Category Archives: Economy

Teapublican Lie #26.

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“The Housing Collapse was created by Democrats, Fannie Mae and Freddie Mac.”

If you listen to Teapublicans, you’d think Democratic Congressman Barney Frank was almost solely responsible for the collapse of the housing market aided by Fannie Mae and Freddie Mac. And they’d have you believe that the collapse is further evidence of an out-of-control federal government that forced banks to loan to the poor then guaranteed loans that could never be repaid.

Yet it was legislation authored and passed by Republicans that led to the collapse.

For example, in 1986, the Reagan administration eliminated tax deductions for credit card interest. Since interest on mortgages was still deductible, that encouraged many Americans to use their homes as credit accounts through home equity loans and refinancing.

The Republican-sponsored Taxpayer Relief Act of 1997 excluded capital gains taxes on home sales encouraging speculation on real estate investments.

The Gramm-Leach-Bliley Act of 1999 deregulated financial institutions permitting banks to risk their customers’ deposits on risky investments.

Finally, Republican deregulation contributed to mortgage brokers and financial institutions writing questionable sub-prime loans in order to collect the origination fees. The loan originators then packaged the loans into mortgage-backed securities selling them to investors. They were even able to mitigate their risks through credit default swaps that allowed them to pass much of the risk onto other institutions such as AIG.

The result of all this was to encourage Americans to view their homes as investments. Those who did not already own a home felt that they could be shut out of the housing market if they didn’t act soon.  That encouraged them to overlook the looming balloon payments of Adjustable Rate Mortgages.

By 2006, the US housing market was a house of cards ready to collapse. And it did.

As for Fannie Mae and Freddie Mac, their only apparent role in the collapse was through the Community Reinvestment Act that encouraged banks to reduce discrimination by writing loans to borrowers in low and moderate income areas. But, in 2006, Fannie Mae and Freddie Mac insured only 24 percent of subprime loans and the Community Reinvestment Act affected only one out of the top 25 subprime lenders.

So Teapublican anger about the housing collapse is entirely misdirected. They have almost no one to blame but themselves.

Seven Common Sense Ways To Fix Our Economy.

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1 – Re-institute the Glass-Steagall Act.

The Glass-Steagall Act was initially signed into law in 1933 to prevent a repeat of the conditions that led to the Great Depression. The law created a firewall between banks of deposit and investment banks, recognizing that a bank of deposit is entrusted with maintaining the financial security of its deposits while an investment bank, such as a stock brokerage, engages in inherently risky activities. When the same financial institution is allowed to participate in both acitivities, the deposits are placed at risk. And since the government insures deposits through the FDIC, it’s also at risk.

Unfortunately, the law was repealed in 1999 and the lax regulation of the Bush administration allowed banks to collapse as the result of the very conditions the law was designed to prevent.

2 – Return Capital Gains Taxes to Reagan-era levels.

During the Reagan administration, the maximum rate on capital gains (money derived from investments) was raised to 28 percent. But, to reward their wealthy masters, Teapublicans have cut the rate to just 15 percent and they want to eliminate capital gains taxes altogether.

Since the wealthiest 1 percent of our population makes most, if not all, its money from capital gains on investments, that means millionaires and billionaires pay an income tax rate of 15 percent or less. On the other hand, many of us who make money from salaries or as sole proprietors pay an income tax of up to 33 or 35 percent, not including payroll taxes for Social Security and Medicare. See the problem?

3 – Return Income Taxes to Clinton-era levels.

Under Reagan, the maximum federal income tax rate averaged 65.70 percent. Under Clinton, the maximum income tax rate was 39.60 percent. Under Bush, the maximum income tax rate dropped to 35 percent leading to massive federal deficits.

Obviously, our current maximum tax rate has weakened our economy.  And unless we find ways to generate more revenue, we will be unable to decrease our debt or repair our infrastructure.

4 – Eliminate the cap on Social Security Withholding.

For the past several years Social Security taxes are withheld on only the first $106,800 of taxable income. By eliminating the cap, we would generate a great deal more money for Social Security, and by paying benefits to only those who actually need them, the Social Security trust fund would be solvent well into the forseeable future, perhaps permanently.

5 – Cut unnecessary duplication of city, county, state and federal offices.

If you want to build a commercial operation today, you may have to trek to as many as four offices to obtain the necessary permits. That’s because each level of government has its own unique regulations. Since environmental issues are necessarily different between Los Angeles, CA and Siren, WI, the need for different regulations is understandable. But why not streamline processes by combining similar functions in a single office? This would not only cut red tape, it would increase efficiency and cut costs.

6 – Buy local.

