“It will give millions of families resigned to financial ruin a chance to rebuild, By bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”
So said Barack Obama. He was referring to a $275 billion giveaway.
Not a giveaway to homeowners.
Not a giveaway to the unemployed.
Not a giveaway to the soldiers fighting his stupid wars.
A giveaway to the banks.
A giveaway to the shareholders and highly paid employees of JP Morgan Chase, Citigroup, Bank of America, and so on down the line of incompetence.
A giveaway from you, me, and all the other suckers.
A giveaway from those who voted for him to those who paid for his television commercials.
And oh by the way, "shoring up housing prices" is bad for almost everyone. It would definitely be bad for the overall state of the economy. Growth will not return until home prices reach levels that can be sustained by the incomes of those who buy them. To do that, they must go down, down, down.
Wednesday, February 18, 2009
Tuesday, February 17, 2009
If Corporations are Legally People, Then GM is a Drunk, Homeless Guy on the Street Corner
We live in a cartoon world. General Motors told us all today that they want $30 billion MORE dollars. They want it so they can, get this... cut production to match a weaker sales outlook.
A country that lends scarce resources to a business so that it can CUT production deserves a recession.
GM also plans to take advantage of gullible citizens of Sweden, the UK, Germany, and Canada. They are headed toward becoming the first multinationalized corporation. What happens when the chancellor of Germany and the Hopemeister disagree over engine specifications?
Did anyone happen to notice that all those workers whose jobs were supposed to be saved by the last bailout are getting fired anyway?
Our priorities are convoluted. GM is dead; Chrysler is dead; Ford is almost dead. They are zombies, walking the streets in clear daylight, sucking the vitality from the rest of us. If we keep this up, there will soon be nothing left. Someone should tell the federal government, that is, the democratic party, that if Americans wanted what GM is making, we would buy it.
A country that lends scarce resources to a business so that it can CUT production deserves a recession.
GM also plans to take advantage of gullible citizens of Sweden, the UK, Germany, and Canada. They are headed toward becoming the first multinationalized corporation. What happens when the chancellor of Germany and the Hopemeister disagree over engine specifications?
Did anyone happen to notice that all those workers whose jobs were supposed to be saved by the last bailout are getting fired anyway?
Our priorities are convoluted. GM is dead; Chrysler is dead; Ford is almost dead. They are zombies, walking the streets in clear daylight, sucking the vitality from the rest of us. If we keep this up, there will soon be nothing left. Someone should tell the federal government, that is, the democratic party, that if Americans wanted what GM is making, we would buy it.
Thursday, February 5, 2009
Presidential Destruction of Words: Exceptional
Barack Obama has ordered that top executives at banks who receive exceptional assistance from the U.S. Treasury be limited to half a million bucks per year in compensation.
We the people are meant to be comforted by this. Our country's resources have been funneled down the sinks of failed businesses, but fear not. Those who manage the absolute worst of the worst will have salary caps.
At present, this edict would apply to 15 people at three institutions: AIG, Bank of America, and Citigroup.
It's been almost a year now since the Federal Reserve signed us all up to lend $29 billion to JP Morgan Chase against the worst collateral in the history of lending. That ominous beginning to the government takeover of the financial industry has mushroomed into a debacle that gets worse every day.
And we are to believe that the Fed's actions last March were not "exceptional."
Nor have bailouts of failed automakers been exceptional.
Nor have uncollateralized loans of 10 and 25 billion dollars been exceptional.
This most recent action is mostly meaningless. On Monday Obama will trot his treasury chief out to tell us that more must be done. Still greater resources must be thrown at failed banks. There is no other choice. We must suck it up.
When we complain and express disgust that they are taking from the relatively poor masses to give to the rich, not just any rich but those particular rich who have put their incompetence on display for all to see, they'll tell us it's okay because Ken Lewis is only getting $500,000.
This act is just the latest in a long series of reactions by people who have no clue what they are doing. They offer poison for food, then give poison as the antidote.
When Monday's "comprehensive" plan meets inevitable failure, they'll react again. Perhaps the next bailout will be called The Exceptional Bailout.
You get what you vote for.
