Archive for the ‘Economics 101’ Category
Posted by iusbvision on August 12, 2011
IUSB Vision Mortgage Crisis Analysis Vindicated by New Book – Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon
Posted by iusbvision on August 9, 2011
In Reckless Endangerment, Gretchen Morgenson, the star business columnist of The New York Times, exposes how the watchdogs [Barney Frank & Chris Dodd] who were supposed to protect the country from financial harm were actually complicit in the actions that finally blew up the American economy.
Drawing on previously untapped sources and building on original research from coauthor Joshua Rosner—who himself raised early warnings with the public and investors, and kept detailed records—Morgenson connects the dots that led to this fiasco.
Morgenson and Rosner draw back the curtain on Fannie Mae, the mortgage-finance giant that grew, with the support of the Clinton administration, through the 1990s, becoming a major opponent of government oversight even as it was benefiting from public subsidies. They expose the role played not only by Fannie Mae executives but also by enablers at Countrywide Financial, Goldman Sachs, the Federal Reserve, HUD, Congress, the FDIC, and the biggest players on Wall Street, to show how greed, aggression, and fear led countless officials to ignore warning signs of an imminent disaster.
Many IUSB Vision readers will remember substantive multi-part analysis which had gone viral on the internet with some of our posts on the subject still getting hundreds of hits per day; these posts being the most popular – HERE, HERE, HERE, HERE, HERE, HERE, HERE, HERE and HERE.
Last year famed economist Dr. Thomas Sowell published his best-selling tome of the mortgage collapse Housing Boom & Bust which told what happened in an analysis that very closely matched ours. Some of our critics might say that this is no surprise because the editors of this website and Dr. Sowell are very like-minded, but the critics did not expect Reckless Endangerment.
This new book from the New York Times business columnist also tells the story almost point per point as we told you right here at IUSB Vision, with the exception of how we saw the modification of Glass-Steagal with the Gramm-Leach-Bliley bill. Partisan leftist Robert B. Reich’s review of this book tells several important parts of the same story that we did (and I am sure he didn’t like it), and The American Interest says that Reckless Endangerment could bring about the end of the Democratic Party itself.
Campus leftists who said that our analysis of the mortgage collapse was just partisan rhetoric can stick this in your pipe and smoke it. Our analysis has been confirmed by sources from the left and right, as well as financial publications such as the Wall Street Journal, Investors Business Daily, Forbes etc. While the New York Times took a different view during the campaign season to help the Democrats, outside of the campaign season the NYT has done some top rate analysis on this issue which they deserve credit for. We told you in our analysis that the New York Times predicted in 1999 that this collapse could happen and published the Republican attempts to fix the problem since 2001.
We have been vindicated. As IUSB Vision Editor I also feel vindicated as I spent countless hours of research and sleepless nights to bring you such an accurate analysis early on in the collapse. We are pleased that our analysis has stood the test of time and is still considered one of the best abridged online sources of this crisis available on the internet.
Here is a 30 minute interview with Dr. Sowell on Housing Boom & Bust which we believe is a must see to get insight on the issue –
Posted by iusbvision on August 8, 2011
It is more than just a scarey title. Mark Steyn is a Canadian news, political, economic, and demographic analyst whose rhetorical witt, wisdom and skill has been compared to Samuel Clemens. He is an award winning writer.
Steyn’s 2008 book titled America Alone, predicted the economic and cultural fall of Western Europe that we are witnessing in our news today. Steyn is not a bomb thrower, rather he is one of the most dedicated and mindful analysts that Canada has ever produced.
Steyn has written for a wide range of publications, including the Jerusalem Post, The Orange County Register, Chicago Sun-Times, National Review, The New York Sun, The Australian, Maclean’s, Irish Times, National Post, The Atlantic Monthly, Western Standard and New Criterion.
Steyn is a visiting professor at Hillsdale College, is a saught after lecturer. There are few in the world that are his rhetorical equal.
Amazon Link for After America.
Posted by iusbvision on August 8, 2011
For someone who the left said wasn’t qualified, her analysis of what is going on and where we have been going has been far ahead of the “experts”.
In the coming days we’ll sort through the repercussions of S&P’s downgrade of our credit rating, including concerns about the impact a potential interest rate increase would have on our ability to service our suffocating $14.5 trillion debt.
I’m surprised that so many people seem surprised by S&P’s decision. Weren’t people paying attention over the last year or so when we were getting warning after warning from various credit rating agencies that this was coming? I’ve been writing and speaking about it myself for quite some time.
Back in December 2010, I wrote: “If the European debt crisis teaches us anything, it’s that tomorrow always comes. Sooner or later, the markets will expect us to settle the bill for the enormous Obama-Pelosi-Reid spending binge. We’ve already been warned by the credit ratings agency Moody’s that unless we get serious about reducing our deficit, we may face a downgrade of our credit rating.” And again in January, in response to President Obama’s State of the Union address I wrote: “With credit ratings agency Moody’s warning us that the federal government must reverse the rapid growth of national debt or face losing our triple-A rating, keep in mind that a nation doesn’t look so ‘great’ when its credit rating is in tatters.”
One doesn’t need a Harvard Law degree to figure this out! Just look across the pond at Europe. European nations with less debt and smaller deficits than ours and with real “austerity” plans in place to deal with them have had their ratings downgraded. By what magical thinking did we figure we could run up perpetual trillion dollar deficits and still somehow avoid the unforgiving mathematics of a downgrade? Nothing is ever “too big to fail.” And there’s no such thing as a free lunch. Didn’t we all learn that in our micro and macro econ classes? I did at the University of Idaho. How could Obama skip through Columbia and Harvard without learning that?
Many commonsense Americans like myself saw this day coming. In fact, in June 2010, Rick Santelli articulated the view of independent Tea Party patriots everywhere when he shouted on CNBC, “I want the government to stop spending! Stop spending! Stop spending! Stop spending! STOP SPENDING!” So, how shamelessly cynical and dishonest must one be to blame this inevitable downgrade on the very people who have been shouting all along “stop spending”? Blaming the Tea Party for our credit downgrade is akin to Nero blaming the Christians for burning Rome. Tea Party Americans weren’t the ones “fiddling” while our country’s fiscal house was going up in smoke. In fact, we commonsense fiscal conservatives were the ones grabbing for the extinguishers while politically correct politicians and their cronies buried their heads in what soon became this bonfire.
With S&P and others now warning that we could face another downgrade if we don’t get serious about our debt problem (i.e., recklessly spending money we don’t have), Washington needs to wake upbefore things get worse! We’re already hearing murmurs about QE3, which is just madness and will further debase our currency at a time when the dollar’s status as the world’s reserve currency is already being questioned. The loss of the dollar’s reserve currency status would adversely impact us in every conceivable way. Our standard of living would decline as imports become more expensive (including imports of foreign oil), government wouldn’t be able to finance deficits as cheaply, and American corporations – employers – would lose a competitive edge. It would be another crack in our status as a financial superpower.
Now we’re all getting hit with rising food prices too. Back in November of last year, I predicted this would happen when the Federal Reserve dropped a $600 billion money bomb called QE2 on us! That’s short for “quantitative easing 2.” It’s a fancy term for running the printing presses and creating money out of thin air – which drives down the value of the dollar and makes the price of everything more expensive.
As I predicted six months ago, these policies will lead us down a path where for the first time in our history our fate will be taken out of our own hands and placed in the hands of the world’s capital markets. They will force us to make the responsible decisions that our leaders are unwilling to make. Just as the destinies of the Central Valley farms have been taken out of your hands by the federal government’s overreach into your water rights, so the destiny of our nation will be taken out of our hands because our leadership has failed to get our financial house in order.
This isn’t some theoretical threat any more. It’s already happening. The world’s biggest bond investment fund PIMCO announced last month that it was dumping U.S. Treasury bonds. The head of PIMCO, Bill Gross, one of the world’s preeminent debt investors, warned that the U.S. is in serious risk of default with our trillion dollar deficits and no end in sight. And last week, credit rating agency Standard & Poor’s downgraded our credit outlook to “negative” – that’s the first time that has happened to us since the attack on Pearl Harbor. The IMF has even given us formal notice that, unless we do something to deal with our debt problem, we could tip the world economy into another recession.
It is a disgraceful and embarrassing situation when the United States finds itself justifiably chastised in the same tone normally reserved for near-bankrupt economies.
And in this, like in shutting off your water, the federal government has failed you. Their reckless spending and destruction of the dollar will make access to available credit for farmers and small business owners harder to get. And it will make transportation costs higher because it will hit everyone at the gas pump. You see, because the Obama White House won’t let us drill domestically, we’re forced to import oil that we pay for in dollars. So, when the value of the dollar drops, the price of gas goes up. And if you think $4 a gallon is bad, wait till you see what life is like at $6 or $7 a gallon.
Last November, the so-called smart people all laughed at me when I warned them of this. They told me not to make such a big deal about rising prices. Well, guess what – it became a big deal all on its own.
In fact, there was an editorial in the New York Sun that said – and I quote: “As gasoline is nearing six dollars a gallon at some pumps, the cost of groceries is skyrocketing, and the value of the dollars…has collapsed to less than a 1,500th of an ounce of gold. Unemployment is still high. Shakespeare couldn’t come up with a better plot. But how in the world did Mrs. Palin, who is supposed to be so thick, manage to figure all this out so far ahead of the New York Times and all the economists it talked to?”
Well, I’m sure the New York Times writers will remember the famous line: “You don’t need a weatherman to know which way the wind blows.” And right now the American economy is in the howling, hot headwinds of a gathering storm. We’re printing up and buying up our own notes at an unprecedented rate, and the Fed is artificially holding interest rates down to nearly zero. Anyone with commonsense could see what was coming. Unfortunately, common sense is in short supply among our leaders. It’s like they never believe that the rules of common sense apply to them. They think somehow we’ll escape from the consequences of their policies. It’s the same magical thinking that allows them to run up trillion dollar deficits and still think that we can “win the future.”
Every other generation has weathered recessions by sacrifice and belt tightening. But our leaders today decided that they could magically paper over the tough decisions by running the printing presses. A little history lesson might have showed them how well that worked out for Germany in the 1930s. The Weimar Republic inflated its currency so much that it took a wheel barrel full of paper money to buy a loaf of bread. That might be the main thing I remember from Mr. Crum’s history class at Wasilla High, but it told me all I needed to know about the inflationary dangers of a weak currency and why we must avoid it. What a shame Mr. Crum didn’t teach at Harvard.
That was just three months ago, and things have already gotten worse. We have to face this storm head on. It won’t be easy, but there are real solutions to grow our economy and reduce our debt.
First, we need to get serious about our deficit. No more accounting gimmicks. No more cuts in “out-years” that never materialize. The permanent political class in D.C. might be fooling themselves with these Enron-like accounting games, but they’re not fooling the world’s capital markets. And we don’t need any more happy talk from the White House about “investing” in solar shingles and really fast trains. The White House shouldn’t even bother floating these new spending programs. We can’t afford them. Period. We need to stop this deficit spending, balance our budget, repeal Obamacare, cancel all unused stimulus funds, and reform our entitlement programs. We have to have an adult conversation about our spending commitments; circumstances have changed, and we must adapt. I know none of this will be easy, but, “thick” or not, the average American outside the D.C. politico bubble knows that we no longer have a choice! We will have entitlement reform and a balanced budget; it’s just a matter of how. We can do it ourselves in a calm, methodical, and responsible manner, or we can wait for the world’s capital markets to ram it down on us. Let’s be responsible and do it ourselves. And let’s get serious about reducing the size of government across the board and rooting out waste. How many more reports (that today are destined to merely gather dust on the shelf) do we need about duplicative and unnecessary programs before we actually do something about government waste?
We need to get this economy moving again, and the real stimulus we’ve been waiting for is domestic energy development. We must reduce our dangerous dependence on foreign oil by responsibly developing natural resources here. This will provide good paying jobs, reduce our trade deficit, increase federal and state revenue, ensure environmental standards, and actually stimulate our economy without incurring any debt. That’s real stimulus! Affordable, plentiful, and secure energy is the foundation of every thriving economy. Let’s make it the foundation of ours. Let’s do the opposite of President Obama’s manipulation of U.S. energy supplies. Let’s drill here, build refineries, and stop kowtowing to foreign countries in asking them to ramp up energy production which makes us even more beholden to them as we rely on their foreign product. Let’s move on tapping our massive domestic natural gas reserves. Natural gas is the perfect “bridge fuel” to a future when more renewable sources are available. It’s clean, it’s green, and we’ve got a lot of it. Let’s drill. Let’s build an infrastructure for natural gas cars and power plants. Energy development can help kick start our economic engine.