For the past 40 years, US manufacturers have shipped raw materials to other nations.  Then shipped the finished products back to the US.  This is not only destroying our economy, it is destroying our environment.  In fact, a case can be made that an enormous Hummer SUV is more environmentally friendly than a Prius.  That’s because the Hummer is made primarily in the US.  Eschewing foreign-made products would do wonders for American workers and everyone who breathes.

7 – Buy small.

Walmart, Target, Amazon, etc. are killing local retail stores which has led to the hollowing out of our central cities and the loss of jobs.  Yes, “big box” stores hire many employees, but they often pay less, provide fewer benefits and contribute less to the local economies.  Moreover, by emphasizing cheaper foreign-made products they continue to depress US manufacturing. 

Everyone likes lower prices and greater selection.  But who wouldn’t be willing to pay a bit more if it means our family members, friends and neighbors can keep or get a decent job? 

Na-na-na-na-na-na-na-na-na Goodbye, Senator Pearce!

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This week, Boss Hogg wannabe, Russell Pearce was defeated in a recall election in Mesa, Arizona. You may remember him as the Godfather of SB1070, Arizona’s anti-immigration, anti-Latino bill. Thing is, he doesn’t deserve credit for writing the bill; only attaching his name to it and bullying it through the Arizona legislature.

One of the few things for which Pearce actually deserves credit is corruption and increased political devisiveness in Arizona. Yet, after the election returns were counted showing that he was defeated despite a litany of dirty tricks, Pearce was unapologetic. In a statement televised locally, he said, “If being recalled is the price for keeping one’s promises, so be it.”

Promises? Pearce didn’t promise anything. Promise is a term of hope. That hardly describes any of Pearce’s loathesome actions.

As former Chief Deputy for the self-proclaimed “nation’s toughest sheriff,” Pearce takes credit for having created “Tent City,” a Maricopa County jail located in the desert where prisoners are denied air conditioning despite 100+ degree temperatures and are served baloney sandwiches for every meal.

As President of the State Senate, Pearce not only unabashedly took $40,000 worth of free trips and football tickets from the Fiesta Bowl committee. He balanced the state’s budget on the backs of children and the poor. He demanded drastic cuts in education, while giving money to big business. He closed state parks in a state that depends on tourism. He drove tens of thousands of Latinos from Arizona further depressing the state’s economy. He fought to allow guns on school campus.  He challenged the 14th Amendment and President Obama’s birthplace. And he pushed for bills that would cement the Teapublican stranglehold on state politics for generations.

But despite the embarrassment of being the first Arizona legislator, and the first Senate president, to be recalled, Pearce vows a comeback. And if he’s ever successful, one suspects he’ll raise devisiveness and the corruption of power to entirely new levels.

The Planned Destruction Of Our Two-Party System.

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If you wanted to destroy the opposing political party – not just defeat it – what would you do?

You’d probably look to take away its source of funding while finding ways to dramatically increase yours, such as destroying labor unions while legalizing unlimited corporate contributions as “free speech.” You’d try to marginalize and delegitimize its leader by claiming he was not born in the US. You’d try to destroy its local organizers (ACORN). And knowing that most disputes will end up in court, you’d try to stack the courts with your own appointees while blocking the other party’s.

When the other party is in power, you’d try to block any attempts to improve the economy through filibusters. You’d try to destroy confidence in any media outlets that don’t support your point of view by eliminating the Fairness Doctrine and defunding public broadcasting. You’d try to eliminate as many regulations as possible, so when you regained power you could do whatever you want. And you’d try to destroy public confidence in a government run by the other party.

When your party is in power, you’d try to change the rules to favor your candidates. You’d try to redraw the congressional and legislative districts so you could get more candidates elected. And you’d try to suppress voting blocs that tend to vote for the other party’s candidates through voter suppression efforts such as those being pushed through Michigan, North Carolina, Pennsylvania, Ohio and Wisconsin.

Finally, to ensure your party’s future dominance, you’d try to control our schools so you could teach your own version of history and pseudoscience by rewriting textbooks such as those published in Texas.

If you think that I’m being paranoid, that these events are coincidental, or that both parties do the same things, you simply haven’t been paying attention.

Proof That Trickle-Down Economics Work.

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In the early 1980s, Ronald Reagan’s Budget Director, David Stockman, revived an old economic theory as the basis for the Reagan administration’s economic policy. Reaganomics, aka Trickle-Down economics, aka Supply-Side economics was based on the “Horse and Sparrow” theory of the 1890s, which some believe was responsible for the Panic of 1896.

The basis of the theory is the notion, “If you feed a horse enough oats, some will pass through to the road for the sparrows.”

