Revisiting Economic Strategy

First off, my apologies for my absence here as of late. The post-election flurry of things I neglected beforehand finally caught up to me, coupled with a great deal of automotive maintenance, and a profound desire to make Ubuntu(!) work the way I wanted. On with the post...

The Federal Reserve is on the brink of yet another drastic interest rate cut, possibly down to .25%, which brings to mind my previous post (see "Credit Crisis Did Not Begin With Housing Decline"). This obviously begs the question, what are they really thinking? Or better yet, are they really thinking?

This graph illustrates the history of the Fed's interest rate fluctuations over the past 5 years.

What seems most alarming about this trend is that the interest rate was dropped in early 2003 and saw its previously lowest point during 2004, followed by steep increases in 2005 and early 2006. It's odd that these increases seem to eerily coincide with a housing down-turn. To spare another lengthy explanation, see my previously linked post.

I realize that the Fed has limited tools at its disposal to repair an ailing market, but as history SHOULD have taught us, dropping the interest rate does nothing but cause exponential inflation after the fact, and when things start becoming more and more expensive at alarming rates, the economy is sure to suffer. Aside from a virtually frozen credit market, things seem relatively cheap now (petro-gas for starters), and things seemed relatively cheap earlier this decade, but when commodity prices started going up, people stopped paying their mortgages (a huge problem is mortgage-backed debt and securities), they stopped paying their credit bills, and things generally went downhill in very short order.

Consistency always seems a better tool to solve economic problems, along with a slow but steady approach, because these jack-rabbit starts and stops cause unnecessary panic in the markets, markets that already overreact to absolutely anything that goes on in the private and public finance sectors. Slow methodical changes would surely be much preferable to this dramatic flux, which does very little to calm our economic fears, and seems to do nothing to stabilize an eroding market.

In Lieu of an Automobile Manufacturer Bailout

Here's an idea that I've been bouncing around in my cranium ever since I heard that auto makers want a ($25 billion) part of the bailout package making its way around in congress.

There's a massive void in the automotive market place, where people increasingly want affordable, dependable, and green vehicles. They would preferably be simple and cost-effective when it comes to maintenance, be carbon neutral, or better yet, carbon negative.

So my proposition is this; let the auto manufacturers have their money, with the caveat that they must BE PRODUCING automobiles that meet the above criteria within five years, otherwise they will be required to be pay back any funds alotted to them from the bailout package, or be forced to close their doors.

We, as Americans, have the engineering skill to accomplish this with VERY little effort. There's no reason that we should not be leading the way when it comes to innovation in world technology.

This kind of contract with the auto makers would save jobs that might otherwise be lost, and possible create more jobs. If they're successful at accomplishing their goals, they've then created an economic force, where people will be essentially breaking down the doors to get their hands on one of these vehicles. Jobs, money, restoration of our place in the world technologies market.

What doesn't make sense about this?

Now Is The Time For Celebration!!!

Redistribution of Wealth? Welfare? Taxes? Give Me a Break...

Redistribution of Wealth

I've been pummeled recently by people's attacks on the "redistribution of wealth" comment that was made by Senator Obama to (the now famous) Joe the Plumber, and I'd like to take this time to defend my position and support for the Senator.

Let me start be outlining a few analogies and arguments that people have been giving me.

Today on my way to lunch I passed a homeless guy with a sign that read "Vote Obama, I need the money." I laughed. Once in the restaurant my server had on a "Obama 08" tie, again I laughed as he had given away his political preference--just imagine the coincidence. When the bill came I decided not to tip the server and explained to him that I was exploring the Obama redistribution of wealth concept. He stood there in disbelief while I told him that I was going to redistribute his tip to someone who I deemed more in need--the homeless guy outside. The server angrily stormed from my sight. I went outside, gave the homeless guy $10 and told him to thank the server inside as I've decided he could use the money more. The homeless guy was grateful. At the end of my rather unscientific redistribution experiment I realized the homeless guy was grateful for the money he did not earn, but the waiter was pretty angry that I gave away the money he did earn. I guess redistribution of wealth is an easier thing to swallow in concept than in practical application...

