| ThoughtsOnline |
|
Rambling thoughts on who knows what... Because not everything is as the conventional wisdom would have it... BLOGS I SORT OF LIKE... Volokh Conspiracy ProfessorBainbridge MarginalRevolution Patterico Powerline Ace Wizbang JustOneMinute XRLQ Betsy's Page HE WHO USED TO LINK ME EVERY NOW AND THEN InstaPundit Email Steve
|
Thursday, September 30, 2010
On one hand, I think banks seeking foreclosure ought to have their papers in order...
On the other hand, many homeowners now facing foreclosure should never have been able to buy their home in the first place... so I'm not thrilled about their using the legal system to stay in the house and, even worse, without having to make any form of mortgage payment while the process plays out. So... I am going to present a common sense compromise. Any one who lied on their mortgage applications or bought a house with no money down or made less than a handful of payments before defaulting on their mortgage doesn't get to avail themselves of the legal protections that should be limited to those who otherwise played fair. Nor should anyone who could afford to make their payments but is simply choosing not to (usually because their house is worth less than the mortgage, the so-called 'strategic defaults') be able to hide behind the technical rules governing foreclosure. If, on the other hand, you are didn't lie on your mortgage application, you made a downpayment of at least 10% of the purchase price and you made your payments for a good while before falling victim to whatever trouble has left you unable to keep making your payments, then the bank has to make sure every last 'i' is dotted and every 't' is crossed before they get to kick you out. In other words, if you screwed the lender when buying your house or if you're voluntarily screwing them now, the bank gets to do the same to you. And if you played fair, then the bank has to do the same. Wednesday, September 29, 2010
Making lemonade from lemons...
There is a push to reimburse Madoff's victims for losses they never really incurred.... Some of the victims want to be reimbursed not just for the money they gave to Madoff but for the money they thought they had. Yeah, it can be pretty upsetting to find out that the millions of dollars you thought you had doesn't really exist. But you didn't really lose that money, you only lost the illusion you had that much money. The real loss is the amount given to Madoff less any money Madoff gave back. And the SIPC - as they should - only compensates people for real losses, not for imaginary losses. If, for some screwy reason, these people succeed in getting taxpayers to reimburse them for money they never had, I see a great 'investment' opportunity, one that yields a fifty-to-one return on investment. And not only that, the federal government stands behind this... and not just your initial investment but the entire 50-to-1 return. Here is how it will work. You send me $10,000 to 'invest' on your behalf. At the end of a year, I will send you a statement showing that there is now $500,000 in your account. (In reality, your account will contain only your initial investment of $100,000, no more and no less) You'll then inform me that you want to close out your account. I'll send you a check for $9,000 (your $10,000 deposit less a $1,000 account opening fee that you've agreed to pay) and a letter informing you that I am sorry but there really isn't $500,000 in your account. You'll then take this letter along with your account statement to the SIPC and get reimbursed for the amount of your 'loss'... a federally guaranteed 50-to-1 return on investment. While I don't play a lawyer on TV, I don't think there is any fraud, at least as the authoritative Wikipedia defines fraud, as you haven't lost anything. You end up with the return I promised so I haven't committed any SEC violations. I haven't taken any of your money and bought boats or planes or anything that would constitute embezzlement or the like. I won't be sending you money that comes from newer account holders so there's no Ponzi scheme aspect to this. Seems like a winner... at least for you and me. The taxpayer gets screwed... but that's nothing new, is it? Monday, September 27, 2010
Wasn't it just a short time ago that Obama said that getting the economy going again was his biggest priority?
So... given that he has now taken to talking about education, does this mean he thinks he has gotten the economy back on track? Or... like a kid with ADHD, does he just have trouble concentrating? And as far as his comments on education, what is with his arguing that kids need to spend more time in school? Who is he trying to impress with those comments? Yeah, I can count on one hand the number of parents nodding their heads in agreement, that their kids would be oh-so-much smarter if only they spend another two months in school. And there is probably some support from parents who know better but figure yaer round school alleviates the need for them to pay for summer day care. To everybody else, this sounds like just another kooky idea from an ivory tower theorist... long in theory, short in common sense.