We the people are meant to be comforted by this. Our country's resources have been funneled down the sinks of failed businesses, but fear not. Those who manage the absolute worst of the worst will have salary caps.
At present, this edict would apply to 15 people at three institutions: AIG, Bank of America, and Citigroup.
It's been almost a year now since the Federal Reserve signed us all up to lend $29 billion to JP Morgan Chase against the worst collateral in the history of lending. That ominous beginning to the government takeover of the financial industry has mushroomed into a debacle that gets worse every day.
And we are to believe that the Fed's actions last March were not "exceptional."
Nor have bailouts of failed automakers been exceptional.
Nor have uncollateralized loans of 10 and 25 billion dollars been exceptional.
This most recent action is mostly meaningless. On Monday Obama will trot his treasury chief out to tell us that more must be done. Still greater resources must be thrown at failed banks. There is no other choice. We must suck it up.
When we complain and express disgust that they are taking from the relatively poor masses to give to the rich, not just any rich but those particular rich who have put their incompetence on display for all to see, they'll tell us it's okay because Ken Lewis is only getting $500,000.
This act is just the latest in a long series of reactions by people who have no clue what they are doing. They offer poison for food, then give poison as the antidote.
When Monday's "comprehensive" plan meets inevitable failure, they'll react again. Perhaps the next bailout will be called The Exceptional Bailout.
You get what you vote for.
Sunday, January 18, 2009
A Real Stimulus Package for the President
In the spirit of hope and change, Life At The Margin offers the following stimulus package for consideration by the new president and his people:
1) Withdraw the U.S. military from the world. Primarily this means closing bases and bringing soldiers home from Japan, Korea, Germany, Iraq, Afghanistan, and Kuwait. But U.S military personnel are stationed almost everywhere, and should not be. We should end all wars immediately as none of them have any use in the defense of the United States and its people. The process will be difficult and may take long. Some countries have gotten used to our presence and may prefer us to stay in the short run. But in no case is it in the long run interest of either the local populations or the people of America for these sustained imperial outposts to continue. Each government of a land that hosts the U.S. military should immediately be told that we are leaving and negotiations should commence as to how to accomplish this with the least negative impact on the local people.
The end result should be this: The U.S. Army should never (except in time of declared war) go outside the borders of the U.S., the Navy should never go farther than 150 miles from our coasts, and the Air Force should never go more than 500 miles from our coasts. U.S. soldiers should train to prepare for the unlikely event that a foreign army attempts to invade our country. They should spend their nights with their families in their homes.
2) Abolish the Department of Homeland Security. As described above the homeland should be made secure by the Department of Defense.
3) End the trade embargo on Cuba. This misguided policy, designed to ensure the political support of a very small, misguided group of citizens, only does harm to the people of Cuba and those of the U.S. Due to geographic proximity our relationship with Cuba is of great importance. Economic cooperation will enhance prosperity for both nations and loosen the grip of tyranny inside Cuba.
4) Pull out of all multilateral trade agreements (WTO, NAFTA, etc.). Adopt a policy of unilateral free trade with all nations and peoples of the world. It is unambiguously good for U.S. consumers to allow unrestricted imports to the U.S. Those products that can be made cheaply in other countries should not be made domestically. This will free up American resources to innovate and produce goods and services that we have comparative advantages in. Other countries may not reciprocate immediately but that should not weaken our resolve. The standard of living in the U.S. will increase and other nations will eventually see this and follow.
5) Change the federal tax code to read, "All income of any type is taxed at x%." Here, x would equal whatever number would equate revenue under the old and new systems. As spending decreases, and only as spending decreases, the tax rate would decline. The ultimate tax rate could probably be as low as 5%.
This tax overhaul would have massive direct and indirect economic benefits, both immediate and long-lasting. A tremendous amount of resources are wasted in support of the tax code. Accountants would be free to produce something of value and resources devoted to lobbying for tax incentives could be diverted to productive enterprise. In addition, no one would be confused about the tax policy.