First off, the analogy is somewhat flawed. The character who undertook this experiment doesn't seem to comprehend that by purchasing food, tipping, or giving money away (to the homeless man) is redistributing wealth. The waiter had no real wealth of which to speak, nor did the homeless man. The only wealth in consideration is that of the patron, who was already in the act of redistribution. You can't deny someone wealth based on the fact that one simply surmises that they are "wealthier" than someone else. I dare say that the homeless may make more per hour than the waiter anyway.

Wealth is rather an obscure consideration in all regards. Woodrow T. Wilson was quoted as saying "America was established not to create wealth but to realize a vision, to realize an ideal - to discover and maintain liberty among men.” I believe the outright desire to accrue and maintain wealth for one's self is one of the primary downfalls of this country. Greed is the most powerful form of corruption.

An overwhelming number of young voters are Obama supporters and defend his theory of wealth redistribution. However, how would these same college age voters feel if this type of redistribution concept were applied to their GPA? For example, would a 4.0 student be willing to share their GPA with someone who is flunking out with a 1.5 GPA? Or would a 4.0 GPA honors student in Molecular Biology be willing to share his/her GPA with someone with a 2.0 GPA in an easier field of study? Students who work hard in college are rewarded with a high GPA. Most students would be flatly opposed to sharing their hard earned GPA with someone who has failed to produce quality work. In addition, a higher GPA often transfers into higher paying jobs. Under Obama, people with higher paying jobs and increased income should willingly share their compensation with those who have shown less commitment and not worked as hard to achieve success.

Let us be clear that GPA and finances are not remotely related. One does not pay taxes on a GPA. You can't use GPA to accrue goods or services. Therefore, I call it intellectual wealth. However, for purposes of illustration, I'll consider them to be the same. GPA does not necessarily transfer into higher paying jobs. Those with lack of GPA aren't necessarily lazy. What extenuating circumstances caused the problem originally? The fact of the matter is that you have no idea how those less fortunate ended up that way.

Welfare

Another point is the welfare issue. An acquaintance of mine recently stated "I don't think I should have to pay because people are lazy. I don't believe in welfare." Child Protection Services is considered part of the welfare system, as is aid to those with low incomes or inability to meet basic living costs, especially those who are raising children, elderly, unemployed, injured, sick or disabled.

For example, my father is a college educated engineer, who worked hard and was studious, received a degree, and was gainfully employed for a number of years. However, in the late nineties, he was laid-off through no fault of his own. They company for whom he worked decided that they could pay a less educated person less money to do the same job. So what we have here is a case of being unemployable by reason of over-education, and was forced for a short time to be on unemployment.

He happily paid his taxes, unemployment being one of them, and was happy to reap the benefit of it when, due to circumstances beyond his control, he became unemployed. Does this make my father lazy or unmotivated? I think not. I think it illustrates the basis of the system to which so many seem to have adverse reactions. My father worked hard, and when times became tough for him, he used the system as it is intended.

I'm not saying that some people don't abuse the system. I'm saying that the system should be available for those that actually need it, when they need it. Maybe the system needs to be rethought and reimplemented to prevent abuse, but the system can work. That, too, is a redistribution of wealth, and I don't think that's at all unfair.

Taxes

One of my primary positions on taxes is that living in America is NOT free. We are a free country, with rights to thought, speech, religion, et cetera. America is not a cost-free country. We enjoy major advantages over other societies and countries and we too often take it for granted. The general populace fails to realize that the deficit is our problem. It's partially what's caused the economy to plummet. We can't live for free and expect things to right themselves.

Furthermore, the entire concept of the tax change is to help promote the economic impact of the middle class. Joe posted a chart that outlines the realized savings, but there are some opponents. Let me dispell some rumors.The small business that makes more than $250,000 isn't really small business in terms of economic impact. You must realize that the taxable profit is calculated after payroll, operating expense, et cetera. As a small business owner, I know that sheer profit in excess of that figure is highly unlikely. An arresting fact is that I could make more money working for someone else than working for myself, but I enjoy the hours.

