Obama Says Debt is Good

In a speech at Georgetown University recently, President Obama explained why it was more important to bail out banks than it was to bail out the American people directly:

The president also defended the massive and unpopular government programs enacted under the Bush administration and expanded under Obama to bail out banks
and other financial institutions. He acknowledged that sending money directly to taxpayers might be more palatable — but said it wouldn't be as effective.

"The truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth," Obama said.

I have two counterpoints for Obama's statement.

1) It's true that there is a multiplier effect by capitalizing banks. However, instead of just handing a bunch of money to the banks, it would have been just as effective to use the bailout funds to pay down the mortgages held by these banks, which would be a huge benefit to the American people.

2) The economy is in free fall mode because it was over-leveraged. In other words, consumers, businesses, and banks racked up too much debt. Now that credit is not as readily available, people are spending less and living more within their means. Another term for the multiplier effect mentioned by Obama is leverage. So rather than let the economy find a new natural balance with less debt, our president wants us to increase our debt levels again!! And he's starting with the banks, the cause of the entire problem in the first place!!!

Don't fall for it. Beware of the debt trap. It sounds as if our government is out to enslave us financially.



Questioning Politics

2nd Report in Recent Weeks Warns of Violence by “Right Wing Extremists”

The following is a news release from the Constitution Party.

In the report, issued on April 7th, the DHS warns of potential violence by “right-wing extremists” who, the report says, can be found among those against illegal immigration, increased federal power and taxation, gun control, abortion and the loss of U.S. sovereignty. The report mentions returning war veterans as being particularly threatening, saying the “recession” is fueling radical “recruiting” of the military.

“This propaganda coming from the United States government should enrage each and every hard working American across the political spectrum”, said Constitution Party National Committee Chairman Jim Clymer.

“Especially the demonizing of veterans who gave so much while fighting in Iraq and Afghanistan. It’s reprehensible that those brave men and women are being eyed with such unwarranted suspicion,” Clymer added.

The DHS report comes on the heels of a report in Missouri which made similar mischaracterizations last month, saying those who follow third party candidates like Constitution Party presidential candidate Chuck Baldwin and Libertarian Bob Barr should be suspect. The Missouri Information Analysis Center’s (MIAC) warning to law enforcement was compiled with the help of the DHS but was later denounced by the Missouri State Police Chief as a “political attack”(http://wnd.com/index.php?fa=PAGE.view&pageId=93067).

The Constitution Party calls on Department of Homeland Security Secretary Janet Napolitano to likewise acknowledge her department’s April 7th report as a political attack, and rescind the damaging document.

“This is an egregious case of political profiling. The timing of this report - to coincide with tax protests across the country - should not be lost on Americans. It’s indeed a frightening reality when those who subscribe to a Constitutionally- based political view are characterized as potentially “violent,” Clymer noted.


Questioning Politics

It's Okay for the Government to Steal

The text below comes from a Libertarian Party communication From the Desk of Robert Kraus.

...if Congress gets its way, an unelected political appointee will soon have the power to solely decide what constitutes “excessive compensation” and forcibly confiscate it.

I’m talking about the so-called “Pay for Performance Act.”

Sponsored by Florida Democrat Rep. Alan Grayson, it gives the Treasury Secretary
unprecedented powers to confiscate the pay of ANY employee at ANY company that
received bailout funds if he thinks they didn’t really earn it – even if the compensation was required by a legal contract.

If it passes, the federal government would have the power to forcibly dictate the salaries of millions of private employees.

It’s another step towards the “maximum wage” law many socialists have been demanding for years.

And it doesn’t define what unearned pay actually is. It gives Tim Geithner, a man who decided to exempt himself from taxes, sole power to write whatever rules he pleases.

It also applies to ANY employee, not just a manager or someone who lost money. If you do ANY work for ANY company that accepted funds – even if you were a profitable employee who did everything right – the government would have the power to steal your paycheck from you.

And it’s retroactive, allowing the Treasury Secretary to use force against people for doing something that was perfectly legal at the time and required by contract.

The Soviet Union didn’t even allow its agents to do that to its citizens!

Now, no one should be getting rich off the taxpayer, but if allowing unelected bureaucrats unchecked authority to steal paychecks with no standard or procedure isn’t scary, I don’t know what is.

Giving the Executive Branch unchecked, uncontrolled and unconstitutional powers was a bad idea under the Bush administration, and it’s still a bad idea under Obama.

And this kind of federal power grab – allowing the Treasury Secretary to invent his own rules and steal paychecks from even profitable and low-level employees for any reason whatsoever – is exactly what the Libertarian Party was founded to fight.

Again, no one’s arguing that incompetent managers should be entitled to taxpayer cash. But this bill would hand an unelected bureaucrat undefined and uncontrolled powers to override legal contracts and decide for himself what private citizens should earn.

It’s another frightening step towards a totally nationalized economy.

This so-called “Pay for Performance Act” is nothing more than another step towards a virtual “national salary cap.”

EVERYONE is at risk.

Please fight back today.

Yours in liberty,

Robert Kraus

Acting Executive Director, Libertarian National Committee

I am amazed by the lack of uproar across our country at how powerful our government continues to grow. These are scary times, and with each baby step our government is taking, it gets more and more frightening.

Where is the outrage?!!


Questioning Politics

The Problem with Socialism

I received the following e-mail forward and enjoyed the analogy.

An economics professor at Texas Tech said he had never failed a single student before but had, once, failed an entire class. The class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said OK, we will have an experiment in this class on socialism.

All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too; so they studied little. The second Test average was a D! No one was happy. When the 3rd test rolled around the average was an F.

The scores never increased as bickering, blame, name calling all resulted in hard feelings and no one would study for anyone else. All failed to their great surprise and the professor told them that socialism would ultimately fail because the harder to succeed the greater the reward; but when a government takes all the reward away, no one will try or succeed.

The problem with Socialism is that you eventually run out of other people's money.

-Margaret Thatcher

Questioning Politics

Secret Report Targets Americans

I received the following Constitution Party e-mail newsletter dated March 17, 2009. Take it for what it's worth.

While I agree with a lot of what the Constitution Party stands for, if they really want to be taken seriously as a political party, they are going to have to do something about their grammar and punctuation in their communications.


Secret Report Targets Americans

Police Told Which Political Beliefs to Consider “Dangerous”

Lancaster, PA: A secret police report targets millions of Americans as potential “domestic terrorists” if they support the Constitution, oppose unlawful taxation, supported 2008 presidential candidates Republican Ron Paul, Libertarian Bob Barr or Constitution Party candidate Chuck Baldwin (Seen here on Lou Dobbs program ), or if they are opposed to abortion, are against unconstitutional gun control, if they display pro-Constitution bumper stickers or own copies of certain books and documentaries.

