Fiscal Policy
Fiscal policy is the means by which a central government takes from its citizens (through taxation) and spends in an attempt to influence an economy. It is important to remember that a central government, unlike a private enterprise, produces nothing, and generates no income itself. It gains wealth by confiscating it from its citizens and redistributing that money as it sees fit. Even more egregious, the political ruling class in America is currently spending over $1 trillion per year MORE than it takes, which has led to a $20 trillion national debt.
Before the Great Depression, the general approach of government was "less is more," a laissez faire attitude that more or less let the markets operate with little interference. After the Great Depression, Keynesian economics took over (in the form of FDR's New Deal) and the government took on a much greater role in attempting to shape the economy.
An attitude of arrogance and an entrenchment of the political ruling class continues to feed the beast, at an ever-increasing rate, to this day. The government has grown to proportions that would enrage the Founding Fathers. The scope of government's involvement in the everyday lives of citizens today would far more closely resemble King George III's treatment of his British subjects than that of what they envisioned for America.
Before the Great Depression, the general approach of government was "less is more," a laissez faire attitude that more or less let the markets operate with little interference. After the Great Depression, Keynesian economics took over (in the form of FDR's New Deal) and the government took on a much greater role in attempting to shape the economy.
An attitude of arrogance and an entrenchment of the political ruling class continues to feed the beast, at an ever-increasing rate, to this day. The government has grown to proportions that would enrage the Founding Fathers. The scope of government's involvement in the everyday lives of citizens today would far more closely resemble King George III's treatment of his British subjects than that of what they envisioned for America.
The following headlines have been reprinted from The Penn Wealth Report and are protected under copyright. Members can access the full stories by selecting the respective issue link. Once logged in, you will have access to all subsequent articles.
|
Tax
Reform |
Federal judge in New York throws out states' lawsuit over SALT deductions. (01 Oct 2019) One of the more interesting components of the Tax Cuts and Jobs Act of 2017 was the $10,000 limit on state and local income tax deductions. In other words, wealthy individuals, primarily residing in states like New York and New Jersey, could only "write off" their first $10,000 of taxes paid each year to their state and local governments. Think of it this way: by having confiscatory state tax rates in place (hello, New York), citizens were forced to pay exorbitant amounts of money for the privilege of living in their respective state. The state governments told them, in essence, "hey, at least you can deduct everything you paid us on your federal tax returns!" The 2017 massive tax overhaul changed all of that, limiting the amount that could be claimed to $10,000 each year. High tax states went ballistic, suing the IRS and Treasury Secretary Steven Mnuchin. This week, that lawsuit ended with a thud. A federal judge in New York, of all places, threw out the case, claiming that the states failed to show that the limitation was unconstitutional (a truly lame argument by the states). Perhaps more citizens of these states will begin fighting outrageously-high state and local tax rates, or simply move to states with lower tax rates. The latter has already begun to manifest. God bless the American experiment, which had the audacity to take control away from a central government and place it in the hands of the individual states, which must then reckon their actions with their own residents. When studying the tactics of politicians, always view their comments and actions through this prism: Are they doing what they are doing to empower the central government, or to place more power at the lowest possible level—the level closest to the people?
|
A fitting day to review the fiscal state of our union
(17 Apr 2018) As millions of US taxpayers head to the post office or hit the "enter" button on their computers to file their 2017 returns today, we thought it would be a fitting day to offer a snapshot of the fiscal state of our union. As of today, the US government has racked up a $21.14 trillion national debt. In other words, our elected officials have spent $21 trillion more than they have taken from us. If all taxpaying US citizens wanted to chip in and pay off that debt, it would cost each of us $174,189. In 2017, the federal government took $3.328 trillion from its citizens. It spent $4.068 trillion. Seven cents of every dollar the US government took in last year via taxation went to pay interest on the national debt, akin to the interest we pay the credit card companies for our outstanding balances. Of course, none of the hard-earned income offered up to the federal government should be confused with the $570 billion we pay in property taxes each year, or the near-10% sales tax we pay on goods and services purchased, or the average 48.8 cents per gallon gasoline tax, or any of the myriad of other fees and taxes we pay to differing levels of government. At least we can go to sleep tonight with the comfort of knowing just how efficiently our monetary sacrifices are being used.
