Saturday, November 27, 2010

Get Ready, Get Set, Blow it

The Republicans are jubilant in their recent victories; Conservatives and Tea Party people see a new dawn. Democrats are morose. Sounds like a mirror image of two years ago. Things can change quickly.
The Democrats blew it by doing what Obama said they would do all along - redistribute income. The question now is whether the Republicans/Conservatives/Tea Party people can do or at least try to do what they were elected to do. The indications are that they will not be able to do anything. That is not surprising given they only hold one house and the other guys hold the other house and the veto pen. But can they convince the American people that the steps that the current Administration are taking on the economy are the wrong ones and that the cutting taxes and spending are the right ones? The indications look like the answer is they won't even be trying.

Winning elections is more one of public perception than having great public policy. For better or worse, the last Presidential election was run with a guy who promoted Hope and Change against a guy who was closely associated with a very unpopular President. The recent Congressional elections were a mirror image. An unpopular President’s party got “shellacked” based upon their policies. That is good for the Republicans if they use it. But…

1. Republican leadership Senators have come out in favor of earmarks. The public perception of the Republican policy is that when the other guy has the gavel, earmarks are wrong but when Republicans have the gavel we really need them. This despite the fact that recent election used earmarks as a platform to spank the Democratic candidates and energize their faithful. Bad start Mitch. Another step back but this can be a big PR gain if they do it right.

2. Committee Chair Appointments. This will be a big one. Some of the people at the top of the list for key positions don’t get it. If leadership just follows the “oldest guy wins” philosophy, most of this will be for naught. The majority of the public will not make a distinction between the “good” Republicans that are trying and the old boys who want to keep the sugar flowing. All Republicans will lose – for the second time and we are in a two strikes and you’re out situation. If they blow it again, it will take a real calamity by the Dems before they get another chance. An avoidable disaster but we shall see.

3. Talk Radio. Much of what these guys say is sound economics; they are also equally adept at saying dopey things. Look at Hannity. He likes to preach to the choir (killing talking to Ida from South Carolina about how they are both “Great Americans”) and has programmed reactions. The “Blue Ribboned Panel” recommended cutting almost everything to balance the budget. Hannity immediately takes any cuts to the Defense budget off the table. Apparently, there is not one military base – foreign or domestic – that has one marching band that could do with one less tuba player. On the larger scale, whether there are opportunities in the huge Defense budget to cut obsolete, useless or bloated programs is not to be considered in Hannity's world. There is a difference between sound defense and unlimited spending. He needs an about face here.

4. Joe Miller in Alaska is contesting an election he appears to have lost. The Republicans lost the PR battle in the Florida “hanging chad” election. Whether they were right or not, that is what happened in the media. Miller is reinforcing that image to the public that the Republican plan is to steal elections. Unless he can better demonstrate a case, even if he wins, the Republicans get hurt. Time to give up Joe. Over all, a step backward for the Republicans no matter what.

5. The Social Conservatives will get restless. The election had nothing to do with “social values”. Whether Frank marries George and/or the both serve in the military has no effect upon jobs being created. The new guys will pick a fight over this one and the Republicans will alienate a few more percent of the people. Another lost PR opportunity.

6. Goals. The NYS conservative Party ran a poll asking what the first thing the newly elected representative should vote on. Repealing the Health Care bill took first with 38%; second was decreasing spending at 30%. The Republican Party stood by while the media and the First Dope branded them as the Party of NO. So after winning 60+ seats their first goals will be to say no again. Who the hell does there PR? How about a goal of REPLACING ObamaCare?

7. Goals II. Hannity again. He starts his show everyday announcing that the Stop Obama/Pelosi/Reid Express has come to a halt and the next step is to see that Obama is a one term president. That most certainly is not the next step. The thing to do is to continue to expand the percentage of the voting population that understand that A) Democratic policies and wrong for the economy and that B) Republicans have sensible, workable and historically successful solutions to the problems that plague us. If those two things are accomplished, the next election will take care of itself.

