Unless Barack Obama really chokes, tonight’s debate really won’t move the needle of public opinion in John McCain’s favor. Oh, plenty of Americans will be watching, but I would wager that a dwindling few of them remain truly “undecided.” This month’s financial mess has served to crystallize in voters’ minds what they were sensing in their guts for far longer — that the Republican Party just isn’t up to the task of addressing the serious issues facing our nation right now.
To be clear, that’s not to say that the GOP can’t return to its once-dominant role as the party of prosperity. But for now, Americans aren’t buying what Republicans, at any level, are selling.
The more I think about it, the more I’m convinced this goes beyond just having a bad year of Abramoff-type scandals, bathroom-stall encounters and federal indictments. Those don’t help, but the larger problem is one of losing their own identity.
The party I knew fought against wasteful spending at all costs; they didn’t take the path of least resistance when faced with tough choices, as congressional Republicans often did with Bush in the White House. I’m not piling on here, but we all know the first step toward recovery …
So why does this matter to John McCain, you ask? After all, he’s the un-Bush, the one who takes on establishment Republicans. Well, yes and no. Yes, he is an independent-minded thinker, but he’s still brushed with the same coat of paint that has stained the entire party this election cycle. And no, in these final four weeks, McCain will not need to go on the offensive, and that means trotting out some tired lines about the tax-and-spend liberal tendencies of Obama. That sort of hackneyed message just doesn’t appeal to the glassy-eyed hopes of young voters.
Irrespective of his policies and their impact on the electorate, Sen. Obama has elevated above those arguments. Tonight’s debate once more will allow him to look presidential. And that’s why you won’t see too much movement in the polls later this week.
Friday, October 10, 2008
Taxing the Rich is a Free Ride for Middle-Class Taxpayers
Voters are told by politicians that the government can raise more money by increasing taxes on the rich. However, they must follow the logical progression of the effect of higher taxes on the rich to see the true impact.
For example, increasing taxes reduces the number of jobs in the private sector. Higher taxes mean the rich have less money to spend for goods provided by the private sector and less money to invest. Less money spent in private-sector consumption means few private-sector jobs. (Housekeepers, gardeners, artists, jewelers and high-end restaurant personnel need to begin looking for new jobs!) Less money to invest means less money in the bank that can be loaned to consumers for homes. It also means less money is available for businesses to expand and hire more people.
Taxing the rich does not hurt those who are already wealthy as much as it does those hardworking young people with the drive and intelligence who add the most value to our society and who are trying to become wealthy. It is the entrepreneurs and small-business people in the U.S. who provide the bulk of the jobs and most of the country’s growth. If the entrepreneurs and small businesses have less money from their enterprises, they will have less money to invest in their business and therefore will hire fewer employees. If taxes are high enough, they may even decide the risk of being an entrepreneur and small-business person is not worth the risks.
Historically, the Laffer Curve shows us that when marginal tax rates are increased, the government generally takes in less revenue as taxes because people modify behavior to reduce taxable income in order to pay less taxes, and there is less economic activity creating income. Americans are not generally aware that the wealthy pay more taxes when rates are low than when rates are high. In 2006, the top 5 percent of taxpayers paid 60 percent of all income taxes while earning 37 percent of the income. The bottom 50 percent of taxpayer paid 3 percent of income taxes. The wealthy paid a much lower percentage of income taxes in the 1960s and 1970s when marginal tax rates where much higher.
For example, increasing taxes reduces the number of jobs in the private sector. Higher taxes mean the rich have less money to spend for goods provided by the private sector and less money to invest. Less money spent in private-sector consumption means few private-sector jobs. (Housekeepers, gardeners, artists, jewelers and high-end restaurant personnel need to begin looking for new jobs!) Less money to invest means less money in the bank that can be loaned to consumers for homes. It also means less money is available for businesses to expand and hire more people.
Taxing the rich does not hurt those who are already wealthy as much as it does those hardworking young people with the drive and intelligence who add the most value to our society and who are trying to become wealthy. It is the entrepreneurs and small-business people in the U.S. who provide the bulk of the jobs and most of the country’s growth. If the entrepreneurs and small businesses have less money from their enterprises, they will have less money to invest in their business and therefore will hire fewer employees. If taxes are high enough, they may even decide the risk of being an entrepreneur and small-business person is not worth the risks.
Historically, the Laffer Curve shows us that when marginal tax rates are increased, the government generally takes in less revenue as taxes because people modify behavior to reduce taxable income in order to pay less taxes, and there is less economic activity creating income. Americans are not generally aware that the wealthy pay more taxes when rates are low than when rates are high. In 2006, the top 5 percent of taxpayers paid 60 percent of all income taxes while earning 37 percent of the income. The bottom 50 percent of taxpayer paid 3 percent of income taxes. The wealthy paid a much lower percentage of income taxes in the 1960s and 1970s when marginal tax rates where much higher.
