"For everyone to whom much is given, of him shall much be required." -- Luke 12:48
Although this verse does not only refer to financial resources, it is obvious that of those whom have great financial resources, much financial commitment is required. The wealthy made their wealth in America and should, in turn, be willing to support America. Those individuals who net more that 200k or married couples who net more than 250k are being asked to pay just 3% more in federal income tax. If that breaks their budgets, then they are living too high on the hog. They need to quit whining, step up to the plate, and help their country. For an individual making $200k, that is an increase of $6,000 per year in taxes. This amount would greatly hurt someone making the median income of just under $50k per year, but not someone who nets $200k. All they have to do is drive their BMW one extra year before trading it for a new one – or forego one of their vacation trips.
It’s time for the wealthy to shoulder their share of sacrifice for America.
Friday, February 27, 2009
Reshaping the nation’s priorities
President Obama, proclaiming a once in a generation opportunity, has proposed a forward-looking, 10-year budget that reflects his determination in the face of recession to spend his political capital in reshaping the nation's priorities. His first budget recognizes what most Democrats have been too scared or Republicans have been too ideologically blind to admit: to recover from George W. Bush’s reckless economic policies, taxes must go up – for the wealthy. Obama said his budget breaks from the recent troubled past, attributing the current economic storm to "an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies' executive suites to the seats of power in Washington, D.C."
After years of steady increase in their share of the pie, Obama is calling for tax changes that would require high-income earners to shoulder more of the load. At the same time, he wants to ease the decades-long burden carried by the middle class. He also calls for taxing private equity partners (people living off of their dividends or trusts) just like the rest of us. Under current law, multimillionaires pay tax on much of their income at about the lowest rates in the tax code. Warren Buffet acknowledged the discrepancy in saying it is unfair that his secretary pays more in taxes than he does. Under the Obama budget, these high dividend earnings would lose favored status and be taxed the same as ordinary income. But, according to officials, there will be no increase in taxes, however, until the economy recovers.
That’s fair.
Anyone who really believes in fiscal responsibility will not object to the proposed tax increases. Yet, a political fight is brewing with Republicans over not only the slightly increased tax (just 3% more) on the wealthiest Americans, but of having an economic engine based on privilege for a few.
The President projects a fiscal 2010 budget of nearly $3.6 trillion, and a deficit for the current fiscal year of $1.75 trillion — a level not seen since WWII. He wants to shrink annual deficits through higher revenues from rich individuals by allowing the Bush tax cuts for the wealthy to expire, by taxing polluting industries, reducing Iraq war costs, and through economic growth by 2010. The proposals signal a serious attempt to tame deficits in a way that restores fairness to a tax code that has been tilted in favor of the very rich for far too long, resulting in a deficit that has disproportionately burdened everyone else.
The budget cuts Obama proposes underscore the changes he seeks. He wants to cut about $5 billion in the coming year for direct payments to large corporate agribusinesses and larger farmers with more than $500,000 in annual net income. He also wants to cut $4 billion in annual subsidies to private banks that make college loans. Instead of private bank loans, he wants to steer people toward government-provided Pell Grants for needy students, increasing the maximum yearly grant for inflation. Those two cuts alone will provoke big fights with the farm and banking lobbies and their mostly Republican supporters in Congress. While Republicans and big business condemned the tax proposals, at the same time, Robert Greenstein, director of the Center on Budget and Policy Priorities, praised the budget as "bold, courageous, and honest." He said that the new budget takes on one vested interest after another (pork). It will require all of the President's skills to get it through Congress.
The President wants to overhaul health care, arrest global warming, expand the federal role in education, and shift more of the costs to the wealthiest taxpayers and corporations, especially the corporations that have made huge profits by sending American jobs overseas or to Mexico. He wants to give tax breaks to companies that hire U.S. citizens. This budget is so ambitious that it has an advantage: Even if Obama achieves only part of his goals, it will still leave a strong record of accomplishment.
Even greater than the scale of Obama's proposals is his determination to break with the conservative laissez-faire, trickle down economic principles that have dominated national politics and policymaking since Reagan. The wealthy made their wealth in America and should, in turn, be willing to support America. Those individuals who net more that 200k or married couples who net more than 250k are being asked to pay just 3% more in federal income tax. If that breaks their budgets, then they are living too high on the hog. They should quit whining, step up to the plate, and help their country instead of complaining that they are being “punished” for being rich.
President Obama’s proposals change the whole paradigm. If he is only half successful, we will have a government that helps all citizens, not just the wealthy, to live better lives. He will have reshaped the nation’s priorities.
After years of steady increase in their share of the pie, Obama is calling for tax changes that would require high-income earners to shoulder more of the load. At the same time, he wants to ease the decades-long burden carried by the middle class. He also calls for taxing private equity partners (people living off of their dividends or trusts) just like the rest of us. Under current law, multimillionaires pay tax on much of their income at about the lowest rates in the tax code. Warren Buffet acknowledged the discrepancy in saying it is unfair that his secretary pays more in taxes than he does. Under the Obama budget, these high dividend earnings would lose favored status and be taxed the same as ordinary income. But, according to officials, there will be no increase in taxes, however, until the economy recovers.
That’s fair.
Anyone who really believes in fiscal responsibility will not object to the proposed tax increases. Yet, a political fight is brewing with Republicans over not only the slightly increased tax (just 3% more) on the wealthiest Americans, but of having an economic engine based on privilege for a few.
The President projects a fiscal 2010 budget of nearly $3.6 trillion, and a deficit for the current fiscal year of $1.75 trillion — a level not seen since WWII. He wants to shrink annual deficits through higher revenues from rich individuals by allowing the Bush tax cuts for the wealthy to expire, by taxing polluting industries, reducing Iraq war costs, and through economic growth by 2010. The proposals signal a serious attempt to tame deficits in a way that restores fairness to a tax code that has been tilted in favor of the very rich for far too long, resulting in a deficit that has disproportionately burdened everyone else.
The budget cuts Obama proposes underscore the changes he seeks. He wants to cut about $5 billion in the coming year for direct payments to large corporate agribusinesses and larger farmers with more than $500,000 in annual net income. He also wants to cut $4 billion in annual subsidies to private banks that make college loans. Instead of private bank loans, he wants to steer people toward government-provided Pell Grants for needy students, increasing the maximum yearly grant for inflation. Those two cuts alone will provoke big fights with the farm and banking lobbies and their mostly Republican supporters in Congress. While Republicans and big business condemned the tax proposals, at the same time, Robert Greenstein, director of the Center on Budget and Policy Priorities, praised the budget as "bold, courageous, and honest." He said that the new budget takes on one vested interest after another (pork). It will require all of the President's skills to get it through Congress.
The President wants to overhaul health care, arrest global warming, expand the federal role in education, and shift more of the costs to the wealthiest taxpayers and corporations, especially the corporations that have made huge profits by sending American jobs overseas or to Mexico. He wants to give tax breaks to companies that hire U.S. citizens. This budget is so ambitious that it has an advantage: Even if Obama achieves only part of his goals, it will still leave a strong record of accomplishment.
Even greater than the scale of Obama's proposals is his determination to break with the conservative laissez-faire, trickle down economic principles that have dominated national politics and policymaking since Reagan. The wealthy made their wealth in America and should, in turn, be willing to support America. Those individuals who net more that 200k or married couples who net more than 250k are being asked to pay just 3% more in federal income tax. If that breaks their budgets, then they are living too high on the hog. They should quit whining, step up to the plate, and help their country instead of complaining that they are being “punished” for being rich.
President Obama’s proposals change the whole paradigm. If he is only half successful, we will have a government that helps all citizens, not just the wealthy, to live better lives. He will have reshaped the nation’s priorities.
Thursday, February 26, 2009
And then came Jindal
For a long while it seemed as if Sarah Palin would be the number one darling of the Republican base and their presidential nominee for 2012. But her inept speaking skills and disastrous lack of intellectual curiosity finally caught up with her. So, Republicans turned their attention toward a new rising star, Governor Bobby Jindal of Louisiana. It has turned out to be another train wreck.
