I have been doing some thinking lately and analyzing the Fed's rate action since 2000 and have decided the biggest problem created by the Fed was not bring rates to historic lows after the 9/11 terrorist attacks. The problem began when the jacked up rates in early 2000. Then after realizing they “goofed” dramatically reversed course in 2001 only to overshoot to the down side where they left rates to low for to long. When realizing this, the Fed followed with a draconian attempt to return the rates back to "normal" beginning in 2004, which wrecked havoc with the credit markets and economy.
Our nation has begun implementing a nearly 800 billion dollar Economic Recovery Plan. This money is on top of the 750 billion dollar TARP, and as we frequently hear would cost over two trillion dollars in total if they were paid for by conventional issuance of treasury bonds. The stated goal of both programs is to head off economic collapse, raise the bottom of the downward trough of the business cycle, and restore the economy to a rational marketplace. Those goals for the economy are our hopes, but we hold back our faith in those hopes because we know that government is a notoriously inefficient spender, and we suspect that corrupt practices and special interests will divert the investment funds into foolish and pointless directions. Experience tells us this is true, so we would be foolish to place our faith in the latest economic theory, or our wise leadership in Washington, or the captains of industry. After all, it was pie in the sky economists, dogmatic politicians and greedy, irresponsible businessmen who put us into the situation we are in. We cannot seriously trust these guys to fix this mess, can we?
Placing our trust in mankind can only lead to disappointment; the Marxists already tried that. While I personally did not spend the wealth that was created for me in the housing bubble, that wealth is now gone, and I have nothing to show for it although I am also not in debt. I did hope we would eventually see a Dow 30,000, and placed my hopes and retirement funds in the stock market, and now much of that money is gone. I guess I can only conclude that I cannot place my hope in my own wisdom. Nevertheless, we live in a deterministic society that believes in the laws of science and nature. Perhaps it is time we stopped gaming the fundamentals of economics to project the disappearance of the business cycle and deal with what the fundamentals of the economy really are. If the wealth I theoretically had when my house was worth the most at the peak of the housing bubble was not real, then what is the worth of a dollar today? The worth of a dollar is the fundamental element that can explain how we can spend our way out of the current economic depression/recession, and the key to how we are going to pay for it.
Since 1973 the value of a dollar has been tied to our nation’s Gross National Product, or GNP. Before that, we were on the gold standard which meant that dollars were tied to the value of gold, or actually had something solid behind them. I was 12 when we went off the gold standard, so I really do not remember being on it, but I don’t see how that was really a big change. The value of gold was tied to how many goods and services could be purchased with it, so it strikes me that the dollar was still worth a percentage of our economic output or GNP. A dollar’s worth today can be described as the fraction 1 over the total number of dollars in the system, and the number of dollars in the system is equal to the value of the goods and services that our economy produces. To simplify this further, if there are 100 dollars in circulation and you have one of them, then you can buy 1% of our GNP with it. The worth of a dollar is determined by the number of dollars in circulation, and the value of the goods and services produced by our economy.
So what has happened to those two variables in the last year? First of all, the collapse of the housing and stock bubbles greatly reduced the number of dollars that were in circulation. Some of that money, like the value of my house and the retirement funds that I did not borrow against, was in unrealized gains, and so was not an actual part of the active money supply, or M1. Much of it, however, was borrowed against and so was in the active money supply. The disappearance of all of that money, in theory, should make the remaining dollars more valuable. In the previous example a dollar was worth 1/100 of the GNP, well if we are now down to 95 dollars in the economy, my dollar should buy more since it is now worth 1/95 of GNP. It is this contraction in the money supply that has made it difficult for banks to lend. The dollars that they had have disappeared!
Another problem that we face in determining the worth of a dollar is that GNP has also been falling. To use the 100 dollar economy as an example, if the money supply fell by 5 dollars, but GNP also fell by 5% then the dollar would still buy the same amount of goods and services. There would neither be inflation nor deflation, just a lot of miserable people who have largely been kicked out of the economy since they have neither a job, nor any assets that they can spend.
So, what is a dollar worth today as compared to last year? The unsettling thing is that we really do not know. We know that the economy is contracting, and we know that the money supply has contracted, and continues to contract. Beyond that, we can see that there is an insufficiency of money supply to allow “normal” borrowing to take place. This uncertainty is the root cause of the volatility in world markets, and no argument about “moral hazard” is going to bring certainty. Since our economic problems are now rooted in both the GNP and money supply, it follows that we need to increase both.
Politically, our two parties fall into camps that each address one or the other of these problems, although Republicans have recently started to advocate a hands off approach. Republicans want to stimulate the economy through tax cuts, which basically gives free dollars to the beneficiaries since no corresponding reduction in government services is planned. This is the same as “printing” money to increase the money supply.
The Economic Recovery Plan seeks to expand GNP by creating demand in the marketplace. Right now, the only entity with money to spend is our government since the contraction of GNP makes investment by businesses undesirable. By spending money on fixing roads or building buildings we create jobs that would not otherwise be there, and those workers can then spend that money at the coffee shop, grocery store, or Wal-Mart. So, one dollar invested by the government in that sort of spending hopefully produces many more dollars in spending by the private sector, which increases the GNP. In economics, this concept is called “velocity.” Remember velocity because we will get back to it later, but understand that the velocity of money spent in the economy is likely to be greater than that of money saved in a tax cut. Beyond that, you have to have a job to get a tax cut.
