Tuesday, October 14, 2008

The Election and The Economy

General Election:

Let me start by saying the neither candidate thrills me. I am going to have to pick someone who is truly the lesser of two evils.

I think McCain is a RINO (Republican in name only). He really should be a registered Democrat. Obama, who has the most liberal voting record in the senate, is really a Marxist…not a Democrat. Today, I believe that FDR would be a Republican given his views, and JFK for that matter. Most Democrats are no longer Democrats…they have gone so far left that they have left their Democrat principles far behind. A lot of Republicans are RINOs and have left their principles behind also. Both parties would do well to come back to their principles.

I personally think there should be term limits in Congress…having lifelong politicians is very bad idea.

Both campaigns talk about their opponents and their opponents’ proposals. This is not bashing…it’s campaigning. I do not expect Obama to like or support McCain’s ideas nor do I expect McCain to like or support Obama’s ideas. Again…it is NOT bashing…it’s campaigning. I do expect them to point out the differences between them and why they think their ideas and proposals are better for this country than that of their opponent.

I think that the bashing that goes on is mostly done by the media and political bloggers. I have seen McCain and Obama compliment each other. Again…questioning each other’s plans and proposals is not bashing. It’s needed.

I also think that more important than what comes out of a candidate’s mouth during a campaign is his/her record. That record shows who they really are, not who they want us to believe they are. There is some voting record information regarding taxes at the end of this e-mail for your consideration.

That being said, let’s delve into the issue of:

The Economy (sources: Investors Business Daily, Eons, Texas Hill Country)

The Subprime Crisis
Let’s begin with the current credit crisis we are facing in this country and let’s go back to the genesis of the problem. How did the government get so involved in the housing market as to precipitate a subprime market meltdown and housing crisis?

The answer: President Clinton wanted it that way. In the early 1990s, Fannie Mae and Freddie Mac were not nearly the massive entities they would later become. President Carter in 1977 signed the Community Reinvestment Act which pushed Fannie and Freddie aggressively lend to minority communities. Clinton supercharged the process. After entering office in 1993 he extensively rewrote Fannie’s and Freddie’s rules. In doing so he turned two quasi-private mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocks and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie and Freddie collapse.

Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.

Though well intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP lead Congress was almost sure to reject, Clinton ordered Robert Rubin’s Treasury Department to rewrite the rules in 1995. The result is that banks were given strict new numerical quotas and measures for the level of “diversity” in their loan portfolios.

Loans started being made on the basis of race, and nothing else.

But those rules were not enough.

Clinton got the Department of Housing and Urban Development to double-team the issue. That would later prove disastrous. Clinton’s HUD secretary, Andrew Cuomo, “made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis,” the liberal Village Voice noted. Among these decisions were changes that let Fannie and Freddie get into subprime markets in a big way.

Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capitol to back their investments vs. 10% for banks.

Since they could borrow at lower rates than banks, banks poured billions of dollars of loans into poor communities, often “no-doc” and “no income” loans that required no money down and no verification of income.

By 2007 Fannie and Freddie owned or guaranteed nearly half the $12 trillion US mortgage market – a staggering exposure.

Worse still was the cronyism.

Fannie and Freddie became home to out of work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a roughly 2 to 1 dominance of Democrats over Republicans.

Then there were the campaign donations. From 1989 to 2008, some 384 politicians got their tip jars filled by Fannie and Freddie.

Over that time, two GSEs (Government Sponsored Enterprises) spent $200 million dollars on lobbying and political activities.

Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage backed paper created from subprime loans are a failed legacy of the Clinton era.

McCain warned about this impending problem in the following letter:

United States SenateWASHINGTON, DC 20510May 5, 2006
The Honorable William H. Frist, MD Majority Leader

United States SenateWashington, DC 20510

The Honorable Richard C. Shelby
Chairman, Banking, Housing and Urban Affairs Committee
United States SenateWashington, DC 20510

Dear Majority Leader Frist and Chairman Shelby,

We are concerned that if effective regulatory reform legislation for the housing-finance government sponsored enterprises (GSEs) is not enacted this year, American taxpayers will continue to.be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole. Therefore, we offer you our support in bringing the Federal Housing Enterprise Regulatory Reform Act (S. 190) to the floor and allowing the Senate to debate the merits of this bill, which was passed by the Senate Banking Committee.

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

Substantial testimony calling for improved regulation of the GSEs has been provided to the Senate by the Treasury, Federal Reserve, HUD, GAO, CBO, and others. Congress has the opportunity to recommit itself to the housing mission of the GSEs while at the same time making sure the GSEs operate in a manner that does not expose our financial system, or taxpayers, to unnecessary risk. It is vitally important that Congress take the necessary steps to ensure that these institutions benefit from strong and independent regulatory supervision, operate in a safe and sound manner, and are primarily focused on their statutory mission. More importantly, Congress must ensure that the American taxpayer is protected in the event either GSE should fail. We strongly support an effort to schedule floor time this year to debate GSE regulatory reform.