Louisiana is the only state in America with a negative economic growth rate, but the GOP presidential hopeful Governor Bobby Jindal stands right beside Barbour in his position that Obama's economic stimulus is bad for his pathetically impoverished state. You might remember that Jindal was heralded as the new brand of GOP visionary who would move Louisiana's economy into the 21st century. That expectation looks remarkably ridiculous today. Jindal will no doubt leave the Louisiana governor’s office without improving an endless cycle of severe poverty among its people.
Yet this was the person chosen by the GOP to counter Obama’s speech to Congress.
Jindal delivered the GOP response to Obama's “State of the Union” speech, serving up retro Republican remedies. An American of Indian ancestry, he started out by hailing Obama for being the first African American president and having “completed a redemptive journey that took our nation from Independence Hall to Gettysburg to the lunch counter and now, finally, the Oval Office.” But then he lit into Obama’s approach to America’s problems: "The strength of America is not found in our government. It is found in the compassionate hearts and enterprising spirit of our citizens." To illustrate this point, Jindal told an anecdote about an unnamed government bureaucrat who during Hurricane Katrina told a sheriff that the sheriff couldn't send out rescue boats without proof of insurance and registration. He was apparently trying to show that the problem with the federal government's response to Hurricane Katrina was that local bureaucrats demanded that people have proof of insurance and registration. But that is not true.
It is unbelievable that Jindal was trying to make a case for Katrina being proof that citizens should trust Republicans more than Democrats.
Throughout his speech, Jindal had little to offer except cut taxes, cut taxes, cut taxes – for businesses and the wealthy. He also tossed out false facts about Obama's stimulus bill, repeating two commonly heard Republican lies about the stimulus package:
“The stimulus includes $8 billion for high-speed rail projects, such as a magnetic levitation line from Las Vegas to Disneyland, and $140 million for something called volcano monitoring.”
The truth is that the stimulus bill does not allocate any high speed rail money for specific projects. In fact, the stimulus money for high speed rail would be allocated by Obama’s transportation secretary Ray Lahood – a Republican. And in mentioning “volcano monitoring”, Jindal was speaking of a portion of the stimulus money for "U.S. Geological Survey facilities and equipment, including stream gages, seismic and volcano monitoring systems and national map activities." Why does Bobby Jindal think monitoring volcanoes is a bad thing for the government to be doing? There is not any immediate way for private enterprise to profit from monitoring volcanoes, so government must do it. It seems obvious to me that employing geologists, building facilities, and buying equipment would have a stimulative effect while helping the states who have active volcanoes to stay on alert.
The GOP’s problem is that there is not one Capitol Hill Republican whom the party could put on national display after an Obama speech. The Congressional Republican leaders (Boehner, McConnell, and Cantor) came across as disingenuous and harsh to the majority of the public during their constant television appearances as they tried to block the stimulus. The public remembers them all too well. Jindal was chosen because he is a first generation American (born of Indian immigrants), can speak to the party's base, and has spent little time chattering on cable television. But he was far from dynamic, especially when repeating the first two talking points of the GOP playbook: government sucks and let's cut taxes more for rich corporations and wealthy players that live off of dividends from their private trusts.
If Jindal is the person whom the GOP wants to push to the forefront, then Democrats have no worries.
Louisiana is the only state in America with a negative economic growth rate, but the GOP presidential hopeful Governor Bobby Jindal stands right beside Barbour in his position that Obama's economic stimulus is bad for his pathetically impoverished state. You might remember that Jindal was heralded as the new brand of GOP visionary who would move Louisiana's economy into the 21st century. That expectation looks remarkably ridiculous today. Jindal will no doubt leave the Louisiana governor’s office without improving an endless cycle of severe poverty among its people.
Yet this was the person chosen by the GOP to counter Obama’s speech to Congress.
Jindal delivered the GOP response to Obama's “State of the Union” speech, serving up retro Republican remedies. An American of Indian ancestry, he started out by hailing Obama for being the first African American president and having “completed a redemptive journey that took our nation from Independence Hall to Gettysburg to the lunch counter and now, finally, the Oval Office.” But then he lit into Obama’s approach to America’s problems: "The strength of America is not found in our government. It is found in the compassionate hearts and enterprising spirit of our citizens." To illustrate this point, Jindal told an anecdote about an unnamed government bureaucrat who during Hurricane Katrina told a sheriff that the sheriff couldn't send out rescue boats without proof of insurance and registration. He was apparently trying to show that the problem with the federal government's response to Hurricane Katrina was that local bureaucrats demanded that people have proof of insurance and registration. But that is not true.
It is unbelievable that Jindal was trying to make a case for Katrina being proof that citizens should trust Republicans more than Democrats.
Throughout his speech, Jindal had little to offer except cut taxes, cut taxes, cut taxes – for businesses and the wealthy. He also tossed out false facts about Obama's stimulus bill, repeating two commonly heard Republican lies about the stimulus package:
“The stimulus includes $8 billion for high-speed rail projects, such as a magnetic levitation line from Las Vegas to Disneyland, and $140 million for something called volcano monitoring.”
The truth is that the stimulus bill does not allocate any high speed rail money for specific projects. In fact, the stimulus money for high speed rail would be allocated by Obama’s transportation secretary Ray Lahood – a Republican. And in mentioning “volcano monitoring”, Jindal was speaking of a portion of the stimulus money for "U.S. Geological Survey facilities and equipment, including stream gages, seismic and volcano monitoring systems and national map activities." Why does Bobby Jindal think monitoring volcanoes is a bad thing for the government to be doing? There is not any immediate way for private enterprise to profit from monitoring volcanoes, so government must do it. It seems obvious to me that employing geologists, building facilities, and buying equipment would have a stimulative effect while helping the states who have active volcanoes to stay on alert.
The GOP’s problem is that there is not one Capitol Hill Republican whom the party could put on national display after an Obama speech. The Congressional Republican leaders (Boehner, McConnell, and Cantor) came across as disingenuous and harsh to the majority of the public during their constant television appearances as they tried to block the stimulus. The public remembers them all too well. Jindal was chosen because he is a first generation American (born of Indian immigrants), can speak to the party's base, and has spent little time chattering on cable television. But he was far from dynamic, especially when repeating the first two talking points of the GOP playbook: government sucks and let's cut taxes more for rich corporations and wealthy players that live off of dividends from their private trusts.
If Jindal is the person whom the GOP wants to push to the forefront, then Democrats have no worries.
The State of the Presidency
In his first speech before a joint session of Congress, President Obama leveled with the American people about how deep and difficult the economic collapse will continue to be. This president was straightforward with American citizens, speaking to us as adults, hiding nothing from us – unlike some presidents of the past.
Obama explained how the need for more stimulus money for banks with greater accountability than the last TARP release, and the need for common sense regulatory reform to prevent unsuitable financial products from being marketed, are all interconnected with increasing the flow of credit to consumers and small businesses. Obama also indicated that the economic crisis offers opportunities for fundamental shifts in national policies related to the economy, energy, education, and health care. The current calamity provides us with the moment to proceed rapidly and ambitiously on these fronts.
In showing his desire for fiscal responsibility, Obama promised to cut unnecessary government spending, saying that his staff had already found 2 trillion dollars in wasteful spending, and to hold a bipartisan summit on Social Security. He also presented an honest and vigorous case for increasing taxes on the wealthiest citizens by ending the Bush tax breaks for the wealthiest 2 percent. He also emphasized the role that government can play in bettering our lives and dared the Republicans to come after him as a tax-and-spend Democrat by restating once again that anyone making less that $250,000 per year (and that is the majority of us) will not pay one single dime in new taxes – not one single dime.
For decades Republicans have dominated our political discourse promising that if we just got government "out of the way" and eliminated regulations and taxes, the private sector would create an "ownership society" where the rising sea of American capitalism would "lift all boats." But the collapse of the economy has brought about a collapse of these myths that sustained the laissez-faire ideology. Obama's speech cut through the Republican mirrors of illusion.
