posted by perkiset on Oct 28

I think it’s important, for the boneheaded right wing nutjobs that want to attribute “socialism” to Barack Obama’s plan that we all know the truth. Today McCain called Obama the “Redistributionist In Chief,” further going on to try to tar Obama with a brush of Socialism that wants to “spread the wealth” in a way that borders on Communism

First, forget the Joe The Plumber, the campaign’s noise and other horsepoop, let’s deal with reality. My arguments are taken from factcheck.org, politifact.org and cnn.com, as well as my own formidable knowledge of tax law and procedure. If you think CNN stands for communist news network, then you might as well find another blog to read immediately.

Unless John McCain intends to dismantle the entire federal government and fire himself on January 21st, 2009, then by his own definition John McCain is a redistributionist and socialist. Any government AT ALL that has the slightest tax base is a redistribution system and, therefore, again, by the McCain camp definition, socialism. Obviously, John McCain simply wants to redistribute tax dollars in the way that HE sees fit rather than the way Obama sees fit. In any case, this does not represent socialism any more than public schools do - so if you want to argue that point go ahead. It’s silly and meaningless hot air trumpeted by the right wing to perversely twist up the difference between Obama and McCain.

Now, the facts about how your taxes will increase if you make more than 250K/year.

For anyone that knows the tiniest bit about taxes (again, I know my way around this issue quite substantially) you are taxed on brackets of money, not the entire sum. Let’s use really really simple examples: let’s assume a ridiculously simple progressive tax system so that I can make my point:

• If you make less than $10,000 per year you pay nothing
• If you make $10,000 -> $19,999 per year you pay 10%
• If you make more than $20,000 per year you pay 20%

This mechanism became clear when we received the stimulus package earlier this year. How is it that EVERYONE received a check for $300/$600 or more? That’s because the “refund” was attributed to the lowest 10K of earnings, making it so that anyone that made more than 10K/year “paid too much” and was due a refund. Confusing, I know, but that’s how they make it work and make it fair.

Again, ridiculously simple so that I can make my point. This year, you make $23,000, so how much do you pay?

• You pay $0.00 on the first $10,000 you made
• You pay $1000 on the money made between 10K and 20K ie., 10% on 10,000
• You pay $600 on the money made about 20K, or 20% on $3000.

So in this example, you would have paid $1600 in taxes. I make this example because Joe the Plumber (stop with the “He doesn’t really exist” and “He’s not really a plumber,” not germane here) said the company he wants to purchase makes 270-280K/year. Although I can’t do the exact calculations because it’s a little tricky, essentially, here is the breakdown:

• He will get a tax break on the first $150,000 made by the company
• He’ll get the same rate as today on the money made between 150K and 250K
• He’ll pay not 35% but 38% on the amount above 250K - the return to the old rate is a bump of 3%.

This means that Joe the Plumber will pay and additional 3% on the 20-30K made per year in his new business, essentially a difference of $900 if it’s on the high side. However, because the way our tax system works, that particular amount will probably still equal a tax break for him, because the tax break on the lowest $150K will still probably be larger than $900. Taxes revenue kicks in really substantially when an entity is making considerably more than 250K/year.

What price, socialism? In this case, it’s $900. Why don’t we hear it this way from the pundits and the candidates themselves? As you just read, tax code is complicated and makes a difficult story. But the McCain camp is using that very story-difficulty to make the case that Obama’s plan is horrible and gonna cause enormous difficulties for our country. To be really clear: The top earners in the country will return to the tax brackets that they were at during the Reagan and Clinton administrations, on the money greater than $250K/year that they earn. Is “burden” too great for our top earners? I dunno, seems that during that tax bracket layout we had some pretty great times during the early Reagan years and the Clinton administration. I’d say that history, as a guide, is unkind to the McCain argument that this is an unfair burden to our wealthiest corporations and people.

To paraphrase Kennedy, “If this is what they call socialism, then I am a socialist.” People please wake up and do your own fact checking. This campaign is so far off the truth scale it’s just not even funny. This stuff is neither partisan or biased by my clearly-liberal leanings.

It’s our current American reality. You’re welcome.

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posted by perkiset on Oct 27

I wouldn’t usually do this, but this comment just so perfectly typifies the right wing spirit of anger and nescience I have to replay it. I’ve added paragraphs for readability, otherwise it is here in it’s original form.
 

First off, I think it’s important to note that I do not enjoy, condone, approve of or in any way support vandalism or disrespect to other people’s property at any time and for any reason. My primary notion of Liberty is that as soon as YOUR notion of Liberty impinges on MINE then the law should immediately be employed to remove us to our separate corners. I am saddened that anyone in support of Obama’s campaign would do that, and you are right to be pissed off about it. I must say, however, that given your clear political slant and lack of penetrating vision or grand scheme of things, I’d like to see a little more scientific data that the McCain signs are always pulled out of your yard but the Obama signs are always fine. I find that dubious.