There are some challenges in life for which there exist more than one solution, such as which restaurant to go to if you're seeking to impress your date... there are probably multiple options you can choose from.
And there are problems for which there is pretty much only one workable solution. For example, if you were looking to lose weight, there isn't much you can do other than to eat less and exercise more... despite the claims of late night TV commercials, there is no such thing as magic beans that one can take to effortlessly shed the pounds. Winning in Afghanistan is another example of a problem that doesn't lend itself to more than one solution... we pretty much have to have a bunch of our guys hunting down and killing the enemy. So it isn't a surprise that Obama's military advisers didn't give him a whole bunch of other options. What is also unsurprising is that Obama knows so little about the subject that he persisted in asking for someone to tell him about the magic bean that everybody with a bit of grasp of reality knows just doesn't exist. Thursday, September 23, 2010
I don't know why Fox News - or, for that matter, any news organization - would use the word 'unexpectedly' in referring to last week's rise in first time unemployment claims.
First, as was pointed out last week, due to a number of states having problems reporting real numbers due to the Labor Day holiday, government bureaucrats simply made up numbers for that week... and, as some wags speculated, perhaps in a way that under-reported layoffs. If so, when the real numbers became available, the under-reported layoffs were added to the number of layoffs from last week, thereby boosting the number of what is being reported as last weeks layoffs. Second, is there any reason for anyone to think that employers are suddenly more optimistic about the future? As layoffs are primarily a result of a lack of employer confidence (they fear that future revenues will not be sufficient to cover current payroll and other operating expenses and thus reduce staff), I have seen nothing to indicate that anyone is more optimistic about the economy this week than they were last week. And when employers get nervous, they cut jobs. To say that the rise in last week's unemployment claims was 'unexpected' means that somebody at Fox News just isn't paying attention. Here's someone who was paying attention... Wednesday, September 22, 2010
Here is another liberal infatuated with Obamacare challenging the GOP to detail just how they would 'fix' things...
Well, the first thing to do is to properly identify the problem, one can't solve a problem if you don't have a clue on what the problem really is. And as I have written before, health insurance isn't the problem, the problem is the high cost of health care. If the cost of health care weren't so high, the problems with health insurance all go away. At its core, health insurance is are groups of people banding together to share among themselves the costs of taking care of each member of the group. In fact, if health care wasn't so expensive, there would far less of a demand for health insurance at all. To illustrate, the reason many young people go without insurance is that they don't spend a lot on health care in the first place; they're more than happy to pay out of pocket for the costs they do incur on a day to day basis. So my approach (speaking for all of the GOP, at least those who make the distinction between health care costs and health insurance costs) is to lower the cost of health care to where getting one's body fixed would be no more expensive than getting one's car fixed. And how to do this? First, increase the supply of providers. It's simple economics, the more people you have providing a service, the less they are able to charge for those services. So let's dramatically increase the number of those who provide health care services... more doctors, more hospitals. And to further increase the supply, let's allow nurses and physician assistants to do even more than they can now. Allow pharmacists to dispense certain drugs directly, without requiring the patient to first see a doctor. Second, let's reduce the costs of providing the care. Eliminating the need for health insurance companies, and with them, all of their expenses and the expenses providers incur in complying with their demands, would dramatically cut health care costs... my guess is that we could shave a good 10% off the top, perhaps even more. To further reduce the costs of providing health care, let's institute true malpractice reform, starting with making the plaintiff attorneys pay the legal costs of the doctors they sue if they don't prevail in court. Establish panels which would adjudicate claims which would eliminate the phenomena of sympathetic juries awarding damages, not because the doctor was truly at fault, but because the jury feels sorry for the plaintiff. Drug companies wouldn't be able to be sued if the patient and/or the patient's doctor were negligent in taking or prescribing the drug. Doing this would cut billions upon billions from the tab. As treating disease with drugs is usually much less expensive than treating it medically, let's speed up the process of developing and approving new drugs. We need to change the FDA's focus from keeping drugs off the market if they show the slightest negative side effects to a focus on approving drugs that, in sum, provide more benefits than costs. This is just a start, there is more that can be done to lower the costs of obtaining health care. And when we do so, paying for health care stops being a financial burden. That is the conservative response to liberals who want to know what we would do for those in need... in a twist of the cliche, 'a rising tide lifts all boats', I am proposing we lower the costs to a point where everyone could afford to pay for whatever level of health care they wanted. Tuesday, September 21, 2010
I think I'm the first* to raise the question: what is the 'October surprise' the Democrats and their media allies have stored for next month?
