Posts Tagged Economy
Clunker Drivers Have Been Bailed Out…Where’s The Outrage?
Posted by Scott in Entitlements, Gov't Spending, Taxes on August 29th, 2009
It was less than a year ago when Wall Street firms started seeing the first wave of government bailouts. Shortly thereafter the media and “Main Street” started crying about corporate excesses and greed. Those same people, however, are praising the “successes” of Cash For Clunkers; even advocating for a sequel Dollars For Dishwashers.
Why was Clunkers a success when the Wall Street bailouts were a miserable failure? Essentially they amounted to the same thing, the only difference was the recipients of our tax dollars. Where’s the outrage against those who were able to get a discount on their new automobile? Where’s the public disclosure (maybe a bumper sticker to thank the rest of us for their new purchase)?
Now I’m not trying to say that I agree with the Wall Street bailouts, because I don’t. I’m just trying to figure out how it’s OK to bailout one group of people and not another. The dollar amounts are irrelevant – the principle is the same.
After all, wouldn’t it just be easier (and more Constitutional) to simply not tax us as much? Lowering taxes for everyone across the board would not only help the auto industry and big Wall Street firms, it will also help every other industry. If everyone has more money to spend, they will spend it where they see fit. Whether that’s a new car, or a new dishwasher, the money will be spent, and the economy will eventually correct itself.
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Before Timothy Geithner became the Treasury Secretary, he worked for the International Monetary Fund (IMF). The IMF employs people from all over the world, including Americans. While working there, foreigners don’t have to pay US income taxes, and in an attempt to be fair to the Americans who also work there, the IMF pays the Americans for their share of income taxes.
This doesn’t mean that Americans are exempt from paying taxes in the US. This is a minor detail that Timothy Geithner missed during his tenure with the IMF. Because of the fact that the IMF didn’t pay taxes on his behalf, he was considered an independent contractor, or self-employed. Under the US tax law there is a concept of self-employment taxes, where the individual is both the employer and the employee for all intents and purposes. This means that they have to pay the employer and employee portions of payroll taxes.
Not only didn’t Geithner pay his self-employment taxes, the IMF reimbursed him for what he should have paid had he been a law abiding citizen like the rest of us.
It turns out that this isn’t the last time that Secretary Geithner followed laws as if they were a suggestion, rather than the rule. Turns out that all of the bailout money being paid out by the billions is unconstitutional as well.
Article I Section 9 of the US Constitution states that “No money shall be drawn from the treasury, but in consequence of appropriations made by law…”. This isn’t just a minor point the founding fathers decided to throw into the Constitution.
Secretary Geithner got around this Constitutional issue when the Emergency Economic Stabilization Act of 2008 was passed. According to a report by the Congressional Budget Office, this established the Troubled Asset Relief Program, or TARP as it has become more popularly known. This authorized “the Treasury to purchase $700 billion in assets to alleviate the crisis in credit markets”.
Essentially, this gave him a blank check to hand out $700 billion to “stabilize” the economy. A stabilization effort, which will take years to pay back if any of the bailed out companies go under.
Isn’t it nice of him to hand out our taxpayer dollars when he isn’t even willing to pay his own fair share?
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If It Ain’t Broke, Don’t Fix It
The current economic situation, was manufactured by Washington politicians and the media. Granted, I doubt any of them wanted the end result to turn out the way it did, but the reality is, that it was manufactured.
Here’s what I mean. During the 1990’s, liberal politicians and the media created the problem of “unaffordable housing”. They used bizarre statistics, saying that minorities were turned down for mortgages more often than whites, and that they also had lower levels of home ownership than whites. Both of which were probably true.
One has to ask then, why was this true? Was it because all mortgage lenders were racist? Or was it because in general whites were more credit-worthy than other minority groups? And just because minorities had lower levels of home ownership, did that mean that they were living on the street, rather than in a home that they owned? Or did minorities rent more than they owned?
Washington’s solution: more restrictions and quotas placed on banks to increase lending to low-income and minority families. This caused banks to loosen their lending policies, and issue more risky loans.
In the short term, this appeared to work in the benefit of lower income families, as they were finally able to get approved for a loan to buy a home. Now, however, we’re seeing massive foreclosures, and a collapsing economy due to tightening credit markets, and bankrupt financial institutions.
During the 1990’s, there wasn’t a problem with unaffordable housing, as everyone, in general, was living within their means. People who couldn’t afford a home, rented, and those who could afford to buy a home did just that. Politicians trying to fix a problem that didn’t exist created exactly the problem that they were trying to solve. People can’t afford to live in the homes they bought, and are now being forced to foreclose.
What’s next? If minorities are foreclosing more than whites, does that mean that there are unfair foreclosure practices in place? Are we going to keep banks from foreclosing on delinquent loans if the loan is to a minority?
Let’s hope Washington has more sense than that.
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Is the US Responsible for Mexico’s Problems?
Posted by Scott in Economy, Foreign Affairs, Guns on April 17th, 2009
President Obama recently visited Mexico to discuss, among other things, the escalating violence in the country, which stems from the growing drug trade.