The report is part of an ongoing attempt by a number of organizations (http://www.splcenter.org/intel/intelreport/intrep.jsp) and movements to characterize law-abiding citizens as “white supremacists”, members of “hate groups” or, more recently as “terrorists”.

The report was generated by the Missouri Information Analysis Center

The Center is described as “the mechanism to collect incident reports of suspicious activities to be evaluated and analyzed in an effort to identify potential trends or patterns of terrorist or criminal operations within the state of Missouri. MIAC will also fun c tion as a vehi c le for two-way c ommuni c ation between federal, state and lo c al law enfor c ement c ommunity within our region.”

The se c ret report, distributed to Missouri law enfor c ement, lists as dangerous legitimate organizations in c luding those who follow a Constitutionally-based ideology in regard to states’ rights, firearm ownership, free spee c h and san c tity of life.

The Constitution Party , the fastest- growing third party, subscribes to the Constitutionally- based, limited role of the federal government and calls on members of all political ideologies to voice strong opposition to smear campaigns that demonize Americans because of their political beliefs.

The Constitution Party made numerous c alls to MIAC and was told an “offi c er” would respond to questions regarding this report.

No one at MIAC returned our c alls.

The MIAC report states “rightwing” militia movements “ c ontinuously exploit world events in order to in c rease parti c ipation in their movements. Due to the c urrent e c onomi c al and politi c al situation, a lush environment for militia a c tivity has been c reated.”

The terms “ c onstitutionalist” and “white suprema c ist” are often used inter c hangeably.

Page 7 of the report warns law enforcement that “militia members most commonly associate with 3rd party political groups. It is not uncommon for militia members to display Constitutional [sic] Party, Campaign for Liberty or Libertarian material. These members are usually supporters of former presidential candidate:[sic] Ron Paul Chuck Baldwin and Bob Barr.”

Issues of c on c ern to those listed by MIAC as reason for law enfor c ement to label them “terrorists” in c lude: Opposition to illegal immigration, implementation of RFID (radio frequen c y identifi c ation) and the planned merger of the US, Canada and Mexi c o (North Ameri c an Union). The so- c alled “militia movement” c ontains people who own c opies of the late Aaron Russo’s anti-tax do c umentary Ameri c a: Freedom to Fas c ism.

Members of a so- c alled “patriot movement” are des c ribed as being “dangerous” to poli c e in a se c tion of the report titled “You Are the Enemy” whi c h states:

“The militia subs c ribes to an anti-government and NWO mindset, whi c h c reates a threat to law enfor c ement offi c ers. They view the military, National Guard, and law enfor c ement as a for c e that will c onfis c ate their firearms and pla c e them in FEMA c on c entration c amps.”

The MIAC report distributed to Missouri law enfor c ement is a more virulent version of a similar report c ompiled by the FBI in Phoenix, AZ during the Clinton administration (see page one and page two of the do c ument). The Phoenix FBI do c ument c alls “defenders” of the Constitution “right-wing extremists.”

Constitution Party 2008 presidential and vi c e presidential c andidates Chu c k Baldwin and Darrell Castle, along with CP National Chairman Jim Clymer, are available to dis c uss this disturbing report and the severe limitations it seeks to impose on free speech.

Inquiries regarding this se c ret report may be made to: MIAC at 866 362 6422.

To see where c itizens are en c ouraged to submit a report that someone c ould be a “terrorist” c li c k HERE.

###

Take Action Now!

1. Call the St. Louis Chamber of Commerce and say you will not be visiting Missouri out of concern of being PROFILED.
(314) 231-55552. Call the St. Louis Convention and Visitors Commission and tell them you won't visit Missouri because of "political profiling". (800) 325-79623. Call the Missouri Information Analysis Center (MIAC) and tell them their smear campaign is not acceptable.(866) 362-6422 and (573)-526-6115


Questioning Politics

New Taxes...Hooray!!!

During the recent campaign season, we heard a great deal about lower taxes for the middle class, tax cuts for 95% of the American people.

Then government spending ramped up like never before. So what gives? How can spending increase while taxes decrease?

The following excerpt is from the Thoughts from the Frontline Weekly Newsletter, written by John Mauldin.

This week saw President Obama give us a budget with a projected deficit of $1.75 trillion dollars, and a massive tax increase on the "wealthy." But hidden in the details was an even larger tax increase on everyone. Obama wants to create a cap-and-trade program for carbon emissions. This is expected to generate $79 billion in 2012, $237 billion by 2014, and grow to $646 billion by 2019. These will be payments by energy (primarily utility) companies to the government. That will cause utilities to have to raise the prices they charge customers for energy. Such a level of taxation is eventually 4-5% of total US GDP. That is not small potatoes. And since the wealthy do not use all that much more power than the rest of us, it will affect the lower incomes disproportionately.

It will take money out of consumers' pockets and transfer it to the government. You can call it cap-and-trade, but it is a tax. And a huge one. Anything that will take 4% of GDP away from consumer spending is not business friendly. And by driving the cost of energy up, it will drive high-energy-using businesses away from the US to developing countries where energy is cheaper. It will make it even harder
for people to save money and drive up costs for the elderly and retired. But it
will make the environmental lobby happy.

Expect more hidden taxes in the near future. There are consequences to big government spending!!


Questioning Politics

China Could Destroy the US

I'm a little surprised it took this long to come out, but from the headline China Worried about US Treasury Holdings,

China's premier didn't say it in so many words, but the implied warning to Washington was blunt: Don't devalue the dollar through reckless spending.

"Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference Friday after the closing of China's annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

China has lent more money to Washington than any other lender, with loans totaling an estimated $1,000,000,000,000 (that's a trillion). Right now the dollar is relatively strong, as people are buying treasuries since they are considered to be the safest of all investments. The strength of the dollar is keeping inflation at bay.

So what would happen if China were to begin a concentrated effort to sell their treasuries? This could begin a wave of mass selling of treasuries at their current high price in order to lock in profits. This selling would have a couple effects. First, the price of treasuries would fall, which would make it more expensive for the government to borrow money, and would induce further selling of treasuries. Second, as foreign entities cash in their treasuries, they would want to convert dollars into another currency. This selling of the dollar would weaken the currency. The entire problem could become a downward spiral that would lead to a large devaluation of the dollar, which in turn would lead to an inflation problem.

As was stated in the paragraphs above, China could decide that holding treasuries is too risky for their liking and begin selling. Another reason China may begin selling is discussed further along in the article,

Wen expressed confidence the world's third-largest economy can meet its official growth target of 8 percent this year and emerge from the crisis "at an early date." But he said Beijing is ready to expand its 4 trillion yuan ($586 billion) stimulus if needed.