I’d like to take a moment with some of your points. First, after 21 months of campaigning, how can anyone say that Obama has gotten a free pass while Palin has been treated with disrespect? It is fair that the 21 months of vetting that have been applied to Obama, McCain, even Biden because he’s run for president twice now should be levied against Palin, who until a few weeks ago was a complete unknown to the country. And it is not disrespectful to plunge hard into areas that we need to know about… like her ties to the successionist Alaska Independence Party, or how she left Wasilla in debt to the tune of millions even though she started her tenure with a surplus, or her behavior during the so-called “trooper-gate” (an admittedly stupid name) or her being involved in a church where the pastor still performs witch hunts? You would say that piercing these issues is less respectful than, say, continually bringing up Reverend Wright for Obama or pushing the Bill Ayers thing? It was important for those things to come out about Obama and it was important to see how he handled them. He will find far less amenable enemies on the world stage than even the Congressional one.

And questioning Obama and his school record? Are you kidding me? Do you really think that Obama is that capable, that magical that he managed to fanagle his way into Harvard, dupe the school administration into making him #1 in his class and hypnotize the entire student body such that he would be elected the first African American president of the Harvard Law Review? Do you realize how silly that sounds?

Your first and final statement about looking for a learned and reasonable man (and being disappointed) and the notion that I have no intellectual honesty re. politics really cement the view. Reactionaries such as yourself look simply for items that help you inflame your own anger rather than facts and historical review to support a future direction. I understand, clearly, why our country is in trouble when I read comments like that. It is even more clear that we need to double the budget for education in our country, and right quick.

The Republican talking points mentioned here and argued ad infinitum by the McCain lemmings and the Republicans that just can’t admit that he’s wrong for the job are just silly. Let’s look at a couple, shall we?

• Obama will raise taxes.
• Palin has much more experience than Obama
• Obama will just raise your taxes.
• We need mavericks in the white house, the kind that McCain and Palin have been all along.
• Obama will kill the economy by raising taxes.
• Obama is a muslim.
• Did I mention that Obama will raise taxes?
• Obama pals around with terrorists.
• Obama will make Al Quaeda all happy and warm inside.
• Obama will ruin the health care system because he’s a socialist.
• Obama will raise taxes.
• Obama is a communist.
• Obama isn’t really an American.
• Obama is anti-American.
• Obama will raise taxes.
• We are in more danger of an attack with an Obama presidency.
• Do we really want someone with a middle name “Hussein” in the white house?
• Obama is unproven.

It’d be lovely if the Republicans actually had a plan, or realistic points to argue - but instead they deflect from their own massive failures to meaningless points and lies. It’s going to be a long 8 days and a longer 4 years I’m afraid.

Thanks, Trex, for making this post and, ironically, my point. As a side note - I’m happy to take responsibility for the people I vote for, unlike the Republicans of today that seem to think Bush was some form of aberration. I’ll stand by whatever happens.

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posted by perkiset on Oct 25

In a surprisingly candid interview with Congress, Alan Greenspan, Lord of the Free Market Conservatives, admitted this week that he was wrong in his assumption that “Banks were the best at managing their own risk.” This surprising admission goes contrary to literally, 40 years of fierce support of the Conservative view of the market, wherein market entities can fix anything themselves and the government is simply a hinderance. We went on to say that the financial bailout package was both necessary and the right fix for our ailing economy.

I am enthused, that if (arguably) the loudest voice for unrestrained capitalism has begun to swing left, there is a cooler-head approach to our future. Could it be that even the most staunch supports of the free market have begun to understand that the free market is not 42? It is not the Answer to Life, the Universe, and Everything?

For those that don’t know, Corporations came into real prominence during the 17th century, most famously with the Dutch East India Trading Company, and later with the British East India Trading Company. Although the notion of corpus, Latin for body of people had existed since the Roman times, it really took hold during this pre-enlightenment era of international trade, starting around 1600 and really kicking into gear in the late 1600s and early 1700s. One of the primary focuses of the “Chartered Company” (so known at the time) was to limit the liability the shareholders of a venture - ie., if the ship sank, the shareholders could not be held liable for the capital lost on the sunk ship. At that time, and even today, I’d argue that this provision of corporate structure is vital and alive today, as it should be.

