More to the Bailouts

So the intrepid host of this blog has been in a little bit of a funk lately, writer’s block if you will. But what a story to share as a way to get back into the blogging scene. Most of you may have already read about this but given the number of riots that haven’t ensued yet, my guess is: you may not.

Last week, I read a shocking report by Bloomberg News  detailing how the Federal Reserve ran up a massive deficit that gave $1.2 trillion in low-cost loans to the largest banks in America and Europe, as the 2008 financial collapse peaked. Yes, my friends. That’s $1.2 trillion with a T! $1.2 trillion loaned out at below-market rates. To put that figure in some perspective, that sum roughly makes up our entire federal debt and is equivalent to approximately one-third of all the assets owned by the Federal Reserve. One-third. That’s not a typo.

The largest aspect of the bailout, the Troubled Asset Relief Program (TARP), dedicated close to half a trillion dollars to support large financial and auto companies. That included billions given to AIG (the crooks financial company responsible for selling mortgage-backed securities) and Fannie Mae and Freddie Mac (the government-backed companies which sold, bought, and insured mortgages). In a report published last year, the Obama administration predicted that the government will lose $17 billion on its TARP investments in car companies, plus another $46 billion on housing programs including the Home Affordable Modification Program. Those losses may be balanced by profits the Treasury made from its loans to financial institutions.

In the case of its secret lending program, the Fed expects to recoup all the money it lent out. Also according to Bloomberg, the Feds have indicated that there were no credit losses on any of its bailout loans and that, in some instances, billions of dollars of profit were generated from interest and fees from the loans. The jury is still out on that, and we will have to see how much recovery the federal government receives from its lending.

Regardless of how much will eventually be repaid, one thing is certain: the amount of money the federal government loaned out (or outright gave away) during the 2008 financial meltdown is mind-blowing and maddening. Before being perverted by corporate interests, this is why the Tea Party was first founded and why the Occupy Wall Street movement is finally getting its legs. The fact that so much taxpayer money was doled out unconditionally and with no accountability is one of, if not the most, outrageous example of robbery we have ever experienced. I’m trying to form a coherent thought, but my efforts are muddled by the shocking nature of this news.

So much for making my triumphant return to the blogosphere.

– ACL

Putting an end to the “green jobs” lie

From guest columnist, The Hippie Conservative:

The year is 1993. The Soviet Empire has collapsed and the former country of Yugoslavia is now on the verge of war as the “Croatian Spring” has devolved into a state of starvation and chaos. The leaves have been stripped from every tree for food, the wood burned for heat and no animals can be found anywhere. A country which once hosted the 1984 Olympics in Sarajevo, the crown jewel of the Soviet Empire, is now reduced to an environmental disaster.

Conclusion: Without a sound economy, ecology and environmentalism has no meaning.

The Obama administration is under the belief that a sound economy and a sound ecology are not mutually exclusive. On that, I agree. Regulations to preserve our resources are necessary to keep the corporate machines from exploiting every corner of this county for profit. Without protection, federal and state lands would be sold off to lower taxes and fix budgets. States would compete for jobs by lowering pollution standards. Clean-ups would be ironically socialized. With a sound and rational regulating system, coupled with economic freedom and healthy profit margins, it’s entirely possible to use the tax money created by a healthy economy to preserve and protect our environment.

The problem is; the Obama Administration is under the mistaken belief that a sound economy can be created by using green energy as its jobs creator.

Here in Michigan, we had a Governor who also believed that green energy, coupled with subsidizing infrastructure projects could create jobs. So many jobs, she promised, that we would be “blown away” by the results. She pumped 100’s of millions of taxpayer dollars into her ideas. She increased road construction to the tune of an extra $100 million a year. She supported and subsidized high tech battery plants, the construction of solar panel manufacturers and the use of windmills. In the end, Michigan, while leading the nation in programs supporting green energy, also led the nation in unemployment 4 of her 8 years. 20,000 “green jobs” were created in a period where 1 million jobs were lost.

Progressives have a mantra when it comes to their failures and Michigan Governor Jennifer Granholm stuck to it like glue, “It would have worked if it were done broader, if we threw more money at it, or if it had no opposition.” She also blamed everyone under the sun but herself and her ideas. She blamed the automobile industry for leaving her state faster than other states while refusing to believe that her policies caused it. She even blamed the past administration for the better part of 6 years. Is this what the Obama administration is going to try to sell us? Blame instead of progress?

The truth is; it didn’t work because the technology is not ready, pure and simple.