Given the stakes - continued control of Congress for the Democrats -v- the GOP taking over one or both houses of Congress and, with it, gaining the ability to stop Obama's agenda in its tracks - if there is anything, anything, anything that the Democrats have, I would expect to see it rolled out in the next handful of weeks. Capturing Bin Laden? Remember how in the months leading up to the elections in 2004, 2006 and 2008, a number of Democrats claimed the CIA had captured Bin Laden and was waiting to announce his capture to when it would do Bush the most good? It would be a nice twist if that were to happen this year. A horrible act of terrorism that served to rally the country the country around the Commander in Chief and, by extension, members of his political party? I remember during the Bush years, there was no shortage of wags claiming that Bush was secretly hoping for such an attack in hopes that it would boost his flagging popularity. Reports of favorable economic activity? Perhaps a jobs that showed a substantial increase in hiring? Or a huge drop in the number of layoffs? Or maybe a big jump in business and consumer confidence? Given how completely Obama has politicized the federal bureaucracy, it shouldn't be too much trouble to rustle up some positive reports over the next couple of weeks. And if those reports were later revised downwards, well, that would be after the election, right? Something that showed Obama was 'right' to bail out Wall Street and the automakers? Perhaps a General Motors IPO that brought in so many billions of dollars as to result in taxpayers actually making a profit on our 'investment'? Or Citigroup and AIG paying back all of the billions they were loaned... with interest? What better way for Obama to demonstrate that voters should stick with him and his team than to come up with some concrete proof that his way works? Of course, the October surprise doesn't have to be something that reflects positively on Obama and the Democrats, their interests could be served just as well with reports of something really negative involving one or more of the GOP challengers. Again, think back to the Bush years: CBS's pushing forged documents in 2004 to malign Bush, reports of improper behavior on the part of GOP congressmen in 2006 and 2008. Prediction: As much as the Democrats would like to trash their opponents, they're losing on so many fronts right now that they couldn't hope to come up with enough mud to dirty enough of the GOP challengers who are now running ahead in the polls. And while it would sure be nice to capture Bin Laden (better yet to kill him), right now people are more worried about the economy than they are worried about Bin Laden, so I'm going with something on the economic front. As it would take real money (more than even George Soros has) to pull off an AIG payback or a GM IPO, I'm going with something on the economic report front.... sometime between now and the end of October something is going to come out of some government office (or perhaps a sympathetic private outfit) that claims that the future is looking a lot rosier than it was just a couple of months ago. It won't be legitimate, but that won't matter... at least not to the Democrats. * I've been informed that I'm not the first, Ric beat me to the punch. Probably some others as well. Oh well.
A writer for Time magazine thinks GOP gains in November could be bad for the stock markets, basing his analysis on a review of past mid-term elections.