Let us assume for a moment that the government, using either or both approaches, essentially prints the money to pay for this stimulus, since I have no idea who has the money to lend it to us. If every dollar we “print” creates two or three dollars in economic stimulus, then we actually raise our GNP numbers by more than we do our money supply, and a dollar actually gains in value! If we take the 100 dollar money supply, and “print” 10 more dollars, the economy would have to grow by 10% to keep the buying power of that dollar constant. If GNP grows by 20% on a 10% growth in money supply, the dollar is worth more! Now, this sounds like “pie in the sky” type economics!
The reason that this type of approach can be used now is two fold: we have a contracted money supply, and we have a contracting economy. If this approach were used in near full employment economic times, the money that the government spent would actually compete with the money the private sector had to spend and we would not see growth in GNP but would see growth in money supply. That would lead to inflation. Money supply increasing while the economy is stagnant or continues contracting will lead to the type of run away inflation that Germany experienced before the rise of Hitler. The key to a noninflationary increase in money supply is expansion of GNP, and that cannot happen if we are truly at full employment. (It can happen in full employment if worker productivity is increasing, but that is another subject.) The keys here are that we are not at full employment, and the money supply has definitely contracted. The difference between the contraction in money supply and the contraction in our economy is the amount of money we can literally print. We are in a window before the economy has contracted too much. We still have an opportunity to spend, but if the economy collapses, that opportunity will be gone. That is why we must act now!
So, we can print noninflationary money now, but will we ever have to pay the piper? Of course we will. Eventually it is hoped that the economy will recover and grow under its own momentum. At that time, the Fed will lose a lot of control over the money supply as stocks recover and housing values potentially begin to recover. At that time the economy will be “printing” its own money through velocity. (I told you we would get back to it.) When velocity increases the government must decrease money supply or new bubbles, like the ones that did us in this time, will occur. Essentially there are three ways that the government can do this:
1) Reduce spending. Fortunately, the new money created in the ERP has time constraints. Both the tax cuts and the projects will expire. While this does not actually take money out of the money supply, it at least stops pumping more money into it. Further cuts will probably be desirable, but I doubt politicians have the courage to make them.
2) Raise Taxes. If I doubt politicians have the courage to cut spending, I know they do not have the courage to raise taxes. Nevertheless, raising taxes to pay off our debts would reduce the money supply and counter the final option.
3) Inflation. This is the cruelest tax of all, and will eventually lead to another economic down turn. If velocity increases while economic output stays constant, money supply increases while GNP stays the same. A dollar will no longer buy as many goods as it did before the money supply increased. The Fed can counteract this by raising interest rates, but in essence that amounts to the same thing as inflation.
In the final analysis, some spending will expire, some taxes will be raised as tax cuts expire, and some inflation will inevitably occur. The mix of those paybacks will largely be determined by the economic policies we follow at that time.
Does this mean that we are placing our hope in politicians that we have not even elected yet? I guess that it does, and that is not a place I want to place my hopes for a fulfilling life. Nor do I want to trust the latest fad to come out of economic academia, and I have already said that I demonstrated a poor ability to perceive economic reality before this crash happened, so I am not a good place to deposit my own hopes. There must be something greater in which we can entrust our hopes. Maybe if we make wealth a means rather than an end we can escape the trap of measuring our lives against the economy. Forget about what a dollar is worth, what are you worth, and to whom? If we begin the search for those answers, maybe we will resist buying houses that we cannot afford and bidding up the prices of stocks. Both Karl Marx and Adam Smith agreed that the economy would function better if there were better people in it; Smith, however, unlike Marx, did not put forth a plan to accomplish that goal, since he already knew that one existed.
In speaking with people about the president’s Economic Recovery Plan, a common question from both supporters and detractors is: “Has the government ever succeeded in something like this?” As a person with degrees in both Economics and History I can state confidently that there have been several times in recent history where something like the current plan has succeeded in reversing our country’s economic fortunes. Perhaps the one example that best illustrates the point is the post World War II example of the Servicemen’s Readjustment Act of 1944, or GI Bill.
As World War II was drawing to a close President Roosevelt and many of our nation’s leaders faced a daunting challenge: what will happen when more than 15 million soldiers, sailors, and airmen get laid off from their jobs at a time when demand for the industrial goods produced by war time industry collapses? The country had faced a similar crisis after World War I, and lack of action had led to the veterans’ “Bonus March” of 1932, and contributed to the depth of the Great Depression. Social upheaval and economic collapse were a very realistic fear!
Harry W Colmery, a former Republican National Committee chairman, was one of the earliest proponents of a government program to mitigate the effects of the war’s end on the economy. Warren Atherton of the American Legion greatly influenced the content of the bill, and Arizona Democratic Senator Ernest W McFarland guided the legislation through Congress. So, the bill had initial support by the minority party, was greatly influenced by a “special interest group,” and was championed by the majority party! The Economic Recovery Plan also enjoyed initial support from Republicans, but largely managed to escape special interest input because the speed in which it was passed, and ended up having to be passed by the Democrats with little support from the minority party.