8. Hannity Redux. Not to pick on him (he deserves it) but one that is personally annoying is that he spent a good part of Election Day – while polls were still open in NY and everywhere else – trumpeting a huge Republican victory. Think about that. Someone you follow says that your candidate has already won. Do you get off your butt and go vote or stay on the couch? He contributed to lowering the Republican tally. Good job, Sean. You are marching the wrong way.

9. There will be more

Judicial Insanity

Last year, a Riverhead judge decided to eliminate the mortgage debt of an East Patchogue couple - all of it principal, years unpaid interest, fees, charges everything. He completely discharged the debt and gave them clear title to the house that was security for the loan that they did not repay. There were no allegations that the lenders did anything illegal, only that they were aggressive in collecting on a valid debt and recovering the security that was pledged on a the loan. Three things are clear: the couple owed the money; they had not paid it back; and the lender wanted their money to be paid back or wanted their security (the house). The judge's decision to void the loan was based upon his perception that the lender imposed "mortifying abuse against Defendant" - they were were mean.

Fortunately, a higher court reversed this madness noting that it was not based upon anything.

The newspaper article announcing the reversal mentioned only a Riverhead judge and avoided any mention of the idiot’s name. But his name is something that everyone should know. His name is Jeffrey A. Spinner and claims to be a registered Conservative. What is worse, he had the Conservative line last time he ran.

Economic Insanity

A woman wrote into the paper with a two part solution to all our economic problems. Her first step is for everyone to stop buying things (she singles out video stuff and make-up)that she considers a waste of money. Her plan is for reinvigorating a consumer economy is for consumers to stop consuming! People should spend within their means but to stop spending on entire industries will: put those industries out of business, make thousands more people unemployed, and remove more people from the tax rolls. The second part of her plan assumes that all this money that would not be spent by consumers on what they want to buy should be sent to the government to use as they see fit. Brilliant! It is a large part of the problem that this dope is allowed to vote.
This level of economic analysis is equivalent to suggesting that the minimum wage be raised to $100 an hour so that everyone makes over $200,000 a year.

Paying for Health insurance

The Obamoids have announced that 85% of health insurance premiums have to be spent on health services. The other 15% can be used to cover those pesky things like Rent, salaries and benefits to employees, electricity, heat, marketing/advertising, general administrative costs, and the twin evils of “executive bonuses” and profits. This comes from a group of people who have no experience running a company, meeting a payroll, or dealing with revenues that are dependent upon market forces. When they run out of money their plan is to print more. The result of this effort will be to put private companies out of business so that the government is the font of all health services. You will be going to the guys who run the Post Office to fund your knee replacement. That will work well.

Unemployment benefits

Last week’s vote against extending benefits without funding it was the right vote for the Republicans but another step along their road to becoming a permanent minority party. Pelosi brought a bill to the floor to vote for extending benefits – no conditions. She put the Republicans in a position where they could not get any reduction in other spending to “pay” for it. Good politics by her - everything happened according to her plan. The Republicans come off like the Grinch; the Democrats are the friends of the (non)-working man. Wanting to fund the extension by not spending (wasting?) money elsewhere was the right thing to do. The Republicans problem is that they do the right thing and stop. No campaign to announce why they took the position; no effort to publicize Pelosi’s political machinations. They didn’t even make the point of their support for the extension. Marketing is not their strong point.

