The meat of the matter-------

Finally, the Presidential Campaign is focusing on the meat of the matter. While the platforms of both parties are, in many respects, hopeless blather, in August three economists at Bank of America did a concise, side by side comparison, of central parts of the economic import of the programs proposed by Mr. McCain and Mr. Obama.

http://montclairrepublicancc.org/McCain_and_Obama.pdf

The analysis has been picked up by Republicans and forwarded here, there and everywhere but the crux of the differences has not gained sustained traction with the majority of the public until the last presidential debates. While the analysis document from the BOA economists has been embraced by Republicans, it does not, to me, appear to be biased or political in nature.

It was the now famous "Joe the Plumber" that finally brought the key and overriding issue to the forefront. That issue, as explained by Mr. Obama to Joe, was, that through his tax plans, " he intended to spread the wealth around." While Senator McCain raised it numerous times in the debate he still has not been pointedly coherent in framing the issue and in countering the Obama camps claims that the McCain approach is, in the long run, the same thing.

However, the BOA analysis points out that Mr. Obama intends to increase taxes upon high wage earners (those reporting net income, after deductions, of over $250,000 a year). In addition, while his plans call for spending bundles of money on many new programs he also intends to drop many millions of low income people from the tax rolls (in addition to the existing millions not paying income taxes today) and then provide additional tax dollars to them by actually giving them a credit as in sending them a government check. The government is already doing this and Mr. Obama wants to vastly expand this misguided, corrosive, free ride.

So, while he claims that he will not raise the taxes of the "middle class" by one penny he is most definitely intending to take more tax money from the middle class to further turn the poor into a dependent class. It amounts to perpetual and thus perpetuating, welfare. A subsidized existence, a public dole, that sucks any form of positive societal contribution out of the recipients. No matter what uplifting name the politicians give these programs, they are destructive and actually poison a healthy society.

The entire concept of any citizen being excused from paying taxes is grating. None of us like paying taxes but most understand it is necessary. Indeed, if being an American is a privilege, and I think it is, we must understand that the wonder of this country has a cost and some of the cost, only some, can be paid for with money, tax money.

Are there inequities in our society? You bet! In recent advertisements in the New York Times they are listing a new duplex in Greenwich Village for some $21 million, marked down from over $23 million. Looking at something like that and the pay scales of many senior executives or investment bankers compared to the wages of many hardworking contributing members of society and the word inequity is mild.

Gobs of money taken from those overly compensated folks as well as the middle class, to be used as a way to blast and propel contributing people out of poverty, is a worthy endeavor. However, paying off the poor is counter productive in trying to reduce the problem and infuriating to an honest taxpayer.

Can intentions and plenty of tax dollars, like the tide, lift all boats---no chance. Some boats leak, some have holes in the hull. Poverty has always been with us and always will be but one would think that we can do better in pushing it back. A government give away, that inbreeds ever greater dependency does not lift souls much less leaky boats. Such an effort is not the answer, it will actually make things worse as it plays to some of the worst aspects of human nature.

Mr. Obama would not agree with me. Thus I have real problem with Mr. Obama as this is the central theme of his campaign and may very well be the defining basis of his very being. Mr. McCain and many of his core supporters, who have chosen to calling themselves conservatives, have simply labeled it socialism, considering that pejorative at least one step worse than being a plain liberal.

Mr. Obama, ever cool, with a nod of knowing explains that Mr. McCain just does not get it. Some truth to that, but neither does he.

If he is elected and I think he will be, every effort must be made to point his intelligent consideration to the fact that in trying to save this country from itself his current plans will likely ensure a historic slide.

Looking forward--------

I was born in 1936, in the middle of the Great Depression. Needless to say I remember nothing about those days in a macro sense, but quite a few things at the micro level that effected my family, until well after the depression was over.


My father, who was an orphan, managed, with the great assistance of an older brother, to graduate college and law school. However, in that economy, the choices for young lawyers without the right connections, who were also highly idealistic, was not good. Before I was born as unemployment reached over 20%, my father quit the law, took the test to become a teacher. He then worked worked until just a few years before his death as an educator for the New York City Board of Education. While teachers today are still not overly well compensated back then they were in far worse shape. At the same time he worked other jobs, tutoring children, running night schools, summer camps and during the war, also in the summer, as an electrician in a shipyard racing to turn out cargo ships to haul sustenance and the tools of war to the troops in Europe.
As I remember it we never had any money and were not even able to finish a month without the check book and wallet being completely empty. A revolving loan of five dollars, from my grandmother, until the 1950's, carried us through. We owned some furniture (some of it still in use), always rented and frequently moved, to take advantage of the free months rent each land lord would give to attract new tenants. We had no debt and no stocks and not until 1948, when we almost went off the Bear Mountain bridge in our 1934 Pontiac, with the leaky fabric roof and no heater, did we get a "modern" Chevy, which was a pre war design.