The GOP's laissez-faire policies not only caused this economic crash, but also caused an enormous, widening gap between the richest Americans and everyone else. The income and wealth gap is wider now than at any time in our nation's history, wider than it was in the Roaring 1920s or the Gilded Age (late 1800s). The Republicans' supply-side economics has produced a demand-side crisis. Due to lack of backbone in asking the wealthier citizens to support necessary government activities with taxes, our nation's infrastructure has been crumbling for the past 30 years. Our health care system spends more money per citizen than any other industrialized country, weighing down the profitability of businesses that still provide employer-based insurance. We have huge trade imbalances, devastated labor unions, a burdensome healthcare system, a barely functioning education system, and a dependence on foreign oil so extreme that conservatives like T. Boone Pickens, Florida Governor Charlie Crist, and California State Governor Arnold Schwarzenegger are pushing for reform.
One of the most difficult challenges President Obama faces, along with the recession and two wars, is nurturing a new attitude in America that emphasizes our spirit of community and interconnectedness. Yet, it is obvious that Obama is up to the challenge of leading this nation toward a new progressivism that values ordinary Americans and communities while dethroning the Republican worldview that has no room for shared sacrifice among all citizens, including the wealthy.
Although the speech was tilted more toward our economic problems, it contained plenty of Reaganesque-type acknowledgments of the spirit of the American people, reminding us that it was an American who first walked on the moon and put together a GI bill that created our middle class. Here’s more:
“History reminds us that at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas. In the midst of civil war, we laid railroad tracks from one coast to another that spurred commerce and industry. From the turmoil of the Industrial Revolution came a system of public high schools that prepared our citizens for a new age. In the wake of war and depression, the GI Bill sent a generation to college and created the largest middle-class in history.”
President Obama came across as confident and in command, laying out a bold blueprint for the future and voicing his intent to usher in a new way of thinking. There is no way to predict if he will be successful, even if he wins the legislation he seeks, in reviving America with his policies. But he did provide reasons for the citizens of the United States, and the world, to hope for a better future. Many polls are showing that the American people have embraced Obama’s spirit of change.
The State of the Economy may not be so strong at the moment, but the State of the Presidency clearly is.
Obama explained how the need for more stimulus money for banks with greater accountability than the last TARP release, and the need for common sense regulatory reform to prevent unsuitable financial products from being marketed, are all interconnected with increasing the flow of credit to consumers and small businesses. Obama also indicated that the economic crisis offers opportunities for fundamental shifts in national policies related to the economy, energy, education, and health care. The current calamity provides us with the moment to proceed rapidly and ambitiously on these fronts.
In showing his desire for fiscal responsibility, Obama promised to cut unnecessary government spending, saying that his staff had already found 2 trillion dollars in wasteful spending, and to hold a bipartisan summit on Social Security. He also presented an honest and vigorous case for increasing taxes on the wealthiest citizens by ending the Bush tax breaks for the wealthiest 2 percent. He also emphasized the role that government can play in bettering our lives and dared the Republicans to come after him as a tax-and-spend Democrat by restating once again that anyone making less that $250,000 per year (and that is the majority of us) will not pay one single dime in new taxes – not one single dime.
For decades Republicans have dominated our political discourse promising that if we just got government "out of the way" and eliminated regulations and taxes, the private sector would create an "ownership society" where the rising sea of American capitalism would "lift all boats." But the collapse of the economy has brought about a collapse of these myths that sustained the laissez-faire ideology. Obama's speech cut through the Republican mirrors of illusion.
The GOP's laissez-faire policies not only caused this economic crash, but also caused an enormous, widening gap between the richest Americans and everyone else. The income and wealth gap is wider now than at any time in our nation's history, wider than it was in the Roaring 1920s or the Gilded Age (late 1800s). The Republicans' supply-side economics has produced a demand-side crisis. Due to lack of backbone in asking the wealthier citizens to support necessary government activities with taxes, our nation's infrastructure has been crumbling for the past 30 years. Our health care system spends more money per citizen than any other industrialized country, weighing down the profitability of businesses that still provide employer-based insurance. We have huge trade imbalances, devastated labor unions, a burdensome healthcare system, a barely functioning education system, and a dependence on foreign oil so extreme that conservatives like T. Boone Pickens, Florida Governor Charlie Crist, and California State Governor Arnold Schwarzenegger are pushing for reform.
One of the most difficult challenges President Obama faces, along with the recession and two wars, is nurturing a new attitude in America that emphasizes our spirit of community and interconnectedness. Yet, it is obvious that Obama is up to the challenge of leading this nation toward a new progressivism that values ordinary Americans and communities while dethroning the Republican worldview that has no room for shared sacrifice among all citizens, including the wealthy.
Although the speech was tilted more toward our economic problems, it contained plenty of Reaganesque-type acknowledgments of the spirit of the American people, reminding us that it was an American who first walked on the moon and put together a GI bill that created our middle class. Here’s more:
“History reminds us that at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas. In the midst of civil war, we laid railroad tracks from one coast to another that spurred commerce and industry. From the turmoil of the Industrial Revolution came a system of public high schools that prepared our citizens for a new age. In the wake of war and depression, the GI Bill sent a generation to college and created the largest middle-class in history.”
President Obama came across as confident and in command, laying out a bold blueprint for the future and voicing his intent to usher in a new way of thinking. There is no way to predict if he will be successful, even if he wins the legislation he seeks, in reviving America with his policies. But he did provide reasons for the citizens of the United States, and the world, to hope for a better future. Many polls are showing that the American people have embraced Obama’s spirit of change.
The State of the Economy may not be so strong at the moment, but the State of the Presidency clearly is.
Wednesday, February 18, 2009
The little red hen
There is a nursery story about a little red hen who wanted to bake some bread. Whenever the little red hen would ask if anyone would help in doing a task, such as grinding the wheat, all the barnyard animals would say “not I.” Once the bread was baked and the little red hen asked “Who will help me eat this bread?” all the barnyard animals said “I will.” Of course, the little red hen refused them because they didn’t help. She fed the bread to her chicks.
Think of the American Recovery and Reinvestment Act (the stimulus bill) as the bread. Every Congressional Republican, except for three, kicked, screamed, and shouted against the bill. They threw tantrums because the bill was not written exactly they way they thought it should be.
But now that it’s passed and signed into law, some Republicans are taking credit for items in the bill, and all are lining up to get as much money as they can for their states, while they have put out ads saying how proud they are of clinging to their principles and voting against the bill.
Hypocrisy to the nth* degree!
Of course, when the stimulus begins to work in a year or so, the Republicans will say that the economy would have righted itself anyway. And if our economy is still in dire straights, they will blame President Obama instead of putting the blame where it rightly belongs – on years of Republican deregulated, laissez-faire economics (often called Reaganomics). If it does work, every Republican and the nine Democrats who voted against it should be throw out of office in 2010!
I cannot help but wish that any state whose Republican senators voted against the bill not get a share of the money. Let’s use those states as test subjects to see if doing nothing, as many Republicans said, will work and if their state economies will find equilibrium without any help from the federal government and without hitting bottom.
Maybe the Congressional Republicans should go back to nursery school and read the Little Red Hen.
*(pronounced inth)
Think of the American Recovery and Reinvestment Act (the stimulus bill) as the bread. Every Congressional Republican, except for three, kicked, screamed, and shouted against the bill. They threw tantrums because the bill was not written exactly they way they thought it should be.
But now that it’s passed and signed into law, some Republicans are taking credit for items in the bill, and all are lining up to get as much money as they can for their states, while they have put out ads saying how proud they are of clinging to their principles and voting against the bill.
Hypocrisy to the nth* degree!
Of course, when the stimulus begins to work in a year or so, the Republicans will say that the economy would have righted itself anyway. And if our economy is still in dire straights, they will blame President Obama instead of putting the blame where it rightly belongs – on years of Republican deregulated, laissez-faire economics (often called Reaganomics). If it does work, every Republican and the nine Democrats who voted against it should be throw out of office in 2010!
I cannot help but wish that any state whose Republican senators voted against the bill not get a share of the money. Let’s use those states as test subjects to see if doing nothing, as many Republicans said, will work and if their state economies will find equilibrium without any help from the federal government and without hitting bottom.
Maybe the Congressional Republicans should go back to nursery school and read the Little Red Hen.