Of course, Reagan and Stockman stated the benefits of their plan somewhat differently. Their belief was that if you cut taxes for the wealthy, particularly those on capital gains from investments, the wealthy would spend the extra money on additional goods and services thereby creating more jobs for the middle and lower classes. Despite its many critics, the theory has been championed by Teapublicans ever since.

Has it worked? One might say that it has worked all too well…for the rich.

According to a recent study by the non-partisan Congressional Budget Office (CBO), from 1979 to 2007 after-tax income for the top 1 percent of US households has nearly tripled, rising by 279 percent. Over the same time period, after-tax income for the middle class grew by just 40 percent. And those at the bottom saw their incomes increase by just 18 percent.

So, by every measure, Trickle-Down economics have reduced income to a mere trickle for all but the very wealthy. Or, if you relate the results to the “Horse and Sparrow” theory, the supposed benefits are just plain horse dung.

Teapublican Lie #22.

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“Welfare moms are worse for our economy than welfare CEOs.”

For years, you’ve heard Teapublicans rail against freeloading welfare moms. They portray them as lazy, drug-addled minority women who turn themselves into baby factories to scam the system and live in relative luxury. Right?

In fact, a Teapublican candidate for the Nebraska Unicameral recently compared them to racoons saying, “They’re going to do it the easy way if we make it easy for them.” And Florida Governor Rick Scott recently signed into law a bill that requires Floridians to submit urine, blood and hair samples before they can receive cash aid from the state.

However, according to the statistics, the majority of those who receive Aid For Dependent Children are white and receive benefits for 2 years or less. Half of all welfare recipients leave the program in the first two years.  Most have only one or 2 children.  And the majority are over 20 years old.

Many succumbed to the “if you really love me, you’ll…” line. But many are divorced and a few are widowed. Contrary to Gov. Scott’s expectations, very few are chemically dependent. And they’re hardly living in luxury.

For example, those who qualify for W-2 Transition (W-2 T) funds reserved for participants who have limited ability to work receive payments of $628 per month with a lifetime eligibility limit of 60 months. Not exactly what Teapublicans want you to believe about so-called “welfare queens” is it?

Now, let’s examine the “welfare kings” of corporate America.

We have given millions of acres to mining companies while requiring no royalties in return. We gave railroads millions of acres and millions of dollars in subsidies for construction. We built and maintain 340,000 miles of logging roads for the timber industry in addition to giving them subsidies of more than $111 million annually. Subsidies to oil and gas companies total more than $40 billion per year.

We provide billions to corporations for the research and development of new drugs and new weapons systems, even providing foreign aid to other nations to help them buy our weapons. We offer corporations insurance at below market rates to encourage overseas investments in high-risk nations. We provide farm subsidies to corporate farmers. State and city governments provide incentives to attract large corporations. They also provide millions to help billionaire owners of sports franchises to build new stadiums and sports arenas.

And, lest you think the Troubled Asset Relief Program was the first time we bailed out financial institutions, don’t forget that we forked over $500 billion to the savings and loan industry in the 1980s.

In short, we allow large corporations to privatize their profits and socialize their risks. Is it any wonder that in previous generations their owners were called “Robber Barons?”

Origins Of The Right’s Misplaced Hate Of Obama.

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I confess that I’ve long been confused about the intense (and, I believe irrational) hatred of President Obama, when it appears to me that he has been guilty of nothing more than trying to correct the problems created by the previous administration.

Upon reflection, I believe it stems from the Right’s unfailing belief in the so-called “free” market.

When the economy, led by the housing market and a lack of common-sense regulations, careened off a cliff in late 2008, the Bush administration recommended a bill to Congress that called for the US to spend billions in order to prop up the failing banks. Lacking the support of Republican leaders in Congress, the measure initially failed. But when the stock markets crashed as a result, enough Congressmen were persuaded to change their votes and the Troubled Asset Relief Program (TARP) went into effect.

The program ultimately stabilized the markets and the economy enough to prevent the Great Recession from turning into a second Great Depresssion. Yet many Republicans were furious. They believed TARP to be a government intrusion into the infallibility of free market principles. When President Obama subsequently offered government-backed loans to General Motors and Chrysler in order to stave off the collapse of the American automobile industry, the free market Republicans and Libertarians went ballistic.

Capitalizing on an idea by a Republican strategist, groups such as the Koch-funded American FreedomWorks spent millions to rally free market believers to protest. They labeled the movement a modern day Tea Party. It turned out to be the perfect way to inspire the Republican base which was dispirited following the 2008 elections.