Saturday, November 20, 2010

Senior Bankruptcy

Newsday guy wrote an article about all the poor seniors who are filing bankruptcy because they have excessive credit card debt. No sympathy here.
Apparently, 67 percent of the senior bankruptcy filings are citing problems tied to credit cards. What could those problems be? The news flash is that they borrowed more money than they could afford to pay back. The Newsday defense is that they were “deluged with applications in the mail, and cards are [were?] easy to get” is a joke. This defense was once simply dismissed by mothers all over the country with the observation that just because the other guy jumps off the bridge you should not do it too. But now more specifics are required. Neither the Banks, BMW, Lexus, nor any one else has the power to make American citizens buy anything against their will. (Excepting of course President Obama’s requirement that everyone must buy medical insurance.) Marketing pitches for a variety of products are a part of every day life for all of us. People who bought more stuff than they could afford and borrowed money to do so, simply did a stupid thing. But their problems are not mine or anyone else’s who has people managed to reach “seniorhood” while living within their not very munificent means. To single out seniors like this is condesending. It can reasonably be assumed that bankruptcy filings are up for every demographic group. For the most part, the reasons are the same - people voluntarily entered into more debt than they could pay back. You could have written exactly the same piece using race in lieu of age and you would have been castigated severely. But you generated this puff piece to rail at banks that lent people money and actually want it back with the agreed to interest. Waste of ink.


Tuesday, November 16, 2010


The earmark defenders are trying to convince everyone that earmarks only account for about $9 billion in spending. That depends. Earmarks are bribes. The system works like this: I’ll put your earmarks in my bill if you vote for it. Then, you put my earmarks in your bill and I’ll vote for that. They both get their earmarks and the taxpayer pays for A.) the bribes (earmarks) necessary to collect votes for these bills, and B.) for the bills that wouldn’t have passed without bribes. Think the total is still $9 billion?


Guilty verdict by a group of his peers. Big surprise. But the charges are misleading. Not paying income tax is a federal crime - let’s see where that goes; not reporting assets is internal to Congress (slap/slap – but where did all that money come from and is there more?); you are supposed to own one rent controlled building and he owned 4 – probably fraud. The big one here is hiding behind the “using government stationary” charge. That means he was soliciting money from companies that had issues before his committee - the one that gives out all the money. In simpler terms the deal is: Your Company donates money to my cause and I pass the earmarked legislation that helps your Company. In more blunt language that is a bribe – felony.
It took minutes for 4 Democrats and 4 Republicans to see that he was guilty and see through his ridiculous efforts to postpone the verdict. Incredibly, there are still people who are defending him with excuses ranging from “everybody does it”, through “he didn’t do it maliciously”, to that old standard of “RACISM”. Sorry Charlie – doesn’t wash. Now wait until we hear Maxine Waters scream.

Friday, November 12, 2010

Privatizing Social Security

The term makes Seniors crazy and makes politicians run the other way. The Democrats media have successfully demonized the word so that no rational discussion can be had. That has to change. The Presidential commissions answer to this part of the problem is to raise the age and tax people more. This only puts the program at odds with the demographics of the country. If there is an inescapable truth, it is that you can’t beat demographics. The answer lies in 6th grade arithmetic.
First some facts:
1. The Social Security Trust fund is not real and has not been for 40 years. President Lyndon (Great Society) Johnson decided, and all the Democrats went along, that FICA tax receipts should get added to all the other tax receipts and get spent. The SS trust fund contains IOUs from the government promising to pay itself the Social Security contributions of the population. Suppose you put $100 a week in an envelope for your retirement; you take it out immediately, replace it with an IOU to yourself for $100 and spend the money. After working for 40 years, how much money is in the envelope? Right, and that is where we are.
2. The return on the Social Security Trust fund is 0%.
3. All your Social Security contributions, the ones that the government has already spent, are not yours.
4. Social Security Contributions that come out of your paycheck each week are matched (100%) by your employer.
5. There is no plan for privatizing Social Security that calls for making any specific investment that “helps” Wall Street. These plans have limitations on what investments can be made to limit speculation (same as IRAs). You can’t buy baseball cards, stock options, Picassos, etc.
6. Back to the arithmetic. Put $1,000 a year into a CD/Municipal Bond that pays 5% (hard to do now but certainly not historically great return). Do that for 40 years. At the end of 40 years, your total contribution has been $40,000. However, thanks to the effect of compound interest, you have an account with about $120,000. Three times what you put in.