Well, aside from agreeing that, in most situations, anything 'could' happen, his looking at the past to predict the future is a pretty close to a 100% flawed approach. Stock markets go up only when there are more investors looking to buy stocks than there are investors wanting to sell. And this happens only when the would-be buyers think stock prices are going to go up even more in the not-too-distant future... which, if you follow the argument, means the first wave of buyers think there is going to be an even larger group of buyers in the not-too-distant future... and, the cycle goes on until those holding stock start fearing that there won't be buyers willing to pay higher prices and thus start to sell. Thus, stock prices are based on investor anticipation of what is going to happen in the future. While their feelings about the future may in part be driven by what has taken place in the past, no one really buys or sells stock based on the past. (this is similar to employers who reduce staffing levels; their actions are not based on what happened in prior periods as much as it is driven by their fear that future revenues won't be enough to cover their current staffing levels) So it is far less useful to look to the past to predict what could happen next year than it is to look at how investors are likely to react to the GOP taking over one or more houses of Congress. Put simply, if investors think the Democrats losing control is going to be good for the economy, they're going to start buying stocks... and, conversely, if investors think the GOP taking control is going to be bad for the economy, then they're going to be looking to sell stocks. My guess is that investors will react positively to GOP gains and proportionally so, investors will be more enthusiastic if the GOP takes control of both houses than they will if the GOP merely reduces the Democrat's margin of power. Monday, September 20, 2010
Arguing that now is not the right time to raise taxes is okay, but there's an even better argument proponents of extending all of the Bush-era tax cuts can make:
Raising taxes on anyone will directly lead to job losses... and not among the supposedly rich folks who are in Obama's crosshairs, but rather among those who are definitely not rich. And while Obama may not care about these people, we definitely do... and that's just one more reason we will not agree to anybody having their taxes raised. And the ammunition for making such a claim? Well, if even those generally hostile-to-tax-cuts agree that cutting taxes has a stimulative effect, then raising taxes will have a dampening effect on the economy... on spending... on hiring... and workers most at risk of losing their jobs. Thursday, September 16, 2010
There's no better way to undermine the claim that the GOP has learned its lessons than for a bunch of high-ranking Republican Congressmen to start shaking down lobbyists for campaign contributions (aka bribes).
Wednesday, September 15, 2010
Thoughts on why Dale Earnhardt isn't winning races...
That he won once upon a time doesn't mean squat, it simply may have been that he had a car that was better than anyone else's... and so much so that he was able to overcome a relative lack of driving ability. Give me thirty more horsepower or a car that can hold a corner 10 miles an hour faster than my rivals and even I could win a couple of races. Second, the car he drove back then isn't the car that he is driving today, there are significant differences in the way the car drives and he may just not have the ability to get as much of this car as do the other guys driving today. A key, at least to me, is that he usually is not among the fastest drivers at any point in a race. If he were, one could conclude he had the car and the ability but just wasn't able to maintain that edge throughout the race. So, as he isn't the among the fastest drivers, the question is 'why not?' Fast lap times come from a combination of the following: How much does the driver have to slow down the car before entering a turn? How much speed can the driver maintain throughout the turn? How soon and how much can the driver get back on the throttle? How much power does the engine provide once the driver gets back on the throttle? The last deals with torque and horsepower; all things being equal, the driver with the stronger engine will run faster lap times. Presumably, Earnhardt uses the same engines that his teammates use, and as both Gordon and Johnson have led lots of laps, I'll venture a guess that Earnhardt's problems aren't due to the engine. The first three deal with a combination of the car itself... and the driver's ability to sense just where the edge of the envelope is. The driver who thinks his car can handle more than it can usually ends up crashing; nothing good comes from going into a corner at 190 miles an hour if the car can only handle an entry speed of 188. And, again all other things being equal, the driver who thinks his car can handle less than it really can will go into and out of a corner slower than his competitors. A driver is killing his lap times if he goes into a corner at 180 MPH with a car that can handle 182 or if he waits to get back on the throttle even fifty feet past the point at which the car can handle his doing so. Since, as with the engines, Earnhardt has access to the same suspension equipment and setup information as do Johnson and Gordon, my guess is that Earnhardt turning slower times is due to his thinking he's pushing the limit of the car's handling when in fact he is far from the maximum. In other words, the car can give him more than he thinks it can. And in racing, if you don't ask the car to deliver, it won't. This thus brings up the question of 'why?' Well, as I alluded to at the beginning, the car used today is different than the cars used when Earnhardt was winning races. It may be as simple as his still basing his driving on the feel he developed years ago, while the drivers who are winning today are either newer drivers like Kyle Busch, who don't have the old history to forget or older drivers like Kevin Harvick who appear to have figured out just how the new car differs from the old. As to what to do? He needs to figure out just how much more the car can give him. And the way to do that is by spending as much time testing as possible. Lots of time on simulators. Lots of time driving the car in test sessions (NASCAR doesn't allow testing at tracks where they race, so he'd have to go elsewhere but even that would be helpful for helping him develop a better feel for the car). Earnhardt needs to figure out where the new line is and, in order to do that, he needs to spend hundreds of hours gradually pushing beyond where he thinks the envelope is. He needs to work on entering a turn with a bit more speed (RPMs, since NASCAR cars don't have speedometers) than he is comfortable, he needs to work on getting back to the throttle coming out of a turn a few feet faster. Since he's likely to be hesitant to do so, his crew needs to show him the data that shows how his competitors are going in and out of corners faster than he is). He needs to take baby steps to changing how he drives the car.
