E!!

From the CNN op-ed page (emphasis mine):

Commentary: Bankruptcy, not bailout, is the right answer

Well, we now have proof positive that hanging out at the New York Times will muddle up anyone’s brain.  David Brooks, once a semi reliable conservative thinker, has penned a lamentation (“Revolt of the Nihilists”) so full of hand-wringing angst that, as Laura Ingraham quipped this morning, “it makes my hair hurt.”

Brooks says the failure of the “rescue package” (that’s an Obama-ism, BTW, and does nothing to endear me to the concept since I abhor victim mentalities of all kinds) means our political leaders have ”failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed.”

Apparently for Brooks, defeat of this bill equals de facto anarchy in America.

Brooks then makes a few apt remarks (ok, so he has not completely lost it), but quickly disappoints again:

And let us recognize above all the 228 who voted no — the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed. They did the momentarily popular thing, and if the country slides into a deep recession, they will have the time and leisure to watch public opinion shift against them.

No:  they showed the world that they were willing to listen to the people who elected them, the constituents in their own districts, who bombarded their offices with variations of “vote no” via email and telephone because they (we) don’t trust the “leaders,” and the “experts” at the Treasury and the Fed.  And why the heck should we, after a colossal failure of social engineering the likes of which this nation has never seen…?!

House Republicans led the way and will get most of the blame. It has been interesting to watch them on their single-minded mission to destroy the Republican Party. Not long ago, they led an anti-immigration crusade that drove away Hispanic support. Then, too, they listened to the loudest and angriest voices in their party, oblivious to the complicated anxieties that lurk in most American minds.

Good freaking grief, Mr. Brooks!  These House Republicans (and the 95 Democrats who voted with them) are the ONLY people standing up for proper conservative principles, including taking a careful, pragmatic approach to complex problems rather than giving people like Paulson a blank check. 

And nobody on the right led an “anti-immigration crusade”:  they just asked the U.S. government to enforce its own laws (what nerve, ay?!)  As for your take on the ”complicated anxieties that lurk in most American minds,” stick with the op-eds because a gifted psychoanalyst you’re not.  The only anxiety we’re having is over whether this bill will really fix what’s wrong, and whether anyone in D.C. is willing to do the hard work of making sure it does.

Now they have once again confused talk radio with reality. If this economy slides, they will go down in history as the Smoot-Hawleys of the 21st century.

So now we’re all just mindless sheep who totter zombie-like after Rush and Laura who are themselves out of touch with real life?  Do you have any idea how elitist and left wing that sounds?  Perhaps you’d like to come out in favor of the Fairness Doctrine also so we can get a dose of “reality” and not be hypnotized by the likes of the evil Limbaugh?

I can’t quote the rest of your op-ed, because frankly, my hair hurts.  My advice to you is stop wringing your pretty little hands and give it some time.  A bill will be passed; the markets will not collapse; and all will be well, if a little dicey for a time. 

And please stop calling it a “rescue” because that’s one of the words that is turning us off out here in Sheepville.

If no bailout bill is passed and no other/better solution can be agreed upon, I am just fine with having us (and the rest of the world) go into a recession where everyone becomes more financially conservative and/or moderate. 

If I personally have to lose a little in the short term, so be it.  It’s what is best and wisest in the big picture that matters.  “Principle over pain.”

(Note to Chris Matthews on his statement that Dems “overwhelmingly” voted for the bailout bill:  sixty percent is not overwhelming.  In fact, I’d say it’s rather underwhelming.)

Roll Call is reporting that the House “voted 228-205 to reject the financial sector bailout bill crafted over the weekend by a bipartisan group of House and Senate negotiators. Speaker Nancy Pelosi (D-Calif.), Majority Leader Steny Hoyer (D-Md.) and Minority Leader John Boehner (R-Ohio) all had urged Members to support the bill. But House Republicans rejected it by a 2-1 margin, and more than 90 Democrats voted no.”

I’m reading accounts that Senator Chris Dodd’s weighty remarks and swelling ego nearly crushed a few innocent bystanders this morning as he bemoaned the Wall Street greed that got us into this mess.