Regulation and the Law of Unintended Consequences
The current financial crisis is a result of the law of unintended consequences of two political policies promoted by both Republicans and Democrats since the Great Depression: 1) encouraging homeownership for all Americans regardless of whether they can afford the costs and 2) over-regulation of the financial community. Both policies have turned into a deceptively sweet bubble of air in the veins of the economy.
First, the government artificially inflated residential real estate sales through several laudable — but sloppily executed — policies such as: 1) tax breaks on interest and property taxes for homeowners; 2) implicit government guarantees of the debt of Fannie Mae and Freddie Mac to purchase conforming home mortgage loans; 3) relaxed credit standards on home mortgage loans permitted by the banking regulators; and 4) encouragement of the collateralization and sale of mortgages to investors.
In the short term, these policies had the beneficial effect of subsidizing housing costs and injecting extra liquidity into the housing market. Over the long term, these policies weakened the economy by inflating housing prices and by encouraging the financial community to make risky loans to homeowners who would not otherwise get a loan in the unregulated mortgage market. The results, as we now see, are disastrous.
Specifically, American consumers were encouraged to buy homes whether they could afford them or not. Homeowners were also lulled into believing that homeownership was an investment and not a housing expense. The annual costs of homeownership with mortgage payment, property taxes, insurance, utilities and maintenance can be over 10 percent of the value of a home. That means a home has to appreciate more than 10 percent annually in order for it to be a good investment. These housing policies significantly contributed to driving up the prices of residential real estate over the past 20 years. They also contributed to over-leveraged homeowners and more risky mortgage loans held by banks and investors.
Don't think for a moment that the passage of today's federal government's far-reaching and historic plan to bail out the nation's financial system, which President Bush signed into law, will resolve these woes and return our economy to stability. Yes, the House voted 263-171 to make this possible and it's well-known in Washington elite circles that this will only give a temporary reprieve to Wall Street and lobbyists. It will, however, do nothing for everyday Americans who will continue to lose their homes and life savings because of unbelievable greed and highly calculated risks that went South.
Stay tuned: Much more to come.
First, the government artificially inflated residential real estate sales through several laudable — but sloppily executed — policies such as: 1) tax breaks on interest and property taxes for homeowners; 2) implicit government guarantees of the debt of Fannie Mae and Freddie Mac to purchase conforming home mortgage loans; 3) relaxed credit standards on home mortgage loans permitted by the banking regulators; and 4) encouragement of the collateralization and sale of mortgages to investors.
In the short term, these policies had the beneficial effect of subsidizing housing costs and injecting extra liquidity into the housing market. Over the long term, these policies weakened the economy by inflating housing prices and by encouraging the financial community to make risky loans to homeowners who would not otherwise get a loan in the unregulated mortgage market. The results, as we now see, are disastrous.
Specifically, American consumers were encouraged to buy homes whether they could afford them or not. Homeowners were also lulled into believing that homeownership was an investment and not a housing expense. The annual costs of homeownership with mortgage payment, property taxes, insurance, utilities and maintenance can be over 10 percent of the value of a home. That means a home has to appreciate more than 10 percent annually in order for it to be a good investment. These housing policies significantly contributed to driving up the prices of residential real estate over the past 20 years. They also contributed to over-leveraged homeowners and more risky mortgage loans held by banks and investors.
Don't think for a moment that the passage of today's federal government's far-reaching and historic plan to bail out the nation's financial system, which President Bush signed into law, will resolve these woes and return our economy to stability. Yes, the House voted 263-171 to make this possible and it's well-known in Washington elite circles that this will only give a temporary reprieve to Wall Street and lobbyists. It will, however, do nothing for everyday Americans who will continue to lose their homes and life savings because of unbelievable greed and highly calculated risks that went South.
Stay tuned: Much more to come.
Thursday, October 2, 2008
Obama Stretching His Lead
I like to make predictions. It’s in my blood. I predicted the Redskins would defeat the Dallas Cowboys Sunday in Dallas. Oh, I didn’t tell anyone because I love my ’Boys, but I (sadly) got that one right, too.
And so I’m making another prediction today — Barack Obama will continue to dominate the campaign high ground for the next few weeks, perhaps stretching his lead to as much as double digits.