(17 Apr 2018) As millions of US taxpayers head to the post office or hit the "enter" button on their computers to file their 2017 returns today, we thought it would be a fitting day to offer a snapshot of the fiscal state of our union. As of today, the US government has racked up a $21.14 trillion national debt. In other words, our elected officials have spent $21 trillion more than they have taken from us. If all taxpaying US citizens wanted to chip in and pay off that debt, it would cost each of us $174,189. In 2017, the federal government took $3.328 trillion from its citizens. It spent $4.068 trillion. Seven cents of every dollar the US government took in last year via taxation went to pay interest on the national debt, akin to the interest we pay the credit card companies for our outstanding balances. Of course, none of the hard-earned income offered up to the federal government should be confused with the $570 billion we pay in property taxes each year, or the near-10% sales tax we pay on goods and services purchased, or the average 48.8 cents per gallon gasoline tax, or any of the myriad of other fees and taxes we pay to differing levels of government. At least we can go to sleep tonight with the comfort of knowing just how efficiently our monetary sacrifices are being used.
Trump to tap Reaganite Larry Kudlow as chief economic advisor
(14 Mar 2018) What an incredible choice. President Trump has asked CNBC commentator and former Reagan economic advisor Larry Kudlow to be his next chief economic advisor, taking over following former Goldman Sachs exec Gary Cohn's departure. In addition to being a master communicator, Kudlow favors free trade, lower taxes, and a stable dollar. His appointment has been almost universally praised; except, perhaps, by David Stockman, Ronald Reagan's whiney Director of the OMB who has been predicting doom and gloom for the past forty years. Cohn, who has a great working relationship with Kudlow, will stay on the job through March to help in the transition.
(14 Mar 2018) What an incredible choice. President Trump has asked CNBC commentator and former Reagan economic advisor Larry Kudlow to be his next chief economic advisor, taking over following former Goldman Sachs exec Gary Cohn's departure. In addition to being a master communicator, Kudlow favors free trade, lower taxes, and a stable dollar. His appointment has been almost universally praised; except, perhaps, by David Stockman, Ronald Reagan's whiney Director of the OMB who has been predicting doom and gloom for the past forty years. Cohn, who has a great working relationship with Kudlow, will stay on the job through March to help in the transition.
US runs a surplus in the month of January (yes, you read that correctly)
(13 Feb 2018) We cannot say this very often, but the United States government just reported a monthly surplus. Yes, more money came into the government than was spent during the month of January, to the tune of $49 billion. Will we run a surplus for the year? Absolutely not. However, it should be noted that the Congressional Budget Office scoring methodologies don't include the increased revenue which could be brought in by a 3% per year growth rate in the US economy. All signs are pointing to the economy hitting that mark this year, and beyond.
(13 Feb 2018) We cannot say this very often, but the United States government just reported a monthly surplus. Yes, more money came into the government than was spent during the month of January, to the tune of $49 billion. Will we run a surplus for the year? Absolutely not. However, it should be noted that the Congressional Budget Office scoring methodologies don't include the increased revenue which could be brought in by a 3% per year growth rate in the US economy. All signs are pointing to the economy hitting that mark this year, and beyond.
With passage of comprehensive tax reform bill, US companies immediately begin to open their wallets
(22 Dec 2017) Within hours of the tax reform bill passing both houses of congress, AT&T (T $33-$39-$43) announced that it would give over 200,000 of its employees $1,000 bonuses. The telecom giant also announced a $1 billion increase in capital expenditures in the US as a result of the reform. Later that day, NBC parent company Comcast (CMCSA $34-$41-$42) also announced it would give $1,000 bonus checks to non-executive employees. On the financial side, both Wells Fargo (WFC) and Fifth Third bank (FITB) announced that they would raise their minimum wage to $15 per hour, citing the bill's passage.