The Chairman of the Senate Banking Committee uttered not one peep, though, re: his acceptance of $165K in contributions from failing Fannie and Freddie (presumably as payback for his opposition to properly overseeing and regulating them).

No mention either, that he benefitted from VIP insider discounted loans from the (now defunct) Countrywide Financial.

K-Lo just posted this, from Jim DeMint’s office:

We’ve just been alerted that despite House Democrats relenting on extending bans on offshore drilling and oil shale in the continuing resolution (CR) appropriations bill, Democrat Senate Leader Harry Reid has decided to sneak an extension of the oil shale ban through as Congress fights over the financial bailout. Oil shale in America’s West is estimated to hold be between 800 billion and 2 trillion barrels of oil — that is more than three times the proven oil reserves in Saudi Arabia alone.

Here is the text of Reid’s proposed new ban on oil shale, that he is trying to add as an amendment to the CR or move seperately as a “stimulus” package, or we should say an anti-stimulus package if this is included.

Sec 1602 continues ban on oil shale. The language follows:

SEC. 1602. Notwithstanding any other provision of law, including section 152 of division A of H.R. 2638 (110th Congress), the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, the terms and conditions contained in section 433 of division F of Public Law 110–161 shall remain in effect for the 19 fiscal year ending September 30, 2009.

It would be an insult to all Americans if Senate Democrats worked to bailout Wall Street while damaging our future prosperity by banning development of vast energy reserves in oil shale.

 I keep reading commentary, even in respected conservative forums, that Paulson’s gigantic bailout plan is bad, and admittedly un-conservative, but that we must do “something” and the alternative is too dreadful to contemplate.

 As Colonel Potter used to say, “Horse-hockey!”  

  Protecting the long-term value of the American dollar is more important than a quick fix.  So is teaching our bankers, traders and lawmakers that the government is not going to bail them out of future messes.  If there’s a pot of government gold at the end of every financial rainbow, what’s to stop everyone from chasing the green leprechaun again?

  Federal action is warranted, but the focus should be less on debt and more on protecting present and future capital.  If we go about this rationally and take this opportunity to promote pro-growth policies and tax reform, investors will respond to the prospect of higher future returns.  It’s that simple.

  Conservatives:  we cannot abandon our principles in times of crisis. We must remain steady at the wheel.

The following letter was sent yesterday to Treasury Secretary Henry Paulson:

September 24, 2008

The Honorable Henry Paulson
Department of the Treasury
1500 Pennsylvania Ave., NW
Washington, DC 20220

Dear Secretary Paulson:

As you continue to craft a financial stabilization plan with Congressional policymakers, I wanted to once again urge you to consider a move that could be executed unilaterally by the Treasury Department: indexing the basis of capital assets to inflation for purposes of calculating gain or loss.

There is a body of legal opinion which holds that the Treasury Department has the power to define “cost basis” when taxpayers calculate capital gain or loss. To date, Treasury secretaries of both parties have chosen to define “cost” as nominal purchase price.

This creates a situation whereby an asset held for many years and later sold may generate a capital gains tax liability when much or all of that gain is purely from inflation. For example, a stock purchased in 1990 for $1000 and sold today for $1676 would face a capital gains tax liability on the $676 “profit.” But in reality, 100% of that “gain” is attributable to inflation.

If the Treasury Department were to re-define “basis” to discount the effects of inflation, it would have a timely and pertinent effect on the current financial challenges. Households and businesses would be able to sell assets, unlock liquidity, and pay a much lower level of taxes. This liquidity is badly needed by capital markets. Best of all, this can be done by you unilaterally, substituting Congressional permission in favor of mere consultation.

Sincerely,
Grover Norquist

– E!! says:  This is better than nothing, but I’d like it much more if we eliminated the capital gains tax altogether.  (Yes, I realize that is probably a pipe dream.  That being the case, Grover’s suggestion is excellent.)

I like Jim Henley’s one-liner: “Wouldn’t it save administrative costs if I just started giving my money to random rich people?”