To demonstrate; General Motors (owned in part, by the U.S. government) recently announced construction of a new, all solar powered manufacturing plant. The solar array cost $7.5 million and will create 310 jobs. It was heralded as the future here in Michigan, but that comes to $24,200.00 per job. If all 4.7 million jobs in Michigan were subsidized this way, it would cost Michigan $113.74 trillion to have a labor force. A bargain I’ll admit, compared to some of the other Obama administration ventures. I myself looked into a windmill for my cabin up north. The windmill I was interested in cost approx. $5000.00 and would supply 1500 watts at peak production. The U.S. government would then subsidize, through tax breaks, $1,500 of that cost. The problem is; it takes 4000 watts to run a house with all the electronics we have today. Add to that the fact that not every day produces peak production and my estimates were that it would take 20+ years to make a sound return on my investment even with the Government subsides. That doesn’t even include replacing the bearings every 3 to 5 years and the fact that the windmill power unit was only expected to last 10 years.

I decided to pass.

Despite the obvious failings of the green energy industry, the Obama administration has pumped billions into this idea. The most recent example is the solar panel company, Solyndra. This green company, once heralded as a prime example for the green jobs market by President Obama himself, has now collapsed after $535,000,00.00 of Federal investment. In the end, Solyndra created 1000 jobs at $535,000.00 per job! Imagine what all those people could have done with over a half million dollars each. I could retire, reinvest in another house and perhaps even start a business that would create real jobs. Even if this technology were to advance to a more logical level, what’s stopping China or anyone else from producing it for cheaper??

Add to that the failed green companies Evergreen, Schott, a branch of General Electric and too many others to list. All of these companies got huge subsidizes under the American Recovery and Reinvestment Act and the average cost per job was just short of a half million dollars each. At the same time, proven industry breakthroughs like gas and oil fracking were ignored and obstructed.

Before you reach the wrong conclusion, let me just say that I’m a huge supporter of green energy and energy independence. I just don’t believe that it’s ready for prime time and I don’t believe that it will produce the number of jobs needed to stimulate our economy that’s being claimed. I’m also not a big supporter of subsidizing industry. Research, done by the traditional methods including universities, is the way to go. If the product is ready, the market will take care of it without the government picking winners and losers based on campaign contributions. The trick is to make sure that the new boat (to use a metaphor) is finished and floating before we leave the one we’re on. The Obama administration is down-right hostile to any fossil fuels even to the point of promoting pure electric vehicles over hybrids that have a better chance of success. If we’re to reach the point of energy independence and less pollution, we need to explore all possibilities and that includes using fossil fuels. Global Climate Change is a serious issue and should not be ignored, but until the climatologists can accurately predict next year, my faith in their long term predictions is lacking. In the short term, we need to fix our economy so that we can have the luxury of caring about our environment.

– H.C.

The Hippie Conservative blogs at http://thehippieconservative.blogspot.com/

“Stop Coddling the Super-Rich”

An amazing op-ed by billionaire, Warren Buffet. So amazing, in fact, that I’m posting the whole thing:

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

I’ve always maintained that Mr. Buffet was a man among men. This is my confirmation.

– ACL

Raising the Roof

From guest columnist The Hippie Conservative:

Right now, as we speak, there is a serious debate going on in the halls of Congress. The debate centers around our Nation Debt and how we will attempt to reduce it before we go the way of other debt-ridden countries like Greece,  Portugal, Ireland, Spain,  Italy and frankly, too many more to mention. Most of these countries share two traits; one, they have  approached the 100% debt to GDP ratio (as we also have) and two, they are being put on welfare by the the IMF and the World Bank. The biggest difference between us and them is the second part, for no one on this planet is big enough to bail us out.

There are two approaches to solving this problem and they are NOT mutually exclusive.

The first is to raise “revenue” (the new code word by the Dems for taxes) and the second is cutting spending which is favored by the Reps. The problem is; neither side is being even remotely honest about the options we have or the consequences that we may face. In this piece I will try to disseminate what is really going on and how we could possibly save ourselves before we find ourselves in fiscal ruin. I’m warning you in advance; this is going to be full of boring numbers. However, I’ll try my best to keep it light.

First, let’s understand where we are.

We spend far more than we take in. About $.40 of every dollar we spend is borrowed; some of it from counties that are using that debt to leverage us into deals that are not favorable to our own interest. Debt to GDP ratio is used  by lenders in much the same way that equity in your house is used. Reach 100%, and it becomes unlikely that anyone will lend to you anymore (which is why the problem is different now than before under Bush, Clinton, or Reagan.). The spending can be broke down into four main entitlement programs; Medicaid, Medicare, Social Security, and Social Security  Disability Income (SS and SSDI are usually grouped together). Also on the table is the Military which, with three running wars that are unpaid for, uses about as much as any one of the entitlement programs. Together they consume approximately 63% of our budget. The debt itself consumes over 6% (in interest) and the remainder is mostly education, Government function and transportation infrastructure. Considering that 70% of the budget is focused on entitlement, military and the debt interest, it is impossible for us to address the problem without cutting those programs unless we raise more “revenue”.

For the Dems that’s an easy fix. Simply raise taxes on the rich. In fact, that’s their answer for everything. The main tenet of Liberalism is simple; the answer to ever problem is more government programs paid for by someone that isn’t them. I’m sorry people, but to a Moderate Centralist like me, that’s all I hear.  The problem with Rich people, as I like to say, is that they won’t keep coming to the same corner to be robbed. However, for the sake of argument, let’s see if that is even possible.