(22 Dec 2017) Within hours of the tax reform bill passing both houses of congress, AT&T (T $33-$39-$43) announced that it would give over 200,000 of its employees $1,000 bonuses. The telecom giant also announced a $1 billion increase in capital expenditures in the US as a result of the reform. Later that day, NBC parent company Comcast (CMCSA $34-$41-$42) also announced it would give $1,000 bonus checks to non-executive employees. On the financial side, both Wells Fargo (WFC) and Fifth Third bank (FITB) announced that they would raise their minimum wage to $15 per hour, citing the bill's passage.
Market drop shows just how much tax reform is baked into market levels
(09 Nov 2017) Think the stock market really doesn't care whether or not we get comprehensive tax reform completed this year? Think again. When news trickled out that the US Senate was considering delaying the corporate tax rate reduction in their version of tax reform, the Dow proceeded to plunge 200 points mid-day. And forget what you hear about members of congress from left-leaning states holding up the bill due to the state and local tax deduction elimination; if this bill fails it will happen thanks to the pompous blowhard members of the senate.
(09 Nov 2017) Think the stock market really doesn't care whether or not we get comprehensive tax reform completed this year? Think again. When news trickled out that the US Senate was considering delaying the corporate tax rate reduction in their version of tax reform, the Dow proceeded to plunge 200 points mid-day. And forget what you hear about members of congress from left-leaning states holding up the bill due to the state and local tax deduction elimination; if this bill fails it will happen thanks to the pompous blowhard members of the senate.
A lesson in good-old-boy croneyism, using one example from the tax plan unveiled today
(02 Nov 2017) Want to know why we can't get anything done to simplify the tax code? Here you go: Under the new tax proposal, the mortgage interest deduction cap goes from $1 million to $500,000 per year. In other words, you can ONLY deduct the interest stemming from the first HALF MILLION of your annual mortgage loan. The CEO of NAHB (National Association of Home Builders) just made the claim, on CNBC, that "THIS WILL CAUSE A HOUSING RECESSION!" What baloney. If you have an $800,000 mortgage loan, you can still deduct the interest on the first $500,000! Total hyperbole. And you, my Rubenesque friend, are the reason (well, one) nothing can get done in DC. By the way, one of CEO Jerry Howard's listed qualifications is: "25 years of lobbying experience in Washington DC." DING DING DING.
(02 Nov 2017) Want to know why we can't get anything done to simplify the tax code? Here you go: Under the new tax proposal, the mortgage interest deduction cap goes from $1 million to $500,000 per year. In other words, you can ONLY deduct the interest stemming from the first HALF MILLION of your annual mortgage loan. The CEO of NAHB (National Association of Home Builders) just made the claim, on CNBC, that "THIS WILL CAUSE A HOUSING RECESSION!" What baloney. If you have an $800,000 mortgage loan, you can still deduct the interest on the first $500,000! Total hyperbole. And you, my Rubenesque friend, are the reason (well, one) nothing can get done in DC. By the way, one of CEO Jerry Howard's listed qualifications is: "25 years of lobbying experience in Washington DC." DING DING DING.
White House, GOP unveil long-anticipated tax reform plan
(27 Sep 2017) The White House and GOP leaders unveiled their tax reform plan—the first since 1986—and the details are sweeping. The corporate tax rate will drop from 35% to 20%, stoking the country’s economic engine. The pass-through business rate will drop to 25%, down from business owners’ current individual tax rate. The seven current personal tax rates will be slashed to three, and the child tax credit will be substantially increased. Zero Democrats will sign on to the plan, but the Senate will invoke the 51-vote rule to push the seismic bill through. And John McCain’s vote won’t even be needed. Expect the bill to pass this year—despite the 40-some workdays remaining—portending good things for the economy and the US markets. Why don't we all have Congress' work schedule? We would put up with some loud-mouthed rent-a-mob picketers at town hall meetings for the kind of perks our elected representatives have.