Beyond that point is people who wish to preserve their wealth, above and beyond a comfortable living wage. If something were to happen to them and they were forced onto the welfare system, they'd have a drastically different view of it. One has to fully consider the ramifications of the system before trying to change it or discount it completely.

A point that is frequently made is that the wealthiest 1% of the American population pay 40% of American taxes. That statement alone may seem unfair, but one has to consider that they control 70% of the disposable (liquid) assets in the United States. Such being the case, should they not pay 70% of the taxes as well?

There's another relation between the current tax system and its inefficiencies, versus the concept of a flat tax, but that's best saved for another post.

McCain Is Not a Terrible Person

I'm going to take a minute to clear the political air. It's not secret that I am a democrat, a liberal, and an Obama supporter. But let's take a breath here, and realize what we're actually doing.

I flat out do not agree with anything that McCain says. I don't agree with his policies, his politics, his morals, or any number of things. I do, however, respect McCain for his service and sacrifice for America. I don't believe him to be a terrible person. I think, at heart, he's a good person, with different ideas of right and wrong for the country than I have.

I just don't think that his service should be the only qualifier. In the not so recent past, past Presidents Kennedy, Carter, Dole, Ford, and many others all served in some branch of the armed services, and while admirable, they did not fall back onto their service as a shield when things went awry for them.

Senator McCain should be respected for his service, to be certain, but I really think we ought only judge the man's ability to run the country by his public record, not by smear.

Credit Crisis Did Not Begin with Housing Decline

(Much of the credit goes to Scott Kelley for most of the opinions in this article, and explaining at length what caused a majority of the problems that we are seeing today.)

Understanding the history of the credit and liquidity market as it stands today requires looking further back than the past several years, long before the housing market drop. Remember the .com bust? I do. Lots of other people do. When stocks dropped like rocks after the .com bust, the Fed panicked, certain that we were on the verge of a recession. So they did they one of the only things they knew how to do; dropped the Federal Interest Rate, to an extraordinarily low rate.

What this meant for financial institutions and corporations was that they could borrow absolutely vast sums of money for next to nothing, and when you factor in the effect of inflation on these loans, essentially you have huge institutions borrowing money for negative interest. They should have ended up owing less back than they borrowed. This could have been a great idea, in the VERY short term, but unfortunately, the Fed dragged its feet for far too long, leaving the interest low for a ridiculously long time; and when the Fed was slow to act, the banks were slow to repay these loans.

Suddenly, the Fed realized that the short term positive effect of this interest rate drop was just that. A short term effect. So, they do the only other thing they seem to be good at; they raised the interest rate.

In a matter of weeks, these companies that had borrowed so much money for nothing, now had a huge loan out that was costing them more and more on a daily basis. They needed a quick income fix for their steadily declining status. What to do?!? Let's give everyone more money than they need to do and buy things that they don't need.

Now we have a loose credit market. A VERY loose credit market. This was the start of the sub-prime lending that would later come back to haunt us. Banks (and others) started hurling money at absolutely everyone who walked through the door, with little to no checks into their personal credit history. People with terrible credit were getting loans that were far too large, loans that anyone should have known they'd have no capacity to pay back.

But before the mortgage payments stopped coming in on these houses, the banks thought they were doing okay, so long as everyone paid and paid on time. Too bad that reality stepped in. Payments stopped coming, banks stopped profiting. Credit stopped coming out of these institutions like it previously was. Stocks started falling, and we have a rather aggravating credit crisis.

Banking giants were starting to fail, and fail at an alarming rate. Predatory larger firms were buying out smaller firms, the FDIC was taking banks over left and right, and in the process, the stock market was flailing. Suddenly, we have a larger credit crisis, which spilled over into an economic crisis.

Housing, credit, economy, nothing was looking good. Small businesses couldn't get loans, which means no expansion in the small business sector. People started cutting back purchasing goods and services, which only further served to depress our economic situation.

So our grand solution to this is to throw seven-hundred billion dollars into the market. Sound good? It shouldn't. We should have already figured out that throwing money at a broken system won't do anything to repair it. You don't put a band-aid on something that needs surgery. It might mask the problem for a while, but it will come back. We need an overhaul of the system, more oversight, regulation. Deregulation didn't work. We should see that now. We take for granted that government interference in the market is essential to preserve private power. The Great Depression should have dispelled any belief that capitalism was a viable economic model. I realize it sounds Socialist, but we can look at the past and realize that the government steps in whether you agree or not.