In addition to energy security, I embrace a pro-growth agenda that can make American corporations far more competitive on the global stage. (I will be writing more about this in the coming days.) We need to tell the world, “America is open for business again!” And let’s welcome industry by reducing burdensome regulations. The Obama administration keeps strangling businesses in red tape. From the EPA’s rulings to that nightmare known as Obamacare, the Obama administration is hanging one regulatory albatross after another around the private sector’s neck. Let’s get government out of the way and give the private sector room to breathe, grow, and thrive. We can provide businesses confidence to expand and hire Americans in a stable environment.
Be wary of the efforts President Obama makes to “fix” the debt problem. The more he tries to “fix” things, the worse they get because his “solutions” always involve spending more, taxing more, growing government, and increasing debt. This debt problem is the greatest challenge facing our country today. Obviously, President Obama doesn’t have a plan or even a notion of how to deal with it. His press conference today was just a rehash of his old talking points and finger-pointing. That’s why he can’t be re-elected in 2012.
Our economic news is disheartening and the task before us can seem daunting, but we must not lose our sense of optimism. People look around today and may see only the negative. They see a culture and a nation in decline, but that’s not who we are! America must regain its optimistic pioneering spirit again. Our founders declared that “we were born the heirs of freedom.” We are the heirs of those who froze with Washington at Valley Forge, who held the line at Gettysburg, who freed the slaves, carved a nation out of the wilderness, and allowed reward for work ethic. We are the sons and daughters of that Greatest Generation who stormed the beaches of Normandy, raised the flag at Iwo Jima, and made America the strongest and most prosperous nation in the history of mankind. By God, we will not squander what has been given us!
Our destiny is still in our own hands if we pick ourselves up and act responsibly and quickly. We must all get involved. Concerned Americans must seek truth, work harder than ever, and be willing to sacrifice today to ensure freedom tomorrow. Please get engaged in 2012 electoral politics and support experienced, vetted, pro-free market fiscal conservatives who will dedicate all to preserving our Republic and protecting our Constitution.
Posted by iusbvision on August 5, 2011
Note: be sure to see more updates below
UPDATE II – Bachmann calls for Tim Geithner’s resignation:
This will affect you.
Moody’s said it was going to hold off for a while but after this they may follow suit.
Unsecured credit will be more expensive. This means those who use short-term loans such as farmers, import/exporters etc will pay more. It means that interest the USA pays on the debt will go up, costing up to $110 billion a year and there will be other impacts.
[Note: This was released late on a Friday night. Releasing at this time skips the weekday news cycle and my Monday there will be other big news to report. As a result most people will not see this in the news therefore it will have less of an effect on Obama.]
· We have lowered our long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’ and affirmed the ‘A-1+’ short-term rating.
· We have also removed both the short- and long-term ratings from CreditWatch negative.
· The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics. · More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
· Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.
· The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.
The message is clear, the cuts are not good enough, and if we spend more than the current cuts (which are actually not cuts at all but planned decreases in the increase of spending) we will get lowered again. As IUSB Vision readers are well aware, we have a history of enacting spending cuts down the road that are reversed by a later Congress.
Our revised downside scenario–which, other things being equal, we view as being consistent with a possible further downgrade to a ‘AA’ long-term rating–features less-favorable macroeconomic assumptions, as outlined below and also assumes that the second round of spending cuts (at least $1.2 trillion) that the act calls for does not occur.
Expect Democrats to read the first point and say, “See it fell short because we did not increase taxes” but as you can see point five makes it crystal clear. S&P is not threatening our rating if tax rates drop or stay the same, they are threatening to lower us again if we spend more than we say.
We must not forget that the Democrats rejected every that had a real shot of preserving AAA. This latest calamity is very solidly in the Democrats responsibility. I know that leftist partisans will reject that fact, but to them I ask, what plan did the Democrats put up that had a shot of preserving AAA? The Democrats did not put up even one plan that would bring us to the point where we just stopped having yearly deficits even ten years down the road.
Granted the GOP could have fought for a slightly better deal, but the government cannot be controlled from just one House of Congress. This is why elections matter.
The S&P Report linked in the PDF above continues to say that there have only been modest reductions in intended discretionary spending and that the real problems of Medicare and other entitlements have not been addressed. The GOP has put forward a plan that will work, the Democrats have been promising to come out with an entitlement reform plan but have reneged.
We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.
Analysts say that, over time, the downgrade could push up borrowing costs for the U.S. government, costing taxpayers tens of billions of dollars a year. It could also drive up interest rates for consumers and companies seeking mortgages, credit cards and business loans.
A downgrade could also have a cascading series of effects on states and localities, including nearly all of those in the Washington metro area. These governments could lose their AAA credit ratings as well, potentially raising the cost of borrowing for schools, roads and parks.
UPDATE – Here are the talking points from the NYT and Paul Krugman in reaction to this. Quite frankly their response is a joke and is designed to fool people who are not trained in economics.
It was S&P that had Lehman Brothers rated AAA just a month before they went bankrupt.
The truth: the overwhelming majority thought that the Fannie Mae/Freddie Mac junk paper and the credit default swaps that insured them were backed up by the US Government, and they were, as this was what most of the bailouts were about, but the government decided to pick winners and losers as to who would get bailed out and who would not.
AIG got bailed out in large part so that it could pay Goldman Sachs who it owed a massive amount of cash. Lehmen Brothers did not get bailed out, by and large because they were Goldman Sachs biggest competitor. All too often Bank A would apply for bailout and so would Bank B; Bank B would get bought out by Bank A using TARP funds and then Bank A would give a large donation to ACORN or another Democrat ally.
This is why so many smaller banks got bailout while Lehman Bros was allowed to collapse arbitrarily and capriciously.
It was S&P that rated AIG’s credit default swaps as rock solid investments.
The truth: and the US Govt bailed them out and the credit default swaps were paid, just as almost everyone expected would happen, so yes indeed they were pretty solid, they got overextended and the claims could not be paid, so you and I paid them and the Goldman Sachs of the world made megabucks.
Of course, if Fannie Mae had not engaged in the behavior it did; buying high risk loans, pushing banks to issue more high risk loans, issuing junk investments based on those loans, and long term massive internal corruption, all while it was being given total cover by Barney Frank, Chris Dodd, and Barack Obama and Paul Krugman defended them with the zeal of a defense attorney.
The Democrats Financial Regulation Bill doubled down and reimplemented the exact same government policies that started the ball rolling towards mortgage collapse in the first place, e.g. the government forcing banks to give out high risk loans in inner cities. Paul Krugman supported that legislation and this policy and does to this day.
It was S&P that admitted to making a $2 trillion accounting error (remember, playing with numbers is their core business and reason for being) in advance of the downgrade of U.S. debt.
The truth: and the Dept. of Education has lost over a billion dollars and has no idea where it went, all in all this adds up to a colossal “so what” as is explained further below.
A downgrade in U.S. debt means functionally that U.S. treasury bills are, in S&P’s oh-so-wise opinion, less trustworthy and a greater credit risk to investors. This comes only a day after investors fled the DOW and S&P500 into the safe and waiting hands of…you guessed it: U.S. treasuries. The same treasuries that S&P suddenly finds a more dangerous buy. So what does that say about the stock market, and the S&P500? Perhaps S&P might wish to re-evaluate the credibility of its own market index.
The truth: with every plan to lead to a balanced budget rejected by Democrats for as long as the eye can see, it is a crystal clear message that the government, as long as Democrats are in power, has no intention to pay off the debt, ever. If you don’t think that this makes our Treasury Bills less secure than you are likely smoking something you shouldn’t be.
History has shown that when a nation’s deficits exceed 100% of GDP its currency and credit have a rapid collapse. It happened to Greece as it approached 120% of GDP. It is predicted that it will soon happen to Spain. If you think it cannot happen here please see the previous paragraph.
None of the other ratings agencies are taking the drastic step that S&P has. S&P is all alone in their move to downgrade U.S. credit.
The truth: There is nothing drastic about it, both S&P and Moodys have warned since 2009 that this would happen if the United States continued to burrow like this. They both put out warning after warning. I have written about those warnings and so has the elite media. Moody’s will likely follow suit in a matter of months. Mini-UPDATE – This talking point is a LIE. Egan-Jones Rating Agency downgraded the USA to AA+ on July 16, 2011.
When all is said and done, U.S. treasuries are still the safest investment in the world, and it would take either an idiot or someone with a strong political agenda to contend otherwise.
The truth: and that is why so many countries are dumping our debt and buying Gold, Euros, oil futures, etc. Why? The economic policy the Democrats and the Federal Reserve is following reduces the value of the dollar so that the dollars we pay back are worth far far less than the dollars the government burrowed.
The investments are safe IF you consider the mass printing of money to pay those bills and service the debt to be just fine. What good is a 4% interest long-term T-Bill when the dollar loses twice that plus in inflation/devaluing?
China alarmed by US money printing [Note: We have many links like this, This one is from 2009. The recent ones are more strident]
As is often the case Paul Krugman’s talking points that are nothing but a pack of mostly irrelevant half-truths (read lies as half-truths are just lies designed to paint a false picture).
Lastly, it does not matter what you or Paul Krugman things of S&P and Moodys. Slandering them will not change the fact that the interest we pay on debt will go up, local governments will see a major impact, those who use unsecured debt such as seasonal loans for farmers, import/exporters etc will have to pay more and the credit markets will freeze up even worse than they are now. All of this will cause inflation that impacts the poor the most.
It has been well reported that the markets have expected this and have been bracing for it for months so that the impact would not be as immediate, but even the markets meltdown of the last 10 days is an indicator as the market has not behaved like it has of late since Jimmy Carter.
So if S&P is so “out there” why would the markets have been preparing for this as expected?
UPDATE III – Rick Santelli understands basic economics, Ezra Klein does not (what a shock). Listen to what Ezra Klein calls for policy wise. Did you catch it?
UPDATE IV – CHINA: ‘Good old days’ of borrowing are over…
UPDATE V: The latest spin and talking points from the left as of Saturday, August 6.
It amazes me how dishonest the far left will go to paint a false picture. The latest tactic is to snip out every instance of revenue from the S&P report and present it as if the credit rating was lowered because the GOP would not raise taxes.
In essence this is the leftists case –
Blaming the Republicans (Tea Party):
“We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.”
“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.”
Tax Increases Needed:
“It appears that for now, new revenues have dropped down on the menu of policy options.”
“The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.”
“..if the recommendations of the Congressional Joint Select Committee on Deficit Reduction–independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners–“
Here are a couple of opinion pieces in the elite media taking that spin:
Is the U.S. Credit Rating a Victim of GOP Sabotage? – http://finance.yahoo.com/blogs/daniel-gross/u-credit-rating-victim-gop-sabotage-021622372.html
Downgrade turns up heat on Congress – http://money.cnn.com/2011/08/05/news/economy/downgrade_congress/index.htm?hpt=hp_t2
First of all, the attempt to spin the S&P report as a slam on the GOP is debunked by the text of the report itself:
Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing.
Second, S&P uses the word revenue several times in the report, but in context they make it clear that what they want to see is a plan that cuts spending with the cuts actually happening, and any revenue enhancing plan actually enhance revenue. Here is the rub, when non-partisan economic realists use the word revenue, this does not always means raising tax rates on wage earners and small businesses as the Democrats define it. There are a number of ways to raise revenue. For example when Bill Clinton signed off on the Newt Gingrich/John Kasich budgets in the late 1990’s this included a temporary reduction in the capital gains tax rate.
In 1997, the Republican Congress passed a tax-relief and deficit-reduction bill that was resisted but ultimately signed by President Clinton. The legislation:
- Lowered the top capital gains tax rate from 28 percent to 20 percent
- Created a new $500 child tax credit
- Phased in an increase in the estate tax exemption from $600,000 to $1 million
And we all know what happened, government revenues shot up in a big way and we actually had a deficit free year.
President Bush and the GOP used this same strategy to increase revenue after the Clinton/Gingrich/Kasich capital gains tax cut expired.