(H/T:  Outside the Beltway)

I had the honor of meeting and assisting Pat Toomey last week at the Conservative Leadership Conference here in Las Vegas.  This morning, Club for Growth says/releases the following (excerpted):

Eighteen months into the credit crunch, many largely capitalized financial services firms are experiencing serious difficulties but the overall economy continues to grow.  GDP growth over the past 12 months was 2.25 percent and 3.5 percent when excluding the drag imposed by the housing sector.  Even within the financial sector, many banks are doing well.  Regional bank indices had risen significantly since the lows of last July—prior to the bailout announcement—and thousands of community banks are thriving.  It is extraordinary that a massive government intervention in the economy is considered inevitable when the economy is not even in a recession.

Indeed it is.  On what is the panic of Wall Street types based?  Could it be fear that lack of liquidity and credit in the market will affect their own bank accounts?

At the same time, socializing economic risks come at a great cost to the American economy by misallocating capital, inviting political manipulation, and putting taxpayers on the hook for possibly a trillion dollars.  Such a large takeover by the government will surely be accompanied by adverse, unintended consequences.  Already, other companies and industries are lining up at government’s door asking for their own bailout.  And if the government incurs $700 billion in debt to finance the purchase of bad bank assets, the danger that it will eventually monetize that debt and trigger dramatic inflation is very worrisome.

“Unintended consequences.”  This concept is one of the great underlying tenets of conservative thought.  The idea is that when one makes broad, sweeping changes there are always unplanned effects, and they are often worse than the problem with which you began.

Our Do Nothing Congress should, in this case, do nothing (other than what Newt said yesterday).  We ought to free things up where we can, allow the market to self-correct, and let those who must (and should) take their proverbial Lumps. 

Access to unlimited cash and credit is not a “human right,” and we should stop behaving as if it is.

Well, as a writer/journalist/blogger, there is nothing like reading something you strongly disagree with to wake you up and get your day started right.  Such is the case with Treasury Secretary Paulson’s statement before the Senate Banking Committee.

Since hearing word of widespread support (Paulson, Congress and the President) for the latest, greatest Bailout I’ve been feeling increasingly dejected.  And concerned.  And angry.

Treasury Secretary Henry Paulson has a “plan” which will “shift” $700 billion in obligations from private companies to the American taxpayer.  Apparently he sees this as the only Way and has 9,000 wizards on stand-by to make it so.  (The same Wall Street wizards that got us into this mess, no doubt?)

And evidently most members of Congress are spellbound and preparing to waft more money New York’s way.

One can only imagine what Banking Committee Chairman Chris Dodd (the largest beneficiary of political funds from Fannie & Freddie) will dream up as he joins hands and sings Tra La La La La with Reid and Pelosi.  I’m not sure how it ends, but I’m pretty sure the working title is Nightmare on Wall Street and that we are barely ten minutes in.

Setting the typically wrong-headed Paulson aside for a moment, how is it that Bush and Congress care so little about protecting the American taxpayer?

And why all the insistence on a quick solution?  This mess was not created in a week, yet Paulson and our illustrious Congressional geniuses think they can solve it by this Thursday?  Does it not occur to anyone that we need to take a deep breath, wade in, and calmly and pragmatically work our way through our many economic and financial problems in a careful and measured manner?

As Newt blogged today (thank God for Mr. Gingrich), between the crisis of liquidity on Wall Street, the crisis of bad energy policy that transfers $700 billion a year to foreign nations, the crisis of Sarbanes-Oxley that cripples entrepreneurs/start ups and drives banks and businesses from New York to London, and the crisis of a high corporate tax rate…we are in some very deep Doo Doo.

Newt proposes a ”non-bureaucratic solution that would stop the liquidity crisis almost overnight and do it using private capital rather than taxpayer money.”  He suggests four reforms that would do the trick without the bureaucracy and additional tax burden.  I suggest you read his blog post as it is well worth the time, but in summation they are:

#1  Stop the mark-to-market rule which is forcing companies into unnecessary bankruptcy. If short selling can be suspended on 799 stocks, the mark-to-market rule can be suspended for six months and then replaced with a more accurate three year rolling average mark-to-market. 

