My sincere apologies for being gone from the blogosphere for the last few months, but there is much to catch up on together. First, the Presidential race is heating up. Second, the credit crisis is claiming victory over some of Wall Street’s finest, and to top it off, Congress is sitting on its hands playing partisan politics while main street can’t catch a break in searching for some kind of certainty and reassurance that this is the United States and we will be alright.
The Presidential election. I have my own very strong opinions on who I will be voting for this November, so I won’t bore you with all of the reasons why, but a few thoughts. On taxes. As everyone who has ever taken an economics class knows, the worst thing you can do in an financial and economic downturn is raise taxes. Now this is what Sen. Obama wishes to do because of all the “fat cats” on the street. I have many issues with this and economics is the most direct reason why I have never and will never vote for Obama. Obama supporters contentions are well taken and heard, but there is no way to convince me or any sane economist that raising taxes in this environment will do anything other than backfire. As you’ve heard, our corporate tax rate is 35%, that’s the second highest in the world. Our income tax, Obama supporters will say is only going to go up to the levels under Bill Clinton (39.6% top marginal rate). However, this does not take into consideration the other taxes people will pay and will pay more on under an Obama disaster. There is the payroll tax, the social security tax, and the capital gains tax, just to name a few, that would increase under an Obama administration. Adding these up puts the tax burden at more than 50% for the top rate…I’ll let you recall history to discover why Reagan was so popular and why the US is on top of the economic world because of his administration (hint: he cut the top marginal tax rate from 70% to 28% during his administration).
Furthermore, while Obama wants to levy this high tax only on the highest of earners (those over 250k), he fails to understand, or maybe his supporters fail to understand that there is only so much you can tax out of this 3-5% of Americans, which doesnt cover his agenda spending items…this means it will have to come out of a higher rate for middle income Americans. Obama wants to give you a $1,000 tax break beyond the current credits, but this will be lost by the higher payroll, social security, and capital gains tax rates EVERYONE in America will be hit by. The rhetoric sounds great, but it’s all hiding the numbers. You think wall street is bad now, wait until November 5. If Obama is elected, I think there will be an exodus out of Egypt between November and whenever he decides to increase taxes. There are plenty of much more lucrative opportunities elsewhere, and if the US can’t be stabilized, the focus of the World will move on.
The Credit Crisis and Congressional Incompetence. OK, now that the Dems have held onto control of Congress for two years, we can all agree that NEITHER the Rs nor the Ds saw this coming with the force it has. Barney Frank wants to tell everyone that the Rs had 12 years to put through GSE reform, and the Ds did it in a year and a half…OK, well as we all know, the facts and circumstances are a LOT different now. I’m not going to point the finger because very few people saw this storm coming with this magnitude. However, I will say that being in Washington for the last year and a half, and working on legal, financial and real estate finance policy here, has been an eye-opening experience.
There is so much that goes into seemingly simple issues and policies, that it is hard to understand it all. This is why, as much as main street hates “Lobbyists”, I will bet you anything that Joe 6-pack couldn’t tell you in a concise, or intelligent way what a lobbyist is, what they do, or how they do it. So every time you see an ad attacking lobbyists, remember: if you’re a union worker, there is a massive group of “lobbyists” in Washington who are advocating for YOUR rights and protection, if you are a Banker, or work for a bank, there is a massive group of lobbyists in Washington advocating on YOUR behalf so that your bank or the bank you work for has less to worry about and more money to make payroll each month to keep you employed, if you’re a teacher, a firefighter, a small business owner, those awful, despicable ”lobbyists” in Washington, are advocating for you, so get it right!
Housing and the Crisis. There will be more on this to come, but suffice to say or now that the huge bailout plan that did not pass yesterday was needed, and some form of it will pass. But I think many Republicans and even the 95 Dems who voted against it, did so in part because of the partisan politics offered by Speaker Pelosi’s remarks before the bill was offered for a vote. For the recod, this is an incredible breakdown in leadership and a total failure to see the big picture. There were a lot of people who were on the fence, both parties, because their constituents were telling them one thing (don’t pass it) and their gut was probably telling them another. First of all, as a moderate Republican, I don’t like the idea of making government bigger, especially this big. So I can understand all the nay votes yesterday, but the great news channels, except for CNBC from what I noticed, failed to explain how the bill works. It was pitched to many as a huge $700 billion bailout for the “fat cats” on Wall Street. Ok, this is wrong for so many reasons it makes me sick. First of all, Treas Secretary Paulson, only gets $250B up front, then $100B if President says ok, then the last $350B if Congress says ok. He also has to consult with ehads of other agencies before action is taken. So there are checks on this that will probably not let it get to $700 billion anytime soon. Secondly, Wall Street is connected to Main Street whether the public likes it or not…that’s where your mortgage goes every month. If some of these banks and financial institutions do not get some help to remain solvent or encouragement to lend money in this economic cycle, yes some of them brought it on themselves, but either way, YOU will feel it. If the credit markets don’t open up, then the public who doesn’t want to “bail out” Wall Street will not get the home loan, auto loan, new credit card, or even education loan necessary to carry on. This also means that credit will not be available to small businesses needing to borrow to PAY those working on main street.
If something doesn’t happen, job losses will increase, credit will be more frozen than it already is, so I hope your credit score is over 700 if you want to own a home or a car. This bill needs to pass, or there will be another 1000 taken off the Dow, after yesterday’s 777 points down, people are losing their pensions, savings, and now their banks. This has to get done. I would like to let the market work itself out, but there is so much scepticism and uncertainty, fueled more so by the idiotic press and media who don’t have a clue about what they’re talking about, that there will be a meltdown we have yet to comprehend. I don’t like the big government idea, but in this situation, like when Alexander Hamilton told George Washington that there needed to be a National Bank to assume all the debt of the states and provide unity and strength for the new country, there must be something done to stabilize the financial sector. Everything trickles down. The US will be ok, and will survive with or without this bill and authority given to Paulson, but the issue becomes how long do we want to be in this mud and are we willing to accept the end of our reign at the top of the financial world.
Stay tuned, more to come…