One of the things I hate is when people over-inflate the importance of something that takes place.
For example, in the annual list of 'all time great rock songs', there is invariably a relatively recently released song or two, yet holding down the #1 spot for a couple of weeks doesn't come close to qualifying a song as one of the all time greats. Or take Twitter and Facebook. Both are neat little programs but neither deserves the accolades they've received. Google is wonderfully profitable in search (also known as electronic yellow pages), but has had a fraction of the impact on the world as they and their fan base think is the case. And the phenomenon takes place in politics. Obama getting elected didn't mean that the country wanted a bunch of liberal policies. McCain losing didn't mean that the GOP can only win if they nominate hard core conservatives. And Christine O'Donnell winning in Delaware doesn't mean the Tea Party is as powerful as its supporters think it is. Let's get real folks. She won in Delaware, a tiny, tiny state and one that isn't representative of much else (who has ever heard someone claim 'as Delaware goes, so goes the country'?). She got a whopping 30,000 votes which, while more than Castle got, wouldn't be much more than a rounding error in a larger state. While I share a good many of the goals of the Tea Party, I'm not going to drink the kool-aid they're pushing... and I'd advise everybody else to hold off as well. Tuesday, September 14, 2010
And while I'm at it (yes, I know, earlier-written posts appear below this one so it looks out of sequence), I think GOP Senator Jim DeMint is either stupid or selfish... perhaps a touch of both.
Huh? I'm referring to his comment that (in effect) he would rather have 40 solid conservatives in the Senate than 60 squishy Republican Senators. Yeah, it sounds good as a soundbite, but upon further reflection, it is a terrible idea. As for why he would be stupid for believing this? He doesn't realize that at the very least, a GOP majority would keep Obama from advancing what remains of his agenda through Congress? He doesn't realize that neither Obamacare nor the trillion dollar stimulus would have passed if the GOP controlled the Senate? He doesn't know that a GOP majority would give Republicans the ability to investigate and publicize such issues as Eric Holder's refusal to enforce all of the civil rights laws? He doesn't know that a GOP Senate majority could up hold some of Obama's more liberal judicial nominations, whereas the GOP remaining in the minority has next to no ability to do anything of the sort? He really thinks there are enough states that would elect 60 solidly conservative Senators? As for why he is selfish? He knows all the above but is willing to sacrifice what good could come from a GOP majority - even a majority made possible by a number of RINOs - in order to inflate his own importance and power among the rabid right? DeMint is certainly a solid conservative. But that doesn't mean he is smart... or above reproach. He's wrong on this... and whether it is due to his stupidity or his power grab, I fear we're going to pay the price.
While I am sure Sarah Palin is rejoicing tonight, I am going out on a limb to predict that this night will come back to haunt her...
.. if, as expected, the Democrats hold on to the Delaware Senate seat and, with it, their Senate majority. And my reasoning? O'Donnell is Sarah Palin redux, beloved by the rabid right yet unelectable in any contest where victory requires more votes than from just the rabid right. O'Donnell losing what was once viewed as a sure-GOP pickup will make many GOP primary voters look at Palin, what with her pathetically low approval ratings among independents and think "why bother voting for her, she can't win". And not only that, but when O'Donnell comes up short - way short - of victory in November and the Democrats hold on to their Senate majority by that one seat, well, there are going to be a lot of angry Republicans. And it won't be just O'Donnell who gets blamed, there will be plenty of people to point out the inescapable fact that the GOP would have controlled both houses of Congress but for Sarah Palin. Monday, September 13, 2010
Why more (and faster) foreclosures will help the economy...