I do not remember feeling behind the curve until late in high school when I saw my friends families prospering, while my father, who by personality and life experience, remained very risk adverse, staying well protected in the civil service system.


That is what I see looking back and unfortunately what I see, and worse, for many, as I look forward.


The financial crisis we are in today is not just a low level economic dip that anyone my age has experienced from the 1970's through the Dot. Com bust of the early 2000's. This is the real McCoy and it will take years for the effects of the recent and continuing collapse for the economy to restore itself to a comfortable growth rate. To date, in most local economies the pain is primarily affecting real estate values. But the spill over into everyday life will follow and hang on with a vengeance.


The popular belief of certain politicians, that Wall Street is not connected to Main Street is total eye wash and the concept that what has happened is the fault of greed confined to Wall Street is worse than self serving.


The ones who ran and prospered unnaturally on the greater Wall Street were a creation demanded by the satisfaction of the wants and hence needs, of those living on Maine Street. The ability to effectively regulate and control both sides of that equation has always evaded man and the governments they create.


Even when governments try, the ingenuity of man soon finds a way around the pesky regulations to serve the needs of hard wired human materialism and personal greed.
It is also safe to say that the economy and lifestyle that enfolds us as we recover will not look like what we have seen over the past 50 years. In addition this country will not have the same international position and clout that we earned and have enjoyed since world War II. For my children and my grandchildren it will be a totally different reality with many unpleasant experiences for them that they will, at the least, learn from.


Fresh leadership will come to the table. We will, in my view, be watching Barack Obama take the oath of office in January. I see no way for a majority of the people to elect a candidate tied to the party in power, no matter how loosely, as the country becomes immersed in a debacle such as the one we now face. Unfortunately, Mr. Obama, bright and articulate as he is, is not equipped by experience to assume such a position and his underlying philosophy, no matter how he tries to play it down, runs far from the basic foundations that have contributed mightily to the successful American experience .


In fairness, I also feel less than enthusiastic about Senator McCain primarily because of his age and his choice of a running mate who could well be less than a full heartbeat from the presidency. As for the fringe candidates, I cringe.


So, if Mr. Obama is elected I will offer my full support and all my energy, in my less than meager way, to urge him and his administration to face reality, to forego their airy dreams and bring us back to equilibrium without killing the advantages of the American economy and reasonable free market activities that cannot be stopped in any event.


If he follows the lead of ranking legislators in his party who, along with a good many Republicans, turned Fannie Mae and Freddie Mac into the absurd behemoths they became, in a misguided effort to provide home ownership to those who could not afford homes, we will be in worse shape.


If he tries to effectively redistribute the wealth of America to those who have not, for any number of reasons, earned it, his cure will poison our economic well for far longer than a decade. His plans to remove more low wage earners from the tax rolls magnifies his philosophic beliefs and is totally inappropriate. While there can be much debate as to what a fair, graduated tax should be the concept that some can avoid even token payments for the right and good fortune of being an American is wrong.


One should look forward with enthusiasm, this country always has. It is difficult for me to do so at this time.

What can we do??

As the markets contract, as money, the blood of commercial life, clots and no longer flows one wonders what one can do.

I have resorted to faxing (email and phone did not go through) the single congressman in the great State of Maine who voted against the Treasury plan in the first time around. The value of the proposed plan is all ready severely depreciated in value as the elected leaders stumble around, failing to understand what their meandering and posturing will surely cause.

To gain a perspective from an informed fellow all should consider spending an hours time watching a recent interview of Warren Buffett at:

www.charlierose.com/shows/2007/05/10/1/an-exclusive-conversation-with-warren-buffett - 66k

-----------and it is not a bailout

The week plus that was, after my last post, has offered lots of reinforcement for my stated angst. It was not so much the behavior of the markets, which was as anticipated, but the exposure to moronic utterances of those elected officials who we have entrusted with our well being.

Utterances by Mr. Obama and Mr. McCain were no better.

Obama made the case that the economy was the Bush economy and that McCain would be four more years of Bush. First, the mortgage, housing market mess goes back to at least early in the Clinton administration and perhaps well before that. As earlier mentioned, Fannie Mae and Freddie Mac were put in place to provide ease for those seeking to buy a house to gain financing. The intent went so far that it threw out sound credit scoring and encouragedthose with little to no hope of keeping up with payments to overbid and to still gain a mortgage. It was not just the low income folks who took advantage of the easy money. It drove the entire housing market with everyone willing to go far out on a limb to move up and keep up or ahead of the Jones’. The inflated prices that the excess credit fueled led to home equity loans on houses with inflated values that fueled still further consumer spending that was then again parlayed with growing credit card debt.