Reducing the capital gains tax rate from 20% to 15% increased capital gains tax receipts by 79% from 2000 to 2004. Cutting the dividend tax rate by more than half–from 39.6% to 15%–increased dividend tax receipts by 35% from 2002 to 2004. And corporate tax receipts have nearly tripled since 2003, reaching $250 billion for the past nine months, 26% higher than the same period last year. (WSJ July 25, 2006)
For anyone willing to read it, the January 2007 Congressional Budget Office annual report settles any debate. Citing the original CBO forecasts of capital gains tax revenue of $42 billion in 2003, $46 billion in 2004, $52 billion in 2005, and $57 billion in 2006, Democrats who opposed the rate reduction in 2003 claimed that the capital gains tax cut would “cost” the federal treasury $5.4 billion in fiscal years 2003-2006.
Those forecasts were embarrassingly wrong. The 2007 CBO report revealed that capital gains and dividends tax collections were actually $51 billion in 2003, $72 billion in 2004, $97 billion in 2005, and $110 billion in 2006, the last two years nearly doubling initial forecasts.
In other words, forecasts in earlier CBO reports were low by a total of $133 billion for the four-year period. (Am Thinker September 11, 2010)
By lowering the rate we increased the revenue. Why is that?
It is the same reason that the Obama Deficit Commission, which was totally ignored by the Democrats, said that the best way to increase revenue is to lower the tax rates, including the corporate tax rate, make the progressive taxes flatter, reform the tax code so that it is easier and less expensive to comply with. Their reasoning is simple, the expense of compliance causes people to resist the tax code, or to often avoid taking action that will be taxable. High tax rates encourage people who have disposable assets/income to just park their money in such a way that it is not taxed. The money just sits there, or is invested in gold, or in China, or is sheltered. This is why “tax the rich schemes” actually transfer the tax burden to the lower middle class and accomplish exactly the opposite of their stated intent. For explanations in great detail of why that is examine the following LINK. Also the tax increase plan put forth by the administration does not target the millionaires and billionaires hardly at all, but guess who it will impact the hardest – LINK?
There are two more ways that this report has been spun. They quote this section of the report on page four:
Our revised upside scenario–which, other things being equal, we view as consistent with the outlook on the ‘AA+’ long-term rating being revised to stable–retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating.
But here is what the left leaves out; immediately above those lines it says the following:
Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.
So what does that mean in English? It means that IF we have a REAL GDP growth of 3% steady and inflation stays below 2% a tax increase can work. But you see that is the problem, those are BIG ifs. Real GDP growth is under 2% and close to 1% in the private sector. Inflation, when measured with the same formula that was used under Carter/Reagan is at almost 10%. This figure also assumes that growth will not be impacted by such a tax increase, and since small businesses and upper middle class wage earners would get hit hardest by the Administration’s proposed tax increase (as we demonstrated above) the impact on economic growth would be substantial.
Some, like the economically incompetent and flamboyantly partisan Daniel Gross who writes in the Yahoo Finance column linked above, simply engage in the most dishonest demagoguery imaginable:
It has long been obvious to all observers — to economists, to politicians, to anti-deficit groups, to the ratings agencies — that closing fiscal gaps will require tax increases, or the closure of big tax loopholes, or significant tax reform that will raise significantly larger sums of tax revenue than the system does now. Today, taxes as a percentage of GDP are at historic lows. Marginal rates on income and investments are at historic lows. Corporate tax receipts as a percentage of GDP are at historic lows. Perhaps taxes don’t need to rise this year or next, but they do need to go up in the future.
Otherwise, the math of deficit reduction simply doesn’t work. And that’s how the deficit reduction deals signed off on by Republican presidents like Ronald Reagan and George H.W. Bush came about.
Yet the action in Washington in the past year has all gone in the opposite direction. President Obama deserves some of the blame. Several months ago, he struck a deal with Congress to make the fiscal situation worse — extending the Bush tax cuts for two more years and enacting a temporary cut in the payroll tax.
Wow it sounds horrible doesn’t it? Can we just tax ourselves into prosperity or is there something missing from Mr. Gross’ assessment?
Today, taxes as a percentage of GDP are at historic lows
That is because government spending as a percentage of GDP is at historic highs. The way that GDP is calculated the formula (which is greatly flawed but that subject is a 40 page term paper) adds governments spending to all private sector consumer, investment, exports minus imports, and capital goods spending – so when government spending goes up by 80% and the tax rates stay the same the percentage of the tax rate to GDP drops. If you simply compare the private sector part of the equation to how much is taxed that paints quite the opposite picture. So in essence, the more the government prints, burrows and spends, the lower it pushes that tax to GDP ratio. In 2007 the yearly deficit was a measly 198 billion, whereas last year just the yearly deficit approached $2 trillion – an increase by a factor of 10. 2010 YEARLY DEFICIT: $2.08 Trillion. That is 10 times higher than the last year Republicans had budgetary control.
Marginal rates on income and investments are at historic lows.
In the 1950’s the top marginal tax rate was 90% and after 1964 the trop marginal rate was lowered to 70% by JFK. So this appears to be true, or is it? Here is what he forgot to tell you. Back in those days almost every transaction was a cash transaction. It is very easy to keep cash transactions off the books and they did not have computers tracking things like we have today. The simple fact is that there was massive tax noncompliance. If you were going to have to pay 90% tax on doing a business transaction why would you do it? People just cheated and did not report many of their transactions. Much of the private sector did this as a matter of survival to stay competitive. The fact is that we pay much more now than we did before because compliance is much higher than it was back then. Also Mr. Gross looks at only two taxes, the wage rate and the capital gains rate, but how many other taxes are there now which we did not have back then? There are hundreds of smaller other taxes now of phones, internet, etc and this list could go on forever. There is a great deal of direct inflation cause by being taxed right and left.
And speaking of that capital gains tax, which we showed you before that actually takes in more money as the rate is lowered; China has zero capital gains tax because they see it as a disincentive to engage in economic activity. China has been enjoying 9% plus GDP growth for some time now and they buy much of our debt.
Corporate tax receipts as a percentage of GDP are at historic lows
But here is the rub, the largest corporations get big giveaways in the tax code which allows Google to pay 2.4% of 3.1 billion in income and GE to pay 0% on 14.2 billion. This is why these corporations, and most of Wall Street supports Democrats because they have been stopping all attempts at tax code reform. Top 20 Industry Money Recipients This Election Cycle – Who is in the back pocket of Wall Street? – Reminder: Big Business Loves Big Government (especially Democrats)
Also keep in mind that Canada and Japan have recently lowered their corporate tax rates to attract business back home. When Ireland lowered its corporate tax rates they attracted a lot of companies to set up shop there and their revenue went way up. Higher taxes on businesses cause businesses to either go out of business or flee the country. When companies decide to stop being American companies the tax from them vanishes. The more you tax corporations, the more will leave, the less money you will get and the more unemployed you will have. Never forget that when corporations have to pay high taxes, they simply raise the price of their product to cover it so it is YOU that pays. A high corporate tax simply inflates prices and makes the corporation the tax collector for the state.
But just for good measure:
One place it (the “unexpected” revenue) has come from are corporations, whose tax collections have climbed by 76% over the past two years thanks to greater profitability. Personal income tax payments are up by 30.3% since 2004 too, despite the fact that the highest tax rate is down to 35% from 39.6%. The IRS tax-return data just released last month indicates that a near-record 37% of those income tax payments are received from the top 1% of earners — “the rich,” who are derided regularly in Washington for not paying their “fair share.” (WSJ Oct. 6 2006) – The rich paid more in real dollars after the tax cuts.
Stay tuned for more talking point debunking.
Posted by iusbvision on August 1, 2011
Please forgive the lack of updates as I described in our previous post we have not been in a position to do a lot of blogging lately. A new web site is coming as well for the editor.
As far as the budget deal we thought we have a few comments.
1 – We were never in danger of a default. The government brings in almost 200 billion a month in tax dollars which is more than enough to service the debt. Anyone who said that the August 2nd date would result in default is just lying straight up. Judging by how the elite media has been repeating this it furthers my personal observation that journalists are lazy and are, as a collective, the most uninformed people I have ever encountered.
2 – These polls that you here about in the news saying that the people want “republicans to compromise” are polls like the CBS News poll that had a sample which included only 25% Republicans, so the sample was rigged. Notice how the Democrats are not asked to compromise in the press? When the people were stone against Obama Care by a 60% margin where was the press pounding the polls than? Where was the compromise when the Democrats would not allow the GOP into the room and would only see the bill a few hours before a vote?
3 – “Reagan increased the debt limit”… Reagan did not have a House controlled by his own party. During that time we had the 24/7 nuclear triangle operating at the pinnacle of the Cold War and a government shut down at such a time would have undermined our efforts to posture and beat the Soviets.
4 – “We need to raise taxes on the rich”. First of all we have been “raising taxes on the rich” for decades now so why is it that John Kerry paid 12.34% on $5,072,000 worth of income? The dirty little secret is that the tax rate that the Democrats are talking about is the wage earner rate which is paid by high-end wage earners such as doctors and engineers, but it is also the rate paid by most small businesses that have employees. Most of the income that the “rich” bring is defined by the tax code as “unearned income”, so you could raise this tax rate to the moon and the multimillionaires and billionaires will laugh as it will not be they who pay it. For more details on why this is follow this LINK.
Using static models as the CBO likes to use the Democrats proposed tax increase would pay for all of 10 days of deficit spending. Of course since people do not operate in a static universe the result would be an impact on job creators and even less revenue growth to the government. Can anyone name a mainstream economic theorist who said to raise taxes during what appears to be a double dip recession?
4 – As far as spending cuts in the “deal”, we must remember base line budgeting. If we froze spending at current levels Washington would consider that to be a $9.5 trillion dollar “cut”, so all we are talking about here is a small reduction in the typical increases in spending. As far as spending cuts are concerned this is not a serious plan as spending under this deal will continue to skyrocket. Democrats and some leftist journalists are calling these “draconian cuts” and are simply engaging in the most dishonest demagoguery imaginable.
5 – But here is the rub, when we lose our AAA credit rating, which now appears unavoidable as both Moodys and S&P have said that neither the Boehner plan nor the Reid plan are serious about getting spending under control, it will cost us more than $100 billion a year in interest alone; when that is factored in there are no reductions even in the increases in spending. It gets worse. When you add the damage to the economy that loss of AAA will bring it makes all of this worse.
The loss of AAA will impact most unsecured credit, it will impact the value of the dollar (inflation), it will impact those who use short-term credit such as farmers who use seasonal loans and import/export businesses. It is going to damage the economy in such a way that most people will feel it. We did not lose AAA even during the great depression. The “deal” which passed is also easy to demagogue because the left will say that this deal IS the “Boehner Plan” (which is largely isn’t any more do to an almost total cave on spending cuts) and HIS plan caused us to lose AAA.
[Note: The first plans that were introduced by the Tea Party/GOP were much more serious and had a real chance of preventing the loss of AAA. While this is indeed a failure of government, is there any doubt that the Democratic Party is intent on blowing up our credit rating? The first proposals from the House had a chance of preserving AAA and the media/Democrats had a conniption fit calling called it extreme. Think about this folks, preserving AAA is now an extreme position according to much of the elite media and a political party. The Constitution does have limits and the GOP cannot run the government from the House. This is why elections matter.]
6 – The deal also includes a vote on the Balanced Budget Amendment to send it to the states. If this amendment resolution passes the Democrat controlled Senate and gets to the states it will be a great tool to begin to get this spending problem under control. If it looks like it will pass the Senate I expect the Democrat leadership will pull some stunt prevent the vote or prevent its passage. Government has a structural institutional incentive to spend more and more, so the only way to curb that is to make a structural change. Aside from a vote on this Amendment, which I will stress has not happened yet, this was not a tough deal or a Herculean compromise by any stretch.
This is a must see exchange between Marco Rubio and John Kerry on the debt limit debate. Be sure to watch every second as this is invaluable.
Kerry will think twice before trying to posture Marco Rubio again. Notice also, even though Rubio did not join the TEA Party Caucus he defends their position, which is to offer a plan that fixes the problem. Rubio uses a most interesting analogy to show why this is so important.
UPDATE – The latest version of the deal includes $2.1 Trillion in cuts over 10 years with half planned now and the other half planned by a “budget cut committee later”. Keep in mind that cuts in “Washington Speak” are not cuts, but rather a decrease in the increase in spending. So instead of a planned increase in spending over 10 years of $9.5 Trillion they will plan to increase spending by $7.4 trillion. The president gets his debt increase limit extended to well passed the campaign, deficit spending shoots up, no entitlement reform, no plan to balance the budget over the next eight years. There are some actual small cuts in discretionary spending, but entitlement spending that is on autopilot. Of course even this is a fraction of the increase in discretionary spending that has gone up since 2008.