(27 Sep 2017) The White House and GOP leaders unveiled their tax reform plan—the first since 1986—and the details are sweeping. The corporate tax rate will drop from 35% to 20%, stoking the country’s economic engine. The pass-through business rate will drop to 25%, down from business owners’ current individual tax rate. The seven current personal tax rates will be slashed to three, and the child tax credit will be substantially increased. Zero Democrats will sign on to the plan, but the Senate will invoke the 51-vote rule to push the seismic bill through. And John McCain’s vote won’t even be needed. Expect the bill to pass this year—despite the 40-some workdays remaining—portending good things for the economy and the US markets. Why don't we all have Congress' work schedule? We would put up with some loud-mouthed rent-a-mob picketers at town hall meetings for the kind of perks our elected representatives have.
The United States passes a disgraceful milestone: $20 trillion of debt
(12 Sep 2017) We all knew it was coming, but that doesn’t make it any less disgusting. According to data just released, the total amount of US national debt surpassed the $20 trillion mark last Friday. Let’s put this in terms of a typical American’s credit card debt. The average balance-carrying household has $16,048 in revolving debt. When you are living paycheck to paycheck, like the federal government is, freeing yourself of that $16k anchor around your neck seems insurmountable. But that’s not the worst part. The interest is accruing on that debt as quickly as the minimum monthly payments are being made, so most Americans remain stuck in this state of hell. The US government, our elected officials, continue to spend about $1 trillion more than they take from taxpayers each year, but the interest on the debt compounds the problem. Disgraceful. And nobody seems to care. Liberals in congress are demanding free college education for our young people. Hell, why stop there? Just make everything free, from health care to college to automobiles to housing. If $20 trillion doesn’t seem to bother anyone, why not make it $100 trillion of debt?
(12 Sep 2017) We all knew it was coming, but that doesn’t make it any less disgusting. According to data just released, the total amount of US national debt surpassed the $20 trillion mark last Friday. Let’s put this in terms of a typical American’s credit card debt. The average balance-carrying household has $16,048 in revolving debt. When you are living paycheck to paycheck, like the federal government is, freeing yourself of that $16k anchor around your neck seems insurmountable. But that’s not the worst part. The interest is accruing on that debt as quickly as the minimum monthly payments are being made, so most Americans remain stuck in this state of hell. The US government, our elected officials, continue to spend about $1 trillion more than they take from taxpayers each year, but the interest on the debt compounds the problem. Disgraceful. And nobody seems to care. Liberals in congress are demanding free college education for our young people. Hell, why stop there? Just make everything free, from health care to college to automobiles to housing. If $20 trillion doesn’t seem to bother anyone, why not make it $100 trillion of debt?
(22 May 2017) Trump's budget leaves Social Security untouched but slashes government spending. Using the common sense approach that the federal government has become a bloated and out-of-control nightmare (a $20 trillion debt proves it), President Trump has unveiled a FY 2018 budget that slashes wasteful spending, but does not make cuts to Social Security or Medicare. The "taxpayer first" (as OMB Director Mick Mulvaney labels it) proposal calls for large cuts to government programs and overhauls to the US tax code and health care system. Long overdue. Now, let's see who on the president's side of the aisle has the guts to support the needed reforms in the face of George Soros-funded "town hall" rent-a-mobs. The budget proposal calls for $3.6 trillion in actual cuts through 2027. Considering that amount is roughly what the government spends each fiscal year, don't believe the false narratives and trumped-up human interest stories the mainstream media will concoct over the coming weeks and months.
(26 Apr 2017) White House unveils plans for largest tax cut in US history. With the express purpose of creating American jobs and getting back to a regular and sustained growth rate of 3% (roughly double that under Obama), the Trump administration announced the foundation of its sweeping tax cut plan. If enacted, it would amount to the largest single tax cut in US history, both for corporations and individuals. The number of tax brackets would be reduced from seven to three—10%, 25%, and 35%, with the first $24,000 of income for a married couple filing jointly becoming tax-free. Read the details of the plan in this Sunday's Penn Wealth Report.