Remember that rate drop that I discussed earlier? As of today, the Fed dropped the interest rate to 1.5%. It seems that they only have one solution to any crisis, and they don't seem to see that their new solution is the same as their old solution, the one that didn't work, the one that got us into this mess in the first place. Henry Paulson still admits that some banks will fail. Unless they fix the root of the problem, we're most likely not going to get out of this mess anytime soon.

It may seem relatively bleak, but as Joe pointed out, it's not quite as bad as Black Monday in 1987.

Barack Obama and Bill Ayers? Not Likely...

Let's set a few things straight here. The claim that Barack Obama is more "radical" than he lets on, simply because of a supposed association with William Ayers is absolute denigration. I've taken the time to sift through quite a heap of newspaper articles and records, as well as online searches to come up with the following:

• During the time of the Weather Underground bombings (1969 - early seventies), Senator Obama was only 8 to 9 years old. (Senator Obama was born on August 4, 1961.)
• Senator Obama and Bill ayers did serve together in an organization called Woods Fund of Chicago, which was an anti-poverty organization, from 1999 to 2002.
• It is true that Bill Ayers donated $200 to Senator Obama's re-election fund (Illinois State Senate) in 2001. $200 doesn't really much seem like an earth-shattering amount. (By many accounts, Senator Obama was well-liked and respected, and it would be difficult to find someone who hadn't donated to his cause.)
• Also interesting to note, Former President Bill Clinton commuted the sentences of two convicted Weather Underground members. Ayers was never convicted.

Are these the "associations" the McCain campaign is trying to hammer into people's minds? Because in my view, they don't actually seem to add up to anything other than circumstance. This "guilty by association" line of thought wouldn't seem to do anyone any good. In that case, logic would dictate that McCain should be held accountable for his association with Watergate burglar G. Gordon Libby. I should hope that Senator McCain doesn't condone conspiracy, or burglary. John McCain Finds His Own Radical. It is odd that so few people would take it without bothering to check the facts. We can't take anything at face value these days, so it's always good to check your facts.

UPDATE: In light of recent comments, I feel the need to further clarify my viewpoint, and add further information that I think is relevant to this conversation. I don't generally make it a habit of adding to my posts, but I think this time I'll make an exception.

***First off, I (possibly wrongly) assumed that the Annenberg I found referenced was the foundation that produced the public education materials. I have since read further into the project, and can see that the two in question did indeed serve together on the CAC board. Barack Obama was the first chairman on the CAC board. However, I don't necessarily see that these happenstance circumstances tie the two together in a politically significant way. I don't see that they were friends. Colleagues, perhaps, but not friends. You don't have to be friends (or even agree) with the people you work with.

I wasn't primarily interested in finding evidence of contributions to political campaigns. I was more interested in finding any evidence of sympathy for the causes Ayers had championed in the late sixties/early seventies. There is no such evidence that Senator Obama condoned these behaviors. There is, however, evidence that he publicly denounced any such radical acts of violence.

As for ACORN, I can find nothing that implies that Senator Obama actually served as an organizer, trainer, or worked with any other capacity within ACORN. It is also widely assumed that Project Vote was associated with ACORN, which it was not. What is true is that Senator Obama served as lawyer in a successful lawsuit with the Department of Justice against Illinois to force compliance with federal voting access law. The Department of Justice and Barack Obama worked together on behalf of ACORN.

Perhaps most famously, Ken Blackwell may be one of the figureheads behind the Obama/ACORN association, but there seems to be little to no basis for this line of attack. Blackwell had already made a name for himself by being both Ohio Secretary of State and chair of George Bush’s Ohio election campaign. His judgment and reliability seems questionable in light of these facts.

