Sunday, December 28, 2008

Top Ten Issues

My top ten issues facing the nation, in no particular order:

  1. Economy

  2. Social Security

  3. The wars in Iraq/Afghanistan

  4. Jobs

  5. Education

  6. Taxes

  7. Two-Party System

  8. Government Corruption

  9. Health Care

  10. Housing

Once a week over the next ten weeks, I will write what I title "If I Were President", and discuss what my platform might be in each of these areas if I were going to run for President of the US of A.

Stay tuned.

Tuesday, December 23, 2008

Bailouts for Everyone!!! (Except You and Me)

We're in the midst of a $700 Billion bailout of the financial system. This is a scary large monetary figure. I was against the bailout, as I am very concerned with the lack of accountability for the bad decisions the large banks and mortgage companies made. They should be punished, and the natural punishment is to fail as an ongoing entity.

The car companies are now going to be bailed out to the tune of $17.4 Billion. In the past, this would have seemed like a gargantuan amount. People would have been outraged instead of accepting of the bailout. This bailout could not have happened without the preceding $700 Billion bailout of the banks to take the heat.

Neither of those bailouts scare me the way Obama's proposed stimulus plan scares me.

Both the $700 Billion and the $17.4 Billion bailouts are being spent on "investments". In other words, they consist of loans or capital infusions for which the government receives stock or warrants. The expectation is that some portion of this money will eventually be returned to the government either as interest, dividends, or capital repayment. In the end, the taxpayers will hopefully not be eating the entire price of the bailout.

Now we have the newest proposal, now estimated at $800 Billion, but potentially rising to more than $1 Trillion. The intent of this proposal is to spend money on infrastructure and job creation. There is no explicit means for providing a return on investment. The money will be gone...spent. This is costing every single person in the country close to $3,000. For my family of four, our share is $12,000. I, for one, can not afford that kind of price tag, no matter how beneficial the result will be to the overall health of the country. Luckily, I shouldn't have to pay it all in one lump sum. But I know that I will be paying it with a small tax increase here and a new tax there. It's likely most people won't even realize their money is being siphoned away from them. Ignorance is bliss.

People tell me I'm a glass half empty kind of person. Can you blame me?

New Stimulus Details

You can read more about Obama's new stimulus proposal here.

I know this plan will help a lot of people. A number of the large construction companies will see a great deal of increase to their bottom lines. This will be quite a windfall for a number of government contractors. Hooray for them!! I'm sure a large number of blue-collar jobs will be created as a result of the infrastructure work that will be taking place. And believe me, I am all for improving our country's infrastructure.

But does this plan help you and me? I don't see any relief coming for distressed homeowners. I don't see this solving the mortgage crisis. I don't see this stimulus unfreezing the credit markets (and I will be speaking more on this at a later date). In fact, on the surface of the plan, I see absolutely nothing in it for me except a tax increase.

I want our economy to succeed. I want people in general to succeed and find happiness. Will the stimulus plan help get us out of a recession? Maybe. Nobody really knows. There has never been a recession quite like this one. The recession will supposedly end at some point without any government intervention. The stimulus plan is being proposed to hurry the end of the recession. Is it worth $800 Billion to end the recession a few months early?

Monday, December 22, 2008

My Bailout Proposal

I think the government has this bailout mess all wrong. They are bailing out the wrong people!! They need to use a bottom-up approach rather than a trickle-down approach. And it all needs to start where the mess began...home owners.

I propose the government give all homeowners the option of taking a tax credit of 10% of the purchase price of their primary residence each year for up to ten years. That puts money into taxpayers' pockets now, and provides added incentive for people not only to work harder to stay in their home, but gives potential new home buyers a little more motivation to get into the market.

This would not necessarily be a tax cut, but rather a tax deferral. Each year that a taxpayer chooses to write down the value of his house by 10%, it reduces the cost basis of the house. When the house is later sold, the government would collect a larger amount in capital gains. For example, if the house is sold after ten years, the entire amount of the sale would be taxed at the capital gains rate.

I think this would result in the following:

  1. Distressed homeowners could use the money they receive from the tax credit to get caught up on their mortgages.

  2. More people would be inclined to buy their first home in order to receive the tax credit. This would reduce the inventory of homes for sale and help to stabilize prices.

  3. Homeowners would be less likely to sell their homes as a greater percentage of the sales price would be taxable. This would also reduce the inventory of homes for sale, and would drive up prices.

I'm sure there are many kinks to be worked out of this system. What do you think? Any ideas for making this plan better?