As nice as it is to offer tax relief to the poor, the zero tax rate on low-income people has greater cost than benefits. A huge percentage of our population is indifferent to the profligate ways of government because they perceive it as having no impact on them. In reality they are still subject to the stealth tax of inflation. A balanced budget with reduced spending will significantly reduce the threat of inflation, and a low tax rate for all would be a small burden for all, including the poor.
6) Raise the starting age for social security benefits to equal life expectancy and cut the social security tax in half. Social security was never meant to be a retirement program. It is insurance, and only really old people and disabled persons should rely on it in any way.
7) Increase the tax on use of fossil fuels and eliminate all subsidies for "alternative" fuels. This would solve myriad problems, including the global warming issue. The increase in the tax could be 2 or 3 dollars per gallon of gas or equivalent. All energy sources should compete in a free market based on costs and benefits alone. Fossil fuel use causes a negative externality (a cost not borne by its users) which can be internalized by this simple tax. Revenue from this tax should be used to pay down the federal debt. Once the debt is reduced to zero, the income tax can be reduced.
8) Eliminate all federal aid for college tuition. This includes loan subsidies, grants, etc. These programs are sustained on rhetoric of affordability, and the intentions of lawmakers may well have been to that end. But they serve to make higher education less affordable as they feed the increases in tuition rates. Banks and universities are the beneficiaries, not students.
9) Eliminate tax incentives for retirement plans. This is part of number 5, but deserves specific mention. IRAs, 401(K), and similar plans should be eliminated. We are a debtor nation; retirement is for savers. Far from encouraging the nation to save and invest, these programs have encouraged perverse behavior, such as earning a modest return in an IRA while borrowing on credit cards to consume. They have also created a false sense of security for many citizens. The values of these accounts is not guaranteed and retirement is not an entitlement. In addition, many of these plans have restrictions that prevent people from optimally employing their savings.
All assets held in these accounts should be made immediately available for withdrawal without tax penalty. Any contributions already made, or gains accrued to date should be taxed, or be free from tax, according to current law. Future gains should be taxed at the regular rate and no new contributions should occur.
10) End all bailouts. No single business is so important that it should be propped up by taxpayers. The "too big to fail" idea is a hoax perpetrated by those who stand to benefit from the bailouts. Bailouts are theft from American workers and an assault on economic freedom. They are also a disincentive for innovation and productive work.
If a particular service is important to the functioning of our economy, people will compete to offer that service. The bailout policy only causes poor businesses to survive at the expense of strong ones. Once the country gets a clear indication that the bailouts are over, we will set our sights to creating value for people. Only then will the economy truly recover.
Some of these changes will cause short-term pain for a lot of people as the economy adjusts. Most notably, many will lose their current jobs, but new jobs will be created for those people to fill. On average the new jobs will be better than the old ones as greater value is created. In the meantime, we still have unemployment insurance to ease the transition for those who need to find jobs. There is no way out of the pain. Current policies only push the pain into the future. But by doing so, they make the ultimate level of pain much greater. We have to go through this to get through this.
1) Withdraw the U.S. military from the world. Primarily this means closing bases and bringing soldiers home from Japan, Korea, Germany, Iraq, Afghanistan, and Kuwait. But U.S military personnel are stationed almost everywhere, and should not be. We should end all wars immediately as none of them have any use in the defense of the United States and its people. The process will be difficult and may take long. Some countries have gotten used to our presence and may prefer us to stay in the short run. But in no case is it in the long run interest of either the local populations or the people of America for these sustained imperial outposts to continue. Each government of a land that hosts the U.S. military should immediately be told that we are leaving and negotiations should commence as to how to accomplish this with the least negative impact on the local people.
The end result should be this: The U.S. Army should never (except in time of declared war) go outside the borders of the U.S., the Navy should never go farther than 150 miles from our coasts, and the Air Force should never go more than 500 miles from our coasts. U.S. soldiers should train to prepare for the unlikely event that a foreign army attempts to invade our country. They should spend their nights with their families in their homes.
2) Abolish the Department of Homeland Security. As described above the homeland should be made secure by the Department of Defense.
3) End the trade embargo on Cuba. This misguided policy, designed to ensure the political support of a very small, misguided group of citizens, only does harm to the people of Cuba and those of the U.S. Due to geographic proximity our relationship with Cuba is of great importance. Economic cooperation will enhance prosperity for both nations and loosen the grip of tyranny inside Cuba.