Obama’s Treasury Secretary Tim Geithner: Taxes on ‘Small Business’ Must Rise So Government Doesn’t ‘Shrink’
Posted by iusbvision on June 28, 2011
Wow, Geithner is spinning hard. 3% of businesses. Most businesses are on paper or are 1-2 man operations. Small businesses used to do almost 80% of the hiring in this country, now it is only 64%. The tax he wants will affect most businesses who actually hire. That is the point he is so desperate to avoid. Congressman Ellmers almost put him away and the following two questions in red text would be the key followups that would have finished him, “Mr. Geithner, how much of that 3% of small businesses you want to tax actually employ five or more people?”
At the same time the Obama Administration is fine with his friends at Google paying 2.4% on $3.1 billion in profits. General Electric, which was ran by Obama’s friend GE CEO Jeffery Immelt who just took a job at the White House, paid no tax on $14.2 billion in income and actually got government subsidies. GE also owned MSNBC until just recently, but I am sure that is just another one of those funny coincidences.
Geithner talks about the top 2%, but what he didn’t tell you is that the way the tax code works that top 2% excludes much of the very wealthy [see this link for details why]; who such a tax smacks are the genuine wealth creators , upper middle class risk takers and small businesses. A husband and wife with two kids may own and operate three local pizza shops and on paper that small business will bring in $250,000 a year in income (notice I did not say profits, I said income), but most of that money will go to paying employees, buying the pizza delivery man’s gasoline, food, energy for the ovens and freezers, boxes, cleaning supplies, wages, other taxes etc. Everyone must get paid before the owners do and they will be lucky to scrape $50K for themselves, which in turn they will be paying more taxes on.
Then comes the right hook, “Mr. Geithner, how can one be against small businesses that actually hire (pause for effect) and for jobs at the same time?”
I just talked to Addison Scott, who is on Congressman Ellmers’ staff, and I passed those two questions on to them. I can’t wait to see her lay these two questions on Geithner and watch him squirm.
Geithner’s explanation of the administration’s small-business tax plan came in an exchange with first-term Rep. Renee Ellmers (R.-N.C.). Ellmers, a nurse, decided to run for the U.S. House of Representatives in 2010 after she became active in the grass-roots opposition to President Barack Obama’s proposed health-care reform plan in 2009.
“Overwhelmingly, the businesses back home and across the country continue to tell us that regulation, lack of access to capital, taxation, fear of taxation, and just the overwhelming uncertainties that our businesses face is keeping them from hiring,” Ellmers told Geithner. “They just simply cannot.”
She then challenged Geithner on the administration’s tax plan.
“Looking into the future, you are supporting the idea of taxation, increasing taxes on those who make $250,000 or more. Those are our business owners,” said Ellmers.
Geithner initially responded by saying that the administration’s planned tax increase would hit “three percent of your small businesses.”
Ellmers then said: “Sixty-four percent of jobs that are created in this country are for small business.”
Geithner conceded the point, but then suggested the administration’s planned tax increase on small businesses would be “good for growth.”
Good for the growth of government perhaps, not the economy.
Posted by iusbvision on June 21, 2011
This is not from any light-weight folks, this is linked on Dr. Greg Mankiw.
Mankiw wrote one of the most respected series of econ college textbooks used in universities today.
Tim Conley and Bill Dupor have a new paper on the American Recovery and Reinvestment Act (that is, the Obama stimulus bill). Their empirical findings:
Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.
Earlier this week, they reported their findings in a paper titled “The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled.” The paper is dense and rather lengthy, and requires considerable study. Here, however, is the bottom line:
Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.
So the American people borrowed and spent close to a trillion dollars to destroy a net of more than one-half million jobs. Does President Obama understand this? I very much doubt it. When he expressed puzzlement at the idea that the stimulus money may not have been well-spent, and said that “spending equals stimulus,” he betrayed a shocking level of economic ignorance.
Posted by iusbvision on June 21, 2011
Mercatus Center at George Mason University – http://mercatus.org/freedom-50-states-2011
Posted by iusbvision on June 21, 2011
The Putin/Medvedev oligarchical neo-dictatorship has endorsed Barack Obama’s re-election. Why wouldn’t they. Obama reneged on a promised missile defense shield for Poland and the Czech Republic, let Sakashvilli and the Georgians twist in the wind, handed Medvedev Britain’s key nuclear secrets, and signed on a lopsided arms treaty that gave away the farm. The Russian Oligarch could not have a more submissive counterpart.
Russian President Dmitry Medvedev said on Monday he wanted his US counterpart Barack Obama to win re-election next year, fearing that the two men’s efforts to improve ties may lose steam under a new administration.
“I can tell you directly — I would like Barack Obama to be re-elected president of the United States maybe more than someone else,” Medvedev said in an interview with the Financial Times whose full transcript was released by the Kremlin early Monday.
“If another person becomes US president then he may have another course,” he said.
How touching. Keep in mind that under Putin/Medvedev Russia has been murdering journalists who tell the truth about them, they have been overtly manipulating the European energy market to meddle in elections, and they have sacked the Republic of Georgia.
But I will give credit to Russian leadership in one area, they were smart enough to adopt the tax system developed by famed American economics guru and business leader Steve Forbes, while Obama pushed us deeper into the tax system designed by Karl Marx. Of course, Marx received two inheritances, squandered them both and couldn’t balance a checkbook.
Dr. Walter Williams: Unions discriminate against black Americans, minimum wage impacts black teen unemployment. Regulations make licencing so expensive they keep minorities out.
Posted by iusbvision on June 21, 2011
When I was growing up, gas was 70 cents a gallon and when you went to get gas, a young person who was apprenticing at the service center attached to most every gas station would come out, pump your gas, check your tires and fluids, wipers etc. That young person was apprentricing under an experienced mechanic and learning valuable skills.
Those days are gone. Now gas is $4.00 and you pump it yourself. Service? Forget it, you will be lucky if the clerk speaks English. The minimum wage, labor regulations, and government regulations have brought such apprenticeships to a screeching halt.
Posted by iusbvision on June 17, 2011
Posted by iusbvision on June 15, 2011
Central planning of an economy doesn’t work in large, diverse, environments, and works poorly in small homo-genius societies (Greece, Spain, Portugal all collapsing).
Government spending does not create wealth and in only limited circumstances does it have a long term positive impact with a high velocity of money. Politicians do not spend money on the greatest needs of individuals, businesses and communities; rather they spend those dollars with the hope that it will buy votes, increase influence, and come back in the form of campaign donations. People tend to act in their own self interest, so how can a politicians best interest be everyone elses?
Central planners are also very fond of “tax credits” which they call “tax cuts”. You get a tax credit if you engage in a behavior that the government approves of. This causes people and businesses to act not in what is best for them, their family, their business, their economic needs or the needs of their customers, rather they are acting in the interests of a politician. How is that good for the economy when it comes down to you feeding and taking care of your family? This also results in mass corruption as the tax code becomes a behemoth filled with politicians picking winners and losers. This is called “crony capitalism” or “state run capitalism” (all of which is just a mutation of socialism/corporatism).
Tax credits are also used as the politicians rhetorical ruse. Very often government tax credits are such a regulatory burden they are an economic non starter or they are so “targeted” it means that almost no one will qualify for them [Example: Tax credit for a family of four who makes under $40,000 per year, who is buying house over 2,000 square feet, that is ran by solar power].
The more the planner’s plans fail the more the planner’s plan – Ronald Reagan.
With a flamboyant downgrade of the outlook for economic growth, jobs and profits, Wednesday’s 280-point Dow plunge to launch the so-called June stock swoon is a warning shot across the bow.
The Dow tanked alongside a batch of dismal economic data. The ISM manufacturing index, ADP employment, Case-Shiller home prices and consumer confidence are all pointing to 2 percent growth or less, rather than the kind of 5 percent growth we ought to be getting coming out of a deep recession.
The economy now looks like a Government Motors engine that’s stalling out. Or perhaps, with energy and food inflation, and housing deflation at the same time, the economy is acting like a pinball machine on permanent tilt.
There’s a key message here: Big-government stimulus never works.
First there was the massive Barack Obama stimulus spending. Then QE1. And now QE2 is winding down. And what did we get for all this? Slower growth overall, paltry job creation, more energy and commodities inflation, continued housing deflation, and virtually no new business start-up entrepreneurship.
We know the Obama spending package failed to create a 7 percent to 8 percent unemployment rate, as advertised. And now we’re learning that the Fed’s QE2 has actually done more harm than good.
All that money-printing stimulus worked to depreciate the dollar and jack-up commodity prices, especially oil and gasoline, but also food. So both companies and consumers have been punished.
Some demand-side boneheads on Wall Street want the Fed to move to QE3, allegedly to fight a stalling economy. But if the central bank prints another $600 billion or so, all that will do is sink the greenback another 10 percent and drive oil and gasoline prices higher and higher. And that, in turn, will slow business and consumers even more.
Posted by iusbvision on June 10, 2011
Veronique de Rugy is one of the most respected economists alive today.
IUSB Vision Editor Chuck Norton comments:
This came as absolutely no surprise to me. As with most taxes that are “designed to target the rich” they do no such thing and the “alternative minimum tax” is no different
The Democratic Party leadership pretends to be interested in genuine class warfare. You hear President Obama talk about “taxing millionaires and billionaires” yet the very policies he and much of the Democratic leadership advocate do no such thing.
Democrats have not been interested in taxing the genuinely rich and aren’t today. John Kerry made $5,072,000 in 2003 and had a total federal tax burden of 12.34%. The very wealthy enjoy a 16,000 page tax code that is filled with exceptions. Much of the income those like John and Teresa Kerry receive is defined as “unearned income” or earnings that are not taxable at the wage earner rate so even if the regular income tax rate was increased to 50% the percentage the Kerry’s would pay would only go up by a couple of points, if that.
Yet small business “sub-s corporations” (most domestic small businesses that have between 1-200 employees) are taxed at the wage earner rate and would be devastated by a 50% rate. Small businesses do most of the hiring in this country. Would someone care to explain how Democrats can claim to be for workers while being against their employers?
The truth is that very few people make over $250k in taxable wages. President Obama talks about taxing billionaires and millionaires (defined as those who make over $250k), but the way the tax code works the wealth of George Soros like billionaires is almost perfectly protected. If George Soros and the Kerry’s paid a percentage like small businesses must, who would fund the Tides Foundation and the Democrat’s 527 groups?
As you may be aware, Google made $3.1 BILLION last year and had a federal tax burden of 2.4%. Google throws fund-raising galas for Obama and the Democrats and have given the Democrats massive donations. Where are the “liberals” condemning the Google Corps of the world? How about GE, whose former CEO now works at the White House, earned 14.2 billion dollars and not only did they have a tax bill of zero, they received taxpayer subsidies.
Yet Obama has waged a rhetorical war against the Chamber of Commerce and who do they represent, you guessed it, most small and medium-sized domestic businesses. Obama blasted the Chamber of Commerce for daring to oppose his plan to tax such businesses at a rate of 39.6%.
Policies such as ObamaCare, tax increases, and other actions that cause regulatory uncertainty all but force the producers and investors to stop moving their money domestically. They have the option of just parking it or investing it inChina, all of which has the effect of transferring the tax burden away from the wealthy onto the working poor and middle class. Democrats are not interested in taxing the wealthy; they are interested in taxing the domestic producer class.
This brings us to Norton’s First Law: big Business loves big government because big government taxes and regulates the small and medium-sized competition out of the competition. This is a staple of modern “Alinsky” style Democrat strategy. This process is called “consolidation”. The goal of leftist philosophy is to control the wealth “rationally” from above so that less is “left to chance”. With all of these small businesses creating wealth that is chaos which is difficult to control. Through consolidation more of the wealth that is created flows through large corporations that are easier to control.
The Obama bipartisan deficit commission was tasked with the challenge of how to raise revenue, grow the economy and pay off the debt. After an exhaustive study the commission concluded that lowering tax rates, lowering the corporate tax rate and simplifying the tax code to encourage tax compliance, and to encourage more wealth to come back home (so it at least can be taxed), was the most prudent course of action. Reagan would have been pleased with those recommendations.