And now the party is over.


As a society and as a nation we have spent far more than we can afford and the way out of the mess, so called bailout or not will be long and painful. All we can hope for now is that it will not be a cataclysmic correction.


Henry Paulson, the Secretary of the Treasury and Ben Bernanke the Chairman of the Federal Reserve Bank have put their health and well being on the line as they struggle seven days a week and in the night time too, as they try to forge a mechanism that will hold the Apocalypse back.


Their recommended program, for the government to take the banks bad debts off their balance sheet , at a fire sale price, makes sense as we face desperation. It may not work but it is the best shot we have. The debt, taken in to the Treasuryat a major markdown from face value. All ofthe paper in question is not totally bad and the government should be able to recoup it’s investment and perhaps more, over the coming years.


It is by no means a bailout. Rather it is an attempt to use the remaining credibility of the United States of America to take one grand additional massive mortgage on the country's future. Senators, in pompous pose and Congressman awash in ignorance have berated and pilloried Paulson and Bernanke in public hearings, shaming themselves and those who voted them into power.


As some have bemoaned the load being put on the taxpayer Paulson has correctly stated that the load is all ready on the taxpayer and that to do nothing will bury the taxpayer. He is right.

Certainly clever greedy types have made a fortune catering to the wants and wishes of the not so clever but greedy citizens. The root cause is the over extension, by the public, and the willingness of the politicians to help the public, their constituents, to do just realize dreams that they cannot afford.


Now, tonight, Obama and McCain will have their first debate. I am not optimistic that much light will be shed on this key subject.


For McCain it is a critical juncture as his running mate Sarah Palin has, in her exposure to interviews by Katie Couric of CBS, failed badly. And his rush to Washington to help out in ending the congressional side show on the credit package came off as posturing with no position.

Food for analysis - Georgia

While it is impossible to authenticate articles like this they all provide perspective and assist in reaching or supporting ones opinions. This Reuters piece makes sense though I am sure it has a hefty level of self interest added by the source.

http://www.reuters.com/article/wtMostRead/idUSLD12378020080914

Column from January, 2008 - Monday will be a bad day!!

Column of mine published in January 2008.

RUN FOR YOUR MONEY ---- WHERE?

The other day an old friend called. We had been in the Navy together and continue to share a jaundiced view of the powers that be. He asked me how safe he should feel with all his money, hopefully enough to get him out of this life - dead, resting in a variety of accounts at Merrill Lynch, the humongous investment and brokerage house. I snorted, not in derision but because I was in the same boat, along with all the rest of us, unless you are sleeping on a mattress of gold bars.

All of us, rich, comfortable, stretched or poor are caught in a pickle. Our financial underpinnings are less than what we assumed they were, less than what we have taken for granted, at least going back to 1933. Since 1933 there has not been a vision of a financial abyss such is now hovering on the horizon.

In March of 1933, a different time in every way, except for greed and other unpleasant hard wired human traits, President Roosevelt shut the nations banks for a four day "holiday," in order to calm the population and slow the drainage of cash and gold that people wanted back under their mattresses. The government was able to shore up the financial system, ease the panic and put in place the Federal Deposit Insurance Corporation (FDIC), that insures, by the government, bank deposits, in member banks, for up to a total of $2,500 in 1934 and $100,000 today with an additional $250,000 coverage on Individual Retirement accounts (IRA). A lot of money in those days and still a big deal today.

Over the past several months Merrill Lynch, Citigroup, Bank of America and innumerable investment houses, mutual funds and even the sacrosanct treasury of the great state of Maine have literally had the hubristic stuffing plucked out of their over inflated mattresses. Racing for fat returns they all drank their own bath water either packaging for resale, buying, or both, rafts of mortgage obligations, from "sub prime" borrowers. Many who had little hope of ever paying them off.

Insurance funds that were supposed to cover the failures are proving insufficient to cover the mess and as these rock solid piggy banks have had to show their losses they have been scrambling all over the world to raise capital by selling steeply discounted stock to deep pockets. The majority of the new investors are sovereign funds of various countries who are floating on trillions of petro and lead toy generated dollars. In short the dollars that we profligate citizens have shipped overseas are now coming back to buy our banking assets that rest on collapsing pillars of probity.

Needless to say the dollar also has tumbled in value. To the extent if your retirement money is in Treasury Bills, the assumed safest of the safe, though you will get your money back with interest it will be worth substantially less than when you put it in safekeeping. Maybe way less.