In his visit, Obama acknowledged that the US shares a piece of the responsibility for the violence in Mexico because of the guns that get smuggled into Mexico from the US. To his credit, President Obama said he would rather concentrate his efforts on anti-smuggling laws rather than on more restrictive laws on sales of guns in the US. Although he did admit that the Clintonian Assault Weapons Ban “made sense”, but that “none of us is under the illusion that reinstating that ban would be easy, and so what we’ve focused on is how we can improve our enforcement of existing laws.” I’m reading that as a positive for now, but stay tuned I’m sure there will be more developments on that front.
Back to my original point, regarding how the US shares the responsibility for the escilating violence in Mexico. Is it our fault that the Mexican economy is in such bad shape that their people have to resort to illegal means to bring money into the country? Is it our fault that the best way for Mexicans to make an “honest” dollar is by crossing the border in to the US and working illegally? Either that or they could team up with a drug cartel and add to the already out of hand violence.
I’m failing to see how the US has caused any of this. True, many of the guns used by the drug cartels were purchased in the US and smuggled across the border. To that same logic though, couldn’t one reason that Mexico is to blame for the US drug problem?
Each country has their own unique social and economic issues, which should be addressed. It doesn’t help either situation though when blame is incorrectly placed on the wrong party. It especially doesn’t help when it’s our President blaming us for other countries problems.
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It seems these days that everyone is on the Government bailout bandwagon. Not just in the United States, but all over the world, people are crying out to their governments to bailout failing companies. What’s worse is, it’s happening.
I question these people who say that a government bailout is the only way a troubled economy will right itself. I question why these people think that the government will be able to effectively run the nations largest banks, insurance companies and automakers. What has the government ever done that was efficient, or well run?
The perception that the government is the cure-all solution for our economy, goes back to the “woe is me” philosophy that is plaguing society. “I can’t get a job…government please support me”, “I can’t get a loan…government please fund me”, “A hurricane wiped out my neighborhood…government give me a place to live”, “I can’t keep my company afloat…government please bail me out”. These situations all have one thing in common. Someone is taking taxpayer money while doing literally nothing to earn it.
Businesses and their executives are being barraged by negative media to look inept. Government is being viewed as the knight in shining armor, who will slay the evil “Wall Street Dragon”.
Companies who take government bailout funds (and individuals who take handouts for that matter) are only placing a band-aid over a severed limb. It gives the appearance of trying to stop the bleeding, but without serious attention, the patient is going to bleed out.
The companies who are going to come out on top of this whole mess are the ones who anticipate where the shortfalls in the economy will be, and adjust their business strategies to take full advantage.
The companies who are going to fail are the ones who think that they can get by with a band-aid to weather the storm.
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Shape Up Automakers…Or ELSE!
President Obama told the US auto industry to shape up, because we can’t keep a permanent flow of cash into their hands. Essentially, he said the bailout funds are going to run dry for the auto industries, if they don’t show that they have a plan to save themselves.
In the same speech, however, President Obama also said that we won’t let the US auto industry simply vanish. To me this seems contradictory.
The short deadlines given to Chrysler and GM, are forcing moves such as a potential merger with Italian automaker Fiat. This may not be the best move for Chrysler, but given the accelerated deadline, it may be their only option. It seems to me as if the Obama administration is forcing the US auto industry to make hasty decisions, for possibly no other reason than to gain popular support from the public.
Granted these companies, in my opinion, wrongfully took taxpayer bailout funds, and should have to be held accountable for what they do with the money. I just don’t think that it makes sense to force them to make moves for the sake of “getting something done”.
Sometimes good things come to those who wait.
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AIG Outrage
President Obama lashed out against the plan of AIG to pay roughly $165 million in bonuses after accepting about $170 billion in bailout money. He was quoted saying that the bonuses were an “outrage”, violating “fundamental values”, which underscore the need for financial regulatory reform.
I’m curious. Which fundamental values is President Obama referring to?
It couldn’t be the fundamental values of a capitalistic society. If he was, AIG shouldn’t have gotten a dime from the government in the first place. After all, we are still a capitalistic society aren’t we?
Come to think of it, if that was what he was referring to, there wouldn’t be a “need for overall financial regulatory reform” either. The free market would be left to allow bad companies to fail and good companies to prevail.
The fundamental values of a free market shouldn’t allow the government to interfere – that’s why it’s called a free market.
To add insult to injury, Treasury Secretary Geithner said the administration will require the top banks receiving federal aid to include small-business loans in their monthly reports. “We need you to put that assistance to work for the American economy,” he said. Not only do these companies have to recover from one of the worst economic times they probably have ever faced, but now they’re going to be pressured to make small business loans with the bailout money they received.
So what happens once these small businesses go under? Is AIG going to be left holding even more bad loans? Are we going to have to pump even more money into AIG if they start making loans to struggling businesses who ultimately will never be able to pay the loans back?
Businesses come and go. The strong ones just stick around a little longer. If AIG was destined to fail in 2008, we should have let it fail. The same goes for GM, Ford, and any other business that was determined to be “too big to fail”.
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