A component of Obama's policies has been to keep people from losing their homes to foreclosure. I'm not sure if this is because he thinks there is a political benefit to doing so or if he's motivated by economic considerations or some combination of the two. Either way, as with most of his economic policies, things would be better (not necessarily for those homeowners, but certainly for the country as a whole) if we went 100% in the other direction. Why? Yes, that's right, because it would have a net positive impact on consumer and business confidence. Homeowners facing foreclosure have close to zero confidence (and rightfully so, their lives pretty much suck right now). But even if one could do something to boost their confidence, they don't have any money. They're already spending 100% of what they make. They have no unspent income with which to boost spending (and with it, the economy). Nor do they have any untapped savings or other assets that they can spend. And for the same reason, doing something that makes this group even more negative isn't going to hurt, this group can be counted on to continue to spend 100% of what they make. Remember, not all groups are considered equal when it comes to stimulating the economy. One group that counts for more consists of people who aren't spending everything they make. Getting these people to boost their spending will have a positive impact as their spending trickles through the economy (yes, I just did coin the term 'trickle through economics'). And one such group is the people who would like to buy a home. They have lots of money in reserve (or lines of credit to tap). Money they're saving for down payments, and even more money to spend on redecorating and buying the things every homeowner seems to feel they need: a grill, new furniture, housewarming party, etc. Right now, this money is sitting in banks and brokerage accounts. In normal times, there wouldn't be an economic hit, as the banks would have loaned out these funds to other would-be borrowers, but today, with a dearth of borrowers, this money is just sitting in the equivalent of government money market accounts. But they haven't been buying, in large part because the houses occupied by deadbeats aren't on the market. And the huge number of homes in default clouds the picture for what the true value of a home is. Opening up the foreclosure spigot would eliminate both problems. Thus, kicking out the deadbeats and selling off the houses would generate a huge boost in spending... and with it, a boost to the economy. And the jump in spending wouldn't be limited to coming from just those buying houses. Homeowners who aren't behind on their payments have nonetheless been cutting back on their spending and will continue to do so until there's some firmness to housing prices. Eliminating the uncertainty of just where values are will free up some amount of cash currently being held in reserve. And I don't buy the claims that running houses through foreclosure will have negative effects elsewhere. People who live in neighborhoods with high default rates have already factored that into their thinking, it isn't as if these people are deluding themselves with artificially high house prices. And the same holds for banks, everybody knows bank real estate portfolios aren't worth anywhere near as much as the banks claim. Ironically (and I think I'm using the term properly), increasing the number of foreclosures would boost confidence, as investors would be more comfortable with a lower number that had some substance to it than a higher number they feared was merely the figment of some banker's imagination. Yes, there would be an emotional hit to those people losing their homes. But that would be offset by the emotional lift to those who were able to buy a home. And given a choice between helping one of two groups, I'd prefer to help the group which can help us all.... by boosting spending and, with it, the economy. When you think about it, Obama's policies just aren't hurting those with money, they're also hurting the people he thinks he's helping. People in financial trouble need jobs.. and the only way they're going to get jobs is with a growing economy... which isn't going to happen as long as Obama sticks to his policies.
I'm pretty sure Obama adviser David Axelrod is calling us stupid...
How else to explain his comment that "health care... is going to become more popular"? I guess he thinks we're just not smart enough to know now just how good we're going to have it. I always find it funny - and sad - when politicians call stupid the very voters who were apparently smart enough to have voted for them in the not too distant past. Friday, September 10, 2010
Once again, Republicans are turning out to be the best friend an embattled Democrat has these days...