(15 Mar 2017) Jamie Dimon sees enormous economic boon coming from repatriation of capital. Due to America's confiscatory corporate tax rates—higher than any other industrialized nation—US companies have parked roughly $2.5 TRILLION overseas. Why bring it back, they argue, just to have 35% taken away immediately by the government? And that's on top of what they've already paid to foreign governments via taxes when the goods or services in question were delivered. President Trump has promised to free those 2.5 trillion hostages, and soon. Think of what that would do for the US economy. JP Morgan's (JPM $57-$92-$94) Jamie Dimon, one of the best financial minds in the country, says that this great repatriation of cash will create a "QE-4"-type of stimulus for the US economy. A real stimulus plan that wouldn't cost the US taxpayers a dime? Bring it on. More winning.
(14 Feb 2017) Mnuchin becomes America's 77th Secretary of the Treasury. From Hamilton to Mnuchin. With only one Democrat senator voting to confirm, Steven Mnuchin has become the US Treasury Secretary. Roughly 228 years after George Washington appointed Alexander Hamilton, Vice President Mike Pence swore in the 54-year-old Mnuchin, with his fiancée, Scottish-born actress Louise Linton, holding the bible and President Trump standing nearby. No congress in 228 years has ever taken this long to confirm a president's pick for the top fiscal spot. Even tax-cheat Timmy Geithner received 30 votes from the Republicans in the US Senate, and a much faster confirmation. Joe Manchin of West Virginia was the only Democrat to vote in favor of the president's former campaign chair, showing just how petulant some in Washington have become.
What does it say when America has the highest corporate tax rate in the world? At least Venezuela, France, and Cuba are runners-up.
Warped New Government Regulation Means More Foreign Ownership
(24 Feb 15) As is typically the case, it was presented as something that would stop the wealthy from getting away with murder. In reality, it has opened the door for US companies to be purchased at an alarming clip by non-US entities. And we have the government to thank.
Here’s the situation: The corporate tax rate in America is the highest of any developed country in the world. So high, in fact, that US firms are forced to keep money they make outside of the US in foreign bank accounts, as it, too, will be taxed if brought back to the US (keep in mind that this money was earned and taxed overseas).
To responsibly reduce their taxes (maximizing profit is the legal responsibility of corporate stakeholders, by the way), US firms had been purchasing overseas companies and moving their headquarters to that location to avoid onerous US taxation. This past year the US Treasury Department issued new rules designed to stop these “tax inversion” deals from taking place. So what do you suppose the natural consequence would be?
You guessed it. Foreign companies are now buying US companies at an ever-increasing rate with the same result—except the companies will no longer be American-owned. Take Darth Vader Valeant’sVRX pending takeover of NC-based Salix PharmaceuticalsSLXP. Since Canada does not tax income earned by a Canadian company outside its borders, Valeant will be able to bring all of that American Salix income home, north of the border. Outrageous.
Ironically, this dunderheaded move comes as the US dollar is strengthening, which would otherwise make it easier for US companies to go on an international spending spree. Unless the administration does not want US companies to be successful, the only other read we have is that they do not understand business economics, only class warfare. Whatever the reason, say goodbye to yet another great American company. (Reprinted from the Journal of Wealth & Success, Vol. 3, Issue 9.)
Deal Struck to Fund Government through October
(14 Jan 14) House and senate negotiators hammered out a $1 trillion budget deal that, if approved by both chambers, would fund the government through October and take away the threat of a new government shutdown. The deal avoids something both sides of the aisle feared--a new round of sequestration cuts that would slash military and social programs further. Ironically, it was the "draconian" sequestration measures implemented last year, after congress could not agree on a budget deal, that led to some semblance of fiscal responsibility. The dire economic warnings given if sequestration was implemented never materialized.
The bill is certainly not ideal, and both sides are already harping about the details, but it avoids another bitter budget battle this summer that would certainly be tainted by the upcoming mid-term elections. While the stopgap bill does fund Obamacare at 2013 levels, it cuts a related public-health fund by $1 billion. Likewise, while funding is included for the nightmarish Dodd-Frank financial regulatory law, it was funded at a rate of $1.35 billion--$324 million less than what the president requested.
