrepreneurs are at the core of American innovation, and their efforts have served us well for over two centuries of history. They create the ultimate job security for everyone: the availability of a better opportunity if your current job is no longer there, or does not suit you anymore. Small businesses are the main job creators of our economy, and raising taxes on them affects not just owners, but also their employees, financiers, suppliers, clients, and consumers at large, who are forced to pay higher prices for the same products or services. America had once a low tax environment that made it irresistibly attractive to every entrepreneurial spirit in the world, and played a fundamental role in the growth of our prosperity. However, with time many other countries followed our lead, and lowered their own taxes even more, to compete in a fierce globalized modern world. In so doing, America was left behind with the corporate tax rates of old, which need to be lowered as well. As Henry Hazlitt would clearly put it, higher taxes unavoidably determine the actions and incentives of those from whom they are taken. When a corporation loses a hundred cents of every dollar it loses, but is allowed to keep only fifty-two cents of every dollar it gains, and when it cannot adequately offset years of losses against its years of gains, its internal policies are affected. It does not expand its operations, or it expands only those attended with a minimum of risk. Prospective employers who recognize this state of affairs are deterred from starting new businesses. Technology innovation is also sacrificed or slowed down. The result in the long run is not just increasing unemployment, but that consumers are prevented from getting better and cheaper products, to the extent that they otherwise would, and that real wages are held down, compared to what they might have been, had taxes not been increased; Period.
Sen. McCain has proposed reducing the Estate Tax rate to 15%, and a generous $10 million exemption; allowing families to keep businesses and properties as their loved ones pass away.
Sen. McCain also seems to understand the need for state-of-the-art technologies to be available to private businesses competing in a globalized economy. With that in mind, he is proposing a first year deduction, or “expensing”, of equipment and technology investments; as well as a permanent tax credit equal to 10% of wages spent on R&D.
Another important element of his plan _and probably one of the toughest_ is bringing a new culture to Washington. Idealistic as it may sound, it is the only hope we have of setting the bases for a brighter future. Doing away with pork barrel spending and petty earmarking and appropriations is not just a moral imperative, but also the soundest way to do business; and if there is a man who has consistently crusaded against them is Sen. McCain. When confronted with this reality, Sen. Obama might claim that the amount of federal spending wasted in earmarks is the equivalent of a drop in the sea; but I put in doubt his alleged reduction of it to a mere $18 billion a year: the many perks that were added as “sweeteners” to the second version of the government rescue plan, for it to pass Congress, amounted alone to more than that; and we are talking about a single measure alone. The truth is _and anyone who has ever saved a penny knows this well_ that cutting frivolous spending resulting from lobbying and political peddling, as well as poorly performing government programs, is not just a matter of ethics, but of common sense. These earmarks and failed programs are benefiting a few, at the expense of the rest; and keeping limited resources from being allocated to better pursuits, like education or healthcare. No amount of money is insignificant enough when it comes to funding our future.
John McCain has also had the courage and the vision to part ways with many within his own party in energy related issues. Once shown the evidence, he understood Global Warming as the problem it is, and how it interconnects with the issues of energy independence and national security. As a result, he and his advisors implemented a comprehensive energy plan, which includes building 45 new nuclear plants by 2030 _ thus following the successful examples of France, Russia and China, which strongly rely on nuclear power to satisfy their energy needs_, advancing clean coal technology, and encouraging the market for alternative sources like wind, solar and hydroelectric power.
The intended goal of fostering alternative sources of energy, as part of an overall energy independence strategy, is pretty similar to that of Sen. Obama. However, the approach to achieve it is totally different. Sen. McCain proposes an even- handed system of tax credits, which would remain in place until renewable energy has progressed to the point that it is competitive with conventional energy sources. From that moment on, it would be up to the market, and the ingenuity and technical innovation of leading companies, to make accessible the energy thus created to consumers, at affordable prices. To me, that sounds pretty much like the way to go…
Under McCain’s plans, exploration of domestic oil and natural gas would tap into the existing reserves in hard to reach areas and off-shore. While it is true that ours represent only a single digit percentage of the known world oil reserves, that is enough to positively affect present day prices _regardless of what Sen. Obama and his supporters would say_. By sending a strong signal to markets that future oil supplies will be increased _and demand kept at bay through improved fuel consumption efficiency_, the futures traded at the stock market lower in price, thus bringing gas prices down with them. The market for natural gas is less internationally integrated than that of oil. Therefore domestic natural gas supply increases can lower prices even more.