The main parts of the bill were provisions for college or vocational training, and one year of unemployment benefits for returning service men. So, it invested in our future by creating a more educated and skilled work force while deferring many people’s entry into the work force, and provided immediate help to the unemployed. Subsequent legislation, after the war including the Employment Act of 1946, and various programs aimed at making home ownership a practical goal for most families also had a stimulative economic effect. The Marshall Plan, with its buy American provisions did as much to bolster our economy as it did to rebuild Europe.
While our challenges after World War II were brought on by different circumstances, they were similar to the problems we face today: industry that needs to be retooled, a collapse of world wide demand caused by the inability of consumers to pay, a surge of suddenly unemployed workers, all of which is happening after years of deficit spending by the federal government. The actions that the United States took spurred demand across our economy by directing government spending into programs that created long lasting value for our nation. The Economic Recovery Plan has exactly the same goal.
Our country’s reaction to the economic challenge that it faced after World War II was hugely successful and can largely be credited with creating the middle class that became, and remains, the main economic driver in the U.S. economy. Our country eventually had to stop deficit spending, and bring forth a balanced budget when the economy got to a stable point, but it can be said that government fiscal (spending) policy has a long and mostly successful history as a tool for dealing with economic hardship. President Obama’s Economic Recovery Plan, like the GI Bill, is aimed at solving a problem BEFORE it gets out of hand. History says that it can work, and it is worthy of our enthusiastic support.
I have thought long and hard about our president's decision to cap pay of TARP recipient’s top people and have come to the conclusion it is just plain to low. I would like to have heard some rationale for the cap. We are talking about financial institutions here that vary from a few million dollars in market cap to billions. Any one off salary cap is completely out of touch with several realities: 1) the size of the firm and responsibility that goes with it, 2) the practical costs of living in places like NYC where some of the biggest firms are centered, 3) the real loss of management flexibility in providing incentives to people at the companies who received TARP.
Let's all consider this as a proposal for mature discussion.
Mr. President Obama, and All Senior Staff of the President,
With great respect for you, and the work you are engaged on the path of our national economic recovery.
I am a citizen of true Spiritual orientation, I am not either atheist nor agnostic. I humbly make this suggested proposal...:
TAX ALL "RELIGIOUS" ORGANIZATIONS. TAX THE LANDS, OFFICES, BUILDINGS, BUSINESSES, AND SUBSIDIARY HOLDINGS OF ALL "CHURCHES."
"Churches" are obviously defined to mean all Catholic, Protestant, "TV-churches", Televangelists, aligned and non-aligned groups, Mosques, Temples, Synagogs, and etc. of every 'faith,' denomination, or orthodoxy. None can cry "foul" or "discrimination," as this proposal applies to all such organizations.
Too many of these are hiding revenue, income, stocks, bank accounts, profit-making assets and businesses behind the false facade of "religious exemptions."
Also for consideration here, is proposed to eliminate the IRS 1040 tax-deduction for all 'donations' to "churches" or "religious organizations."
The time has come now, for all such "exempt" religions to pay their 'fair-share.'
The only exemptions to be allowed for "churches," should be those projects directly engaged in TRUE humanitarian efforts.
Such exemptions should be allowed for Hospitals of such religious organizations; for Schools; for food, shelter, medical, and emergency aid assistance that such organizations establish.
Also exempt, should the 'Native American' churches and their associated projects. However, the profits from 'Casino activities' SHOULD be subject to taxation.
There are literally many Billions of dollars to be realized from the application of taxation to all otherwise Non-Humanitarian holdings of all the 'religions' and 'churches.' These 'churches' have hidden assets and profits from the eyes of scrutiny far too long.
In these times of the greatest crisis in the economy of our nation, every available resource must be applied to the solution.
Sir, you and your staff should include this proposed solution to the considered Tax-Relief package for the acceptance of Congress.
I do hope that you will give this proposal serious consideration. I vote YES, and ask the same of you, sir.
I am but one citizen who supports you in ALL your efforts, and I commend you for the work you are doing.
My hope is for your continued success.With great Respect,Rod
Insurance companies should be required to give back most of unused funds at the end of each year or so. Kind of like the Jubilee year.
ALH
http://arialittlhous.blogspot.com
As to where the money for this recovery should come from...frankly it's time to pull back on military spending just as we pull back our troops from the Iraq invasion. Yes, I'm ex-military myself, but we need to really resist the urge of investing in building military programs, facilities and weapons right now. There are too many much more important needs, including those in roads, environment, health, energy, our power-grid as well as protecting our ports, nuclear plants and water systems from terrorism.
If Obama has as much guts as he is smart, he can create a significant stimulus program by diverting military funds to programs which create a more direct impact on our lives, our economy, our health and our internal security.We have alot of these needs right in our own area.
The IdeaMan
Why does the money from the "bail-out" go to Government infrastructure and private business when it could be better used in the hands of the people? If an impactful stimulus check were given to each registered taxpayer, would the economy not be better stimulated intrinsically? As a taxpayer $600 or $800 isn't big enough to make a dent in the economy as it is right now. A considerably larger sum to each person, totaling far less than the current projected/proposed bail-out amount, would trickle "up" with a much quicker effect.