On the other side of the spectrum, the Pentagon will be spared from facing $20 billion more in cuts on top of last year's $34 billion sequestration axe job. The 1% cut to cost-of-living increases for disabled vets, which had become--rightfully so--a lightning rod issue, was also reversed. While the bill provides billions of dollars in aid to Egypt, it does attach some strings, albeit using the administration's gauge, to receiving that aid.
Overall, this deal is net positive. However, keep in mind that it represents only a small portion of the actual federal budget--a $3.5 billion per year beast. As one former senator put it, this deal pays for the family's groceries for the next 8 1/2 months, but doesn't look at the fixed expenses or the level of household debt. At least we won't have to listen to the media bloviating about all of the people hurt by a government shutdown, while never mentioning those who could be helped by the billions spent each year on the interest on our $17 trillion dollar national debt.
Union Protesters Decry Bankruptcy Decision
(03 Dec 13) Union protesters rallied angrily in Detroit following a U.S. bankruptcy judge's decision to allow the city to proceed with plans for reorganization. It is ironic that they were carrying signs of Michigan Governor Rick Snyder depicted as satanic, when it was their own labor organizations--not the governor--who put them in their predicament.
Detroit is a city which has been run by organized labor and its minions for two generations. And it was these elected officials and potentates who, year after year, decade after decade, spent more money than they ever brought in through the taxation of citizens and the corporations based there. I recall when Detroit filed for bankruptcy back in July. The largest municipal bankruptcy in history, they had racked up an incredible $20 BILLION in debt which they could not pay. It reminded me of Bernie Ebbers, the criminal former CEO of WorldCom, and how he gobbled up company after company, keeping the creditors at bay, until a federal agency refused to let him merge with Sprint--and the gig was up. Detroit ran out of rocks to hide behind. 40 years of making deals with the devil had caught up with them, and the gig was up. Perhaps they were hoping for a federal bailout using U.S. tax dollars, but that was too hard to sell with so many Americans hurting from the recession. So, they took the only door still open--bankruptcy.
This is a lesson for any American relying on deals they made through collective bargaining between organized labor and a government entity. Eventually, the money will simply not be there. Perhaps it will last for your lifetime, but are you really willing to play that game of Russian roulette?
To the protesters on the street: First of all, it is amazing that you all happened to make the exact same sign depicting the governor as the devil. What are the odds?! Secondly, start doing the math--or at least teach your kids to do the math. Detroit was a painfully slow train wreck manifesting on the tracks. For decades, anyone willing to look at the numbers could see they simply didn't add up, and were getting worse each year. What mystical, magical panacea did you expect to be around the bend? For the rest of us: look at the slow and methodical train wreck developing that is social security. For decades we have been forced to pay into a special "lock box" that is pure fantasy. The government has taken our money and scooped it in with the rest of the coal fueling the federal engine. This voyage is unsustainable, as one-third more coal is being burned than is replenished each year. Forget the protests--they don't work. Instead, make sure you are preparing for your own family's well being, without any help from the government, and start working for a federal balanced budget amendment. 49 of the 50 states (what are you thinking, Vermont?) have some sort of balanced budget provision in place; it is time to ask ourselves why our nation does not.
The Administration that Cried Wolf
(10.10.2013) As mentioned in previous pieces, we were looking forward to not seeing tax cheat Timmy Geithner's face on television anymore. Be careful what you wish for. New Treasury Secretary Jack Lew has already proven to be a partisan hack and, unfortunately, a bald-faced liar. That is bad enough--having an administration with members who find lying to the American people so easy--but worse yet is the willingness of the media to forward and further those lies.