The biggest gripe the Dems have is the Bush Tax Cuts. The biggest lie that they tell you is; without it, we wouldn’t be in this situation and would be back into surpluses like we had under Clinton. There are several things wrong with that statement. The Bush tax cuts (for purposes of this piece I’ll include both the 2001 and 2003 cuts) didn’t amount to nearly enough to cover our borrowing. In fact, all 10 years of it would basically only erase this year’s deficit. Not the past 9 years. It’s a clever piece of wordplay, “Without the Bush Tax cuts, we wouldn’t have this deficit.” Correct, if you’re only counting this year’s. The second deception is that they use numbers that include ALL the Bush Tax cuts, not just the part that benefited the wealthy. Those include deductions for dependents, rebates, and raises in the Standard Deduction. While it’s true the bulk of the cuts went to the wealthy, including these cuts to the poor and middle class, it is dishonest in the way it’s presented. Let’s take a quick look at the income tax cut for the wealthiest Americans for example. Bush cut their rates from 39.6% to 35%, a decrease of approx. 5 percentage points or roughly 12% of their tax burden. Given that we get about $ 1 trillion in “revenue” from Federal income taxes and the rich pay about 90% of those revenues, we get;  $1 trillion x .12 = 120 billion divided by 90% = $108 billion a year. That’s a nice start, but a loooong way from solving our $1.4 trillion deficit. If you included every part of the Bush cuts that benefit the top 10% (like capital gains, estate tax, etc.), the highest number I can come up with is about $160 billion a year.  Again, I would support this, but it’s not the solution on it’s own. We have about $1.24 trillion to go.

Another gripe is; the Bush wars were unfunded. Well, that’s partially true. Some of the cost we would have had anyway. It’s not like military spending just stops when we’re not at war.We spend about $700 billion on defense and it’s hard to see a way we could reduce that by much since most of that is simply maintaining the military. A lot of the actual war cost was funded through one-time appropriations which would put it outside of the 70% we’re trying to cut . Accounting all the defense budget as being a target for cutting is once again dishonest. However, stopping all the wars (which I’m in favor of) would definitely save money through contracts. My research only showed that defense contract accountability needs to be stepped up. A safe number would be $ 100 billion saved a year. On the actual defense budget side,  I’ll go with the the Bowles-Simpson plan which recommended $100 billion in cuts. So, we would save another $200 billion which would bring us to $1.04 trillion. Still a long way to go.

Probably the single most dishonest thing that is being chanted by the media is that without a raise in the debt ceiling, we will “most likely” go into default. If that’s the “most dishonest”, then this statement is the second most dishonest, “Social Security checks won’t go out.” Both are patently not true unless the Obama administration makes them true. How would we not go into default? One solution is simple-print money. During the celebrated QE1 and it’s sister, QE2, the Treasury printed hundreds of billions of U.S. dollars. Why can’t we just print more? Unlike borrowing, printing doesn’t go on the debt. Social Security is also not the problem. S.S is almost completely self supporting. Why would they stop those checks then? The same reason your local school cuts busing when a millage fails; they want YOU to suffer, not them.

On the Republican side I hear only one argument, “Taxes of any sort will stifle the economy.” I would rate this as true to a point. The best way to tax is to tax prosperity, that’s what Clinton did. Taxing people when they are struggling however, particularly small business, practically guarantees that more will fail. That’s not rocket science. However, marginal tax increases on companies that aren’t struggling, like the oil companies, seems necessary. This is a well we have to be careful not to drain. Never in history has it been easier for companies to yank up their headquarters signs and move to some place more tax friendly. If you want an example, look at Michigan. I am convinced that there is a small amount that can be taken without pushing them out. How much depends on the company and it’s situation. I would warn anyone who thinks taxing corporations is the solution to think again. They won’t, and don’t have to, keep coming to the same corner to be robbed.

In conclusion, we are in dire straits. We CAN NOT tax our way out of this. The Democrats that are selling that line are simply lying to you. What they are really telling you is that we won’t commit suicide if we go up a couple of floors before we jump. The truth is; it will just take longer to fall and we’ll hit the bottom harder. We CAN NOT avoid cutting entitlements…I’m sorry. Taxing to alleviate some of the pain is necessary, but is not the solution. Democrats get fired for cutting social programs and entitlements. Republicans get fired for raising taxes. Both sides are fighting to blame the other for the cuts and taxes that both sides know is necessary. The only solution is forgiving both sides and taking the medicine for our sickness of spending too much and taking in too little.

– H.C.

The Hippie Conservative blogs at http://thehippieconservative.blogspot.com/

Taking Weinergate in Good “Spirit”

And the jokes keep a ‘coming.

My bet is: Brother Tony will be taking more buses from now on. That is, until Greyhound decides to offer a special Grey Hound Dog fare or something.

– ACL