Monday, July 11, 2011

The Lies Politicians Tell You

Why Banks were bailed out and you weren't

I don't care if you're a Democrat, a Republican or an Indpendent.  What it is important for you to know is you are being lied to and it has been going on for years.  Some of these lies have created the problems we have in the United States today.  Alarms were sounded, but nothing was done.

Here's a brief reminder of things you may already know:

  1. Banks were allowed to sell off Morgage Loans starting about a decade ago.
  2. These loans were packaged up and sold to investors.
  3. Since the banks no longer had a stake in whether these loans failed anyone could qualify.
  4. Credit checks were minimal, many people didn't need to prove their income, and were encouraged to lie.
  5. The loan packages were falsely labeled as secure credit by the rating agencies.
The result:  many people were able to buy houses that ultimately couldn't afford them and this house of cards came crashing down.   How could this have been allowed to happen?  The simple answer is that there was insufficient regulatory oversite of the Banks, of the loosening of qualifications for getting a mortgage, of the derivatives that made it look like any losses from these mortages were insured, and of the rating agencies that took all of this at face value.  Now we have one of the most serious economic calamities since the Great Depression.  Millions are unemployed and millions more have given up looking for work.

The Takeaway:  When you hear your representatives saying there is too much regulation think about this fiasco.  Regulations, which the banks didn't want, could have prevented this - but they are BIG political contributors, so it didn't happen.  And who, exactly, was bailed out after this crisis occured?  Why, the big banks of course.  Not that it may not have been necessary, but why was so much of the bailout focused on the banks and comparitively little on job creation.  Real job creation, that is, not the tax cuts that were demanded to pass the bill: Tax cuts which heavily subsidized the most wealthy who, you all were told, were going to use the money to create jobs.  Why that's trickle down economics.  Isn't it odd how none of the tax benefits actually trickle down.  Do you think, perhaps, the people who sponsor these tax cuts already know this?  That they do it because the people getting the tax cuts are their big political donors?  Consider that while we move on to an impending crisis. Oh, one more thing: have you seen a single bank executive go to jail for the apparently fraudulent practices that went on?  No, I didn't think so.

The Debt Crisis

In a matter of weeks the U.S. faces the prospect of being unable to pay all of its debts because of the stalemate now going on in congress over raising the debt ceiling.   Most independent observers who are NOT politicians tell us that we need BOTH to cut spending and raise taxes.  The Democrats have staked out the "Third Rail" territory.  They know it is very unpopular to tinker with Medicare or Social Security, which the Republicans have wanted to do.  These programs are, after all, the largest and most expensive programs for the Government dwarfing almost everything else.  The fact is, our budget cannot be in balance without some changes to these programs.  On the other hand the Republicans have staked out taxes as their sacred cow.  No one, however rich, should pay a dime of extra taxes.  Nor should we even close "loopholes" that give away billions of dollars to oil companies that already are making record profits.

Clearly, both positions are purely meant for political gain and do not help solve the problem.  I think we should accept, as a given, that Medicare (most of all) needs to be reformed.  Here's a modest proposal that neither side would accept.  Let's put Co-payments on drugs which cost over a certain dollar thershhold.  Now to balance that we need to put limits on Drug Company profits.  They will tell you that R&D is expensive and is the reason they need these profits.  They will tell you that while spending twice as much on advertising as on R&D.  So here's the deal:  allow drug companies 35% returns on their R&D and only on their R&D.  Restrict returns on advertising and other expenses to 15%.   Expected result: lower drug prices offsetting the costs of most drugs so that the impact on Medicare is minimized.

Now what about taxes?  You hate those taxes, of course.  But, do you realize that 90% of the population is paying much more than they should to subsidize the rich?  I'm not saying  that the rich do not pay substantial taxes.  They do, even with the loopholes and their clever tax lawyers.  However, for several decades now, 90% of the U.S. population has struggled just to stay even with inflation.  Not the top 5%, though, and espcially not the top 1% or top .1% of income earners.  They have seen their real incomes, after taxes and inflation, go up smartly while the rest have been treading water.  Isn't it about time that this change.  The Republicans will call this class warfare.  Naturally, these are the people who pay for their campaigns.

So, lets make one thing completely clear:  IF YOU ARE EARNING LESS THAN $300,000 PER YEAR YOU ARE IN THE BOTTOM 90%.  YOUR TAXES COULD BE CUT IN HALF IF THE TOP 5% PAID $5 FOR EVERY $4 THEY NOW PAY.   This is completly revenue neutral.  That is, the Federal Goverment would take in the same amount in income taxes.

But, perhaps you are not as greedy as the Bankers, Hedge Fund Brokers, and Oil Companies that corrupt politics with their influence peddling.  Perhaps you realize that there is no free lunch that the politicians have been promising you all these years.  We really must pay for our roads, our bridges, our schools, our policemen, our firemen.  Much of these expenses have been subsidized through Federal Taxes.  So, if you've seen layoffs of teachers and police in your area, it may well be that your community can't afford them without the Federal Support it used to get.  If you want those services back then consider this:  If the top 5% paid $5 in taxes for every $4 they do now while those in the bottom 90% (earning less than $300,000) paid $4 for every $5 then the government would take in over $110 Billion extra every year not counting the growth in the economy.  So, over the 10 year budget cycle that amounts to well over $1 Trillion.

Unless your are in the top 5% you get both a tax cut and enough additional Federal Revenue to help close the budget deficit and restore revenues desperately needed by the states to rehire teachers, police and firemen.  So, why not call your legislators or send them an e-mail and tell them  "I'm mad as hell and I'm not going to take it anymore."   We don't need demigods with questionable motives paralyzing our government and you CAN stop it.

For those who deal in figures I will post the data on which this is based at a later date.

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