*(pronounced inth)
Monday, February 16, 2009
Become debt free
John Steinbeck's The Grapes of Wrath depicts the hardships the Okies endured during the Great Depression: starvation, squalor, and general misery. This misery was made much worse by two things: (1) the fact that they didn't own their homes outright, and (2) their mule-headed determination to rely on the credit-based economy. They would have had problems during the Great Depression, but not to nearly the same extent if they had owned their homesteads outright.
The same goes for everyone, whether we are in an economic downturn or not. So, how do you pay off your mortgage as soon as possible when you have other debts?
Of course, this plan assumes that you still have a job and that you are not stretched so tightly that you have no money for food during the last week of the month.
First, make a deliberate decision to become mortgage free as soon as possible. It should become a major life goal. Second, immediately stop spending more than you make in one month. Third, realize that this will take several years – more than a decade. Focus on your goal. Be methodical. And every time you get a raise at work, no matter how small, put it in savings and continue to live off the same monthly budget as before the raise.
This is not hard to do. But you do have to be patient because it takes several years to become debt free.
Here are the steps:
Step 1 - First make a complete list of everything you owe. Write down all your credit card balances and the minimum required payment. Don't overlook miscellaneous accounts such as doctor bills or furniture loans. Now add car loans, boat loans, and recreation vehicle loans including balances and payments. Last, add your mortgage payments and balances. Be sure to include second mortgages, lines of credit, and any equity loans.
Don't panic when you see how much you owe.
Step 2 - Stop spending more than you make. This might mean cutting back on purchases you don't absolutely need. No, you do not need that cute pair of shoes or the new dress. No, you do not have to buy the expensive cuts of meat. Decide today that you are not going to live beyond your means any more. Do not, I repeat, do not keep charging stuff to your credit cards. STOP.
Now take the list you created and rewrite it starting with the smallest balance at the top, then the next smallest, and so forth, with the largest balance (most likely your mortgage) last.
Step 3 – Free up some money for the month. You do not have to think big at this point. How much could you free up if you eat out one less time each week. If you spend $12.50 less per week for restaurant meals or by foregoing the movie theater (rent a movie instead), or not taking Sunday drives for pleasure (read a library book instead), and by brown bagging a sandwich and piece of fruit for lunch during the week, you can save at least $50 per month.
$50 per month is all you need to begin to methodically pay off your debts.
Step 4 - Begin by taking the lowest balance at the top of your list and adding the money you saved by not eating out, not taking Sunday drives, etc, to the minimum payment every month until the balance is paid off. Example: Suppose the balance is $1000 on credit card number one and the minimum payment is $15. Simply add $50 to the minimum payment for a total of $65 each month until the balance is paid in full. While you are doing this, it is important to continue making the minimum payments on all other debts.
Then, if you have more than one credit card, do not use that credit card again. Send a letter to the company asking that the account be closed. Cut up the card.
Step 5 - Once you have paid off the first credit card, start on the second. Use the whole payment you were paying on the first card, including the extra money from not eating out so often, and add it to the monthly minimum payment for card two. Once the balance is paid off, if you have other credit cards, close the account for card two.
Continue the process with credit cards number three and four, etc, until all credit cards are paid in full. Make sure you close all credit card accounts except for one MasterCard or one Visa that you use only for emergencies. Charge a very small amount each month and pay off in full each month to keep the card “active.”
Step 6 – One at a time, work your way through paying off installment loans, personal loans, car loans, and other vehicle loans while keeping in mind your eventual goal is to pay off your mortgage.
You started this program by simply eating out less, not going to the movies, etc, saving $50 per month. You added the $50 you saved to the first credit card minimum payment. Then you added the monthly payment you made on the first credit card to the second card and the second to the third and so on. After the credit cards were paid off, you added the total you were paying against your credit cards to your car loan. Once the car loan is paid off, add the full amount of the car payment plus the credit card payment toward the next largest loan. In a few years you will have become entirely debt free, except for the mortgage on your house.
Note: Once your car(s) is paid for, do not buy a new one. Keep up with the maintenance on the car you have and drive it forever – or until the wheels fall off – with 200,000 miles being your goal. Hopefully, you bought a good car in the first place. If you end up having to replace your car – buy a reliable, “certified” used car, with less than 50K miles from a dealer – for cash if possible – buying only what you can easily afford. Make sure you get at least a 90 day warranty and 30 day return policy in case something goes wrong with it.
Step 7 – Now you are ready to accelerate your house payments and pay off your home. Let's suppose by the time you finish paying off your credit cards as well as all other loans that you have gradually worked up to applying about $800 to $1000 per month to your debt reduction program. If you have a $250,000 mortgage at a fixed rate of 5.5% for 30 years, your principal and interest payment would be $1420. Take the $800 or more that you were using to pay down your other debts and apply it to your mortgage principal each month.
Here’s the catch: Make certain to instruct your mortgage company, in writing, to apply the additional payment of $1000 to principal. You should send a note with a separate check asking that the extra money be applied to your principal. If you don’t give them written instructions, they will just use the money as an extra “house payment” with interest and escrow. They will consider you to just be “paid ahead.”
In applying the extra $800 monthly toward your mortgage principal, you will pay off your home in less than a dozen years.
With patience and focus you can become debt free. And all you had to do was skip a weekly restaurant meal, ditch the movie theater, forego the Sunday drive, and brown bag your lunch.
References: Years of reading Money Magazine, Kiplinger Magazine, and Suze Ormond – just to name a few.
The same goes for everyone, whether we are in an economic downturn or not. So, how do you pay off your mortgage as soon as possible when you have other debts?
Of course, this plan assumes that you still have a job and that you are not stretched so tightly that you have no money for food during the last week of the month.
First, make a deliberate decision to become mortgage free as soon as possible. It should become a major life goal. Second, immediately stop spending more than you make in one month. Third, realize that this will take several years – more than a decade. Focus on your goal. Be methodical. And every time you get a raise at work, no matter how small, put it in savings and continue to live off the same monthly budget as before the raise.
This is not hard to do. But you do have to be patient because it takes several years to become debt free.
Here are the steps:
Step 1 - First make a complete list of everything you owe. Write down all your credit card balances and the minimum required payment. Don't overlook miscellaneous accounts such as doctor bills or furniture loans. Now add car loans, boat loans, and recreation vehicle loans including balances and payments. Last, add your mortgage payments and balances. Be sure to include second mortgages, lines of credit, and any equity loans.
Don't panic when you see how much you owe.
Step 2 - Stop spending more than you make. This might mean cutting back on purchases you don't absolutely need. No, you do not need that cute pair of shoes or the new dress. No, you do not have to buy the expensive cuts of meat. Decide today that you are not going to live beyond your means any more. Do not, I repeat, do not keep charging stuff to your credit cards. STOP.
Now take the list you created and rewrite it starting with the smallest balance at the top, then the next smallest, and so forth, with the largest balance (most likely your mortgage) last.
Step 3 – Free up some money for the month. You do not have to think big at this point. How much could you free up if you eat out one less time each week. If you spend $12.50 less per week for restaurant meals or by foregoing the movie theater (rent a movie instead), or not taking Sunday drives for pleasure (read a library book instead), and by brown bagging a sandwich and piece of fruit for lunch during the week, you can save at least $50 per month.
$50 per month is all you need to begin to methodically pay off your debts.
Step 4 - Begin by taking the lowest balance at the top of your list and adding the money you saved by not eating out, not taking Sunday drives, etc, to the minimum payment every month until the balance is paid off. Example: Suppose the balance is $1000 on credit card number one and the minimum payment is $15. Simply add $50 to the minimum payment for a total of $65 each month until the balance is paid in full. While you are doing this, it is important to continue making the minimum payments on all other debts.
Then, if you have more than one credit card, do not use that credit card again. Send a letter to the company asking that the account be closed. Cut up the card.
Step 5 - Once you have paid off the first credit card, start on the second. Use the whole payment you were paying on the first card, including the extra money from not eating out so often, and add it to the monthly minimum payment for card two. Once the balance is paid off, if you have other credit cards, close the account for card two.
Continue the process with credit cards number three and four, etc, until all credit cards are paid in full. Make sure you close all credit card accounts except for one MasterCard or one Visa that you use only for emergencies. Charge a very small amount each month and pay off in full each month to keep the card “active.”
Step 6 – One at a time, work your way through paying off installment loans, personal loans, car loans, and other vehicle loans while keeping in mind your eventual goal is to pay off your mortgage.