"We already have our plans ready to tackle even more difficult times, and to do that we have reserved adequate ammunition," he said. "That means that at any time we can introduce new stimulus policies."

Communist leaders worry about rising job losses and possible unrest amid a trade slump that saw Chinese exports fall 25.7 percent in February from a year earlier. They have promised to spend heavily to create jobs and boost exports.

In other words, China could decide that their money is better suited by spending within their own economy rather than collecting a minuscule amount of interest from the US Government.

The decisions China makes regarding the US debt that they hold could be the deciding factor for the direction the finances of the US take. This is something to watch and be wary of.


Questioning Politics

"Alternative" Political Parties

The following is an excerpt from the Monday Message mass email from the Libertarian Party dated February 23, 2009. My hope is that someday the general population will realize that there is a political party that more closely follows their own viewpoints than do the Republican and Democratic parties. We have a choice that extends beyond those two overly powerful parties. Learn about these "alternative" parties and make a more informed choice.

Backed by a growing swing vote that decides elections and support for its economic plans, the Libertarian Party is not an “alternative” political party. “Alternative” implies something outside the mainstream or an unconventional choice. The Libertarian Party, with its sensible balance of fiscal responsibility and social moderation, is, in fact, the nation’s only mainstream political party.In a nation where a vast swath of the electorate define themselves as generally fiscally conservative and socially liberal, it is the Democrat, Republican, Constitution and Green parties that find themselves isolated on the extreme left and right. Not only are these the voters who decide elections, poll after poll finds these voters generally agree more with the Libertarian Party than any other.

In their 2006 study of the American electorate, The Libertarian Vote, Cato Institute scholars David Boaz and David Kirby find between ten and twenty percent of the electorate is generally fiscally conservative and socially liberal – in other words, libertarian. A 2006 Gallup Governance Survey puts the “libertarian” vote at 21 percent, tied with the “liberal” vote and behind only the “conservative” vote at 25 percent.

That growing libertarian vote is getting close to the same percentage as those describing themselves and liberal or conservative and large enough to assemble a
winning coalition in election races. Many of the “unaffiliated” or “non-ideological” voters agree more with libertarians than with conservatives or liberals.

Much of the blame lies with ballot access laws placing an intolerable burden on citizens who wish to vote for something other than Republicans or Democrats. The Libertarian Party is hard at work in state legislatures across the country changing those laws.

Those same polls show majorities support the libertarian solution of reducing the size and government and expanding regulatory and tax relief for employers. They know it does more to create jobs and renew faith in the economy than spending $30 million on the “salt marsh mouse,” as Democrats propose, or spending $700 billion bailing out unsuccessful businesses and trillions more expanding government, as the past big-spending Republican administration and Congress did.

I am a registered Libertarian. I am strongly fiscally conservative. I am only moderate on social issues. If I were not a Libertarian, I would most likely be a Constitutionalist. For those of you who are both fiscally and socially conservative, I would strongly suggest checking that party out.

The point is...you don't have to settle for the lesser of two evils.


Questioning Politics

Thomas Jefferson Said It Best

The following are some interesting quotes attributed to Thomas Jefferson, from BrainyQuote:

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.

I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.

My reading of history convinces me that most bad government results from too much government.

No free man shall ever be debarred the use of arms.

The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.

Banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.


Questioning Politics

Intervention Required

The Senate has passed a new spending bill in the amount of $410 billion. President Obama is expected to sign the bill immediately.

I know promises really have no place in politics, but you will recall that one of Obama's primary campaign promises had to do with eliminating earmarks, pork, and wasteful spending.

The omnibus spending bill includes more than 8,000 congressional "earmarks," which total almost $8 billion. The earmarks have caused critics to question President Barack Obama's pledge to end wasteful spending, but Obama administration officials say the bill is a holdover from the previous Congress.

I guess Obama is taking a free pass on this first budget of his? And, not surprisingly, the Republicans are having just as much fun on this spending spree as any of the Democrats.

Many groups, including the Libertarian Party, and requesting (as a hopeless formality, I'm sure) that Obama veto the bill.

America’s third largest party urged President Barack Obama Tuesday to live up to his promise to “end politics as usual in Washington” and veto a $410 billion spending bill. The legislation includes 8,570 earmarks totaling $7.7 billion, a practice Obama pledged to end as part of his pitch to voters during the 2008 election.

“Republicans already broke their weeks-old promise to stand for fiscal responsibility by fighting to have their fair share of earmarks included in the bill,” said Libertarian National Committee Communications Director Donny Ferguson. “Will Obama keep his promise to end earmarks by vetoing this bill, or will this be the latest in a long string of broken Obama promises? Is Barack Obama a man of his word, or just another politician?”

The White House has indicated Obama will sign the bill, despite his earlier promises to oppose earmarking.

“Republicans are banding together to grab taxpayer cash and Obama is ignoring his own pledge to stop the practice. With Republicans and Democrats working together to continue wasteful spending it’s abundantly clear the Libertarian Party is the only party agreeing with the American people that earmarks must be abolished,” said
Ferguson.

Passing large spending bills is acting like a drug for our government (GOP & Dems alike). They are getting such a rush from finding "new and improved" ways of spending our money. But the system is growing immune to the rush, so each new spending program is going to have to be more monumental than the last in order to get the same rush. Our government is on a downward spiral. It's time for intervention!!


Questioning Politics

What Went Wrong with AIG?

The following was originally posted by John Carney on The Business Insider. This analogy explains in simple to understand language what happened to AIG to make it such a drain on taxpayer money. Enjoy.

Still confused about how AIG lost its shirt by going into the securities lending business big time? We understand. It's terribly complex and full of words that make your eyes glaze over.

So we decided to break it down into the simplest terms Wall Street transactions can be explained: the two cows story.

You have two cows.

John Paulson borrows one cow so he can sell it for $100. He gives you $10 as collateral.

You buy your neighbors cow for $100, which you finance by taking out a $90 loan from the bank and use John's $10 to make up the rest.

You brag to everyone about your financial health. You have assets--two cows you own, plus one Paulson owes you--worth $300, and liabilities of just $100.

A third of the country goes vegetarian.

You thought your two cows were worth $200 and now they are worth $140.

You express confidence in your financial health. Your assets are now worth only $200--your two cows plus the one John owes you--but your liabilities are still only $100. If necessary, you could sell the assets at this distressed price and pay off all your loans.

You hold onto your cows because you are sure the market is "dislocated." Some day someone will want to eat beef again.

The rest of the country goes vegetarian. Your two cows are now worth $2 each to guys who want to make dog food.