If you wonder why so many jobs have moved overseas and in some cases to places where governments are corrupt and workers are really exploited; now you are seeing the other side of the coin. The private sector and the jobs that go with it cannot be expected to pay for a government that costs $4 trillion a year and hope to remain competitive. If you want to see demand for American labor to rise, start by making it more economical for jobs to come home.
Posted by iusbvision on June 9, 2011
TOLEDO, Ohio (AP) – An Ohio restaurant mentioned last week by President Barack Obama as an indirect beneficiary of the government’s Chrysler bailout will go out of business Sunday after a more than 70-year history.
Co-owner Richard Lawrence of New Chet’s Restaurant in Toledo says business has fallen victim to the economy and the workplace smoking ban approved by Ohio voters in 2006. He told The Blade newspaper of Toledo on Wednesday that auto industry cutbacks also hurt.
Lawrence says he used to deliver up to $300 in food per week to Chrysler Group LLC’s Jeep plant in Toledo, but now that’s down to about $100 worth.
Obama visited the plant on Friday and told workers that without them, who would eat at Chet’s or patronize other local businesses?
Information from: The Blade, http://www.toledoblade.com/
Posted by iusbvision on June 9, 2011
The title as well as some of the commentary below is from Dr. Robert Schneider.
Schneider has been an important figure in American foreign policy and global security during the Reagan and Bush 41 years. Dr. Schneider and myself enjoyed a great conversation about the following article with another CEO/economist from out West. [I have not yet obtained permission to name the Western CEO as of yet but he is described as having an “Obscene IQ” as I am confident his clients will attest to.]
Normally I do not share such conversations, but this one is such a valuable exploration of current public policy I made an exception. Keep in mind that what you are about to read is a conversation that is completely spontaneous. What you are about to read is an intellectual feast. Enjoy!
Dr. Schneider: I find most the folks on here trying to use “logic” to make arguments, without understanding the fundamental principles underpinning the Ryan plan. The dems argue we have to have stimulation (not Anthony Weiner’s type) to get the economy going again. Here is the argument which the other side can’t counter. Of course, the Ronulans wouldn’t know an economic argument from a sack of worms, but it might be fun to watch their heads explode as you lay this article on them. It is the knockout punch.
For our arguments to win the day against liberals, and others who may think it’s ok to bash Ryan, these arguments are key to getting us back to a prosperous nation, and out of our economic gloom.
Ugly Modeling: Will spending cuts ruin or improve America’s economy?
By Veronique de Rugy
From Reason Magazine
In February, the Goldman Sachs economist Alec Phillips predicted on ABCNews.com that a Republican proposal in the House of Representatives to cut $61 billion from the federal budget in fiscal year 2011, would, if enacted, shave two full percentage points off America’s gross domestic product in the second and third quarters of this year. A few days later, The Washington Post described a new study by Mark Zandi, the chief economist at Moody’s Analytics and an architect of the 2009 stimulus package, a.k.a. the American Recovery and Reinvestment Act. Zandi’s amazing verdict: The spending cuts would destroy 700,000 jobs by the end of 2012.
After every newspaper had published the gloomy predictions, Goldman Sachs issued a “clarification” of Phillips’ analysis. Phillips now says he was misunderstood by journalists eager to spread a doom-and-gloom message and predicts the impact of spending cuts probably will be mild and temporary. Perhaps he was influenced by Federal Reserve Chairman Ben Bernanke, who testified in March at the Senate Banking and Urban Affairs Committee that Goldman’s numbers were incorrect.
Yet even this correction implicitly assumes that government spending is the source of all recovery. The logic, as with Bernanke’s and Zandi’s analyses, is that government spending cuts reduce overall demand in the economy, which affects growth and then employment. This argument ignores the fact that the government has to take its money out of the economy by raising taxes, borrowing from investors, or printing dollars. Each of these options can shrink the economy.
All these analysts also systematically ignore the fact that GDP numbers include government spending. When the federal government pumps trillions of dollars into the economy, it looks as if GDP is growing. When government cuts spending—even cuts within the most inefficient programs—aggregate GDP shrinks.
But that’s misleading. If Washington spends $1 a year on a bureaucrat’s salary, for example, GDP numbers will register growth of exactly $1, whether or not the employee has produced any value for that money. By contrast, if a firm pays an engineer $1, that $1 only shows up in the GDP if the engineer produces $1 worth of stuff to sell. This distinction biases GDP numbers—and the policies based on them—toward ever-increasing government spending.
Furthermore, GDP does not capture changes in personal investment portfolios or changes in private research and development spending. In the last two years, corporate cuts in the latter area have been large but unaccounted for. Also not included in GDP: pension benefits and the U.S. Flow of Funds Accounts balance-sheet information from the Federal Reserve Board. That means that when it comes to GDP, states’ grossly underfunded pensions are off the books, along with the loans and purchases conducted under TARP.
Another problem with these analyses: Economists of all persuasions have proven to be really bad at predicting the future, especially when it comes to jobs. Take the stimulus. Forecasters at the White House and the Congressional Budget Office (CBO) predicted the stimulus package would create more than 3 million jobs. And in August 2010, the CBO estimated that the stimulus had indeed created between 1.4 million and 3.6 million extra jobs, thrilling supporters of economic intervention. But unemployment stubbornly remained around 10 percent.
What was wrong with the CBO’s numbers? “When the upper limit of your estimate is almost three times the lower limit, you know it is not a very precise estimate,” the George Mason University economist Russ Roberts pointed out in testimony to the House Subcommittee on Regulatory Affairs, Stimulus Oversight, and Government Spending in February.
The truth is that there is no way to know the real number of jobs “created or saved” by the stimulus. For that, the CBO would have had to collect data on output and employment while holding other factors constant. But the CBO didn’t do that because that’s different from its job of “scoring” the possible results of proposed legislation. As the CBO explained in a November 2009 report, “Isolating the effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, the new data add only limited information about [the law’s] impact.” In other words, CBO number crunchers gave it their best guess before the stimulus and arrived at their subsequent numbers by applying their original prediction model. If the model is wrong, so are the numbers.
No one knows what economic output would have been without the stimulus, and no models can tell us the answer. As Roberts testified, “The economy is too complex. Too many other variables change at the same time.”
Also, the Zandi and Phillips models are based on the Keynesian view that government spending produces recovery. According to that theory, $1 in government spending produces substantially more than $1 in growth, a phenomenon known as the “multiplier effect.” The Goldman Sachs study assumes a multiplier greater than three—i.e., more than $3 in additional GDP for each dollar of government spending. But a review of the empirical literature reveals that in most cases a dollar in government spending produces less than a dollar in economic growth. And these findings often don’t even take into account the impact of paying for that government dollar via increased taxes.
The Harvard economists Robert Barro and Charles Redlick estimate that the multiplier for stimulus spending is between 0.4 and 0.7. In another study, the Stanford economists John Taylor and John Cogan concluded that the stimulus package couldn’t have had a multiplier much greater than zero. Even the multipliers used by Christina Romer, the former chairwoman of the White House Council of Economic Advisers, and Jared Bernstein, economic adviser to Vice President Joseph Biden, in their January 2009 paper “The Job Impact of the American Recovery and Reinvestment Plan,” ranged from 1.05 to 1.55 for the output effect of government purchases. More recently, the Dartmouth economists James Feyrer and Bruce Sacerdote, who supported the stimulus, acknowledged that it didn’t boost the economy nearly as much as the administration models claimed it would.
The use of these outdated models and unrealistic multipliers explains why Zandi was wrong about how many jobs the stimulus would create. He claimed “the country will have 4 million more jobs by the end of 2010” if the stimulus passed. In truth, by the end of 2010 total payroll jobs had fallen by 3.3 million, and the unemployment rate had risen from 7.8 percent to 9.4 percent. The administration’s post-facto claim is that unemployment would have risen even more without the stimulus. To argue this, they again must pretend that they know what would have happened in the absence of a stimulus.
Now what? Many economists and many members of the business community argue that recent policy changes have hampered investment, making a bad situation worse. The prospect of endless future deficits and accumulating debt raises the threats of increased taxes and of government borrowing crowding out capital markets, diverting resources that could be used more productively. As a result, U.S. companies are less likely to build new plants, conduct research, and hire people.
We have tried spending a lot of money to jump-start the economy, and it has failed. Now we need to cut spending and lift the uncertainty paralyzing economic activity. That approach will not just be more fiscally responsible. It will also empower individuals and entrepreneurs. And they are the only ones who can bring on a real recovery.
Ms. de Rugy (firstname.lastname@example.org), a senior research fellow at the Mercatus Center at George Mason University, writes a monthly economics column for reason.
IUSB Vision Editor Chuck Norton: This article above is a VERY good argument, but even so I would add just a couple of minor points (and thoughts).
The Keynesian GDP formula also assumes that government spending is better than consumer or even capital investment spending because people in the private economy will save some of their money and not spend it. Keynes calls this “leakage”.
This concept almost completely ignores the fact that savings have a positive impact on the economy in several ways. If you save the money in a CD the banks have more depositors’ money that can be used for loans and it helps to ease the credit market. Money saved in the form of bonds or stocks or other investing has obvious positive effects that are not measured PROPERLY in the Keynes GDP formula as it is only a dollar per GDP measurement and investment dollars for production have a much larger impact – this is literally where the creation of wealth comes from.
The other impact that savings have in an economy is psychological. Are you more likely to buy a car, or a durable good, or take a risk with an investment if you have more savings? The impact of “confidence” on the economy is difficult to overstate.
The economist Art Okun describes what he called “Okun’s Leaky Bucket” when it comes to government spending. When government spends or redistributes wealth, some of the money just goes poof. It is more than the decreasing incentive for the productive to work when they are punished or the money that is eaten up by the bureaucracy; government spending is just less efficient period for a number of reasons, so the Keynesian dollar per GDP formula critiqued in Bob’s posted article is even worse than the article explains.
When you (or a business) use a dollar it is spent on the greatest need or want. In the macro this results in great efficiency because dollars are going where they are needed/wanted the most. Government spends money for political reasons, corruption, and “make work” central planning. Those dollars are not spent to “produce with maximum efficiency and impact”, they are spent in the hopes that some of it returns in the form of campaign contributions.
When money is used for production to actually make things, especially capital goods, the velocity of those dollars expands greatly, and while it is doing the maximum good in creating wealth, those dollars are taxed more times as they move through various hands and government revenue increases. It is a win/win.
The Keynesian GDP formula assumes that government spending is equal to or better than capital investment spending and such a notion is laughable on its face.
Assume for a moment that we have an economy of 1000 men making widgets. Just to pick a round number lets say they have a GDP of 1000 units. The GDP is equal to the combined productive output within nation’s borders in a year. Enter “The Bernanke” who prints up 100 units and enter “The Pelosi” who spends those 100 units. Congratulations! Now on paper your production just went up to 1100 units of GDP. See how much MORE productive we are!
In reality you still just have 1000 widgets. The increase in GDP is a fantasy. A new GDP formula is needed.
Western CEO/Economist: 100% of the time government stimulus has failed to truly stimulate. Sure, buying a ton of office supplies helps out International Paper, Staples, etc. however it is a $1 gov spends does NOT turn into a $1 in taxation, usually less than 20%.
However, that same $1 in the private sector the velocity of money is accelerated. Also, it is not money spent by government that it has, it must borrow it and that is in essence $2 dollars. Dollar spent and dollar borrowed.
Art Laffer, Milton Friedman, etc have proved that reduced tax rates has a much better stimulative effect on real GDP than any other single measure and it is a LASTING measure. Bush tax cuts took us IMMEDIATELY out of the Clinton (fairly cyclical) recession.
Another thought: the way to have REAL GDP growth is in building: Homes, offices, cars, ships, etc. Without real construction growth (not possible with frozen credit markets) you cannot have sustained GDP growth. Money Supply is growing at 12% or higher with GDP at maybe 1.5%. That is financial suicide.
I am NOT afraid of the border, Al Qaeda, etc, I AM afraid of this massive debt.
Chuck Norton is dead on. Fellow economist? Keynes was uber bright for the TIMES. HE is dated, just like the Austrian boys Hayek and von Mises, both uber bright but not for a truly global world.
Dr. Schneider: V= nQ/M some things you just never forget.
CEO/economist: Most econ theory is just that, theory. Milton taught us to THINK. Free markets ALWAYS chose the right winner. It is when gov makes winners and losers that the tax payer pays and pays…….