You started this program by simply eating out less, not going to the movies, etc, saving $50 per month. You added the $50 you saved to the first credit card minimum payment. Then you added the monthly payment you made on the first credit card to the second card and the second to the third and so on. After the credit cards were paid off, you added the total you were paying against your credit cards to your car loan. Once the car loan is paid off, add the full amount of the car payment plus the credit card payment toward the next largest loan. In a few years you will have become entirely debt free, except for the mortgage on your house.
Note: Once your car(s) is paid for, do not buy a new one. Keep up with the maintenance on the car you have and drive it forever – or until the wheels fall off – with 200,000 miles being your goal. Hopefully, you bought a good car in the first place. If you end up having to replace your car – buy a reliable, “certified” used car, with less than 50K miles from a dealer – for cash if possible – buying only what you can easily afford. Make sure you get at least a 90 day warranty and 30 day return policy in case something goes wrong with it.
Step 7 – Now you are ready to accelerate your house payments and pay off your home. Let's suppose by the time you finish paying off your credit cards as well as all other loans that you have gradually worked up to applying about $800 to $1000 per month to your debt reduction program. If you have a $250,000 mortgage at a fixed rate of 5.5% for 30 years, your principal and interest payment would be $1420. Take the $800 or more that you were using to pay down your other debts and apply it to your mortgage principal each month.
Here’s the catch: Make certain to instruct your mortgage company, in writing, to apply the additional payment of $1000 to principal. You should send a note with a separate check asking that the extra money be applied to your principal. If you don’t give them written instructions, they will just use the money as an extra “house payment” with interest and escrow. They will consider you to just be “paid ahead.”
In applying the extra $800 monthly toward your mortgage principal, you will pay off your home in less than a dozen years.
With patience and focus you can become debt free. And all you had to do was skip a weekly restaurant meal, ditch the movie theater, forego the Sunday drive, and brown bag your lunch.
References: Years of reading Money Magazine, Kiplinger Magazine, and Suze Ormond – just to name a few.
Saturday, February 14, 2009
Creation of a loyal Dem generation
Karl Rove’s slash-and-burn style of politics may have done long term damage to the Republican party, both in terms of the number of people who identify with the party as well as broader issues of ideology.
The Republicans spent 35 to 40 years building themselves into a position where they could make a legitimate challenge to American liberalism. Finally, with the election of George W. Bush, they managed to reach a position where a permanent conservative majority seemed very likely. But at the moment they reached the zenith of their accomplishment, the Bush-Rove group managed to produce corruption, incompetence, and harsh partisanship, turning away from GOP basic tenets. They systematically dismantled everything with such speed that moderate Republicans ran for the hills leaving the base in denial (some have wool over their eyes even now).
The Bush tax cuts, given mostly to the wealthy, have already added about $2 trillion dollars to our deficit. The bottom line is that a party that added trillions of dollars to the future debt during a time of boom has no credible answer, other than raw partisanship, for opposing the $800 billion stimulus bill during the worst downturn in employment and GDP since the Great Depression. The Republican party, which insisted for eight years that "deficits don't matter," has no standing to oppose a measure that provides barely a minimum amount to form an economic bottom in an impending depression.
It is increasingly difficult to make an argument that the Republican party is acting in good faith with President Obama or the American people. What is most troubling is that just after the election, the tone for the party was set by Rush Limbaugh, who openly said he wanted Obama to “fail” and immediately threw down the gauntlet against cooperation with the new President. The Republican party leaders and base immediately fell into the all too familiar lock-step. Even so, their states will share in the $54 billion that is designated to help all states keep their state workers – including policemen, firemen, and teachers – on the job; hire people to build and repair roads, schools, and bridges; shore up medicaid; extend unemployment benefits; etc.
To take the Republicans' fiscal conservatism seriously at this point is to engage in instant amnesia. Along the same line, to find a sliver of a reason in Judd Gregg's own self-defense for changing his mind about being Secretary of Commerce (other than partisan pressure) is close to impossible.
The Grand Old Party (Republican) may be digging its own grave. The latest Pew report on trends in public opinion over the last decade is a clear indictment of the Bush-Rove brand of conservatism and, therefore, the Republican party. Party identification is now 50 percent Democrat and 35 percent GOP. Religious intensity is falling; acceptance of gay people is rising. The younger generation is the most secular of any. Support for the military has never been stronger - people don't blame the troops for the war. Women's equality and freedom are values now overwhelmingly popular among all groups, including Republicans, and strongest among the young. At this point in time, the party has been relegated to mostly southern and a few western mountain states.
Over the last eight years, the Republicans seem to have unwittingly created the most loyal generation (the under 30s) to the Democratic Party since the New Deal.
The Republicans spent 35 to 40 years building themselves into a position where they could make a legitimate challenge to American liberalism. Finally, with the election of George W. Bush, they managed to reach a position where a permanent conservative majority seemed very likely. But at the moment they reached the zenith of their accomplishment, the Bush-Rove group managed to produce corruption, incompetence, and harsh partisanship, turning away from GOP basic tenets. They systematically dismantled everything with such speed that moderate Republicans ran for the hills leaving the base in denial (some have wool over their eyes even now).
The Bush tax cuts, given mostly to the wealthy, have already added about $2 trillion dollars to our deficit. The bottom line is that a party that added trillions of dollars to the future debt during a time of boom has no credible answer, other than raw partisanship, for opposing the $800 billion stimulus bill during the worst downturn in employment and GDP since the Great Depression. The Republican party, which insisted for eight years that "deficits don't matter," has no standing to oppose a measure that provides barely a minimum amount to form an economic bottom in an impending depression.
It is increasingly difficult to make an argument that the Republican party is acting in good faith with President Obama or the American people. What is most troubling is that just after the election, the tone for the party was set by Rush Limbaugh, who openly said he wanted Obama to “fail” and immediately threw down the gauntlet against cooperation with the new President. The Republican party leaders and base immediately fell into the all too familiar lock-step. Even so, their states will share in the $54 billion that is designated to help all states keep their state workers – including policemen, firemen, and teachers – on the job; hire people to build and repair roads, schools, and bridges; shore up medicaid; extend unemployment benefits; etc.
To take the Republicans' fiscal conservatism seriously at this point is to engage in instant amnesia. Along the same line, to find a sliver of a reason in Judd Gregg's own self-defense for changing his mind about being Secretary of Commerce (other than partisan pressure) is close to impossible.
The Grand Old Party (Republican) may be digging its own grave. The latest Pew report on trends in public opinion over the last decade is a clear indictment of the Bush-Rove brand of conservatism and, therefore, the Republican party. Party identification is now 50 percent Democrat and 35 percent GOP. Religious intensity is falling; acceptance of gay people is rising. The younger generation is the most secular of any. Support for the military has never been stronger - people don't blame the troops for the war. Women's equality and freedom are values now overwhelmingly popular among all groups, including Republicans, and strongest among the young. At this point in time, the party has been relegated to mostly southern and a few western mountain states.
Over the last eight years, the Republicans seem to have unwittingly created the most loyal generation (the under 30s) to the Democratic Party since the New Deal.
Thursday, February 12, 2009
"House of Cards" on CNBC
Tonight at 8 and midnight, Saturday night at 11 p.m., and other days, CNBC shows House of Cards, a remarkably clear overview of the financial debacle that has put us all in this fine mess.
The introduction shows an e-mail, written in 2006, from (presumably) some a greedy Wall Street financier who writes, "Let's hope we're all wealthy and retired by the time this house of cards collapses."
House of Cards, reported by David Faber, begins with a walk through a blighted Florida neighborhood, where cockroaches hang from doors, and clouds of mosquitoes hover over pea-green pools. A sheriff who has just turned out yet another family recalls the words of one little boy: "How is Santa Claus going to find me - now?"
The broadcast heads out west to the crucible of the mortgage boom and where the idea of subprime mortgages began - Orange County, Califonia. Just when you start to think that everyone who got sucked into the subprime mess was a greedy moron, you meet Cynthia Simons of Compton, a ready mark for an unscrupulous mortgage broker who duped her into a mortgage that was not right for her.