So what to do?

Run to the bank and yell give me my money? Forget it, they cannot print the stuff fast enough. Look to a stimulus package? How funny, in other words send more depreciated dollars to the citizens and urge them to blow it at the mall all in the hope of holding off an inevitable shattering correction.

Am I an alarmist? To a degree, probably, but face it we have been living way beyond our means. Stories in the Wall Street Journal, the New York Times and the Economist point out that the country has taken bigger hits in the past and that we are a $ 13 trillion economy. So what does it matter if we take a mere $700 billion hit on the mortgage trash.

But, but, but — if this mess spreads to all other parts of the debt economy, credit cards, home equity, retail sales, etc., as I am convinced it will, we could end up realizing that we are all living on the San Andreas fault of a shaky global economy.

What did this? The nasty greedy corporations? Please, we all did it. We want, and our politicians, of all stripes, want us to be happy so they feed our wants. Meanwhile we cannot even fill the infrastructure jobs that the 12 million illegal immigrants fill. Not because we can’t, but because we view such employment with disdain. Who wants to work as a busboy when they can sit at the table? Who wants to have their kids educated until they are stuffed with knowledge on physics and engineering and math when it is a free ride and easier to take a bogus course in "lifeology."

The piper will be paid.

Our future-------

This week we learned that President Bush has authorized cross border attacks, by ground forces in Afghanistan, on Pakistani tribal retreats from where the Taliban launches attacks on NATO forces in Afghanistan. The Pakistani government has wailed over our ignoring their sovereignty but unless those enclaves are thrashed our hopes of eliminating this terrorist base their infrastructure could take over Pakistan along with it’s nuclear weapons and know how.


Meanwhile, Russia, with foreign investors bailing out, has pulled back from forward checkpoints in Georgia, one of it’s breakaway republics. This, even after Vice President Cheney, as Bush emissary, pledged $ 1 billion of our money to rebuild that befuddled country, after it was appropriately thrashed and trashed by Russian forces, who were responding to Georgia’s full scale attack on it’s own breakaway province of South Ossetia.


On a muggy, overcast day in Maine I am reviewing video clips on the web of the scenes in Galveston and Houston that have also been thrashed by Hurricane Ike while also following the news reports of top level meetings aimed to still the economic hurricane that is thrashing our financial and banking system.


Finally, I have watched with interest and no small dismay the ABC interviews of Governor Sarah Palin, the Republican candidate for Vice President, by Charles Gibson, that networks lead talking head. I was and am dismayed.


Dismayed by Gibson’s prosecutorial and churlish tone and Ms. Palin’s obvious lack of background. Having once been in such a situation I regret the need for her or anyone to be placed in a position subject to a talking heads interrogation that are then distorted by the network edits.


Needless to say she could have avoided such treatment simply by refusing Senator McCain’s offer to join his ticket. After she accepted the interview entertainment, instead of the Republican minders trying to cram everything that there is to know about everything into her head over a week they should have trained her to answer fire with fire.


No one, including Bill or Hillary Clinton, Barack Obama or John McCain can or should be expected to give a discourse, in detail, in under twenty seconds a question, on any of the key points challenging our country and the world. No one can provide clear steps to just address the few points I have listed at the intro to this blog, let alone provide a running, real time analysis of how to cure the worlds ills and uncertainty.


Ms. Palin however, did not chose to do that and her vulnerability came through. Her understanding of what the Bush doctrine was, or is, demonstrated lack of depth. Her statements about stem cell research demonstrated that she really had no idea what stem cell research is.


Her stated beliefs that she and McCain can make a dent in our entitlement mess by bringing efficiencies to government agencies is a hopeless concept.


But why do I focus on her a mear potential vice president? She is absolutely correct that others who have come to that office never had met a head of state before and yes, I do not think that such an accomplishment is a qualification for anyone. However, I am two months older than John McCain and if, like the old cliche, she is one heartbeat away from being president, I am dismayed. Her lack of background and core beliefs that are based on a depth of religious surety, that we have seen having great effect on the reasoning of George Bush, magnifies my concerns.
Meanwhile Obama squirms and Biden is lost and alone, somewhere out in America. Obama all ready has given answers to all of the questions that someone like Charles Gibson will ask (Gibson and Stephonopolous once probed Obama about a flag pin in his lapel.) and it will sound like beautiful music. But, if he actually tries even half of what he may at any given time espouse (it changes) he will not be leading a nationwide sing along.


So, our future is cluttered. Problems are building, problems are escalating and there is no leeway for frivolous as usual.


Our future is grim!