If I have a substantial stimulus "check" I will buy a house, and a car, and furniture, and hire someone to do landscaping, and get medical attention that has been postponed. In other words I would be bettering not only myself but those in my community. Farther out, my actions would impact the banks with the funds I would invest in savings, 401K, and stocks, and pay more taxes directly back to the government, etc.
I would like to propose an amount of one million dollars per taxpayer. While that sounds at first like a lot of money wouldn't it be far less than the 700 billion currently on the table? The effect on the economy would be instantaneous and positive. This would lessen the "regulation and control" on agencies that are being "created" to implement the "rescue" and would put the forces of the natural economy back in balance and in the hands of those who drive it.
Please don't spend my money on GM, Ford, Chrysler or any other company that has been grievously mismanaged. Their record of fiduciary responsibility speaks for itself; they have already demonstrated the behaviors won't change.
It would be interesting to know what percent of the AIG "loss" is attributed to the "naked CDS" contracts, the ones where the buyers of insurance where speculators with no real exposure to the CDS reference debt? In another words, how much of its "loss" is simply a gambling paper "loss" due to their contractual obligation to pay the CDS speculators their gambling "wins"?
Poverty, hunger and homelessness have been haunting the United States, the world richest country, according to the Human Rights Record of the United States in 2004.
The report, released by the Information Office of China's State Council on Thursday, said the United States refuses to ratify the International Covenant on Economic, Social and Cultural rights and took negative attitude to the economic, social and cultural rights of the laborers.
My workplace is as “red” as it comes. Being a Obama supporter in my office brings about as much love as a man in a white sheet walking through Harlem. But it is informative, to hear the reasons why so many in my office are McCain supporters.
“The cop, teacher, and fireman,” said one person, “didn’t study hard like lawyers and doctors. They didn’t give up weekends and parties. They didn’t ‘just get by’ with mediocre grades. So why should they be punished by having their hard earn money taken away? Why should we be a socialist state and redistribute the wealth like Obama wants?”
It may not be true but I’ve heard this before and you may have also, like multi-nation corporations the very wealthy do not have one or a single country.
Warren Buffet, the very wealthiest, seems to be trying to help and was also one of the first to say it was a recession even though it did not meet the text book definition of one and was criticized by others. On the other hand some were saying it was just “a rough patch in the road”.
It does not seem to be a rough patch in the road.
Want to know what they propose? HEre's a list of 41 specific economic policy initiatives that have been outlined during the campaign.
There’s a pretty good summary of the candidates’ respective economic policy positions online if you visit reputable sources. I present my opinion on them as a professional economist (and professor of public/government finance), but of course ***you*** should make your own informed opinion about their respective merits. I present my own cumulative score after each policy suggestion.
One overriding concern: can we afford these proposals? Well, we spend $12 billion per month on the military in Iraq right now (with more to come as medical costs pile up). And Obama is proposing higher taxes to pay for any additional spending. I think the answer is ‘yes, we can afford it, but we have to curtail military spending’.
1. Gas prices – McCain proposes to suspend the federal gas tax over upcoming summer(s) and is clearly aiming for a short-run stimulus, which is just plain silly in my mind. Gas is one of the few things that it actually makes sense to tax ***more***, especially if you spend the tax revenues on something productive. Try spending it on incentives to consumers to buy hybrid or electric cars, for example (see below). The gas tax rakes in something around $60 billion per year for the federal government [Source: Tax Foundation]. So mark it specifically for weaning us off the habit… buy electric fleets for government services or pay consumers to switch vehicles. If you think really long-term, support more photovoltaic and wind power and battery research (but that’s probably another discussion). But suspending it even as we promote energy-conscious behavior? Talk about a mixed signal from DC. Obama 1, McCain 0.
3. Tax on oil corporation profits – If we’re going to tax profits in a specific industry, then at least give them back to consumers most hit by that industry’s high prices. If we don’t, it’s a slippery slope to the next industry which we could selectively tax in order to increase federal coffers. And then ultimately wouldn’t we simply be picking winners and losers (i.e. a government-run economy)? Obama has the right idea. Obama 2, McCain 1.
4. Fuel economy standards – I would agree with Obama that it is insufficient to increase the penalties on automakers for violating CAFÉ standards if you don’t also move the standards up. It simply becomes increasingly easy over time to meet the standards (technological progress being what it is), so let’s move the bar to keep ourselves improving. Obama 3, McCain 1.
5. Flexfuels – There’s very little difference on their stands here, but I agree with Obama that there is no reason we cannot mandate them immediately, rather than ‘speed up adoption’. Obama 4, McCain 1.
6. Consumer automotive incentives – The current incentives max out at $3150, so both plans are good. Obama’s is more aggressive, offering $7000 instead of McCain’s $5000. Obama’s concrete plan is to have 1 million 150-mpg cars on the road within 6 years. No goal for McCain. Obama 5, McCain 1.
7. Producer automotive incentives – Obama proposes $4 billion in tax credits for automotive firms who switch to producing higher-efficiency cars. McCain is silent here. Obama 6, McCain 1.
8. Mass transit – Obama proposes more support, including encouraging employer-supported transport programs. No word from McCain. Obama 7, McCain 1.