Faber talks to many people who were involved in the subprime boom and its collapse. There's also a probing interview with former Fed chief Alan Greenspan. Faber even travels to Norway to find a town nearly ruined by an exotic security specimen called a collateralized debt obligation. You'd think mea culpas would abound, but he uncovers none: Even Greenspan admits there was nothing he could do to avert one of the great economic crises of modern history.
Because this superb explanation debuts on Thursday night prime-time, you might miss it. But be sure to see it at another time. It would be a terrible shame if you don’t, because we need to see and absorb cautionary accounts like this - one whose authors had their eyes wide open and asked the right questions.
House of Cards is the single best account of the collapse I've seen.
It will be repeated on Sunday, February 15th at 9PM and Monday, February 16th (President's Day) at 8AM, 8PM and 12AM.
The introduction shows an e-mail, written in 2006, from (presumably) some a greedy Wall Street financier who writes, "Let's hope we're all wealthy and retired by the time this house of cards collapses."
House of Cards, reported by David Faber, begins with a walk through a blighted Florida neighborhood, where cockroaches hang from doors, and clouds of mosquitoes hover over pea-green pools. A sheriff who has just turned out yet another family recalls the words of one little boy: "How is Santa Claus going to find me - now?"
The broadcast heads out west to the crucible of the mortgage boom and where the idea of subprime mortgages began - Orange County, Califonia. Just when you start to think that everyone who got sucked into the subprime mess was a greedy moron, you meet Cynthia Simons of Compton, a ready mark for an unscrupulous mortgage broker who duped her into a mortgage that was not right for her.
Faber talks to many people who were involved in the subprime boom and its collapse. There's also a probing interview with former Fed chief Alan Greenspan. Faber even travels to Norway to find a town nearly ruined by an exotic security specimen called a collateralized debt obligation. You'd think mea culpas would abound, but he uncovers none: Even Greenspan admits there was nothing he could do to avert one of the great economic crises of modern history.
Because this superb explanation debuts on Thursday night prime-time, you might miss it. But be sure to see it at another time. It would be a terrible shame if you don’t, because we need to see and absorb cautionary accounts like this - one whose authors had their eyes wide open and asked the right questions.
House of Cards is the single best account of the collapse I've seen.
It will be repeated on Sunday, February 15th at 9PM and Monday, February 16th (President's Day) at 8AM, 8PM and 12AM.
Sunday, February 8, 2009
I hope you all have lifeboats
The economic downturn has already gone way beyond the subprime mortgages and risky derivatives. The crisis began with housing, but the implosion of the Bush era laissez-faire policies of deregulation, where bankers and the financiers did as they pleased with little regard of the consequences, has finally caused a negative reaction throughout all economic sectors, not just in the U.S. but around the world. Jobs are being lost by the millions worldwide. The Bush regime caused this economic calamity not only through bank deregulation, but also through giving excessive tax cuts to the wealthy while, at the same time, spending on an expensive budget-busting, deficit-increasing, $12 billion dollars-a-month, unnecessary war.
The dominoes are falling. Here is what is happening now:
· Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving which is a huge blow to the economy right now. Savings are good in the long run, but a sudden turning off of the shopping spigot worsened the economic downturn. This has caused massive job loss worldwide in retail and manufacturing.
· Credit is still tight while some banks continue to fail. Not only are those who worked in the financial sector losing their jobs, but people are losing their savings, including retirement savings. Others cannot get loans to purchase houses, cars, appliances, etc, regardless of credit rating.
· Real estate developers, watching rents fall and financing costs soar, have stopped building, with many completely shutting the doors of their businesses, causing major job losses in the construction and real estate sectors.
· Manufacturing and retailers are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. There is no demand for their products.
· Exports (goods sold to other countries), which were one of the U.S. economy’s few areas of strength over the last couple of years, are now plunging.
By decreasing interest rates, the Federal Reserve has always been our main line of defense against recessions, but they have already cut the prime lending rate (the rate for banks lending to each other) to near zero and can do nothing more to stop or even slow down the economic free fall.
This country is moving closer to an extremely deep, catastrophic recession, if not a depression, as Congressional Republicans stubbornly spout their worn out clichés about wasteful government spending and the wonders of tax cuts — as if the economic failure of the last eight years never happened. Republicans seem to have no sense of reality. Because their ideology gets in the way, they lack the ability to understand that the U.S. is falling into an abyss, and once we do, it will be very hard to get out again. These old disciples of Reaganomics are clueless that allowing the market to “work through” this problem will likely send us into a depression. In fact, Gordon Brown, the British Prime Minister, said this past Tuesday that the world economy was already heading for a 1930s-style depression.
Republicans seem to be confused about the nature of bipartisanship. Since President Obama spent time inviting Republicans to the Whitehouse and visiting them on the Hill in the spirit of bipartisanship, Republicans act as if they have a free pass to rewrite the entire legislative package and its intent. But that is not what bipartisanship is. Bipartisanship is the willingness to compromise and incorporate ideas that Republicans and Democrats alike agree are good for the country. Yet, even though Democrats, at the insistence of the President, removed some spending items from the stimulus bill and put in tax cuts to please Republicans, Congressional Republicans formed a locked-step barricade to a Recovery and Relief bill that is our best chance to try to stop an impending catastrophe. They proudly point to sticking together to vote against the Democrats’ economic stimulus plan, and to how the Senate Republicans, except for about three moderates, are doing the same.
There is no true willingness on the part of Republicans to compromise, even though they say they are willing. There seems to be only a desire to beat the Democrats, weaken the President, and have things their way. This is not bipartisanship. They should listen to Republican Governor Charlie Crist who said, “My guy didn't win but President Obama is my man now and he's my president. I want him to succeed because that means my country succeeds. That's the only way a true American should feel.”
After the stimulus bill left the House last week, a small bipartisan group of moderates from the Senate worked around the clock over the past few days to hammer out a better compromise that they felt both sides of the aisle could approve. They added more tax cuts and cut spending further, including cutting out aid to the states, to where the bill is now about 45% tax cuts and 55% spending. As Susan Collins, R-ME, and Ben Nelson, D-NE, introduced the new compromise to the Senate, Republicans objected before even having read the bill. Why? Because they want tax cuts only – tax cuts for everyone, including the wealthy and big business. They continue to insist that tax cuts trickle down and create jobs regardless of the fact that the Bush cuts did no such thing over the last eight years.
What is most amazing is that after not saying one word against the budget-busting $12 billion per month spending on the Iraq War, often insisting that heavy military spending helps the economy, Republicans are now screaming about how much the $830 billion stimulus will add to the deficit. These hypocrites will spend us into a chasm when it comes to military spending, but insist that government stimulus spending will put the deficit into unmanageable territory. In fact, Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis. O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key Bush constituency. O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits topping $500 billion that year posed a threat to the economy, but Cheney told him, "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired.
That being said, now is not the time for our government to pull back from deficit spending. According to most economists, government spending is what is needed because for every dollar directly spent by government, we will get $1.50 in stimulus — this is not the case with tax cuts. Once things stabilize, Congress can work on reducing the deficit. But for now, they absolutely must spend on goods to increase “demand” and fill the void left by consumers who have cut back.
While many Republicans appear to be blind, deaf, and dumb as to the causes of this terrible economic mess, the victims within the middle and working classes are seeing their livelihoods ruined, jobs taken away, pensions eroded, and homes foreclosed on. They are struggling with gas and food price inflation, saddled with ever-increasing debt, and forced to work under more and more stress due to fear of layoffs. The Iraq war notwithstanding, this is the reason why the GOP no longer has a single House member from any of the six New England states and no Senators from the Pacific Coast states.
Not all Republicans are against the Recovery (stimulus) bill. Republican governors and mayors around the nation have called on the Republicans in Congress to get out of the way. The Republicans Governors around this country need this stimulus money to get their folk back to work. They are backing Barack Obama, as Governor Charlie Crist of Florida stated on Hardball with Chris Matthews this past Tuesday:
“Here in Florida, we just came through a special session where we had to cut over a billion dollars more as it relates to making sure that we stay in balance. This program (the stimulus bill) will help us with education, with health care, Medicaid specifically, infrastructure. These are the kinds of things that produce jobs. It could mean $13 billion to the Sunshine State. It comes at a time when we need it. People need jobs. It‘s about jobs, jobs, jobs. This will help us produce that, and I think it‘s important to move forward. …And I think that‘s what this (bill) can offer to people. I don‘t think it‘s perfect, but I think we need to do something in order to help our country.”