Teapublicans deluded themselves into believing that the Great Recession was not the fault of the repeal of the Glass-Steagall Act or the Bush administration’s lax oversight of the financial industry.

They focused, instead, on President Obama’s attempts to fend off an economic Armegeddon. In addition, they convinced themselves that the national debt, which had doubled under President Bush, was now the fault of President Obama. They believed the auto bail-outs and economic stimulus were evidence that the administration was moving toward socialism. The President’s eventual signing of a bill to reform the out-of-control healthcare system added even more fuel to the torches being carried by the Tea Party.

When viewed in context, the Teapublican fears seem irrational. But when viewed through a partisan lens and slavish devotion to free market principles, regardless of their consequences, the fears are understandable, if not logical.

Moreover, this helps to explain why so many lower and middle class Americans vote against their self-interest by supporting Republican candidates determined to transfer wealth upward through tax breaks for the wealthy.

Over many years of listening to Fox News pundits and Rush-to-the-table Limbaugh, these people have become convinced that all of their problems will be solved if only we rid ourselves of government intrusion and allow Teapublican leaders to work their free market magic. Indeed, these voters are likely convinced that the only thing standing between them and unimagined riches are evil Democrats, who in their Teapublican minds, are trying to replace capitalism with socialism, or worse yet, communism or fascism.

Never mind that many of these people don’t have a clue of what any of these “isms” actually mean. Hence the Tea Party signs that read “Keep your government hands off my Medicare.”

Teapublican Lie #20.

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“Teabaggers are patriots. Occupy Wall Street demonstrators are misguided thugs and revolutionaries.”

The Tea Party claimed to be a grassroots movement, but in reality, it was created by Republican strategists, financed by Republican think tanks and billionaires, and promoted and publicized by Fox News Channel, Rush-To-Judgement Limbaugh and the rest of the Republican megaphones.

The Occupy Wall Street movement, on the other hand, receives no money from millionaires and billionaires. It has no think tanks to fund it. And it has no media organizations under its control. The movement was created by a diverse group of young people fed up with the wealthy who control Congress and dictate public policy. And it’s growing.

So why are the Teapublicans now dismissing them as out-of-control rabble? Why are Teapublicans portraying them as dangerous and disrespectful? And why are Teapublicans saying “they ought to get a job?” Actually, that’s the question at the very heart of the movement. The Occupy Wall Streeters want to get a job, but feel that Teapublican policies dictated by the wealthy prevent them from any chance of success.

Instead of trying to initiate legislation that might create jobs to make the Occupy Wall Streeters go home, Teapublicans would rather spend their time denying tax hikes for millionaires and billionaires. And they are using their media megaphones to portray the movement as dangerous. On his daily radio diatribe, Glenn Beck even said, “They’re coming to kill you!”

Hmmm…think about it for a moment. Which group brought guns to their rallies and carried signs with overt threats against Congress and the President? Here’s a hint: It wasn’t the Occupy Wall Street demonstrators.

A Look Into The Future of Teapublican Budget Cuts.

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Despite the fact that our $14 trillion debt was largely created by Teapublican presidents, now that we have a Democratic president, the Teapublican-controlled Congress is dead set on forcing enormous budget cuts at any cost.

Set aside for a moment that their primary agenda is to end regulations for their corporate masters and to starve only those departments that are contrary to their ideology (primarily the EPA and the Dept. of Education). The real concern is what such draconian cuts will do to our economy.

If you want to see a preview of the consequences, you need only to look to Greece.

As you likely know, the Greek government is in danger of default. To “cure” its ills, Germany along with the other nations that are part of the European Union, agreed to bail out Greece. But only if Greece would enact drastic spending cuts and large tax hikes.

The result? It would seem that the “cure” is in danger of killing the patient. Indeed, the cuts have put the entire European Union in recession. And the symptoms have spread to the US. Every time the European Union sneezes, our markets react.

The problem is that the new austerity measures have resulted in more Greeks losing their jobs. And without jobs, the Greeks are unable to pay the increased taxes. Many have been forced to pay taxes out of their savings (if they have savings). Many can’t pay their taxes at all. That only results in more deficits, more spending cuts, more tax increases, and so on.

Although Greece is the most extreme example of an economy in trouble, it’s not alone.

Ireland’s economy is also particularly weak. You may remember that before the global recession, Ireland was called the “Celtic Tiger” having built its reputation by luring foreign corporations (many from the US) through some of the lowest corporate taxes in the world. Indeed, Teapublicans have repeatedly cited Ireland as a model for reforming our own corporate tax structure.

One would hope that our nation could learn from these examples of what not to do. But, since Teapublicans mostly ignore anything beyond our borders (except for oil deposits), I’m not hopeful.