The people who object to any privatization plan first make an effort to scare people who are currently on or close to receiving Social Security. No privatization plan changes their benefits. The only issue remotely impacting these people (I am one of them.) is funding to.
Another objection is that it gives money to the Wall Street guys. Wrong. Under any of these plans, Social Security contributions are your property, all plans call for it to be a voluntary program and under your basic control. What you do with the money is your business, again, within safety and soundness restrictions. There is absolutely nothing in any of the proposals that says it must be in the stock market. As with IRAs, precious metals, CDs and municipal/corporate bonds are all valid investments.

Look at the arithmetic again. Money triples over 40 years at 5%. Current FICA levels are about 13.5% counting employee and employer. Someone making $50,000 contributes a total of $6,750 a year. Doing that for 40 years at 5% gets you just over $800,000. It is yours. The interest that throws off would be more than your get from Social Security, even without touching the principal. You can do what you want with it. Give some to your kids. And you would not contribute one more penny that you are contributing now. By the way, the guy who makes $25,000 winds up with about $400,000. If you actually get a raise someday, the return is even better.

Now why does this happen. The comparison between the current plan and privatization is easy. One gets a 0% return and one gets the marvelous impact of compound interest.

The only real issue to doing this is funding the current system until it is replaced. The flippant answer to that is that we can’t fund the current system now. Not helpful but it shows what are options are. We have to do something besides continually raising retirement age and contribution levels. The effort needs to be put toward figuring out how to do the transition, not continually bandaging a system that was fraud when Bernie Madoff did it.

Wednesday, November 10, 2010

Starting Somewhere

A big news story about Federal, State and Local governments giving $17,000 in tax credit to people who by a certain ($32,000)electric car. The rationale is that “you have to start somewhere”. The issue is where to start. The premise here is that tax incentives for individual people to buy a product that you want them to buy is a good thing. (This is otherwise known as income redistribution. You take tax money from everyone and give it only to people who buy the product you - the Government - wants you to buy. This incentive means raising taxes.
Another form of incentive is not getting in the way of people who develop stuff that can be turned into a profitable enterprise - like the Model T – how much government help did old Henry get?
The argument is in which process is better:
This one gives the makers of this car the ability to sell their product at prices where the company cannot make a profit. Why? Because the government says this is the product we want to push. Not A FUNCTION OF GOVERNMENT. What happens when the tax breaks are withdrawn? Sales fall. Is the government supposed to bail out the business? The logic will be that we have to bail out the business to save the jobs that we created that were unsustainable. Who gets to pay for that bail out?

The other plan is to leave these companies alone. Good ideas are good ideas and will rise to popularity is they are allowed to. So it costs more now - so what. What did the first PCs and cell phones and the Model T cost in today’s dollars. There were ridiculously expensive but people bought them and they became less expensive. Businesses build new stuff because they see a market need and try to fill it and make a profit. A risk /reward issue. There is a risk, and as the potential gain becomes less and less it becomes less worth it to take the risk. The larger the chunk that the government will take the less likely that people will take the risk.

The primary argument against cutting taxes to is that it will create greater deficits. (The problem with all the government (CBO) calculations about tax cuts is that they are by law required to calculate tax projections based upon people not changing their behavior. For example, if the raise the taxes on a pack of cigarettes by $2, the figure that they will get another $2 for every pack of cigarettes currently sold. But people will buy fewer packs so their calcs are always wrong and wrong in ways that show tax increase lower deficits.) Behavior changes; risk takers take greater risks and tax receipts increase, look up what happened under Kennedy and Reagan. Receipts increased after the tax cuts. The problem was that Congress just spent that money and more.

So let people build whatever kind of cars they want and let people buy them. Without the government.

