Economy & Budget

Change Before Depression

Here's the new campaign slogan for both presidential candidates: "Change? Maybe it's too late."

That's what it should be, if our politicians were being honest. Of course, they're not. I say "of course" because we Americans have finally realized that we've been played like fools. The trust that's needed to keep us together has been dissolved by the decades of toxic dishonesty. As a nation, as an economy, we are coming unglued.

When the presidential-wannabes talk about change, their proposals fall so pathetically short of what we need to do as a country, one could argue it wouldn't really matter if Sarah Palin took power. She may be vacant, but so what? She's no emptier than the promises the others are making.
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Regulation and the Law of Unintended Consequences

The current financial crisis is a result of the law of unintended consequences of two political policies promoted by both Republicans and Democrats since the Great Depression: 1) encouraging homeownership for all Americans regardless of whether they can afford the costs and 2) over-regulation of the financial community. Both policies have turned into a deceptively sweet bubble of air in the veins of the economy.

First, the government artificially inflated residential real estate sales through several laudable — but sloppily executed — policies such as: 1) tax breaks on interest and property taxes for homeowners; 2) implicit government guarantees of the debt of Fannie Mae and Freddie Mac to purchase conforming home mortgage loans; 3) relaxed credit standards on home mortgage loans permitted by the banking regulators; and 4) encouragement of the collateralization and sale of mortgages to investors.
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Corporate Tax Rate Illusions

Last week, John McCain and Newt Gingrich cited Ireland's low corporate tax rate of 11 and 12 percent, respectively, (it's actually 12.5 percent) as evidence that American business were overtaxed.

Well, you don't have to be Warren Buffett or Bono to know that there are some large differences between the U.S. and Irish economies and that what works for the Irish economy is certainly not what would work for the U.S. economy (though I wonder why they didn’t mention Ireland’s universal healthcare system, or free tuition at its universities).
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Predictable

The intrepid investigator Bob Stevenson, former spokesman for ex-Sen. Bill Frist (R-Tenn.) and Sen. Pete Domenici (R-Tenn.) and now one of the most highly sought Senate lobbyists around town, did some quality research into the genesis of the current crisis, and came up with an interesting article from Steve Holmes of The New York Times. The article was published Sept. 30, 1999, nine years ago almost to the day.

It is a fascinating read:
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McCain and the Economy: The Critical Question

It all comes down to this one basic question: How would a McCain administration differ from the Bush administration on America's economic policy?

The answer — one that the American people are figuring out — is that there is no real difference. If you liked the last eight years under George Bush, you will love the next four under John McCain.

Let's take tax policy. McCain would extend the Bush tax cuts and even expand them for the big oil companies and the super-wealthy. His plan would add over $3 trillion to the debt, further sink the middle class and reward the greed he has been trying to condemn.
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Would Speaker Hoyer Have Gotten the Votes?

The failure of the House of Representatives to pass the financial bailout, or, if you prefer, the federal rescue plan, highlighted divisions within both party conferences.

On the Republican side, where more than two-thirds of members voted against the package, the tally is not all that surprising. Conservatives tend to be highly suspicious of such legislation, and in the House, conservatives are organized and active.

More surprising is that some 40 percent of House Democrats defied Speaker Nancy Pelosi (D-Calif.) and voted "nay."
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The Other ‘M’ Word

America has heard a lot of talk this month about “meltdowns” and the financial calamities that await us if the Congress doesn’t act soon and with a singular voice that our credit markets are going to be all right.

But have you all been paying attention to what’s taking place off the stock exchange? First it was Bank of America’s announcement that it was buying Merrill Lynch. Then Washington Mutual collapsed and will no doubt get folded into another entity. Then Citigroup bought banking giant Wachovia.

Detecting a pattern here? All the major customer banks in this country are consolidating into so-called superbanks, or the other ‘M’ word — monopolies.
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McCain's Spinning Smokescreen

I know I am being used. John McCain is on a bender, having abandoned Straight Talk for some other kind of talk that is often hard to understand. It has been three weeks running, and he just can't stop. But this is all by design. He is getting me to write this, because if he behaves wildly enough we have to keep writing the What Has Happened to McCain? pieces instead of writing about the Initiation of Sarah. (Most of you are too young to catch that 1978 movie reference.)

Yesterday's failure of McCain's leadership — the bailout package belongs to him if he in fact worked so hard on it after suspending his campaign — sent him spinning around so fast it is hard to know what he said or what it meant. He started by declaring it was no time for blame, then pivoted to this: "Sen. Obama and his allies in Congress infused unnecessary partisanship into this process."
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The Cost of Business as Usual on the Hill

Congress once again could not get out of its own way as it failed to pass the critical $700 billion rescue plan.

It seems no one on the Hill is willing to acknowledge the gravity of the financial crisis, because there seems to be no urgency to take the much-needed action to keep our entire financial system afloat. If Congress really understood how crippling this crisis is, they would know that inaction has a price as well.

As the broader stock markets tumbled, more than $1.2 trillion of value was lost — well beyond the cost of the proposed package. Instead, both sides of the aisle are more worried about pushing their agenda and pointing the finger at the other party in an effort to find blame or shirk responsibility.
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John McCain: Country Last, Politics First

This has been a sad week for the country. We have certainly seen more profile, less courage, from presidential candidate John McCain over the past 10 days. When it came time to stand up and put our nation first, as his slogan says, McCain did just the opposite.

But before we get to the economic mess of the day, and McCain’s lack of leadership, one quick point.

Unfortunately, “politics first” has been the story of his entire campaign this year. Who could argue, with a straight face, that putting Sarah Palin on the ticket was “country first,” even before the pathetic national interviews that she has recently done? Totally incomprehensible blathering, which even Republicans have condemned, shows Palin to be out of touch and terrifyingly incapable of putting three sentences together. As the National Review’s conservative columnist Kathleen Parker put it in urging Palin to withdraw, “If BS were currency, Palin could bail out Wall Street herself.” Palin ought to head up the “know nothing” party.
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