Sen. McCain’s proposals are also aimed to incentivize free trade. Globalization is full of challenges and opportunities. The truth is there are jobs _and industries_ which are long gone, and will never get back. That is not necessarily wrong, as long as displaced workers can be re-trained and find new jobs in the industries of the future. Enhanced options, through voucher schools and more efficient public school boards, would also allow parents to choose the right education for their children, as they prepare for an increasingly competitive world.
Free trade is necessary to place our products in global markets, while allowing consumers access to high quality, low price products from overseas. It rewards the most efficient businesses, as only they can survive worldwide competition. Raising tariffs to foreign imports is a sure way to raise prices to the consumer, and to replace those very same products with others of equal or similar price, but of less quality _produced by less efficient domestic companies, which are thus indirectly supported by government intervention_. At the same time, discouraging imports reduces the purchasing power with which foreign consumers will buy our exports. Furthermore, by making it harder for our companies to reach foreign markets, we are actually helping their competitors occupy their place. For every American company that withdraws, there is a Chinese or European one ready to take its share of the market.
More easily forgotten is the positive impact free trade has in developing countries’ economies. Both NAFTA and CAFTA have improved the lives of thousands in Mexico, Central America and the Caribbean. By allowing peasants, laborers and small business owners to prosper, they exert a much needed stabilizing force in those fragile democracies; and by making a decent living at home, these very same people are given hope, and discouraged from coming to the U.S. as illegal immigrants.
There are many more economic proposals being offered by either candidate; but the most relevant ones are those exposed above.
Some people look back and think that, just because former Pres. Bill Clinton and Sen. Barack Obama happen to belong to the same party, electing the latter will automatically bring prosperity back; of the kind that was enjoyed during a long stretch of the Clinton administrations. Let’s not fool ourselves: Barack Obama is no Bill Clinton _and John McCain is no George Bush, for that matter_. President Clinton, who built upon the economic foundation President Reagan had left behind, signed into law welfare reform _so that people would have to actively look for a job before being eligible for welfare_. He did away with the “retirement test” for Social Security benefits _thus providing a huge tax cut for elderly workers_, successfully pushed the North American Free Trade Agreement (NAFTA) _one of his biggest achievements_ through Congress, against the intense opposition of unions and many Democratic legislators and activists, signed into law an extensive capital gains tax cut, and reduced government spending to the point where he could balance the budget. None of those policies are included in Sen. Obama’s proposals.
Big government intervention and control of the economy, class warfare and arbitrary redistribution of wealth are not the change we need. In spite of today’s climate of fear and doubt, freer and more flexible markets, with the required minimum of prudent oversight, will still do more for any economy than the heavy hand of government.
I admire Sen. McCain, the man; with his virtues and shortcomings. His many years of plain heroism _while fighting in Viet Nam, and during the difficult time spent as a POW, tortured by his communist captors_, are a vivid example of patriotism. I recognize him for his integrity, for his commitment to fight corruption _the fact he felt worse for allowing his good name to be tarnished by his association with Keating, early in his congressional career, than during any of his torture sessions in VN, speaks a lot about his moral fiber_. His military service and his long legislative career _in which he often faced members of his own party in those issues he felt they were wrong, and took stands for doing the right thing for campaign finance reform, the surge in Iraq, torture, immigration, global warming, the oncoming financial debacle, and a long list that wouldn’t fit here_, deserve a lot of respect and gratitude.
Nevertheless, being a good soldier and a good legislator, per se, would not be enough qualifications to be a good President. It also takes a few things Sen. John McCain equally commands. It takes strong Christian values and respect for Human rights and our Freedoms, foreign policy experience and good judgment, the right economic policies _which he certainly has_ and an unselfish, unassuming disposition to do what it takes in the service of the country he loves so much: America. His pro-growth, no-nonsense economic policies are our best hope to avert this recession, and get our economy back on track. That’s because in the end, as Tony Blair would say: “there are no left or right economic policies, only good and bad ones…” For all I know, Sen. McCain’s definitely belong to the former.
Make no mistake; at this difficult time, Sen. McCain is the man of the hour. He deserves to be trusted again, this time with the highest office in the land.
John McCain is going to be a great President of the United States of America.
That is why I support him…and why I respectfully ask you to do the same, for your own sake…
Now go out and vote.
Eduardo A. Pardo Fernández
Miami, October 29th, 2008.