9. Carbon emissions – Obama aims for a 80% reduction by 2050, McCain a 50% reduction. Obama 8, McCain 1.
10. Renewable energy research – Obama proposes $150 billion over ten years, getting 10% of nation’s energy from renewable sources by 2013. McCain is more vague on using ‘market incentives’ to encourage renewable energy research, but proposes $2 billion per year to improve ‘clean coal’ technology. Forgive me, but that’s another nonrenewable fossil fuel. Cleaner, but still nonrenewable. So I would say we’re simply trading an oil problem for a coal problem down the line. To be fair, in addition McCain plans 45 new nuclear reactors by 2030, which I believe is very sensible (very slow, but very sensible). I would prefer renewable energy sources with more inert waste products, but at least we’re proposing a move from nonrenewables (kind of, since enriched uranium / plutonium are still nonrenewable). Bottom line: we know very well that energy suppliers have clear network externalities (e.g. replacing an entire system of gas stations will not make sense one by one, but would be amazingly productive if done all together), so I aggressive and decisive government action is clearly required. Obama 9, McCain 1.
11. Offshore drilling – McCain wants to lift ban, Obama wants to permit a limited amount. Hard to tell what the difference is until we know what a ‘limited amount’ is. Tied in my mind.
12. Energy consumption – Obama has a clear goal of reducing electricity consumption by 15% by 2020. No word from McCain. Obama 10, McCain 1.
13. Carried interest tax rate – The current tax policy on ‘carried interest’ is 15%. But it’s income, so shouldn’t it be taxed like income? There’s a strange incentive in the system right now to make as much of your income this form as possible, since the tax savings for high-income individuals are huge. Obama proposes to close the loophole, consolidate carried interest as income. McCain wants to keep it. Who gains from the current policy? High-income individuals. So Obama is suggesting a more progressive income tax, McCain likes it where it is. Considering that the US tax code is already very low in progressivity (transfers from rich to poor) compared to other nations, and has been dropping since the 1960s, I think this modest correction is warranted. Obama 11, McCain 1.
14. Estate taxes – McCain wants a higher exemption ($5 million tax free) and to reduce the top rate from 55% to 15%. Obama wants a lower exemption (still a generous $3.5 million tax-free) and a top rate at 45%. Ninety-nine percent of all estates fall below either cutoff line, so only the rich are affected here. Potential revenue for the government is huge (the difference between 45% and 15% of a single 100-million-dollar estate is $30 million). And the 15% is a really funny number, since it is lower than the income tax rate for high-income individuals. Why protect the very few rich at the implicit expense of the rest of the population? Obama 12, McCain 1.
15. Capital gains taxes – Obama wants to make these more progressive for households earning more than $250000 per year. Granted, he doesn’t propose to make them much more progressive (20% instead of 15%), and I think we could go much further. Personally, I’d like to see them mirror the income tax rate in progressivity, and if we really insist on encouraging capital ownership then just offer a tax credit for 5-10% of the gains regardless of income, and treat capital gains as one would regular income. The current situation means that the ultra-wealthy who live off of capital gains pay far less than their share of all taxes. And how many low-income individuals are there who actually have capital gains at all? McCain proposes a completely flat capital gains tax, just as it currently stands. Obama 13, McCain 1.
16. Housing crisis – I don’t see much difference between the candidates on this one. Both would argue that troubled homeowners should have the opportunity to refinance. Obama sets out $10 billion for state and local governments to help restructure, another $10 billion for those homeowners damaged by predatory loans. I’m not sure that those funds are necessary, so I give McCain the win on this one. Obama 13, McCain 2.
17. Housing-related taxes – Obama proposes a 10% tax credit for homeowners who do not itemize. An interesting way to help poorer taxpayers, although it only applies if you own your home. Still, better than nothing. Obama 14, McCain 2.
18. Mortgage fraud – Both candidates propose new oversight of different forms, McCain with a new taskforce, Obama with more legal sanctions and stiffer penalties. Both also talk about transparency in the process, McCain quite generally and Obama more specifically about databases. I see this one as a tie.
19. Social security accounts – McCain wants to augment the current system with individual accounts. Obama doesn’t. My question--- how are supplemental accounts any different from IRAs or 401(k)s or 403(b)s or SEPs? Sounds like what we have already, just by another name. At least we’re not talking about replacing the current system with individual accounts (aka ‘complete macro-financial suicide’). I can’t vote on this one until I understand what McCain means.
20. Social security contributions - Currently workers pay Social Security contributions only on the first $97500 of their income. Employers match that contribution. Obama proposes a contribution that applies to incomes above that rate, since the system is incredibly regressive (low-income individuals pay a far greater percentage of their income to Social Security than high-income individuals… e.g. an individual earning $97500 and one earning $10000000 pay exactly the same number of dollars in Social Security contributions). Long overdue. Obama 15, McCain 2.
21. Social security benefits - McCain suggests that we work on the other angle, that of reducing or slowing benefits instead. Obama has spoken out against raising the retirement age. Life expectancies are longer, and even ‘working life expectancies’ are longer than they were a generation ago (people work until much later in life), but the current system already offsets for earned income, so it’s already automatically built into the system to a certain degree. If we make it even later, we encourage older people to stay in the workforce at the risk of unemployment for younger workers. However, we do get their income taxes as they work. The catch is that we might miss some older but not really old (e.g. 67 year olds, not-working) people who will not have another source of income. I’m unconvinced that this is a good idea, but perhaps with some real data I could be persuaded. For now, no vote from me.