4) Pull out of all multilateral trade agreements (WTO, NAFTA, etc.). Adopt a policy of unilateral free trade with all nations and peoples of the world. It is unambiguously good for U.S. consumers to allow unrestricted imports to the U.S. Those products that can be made cheaply in other countries should not be made domestically. This will free up American resources to innovate and produce goods and services that we have comparative advantages in. Other countries may not reciprocate immediately but that should not weaken our resolve. The standard of living in the U.S. will increase and other nations will eventually see this and follow.
5) Change the federal tax code to read, "All income of any type is taxed at x%." Here, x would equal whatever number would equate revenue under the old and new systems. As spending decreases, and only as spending decreases, the tax rate would decline. The ultimate tax rate could probably be as low as 5%.
This tax overhaul would have massive direct and indirect economic benefits, both immediate and long-lasting. A tremendous amount of resources are wasted in support of the tax code. Accountants would be free to produce something of value and resources devoted to lobbying for tax incentives could be diverted to productive enterprise. In addition, no one would be confused about the tax policy.
As nice as it is to offer tax relief to the poor, the zero tax rate on low-income people has greater cost than benefits. A huge percentage of our population is indifferent to the profligate ways of government because they perceive it as having no impact on them. In reality they are still subject to the stealth tax of inflation. A balanced budget with reduced spending will significantly reduce the threat of inflation, and a low tax rate for all would be a small burden for all, including the poor.
6) Raise the starting age for social security benefits to equal life expectancy and cut the social security tax in half. Social security was never meant to be a retirement program. It is insurance, and only really old people and disabled persons should rely on it in any way.
7) Increase the tax on use of fossil fuels and eliminate all subsidies for "alternative" fuels. This would solve myriad problems, including the global warming issue. The increase in the tax could be 2 or 3 dollars per gallon of gas or equivalent. All energy sources should compete in a free market based on costs and benefits alone. Fossil fuel use causes a negative externality (a cost not borne by its users) which can be internalized by this simple tax. Revenue from this tax should be used to pay down the federal debt. Once the debt is reduced to zero, the income tax can be reduced.
8) Eliminate all federal aid for college tuition. This includes loan subsidies, grants, etc. These programs are sustained on rhetoric of affordability, and the intentions of lawmakers may well have been to that end. But they serve to make higher education less affordable as they feed the increases in tuition rates. Banks and universities are the beneficiaries, not students.
9) Eliminate tax incentives for retirement plans. This is part of number 5, but deserves specific mention. IRAs, 401(K), and similar plans should be eliminated. We are a debtor nation; retirement is for savers. Far from encouraging the nation to save and invest, these programs have encouraged perverse behavior, such as earning a modest return in an IRA while borrowing on credit cards to consume. They have also created a false sense of security for many citizens. The values of these accounts is not guaranteed and retirement is not an entitlement. In addition, many of these plans have restrictions that prevent people from optimally employing their savings.
All assets held in these accounts should be made immediately available for withdrawal without tax penalty. Any contributions already made, or gains accrued to date should be taxed, or be free from tax, according to current law. Future gains should be taxed at the regular rate and no new contributions should occur.
10) End all bailouts. No single business is so important that it should be propped up by taxpayers. The "too big to fail" idea is a hoax perpetrated by those who stand to benefit from the bailouts. Bailouts are theft from American workers and an assault on economic freedom. They are also a disincentive for innovation and productive work.
If a particular service is important to the functioning of our economy, people will compete to offer that service. The bailout policy only causes poor businesses to survive at the expense of strong ones. Once the country gets a clear indication that the bailouts are over, we will set our sights to creating value for people. Only then will the economy truly recover.
Some of these changes will cause short-term pain for a lot of people as the economy adjusts. Most notably, many will lose their current jobs, but new jobs will be created for those people to fill. On average the new jobs will be better than the old ones as greater value is created. In the meantime, we still have unemployment insurance to ease the transition for those who need to find jobs. There is no way out of the pain. Current policies only push the pain into the future. But by doing so, they make the ultimate level of pain much greater. We have to go through this to get through this.