Tuesday, November 9, 2010


Meanwhile, with the help of the media, the race for the 2012 Republican Presidential nomination is already in full swing. Primaries are the way it is supposed to happen. The key will be to do two things: have a primary season with a minimum of bloodshed and wind up with a candidate that does not start out with built in negatives that have to be overcome. Elections are won and lost buy the Party that can attract the 20% of the people in the middle of the spectrum. Most of these people are not political junkies - sound bites, 30 second interviews, campaign slogans and headlines are their news. Getting negatively branded in the minds of this group is an irrevocable injury. It is not hard to determine who fits into this group. Doesn’t mean that these people need to disappear, just means they would not make good candidates. Fund raising, cheer leading and endorsements are valid mission for whoever can do it well. It also does not mean that the chosen Republican candidate has to move compromise anything from a policy stand point. It does mean that two people can run on exactly the same policies and make the same and one can get elected and the other would have no chance.

Keeping the ol' boys around

Newsday has an article showing the depth of their typical analysis. The issue was the Republican promise to stop earmark spending and how much money will be “lost” to LI as when this practice stops. They listed about $18 million of $65 million in earmarks that the local Democratic will admit to obtaining. To say that this was a somewhat shortsighted analysis is an understatement. Some things to consider:
These 6 people got this money but there were another 529 people in Congress trying to feed at the same trough - a trough that is 41% filled with borrowed money – mostly from China.
The rest comes from taxes. Of all the tax money that goes to Washington, a higher percentage of that money comes from LI than the percentage of the earmark money LI gets back. Seems like a bad deal to me.
It can be debated as to whether all of the recipients of this largesse are properly objects of the federal government.
Finally, this is the tip of the iceberg. The use of earmarks is well established as a means for obtaining votes in Congress that are not otherwise available. The game is You-vote- for-my-money-wasting-bill-that-you-don’t-like-but-contains-your-earmark-and-I-will-vote-for-your-bill-that-I-don’t-like-but-contians-my-earmark. No one sponsors a bill with their own earmarks and the tradeoff protects everyone. The amount of money that is spent on bills that only pass because of this is incalculable. It is not just the earmarked money.

Creation Myth

There is a movie coming out that claims to be about why the mortgage industry collapsed. They managed “explain” the securitization process and leaves out Fannie Mae, Freddie Mac and the other government agencies responsible for 90% of the mortgage securitization market. The government invented subprime mortgages and pushed them on the banks. Where do they think the banks were laying off most of these crappy loans? On the government! Banks knew the loans were subprime and that is why none of the banks kept them in their portfolios - the government was buying and guaranteeing them (through the agencies which have the full faith and credit of the US treasury.) There was a no risk to Banks BECAUSE OF THE GOVERNMENT. That made them prime loans to the banks.
And have these agencies stopped this ridiculous practice. Nope. They are still offering balloon teaser rate loans and subprime documentation. Without acknowledging the reason for it, the situation will never get fixed.

Don't Stop Now, It worked so well

The current economic situation is the direct result of Freddie Mac and Fannie Mae pushing subprime mortgages as a social policy. People borrowed more than they could repay and created the bubble. When the teaser rates these agencies offered went up, the bubble popped and things went to hell. As long as people insist on blaming Bush, Republicans and Banks, the situation will not be resolved. Obama’s vaunted Financial Reform doesn’t even mention Freddie Mac and Fannie Mae - no solutions there.

The Art of Compromise

This election has taught us that losers want to compromise. The Democratic leadership from the First Dope on down wants to compromise (a little); the media - after supporting every one sided thing that the Democrats wanted to do – thinks it is only right to compromise. After all its suggestions were ignored, after being accused of being “enemies”, being told to “sit in the back of the bus saying”, being branded as the “ Party of NO” and overwhelming winning the election, what are the Republicans to do? It remains to be seen what the definition of “compromise” is. If the Democrats waste $1,000,000,000,000 on a stimulus package that doesn’t work, is it a compromise to waste only $500,000,000,000? That meets them half way. The media will see things like this as a viable effort at a compromise. It’s not.