John Paulson buys a cow in the market for $2 and he gives it to you as repayment of the loan. You now have three cows worth six bucks.

John wants his $10 back.

The bank calls. It wants its $90 back.

You call the Federal Reserve and ask for a bailout.

Questioning Politics

President Obama's Tax Plan

Questioning Politics

Another Step Towards Socialism

We shouldn't be surprised to see that there is now talk of nationalizing the failing car industry. It's interesting and saddening to see the steps that are being taken to lead down this slippery slope. I expect to see further steps being attempted in the coming months as the US economy continues to sputter on.

Questioning Politics

Obama Declares War

Obama gets thrashed in an article by Larry Kudrow on CNBC.Com. In discussing the State of the Union address during the week, Kudrow writes:

He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.

That is the meaning of his anti-growth tax-hike proposals, which make absolutely no sense at all — either for this recession or from the standpoint of expanding our
economy’s long-run potential to grow.

Is Kudrow taking it a bit too far by calling this a declaration of war? Maybe. Will Obama's plans to spend our way out of the recession work? At some point, the government can spend enough to revive the economy. But at what cost?

Study after study over the past several decades has shown how countries that spend more produce less, while nations that tax less produce more. Obama is doing it wrong on both counts.

There is a lot to fear about the current spending plans by the administration, including the threat (promise?) of tax increases, and the specter of inflation in the near future, not to mention what are we going to do should this spending program not work.


Questioning Politics

Citi Is First In Line

It sounds like Citi is in talks with the Government to essentially nationalize the bank. It sounds like a very sweet deal for Citi. As Henry Blodget writes,

So Citigroup (C) has proposed that the US taxpayer and other preferred shareholders convert up to $75 billion of preferred stock into common stock, thus bolstering the company's tangible equity and putting it in less desperate need of a complete takeover.

And what will the US taxpayer get for this preferred stock conversion? 40% of the company for some of its $45 billion of preferred, say reports. The reports add that Citigroup's goal here is to keep the US's ownership under 50%, so this won't be a de facto nationalization.

Well, that's nice for Citigroup...and another ream-job for taxpayers. Citigroup's
common equity is currently worth $10 billion. If the US were to convert all $45 billion of its preferred at the current stock price, it should end up with 80% of the company, not 40%.

For the US to convert $45 billion of preferred to common and only get 40% of the company, Citigroup's existing common equity would have to be valued at $65 billion, not $10 billion, and the conversion price would have to be about $10 a share. Or the US would only be able to convert $4 billion of its $45 billion, which wouldn't help Citigroup's tangible equity ratio much.

Does this strike anyone else as completely corrupt? I hope there is more to the story that will come out as the situation unfolds. But as it is now being reported, it just doesn't sound fair or equitable to taxpayers.

The sad thing about the story is that this kind of corruption doesn't suprise me. I expect to hear about many more handouts in the billions of dollars this year. This is still only the beginning.


Questioning Politics

More Complaints about the Mortgage Bailout

A story on CNNMoney.com is backing up the points I was trying to make yesterday about the problems with the mortgage bailout.

Don't have a job?

Struggling to keep up with payments on a home worth less than half the mortgage?

Owe way more than your home's value, but can still afford the payments?

Sorry, but you likely aren't among the 9 million people who may get help under President Obama's $75 billion foreclosure prevention program.

The article went on to tell the story of a homeowner who is facing a similar situation to mine and thousands of others here in Vegas and in the Southwest in general.

Take Joe Martinez of Bristow, Va., who fits the profile of the "responsible" homeowner Obama cited in the plan. The government contractor and his wife thought they did everything right when they bought their brand new $600,000 house two years ago. They put 5% down and got a 30-year fixed-rate mortgage they could afford.

Others in their neighborhood, however, couldn't keep up with the payments. As foreclosure rose, the value of the couple's home plummeted to $450,000, leaving them doubtful they'd ever recover their investment.

Martinez called their lender to try to get into the Hope for Homeowners program, which would reduce their loan balance to 90% of the home's current value. But they were turned down because they weren't in default.

So two months ago, the couple stopped paying their mortgage, hoping they could then qualify. But even if they don't, they are willing to take the hit on their credit scores to stop throwing money down the drain.

"There's just no point to stay here," said Martinez, 29, adding he could rent the house across the street for half his monthly mortgage payment. "We don't want to give up our home, but it's never going to come back."

Martinez isn't interested in having his interest rate lowered. He would like to see some of his principal forgiven.

"Why would it be such a big deal for them to modify my loan?" he said, noting that his tax dollars are being used to finance the program. "Wouldn't that stabilize the economy?"

Is it time for we the people to all just stop paying our mortgages and walk away from our houses? The banks have already received our money in the form of taxpayer funded bailouts.

"Cutting principal is really what's needed to contain foreclosures," said Christian Menegatti, lead analyst for economic research firm RGE Monitor.

The next wave of mortgages may very well be instigated by those of us who are under water on our mortgages and just don't have any hope of ever getting back on the plus side. Nothing in the current mortgage bailout will do anything to solve the problem. We've been abandoned by our government after stealing our money to save irresponsible lenders.

Some experts, however, say Martinez is the exception. Those who can make their payments aren't likely to walk away because still need a roof over their head, said Howard Glaser, a mortgage industry consultant.

"Homeowners aren't day traders in their homes," he said. "The investment value is not an issue."

Really? Homeowners don't care about the value of their homes? Really?!!! We're the exception to the rule?!! REALLY?!!! That's exactly the kind of thinking that disappoints me most about this administration.


Questioning Politics

The Morgage Bailout Will Help Who?

He's gone and done it. Obama has unveiled his bailout for the mortgage industry to the tune of $75 Billion. Once again, it is a voluntary program to encourage banks and mortgage services to help troubled borrows refinance their mortgages or get their mortgages modified.

Those who know me know that I don't think the government should be spending any of our tax dollars to try and bailout mortgages or cars or banks or countries. Unfortunately, the government is going to spend our money, so I've resigned myself to complaining about how they spend it instead about whether they spend it or not.

The mortgage bailout is Obama's first attempt at actually trying to attack the heart of the economic downtown. It's about time somebody tries to do something about foreclosures, no amount of spendulus is going to help the economy until the housing market is turned around. But what is the program really going to accomplish?

I laugh at the fact that the bailout of mortgages amounts to $75 Billion, which is dwarfed by the spendulus package ($878 Billion) and the bank bailout ($700 Billion). Obama estimates his plan will help 9 million borrowers. A quick check of the math shows that amounts to $8,333 per borrower helped. The obvious question is how will 8 grand prevent anybody from losing their house over the long term? It doesn't add up!!