22. Prescription drugs – Both favor importing at least some (in McCain’s case, I believe more than some) prescription medication from Canada. This is a serious double-edged sword. Right now, pharma companies rely on high prices in the US to drive development of new products, using price discrimination to offer lower prices to other nations (e.g. Canada). If we swamp that market, prices will go up for Canadians and more importantly, the number of new drugs developed will go down for us and the entire world. Less new drug development means less competition among alternative curatives, so prices won’t go down as much as most politicians like to state. I think they’re both wrong on this one, and I would simply pass more of the price of prescription medication along to the consumer who can afford it (i.e. non-Medicare/Medicaid).
23. Malpractice reform – McCain wants no payment to health care providers if errors or mismanagement occurs. Seems like a no-brainer, except that who decides? If it’s a court’s legal decision that makes the case, then isn’t that happening already via awarded malpractice damages? If it’s not a court-based decision, how do we proceed? Another layer of review above HMOs, PPOs, and POSs? Again, I need more information before I can vote on this one.
24. Medicare – Obama wants government-brokered procurement of prescription drugs (aka bulk discounts) and more use of generics. The only real question is why we aren’t already doing this. Obama 16, McCain 2.
25. Medicare gap – There is a silly gap (called the ‘doughnut hole’) in Medicare Part D, where people with large health expenses pay more of them than either those with medium expenses or catastrophic expenses. There’s a weird incentive to have something worse go wrong, so that Medicare will kick in again. It’s plainly stupidly written legislation. Obama has made it a point to mention, McCain hasn’t. I have to assume that they would both fix it, so I won’t count it for Obama or against McCain.
26. Income tax rates – Obama will repeal Bush tax cuts for couples making more than $250,000. McCain leaves tax cuts in place permanently. They weren’t meant to be permanent, nor should they be. We’re already taxed less than any industrialized nation. Obama also proposes increased tax relief for low-income households. Obama 17, McCain 2.
27. Alternative Minimum Income Tax – McCain has vowed to permanently reduce its reach. And about time, too. It was originally designed for high-income households, but the numbers haven’t been seriously revised for 20 years. It has been roundly recognized as the most serious flaw in the US income tax code. Maybe Obama would fix it, but he hasn’t spoken on it (that I know of). Obama 17, McCain 3.
28. Business Taxes – I see this one as a wash. They both propose similar R&D credits (although McCain wants to change the formula… I just haven’t seen the changes yet). McCain has vowed to lower the corporate tax rate, Obama is considering it. Both propose tougher taxes on oil companies. McCain proposes to speed expense deductions (a good idea to stimulate investment), and Obama proposes a capital gains tax exemption for owners of small businesses (good for encouraging entrepreneurship). Give each candidate a vote for their good ideas. Obama 18, McCain 4.
29. Health care for children – Obama would make it mandatory, McCain would not. It’s not an omission, McCain is just against mandates. Obama 19, McCain 4.
30. Tax on health care premia – McCain proposes to tax the implicit income received when an employer covers a share of an employee’s health care premium. Sounds regressive to me, but reasonable. Obama 19, McCain 5.
31. Health care finances – McCain proposes a tax credit for those who buy their own insurance. Obama proposes an income-based subsidy (which I read to be the same thing).
32. Universal coverage – Obama would require all employers to either offer coverage, help employees buy coverage, or contribute to a national plan. McCain is firmly against mandating behavior. So here’s what I see happening: firms in really risky businesses (think oil rigs or commercial fishing) will cease to offer insurance plans because their co-insurance rates are so high. Workers will procure insurance on their own, especially if they are offered a slight raise to do so, which is great so far. Now, really safe industries (think millions of desk jobs across middle America) will wonder why they go to the expense, since no one is disastrously injured or ill in most cases. So they will offer their workers a slight raise, and they procure insurance for themselves as well. But why stop there? Now there’s a new set of ‘most risky’ and ‘least risky’ employers who will ask themselves the same questions. I see the complete unraveling of employer-based health insurance, especially since McCain proposes to tax the implicit income of a employer-provided health care system (see above). Alright, so what’s wrong with individual-health as a system? Well, who will buy it? If everyone bought it, then the risk would be spread across the entire population. But if you’re young and healthy, in a low-risk occupation, you would opt out. So the risk in the pool goes up. Now there’s someone else who sees it not worthwhile (someone just a little less young and health, in a slightly more risky occupation). This ratchets upward until eventually it is only the old and unhealthy, or those in high-risk occupations, who can afford or wish to afford insurance. Again, what’s wrong with that? Health insurance has a public good aspect to it… I’m better off if you have health insurance, because my odds of getting sick worsen if you get sick, or if you behave irresponsibly with your health. After all, if you eat too much sugar and get diabetes, I’m going to pay for your Medicaid in your later years, aren’t I? There’s a reason that health care coverage should be universal… to spread the risk… even if one doesn’t believe in socialized medicine for the ‘socialism’ reasons. Obama gets a huge vote here. I would count it for three votes if I thought that was fair. Obama 20, McCain 5.