Monday, January 12, 2009
Bush Disappointed That Saddam Was Not Armed To Destroy
"There have been disappointments. Abu Ghraib obviously was a huge disappointment during the presidency. Not having weapons of mass destruction was a significant disappointment. I don't know if you want to call those mistakes or not, but they were -- things didn't go according to plan, let's put it that way."
That's a direct quote from Mr. George W. Bush. Pay particular attention to the sentence, "Not having weapons of mass destruction was a significant disappointment."
I don't believe anything else needs to be said about the character of the man that the people of this country elected to its government's highest office...twice.
That's a direct quote from Mr. George W. Bush. Pay particular attention to the sentence, "Not having weapons of mass destruction was a significant disappointment."
I don't believe anything else needs to be said about the character of the man that the people of this country elected to its government's highest office...twice.
Thursday, December 25, 2008
Snow in Seattle
It snowed this week in Seattle. Nestled, as we are, between two sets of snowy mountains it is probably hard for non-Seattlites to believe that this is a rare event. Nonetheless, snow itself is unusual in the city; for snow to fall and stay on the ground past noon is almost unheard of.
The last time there was a significant snow dump here, the storm gave us 31 inches in 1996. This time around we were blessed with about 9 inches, and it disrupted the city quite a bit. The disruptions lasted about a week.
I'm all for shutting things down at times like this, but I admit to be being a little tired of walking slowly over ice to get anywhere. And 4 inches of slush and compact snow on some main arterials doesn't make me so happy either. When people complain about the inconvenience the day it snows I think they need to lighten up; when people are mad at slippery roads a week later I'm a touch more sympathetic.
Thus has arisen a debate in the city as to whether our government should have done more to mitigate the effects of the storm.
One irate caller to a radio show explained that he has lived in Rochester, Concord, and Milwaukee; and that those cities remove snow from the roads immediately. The Seattle response, he said, was grossly incompetent.
But one of these things is not like the others. Rochester, Concord, and Milwaukee receive yearly average snowfall (in inches) of 92.3, 63.8, and 47. In Seattle our average is 7.3. I'll give this guy the benefit of doubt and assume he has not lived here long enough to understand that snow is unusual.
So this is not a question of whether roads should be plowed or not; it is a question about the role of government. It makes perfect sense for a citizen of Rochester, NY to expect his government to do a good job at snow removal. But in Seattle we do not elect people, at any level of government, to be competent snow removers. Nor should we. To do so would be to sacrifice some other, more relevant issue.
The average cost of removing snow in Rochester is much lower than it is in Seattle. Since the cost is high we choose to forego the service.
The last time there was a significant snow dump here, the storm gave us 31 inches in 1996. This time around we were blessed with about 9 inches, and it disrupted the city quite a bit. The disruptions lasted about a week.
I'm all for shutting things down at times like this, but I admit to be being a little tired of walking slowly over ice to get anywhere. And 4 inches of slush and compact snow on some main arterials doesn't make me so happy either. When people complain about the inconvenience the day it snows I think they need to lighten up; when people are mad at slippery roads a week later I'm a touch more sympathetic.
Thus has arisen a debate in the city as to whether our government should have done more to mitigate the effects of the storm.
One irate caller to a radio show explained that he has lived in Rochester, Concord, and Milwaukee; and that those cities remove snow from the roads immediately. The Seattle response, he said, was grossly incompetent.
But one of these things is not like the others. Rochester, Concord, and Milwaukee receive yearly average snowfall (in inches) of 92.3, 63.8, and 47. In Seattle our average is 7.3. I'll give this guy the benefit of doubt and assume he has not lived here long enough to understand that snow is unusual.
So this is not a question of whether roads should be plowed or not; it is a question about the role of government. It makes perfect sense for a citizen of Rochester, NY to expect his government to do a good job at snow removal. But in Seattle we do not elect people, at any level of government, to be competent snow removers. Nor should we. To do so would be to sacrifice some other, more relevant issue.
The average cost of removing snow in Rochester is much lower than it is in Seattle. Since the cost is high we choose to forego the service.