Troubled borrowers fall into one or more of three groups.

1) The economically challenged: those who have been laid off or have otherwise had income reduced due to economic conditions.
2) Sub-prime borrowers: those who got involved in crazy schemes to get them into houses they couldn't ever really afford.
3) Underwater mortgages: those who have seen the value of their home fall below the amount they owe on their mortgage.

Group 1 is out of luck. The bailout is only meant to help people who could afford their mortgage if the payments are reduced.

Group 3 is screwed. I'm especially bitter about this as I am a Las Vegas home owner and have watched my property value fall by about 45% over the past two years. I could not believe when I read the following passage:

...the new mortgage, including refinancing costs, can't exceed 105% of the current market value of the property, excluding many of the hardest hit.

My mortgage far exceeds the 105% threshold, as do most of the new buyers in California, Nevada, Arizona, and Florida. I just have to hope that I happen to be in an area that is considered the hardest hit. Certainly not a slam dunk decision for our government, as obvious as it might seem.

That leaves group 2 as the people most likely be helped by this program, but even that is a big maybe. Many of these borrowers did not provide income information for their home financing. It's entirely possible that the government can do nothing for them. Regardless, this group is the most irresponsible of the three groups, and deserves the help the least. So of course, they're getting the most help.

In my opinion, it's the responsible homeowners who are under water on their mortgage due to no fault of their own, other than buying at the wrong time, who could use the most help. My opinion is absolutely biased, since this is the category into which I fall. But I'm sure I'm not alone when I consider walking away from my house. My house must appreciate by 52% from its current level before I will break even. An optimistic holding period for reaching that goal is 10+ years. I never had any intention of staying in my house for over ten years. I look around at the homes I could buy now, and even at the homes I could now rent, and wonder why I should go on paying $500 more per month than the going market rate. I know I'm not the only one in this situation. But as a group, I don't see any help (from our own tax dollars) coming our way.


Questioning Politics

Oil Independence

I am not an environmentalist. I am against forcing people to go green. It should be the choice of the individual to spend the extra money to buy environmentally friendly products.

However, I am very concerned by our dependence on foreign oil. I received the following e-mail from the T. Boone Pickens Army. It's a good read.

Army!

We have to stay on offense! We can’t let the new Congress and the new Administration shove our dependence on foreign oil to the back burner. Here’s why. When we started the Pickens Plan last July, oil was at about $147 per barrel, gasoline at the pump was $4.11, and we were importing about 70 percent of the oil we use. Today oil is $100 per barrel less, but we are still importing about 70 percent of our oil. Why is this important? Because we are still at the mercy of foreign governments and unstable areas of the world for our oil supply. It is still a crisis, but it’s also an opportunity for us to fix it. Look at the headlines from just the past couple of days.

- Oil up $5 on OPEC cuts.
- Russia cut off natural gas supplies to Ukraine.
- Iran calls for oil embargo for supporters of Israel.

Just before the holidays, OPEC met to try to raise oil prices. OPEC delivers 40 percent of the daily oil supply. They decided to cut their output by 2.2 million barrels per day to try and get the price back in the $70 range. You've heard me tell you before that if consumption runs short of supply, then the only way to balance the books is by raising the price. What have we seen? Gasoline at the pump has jumped back over $2 per gallon in many areas and is moving back up.

Next headline: On New Year’s Day, Russia cut off natural gas supplies to Ukraine in a dispute over prices and payments. According to Reuters news service, “That has hit natural gas supplies to countries in eastern and southern Europe facing freezing temperatures and has worried European countries, which get one fifth of their gas through pipelines that cross Ukraine.” Think about that: The Russian government is willing to force its customers to pay whatever price it sets by cutting off supplies; not threatening to cut off supplies, but by actually doing it in the coldest part of winter. We don’t rely on Russia for our natural gas. We don’t import any of it, and we have plenty of our own natural gas supply.

The problem comes from that second headline – what happens if Iran and other Mideast and African countries decide to use oil as a weapon against us like Russia is using natural gas as a weapon against Ukraine? I’m not making this up. Here is what the Iranian News Agency reported over the weekend: "Pointing at Westerners' dependence on the Islamic countries' oil and energy resources, [Iranian leaders] called for cutting the export of crude oil to the Zionist regime's supporters the world over.” Iran understands how to leverage our over-dependence on foreign oil. OPEC understands how to manage output. We are left without any weapons in this price war. We have to remind our leaders in Washington that whether oil is a $50 a barrel or $150 a barrel it is the level of our dependence on foreign oil, not just the price, which puts us all at the mercy of unfriendly foreign governments and you don’t know when they will move against us.

-- Boone


Questioning Politics

Quote of the Day

Walter Williams, Professor of Economics, George Mason University:

"Imagine you see a person at work taking buckets of water from the deep end of a swimming pool, and dumping them into the shallow end in an attempt to make it deeper. You would deem him stupid. That scenario is equivalent to what Congress and the new President proposes for the economy."


Questioning Politics

Libertarians and Israel

The following is a mass e-mailing from the Libertarian party dated Jan. 5, 2009. I fully support the viewpoint held by the Libertarian Party on this issue. I don't understand what we have to gain by supporting Israel when there are many issues that ought to be addressed within our own borders that to me seem much more pressing. Enjoy.

Your Monday Message from the Libertarian Party:

Since its creation as a Jewish state in the late 1940s, Israel has been one of the main sources of tension and unrest in the Middle East. Now, more than 50 years later, Israel once again finds itself at odds with its Palestinian neighbors, forcing the hand of the United States to show where it stands on one of the most polarizing issues in modern history.

The tension between Jews and Arabs in the Middle East goes back thousands of years, and there is no easy solution to the issues in the Israeli/Palestinian dispute. Many U.S. presidential administrations have tried to act as brokers of power or arbiters of peace without any success. Libertarians aren't foolish enough to think we have the answer to solve the Israeli/Palestinian conflict. However, we do realize that steps can be taken by the United States to remove itself from injury in the conflict, and perhaps begin the process of long-term stability in the region. The biggest of these steps is to eliminate all economic and military aid to Israel and all other foreign countries. It's the general opinion of Libertarians that as far as the U.S. government should be involved, Israel should look out for its interests so long as its actions are not subsidized by the American taxpayer and Israel does not look to the U.S. for assistance. However, because Israel is the top recipient of foreign aid (aside from Iraq), it is reasonable to assume that some of the money given to it by the United States in foreign aid is used to either directly or indirectly support Israeli military operations.

Therein lies the problem.