For convenience and clarification, I'm posting links to the various sources from which I'm pulling information, and some of the articles themselves. If you have an opposing point of view, and articles or information that are relevant, please post them! I'll be more than happy to read and consider the information contained within. I have no qualms with entertaining opposing viewpoints. I make no claims that I'm always right or perfect, and can make mistakes.***

OBAMA/AYERS

New York Times, Associated Press, CNN, New York Times, Washington Post, Detroit Free-Press, Chicago Sun-Times


OBAMA/ACORN

BARACK WAS PRAISED FOR COMPLETE PROJECT VOTE; ACORN WAS NOT INVOLVED

Obama’s Voter Registration Drive Registered 150,000 New Voters, The Highest Number of a Single Local Effort. In 1993, Crain’s Chicago wrote of Obama’s effort to register voters for Bill Clinton’s election, “Last year, Barack Obama galvanized Chicago’s political community, as no seasoned politico had before. The director of Illinois Project Vote orchestrated an unwieldy band of 10 staff members and 700 volunteers to the tune of 150,000 new voters for the general election — the highest number registered in a single local effect. ‘Under Barack’s leadership, we had the most successful, cost-effective and orderly voter registration drive I’ve ever been involved with,’ says Alderman Sam Burrell of the West Side’s 29th Ward.” [Crain’s Chicago Business, 9/27/93]

Chicago Magazine: Obama Headed “Most Effective Minority Voter Registration Drive.” Chicago Magazine reported, “None of this, of course, was accidental. The most effective minority voter registration drive in memory was the result of careful handiwork by Project Vote!, the local chapter of a not-for-profit national organization. "It was the most efficient campaign I have seen in my 20 years in politics," says Sam Burrell, alderman of the West Side’s 29th Ward and a veteran of many registration drives. At the head of this effort was a little-known 31-year-old African-American lawyer, community organizer, and writer: Barack Obama.” [Chicago Magazine, 1/93]

National Project Vote Director Sandy Newman: Obama Did “One Hell of a Job.” Chicago Magazine reported, ““Project Vote! is nonpartisan, strictly nonpartisan. But we do focus our efforts on minority voters, and on states where we can explain to them why their vote will matter. Braun made that easier in Illinois.” So [Sandy] Newman decided to open a Cook County Project Vote! office and went looking for someone to head it. The name Barack Obama surfaced. “I was asking around among community activists in Chicago and around the country, and they kept mentioning him,” Newman says. Obama by then was working with church and community leaders on the West Side, and he was writing a book that the publisher Simon & Schuster had contracted for while he was editor of the law review. He was 30 years old. When Newman called, Obama agreed to put his other work aside. “I’m still not quite sure why,” Newman says. “This was not glamorous, high-paying work. But I am certainly grateful. He did one hell of a job.” [Chicago Magazine, 1/93]

Obama Trained Registrars And Ran Media Saturation Campaign. Chicago Magazine reported, “Within a few months, Obama, a tall, affable workaholic, had recruited staff and volunteers from black churches, community groups, and politicians. He helped train 700 deputy registrars, out of a total of 11,000 citywide. And he began a saturation media campaign with the help of black-owned Brainstorm Communications.” [Chicago Magazine, 1/93]

Close Daley Advisor: “Barack Ran This Superbly.” Chicago Magazine reported, “Some of Daley’s closest advisers are similarly impressed. “In its technical demands, a voter-registration drive is not unlike a mini-political campaign,” says John Schmidt, chairman of the Metropolitan Pier and Exposition Authority and a fundraiser for Project Vote! “Barack ran this superbly. I have no doubt he could run an equally good political campaign if that’s what he decided to do next.”” [Chicago Magazine, 1/93]

Project Vote Credited With Voter Registration Surge. The Wall Street Journal reported, “Voting experts at the Democratic National Committee point to surging registration in several big cities, such as Detroit, Chicago and Philadelphia. Most of that work has been done by the nonpartisan Project Vote, a voter participation organization based in Washington, D.C. Its director, Sandy Newman, says his group has helped to register 150,000 new voters, almost all of them black, in Pennsylvania; 110,000 in Chicago; 70,000 in Michigan; 40,000 in Ohio; and 160,000 (with the help of the New York Public Interest Research Group) in New York City. With the exception of New York, where Mr. Clinton holds a big lead, these are all battleground states, and most of these voters will cast their ballots for Mr. Clinton.” [Wall Street Journal, 10/30/92]