Phil Donahue interview of Milton Friedman:
Donahue: When you see around the globe the mal distribution of wealth the desperate plight of millions of people around the world in under developed countries. When you so few haves and so many have not’s when you see the greed and the concentration of power. Did you ever have a moment of doubt about capitalism and whether greed is a good idea to run on?
Milton: Well first of all, tell me is there some society that you know of that doesn’t run on greed? Do you think Russia doesn’t run on greed? Do you think China doesn’t run on greed? What is greed? Of course none of us are greedy; it is always the other fellow that is greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus! Einstein did not construct his under order from a government bureaucrat! Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty that you are talking about, the only cases in recorded history, is where they have had capitalism and largely free trade! If you want to know where the masses are worse off is in the exact society’s that depart from that [sic] free trade and capitalism. So that the record of history is absolutely clear that there is NO alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free enterprise system.
Donahue: But it seems to reward not virtue as much as the ability to manipulate the system.
Milton: And what does reward virtue? Do you think that the communist commissar rewards virtue? Do you think a Hitler rewards virtue. Pardon me, but do you think American Presidents reward virtue? Do they choose their appointees on the basis of virtue of the people appointed or on the basis of their political clout? Is it really true that political self-interest is nobler somehow than economic self-interest? I think that you are taking a lot of things for granted. Just tell me where in the world do you find these angels who are going to organize society for us?….
Dr. Schneider: Markets are smarter than people.
Chuck Norton: I have to tell you guys this funny story in light of Bob’s last comment “Markets are smarter than people”.
I got into an argument with a Marxist prof who was all about central planning and not leaving people’s livelihoods to chance (the market) and insisted that a more rational top down approach was safer and fairer.
So I said to the prof, OK, let’s make a society of 10 million people and you can pick the ten smartest people through all of recent history to plan this economy. Assume that you are in a place with adequate resources to serve the population reasonably. Please pick your 10.
She picked her ten. They were all men with names many would know. I answered, OK now tell me which one of these men will be the central planner in charge of tampons and maxi pads (Laughter). [Markets are smarter than central planners with good intentions, or bad ones – Editor]
Posted by iusbvision on June 9, 2011
This is a 49 minute lecture that is a very good lesson in economics and how propagandized our schools are.
Posted by iusbvision on June 6, 2011
Top White House economist Austan Goolsbee said on Monday he was stepping down, marking the exit of one of President Barack Obama’s closest aides at a time when new signs of weakness have emerged in the U.S. economy.
Less than a year after he was named chairman of the White House Council of Economic Advisers, Goolsbee plans to return to his teaching job at the University of Chicago, the Obama administration said in a statement.
Goolsbee’s departure leaves Treasury Secretary Timothy Geithner as the sole remaining senior member of the original economic team.
Goolsbee and Obama got to know each other at the University of Chicago, where the president had been a lecturer in constitutional law. Goolsbee advised Obama’s campaign for the U.S. Senate in 2004 and his 2008 presidential campaign.
Goolsbee has been one of the administration’s more visible spokesmen on the economy and lately has emphasized his view that the recovery remains solidly on track, despite a report on Friday showing tepid jobs growth and a rise in the unemployment rate in May to 9.1 percent from 9 percent in April.
Former Reagan National Security Staffer Bob Schneider Comments:
Top White House Economist steps down from his post, and pledges to take a course in economics one day. “It’s on my bucket list”, Austen Goolesbee announced: “Along with a name change. People laugh and me and I don’t like it”
Schneider’s humorous comments really do set the proper tone for Goolsbee. This man has been a joke. I wish there was a more civil way to express this truth, but his manipulations in defense of this economic policy have been simply outrageous and fantastic (in a bad way).
Bob Schneider hit this one out of the park. As a student of economics myself, it makes me ill when SO MANY economists simply end up being political prostitutes, because bad economic policy can cause suffering to many millions of people. This is not a game and Goolsbee treated it like one. Good riddens (urban dictionary spelling).
Posted by iusbvision on June 2, 2011
By IUSB Vision Editor Chuck Norton
What does “or else” mean? It means that Moody’s strips the United States of it’s AAA credit rating. What does that mean? I have no time to explain now as I am about to leave for dinner, but essentially it means that the Great Depression will look like a stroll in the daisy’s.
I have been in the process of putting together an economic roundup post of a new dip in the recession. A double dip recession is exactly what we predicted in early 2009. The papers said that this dip was unexpected, but even someone with basic economics training and a little talent could see it coming and we did [When I took the economics aptitude test that the IU Business and Economics School gives all B&E students I received one of the highest scores in IU history. We are not trying to be cocky, but like I said, a little talent – Chuck].
Now the game is over. The Democrats spending binge must end or else.
I would like to deal with the first objection that the left is going to make, “What do you mean ‘The Democrats spending binge’! Isn’t this all Bush’s fault because of the tax cuts?”
This graph answers that question. Remember the first tax cut was passed in 2001, it was the “Bush Bucks” refund checks. It did not help much. The real tax cut in 2003 is the one that set long term rates and tax rules to help economic certainty is the one that made the difference.
2003 is the year that the Iraq war started as well. It took about a year for the tax cuts and rules to settle into the economy, but you can see the results. In spite of increased spending the deficit was dropping in fact the “rich” paid more taxes in real dollars (that is in dollars and inflation adjusted dollars) after the tax cuts were passed. For more information on this graph check HERE and be sure to read the commentary at the bottom of the page.
The simple truth is this, when the productive are taxed at a higher rate they just park their money so it is not taxed at all. The same thing happens when there is economic uncertainty. The result is that the tax burden is transferred from the rich to the middle class; exactly the opposite of the left’s stated intent.
The second objection is equally as obvious and equally as easy to defeat, “Look at what the Clinton tax increase did for the economy and the deficit.” Yes by all means lets do just that. The massive 1993 tax increase did increase revenue, but not nearly as much as the Democrats, CBO static models and such had predicted. Reports from the CBO, OMB, and IRS all agree – LINK. After the Republicans took over Congress, passed welfare reform, cut spending, set a path to a balanced budget and CUT TAXES on capital gains from 28% to 20%, instituted the child tax credit, cut taxes on inheritance and raised the ceiling for IRA’s the economy exploded and revenue pored in. Unfortunately at the end of Clinton’s term the capital gains tax cut expired because it had a sunset provision, Clinton pushed massive new fuel and energy regulations which sent fuel prices skyrocketing and the tech bubble burst causing a stock market crash.
So what will happen if we lose AAA and how will it impact you?
Coin Week explains this in technical terms:
* A credit rating reflects the risk of default. A downgrade will raise the cost of borrowing for the United States government‚ could have a spillover effect on corporate debt and investors will buy fewer U.S. Treasuries.
* There could be a massive outflow of foreign investment. Some global funds are mandated to invest only in AAA debt and if the U.S. loses its AAA rating‚ it loses those investors.
* A credit rating downgrade provides a perfect excuse for an alternative reserve currency to replace the dollar. China‚ Russia and other countries are already suggesting creating a “basket of currencies” that would replace the U.S. dollar.
* Interest rates will increase. Should the United States lose its AAA credit rating‚ it will trigger rising interest rates in an already unfrozen credit market.
* The risk of inflation increases. Philadelphia Federal Reserve President Charles Plosser has warned that the U.S. government’s emergency programs for the economy undermined central bank independence and raised the risk of inflation. “When a nation’s treasury or finance ministry and its central bank work too closely together‚ there is a clear risk that the government’s spending will end up being financed by the central bank’s power to create money‚” Plosser cautions. “History shows us that you can get very bad economic outcomes with rapidly rising inflation.”
What does this mean in English?
Many of those who invest in the United States would stop, as many funds mandate investments of AAA risk. Wealth would leak out of the country fast. It will be harder for the United States Government to burrow money. This will cause interest rates to rise.
The interest on the debt that the government would pay every year would skyrocket, leaving even less money to pay our bills with. The credit markets would dry up even worse than they are now. This will make it very expensive or impossible for seasonal businesses like farms to get seasonal loans. Many businesses use short term loans for big contracts and sales such as the purchase of a capital investment like a large production machine or a farm tractor. All of this will mean less production, job loss, and severe inflation. The government, being unable to borrow as much money and as cheaply, will do more of what it is doing now, just print up money. This makes the value of YOUR dollar even less resulting in even higher prices for everyone. At that point the government will be forced to have massive spending cuts, or print money till it is like the Yen.
Interest rates on mortgages, credit cards etc would jump considerably.
We did not lose AAA even during the Great Depression. In a country that requires as much temporary credit as our economy and production does, losing AAA will impact us in a way that is much worse than it would many smaller countries.
It gets worse as I have saved the worst for last. Many of these short term loans/credit is used for large import/export deals. The United States is the world’s largest importer and has fallen to fourth behind the EU, China, and Germany in exports. We have not even considered what impact this would have on global markets.
Welcome to hell.
We are already heading into a double dip
Companies in the U.S. added fewer workers than forecast in May, a sign that job growth is struggling to gain momentum, data from a private report based on payrolls showed today.
Employment increased by 38,000 last month, the smallest increase since September, from a revised 177,000 in April, according to figures from ADP Employer Services. The median estimate in the Bloomberg News survey called for a 175,000 advance for May.
U.S. private-sector payroll growth slowed sharply in May, falling to the lowest level in eight months and prompting some economists to lower forecasts for job growth in Friday’s U.S. government report.
The pace of growth in the U.S. manufacturing sector tumbled in May, slackening more than expected to its slowest since September 2009, according to an industry report released Wednesday.
The Institute for Supply Management (ISM) said its index of national factory activity fell to 53.5 in May from 60.4 the month before. The reading missed economists’ expectations for 57.7.
Stocks sank more than 2 percent Wednesday, following several economic reports that confirmed a struggling recovery and after Moody’s downgraded Greece’s bond ratings deeper into junk status.
The last month has been a horror show for the U.S. economy, with economic data falling off a cliff, according to Mike Riddell, a fund manager at M&G Investments in London.
“It seems that almost every bit of data about the health of the US economy has disappointed expectations recently,” said Riddell, in a note sent to CNBC on Wednesday.
“US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing.”
“And that’s just in the last week and a bit,” said Riddell.
Pointing to the dramatic turnaround in the Citigroup “Economic Surprise Index” for the United States, Riddell said the tumble in a matter of months to negative from positive is almost as bad as the situation before the collapse of Lehman Brothers in 2008.
Obama’s Treasury Sec. Tim Geithner said just on April 26 that there was no risk of the United States losing the AAA credit rating. So much for that. Real pro’s like Jim Rogers said that he expects us to lose AAA. Famed University of Maryland economist Pete Morici and David Walker, the former Comptroller of the United States say we should have lost it already – LINK. Jim Leaviss, head of retail fixed interest at M&G, the fund management arm of the Prudential, says that the United States will lose AAA after 2011 – LINK.
Social Security now in permanent deficit, Medicare Trustees admit the system is in trouble, liberal ‘Think Tank’ fails at statistics in deficit denial…
Posted by iusbvision on May 18, 2011
The system is not sustainable. The bureaucracy is huge and government employees earn 30-300% higher than their private sector counterparts and have gold plated benefits. Every dollar that goes to a bureaucrat who is not accountable to you and has no incentive to be efficient is another dollar that is not used for someones good care.
Government programs should not be “unionized job programs to get union dues to the Democrats” first, and programs people use second. We cannot afford to carry on the status quo any more if we want to deliver on promised benefits. Unless we have reform such as the Paul Ryan plan, the system will blow up and the government reports show it.
The debate about whether Social Security faces a problem and needs to be fixed is over. The 2011 trustees report, which was released this afternoon, shows that the program already faces massive permanent annual deficits. In 2010, Social Security spent $49 billion more in benefits that it took in from its payroll tax. This year, that deficit will be approximately $46 billion.
Now is the time to focus on solutions. Instead of just blindly defending the current program, both Congress and the Obama Administration should propose comprehensive programs that permanently fix Social Security. It is one thing to oppose a solution; it is another to come up with a plan and fix the problem.
Social Security Problem $1.2 Trillion and One Year Worse
In net present value terms, Social Security owes $9.1 trillion more in benefits than it will receive in taxes. The 2011 number consists of $2.6 trillion to repay the special issue bonds in the trust fund and $6. 5 trillion to pay benefits after the trust fund is exhausted in 2036—a year earlier. This is an increase of $1.2 trillion from last year’s report, which also reflects several changes to assumptions and methodology.