I know this for two primary reasons. First, the narrative of this financial crisis facing America plays to Sen. Obama’s strengths — he’s measured and thoughtful in his responses and in the principles he lays out. Some would argue that he’s been too vague, but that’s what presidents do — set priorities and let the bean-counters sort through the numbing details.
Second, the Republican brand continues to haunt John McCain and his campaign. Countless times over this week you heard the phrases “Bush administration” and “Republican-led Congress” of the past eight years presiding over this ticking time bomb. As my momma likes to say, “the chickens have come home to roost” on this one, and, whether the blame is well-placed or not, the Republicans are bearing the brunt of this bailout criticism.
The Obama machine will roll again today with the Biden-Palin debates. Sen. Biden is an institution in this town, and he knows how to rabbit-punch verbally. And while Sarah Palin is the journey-woman who puts the human touch in John McCain, she’ll get her lunch handed to her tonight if she performs as poorly as she has lately with the national press corps. Say what you will about the networks, but they only ask the questions. It’s up to the candidates to pivot and parlay meaningful responses that strike at the heart of why they deserve elected office. I know Sarah Palin has that fire in her belly; I just fear I won’t see it in tonight's debate.
Oh by the way, why aren’t the Republicans and fair-minded individuals demanding the removal of Gwen Ifill from moderating this debate? If Obama-Biden win in November, she will hit a financial jackpot with her soon-to-be-released (Random House) high-praise book about Sen. Obama.
Wow, only in America. Random House is laughing all the way to the bank. Clink … Clink … Clink.
And so I’m making another prediction today — Barack Obama will continue to dominate the campaign high ground for the next few weeks, perhaps stretching his lead to as much as double digits.
I know this for two primary reasons. First, the narrative of this financial crisis facing America plays to Sen. Obama’s strengths — he’s measured and thoughtful in his responses and in the principles he lays out. Some would argue that he’s been too vague, but that’s what presidents do — set priorities and let the bean-counters sort through the numbing details.
Second, the Republican brand continues to haunt John McCain and his campaign. Countless times over this week you heard the phrases “Bush administration” and “Republican-led Congress” of the past eight years presiding over this ticking time bomb. As my momma likes to say, “the chickens have come home to roost” on this one, and, whether the blame is well-placed or not, the Republicans are bearing the brunt of this bailout criticism.
The Obama machine will roll again today with the Biden-Palin debates. Sen. Biden is an institution in this town, and he knows how to rabbit-punch verbally. And while Sarah Palin is the journey-woman who puts the human touch in John McCain, she’ll get her lunch handed to her tonight if she performs as poorly as she has lately with the national press corps. Say what you will about the networks, but they only ask the questions. It’s up to the candidates to pivot and parlay meaningful responses that strike at the heart of why they deserve elected office. I know Sarah Palin has that fire in her belly; I just fear I won’t see it in tonight's debate.
Oh by the way, why aren’t the Republicans and fair-minded individuals demanding the removal of Gwen Ifill from moderating this debate? If Obama-Biden win in November, she will hit a financial jackpot with her soon-to-be-released (Random House) high-praise book about Sen. Obama.
Wow, only in America. Random House is laughing all the way to the bank. Clink … Clink … Clink.
The Other ‘M’ Word
America has heard a lot of talk this month about “meltdowns” and the financial calamities that await us if the Congress doesn’t act soon and with a singular voice that our credit markets are going to be all right.
But have you all been paying attention to what’s taking place off the stock exchange? First it was Bank of America’s announcement that it was buying Merrill Lynch. Then Washington Mutual collapsed and will no doubt get folded into another entity. Then Citigroup bought banking giant Wachovia.
Detecting a pattern here? All the major customer banks in this country are consolidating into so-called superbanks, or the other ‘M’ word — monopolies.
The Consumer Federation of America is not so sure this is a good idea. Much like the airline industry, banks compete for customers’ attention and their dollars. They offer neat perks such as free checking or no fees on withdrawals from ATMs. Didn’t like the rate your bank’s credit card offered you? No problem, just threaten to take your business elsewhere. See, that’s the beauty of so many mom-and-pop banks to go along with the mega ones — we could price-shop and get a better deal. The Federation fears we’ll lose that ability, to some extent or another, and I’m inclined to think they’re correct.
The jury is still out for me on whether I like this move or not. I do know one thing, however — a functioning bank sure beats no bank; or long lines of angry customers on bank runs to retrieve their savings, like the Indy Bank episode earlier this year. That’s bad news, and something we can ill afford. In fact, we’ve been seeing secret bank runs now, as individuals try to get their deposits under the FDIC-insured $100,000 level in order to have some guaranteed protections. Raising that deposit rate, as both candidates have endorsed, is a good idea.