More on Social Security

Is there a reason the government is so opposed to letting individuals control their own Social Security funds? I know there are a number of people out there who are, from a financial perspective, less than talented. I'm not proposing that we privatize Social Security (although I'm not opposed to the idea, either), and force everyone to decide what to do with their accounts. I would just like to have the option of controlling my own destiny, so to speak. I strongly believe I could beat the rate of return the government offers on Social Security investments. And if for some reason I can't match that rate, I'm willing to deal with those consequences.

I don't have any facts to back this up, but if I had to guess, I'd say the primary reason we aren't allowed to control the funds in our Social Security accounts is because those funds aren't really there. The money has been spent already, and all that's really sitting in our Social Security accounts is a big fat IOU. Does that thought scare anyone?

Saturday, December 20, 2008

The Great United States Ponzi Scheme

A lot has been made of the recent discovery of the $50 billion Ponzi Scheme allegedly perpetrated by one Mr. Bernard Madoff.

For those who may not know, a Ponzi scheme is an investment offering an unusually high rate of return. The scheme involves paying said return to its existing participants using money received from new participants rather than paying out actual earned income, as there is little or no underlying income to be had. The scheme is always destined to collapse once there aren't enough new participants to cover the returns owed to the existing participants. (Visit Wikipedia for a more detailed explanation.)

My question is this: we know that Ponzi Schemes are highly illegal due to its fraudulent nature. Does our Social Security system fall into this category? If so, shouldn't the perpetrators of this fraud be prosecuted? The Social Security scheme is far greater and affects more people than any other fraud in the history of the world. The $50 billion Madoff scheme pales by comparison. While Social Security isn't offering an especially high rate of return, the rate it is offering is certainly unsustainable. It's not okay that the system has not yet collapsed. It's still a fraud, and the likelihood of an eventual collapse is 100%.

Friday, December 19, 2008

Who's in Charge?

I like this article a lot. This is a very appropriate way to begin my blog.


By Charlie Reese

Politicians are the only people in the world who create problems and then campaign against them.

Have you ever wondered why, if both the Democrats and the Republicans are against deficits, WHY do we have deficits?

Have you ever wondered why, if all the politicians are against inflation and high taxes, WHY do we have inflation and high taxes?

You and I don't propose a federal budget. The president does.

You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.

You and I don't write the tax code, Congress does.

You and I don't set fiscal policy, Congress does.

You and I don't control monetary policy, the Federal Reserve Bank does.

One hundred senators, 435 congressmen, one president, and nine Supreme Court justices 545 human beings out of the 300 million are directly, legally, morally, and individually responsible for the domestic problems that plague this country.

I excluded the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered, but private, central bank.

I excluded all the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman, or a president to do one cotton-picking thing. I don't care if they offer a politician $1 million dollars in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator's responsibility to determine how he votes.

Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party.

What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of a Speaker, who stood up and criticized the President for creating deficits. The president can only propose a budget. He cannot force the Congress to accept it.

The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating and approving appropriations and taxes. Who is the speaker of the House? She is the leader of the majority party. She and fellow House members, not the president, can approve any budget they want. If the president vetoes it, they can pass it over his veto if they agree to.

It seems inconceivable to me that a nation of 300 million cannot replace 545 people who stand convicted -- by present facts -- of incompetence and irresponsibility. I can't think of a single domestic problem that is not traceable directly to those 545 people. When you fully grasp the plain truth that 545 people exercise the power of the federal government, then it must follow that what exists is what they want to exist.

If the tax code is unfair, it's because they want it unfair.

If the budget is in the red, it's because they want it in the red.

If the Army & Marines are in IRAQ, it's because they want them in IRAQ .

If they do not receive social security but are on an elite retirement plan not available to the people, it's because they want it that way.

They vote their own pay raises for themselves because they want it that way.

There are no unsolvable government problems.

Do not let these 545 people shift the blame to bureaucrats, whom they hire and whose jobs they can abolish; to lobbyists, whose gifts and advice they can reject; to regulators, to whom they give the power to regulate and from whom they can take this power. Above all, do not let them con you into the belief that there exists disembodied mystical forces like 'the economy,' 'inflation,' or 'politics' that prevent them from doing what they take an oath to do.

Those 545 people, and they alone, are responsible.

They, and they alone, have the power.

They, and they alone, should be held accountable by the people who are their bosses provided the voters have the gumption to manage their own employees.

We should vote all of them out of office and clean up their mess!

Charlie Reese is a former columnist of the Sentinel Newspaper.