33. Bankruptcy law – McCain wants to make it harder to file, Obama wants to reform it to make it easier but more specific. I’m with McCain on this one (and so is Congress, who passed a 2005 bill to this effect). Obama 20, McCain 6.
34. Retirement savings – Both candidates want to require enrolment, but Obama goes further to require every firm to have a retirement program of some sort. He also proposes matching funds for low-income families who save. Obama 21, McCain 6.
35. Trade – McCain is cleanly pro-trade, Obama is clearly looking to sweeten existing trade agreements. Both would beef up training assistance for dislocated workers. McCain gets my vote here, as he ‘gets’ the idea of free trade (probably because he was around for the original passage of the bills). Obama 21, McCain 7.
36. Deficit – Both talk about it, but it’s unclear what they will do. McCain is particular vague, suggesting I think that we will grow our way out of it (how, pray tell, given our 30-year history of growth and deficits?). Obama is clearly looking to more tax revenues from high-income families, along with troop reductions in Iraq. Obama gets my vote simply because he’s more realistic about method. Obama 22, McCain 7.
37. Workforce training – Obama wants more employment-related training, specifically in ‘green’ activities. McCain also wants better retraining, but is less specific. Obama 23, McCain 7.
38. Minimum wage – Obama wants to raise it substantially (by $2.25 an hour to $9.50) and then index it to inflation. McCain wants to keep it fixed where it is. There’s a tension in my mind here against the obvious unemployment costs, but I’m still in favor of the raise given the small deadweight losses involved in inelastically supplied labor hours. And why haven’t we indexed before this? Seems obvious, doesn’t it? Obama 24, McCain 7.
39. Federal funding for research – Obama wants to double it. No word from McCain. If there was ever a case for a public good, this is it. And if we want economic growth, what better way than science and technology? Obama 25, McCain 7.
40. Infrastructure – Obama wants to fund a $60 billion fund for public works nationwide. Again no word from McCain. That’s the cost of 5 months in Iraq (before we count medical costs for post-war vets, of course). Obama 26, McCain 7.
41. Small business – they are split on this in my mind. Obama proposes a credit to small business to help pay for health insurance of employees (insurance as mandated under his plan). McCain focuses his benefit on speeding up the expensing of depreciable assets (also a good idea). No vote from me, or rather a vote for each. Obama 27, McCain 8.
So my final vote is 27 for Obama, 8 for McCain. Obviously, you’ll have your own opinion. But at least you know how they stand.
One caveat: it is impossible for a political candidate to ever keep all election promises. Partly that’s due to compromise, partly due to changing circumstances, partly due to hubris in thinking that any one person changed in the administration (even the president) could really change the course of a nation dramatically. However, I look for the thematic integrity and thought process more than specifics.
For those of us who feel strongly enough about the excesses and want to give every member a piece of advice: there is a way to email representatives who do not accept email from outside their districts. It's simple: all you have to do is use the zip code of the representatives home office. Most of the emails I did this with went thru. Most of the sites only use one filter in determining who is a constituent and who is not. That filter: is the zip code. So go ahead and email those reps who don't want to be bothered with the rest of us!
This is the text of the email I've been sending out over and over again. I suggest starting with names of those mentioned in the news or are familiar names in your locale.
I expect that no one is going to agree with everything I told them in this email. But: I'm sure most will agree with the objective.
"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." -- Thomas JeffersonLetter to congress:GreetingNO "BAILOUT" - NO WAY - NOT ONLY "NO" - BUT "HELL NO""Bottom line" first: THIS "BAILOUT" IS A FASCIST BID FOR ABSOLUTE POWER: using tools developed by Dr. Joseph Goebbels and improved on by the likes of; William Krystal, Carl Rove (and other subscribers to the "PNAC" doctrine); who have given us our "Fire at the Reichstag" on September 11, 2001, "Weapons of mass destruction" and the destruction of Iraq. Now: they bring us this; with their politics of fear and deceit. We need to be reminded that G. W .Bush's grandfather, Prescott Bush did conspire to assassinate FDR and set up a fascist state based on the Third Reich. "Things would be a heck of a lot easier if this was a dictatorship; as long as I AM THE DICTATOR" - - G. W. Bush (43rd president of the United States) Prescott Bush also overtly financed Adolph Hitler's war machine up thru 1942 and covertly financed the Nazis until 1951. The treasonous activities of Prescott Bush is what mandated use of the "Trading With The Enemy Act" against Prescott Bush, a TRAITOR in 1942.These people have also given us the "Patriot (antifreedom) Act" and the "Military Commissions Act (license to torture)" The right to a speedy and fair trial are gone. Habeus Corpus is gone. Reasonable expectations of privacy are gone. The right to be free from unreasonable search and seizure is now only a privilege for the wealthy. Welcome to the Soviet States of America.We also have taxation without representation. Only 1 in 40 support the "Bailout". If this bailout sees the light of day: "taxation without representation" becomes tacitly confirmed by the passage of an unwanted piece of unAmerican "legislation". We had an issue about that same thing with another King George. Is it time to dust off the muskets and dry our powder now?I find it odd that the $700 billion "Bailout" is almost exactly what has been WASTED in Iraq and Afghanistan.Let the "Meltdown" continue. Let the markets "correct" on it's own.In taking a clue from the Bill Gates initiative: I closed my IRA and converted to the Euro. I am encouraging everyone to do so until we return to the sound practices defined in Article 1 - Section 10 of the Constitution of The United States.Considering what you guys are doing; It is doubtful that many of you took your oath of office seriously. I would not be surprised if any of you have actually READ the constitution. We know that NONE of you read that fear mongered piece of trash called "The Patriot (antifreedom) Act" and that the "Military Commissions Act (license to torture)" was glossed over so quickly that most of you didn't realize that each and every item in the Bill Of Rights NOW HAS A "LOOP HOLE" If there are no "Private Investors" interested in purchasing these "assets"; it is because these "assets" are still overvalued, or are damaged beyond repair, in this "fire sale". Since there are no private investors who are interested: THIS IS NOT A GOOD DEAL.for the tax payer either. The tax payer would never receive any benefit at all, because there are none. We stand a chance for a much better outcome if you start pumping $700 billion in quarters into a broken slot machine in the basement of some casino in VegasAny positive outcome with this "Bailout" will be illusory, and very short lived. The underlying problems caused by CEOs, boards of directors, and elected/appointed government officials, who have loyalties that are incompatible with American interests; WILL NOT BE ADDRESSED.This "Bail/Handout" WILL DEVALUE THE DOLLAR by as much as 50% in the long term. It WILL cause DOUBLE DIGIT INFLATION that is already apparent at the gas pumps and our utility billsThe only thing this "bailout" will do is absolutely nothing positive for those of us who actually WORK AND PRODUCE. It will leave every American yet to be born with crushing debt for something that never had any value for us and has the legacy of only questions and animosity for them.The largest contributing factor in this crisis is the "mortgage meltdown" and foreclosures. Force the banks to stop all foreclosures and issue those in default a "Lease with option to buy". That would increase incoming cash flow and have a calming effect that would have some positive effects in the retail markets as well.The second largest contributor is the ILLEGAL and CRUEL war on Iraq. Another King George waged a "Cruel War" on the colonists of the 18th century. Lookie what happened ! !: Doesn't that make you wonder why the Iraqi Freedom Fighters are hopping mad? When the NIE report comes out AFTER the "elections"; it will state that the situation in Afghanistan is "GRIM" and Iraq, a very close second.This "Bailout" being rammed down our collective throats by using the politics of fear mongering helps no one, except the fat cat executives who purposely overvalued everything in their domain, in order to collect obscene salaries and "golden parachutes" when their greed and incompetence becomes an insult to the intelligence of other board members and the share holders who did have a say.The Federal Reserve act of 1913 is at the core of this debacle. The covert intent in that fascist legislation turned a free economy into the biggest "Ponzi Scheme" ever imagined or possible. John McBush made sure that "deregulation" went full steam ahead while he was busy conspiring with the Carlyle Group to send American jobs overseas to fatten his own pocketbook with "soft money".The "Federal Reserve" is no more "Federal" than "Federal Express". The Federal Reserve is a PRIVATE BANK. The Federal Reserve is only interested in the what the top 1% in this country demand.The "Politically Correct" term for this "Bailout" is "HANDOUT" or a really BIG "GOLDEN PARACHUTE" because of unfettered FRAUD on every level, we have no faith in a government that lied us into an illegal war that has cost us our national treasure and credibility. Not to mention the 2+ million innocent Iraqi people we murdered.The "Politically Correct" term for the method used to achieve the objective is EXTORTION.The crisis these criminals KNOWINGLY created is a matter of NATIONAL SECURITY.FEDERAL CRIMINAL charges are in order: "Criminally Negligent TREASON" should be the least severe charge against the CEO's and others who had the ability to affect the markets in the way they were. These people should be handled like they would be treated in China for looting the treasury and everyone's future including their personal financial investments.Live within your means and cut costs:Stop all aid to Israel (the root cause and chief instigator of all our foreign policy misadventures)Israel should be put on the list of "States That Sponsor Terror"Ban all lobbyistsCease all combat operations and aerial bombardmentsClose all Military bases in occupied countries (Japan, Germany, Iraq, Afghanistan, Kuwait, The Philippines, Hawaii, Puerto Rico, Cuba, Korea, Nazi Israel etc.)Cancel all "No-Bid" contracts, including defense (where the most fraud is concentrated)Shut down "DHS"Reorganize FEMA into the type of a user friendly agency that should have had ALL affected residents of New Orleans back home 2 years agoHalve the budget for the IRS Enact a "Federal MAXIMUM WAGE act" that limits compensation to 10 times the current Federal Minimum WageRaise the Federal "Minimum Wage" to the current national average hourly rate which was $18.00 in 2007Raise the income tax on all income over $250K to 95% with no "deductions" or "exemptions"End the policy of all big business "Bailouts"Ban all technology that does not leave a verifiable "Paper Trail" in the election process. 2 Stolen Presidential elections were 2 too many.Ban Tasers and the chemical weapons used by law enforcementStop the tortureReinstate the bill of rightsBring all of the architects of the "War On Terror" to trial for war crimes, sedition, and treasonThis country is broken literally and financially. If you don't fix it: someone will finish the job from the inside or the outside. Your action/inaction will determine the outcome.