GOP Congressman Lynn Westmoreland, in comments made today before a group of Republican activists, predicted that a GOP takeover of Congress could very well lead to a government shutdown. Well... it might, but what is the point in talking about that now? What does Westmoreland, vice chairman of the National Republican Congressional Committee and thus supposedly focused on getting Republicans elected to Congress, think the public's reaction is going to be? GOP voters are already heavily motivated to come out and vote, not a single additional GOP voter is going to show up for the opportunity to shut down the government. The challenge (for both parties) is to win the votes of the mushy middle, those who, by definition, aren't as solidly conservative as the right. These people shy away from confrontation, they like taking baby steps in what they think is the right direction and not what they think of as big scary leaps into the unknown (one of the reasons they opposed Obamacare, it was too much, too fast). And as much as these voters might not like the big government spending, they have no appetite for actually shutting down the government. These people don't want their national parks and Social Security offices and local FBI offices all closed. They don't want food inspectors told to stay home nor do they want disruptions to the air traffic system. One of the last chances the Democrats have to keep control is to convince the mushy middle that, as bad as the Democrats have been, the GOP is just too scary and rash to be trusted with the somber responsibility of keeping the country running. And with Westmoreland going on like he is, the Democrats can use the GOP's own words against the GOP. So, Representative Westmoreland, please stop talking, you're not doing yourself or anyone on your side of the aisle any good. Just step away from the microphone... at least until the day after Election Day.
Not that I or anyone else needs his permission* to do so, but I definitely blame Obama for the lousy condition of the economy...
Consumer and business confidence wasn't good when he took office. But rather than simply reassure people that things weren't as bad as they feared, which would have gone a long way to getting things back on track, he actually made things worse with his stimulus, health care legislation, demonization of business and plans to raise taxes on millions of people. So yes, Mr. President, I blame you. *based on the headline "Obama says voters may blame him for economy" Thursday, September 09, 2010
Just to show how balanced I am, I'll point out how even a nicely conservative WSJ gets it wrong on economic policy... and for the same reason the liberals get it wrong, because they see the forest but not the confidence trees...
While night follows day, spending on investment doesn't directly follow cuts in taxes on investments as the WSJ implies is the case. And the flaw with one time tax cuts is not just, as the WSJ argues, that businesses will simply accelerate purchases, but primarily because one time events are not viewed as something that changes the dynamic on an on-going basis. Nor does allowing immediate deducting on expenditures result, as the WSJ seems to imply will be the case, in a waning of the fear that is keeping businesses on the sidelines. First of all, even an immediate deduction still leaves the company with less money than they had before making the purchase... and, second, it doesn't matter how fast someone can deduct an expenditure, if the business doesn't think they'll get back in increased sales more than they lay out for the purchase, they're not going to make the purchase.
Allan Sloan tries to make a case for helping those who, in his words, have "done nothing wrong except buy a home when the housing bubble was at its peak a few years ago".
According to Sloan, these people are being 'screwed' because, having bought at the top of the market, they are now likely underwater on their mortgages and thus unable to take advantage of the low refinancing rates. But why are they underwater? Oh, that's right, they not only bought houses at the top of the market, they took advantage of the 100% financing available at the time. Maybe Sloan sees nothing wrong with either, but to me, that's two strikes. Not that I'm holding myself out as a paragon of good choices, but I could have bought an even bigger house if I had gone the no-down payment route and I could have bought in the go-go days of 2006 and 2007, but neither was what I thought prudent. And why should we even consider them 'screwed'? If they did nothing wrong, they should be able to handle the payments they committed to make in return for the right to live in the house they purchased. That people who have equity in their homes are able to refinance doesn't mean that the people who didn't make down payments can't refinance are screwed. They got the deal they signed up for. That they're continuing to make their payments is admirable, but not something that entitles them to victim status. And Sloan also makes a mistake when he deems a proposal for helping these people (see Sloan's article for the specifics) as not requiring the mortgage holder to take a write-down. Au contraire, and as Sloan well knows, the amount of money the current holder of the mortgage paid was based on not just the principal portion of the mortgage (which wouldn't be written down) but also on the stated interest rate. A cramdown of the interest rate would result in the mortgage holder taking a write-down on their loan. I'm surprised, Sloan is usually better than this. Wednesday, September 08, 2010
Given how critically important it is to boost confidence if you want to stimulate economic growth, let's look at Obama's opposition to extending the Bush-era tax cuts to the high end of the income spectrum...