A key change in this year’s report is that Social Security is predicted to run cash-flow deficits from now on. The immediate cash-flow deficits are largely due to the effects of the recession on its finances. The recession increased the amount of benefits paid out by Social Security as older workers who have lost their jobs choose to file for benefits earlier than they might have otherwise. Meanwhile, younger unemployed workers are unable to pay Social Security taxes, while workers who suffer a drop in their income pay lower amounts.
Net present value measures the amount of money that would have to be invested today in order to have enough money on hand to pay deficits in the future. In other words, Congress would have to invest $9.1 trillion today in order to have enough money to pay all of Social Security’s promised benefits through 2085. This money would be in addition to what Social Security receives during those years from its payroll taxes.
The just released 2011 Medicare trustees report does not contain any big surprises. Much of what the trustees say in this report they have said before: Medicare poses enormous challenges for patients and taxpayers alike, and its financial condition continues a downward slide. Some key findings:
- Medicare’s unfunded obligations increased by $2 trillion. A key indicator of the true cost of the program is the cost of the promised benefits that are not financed by dedicated revenues. Using their standard 75-year projection (2011–2085), the trustees estimate this year that Medicare benefits promised that are not paid for amount to $24.6 trillion, compared to their projection of $22.5 trillion last year. These and other projections in the report are based on current law, including the official assumption that the estimated $575 billion in savings from Medicare provider cuts under Obamacare will be sustained, as well as the 29 percent reduction in Medicare physician payments in 2012. The Medicare trustees concede the point: “Although the long-term viability of some of these provisions is debatable, the annual report to Congress on the financial status of Medicare must be based on current law” (emphasis added). Different assessment and different accounting techniques, of course, can yield different estimates of these long-term costs. Based on an alternative scenario of projected costs and spending that many analysts considered more realistic, the Medicare actuary in 2010 estimated the long-term Medicare debt at $34.8 trillion. The Medicare actuary has yet to offer his alternative assessment for 2011.
- The financial condition of the Medicare Part A trust fund is worse. The Hospitalization Trust Fund—the part of the program that pays seniors’ hospital bills—is in worse shape than reported last year. The Hospital Insurance (HI) Trust Fund is going to be exhausted in 2024 rather than 2029. While the fund has started running big annual deficits ($32 billion in 2010 and $34 billion in 2011), the five-year acceleration of the fund’s exhaustion has been aggravated by a combination of higher hospital spending and the consequent reduction in the payroll tax receipts resulting from the economic downturn. When the HI fund is exhausted, obviously it cannot pay benefits. Congress would have to replenish it with higher taxes. One more point: It should be noted that the most recent Congressional Budget Office assessment of the trust fund (March 2011) is more pessimistic and projects an exhaustion in 2020.
- The “Medicare Funding Warning” has been issued again. Under current law, the Medicare trustees are required to issue a Medicare Funding Warning. This means that general revenues will account for more than 45 percent of Medicare’s total outlays. The 45 percent threshold for such funding, in contrast to dedicated revenues, is officially “excessive” under current law. In this year’s report, the statutory threshold has been reached again this year, as it was last year, and the President is required to develop a proposal to transmit to Congress to deal with the problem.
This year’s trustees report only confirms the seriousness of the financial challenge posed by an unreformed Medicare program. Over the full 75-year budget window for the entitlements, about 90 percent of the growth of Medicare and Social Security is going to occur by 2035. The baby boom generation, to be supported by a relatively smaller workforce, will drive costs to new levels. That is indeed why The Heritage Foundation’s comprehensive reform proposal, Saving the American Dream, takes on an even greater urgency.
Leftists in Deficit Denial
Liberal Think Tank Fails Statistics
A chart created by the Center on Budget and Policy Priorities (CBPP) has been circulating among liberal bloggers such as Ezra Klein, James Fallows, and Andrew Sullivan.
The chart, seen to the right, purports to show that the next decade’s deficits are entirely the result of the 2001 and 2003 tax cuts, wars, bailouts, recession, and stimulus.
Their methodology fails statistics 101.
Imagine a basketball team that loses 100-98. It would make no sense to cherry pick one single basket by their opponent and blame it for 100 percent of the loss – letting all other baskets scored off the hook. Yet that is essentially what CBPP is doing.
See the rest of the story with charts and evidence HERE.
Posted by iusbvision on May 16, 2011
… all because this policy worked out so well the last time right?
[LINK – start at the bottom of the linked page and start reading to get a great education on the mortgage crisis. It started with the abuse and deliberate misapplication of redlining regulations to accomplish political goals and economic social engineering. When the OFHEO regulator tried to warn Congress Democrats like Barney Frank and Chris Dodd insisted that the regulator was lying and even used the race card against them, of course the worst economy since the Great Depression has shown us that everything wasn’t fine – Editor]
(Business Week) — Community activists in St. Louis became concerned a couple of years ago that local banks weren’t offering credit to the city’s poor and African American residents. So they formed a group called the St. Louis Equal Housing and Community Reinvestment Alliance and began writing complaint letters to federal regulators.
Apparently, someone in Washington took notice. The Federal Reserve has cited one of the group’s targets, Midwest BankCentre, a small bank that has been operating in St. Louis’s predominantly white, middle-class suburbs for over a century, for failing to issue home mortgages or open branches in disadvantaged areas. Although executives at the bank say they don’t discriminate, Midwest BankCentre’s latest annual report says it is in the process of negotiating a settlement with the U.S. Justice Dept. over its lending practices.
Lawyers and bank consultants say regulators and the Obama Administration are scrutinizing financial institutions for a practice that last drew attention before the rise of subprime lending: redlining. The term dates from the 1930s, when the Federal Housing Administration drew up maps using red ink to delineate inner-city neighborhoods considered too risky for lending. Congress later passed laws banning lending discrimination on the basis of race and other characteristics. “The agencies have refocused on redlining because, in the wake of the subprime explosion and sudden implosion, they are looking at these disadvantaged neighborhoods and not seeing any credit access,” says Jo Ann Barefoot, co-chair at Treliant Risk Advisors in Washington, D.C., which consults with banks on regulatory issues.
The 1977 Community Reinvestment Act (CRA) requires banks to make loans in all the areas they serve, not just the wealthy ones. A Bloomberg analysis found the percentage of banks earning negative ratings from regulators on CRA exams has risen from 1.45 percent in 2007 to more than 6 percent in the first quarter of this year.
Posted by iusbvision on May 16, 2011
Posted by iusbvision on May 13, 2011
You Promised To Save Millions From Foreclosure Yet Your Housing Program Was A Failure And Now The Housing Market Is In The Midst Of A “Double Dip.” Why Has Your Administration Largely Ignored Struggling Homeowners?
PROMISE: President Obama Promised That His Housing Program Would Prevent 7 to 9 Million Families From Foreclosure. “And we will pursue the housing plan I’m outlining today. And through this plan, we will help between 7 and 9 million families restructure or refinance their mortgages so they can afford—avoid foreclosure.” (President Barack Obama, Remarks On The Home Mortgage Industry In Mesa, Arizona, 2/18/09)
Only One In Four Of 2.7 Million Homeowners Seeking Assistance From Obama’s Mortgage Relief Plan Succeeded In Getting Their Payments Reduced. “Just one in four of the 2.7 million homeowners who sought to participate in the Obama administration’s signature mortgage assistance program have succeeded in getting their monthly payments reduced.” (Alan Zibel and Louise Radnofsky, “Only 1 In 4 Got Mortgage Relief,” The Wall Street Journal, 2/28/11)
Inspector General Neil Barofsky, Who Oversaw HAMP, Said That The Program “Continues To Fall Short Of Any Meaningful Standard Of Success.” “The program has faced sharp criticism. Neil Barofsky, the departing special inspector general overseeing the program, has faulted the administration for launching it with inadequate analysis and only partially developed guidelines. This led to delays and confusion, and the program ‘continues to fall short of any meaningful standard of success,’ he said a report released in January.” (Alan Zibel and Louise Radnofsky, “Only 1 In 4 Got Mortgage Relief,” The Wall Street Journal, 2/28/11)
“It’s Official. Home Prices Have Double Dipped Nationwide, Now Lower Than Their March 2009 Trough, According To A New Report From Clear Capital.”(Diana Olick, “National Home Prices Double Dip,” CNBC, 5/5/11)
“Home Values Posted The Largest Decline In The First Quarter Since Late 2008, Prompting Many Economists To Push Back Their Estimates Of When The Housing Market Will Hit A Bottom.” (Nick Timiraos, “Home Market Takes A Tumble,” The Wall Street Journal, 5/9/11)
The Oregonian: “Economists Who Once Predicted That Prices Would Bottom Out Sometime This Year Now Are Saying, Well, Maybe In 2012.” “Lenders have filed more than 300,000 foreclosures against American families every month for almost two years. As long as that’s occurring, the housing numbers will stay bleak. Home prices nationally have fallen for 57 consecutive months. … Economists who once predicted that prices would bottom out sometime this year now are saying, well, maybe in 2012. ” (Editorial, “American Housing: Underwater And Still Sinking,” The Oregonian, 5/9/11)
Posted by iusbvision on May 13, 2011
Of course this is aside from his assault in Gulf Coast jobs with the illegal offshore drilling ban, the assault on Alaska jobs with the revocation of Shell’s oil rights, the assault on West Virginia jobs with the completely arbitrary revocation of mining permits, the assault on Nevada jobs with the political closing of the Yucca Mountain nuclear facility.
South Carolina Gov. Nikki Haley responds on this blatant show of corruption from the Obama Administration.
[Editor’s note – The Democrats used every sex smear in the book trying to defeat this governor in the last election.]
More details from Newt Gingrich in Human Events:
In October 2009, Boeing decided to open a new production facility in North Charleston, SC to meet the growing demand for its 787 Dreamliner airplane.
The decision came after months of negotiations with the machinists union leadership at Boeing’s main production hub in Puget Sound, WA. Since 1995, there have been five work stoppages in the Puget Sound plant. The most recent strike, in 2008, lasted 58 days and cost the company $1.8 billion.
Still, Boeing negotiated in good faith with the union leadership for the Puget Sound facility to try and find a way to open the new factory there. In exchange, Boeing wanted a ten year moratorium on strikes so the additional capacity upon which the company was about to spend billions of dollars would be a sound investment.
Boeing and the union were unable to reach an agreement so the company looked elsewhere. They eventually settled on South Carolina, which is one of the twenty two “right-to-work” states in our country where workers cannot be forced to join a union.
The complaint filed last month by the NLRB on behalf of the machinists union alleges that Boeing located the new facility away from Puget Sound in retaliation for the 2008 strike, which is illegal under the National Labor Relations Act. It makes this accusation despite the months Boeing spent negotiating with the union to try and reach a deal to open the new facility in Puget Sound, and despite the fact that there is a clear legal precedent that allows companies to consider the impact of future strikes when deciding where to open new facilities.
It is the timing of NLRB’s complaint, in fact, which seems retaliatory in nature, not Boeing’s business decision.
The complaint comes a full seventeen months after Boeing announced the location of the new facility and thirteen months after the union leadership first asked NLRB to look into the issue.
Boeing has already begun construction of the new facility, hiring over 1000 people in South Carolina and investing $1 billion. This complaint puts all those jobs created and all that money invested at risk.
Unelected, Unconfirmed Bureaucrats Running Wild
This action by the NLRB is even more disturbing when you consider that it is being led by Lafe Solomon, the acting General Counsel for NLRB, who still needs to be approved by the Senate. He only holds his position because of a recess appointment by President Obama.
The president also used a recess appointment to place Craig Becker on the NLRB after Becker was rejected by a Democratic Senate in 2010.
As a recent Daily Caller article discovered, Becker’s past writings reveal a disturbing socialist bent that bear directly on the Boeing complaint.
Becker has previously written that the federal government should control and constrain the freedom of companies to direct their capital and resources as they please in order to rig labor negotiations in favor of unions. Becker has also written that the NLRB possesses the power to impose card-check policies on the nation without an act of Congress.
An Assault on the Right to Work
It is clear that President Obama is packing the NLRB board with left wing ideologues as a payoff to his union boss allies, so that the fix is in with regard to this case and others like it.
The move is consistent with an ongoing pattern in the Obama administration, in which they use the apparatus of big government to reward their allies and punish their opponents.