Lew got grilled on Capitol Hill today. The boy who cried wolf told senators he would be unable to guarantee payments to any group without a higher debt limit. When confronted with the fact that the government hauls in about $225 billion per MONTH from U.S. taxpayers, and servicing the debt costs nowhere near that amount, he claimed that computer programs would be unable to prioritize payouts! Now, if that is true then the strongest economic powerhouse in the world is in deep, deep, trouble. Lew went on to ask senators "who should we pay, veterans or social security recipients, active duty military or kids in need?" Please, Jack, how stupid do you believe the American people are? The funds are available to pay all groups who need to get paid simply by using the monthly shakedown from the American taxpayer--not by raising the debt ceiling one dollar.
Yesterday, the President of the United States used terms like "hostage-takers," "gun-to-the-head," and "ransom" to describe his political foes and their actions. Ironic coming from the man who, at the Gabby Giffords rally in Arizona last year, claimed that the rhetoric and hate speech must end. Meanwhile, virtually none of this has been pointed out on the major network news shows.
Yesterday, the administration's fear-mongering had a major impact on markets. Today, the administration that cried wolf is not being listened to, at least not by investors. The Dow is up well into triple digits because former vice-presidential nominee Paul Ryan has crafted a plan to raise the debt ceiling for six weeks while the two sides come to the table and discuss the nightmarish $17 trillion debt that has been racked up by the government. The president is going to have to agree to talk, or not even his best buds in the press will be able to help him anymore. With a new 37% approval rating out, perhaps the terrorist and weapons-related portrayals of political opponents will subside. The president likes to point out that elections have consequences. Yes, they do. But the consequences are not a scorched earth effort to silence the majority party in the house of representatives. Time for the administration that cried wolf to come up with a new game plan. We will not hold our breath.
Billionaire Sam Zell Talks Government Shutdown with CNBC
(10.08.2013) As someone who is intimately familiar (as a chronic viewer) with CNBC, network NBC's cable business channel, I can say that the sycophantic support for the president during the government shutdown by the likes of correspondent John Harwood has been hard to stomach. Most disturbing is the fact that they fully believe theirs is a "fair and balanced" viewpoint. John Harwood: "There is only one side that wants this shutdown. The president and the Democrats simply want to re-open the government." Plummeting network media viewership aside, these stations have tied their wagon to one party rule. Every now and again, however, a voice of reason accidentally slips through the cracks. As was the case when Sam Zell was asked about the Tea Party and the shutdown on CNBC's early morning show, Squawk Box. Below are some of the billionaire's comments I happened to note:
"...The solution is dialogue. And frankly, I think it would be terrible for our democracy if effectively one branch of the government laid down the law to the other branch. We have, you know, the Founding Fathers created a republic...with checks and balances. The lines have been blurred, and it's led to some people presuming they have more power than they have, and trying to bully things through as opposed to reaching consensus."
"The whole Obamacare scenario is about the fact it wasn't bipartisan and, as a result, 50% of the country thinks it sucks, and I'm part of that group."
CNBC: "(Do) you blame the Tea Party for this?"
Zell: "No. I think the Tea Party is a reaction to an imperial White House. Come on...'I'm not going to negotiate.' Is that the way the president deals with his daughters? ...The president is elected to negotiate. That's his job, you know.... I'm not a big Tea Party fan at all...but they have a right to have a view and (for that) they are being treated as though they are crazy."
CNBC: "Is the American Dream still alive?" (Sophomoric question)
Zell: "Yes, although the degradation of the education system and the 'dumbing down' of our minorities is having an enormous negative impact on income and is a leading factor in the disparity of wealth in this country."
Sam Zell is the former owner of the L.A. Times and the Chicago Tribune. He has given political donations to Republicans and Democrats running for public office. He amassed his billions in the real estate industry.
Lew is Being Dishonest with Respect to U.S. Servicing its Debt in a Shutdown
(27 Sep 13) Don't buy the argument that today's political arena is any more bellicose than it has been throughout history. That is the mantra from journalists who are too lazy to perform their own historical research, or those simply wishing to forward an agenda.