#2  Repeal Sarbanes-Oxley. It failed with Freddy, Fannie, Bear Stearns, Lehman Brothers, and AIG. It is crippling our entrepreneurial economy. One San Jose firm told Newt they would bring more than 20 companies public in the next year if the law was repealed. It’s Sarbanes-Oxley’s $3 million per startup annual accounting fee that is keeping these companies private.

#3  Go to a zero capital gains tax like China and Singapore.  Private capital will flood into Wall Street (at no cost to Joe Taxpayer) and lead to an increase in federal revenue through a larger, more prosperous economy.

#4  Pass an “all of the above” energy plan designed to bring home $500 billion of the $700 billion a year we are sending overseas. With that much energy income, our economy would boom.

E!! endorses these proposals (a fact I’m sure Newt is happy to hear) and strongly advises against implementation of the Paulson plan which by all reasoned accounts is going to be a total Mess.

In closing, I’ll be waiting to see what McCain says and does about all this.  If he doesn’t reject the Paulson/Bush/Congressional plan and closely align himself with much of what Newt said here, I may not be able to vote for him after all.

(Note:  To those who have heard me joke that I am going to “get drunk and vote for McCain,” consider this my semi-official back-peddle…pending the outcome of this mess and McCain’s stand on things.  Let’s see how Maverick-y the self-proclaimed maverick is when it really counts.) 

With the takeover of AIG, the federal government has wangled its fourth major bailout and taken control of its very first insurance company.  

Both McCain and Obama have called the bailouts of AIG, Fannie Mae, Freddie Mac, and Bear Stearns “necessary measures.” McCain blames greedy Wall Street tycoons while Obama blames failed GOP policies.
 
Most sensible folks agree that the government’s implicit guarantee to Fannie Mae and Freddie Mac were a license to lenders to run rampant.  Fannie and Freddie were able to buy bundles of home mortgages and/or mortgage-backed securities in massive quantities without contemplation of the financial risks.

  
Some economists blame the regulators/regulations.  I disagree.  The financial industry is heavily regulated.  It was the government’s guarantee of Fannie and Freddie that emboldened lenders to put together dicey loans and encouraged undisciplined financial endeavors.

Government policy laid the foundation of the mortgage crisis more than three decades ago when Congress passed the Community Reinvestment Act of 1977. The law forced banks to loan money to low-income borrowers in order to meet the “needs” of the local community.

No worries, though.  The banks knew they could sell off those loans to Fannie or Freddie, and F & F knew they could buy those loans with little regard for the risk.

I’m reminded of the past weekend here in Las Vegas when a few enthusiastic friends (first time visitors) went out and hit the blackjack tables. 

A young man playing two hands was dealt four sevens.  A friend advised him to split and play four hands.  Pondering the risks, he hesitated – but the helpful friend offered to cover his losses and let him keep all the chips if he won. 

What do you suppose that young man did?

He behaved as anyone would:  he played all four sevens.  And, unfortunately, lost on all.

So it goes on the tables of Sin City.  So too, in Congressional corridors and bank board rooms. 

If there’s one thing I’ve learned from blogging and receiving tons of email, we all have our “pet” electoral issues and hot buttons – and they vary widely from person to person.  For me, it’s national security first; the economy (and tax policy) second; and energy policy (a closely related) third.

On the subject of the economy, Jack Kemp has a good op-ed on the presidential candidates and their proposed tax plans (thanks to Mike Davis at the NV RLC for bringing it to my attention).  I strongly encourage voters to read the whole thing, but here are some key points (summarized in my own words):

Barack Obama says he supports a tax cut in the form of a $500 refundable income tax credit for all workers (except those in the top 5 percent of income earners, who will pay more taxes) “unless the economy remains weak.”  So…Obama does recognize that tax increases on the rich have a negative effect on the overall economy.  (But why does he think that matters only in “weak” economic times?)

Obama’s tax credit does not reduce marginal tax rates, so it won’t benefit the general economy because it provides no long term (additional) incentives for work, savings, investment or business expansion.  (People will get their $500 refund check, spend it, and that will be That.)