There are several complications with U.S. foreign aid going to Israel. One, it makes the United States culpable for the actions of Israel that many times come with international condemnation. Secondly, it opens up the United States to cries of extreme bias in favor of Israel—a main catalyst for terrorism against U.S. interests at home and abroad.Critics of removing foreign aid from Israel cite that this is the United States turning its back on a staunch ally. However, this couldn't be further from the truth. The United States is not "giving up" on Israel by removing foreign aid as much as it is adhering to a principle of non-intervention—in Israel and across the world as well. Israel will still be a trading partner with the United States, and will benefit greatly from this trade. Additionally, Israel has a strong and effective military along with nuclear arms to deter aggression.

The United States' top priority needs to be the United States, and our billions of dollars of foreign aid to Israel have hurt our national security and international standing. "Contrary to the warnings of the do-something buffs, U.S. interventions in the Middle East have likely unleashed more anti-American terrorism and more pressure on energy markets than they have prevented," says Leon Hadar, a research fellow in foreign policy studies at the Cato Institute. In essence, the interests of Israel are not always those of the United States. However, it is not an analysis of what we have gotten in return from our relationship with Israel as it is an adherence to the principle of non-intervention. There is great wisdom in remaining disconnected from the problems facing other nations, especially when these problems are complicated and have negative consequences for getting involved. At issue for Libertarians in the current situation with Israel and Palestine is not so much who is right or wrong, but whether the United States should continue to support other countries with foreign aid. Libertarians may all feel differently on whether Israel is "justified" in invading Gaza, but Libertarians all agree that taxpayer-subsidized foreign aid to other countries is bad for business and bad for peace.

Treating Israel like any other country is not abandoning an ally, but freeing the United States from a cumbersome relationship of the likes George Washington, Thomas Paine and Thomas Jefferson all warned against hundreds of years ago. In the words of Jefferson, "peace, commerce, and honest friendship with all nations; entangling alliances with none."

Live free,

Andrew Davis
Director of Communications
Libertarian Party

Questioning Politics

The Time for Transformation Has Arrived

Today the House passed $787,000,000,000 in new spending under the guise of saving our economy from complete and utter destruction. It should be noted that none of the Republican members of Congress approved the bill, and even seven Democrats opposed the spendulus package.

The bill now goes up for vote by the Senate, where it is expected to pass with the support of the two "Republican" senators from Maine pushing it over the hump.

"We've done something today that's transformational for the nation," said House Speaker Nancy Pelosi, D-Calif., in a press conference after the vote.

House Appropriations Committee Chairman David Obey, D-Wisc., characterized the bill as "the largest change in domestic policy since the 1930s."

Does this talk of change and transformation scare anyone besides me? Personally, I like a free market system. I enjoy living in a Democracy. I don't want our country to transform into something else. I don't want this kind of domestic policy change. This kind of deficit spending is not healthy. In fact, this kind of deficit spending on the part of consumers is exactly why we are in this mess in the first place.

On top of the spendulus package that just passed, Obama is now considering a plan to subsidize the mortgages debt of homeowners facing foreclosure on their homes.

Details remain scarce, but at this point the subsidy plan entails having struggling homeowners take an affordability test and undergo a re-appraisal to see if they are eligible. The subsidy would allow servicers to adjust the loan terms without having the mortgage's investors take a loss, which should make them more open to the loan modification.

If the investors and mortgage holders aren't taking a loss, then who is? Taxpayers would take the loss. How is this fair to those who have been responsible about living within their means?

In my opinion, these policies are leading us perilously close to Socialism and/or Communism.

Questioning Politics.

Could This Be the End of Democracy As We Know It?

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship."

I believe this quote is attributed to Thomas Jefferson, although I could be wrong about that. Regardless of who said it, the point remains frighteningly true. I'm not about to say this current series of spendulus packages and government spending increases will be the cause of the downfall of the US government as we know it. But we should all be on high alert for further signs of a move towards socialism and/or widespread government dependence.

The late Dr. Adrian Rogers is credited with the following quote:

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."

It's important to be aware of the steps the government is taking and prepare yourself for the worst. I certainly don't want to be working for the benefit of someone else. If that's the situation we find ourselves in, we better have a plan of action to absolve ourselves of the problem. Any suggestions about what could be done?

Questioning Politics.

Quote of the Week

Morgan Stanley CEO John Mack apologized for his company's part in causing the housing bubble.

Rep. Michael Capuano, Democrat from the Boston area, rejected the apology with the following comment:

"You come here today on your bicycles after buying Girl Scout cookies and helping out Mother Teresa. You're saying, 'We're sorry. We didn't mean it. We won't do it again. Trust us.' I have some people in my (district) who have robbed some of your banks and they say the same thing."

I couldn't have said it better myself!!

If There Must Be a Tax Increase...

The other day, one of my favorite blogs, Independent Political Report, posted a letter from Ralph Nader regarding a financial transactions tax.

I have not paid attention to Nader or his views recently, but I appreciated some of the ideas put forth in this letter. For instance,

Let’s start with a fairness point. Why should you pay a 5 to 6 percent sales tax for buying the necessities of life, when tomorrow, some speculator on Wall Street can buy $100 million worth of Exxon derivatives and not pay one penny in sales tax?

The basis of my position on tax entails trying to find the most fair and equitable tax treatment for all people. I hate paying taxes, but I understand it is a necessary in order to provide for a safe and effective country. It doesn't seem fair to me that speculators are purchasing assets (stocks, bonds, etc.) without paying a sales tax, simply because of the type of asset it is. Nader goes on to say,

He adds that after the 1987 stock market crash, securities-trading taxes “or similar measures” were endorsed by then Senate Minority Leader Bob Dole and even the first President Bush. Professor Pollin estimates that a one-half of one percent tax would raise about $350 billion a year. That seems conservative. The Wall Street Journal once mentioned about $500 trillion in derivatives trades alone in 2008—the most speculative of transactions. A one tenth of one percent tax would raise $500 billion dollars a year, assuming that level of trading.
Economist Dean Baker says a “modest financial transactions tax would be enough to “finance a 10% across-the-board reduction in the income tax on labor.

I would love to see a decrease in my income tax bill. I don't believe a 0.1% tax added to my purchases of stocks would hurt me, nor would it affect most people.

There are conditions, however, to my support for a tax of this nature. I would only favor this tax if there is a reduction in income tax. This condition would be next to impossible to be included, with the economy in being in its current state.

Condition #2 is that there be a waiver of financial transaction taxes in 401(k) and other retirement accounts. Taxing retirement accounts would be counterproductive.

I don't anticipate ever seeing a proposal such as this being discussed seriously in Congress or the Senate. The big financial institutions who would end up paying a large chunk of the increased revenue just wouldn't allow it to happen. It's all just wishful thinking.