Van Jones, author of The Green Economy, spoke of what will happen if the stimulus is not big enough: “You can't jump halfway across a chasm — you just end up falling into the abyss.” Jones explained further: “… when I look at it (the stimulus bill) in its entirety, I fear that we may soon look back and say that we missed a huge chance to go bigger and bolder. After all, there were three flaws with the old economy that has crashed: it favored consumption over production; debt over smart savings; and environmental damage over environmental renewal."
Many economists, including Nobel Prize winning Paul Krugman, say that in the absence of bold and timely Congressional action, we’re headed for a deep, prolonged slump with unemployment in the double-digits. We are talking about white collar workers, not just blue collar, in soup lines.
So far, my husband and I are doing okay because for at least this year our state is managing to keep the school system afloat, continuing to pay teacher salaries. But the next school year may be a different story altogether with layoffs and IOUs instead of paychecks (as they did during the Great Depression). We have been putting off buying big ticket items, spending only on necessities, and saving every penny we can — just in case.
I hope you all have lifeboats.
The dominoes are falling. Here is what is happening now:
· Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving which is a huge blow to the economy right now. Savings are good in the long run, but a sudden turning off of the shopping spigot worsened the economic downturn. This has caused massive job loss worldwide in retail and manufacturing.
· Credit is still tight while some banks continue to fail. Not only are those who worked in the financial sector losing their jobs, but people are losing their savings, including retirement savings. Others cannot get loans to purchase houses, cars, appliances, etc, regardless of credit rating.
· Real estate developers, watching rents fall and financing costs soar, have stopped building, with many completely shutting the doors of their businesses, causing major job losses in the construction and real estate sectors.
· Manufacturing and retailers are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. There is no demand for their products.
· Exports (goods sold to other countries), which were one of the U.S. economy’s few areas of strength over the last couple of years, are now plunging.
By decreasing interest rates, the Federal Reserve has always been our main line of defense against recessions, but they have already cut the prime lending rate (the rate for banks lending to each other) to near zero and can do nothing more to stop or even slow down the economic free fall.
This country is moving closer to an extremely deep, catastrophic recession, if not a depression, as Congressional Republicans stubbornly spout their worn out clichés about wasteful government spending and the wonders of tax cuts — as if the economic failure of the last eight years never happened. Republicans seem to have no sense of reality. Because their ideology gets in the way, they lack the ability to understand that the U.S. is falling into an abyss, and once we do, it will be very hard to get out again. These old disciples of Reaganomics are clueless that allowing the market to “work through” this problem will likely send us into a depression. In fact, Gordon Brown, the British Prime Minister, said this past Tuesday that the world economy was already heading for a 1930s-style depression.
Republicans seem to be confused about the nature of bipartisanship. Since President Obama spent time inviting Republicans to the Whitehouse and visiting them on the Hill in the spirit of bipartisanship, Republicans act as if they have a free pass to rewrite the entire legislative package and its intent. But that is not what bipartisanship is. Bipartisanship is the willingness to compromise and incorporate ideas that Republicans and Democrats alike agree are good for the country. Yet, even though Democrats, at the insistence of the President, removed some spending items from the stimulus bill and put in tax cuts to please Republicans, Congressional Republicans formed a locked-step barricade to a Recovery and Relief bill that is our best chance to try to stop an impending catastrophe. They proudly point to sticking together to vote against the Democrats’ economic stimulus plan, and to how the Senate Republicans, except for about three moderates, are doing the same.
There is no true willingness on the part of Republicans to compromise, even though they say they are willing. There seems to be only a desire to beat the Democrats, weaken the President, and have things their way. This is not bipartisanship. They should listen to Republican Governor Charlie Crist who said, “My guy didn't win but President Obama is my man now and he's my president. I want him to succeed because that means my country succeeds. That's the only way a true American should feel.”
After the stimulus bill left the House last week, a small bipartisan group of moderates from the Senate worked around the clock over the past few days to hammer out a better compromise that they felt both sides of the aisle could approve. They added more tax cuts and cut spending further, including cutting out aid to the states, to where the bill is now about 45% tax cuts and 55% spending. As Susan Collins, R-ME, and Ben Nelson, D-NE, introduced the new compromise to the Senate, Republicans objected before even having read the bill. Why? Because they want tax cuts only – tax cuts for everyone, including the wealthy and big business. They continue to insist that tax cuts trickle down and create jobs regardless of the fact that the Bush cuts did no such thing over the last eight years.
What is most amazing is that after not saying one word against the budget-busting $12 billion per month spending on the Iraq War, often insisting that heavy military spending helps the economy, Republicans are now screaming about how much the $830 billion stimulus will add to the deficit. These hypocrites will spend us into a chasm when it comes to military spending, but insist that government stimulus spending will put the deficit into unmanageable territory. In fact, Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis. O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key Bush constituency. O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits topping $500 billion that year posed a threat to the economy, but Cheney told him, "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired.
That being said, now is not the time for our government to pull back from deficit spending. According to most economists, government spending is what is needed because for every dollar directly spent by government, we will get $1.50 in stimulus — this is not the case with tax cuts. Once things stabilize, Congress can work on reducing the deficit. But for now, they absolutely must spend on goods to increase “demand” and fill the void left by consumers who have cut back.
While many Republicans appear to be blind, deaf, and dumb as to the causes of this terrible economic mess, the victims within the middle and working classes are seeing their livelihoods ruined, jobs taken away, pensions eroded, and homes foreclosed on. They are struggling with gas and food price inflation, saddled with ever-increasing debt, and forced to work under more and more stress due to fear of layoffs. The Iraq war notwithstanding, this is the reason why the GOP no longer has a single House member from any of the six New England states and no Senators from the Pacific Coast states.
Not all Republicans are against the Recovery (stimulus) bill. Republican governors and mayors around the nation have called on the Republicans in Congress to get out of the way. The Republicans Governors around this country need this stimulus money to get their folk back to work. They are backing Barack Obama, as Governor Charlie Crist of Florida stated on Hardball with Chris Matthews this past Tuesday:
“Here in Florida, we just came through a special session where we had to cut over a billion dollars more as it relates to making sure that we stay in balance. This program (the stimulus bill) will help us with education, with health care, Medicaid specifically, infrastructure. These are the kinds of things that produce jobs. It could mean $13 billion to the Sunshine State. It comes at a time when we need it. People need jobs. It‘s about jobs, jobs, jobs. This will help us produce that, and I think it‘s important to move forward. …And I think that‘s what this (bill) can offer to people. I don‘t think it‘s perfect, but I think we need to do something in order to help our country.”
Van Jones, author of The Green Economy, spoke of what will happen if the stimulus is not big enough: “You can't jump halfway across a chasm — you just end up falling into the abyss.” Jones explained further: “… when I look at it (the stimulus bill) in its entirety, I fear that we may soon look back and say that we missed a huge chance to go bigger and bolder. After all, there were three flaws with the old economy that has crashed: it favored consumption over production; debt over smart savings; and environmental damage over environmental renewal."
Many economists, including Nobel Prize winning Paul Krugman, say that in the absence of bold and timely Congressional action, we’re headed for a deep, prolonged slump with unemployment in the double-digits. We are talking about white collar workers, not just blue collar, in soup lines.
So far, my husband and I are doing okay because for at least this year our state is managing to keep the school system afloat, continuing to pay teacher salaries. But the next school year may be a different story altogether with layoffs and IOUs instead of paychecks (as they did during the Great Depression). We have been putting off buying big ticket items, spending only on necessities, and saving every penny we can — just in case.
I hope you all have lifeboats.
Monday, February 2, 2009
The right ideas
The level of household borrowing that took place over the last two decades was unsustainable. We were told by many economists that it was unsustainable, but no one, including government, listened. Now, due to the recession, consumers have battened down the hatches and are not spending. This, along with the unscrupulous lending practices and risky investments of banks due to government deregulation, helped to send our consumer-based economy into a downward spiral.