Saturday, December 20, 2008
So Says The Dictator
Yesterday, George W. Bush lent 13.4 billion dollars to GM and Cerberus Capital Management, whose board is chaired by Bush's old pal John Snow.
First, that money was not Bush's to lend. Eight days earlier, the Congress of the United States rejected a proposal that would lend taxpayer money to GM and Cerberus.
George Bush is the executive, meaning that his job is to execute the will of the people as expressed democratically through their elected representatives in Congress. He has no authority to take unilateral action such as this.
In order to "justify" his action, Bush had to pretend that the auto industry is made up of banks. Of course, I guess it is possible that he actually believes that General Motors is a bank.
In explaining the action, Bush said this:
"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay -- and I would not favor intervening to prevent the automakers from going out of business.
But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action."
Apparently, Bush supports free market principles in good times, but not in bad. But either one supports a free market or not, and it is clear, regardless of the rhetoric he uses, that George Bush and the Republican party are not supporters of a free market.
The financial crisis is not the cause of the automaker failures. They have been dying for years. The demise actually started decades ago. They are a drain on our economy, sucking valuable resources onto showroom lots to waste away with barely a test drive.
Recession is the perfect time for automakers to go out of business. It is the liquidation of failed businesses that propels an economy out of recession. Recession and credit contraction are the mechanisms by which unproductive endeavors lose out to those which efficiently create products that people are willing to pay for.
General Motors has survived the last few years on reputation alone. Private interests have been willing to turn excess capital over to them in the mistaken belief that there would be a turnaround. Now, those private interests have finally had enough. They have given up on the U.S. auto industry and set their minds, and their capital, to other pursuits.
It is not the role of government to prop up businesses that every right-minded investor has given up on.
As for the idea that this action "saves jobs," think again. The terms of the loans are onerous. The U.S. taxpayer is getting screwed, but employees at GM and Chrysler are right on our heels (Those who bought GM stock on the news are the biggest losers, but hey, they made their own bed). Many of them will be fired regardless; those are the lucky ones. The ones who stay will endure months or years of wage cuts, benefit cuts, increasing union dues, interminable worry, and depressing work environments.
It is no fun spending your days inside a dying beast.
First, that money was not Bush's to lend. Eight days earlier, the Congress of the United States rejected a proposal that would lend taxpayer money to GM and Cerberus.
George Bush is the executive, meaning that his job is to execute the will of the people as expressed democratically through their elected representatives in Congress. He has no authority to take unilateral action such as this.
In order to "justify" his action, Bush had to pretend that the auto industry is made up of banks. Of course, I guess it is possible that he actually believes that General Motors is a bank.
In explaining the action, Bush said this:
"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay -- and I would not favor intervening to prevent the automakers from going out of business.
But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action."
Apparently, Bush supports free market principles in good times, but not in bad. But either one supports a free market or not, and it is clear, regardless of the rhetoric he uses, that George Bush and the Republican party are not supporters of a free market.
The financial crisis is not the cause of the automaker failures. They have been dying for years. The demise actually started decades ago. They are a drain on our economy, sucking valuable resources onto showroom lots to waste away with barely a test drive.
Recession is the perfect time for automakers to go out of business. It is the liquidation of failed businesses that propels an economy out of recession. Recession and credit contraction are the mechanisms by which unproductive endeavors lose out to those which efficiently create products that people are willing to pay for.
General Motors has survived the last few years on reputation alone. Private interests have been willing to turn excess capital over to them in the mistaken belief that there would be a turnaround. Now, those private interests have finally had enough. They have given up on the U.S. auto industry and set their minds, and their capital, to other pursuits.
It is not the role of government to prop up businesses that every right-minded investor has given up on.
As for the idea that this action "saves jobs," think again. The terms of the loans are onerous. The U.S. taxpayer is getting screwed, but employees at GM and Chrysler are right on our heels (Those who bought GM stock on the news are the biggest losers, but hey, they made their own bed). Many of them will be fired regardless; those are the lucky ones. The ones who stay will endure months or years of wage cuts, benefit cuts, increasing union dues, interminable worry, and depressing work environments.
It is no fun spending your days inside a dying beast.
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