Obama for Change

All About the Stimulus

I read a very interesting article on CNNMoney.com about the need for the economic stimulus and why other proposals, such as giving the money directly to taxpayers might not be the best idea.

A lot of the article made sense to me, and I don't feel quite as uptight about what is going on in Washington.

On the other hand, a lot of it sounded like it could be propaganda. If given enough time, you could write a persuasive article for just about anything.

For me, the real question is why would anyone actually interested in the long-term welfare of this country wish to add another $1,000,000,000,000 to our deficit to knock a few months off a recession that will correct itself within a couple years at most?

In the end, it boils down to my lack of trust in the government agenda. I feel that although something might need to be done, this "stimulus plan" is not based in an effort to revive the economy. If left alone, the economy will rebound on its own like it always has and always will. It might take two or three years of pain, but this pain is essential to creating a healthy economy in the future.

The "spendulus" might knock a couple months off the length of this recession. But is that really worth adding $1,000,000,000,000 to the national deficit? Worse yet, is it worth the guaranteed inflation that will haunt us on the other side of the recession?

Wasting Money

We learned in a Congressional Oversight Panel report, released Friday, that the initial $250 Billion in disbursements from the bailout was a smashing success for the banks. The report states that the initial disbursements amounted to overpayments to these companies in the amount of $78 billion. That's all equity (probably non-taxable) on the banks' books. They must be thrilled!!!

Financially ailing insurance giant American International Group, which the Treasury Department deemed to be too big to be allowed to fail, received $40 billion from the Treasury for assets valued at $14.8 billion, the oversight panel found.

This makes me want to establish my own bank and immediately begin requesting funds from the government. Do you think they'd fall for that one?

One of the following happened:

1) The government overpaid on purpose as a way of propping up the balance sheets of the banks. In other words, this was a massive government handout that the treasury knew would never be paid back, despite their insistence to the contrary;

or

2) The government didn't know that they were paying too much. I don't know if this is the scarier scenario or not. I do think this is the most likely case, as evidenced by this quote:

In December, in response to questions from the oversight panel, the department wrote that the value of preferred stock purchased by the government was "at or near par," meaning Treasury paid $1 for every $1 dollar of asset.
"The way the Treasury secretary described it does not fit with the numbers that were produced in our much more extensive valuation analysis," panel chairwoman Elizabeth Warren told reporters Friday. "The secretary of the Treasury described it in December that these were par transaction and that is not supported by the numbers."

The fact of the matter is, whether you agree with the stimulus or not, how can you trust the government to handle financial transactions of this magnitude based on their track record? Leaving aside the persistent threat of corruption, most politicians just don't have the education or experience to deal with financial matters of this sort.

Meanwhile, the Government continues to act just like a little kid, always pushing their limits to see how much they can get away with before we, the people, get angry enough to do something. Unfortunately, we apparently haven't gotten angry enough in a long long time.

This is just another reason why I am 100% opposed to any new stimulus plan being proposed.

Letter from Chairman Stan Lockhart

Below are excepts from a letter dated February 3, 2009 from Utah Republican Party Chairman Stan Lockhart. Very interesting read!!

Dear Fellow Republicans:

Last week I was in Washington DC and had a chance to hear a great deal regarding the federal "stimulus package". As crafted by Democrats, I can't see much evidence that it will deliver on its promise to jump start the economy. Much of the funding won't be spent immediately and many of the pork barrel projects won't create jobs. It is the same old tax and spend liberalism we thought Ronald Reagan vanquished long ago. This huge spending bill has reminded me of some famous quotes:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship."

"Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage."

We live in a world of instant gratification. Advertisements bombard us daily with slogans like "you deserve it now". No wonder some are blinded with promises of government doing most things for them. It's an enticing pitch. But dependence on government leads to bondage and it seems as if we are heading there with increasing speed. After all, it's the Democrat mantra.

Timeless, traditional values are needed now more than ever before. Simple, time honored financial counsel of getting out of debt, living within our means and making do with what we have are needed today. Government should live by these same values. Self-reliance should never be out of style. Can anyone truly believe that all this federal spending won't burden future generations? In its current form, this spending bill is mortgaging our posterity's future. There is a phrase that the bandage should fit the wound. In its current form, this Democrat bill is just more special interest pandering.

Economic Stimulus Q&A

This year, taxpayers will receive an Economic Stimulus Payment. This is a
very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV
set, thus stimulating the economy.

Q. But isn't that stimulating the economy of China?
A. Shut up.

Scolding Wall Street

After the New York comptroller's office reported on Thursday that bonuses in 2008 totaled $18.4 billion, Obama and Geithner lashed out against companies that continued to issue huge bonuses while receiving billions in funding from the Treasury's Troubled Asset Relief Program.

"That is the height of irresponsibility. It is shameful," Obama said Thursday.

Obama is right. The bonus payouts at this point in our economic cycle are shameful. Obama is talking the talk.

But what about walking the walk? Why not hold some of these companies accountable for their actions in the form of penalties and fees? As the nursery rhyme goes, words will never hurt them.

I believe in capitalism. I believe in a free market economy. But our free market is broken right now. The essential element we are missing is accountability. Until the companies in question are held accountable for their mistakes, their wrong-doings, and their bad decisions, no amount of stimulus or bailout will correct the state of our nation.

Change

I couldn't have said it any better!!

How will the stimulus package help?

The article What Are They Buying? by Thomas Sowell can be found on National Review.