But one final political point: For decades, I’ve heard Democrats rail against the power of “Big Oil” and “Big Business” and “Big HMOs.” It now appears that “Big Banks” will be added to their litany, and Democrats will only have themselves to blame. But they hope you will forget that minor sticking point as they demagogue the issue in future tirades and accusations of bank greed. They won’t remember this move was a matter of sheer survival, so it’s up to us to remind them …
But have you all been paying attention to what’s taking place off the stock exchange? First it was Bank of America’s announcement that it was buying Merrill Lynch. Then Washington Mutual collapsed and will no doubt get folded into another entity. Then Citigroup bought banking giant Wachovia.
Detecting a pattern here? All the major customer banks in this country are consolidating into so-called superbanks, or the other ‘M’ word — monopolies.
The Consumer Federation of America is not so sure this is a good idea. Much like the airline industry, banks compete for customers’ attention and their dollars. They offer neat perks such as free checking or no fees on withdrawals from ATMs. Didn’t like the rate your bank’s credit card offered you? No problem, just threaten to take your business elsewhere. See, that’s the beauty of so many mom-and-pop banks to go along with the mega ones — we could price-shop and get a better deal. The Federation fears we’ll lose that ability, to some extent or another, and I’m inclined to think they’re correct.
The jury is still out for me on whether I like this move or not. I do know one thing, however — a functioning bank sure beats no bank; or long lines of angry customers on bank runs to retrieve their savings, like the Indy Bank episode earlier this year. That’s bad news, and something we can ill afford. In fact, we’ve been seeing secret bank runs now, as individuals try to get their deposits under the FDIC-insured $100,000 level in order to have some guaranteed protections. Raising that deposit rate, as both candidates have endorsed, is a good idea.
But one final political point: For decades, I’ve heard Democrats rail against the power of “Big Oil” and “Big Business” and “Big HMOs.” It now appears that “Big Banks” will be added to their litany, and Democrats will only have themselves to blame. But they hope you will forget that minor sticking point as they demagogue the issue in future tirades and accusations of bank greed. They won’t remember this move was a matter of sheer survival, so it’s up to us to remind them …
Not Enough Known About Obama
Looking at the presidential candidates, Armstrong Williams says that Americans just don't know enough about Sen. Barack Obama's record, campaign, and what he is really saying on the campaign trail.
The Cost of Business as Usual on the Hill
Congress once again could not get out of its own way as it failed to pass the critical $700 billion rescue plan.
It seems no one on the Hill is willing to acknowledge the gravity of the financial crisis, because there seems to be no urgency to take the much-needed action to keep our entire financial system afloat. If Congress really understood how crippling this crisis is, they would know that inaction has a price as well.
As the broader stock markets tumbled, more than $1.2 trillion of value was lost — well beyond the cost of the proposed package. Instead, both sides of the aisle are more worried about pushing their agenda and pointing the finger at the other party in an effort to find blame or shirk responsibility.
Now is not the time for business as usual on the Hill; there will be time enough to show that the nature of our political system — both Republican and Democrat — is to blame.
In the meantime, what is striking is that many members of Congress expressed concern about giving too much “power” to the Department of Treasury for fear that Secretary Henry Paulson would abuse the position. It seems instead that Congress has abused its power to jockey for position while letting the markets, confidence and hope for Americans fall further.
If I were a member of Congress, I would quickly acknowledge or even concede (gasp!) that the financial and market experts don’t reside in the hallowed halls on the Hill, but rather with the Treasury, the Fed, and the leadership in those offices. Now let them do their jobs.
It seems no one on the Hill is willing to acknowledge the gravity of the financial crisis, because there seems to be no urgency to take the much-needed action to keep our entire financial system afloat. If Congress really understood how crippling this crisis is, they would know that inaction has a price as well.
As the broader stock markets tumbled, more than $1.2 trillion of value was lost — well beyond the cost of the proposed package. Instead, both sides of the aisle are more worried about pushing their agenda and pointing the finger at the other party in an effort to find blame or shirk responsibility.
Now is not the time for business as usual on the Hill; there will be time enough to show that the nature of our political system — both Republican and Democrat — is to blame.
In the meantime, what is striking is that many members of Congress expressed concern about giving too much “power” to the Department of Treasury for fear that Secretary Henry Paulson would abuse the position. It seems instead that Congress has abused its power to jockey for position while letting the markets, confidence and hope for Americans fall further.
If I were a member of Congress, I would quickly acknowledge or even concede (gasp!) that the financial and market experts don’t reside in the hallowed halls on the Hill, but rather with the Treasury, the Fed, and the leadership in those offices. Now let them do their jobs.
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