Chicago Sun Times Headline: “‘Project Vote’ Brings Power to the People.” The Chicago Sun-Times reported, “Project Vote, a collectivity of 10 church-based community organizations dedicated to black voter registration, is off and running. Project Vote is increasing its rolls at a 7,000-per-week clip. Just last Saturday it registered 2,000 during the Chicago Defender’s annual Bud Billiken Parade.” [Chicago Sun-Times, 8/11/92]

BARACK REPRESENTED ACORN IN A VOTER RIGHTS CASE AS AN ATTORNEY

Obama And Other Attorneys Represented ACORN In Their Suit Against The State Of Illinois To Force It To Implement The 1993 Motor Voter Law. In 2007, the AP reported, “Representing the Association of Community Organizations for Reform Now (ACORN), Obama and other attorneys sued the state of Illinois, forcing it to implement federal ‘Motor Voter’ legislation that makes it easier for the poor and minorities to register to vote.” According the U.S. Court Of Appeals, 7th Circuit docket for ACORN v. Edgar, “Appellees, United States and others, sought to force appellant State of Illinois to comply with the provisions of the National Registration Act of 1993 (motor voter law)…The United States District Court for the Northern District of Illinois granted the United States an injunction that compelled the State of Illinois to enforce the motor voter law. The State of Illinois appealed…On appeal, the State of Illinois argued that Congress could not force state governments to administer a federal program that facilitated the registration of voters in federal elections. The court stated that Congress had the power to regulate federal elections under the powers granted by [the U.S. Constitution] mandated the states to initially set up the system of federal elections within their own jurisdiction, subject to the whims of Congress. The court found that these powers and mandates implicitly extended to voter registration as well. [AP, 2/20/07; ACORN, et al v. Edgar, Nos. 95-1800, 95-1801, 95-1802, 95-1803]

Obama Was One Of Three Miner Barnhill Attorneys To Represent ACORN When The Illinois State Board Of Elections Attempted To Dismiss The U.S. District Court’s Order In ACORN v. Edgar In Late 1995. Miner Barnhill Attorneys Obama, Judson Miner, and Jeffrey Cummings were listed as Counsel for ACORN when the Illinois State Board Of Elections attempted to dismiss the U.S. District Court’s order in ACORN v. Edgar in November 1995. On January 26, 1996, the U.S. Court Of Appeals denied the Board’s motion. According to the court’s opinion, “The court dismissed the appeal of defendant governor and other state officials because the district court had not issued a final order from which an appeal could be brought. [ACORN v. Illinois State Board Of Elections, et al. No. 95-3456, U.S. Court Of Appeals for the Seventh Circuit]

Obama Was Listed As The Lead Attorney For ACORN In Court Proceeding Regarding Illinois Motor Voter Implementation Plans

Patrick Was The Lead Attorney For The U.S. Department Of Justice. “For United States of America: Deval L. Patrick, Assistant Attorney General, James B. Burns, United States Attorney, Elizabeth Johnson, Barry H. Weinberg, Tricia A. Tingle, Peter A. Hernandez, Attorneys, Voting Section, Civil Rights Division, Department of Justice, Washington, DC….For Association of Community Organizations for Reform Now, Barack Obama, Esq., Davis, Miner, Barnhill & Galland, Chicago, Illinois, Steve Bachmann, Esq., ACORN, Granger, Indiana.” [ACORN v. Edgar, United States District Court, Northern District, Illinois, No. 95 C 174]

1995: Obama Received The IVI-IPO Legal Eagle Award For IVI-IPO For His Work In Bringing Illinois Into Compliance With The Motor Voter Law. “In 1993, Obama was named by Crain’s Chicago Business as one of “40 under 40” outstanding young leaders in the city of Chicago. He is the recipient of the 1995 Legal Eagle Award from IVI-IPO for his work in bringing Illinois into compliance with the National Voter Registration Act (Motor-Voter). His commentaries have been heard on National Public Radio and his memoir Dreams of My Father was published by Random House in August 1995.” [IL State Senate Majority Caucus Obama Profile (Archived) available here]