John McCain

As evidenced by the failure to pass the Federal Housing Enterprise Regulatory Reform Act of 2005, the Democrats in Congress have repeatedly fought back Republican Party efforts to reform the two mortgage banking giants. Obama was among those that opposed the reform.Instead, Democrats in Congress have sought to preserve the quasi-governmental status of the mortgage giants, seeing Fannie Mae and Freddie Mac as places to locate former top Democratic Party operatives, where they have earned millions in compensation, despite a continuing series of financial scandals. Enron-like accounting manipulation, for example, boosted earnings to a level at which massive executive bonuses could be paid.

Now we have to pay to “bail out” the mess that the Democratic Congress has made and we are supposed to believe that liberals (really Socialists) like Pelosi, Reid, and Obama have our best interests at heart? I don’t think so.

Just a little bit on Taxes (this one could take days…):

Obama’s spending plan now tops 1 TRILLON dollars. Yes…TRILLION. He plans to cut taxes on 95% of Americans. Let’s examine that. First, the top 10% of wage earners in this country pay 80+% of the taxes in this country. The bottom 50% only pay 2.9%. There is a high percentage that don’t pay taxes at all. When you examine this proposed tax cut in detail which I invite you to do, you will find as I did, that it is indeed not a tax cut but an increase in welfare and a socialistic/communistic re-distribution of wealth. Many people who pay not taxes at all will be receiving ‘tax rebates’. Obama himself said today that we need to “spread the wealth around.”

Please explain to me why the money that I work so hard to earn should be taken from me and given to someone else? I donate a great deal tocharities and help people I don’t even know whenever I can. We Americans are a very giving people…not only to our own people but to those overseas as well. It is NOT my responsibility to pay for anyone else. It is my responsibility to be personally responsible and take care of myself and my family. There are times that due to circumstances beyond our control we need help and it’s great that there is help. HOWEVER, to take money from those who have earned it to just give it away to those who have not is just WRONG! Heck, if we’re moving in that direction, I should just sit back with everyone else and wait for my government job, house, car, food, etc. That will do wonders for our country won’t it?!

Here’s some more on taxes:
NOTE: Obama's Income Tax Increase Would Burden Small Businesses Struggling In A Weak Economy:
FactCheck.org: "McCain Is Right About One Thing. Many Small-Business Owners Would Indeed See Their Taxes Go Up If Obama Is Elected And Raises The Top Income-Tax Rates." ("McCain's Small-Business Bunk,"
www.factcheck.org, 7/14/08)

Two-Thirds Of Small Business Income Would Be Subject To Obama's Significantly Higher Tax Rates. "The conservative argument (and that of the John McCain campaign) is that Obama's stated plan to raise taxes on households making $250,000 or more in income is a tax increase on small business. The simple answer to this dilemma can be found in the IRS Statistics of Income Bulletin (Table 1.4, for those who are interested). So what do the data say? In 2006 (the latest year available), $706 billion of such income was reported to the Internal Revenue Service. Of this, about half was reported by households in the top marginal income tax rate. Interestingly, two-thirds of this income was reported by households making $250,000 per year or more -- the very same households that Obama wants to increase taxes on. The Obama campaign maintains that the number of small-business owners is what's important. Economists know what matters is the tax rate that's applied to the bulk of small-business income. Make no mistake about it: Obama's plan to raise taxes on households making more than $250,000 will raise taxes on most small-business profits in America." (Grover G. Norquist, Op-Ed, "An Argument Against Obama's Tax Plan," The Politico, 7/11/08)

With An Obama Administration And Democrat Congress, We Will See "A Big Increase In Spending And Deficits." "Liberals will make a full-bore push for European-style economic policies. On the other hand, the remaining moderates will argue that it was excess and debt that created this economic crisis. ... Obama will try to straddle the two camps -- he seems to sympathize with both sides -- but the liberals will win. Over the past decade, liberals have mounted a campaign against Robert Rubin-style economic policies, and they control the Congressional power centers. Even if he's so inclined, it's difficult for a president to overrule the committee chairmen of his own party. It is more difficult to do that when the president is a Washington novice and the chairmen are skilled political hands. It is most difficult when the president has no record of confronting his own party elders. ... What we're going to see, in short, is the Gingrich revolution in reverse and on steroids. There will be a big increase in spending and deficits." (David Brooks, Op-Ed, "Big Government Ahead," The New York Times, 10/14/08)

Obama Voted In Favor Of The Democrats' FY 2009 Budget, Which Would Raise Tax Rates For Americans Earning $42,000 Or More:
Obama Voted Twice In Favor Of The Democrats' FY 2009 Budget Resolution. (S. Con. Res. 70, CQ Vote #85: Adopted 51-44: R 2-43; D 47-1; I 2-0, 3/14/08, Obama Voted Yea; S. Con. Res. 70, CQ Vote #142: Adopted 48-45: R 2-44; D 44- 1; I 2-0, 6/4/08, Obama Voted Yea)

The Democrats' Budget Would Raise Taxes On Individuals Earning Approximately $42,000 Or More. "The resolution Obama voted for would not have increased taxes on any single taxpayer making less than $41,500 per year in total income, or any couple making less than $83,000. The $32,000 figure is approximately the taxable income of a single person making $41,500 per year, after all deductions and exclusions." (FactCheck.org, "The $32,000 Question,"
www.factcheck.org, 7/11/08)