Everyone is talking about how much money the government is spending, but very little attention is being paid to where they are spending it or what they are buying with it.
The government is putting money into banks, even when the banks don’t want it, in hopes that the banks will put it into circulation. But the latest statistics show that banks are lending even less money now than they were before the government dumped all that cash on them.
Even if it had worked, putting cash into banks, in hopes that they would put it into circulation, seems a rather roundabout way of doing things, especially when the staggering sums of money involved are being justified as an “emergency” measure.
Spending money for infrastructure is another time-consuming way of dealing with what is called an immediate crisis. Infrastructure takes forever to plan, debate, and go through all sorts of hearings and adjudications, before getting approval to build from all the regulatory agencies involved.
Out of $355 billion newly appropriated, the Congressional Budget Office estimates that only $26 billion will be spent this fiscal year and only $110 billion by the end of 2010.
Using long drawn-out processes to put money into circulation to meet an emergency is like mailing a letter to the fire department to tell them that your house is on fire.
If you cut taxes tomorrow, people would have more money in their next paycheck, and it would probably be spent by the time they got that paycheck, through increased credit-card purchases beforehand.
If all this sound and fury in Washington was about getting an economic crisis behind us, tax cuts could do that a lot faster.
None of this is rocket science. And Washington politicians are not all crazy, even if it sometimes looks that way. Often, what they say makes no sense because what they claim to be doing is not what they are actually doing.
No matter how many times President Barack Obama tells us that these “extraordinary times” call for “swift action,” the kind of economic policies he is promoting take effect very slowly, no matter how quickly the legislation is rushed through Congress. It is the old Army game of hurry up and wait.
If the Beltway politicians aren’t really trying to solve this crisis as quickly as they could, what are they trying to do?
One important clue may be a recent statement by President Obama’s chief of staff, Rahm Emanuel, that “A crisis is a terrible thing to waste.”
This is the kind of cynical revelation that sometimes slips out, despite all the political pieties and spin. Crises have long been seen as great opportunities to expand the federal government’s power while the people are too scared to object and before any opposition can get organized.
That is why there is such haste to do things that will take effect slowly.
What are the Beltway politicians buying with all the hundreds of billions of dollars they are spending? They are buying what politicians are most interested in—power.
In the name of protecting the taxpayers’ investment, they are buying the power to tell General Motors how to make cars, banks how to bank, and, before it is all over with, all sorts of other people how to do the work they specialize in, and for which members of Congress have no competence, much less expertise.
This administration and Congress are now in a position to do what Franklin D. Roosevelt did during the Great Depression of the 1930s—use a crisis of the times to create new institutions that will last for generations.
To this day, we are still subsidizing millionaires in agriculture because farmers were having a tough time in the 1930s. We have the Federal National Mortgage Association (“Fannie Mae”) taking reckless chances in the housing market that have blown up in our faces today, because FDR decided to create a new federal housing agency in 1938.
Who knows what bright ideas this administration will turn into permanent institutions for our children and grandchildren to try to cope with?

I think the point that really needs to get across is that the politicians don't have an interest in solving the problem facing the country. They all know the economy would correct itself if left alone for a year or two. This feels more like a consolidation of power and a move towards a more socialist and centralized government than an actual attempt to rescue the economy.

Libertarian Party on Obama's Bailout

The following was a mass email I received from the Libertarian Party last month regarding Obama's proposed stimulus package. It's an interesting read.

Your Monday Message from the Libertarian Party:

Well, we didn't actually go to Harvard.

In doing some background research on Obama's plans for the biggest public works project since the 1950s, we talked to Harvard economist Dr. Jeffrey Miron about what this means for the economy. Here's what he said:

LP: Does it make much sense, in terms of stimulating the economy, for the government to invest in public works programs that, when built, produces nothing further?

Miron: Overall, no. The argument is that the beneficial effects of stimulus on overall activity are worthwhile, even if from a microeconomic consideration the projects to not make good cost/benefit sense. Thus, in the extreme form, the standard Keynesian position would say it makes sense to have the government hire people to dig ditches and fill them back up.
The theory that underlies this view is not stupid, but not compelling either.
At a minimum, any stimulus should be on things we would want even if they were not needed for a stimulus. I am personally not persuaded there are many things in that category given the levels of current spending.

LP: Is there a high chance of damage to the economy by implementing a public works program such as that proposed by Obama?

M: There is certainly the possibility of adverse effects. New programs tend to last and have bad effects on incentives and efficiency.

LP: What do you predict to happen should Obama's proposal be implemented?

M: I think the economy will recover in 6-12 months, with or without the stimulus.

LP: Is the best prescription for economic recovery keeping the government out of the economy?

M: In my view, yes.

Miron brings up a great point about the lasting effects of new government programs. In fact, it was program of the New Deal that was at the center of the latest economic troubles: Fannie Mae.

Additionally, the idea that government can, quite literally, dig itself out of this current economic trough is patently absurd. In doing so, the government often makes things much worse for the economy. You might say that the government pays to dig its own grave--or, at least one for the taxpayers.

There are several major problems with Obama's public works plan, aside form the fact that government is making a mistake by even trying to take a hands-on role in the market.

Cost/Benefit Ratio - It is not a guarantee that construction projects will continue to bring any economic benefit upon completion, and "building for the sake of building"--as is Obama's objective--is an invitation for wholesale government waste. This is like what Miron referred to as "government hir[ing] people to dig ditches and fill them back up." Public works projects that benefit the economy more than the cost of production may be pursued for this reason (at least by those that agree with government intervention, as clearly the Libertarian Party does not); however, no public works program should be undertaken for the sake of simply creating jobs. Some economists, like Economic historian Price Fishback, predict that "such public-works spending would crowd out a significant amount of private construction," on top of being a waste of taxpayer money.

Limited Scope - Public works programs benefit one specific industry, and even a smaller amount of those in that industry. Not every construction firm is able to handle the renovations of a bridge, or the construction of a new school. Most of those that would benefit from a large-scale public works program would be large and specialized firms. As such, a construction-based stimulus would have no demonstrative benefit outside of the construction industry. These types of plans "suffer from a common problem–they will end up generating employment for highly specialized businesses and workers, rather than stimulating economic activity more broadly," says economists Susan Woodward and Robert Hall. "Thus a program that funnels money to construction firms and their workers mainly raises their incomes and employment levels and has relatively little effect elsewhere."

Too Slow For Impact - One main element of any economic stimulus plan is rapid and immediate relief. Relief plans that take too long to implement often kick-in after they are needed. This is a major complaint with most stimulus packages that are proposed, and large-scale public works programs are one the best examples of this delay. Many of these projects will take too long to get from legislation, to planning, to approval, and finally to the actual construction phase in order to have their intended impact. What we will eventually have is massive construction spending during a time where an economic stimulus is not needed.

Magic Money - One of the oft cited objections with Bush's economic policies was his penchant for massive government spending without any plans to offset this spending with cuts in other areas. As a result, trillions have been added to an already exploding national debt. A huge problem with Obama's public works program is that it will add at least $700 billion (and most likely more, in the end) to our national debt, and Obama has stated no plans on how he hopes to address the deficit. Most Keynesians will overlook this fiscal imbalance, but when the spending appears to have no real economic benefit (should it fail the already-established cost/benefit test), then Keynesians must even wonder if there is a point to the spending.

Overall, the moral of the story is this: Obama's public works plans carry no attestable benefit, and much unknown risk. On top of this, there are several other better options for economic recovery...like keeping government out of the economy altogether, and letting it work itself out.
In this economic crisis, the best options for economic stimulus are ones of less government action--not more government action. If government wishes to do anything, we suggest it simply cut taxes. Tax cuts are always a good thing, and their economic impact much more proven.
This way, taxpayers benefit, the economy rebounds and government still gets that warm-fuzzy feeling inside like it did something good.

Live free,

Andrew Davis

Director of Communications
Libertarian Party