South Carolina Senator Lindsey Graham was exactly right when he characterized the complaint as “one of the worst examples of unelected bureaucrats doing the bidding of special interest groups that I’ve ever seen.”
If the NLRB is successful in overturning Boeing’s perfectly rational business decision, it puts tens of millions of future jobs in all 22 right-to-work states in jeopardy. It would make it effectively impossible for U.S. companies to open new facilities in right-to-work states if they are currently located in one that allows forced unionization.
Global Competition Is a Fact, Not a Theory
The Left simply cannot come to grips with the intensity of global economic competition and the demands it places on U.S. economic policies.
This blindness to reality was on display in the reaction to a recent USA Today article showing that Americans paid less taxes in 2009 than any time since the 1950s. The article has been used by the Left in recent days as a counter to the conservative case that tax increases would be devastating to any economic recovery, possibly driving us back into recession.
Their argument shows the Left is completely missing the point. In the new global economy, America is not competing against itself from 1990, 1970 or 1950.
We are competing against Germany, which today has only a 15% federal corporate income tax (and recently hit a 19-year low in its unemployment rate), compared to a 35% corporate tax rate in the U.S., the highest of any central government in the industrialized world.
We are competing against Singapore, which has a capital gains tax of zero, compared to a potential 35% capital gains tax in the United States.
We are competing against Switzerland, which caps the federal personal income tax rate at 11.5%.
We are competing against Canada, which just last week reelected an incumbent Conservative government that has pledged to cut the corporate tax to 15% and lower the personal income tax for families – all while planning to balance its entire budget by 2015.
Consider the case of the New York Stock Exchange. This icon of American free markets is now owned by a Dutch holding company.
That $10.2 billion takeover was driven by simple economic reality. As Walter Gavin, Vice President of Emerson, explains, the Netherlands has a tax code which makes it more profitable for the NYSE to be owned by a Dutch company than by an American one. In fact, according to Gavin, the United States lost almost forty companies to Amsterdam in 2010 alone thanks to their more business friendly environment.
This brings us back to President Obama and his union allies’ assault on South Carolina jobs and all twenty two right-to-work states in America.
If the NRLB’s complaint is successful, U.S. companies will simply increase their flight of capital and new facilities to places outside the United States. In the midst of a struggling economy, it will make it harder for businesses to operate in America, not easier.
The union bosses and their political allies in the White House aren’t going to save union jobs by attacking right-to-work states. They’ll simply prevent new jobs from being created here in America.
Posted by iusbvision on April 17, 2011
Prof. Niall Ferguson
Prof Niall Ferguson: Paul Krugman is a joke, Keynesianism is dead, China is more capitalist than we are, get the debt under control or Western Civilization is done for…
Posted by iusbvision on April 4, 2011
Have you ever heard one of those sports guys on the radio who can tell you the stats of every football and baseball game since 1940 right off the top of their head? Prof. Niall Ferguson is like that, but with history and the history of economics. Prof Niall Ferguson is accepted by a great many academics as the most brilliant historian alive and judging by all I have seen in recent years, I have seen no one who can match his ability and have only seen one man in my lifetime who is in the same ballpark as far as ability is concerned. Take a look at his bio HERE. Ferguson said in another interview that only one time in history has a major power emerged from this kind of debt and survived and that was England after the wars of the 1800’s. It doesn’t look good unless we change course now.
The volume is low on some of the videos so on a couple you will have to crank up the speakers, but it is no miss stuff.
More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined.
Posted by iusbvision on April 1, 2011
Read this one carefully folks…
If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.
It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?
Every state in America today except for two—Indiana and Wisconsin—has more government workers on the payroll than people manufacturing industrial goods. Consider California, which has the highest budget deficit in the history of the states. The not-so Golden State now has an incredible 2.4 million government employees—twice as many as people at work in manufacturing. New Jersey has just under two-and-a-half as many government employees as manufacturers. Florida’s ratio is more than 3 to 1. So is New York’s.
Even Michigan, at one time the auto capital of the world, and Pennsylvania, once the steel capital, have more government bureaucrats than people making things. The leaders in government hiring are Wyoming and New Mexico, which have hired more than six government workers for every manufacturing worker.
Now it is certainly true that many states have not typically been home to traditional manufacturing operations. Iowa and Nebraska are farm states, for example. But in those states, there are at least five times more government workers than farmers. West Virginia is the mining capital of the world, yet it has at least three times more government workers than miners. New York is the financial capital of the world—at least for now. That sector employs roughly 670,000 New Yorkers. That’s less than half of the state’s 1.48 million government employees.
Posted by iusbvision on April 1, 2011
If you found this scene thought provoking please see our previous installment: The Challenge
Many believe a certain film by George Lucas helped Ronald Reagan get elected. Imagine what this film will do. Actually I will make a prediction right now: Unions will threaten theater’s who run it, there will be bomb threats, there will also likely be some union violence. Any takers on that bet?
Posted by iusbvision on March 31, 2011
This is how some corrupt corporations make millions and scam the taxpayers. The AARP is supposed to be non profit. That means that they are not supposed to make hundreds of millions of dollars in profits, they are not supposed to be engaged in partisan politics and they are not supposed to be engaged in a huge conflict of interest. AARP has done all of this at the expense of their members and employees.
Posted by iusbvision on March 26, 2011
You can look at the 2010 Budget Chart Book HERE. Just click on the tabs near the top of the web page for the categories and then you will see sub-categories allowing you to examine almost any meaningful statistic imaginable.
Be sure to look at this chart right HERE to find out just who it is that have been paying taxes and you will see that the top 10% of wage earners paid 71% of federal income tax. But there are two very important thing you should know about this stat.
Starting in 2008 and more so today, this number is going down and more tax burden is being transferred away from the wealthy and investor and production classes. Why? because when you have a government that is this active and when you have this level of economic and regulatory and fiscal uncertainty those who can invest or take risk park their money so it is not taxed or they invest it in a safe place like China, where the leaders have some economic common sense. As a result the tax burden is transfered to the middle class, working poor and small businesses.
To understand how this works in detail please see the following link – Video: How Tax Cuts Work in Our Tax System
The other thing you should know is that for the super rich and the very well connected it does not matter what the wage earner (small business) tax rate is, because they have loopholes in the 6o,000 page tax code made for them and in the case of those like John and Teresa Kerry, or George Soros, much of their income is defined as either non taxable or not taxable at the wage earner rate. Now what party has been saying that we need to have a flatter and more simple tax code to help avoid this problem?
Posted by iusbvision on March 26, 2011
Once again, the headline on a financial story reads: unexpectedly. At what point do we conclude the economists relied upon for these projections are worthless, as they never appear to expect what’s going to happen?
US factory orders drop unexpectedly
Lower demand for machinery and defense equipment prompted a fall in US factory orders in February, the Commerce Department said Thursday, dashing hopes for a rebound after start-of-year blizzards.
New orders for big-ticket items — such as planes, computers and cars — fell 0.9 percent during the month, led by a 4.2 percent drop in machinery orders.
That shocked economists, who had expected orders to rise.
[IUSB Vision Editor’s Note – Indeed. According to the elite media “most economists” were surprised by month after month after month of unexpected, unexpected, unexpected, unexpected, unexpected bad economic news for the last two years. Of course to those who were paying attention it wasn’t unexpected at all.]
Hotair.com nailing Reuters on the not so “unexpected”:
Despite the very obvious red flag from last week’s announcement, today’s announcement managed to catch Reuters by surprise … again:
New single-family home sales unexpectedly fell in February to hit a record low and prices were the lowest since December 2003, showing the housing market slide was deepening.
The Commerce Department said on Wednesday sales dropped 16.9 percent to a seasonally adjusted 250,000 unit annual rate, the lowest since records began in 1963, after an upwardly revised 301,000-unit pace in January.
Sales plunged to all-time lows in three of the four regions last month. Economists polled by Reuters had forecast new home sales edging up to a 290,000-unit pace last month from a previously reported 284,000 unit rate.
What were they expecting? The big drop in starts announced last week had to mean that new-home sales had stalled, and that capital for new starts had been choked off as a result. Last week’s announcement even referenced the climbing inventory in new single-family homes. If inventory grew and new starts fell, should the math on this equation really be that difficult?
Gov. Chris Christie To Public Sector Union Worker: We Can’t Afford To Pay Ninety Percent Of Your Health Care Anymore
Posted by iusbvision on March 24, 2011
Rush Limbaugh comments as well. This is a must see.
“The top 1% of income payers pay 41% of all state income tax. We already have the highest taxes in America and the neighbor who lives next door to you who works in the private sector, is already paying much more for his health care than you are for yours and they are paying the taxes to pay for yours on top of it.”
Christie didn’t even mention that public sector employees tend to make much more than those in the private sector as well. The simple truth is that government employees have been pretty much shielded from the pain of this recession. They have been promised pay and benefits by Democrats who left office years ago that government just cant afford and they knew it.
Posted by iusbvision on March 23, 2011
Democrats are calling 1.5% cuts “draconian” and that is after tripling deficit spending since 2008 and 6.5 times over 2007.
The United States is on a fiscal path towards insolvency and policymakers are at a “tipping point,” a Federal Reserve official said on Tuesday.
“If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when,” Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. “The short-term negotiations are very important, I look at this as a tipping point.”
Leftist conference of unions, students, legislators and leftist community groups: How we will disrupt capital and create economic uncertainty. How we can create a new financial crisis, bring down the stock market….
Posted by iusbvision on March 22, 2011
UPDATE – Steven Lerner, the man in the video overtly plotting a new economic crisis, has visited the White House four times as well as the Treasury Department!!!
Watch this video:
Longer tape of this conversation:
Transcript and full article at Business Insider:
CAUGHT ON TAPE: Former SEIU Official Reveals Secret Plan To Destroy JP Morgan, Crash The Stock Market, And Redistribute Wealth In America
A former official of one of the country’s most-powerful unions, SEIU, has a secret plan to “destabilize” the country.
The plan is designed to destroy JP Morgan, nuke the stock market, and weaken Wall Street’s grip on power, thus creating the conditions necessary for a redistribution of wealth and a change in government.
The former SEIU official, Stephen Lerner, spoke in a closed session at a Pace University forum last weekend.
UPDATE I – Glenn Beck: This is a clear case of economic terrorism – LINK.
UPDATE II – SEIU sued under RICO statute (Via The Blaze):
Cockroaches, bugs, mold, and flies. These are just some of the props and rumors allegedly employed by the Service Employees International Union (SEIU) against the American unit of French catering company Sodexo. And the company’s had enough.
Fed up with tactics that include intimidation, extortion, and yes, sabotage that apparently includes plastic cockroaches, Sodexo filed a lawsuit against the SEIU last week under the Racketeering Influenced and Corrupt Organizations (RICO) Act.
“We work constructively with unions every day but the SEIU has crossed the line by breaking the law,” Robert Stern, general counsel for Sodexo USA, said in a statement. “We will not tolerate the SEIU’s tactics any longer.”
SEIU has been fighting to represent 80,000 hourly Sodexo employees, which is above and beyond the 180,000 hourly employees who are already union members. The union regularly stages protests against the company to make its point, like this one last fall on the campus of George Mason University. The video alleges SEIU bused in protesters, who can be heard chanting, among other things, “As long as it takes, whatever it takes, we’ll be in your face!”
Sodexo’s complaint, filed in federal court in Alexandria, VA, alleges acts of SEIU blackmail, vandalism, trespass, harassment, and lobbying law violations designed to steer business away from, and harm, the company.
And just what exactly might those acts look like? Sodexo gives the details:
The complaint alleges that the SEIU, in face to face meetings, threatened Sodexo USA’s executives that it would harm Sodexo USA’s business unless they gave in to the union, and then carried out its threats through egregious behavior, including:
- throwing plastic roaches onto food being served by Sodexo USA at a high profile event;
- scaring hospital patients by insinuating that Sodexo USA food contained bugs, rat droppings, mold and flies;
- lying to interfere with Sodexo USA business and sneaking into elementary schools to avoid security;
- violating lobbying laws to steer business away from Sodexo USA, even at the risk of costing Sodexo USA employees their jobs; and
- harassing Sodexo USA employees by threatening to accuse them of wrongdoing.
The complaint, filed in federal court in the Eastern District of Virginia, seeks an injunction against the SEIU and its locals and executives, as well as monetary damages to be determined by the court.
UPDATE III – Member of Congress to Attorney General Eric Holder – LINK.