A few weeks ago we reported that Treasury Secretary Jack Lew threw the gauntlet down and told the U.S. House of Representatives that President Obama would not negotiate on the debt ceiling increase. He followed up this week by sending a report to congress stating that unless a continuing resolution is reached funding the government, the treasury department will not have the money to pay its bills after the middle of October. Mr. Secretary, that is a bald-faced lie, and you know it.
Recall the dire warnings we were given by the press and by politicians regarding the draconian cuts that the sequester would bring. We were assured that cooler heads in D.C. would prevail, but they didn't. Yes, the cuts to the American military were deep, but what happened to the doomsday scenario the press outlined? Indeed, can anyone point to one specific "disaster" which came about due to the sequester?
So, let's take a look at what happens in a government shutdown. First and foremost, all essential government functions would continue. The military would be on duty--and get paid. Social security and disability checks would go out. The mail would be delivered. The interest on our debt would get paid--and Lew knows it. National parks and monuments would be closed, as they are not considered "essential" government services. Likewise, about 1/3 of all federal government workers would be furloughed, as they are considered non-essential (typifying how large the federal beast has grown), but they would still be paid for those days.
There are not many people who actually want a government shutdown to take place. However, it is safe to say that there are also not many people who believe the government should be spending $1 TRILLION more each year than what it takes via taxes from its citizens. Perhaps the biggest fear in D.C. is that a government shutdown, like the sequester, would make Americans realize just how little they actually need a federal nanny state looking after them.
Boehner Punches Back--Let the Battle Begin
(19 Sep 13) We have discussed the unusual aspect of a sitting treasury secretary and a sitting president lobbing incendiary weapons against their political opponents so early in a budget battle. Now, the opponent has fired back. In a blistering press conference, Speaker of the House John Boehner was not in a mood to be trifled with. Calling Obamacare a train wreck for the U.S. economy, he indicated that the House will vote on Friday to strip funding for the health care act before allowing the debt ceiling to be raised.
In a feisty meeting with the press, Boehner would not answer speculative questions of what the House would do when the U.S. Senate defeats the measure. While there is virtually no possibility of the Senate keeping the defunding measure intact, several Republican senators said they will filibuster any bill providing funds to the president's health care initiative.
Boehner did not mince words with respect to the president. He told journalists that the man who has no problem negotiating with Vladimir Putin of Russia cannot find it within himself to negotiate with Republicans over the reduction of our $17 trillion national debt. Journalists such as John Harwood of CNBC were quick to point out that the Speaker risks alienating voters ahead of the 2014 mid-term elections. Oddly, similar "concerns" were not voiced after the Lew/Obama comments.
Be Prepared for a Government Shutdown, but Should You be Concerned?
(18 Sep 13) It began with newly minted Treasury Secretary Jack Lew's comments that there would be no negotiating on the demand to raise the national debt ceiling. Odd for Lew to make those comments, considering the executive branch of government--which he is a part of--has absolutely no control over that decision. The legislative branch of government, specifically the congress, controls the purse strings of the Federal government and, thus, the power to raise the debt ceiling.
Lew's comments that "we cannot allow ourselves to default on our obligations" was a straw man argument that holds no water. Lew was inferring that if we do not raise the debt ceiling, we could not make the payment to service our national debt, which is a lie. If a government shutdown occurs (which is becoming quite likely), essential services will continue to be funded, and the national debt racked up by the political ruling class will continue to be serviced.
Less than a week after Lew's incendiary comments, President Obama added fuel to the fire and indicated he would not negotiate or tie spending to an increase in the debt ceiling. Backed into a corner before the fight even began, GOP leadership in the house threw down its first gauntlet of the battle on Wednesday, stating that defunding Obamacare would be tied to congressional approval of raising the debt ceiling, as would talks on tax reform and an approval of the (much overdue) Keystone XL Pipeline.
Negotiations have always been a part of the debt ceiling fight. It was an unusual tactic for the president's team to poison the waters so early in the process, and it appears that the GOP is steeling itself for the battle. What this means for the stock market is a rocky fall, full of volatility and, more than likely, a temporary pullback as the fires rage.