My two cents... I think the idea that the federal government is the best tool to help those in need is foolish. I’ve always thought government exists to promote the general welfare and ensure domestic tranquility (sound familiar?), n guarantee everyone the same standard of living. Obama’s tax plan as I understand it looks to do just that – take money from the top and pass it out directly to people who paid no taxes at all.
I don’t mind paying for roads and bridges and aircraft carriers, etc, but I object to blithely passing other people’s money around through these hand-outs masquerading as “tax cuts.”
God bless each and every one of you who have worked your way up - I’m working to have a similar story some day soon. This is what I teach my children in part because it’s what my depression era parents taught me. I happen to be one of the 95% of the people (or is that number lower?) who stand to benefit from Bill Richardson’s definition of middle-class, and I hate this idea that it’s okay to demand more when the real trick would be to become more efficient.
Sorry to nitpick but it was John Adams, not Ronald Reagan, who coined the phrase
"Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence."
Argument in Defense of the British Soldiers in the Boston Massacre Trials (1770-12-04)
You know what it's all about, taking tax money from those who work hard to earn a good living and giving it to those lazy morons whom simply don't want to work and choose to have children just to freeload off of our government. Socialism, here we come.
"a lot of this depends on whether you believe that people who consume more than they produce, over the course of their lives, are failures or not. My own view is that they are failures. In some cases it may not be their fault, but that does not make it any less so. " -Tigerhawk
I respectfully would reply to my friend and cousin that he is missing the distinction between quantifable value that produces things that economists understand, and qualitative but nonetheless measureable values that add greatly to society (not to mention family) but may not be personally remunerative. Could I make more money as the attorney I could certainly have chosen to become? Certainly. But that is not the value measure I would place on the impact of my work or the societal values it serves. I work for conservation non-profits and do not consider the product of my labor or the rewards I receive for it to be adequately captured in a simple ratio of consumption over production.
I will also point out that when my wife stayed home as the primary caregiver for our two children, she deeply resented that her unpaid work was socially undervalued despite its tremendous value for our family. In fact, measured purely economically we would have been more "productive" had there been two significant wage earners instead of just me. There is nothing wrong with day-care, but the sort of people and citizens our children are becoming, in part because of the supportive home environment we strive to provide, represents anything but "failure".
Sacrifice for a greater good may not balance the books, but it can balance the scales. That is why soldiers risk their greatest personal asset in battle, and why we support our churches and other charities. That is also why, according to Hobbes' Social Contract, we give up some of the freedoms of the state of nature to be part of the state of man. Pure individual freedom is anarchy and a threat to all. Ask the Somalis - aside from the warlords and pirates - how they like living in a failed state.
Expanded in a post at my blog here:
GT, I appreciate that the flow of cash money does capture even a fraction of the value that a person "produces," and I know there are people who do enormous good in the world and earn little or no money for the effort. I am not talking about those people. I am talking about the large number of people who seem to sleepwalk through life, accomplishing nothing in particular and ultimately living off of the efforts of others. Many of those people do not accomplish much in the commercial world, contribute much to their community, or do a particularly creditable job raising their children. The rest of us, whether we earn a lot of money in our professional lives or not, carry them along and pick up after them.
Made me think back to my bible study classes in High School (at that nice Episcopal prep school I suggested you consider among those you are currently exploring).
"The poor you shall always have with you" - Matthew 26:11, but whether this prophesy is understood as describing preordained and predestined condition of life or an obligation to be with and not apart from those who are poor presents a theological puzzle for the disciples themselves, let alone for Christians 2,000 years on.
Deuteronomy 15:11 "For the poor will never cease to be in the land; therefore I command you, saying, 'You shall freely open your hand to your brother, to your needy and poor in your land.'
Mark 14:7 "For you always have the poor with you, and whenever you wish you can do good to them; but you do not always have Me.
John 12:8 "For you always have the poor with you, but you do not always have Me."
So are Christians to exhibit a kind of paternal charity, or do charity when it suits them, or understand that they are part of a closed system and must not distance themselves from those who are poor? You can find demoninations and personal beliefs that emphasize any of these interpretations.
And then there are the beatitudes - "Blessed are the poor for yours is the kingdom of God. Matthew translates it differently as "the poor in spirit", making more of a muddle. Tricky stuff, theology.
You began your post, TH, with the issue of greed, and about all that I can be absolutely sure of in that regard is that it is not limited to any particular social strata, and no one likes being accused of being greedy when a) they manifestly believe they are not and b)there is ample evidence of hypocrisy by those making the accusation. This is why it is one of Christianity's seven deadly sins. It is a wedge.