NOTE: The Democrats' Budget Raised Tax Rates On The 25, 28, 33 And 35 Percent Brackets. For 2008, The 25 Percent Bracket Begins At The Taxable Income Level Of $32,550, Which Is The Figure After All Deductions And Exclusions Are Subtracted From Total Earnings. ("2008 Individual Income Tax Rates, Standard Deductions, Personal Exemptions, And Filing Thresholds,"
www.taxpolicycenter.org, 11/4/07; Andrew Taylor, "Presidential Hopefuls To Vote On Budget," The Associated Press, 3/13/08)

The Budget Also Allows "More Than 20 Million Middle-Class Taxpayers To Be Hit By The Alternative Minimum Tax" After Next Year. "The Senate Wednesday approved a $3.1 trillion election-year Democratic budget blueprint that leaves to the next president the task of sorting out a host of fiscal problems. ... It also manages to predict small budget surpluses by 2012, but only by permitting several of President Bush's tax cuts to expire as scheduled at the end of 2010 and by allowing more than 20 million middle-class taxpayers to be hit by the alternative minimum tax, or AMT, after next year." (Andrew Taylor, "Senate Approves Stand-Pat Democratic Budget Plan," The Associated Press, 6/4/08)

The Budget Would Also Let Capital Gains And Dividends Tax Relief Expire In 2011, Nearly Doubling The Capital Gains Tax Rate And More Than Doubling The Dividend Tax Rate. (Andrew Taylor, "House, Senate Debate Democratic Budget Plan," The Associated Press, 5/21/08)

During The Campaign, Obama Has Called For Higher Taxes On Americans Earning Significantly Less Than $250,000:
September 2007: Obama Suggested Applying The 12.4 Percent Social Security Tax To All Earnings. "While Obama has suggested imposing the 12.4 percent tax on all income above $97,000 per year, Edwards would only impose it on those making more than $200,000 per year. Income between $97,000 and $200,000 would continue to be exempt from Social Security taxes under the Edwards proposal." (Teddy Davis, "Obama Floats Social Security Tax Hike," ABC News,
abcnews.go.com, 9/22/07)

Obama: "If We Kept The Payroll Tax Rate Exactly The Same But Applied It To All Earnings And Not Just The First $97,500, We Could Virtually Eliminate The Entire Social Security Shortfall." (Sen. Barack Obama, Op-Ed, "Fixed-Income Seniors Can Expect A Tax Cut," Quad City Times [IA], 9/21/07)

April 2008: Obama Said He'd Raise The Capital Gains Rate To 20 Percent Or Higher, And Said That Wouldn't Impact The "Average Person." Obama: "In terms of capital gains, I've suggested we might go back up to 20 (percent), because..." Fox News' Chris Wallace: "You had suggested 28 (percent)." Obama: "Well, what I've said is I certainly would not raise it higher than it was under Ronald Reagan, but the fact is that I'm mindful that we've got to keep our capital gains tax to a point where we can actually get more revenue. But that's not something that's going to affect the average person with a 401(k) when people start talking about how, 'Well, there are, you know, millions of Americans who own stock,' most of them own stock in 401(k)s where their taxes are deferred and they pay ordinary income taxes when they finally cash out." (Fox's' "Fox News Sunday," 4/27/08)

June 2008: Obama Said He Would Raise Taxes On The Top 5 Percent Of Earners, Meaning Those Earning Approximately $145,000 Or More A Year. Obama: "It is true that those like myself who are in the top 5 percent, we're going to see a tax increase. I'm going to roll the Bush tax cuts back to the levels they were in the 1990s." (Fox Business' "Fox Business," 6/26/08)
In 2005, The Cut Off For The Top 5 Percent Of Earners Began At $145,283 - Well Below Obama's $250,000 Threshold. "Including all tax returns that had a positive AGI, those taxpayers with an AGI of $145,283 or more in 2005 constituted the nation's top 5 percent of earners." (Gerald Prante, "Summary Of Latest Federal Individual Income Tax Data,"
www.taxfoundation.org, 10/5/07)


Obama Pledged That No One Making Less Than $250,000 Would See A Tax Increase, But His Economic Advisers Said Individuals Would See Higher Taxes Starting At $200,000:
In August, Obama's Economic Advisers Wrote An Op-Ed That Said Individuals Would See Higher Taxes Starting At $200,000 Under An Obama Administration. Obama Economic Advisers Jason Furman And Austan Goolsbee: "Sen. Obama believes that one of the principal problems facing the economy today is the lack of discretionary income for middle-class wage earners. That's why his plan would not raise any taxes on couples making less than $250,000 a year, nor on any single person with income under $200,000 -- not income taxes, capital gains taxes, dividend or payroll taxes." (Jason Furman and Austan Goolsbee, Op-Ed, "The Obama Tax Plan," The Wall Street Journal, 8/14/08)

Julianne Wish
MUIB Partner
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How Writing Articles Helps You Work From Home

How many times have you heard that business owners should write and submit articles?
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