On the other hand, McCain wants to double the personal exemption for dependents from $3,500 to $7,000 for families regardless of income.  (For middle-class workers in the 25% tax bracket, the $3,500 exemption increase would reduce their tax liability by $875 for each child.  Families with three children are thus looking at $2,600+ in tax savings.)

And McCain proposes marginal tax rate reductions – which is great news in country that pays the second highest corporate tax rates in the entire industrialized world.  McCain wants to reduce the federal corporate tax rate from 35 percent to 25 percent – a boon for middle class workers in the form of new jobs, better pay, and a stronger dollar.

And all this will most likely raise rather than reduce tax revenues.  (Why?  Kemp cites a 2007 study by the Treasury Department which showed that Ireland — with a 12.5% corporate tax rate — raises just shy of 50 percent more revenue on a comparative basis than the U.S. does with a 35 percent rate!)

McCain would also keep the top capital gains tax rate and dividend tax at 15% which is needed in the stock world (stocks are now held by more than 2/3rds of all Americans).  McCain further wants to phase out the Alternative Minimum Tax (AMT) which burdens 25 million middle-class families with another $2,700 in taxes each year (on average).

Obama, by contrast, has proposed to raise marginal tax rates for almost every federal tax — the individual income tax, the capital gains tax, the dividends tax, the payroll tax, the death tax, etc. and he would increase corporate taxes where and when he could.

McCain’s plan is a good start, but I agree with Kemp:  we need to promote additional middle-class tax cuts through fundamental reform of our “confusing, contradictory and confiscatory tax code.”

Kemp outlines a proposal by Rep. Paul Ryan, R-Wis. to allow workers to choose a flatter tax system (which is also worth reading about, at the end of his op-ed). 

Here’s Andy McCarthy today:

The mainstream press mindlessly repeats the mantra that Fan and Fred perform a “vital” role in making the dream of home ownership a reality for the lower middle class — increasing market liquidity and thus keeping mortgage rates low. In fact, these quasi-government entities have what is at best a marginally depressive effect on mortgage rates. To create such an artificial effect — however imperceptible — is not a good idea at all; but even if you think it is arguably beneficial, the benefit is palpably not worth $5 trillion in liabilities. And if the mortgage crisis has taught us anything, it is that: without any government intervention, lenders and borrowers will innovate mortgage arrangements; borrowers shouldn’t be encouraged to buy homes they can’t afford; and private/public entities are apt to pour gasoline on a fire.

 

From the American Enterprise Institute:

The nation’s GDP grew at a surprising 3.3 percent rate in the second quarter, up from 0.9 in the first quarter. That is welcome news for the nation’s 154 million strong labor force on this Labor Day holiday. The Census Bureau reported that, in 2007, real median household income rose for the third straight year, a point Douglas J. Besharov made at an AEI conference on August 25.

Although most Americans are uneasy about the nation’s economy, they remain optimistic about their personal prospects. In a recent HarrisInteractive poll, only 18 percent said the country was on the right track; 76 percent felt that way about their personal lives.

Here’s the opener to Jonah’s column today.  It’s a Must Read.  As usual.

The US economy — yes, that economy — grew at a 3.3 percent annual rate last quarter. This no doubt caused consternation at the highest levels of the Democratic Party, perhaps forcing some to consider a new convention film at the last minute: “Dude, Where’s My Recession?”

To hear the Democrats at their convention this week, you’d get the sense that a recession is merely a technical term for the worst human misery ever visited upon a once-great people. You’d think Americans were listening to the Democratic speeches as they huddled around their kitchen tables (if they hadn’t already been used for firewood), deciding which of their children to pack off to the orphanage and how much tree bark they can afford to eat next week. 

Last night, Barack Obama proclaimed: “Our economy is in turmoil, and the American promise has been threatened once more.” He went on to describe an America reminiscent of the Grapes of Wrath (if not Mad Max).

But this was a week-long theme. Over and over again, Democrats insisted that the “American dream” is being snuffed out, crushed, beaten, stabbed and quite possibly dismembered in President Bush’s West Wing bathtub, where Bush and Dick “The Cleaner” Cheney can dissolve the remains in sulfuric acid.  …