Realistically, there is no stimulus plan that can get us back to a healthy economy in the near term. The United States would have to spend such huge sums and run deficits that are so gigantic (much more than the current 2 trillion dollar TARP plus stimulus plan) that we would be saddled with a terrible amount of long term liabilities or, even worse, lead to collapse. According to many experts, we would need to allow an additional 6.3% of the GDP to be added to the deficit per year to get us out of the economic hole. The Democrats’ plan is roughly only 2.5% of GDP added to the deficit per year. So, the stimulus package would need to be 2.5 times bigger to actually help the economy turn around quickly.
The last rebate did not work well because consumers were already feeling the burden of their debt and either paid bills or saved the money. The Bush/Republican tax cuts did not work well because those earning less than $100K, who would have spent most of it for goods, got very little. The largest percentage went to the wealthy with little of it trickling down into creating jobs as promised – other than maid and gardener services. Even so, the Republicans want to give more tax cuts and rebates. Ideological at all costs, GOP proposals are absolutely unrealistic and would do little to stimulate the economy. According to the Congressional Budget Office, for each dollar in tax cuts the return to the economy is 75 cents and for each dollar of direct government spending the return is $1.50. Since tax cuts will have only about half the impact on GDP growth than direct government spending, not even getting back the amount put in, the Republican “plan” would make our deficits much worse. The Republicans are just plain wrong – as the record of the past eight years shows. Tax cuts are less effective than most other measures.
In adding in tax cuts to please the Republicans and get them on board with the stimulus bill, Pelosi said, “… we are committed to the tax cuts because they do have a positive impact on the economy, even though not as big as the investments.” But the Democrats have added increases in entitlements and not enough infrastructure spending in the stimulus bill. Yes, many entitlement programs such as Head Start need more money after having been ignored by the Republicans for about 35 years, but Democrats should not use the stimulus package to add money for these programs. So, the Democrats are on the wrong track, too.
The biggest problem is that the current structure of our consumer-based economy will cause most of the short term tax cut and rebate stimulus money to flow out of the country, increasing our already enormous trade deficit with China and other countries. We need to reverse the trend of sending jobs and manufacturing overseas, restructure the foundation of our economy to create more production of goods in this country, and bring in fewer imports. But it will take years to redevelop our manufacturing base.
President Obama’s ideas of building up our infrastructure, helping what’s left of our manufacturing to be more efficient (such as the Big 3 auto manufacturers), and starting new businesses based on our energy needs are better than what the Republicans and Democrats are putting on the table. Obama wants to establish long term projects that will give the U.S. a strong foundation for the coming decades: increasing domestic energy supplies through wind, solar, natural gas, etc; building and repairing infrastructure including roads, bridges, and schools; and creating a better educational system for future workers. In other words, make sacrifices now, turning away from instant gratification, in order to establish a brighter, more stable future.
If Obama’s ideas are so good, why are so many resisting? Because he is calling the stimulus a “recovery plan”. President Obama will eventually be attacked from both sides when people realize the economy will not recover quickly enough to suit them. Democrats will berate him for not being willing to spend enough in the short term and the Republicans, as usual, will attack government efficacy.
Obama should reframe the issue and explain why we need to make vast long term changes to our economy even though the benefits might not pay off for 5-10 years. Obama should also explain to the nation that there is little that can be done to stop our current downslide. If he does not change the presentation of his ideas, his plans may be judged a failure or derailed altogether.
The only short term spending should be an increase in unemployment insurance, food stamps and other safety nets, and help for home owners who need to renegotiate their mortgages. Many economists, both conservative and progressive, have said there is more of a stimulus to the economy by investing in food stamps and in unemployment insurance than in any tax cut.
As things stand, people will ignore the much better long term path and, instead, push for something with immediate gratification which will result in a continued downward slide. In the meantime, the drop off in U.S. consumption is hitting all the exporting countries very hard (Japan, China, Germany) and leading to a global decrease in trade. The worldwide recession, including mass unemployment, will continue to spiral downward, and like the stock market, must find a “bottom” before we can begin to slowly climb out of the chasm.
Obama has the right ideas, but few people are listening.
Realistically, there is no stimulus plan that can get us back to a healthy economy in the near term. The United States would have to spend such huge sums and run deficits that are so gigantic (much more than the current 2 trillion dollar TARP plus stimulus plan) that we would be saddled with a terrible amount of long term liabilities or, even worse, lead to collapse. According to many experts, we would need to allow an additional 6.3% of the GDP to be added to the deficit per year to get us out of the economic hole. The Democrats’ plan is roughly only 2.5% of GDP added to the deficit per year. So, the stimulus package would need to be 2.5 times bigger to actually help the economy turn around quickly.
The last rebate did not work well because consumers were already feeling the burden of their debt and either paid bills or saved the money. The Bush/Republican tax cuts did not work well because those earning less than $100K, who would have spent most of it for goods, got very little. The largest percentage went to the wealthy with little of it trickling down into creating jobs as promised – other than maid and gardener services. Even so, the Republicans want to give more tax cuts and rebates. Ideological at all costs, GOP proposals are absolutely unrealistic and would do little to stimulate the economy. According to the Congressional Budget Office, for each dollar in tax cuts the return to the economy is 75 cents and for each dollar of direct government spending the return is $1.50. Since tax cuts will have only about half the impact on GDP growth than direct government spending, not even getting back the amount put in, the Republican “plan” would make our deficits much worse. The Republicans are just plain wrong – as the record of the past eight years shows. Tax cuts are less effective than most other measures.
In adding in tax cuts to please the Republicans and get them on board with the stimulus bill, Pelosi said, “… we are committed to the tax cuts because they do have a positive impact on the economy, even though not as big as the investments.” But the Democrats have added increases in entitlements and not enough infrastructure spending in the stimulus bill. Yes, many entitlement programs such as Head Start need more money after having been ignored by the Republicans for about 35 years, but Democrats should not use the stimulus package to add money for these programs. So, the Democrats are on the wrong track, too.
The biggest problem is that the current structure of our consumer-based economy will cause most of the short term tax cut and rebate stimulus money to flow out of the country, increasing our already enormous trade deficit with China and other countries. We need to reverse the trend of sending jobs and manufacturing overseas, restructure the foundation of our economy to create more production of goods in this country, and bring in fewer imports. But it will take years to redevelop our manufacturing base.
President Obama’s ideas of building up our infrastructure, helping what’s left of our manufacturing to be more efficient (such as the Big 3 auto manufacturers), and starting new businesses based on our energy needs are better than what the Republicans and Democrats are putting on the table. Obama wants to establish long term projects that will give the U.S. a strong foundation for the coming decades: increasing domestic energy supplies through wind, solar, natural gas, etc; building and repairing infrastructure including roads, bridges, and schools; and creating a better educational system for future workers. In other words, make sacrifices now, turning away from instant gratification, in order to establish a brighter, more stable future.
If Obama’s ideas are so good, why are so many resisting? Because he is calling the stimulus a “recovery plan”. President Obama will eventually be attacked from both sides when people realize the economy will not recover quickly enough to suit them. Democrats will berate him for not being willing to spend enough in the short term and the Republicans, as usual, will attack government efficacy.
Obama should reframe the issue and explain why we need to make vast long term changes to our economy even though the benefits might not pay off for 5-10 years. Obama should also explain to the nation that there is little that can be done to stop our current downslide. If he does not change the presentation of his ideas, his plans may be judged a failure or derailed altogether.
The only short term spending should be an increase in unemployment insurance, food stamps and other safety nets, and help for home owners who need to renegotiate their mortgages. Many economists, both conservative and progressive, have said there is more of a stimulus to the economy by investing in food stamps and in unemployment insurance than in any tax cut.
As things stand, people will ignore the much better long term path and, instead, push for something with immediate gratification which will result in a continued downward slide. In the meantime, the drop off in U.S. consumption is hitting all the exporting countries very hard (Japan, China, Germany) and leading to a global decrease in trade. The worldwide recession, including mass unemployment, will continue to spiral downward, and like the stock market, must find a “bottom” before we can begin to slowly climb out of the chasm.
Obama has the right ideas, but few people are listening.
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