Which do you think would lead consumers and business to be more optimistic about the future? (1) That starting next year, high income taxpayers are going to cough up billions in additional taxes, thus taking that amount of spending and investment out of the economy? And which also indicates a continuation of the Obama Administration war on the successes of society? OR (2) That taxes on high income taxpayers would stay the same, allowing them to continue to spend and invest at the same level they now are? And which would also indicate that Obama might have started to realize that waging war on those who hire doesn't produce a lot of hiring? Now I don't have an advanced degree in economics, but I'd be willing to bet just about anything that most people would take more comfort in the latter. Now... it may be possible that even though most people would prefer the latter, they'll still take some solace in knowing that not everybody is going to have their taxes go up... and it is possible that this might generate a spark of sorts from people who were afraid of the hit of even more money being sucked out of the economy. But it won't generate as much of a boost as would leaving the rates in place. Of course, Obama doesn't seem to really care about finding the best way to stimulate the economy, he is wedded to his approach and isn't going to change... no matter how much evidence there is that his plan - and spending - hasn't helped.
I'm not planning on burning any Korans myself but Petraeus' claim that doing so will incite the crazies misses one important point: not burning Korans will not lead to the crazies no longer being crazy. If it isn't burning Korans that gets them all hot and bothered, it will simply be something else that we do.
In addition to being motivated by crazy religious practices, they have a huge chip on their shoulder, feeling they have been on the receiving end of hundreds and hundreds of years of insults and slights and so on. And as such, they are incredibly sensitive to what they perceive to be the slightest offense against them and their religion. It doesn't take much to tick off a crazy and they prove this over and over again. Why else would there be worldwide riots in response to some no-name cartoonist drawing some not-so-flattering pictures of their prophet? Or threats to kill a novelist because his book had some parts in it they didn't like? Or the fears that they'll go ballistic because some nobody preacher in nowhereville burns a few books? As Rosanne Roseannadanna put it so well, 'if it's not one thing, it's another'. Tuesday, September 07, 2010
My default position is to approve of any cutting of taxes, as whatever shape or amount the cut takes, it leaves more money in the pocket of the person who earned it.
Having said that, and notwithstanding the support coming from at least some conservatives, there are a lot of good reasons to oppose Obama's proposal to cut taxes on business investment. From an accounting perspective, allowing an immediate deduction for a fixed or long term asset distorts the principle of matching expenses to the periods in which they are incurred. Spending $100,000 on a device that lasts for ten years works out to $10,000 per year and that is the deduction that should be allowed. Second, it is yet another example of the federal government attempting to engineer the economy through tax policy. Suffice it to say that opponents of a large and powerful government should dislike these targeted programs. Third, programs such as this (as well as with Cash-for-Clunkers and the recently ended homebuyers tax credit) mostly provide a benefit to people who were going to purchase equipment anyway, it really won't do much to stimulate purchases by people who weren't 'already in the market'. Why? Well, let's start by looking at the math. Without this program, someone contemplating spending $100,000 would do so if (assuming they had the cash or could get financing) they thought doing so would result in $100,000+ of higher profits over whatever time frame they were comfortable with (some might want a one year payback, others are more comfortable with a multi-year return). To the extent that they get a faster deduction, the payback period is somewhat shorter (the exact time depends on how long the original write off period would have been). This moves some number of purchases into the 'can justify' column as opposed to the 'can't justify' column... but only those which were already pretty close. What this won't do is persuade businesses to make investments they saw need to make... nor will it persuade businesses to make investments they are afraid to make. And what it won't do is to lessen the fear businesses have of a too-powerful Washington that is screwing things ups and making it more expensive or troublesome. It won't make people forget how afraid they are of the higher costs coming from Obamacare, it won't make them ignore how their taxes are slated to go up next year. It won't convince them that Obama's administration isn't going to continue pushing new anti-business regulations. And it won't make consumers less fearful either. It won't make them less afraid of losing their jobs or the value of their house continuing to drop. And any program that doesn't make people less fearful isn't going to be really effective at giving the economy a good boost.
|