The notion of the “modern corporation” came into existence between 1898 and 1904, as market forces and deregulation became popular, the keynote moment really being Santa Clara County v. Southern Pacific Railroad which cleared the way for a new type of merger and corporate acquisition between corporate entities. Unfortunately, this ruling also is the accepted turning point for the notion of “Corporate Personhood,” an ongoing debate about how corporations should be treated to the same rights and privileges as a person, yet they retain the protection and corporate veil from government.

It is this very issue that is at the core of the current financial crisis: Corporations want unrestrained capability and the privilege of being literally, outside the law. This allows them to exercise business as they see fit, irrespective of the benefits or issues created by their activities towards the society in general. And it is here that I have my largest issue with Conservatives.

Conservatives argue that Corporations are better left alone because this is best for the country - they will find the best path forward because they are motivated by profit. I argue that profit is not necessarily the best motivation, when the betterment of the nation and our national society is at stake. The primary difference, and one that you only know if you actually have a corporation (I have many) is that you are bound by law to jealously hold the fiscal and future growth of your corporation at the forefront of every effort. Ergo, legally speaking, if dumping Mercury into a river positively affects your bottom line, then it’s the right way to go regardless of the detriment to the river, or humanity in general. Some argue the notion of “Compassionate Corporatism,” green corporations, and responsible business are the future - I’d argue that these are anomalies and are contrary to the nature of a corporation. There will be people that see long-term enough to know that dumping mercury into a river will eventually hurt the corporation because it kills it’s prospective customers, but most will continue to not give a damn, being more interested in the next quarters earnings report.

Government, for however much you may despise how slow it works or ineffectual it is at times, is supposed to have, as it’s primary mission, the benefit and protection of it’s people. Ergo, it is in direct conflict with the corporate charter and is the only real enemy that a corporation has to it’s future growth, because the government - a “board of directors made up of the body of the nation” can issue orders that countermand efforts of the corporation.

Over the last 30 years, seeing that Government has become more effective at stopping Corporations from doing what they want, conservatives (the collective patron saint of corporate privacy) have assumed a new tact: they have fostered an irrational contempt and propagated a contemporary myth that Government is the enemy, and is the reason for poverty, lack of national growth etc. The corollary to this has been a peculiar political state, where people actually vote contrary to their own interests because they’ve been convinced that the free market is better at taking care of them (or more precisely, for “creating opportunity”) than the government. Why is this contrary to their own interest? Because government is supposed to protect them, corporations protect themselves. Irrespective of what’s best for (the collective you), the corporation will navigate the future with the impetus of what is best for itself.

This piece is not to say that government is the be-all-end-all and CERTAINLY not the most effective entity around. In fact, it is our patriotic duty to both question and audit our government at every turn, because as I mention in those last few words - it is our government. In effect, the government is our own corporation - built with the charter of helping us to maintain our liberties, provide for the common good and protecting us from enemies both foreign and domestic. To this end, claiming government as the enemy essentially says that we, ourselves are the enemy - because if government is not going the way we want it, we must change it with our voices, vote and at times, civil disobedience as required.

It is neither unpatriotic or anti-American to take this line of thought. In fact, it’s ultimately American: As we have seen, Corporations really don’t give a damn what flag they fly under. Moreover, corporations will change flags as necessary to continue their growth. Corporations are really a virus on the societal body - they exist by taking from the populace with no requirement to give back - only to preside over their own growth. Much like a cancerous tumor, a renegade Haliburton, for example (hmmm, a bit redundant there, eh?) exists on the fuel of societal blood (tax dollars) with no care for the health of the host (our common good) at all. The ultimate act of patriotism is in fact to work hard to make sure that our government reflects our common wants, desires and provides a balanced opportunity for all people to prosper. It is in this vein that the difference between John McSame and Barack Obama becomes more clear.

I don’t want to hear comments from W2 people saying that corporations and the free market are the right way to go, that the free market is better than the government at stewarding our future - because unless you actually have a corporation and have been behaving correctly as one for quite a while, you really don’t have a valid opinion on their capability as shepherd. Unless you are an active member of the free market, you have no experience of the reality of the responsibility - you only have what you have what you have been told.

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posted by perkiset on Oct 23

This morning on CSPAN Alan Greenspan was taped giving testimony about the financial crisis and it’s causes. He confirmed that it was the ability for banks to purchase Mortgage Backed Securities that was the essential cause of the problem, although he added one word which I neglected in my previous post, Sub-Prime Mortgage Backed Securities. Again, this was made possible because of the Grahm-Leach-Briley act, which dismantled the Glass-Steagal act of 1933, authored by Phil Grahm, John McCain’s shadow financial advisor.

He went on to say that there would have been some troubles in any case because of the housing bubble’s collapse, which would have occurred anyway. The crisis would have been far more slight, or perhaps not even labeled a “Crisis” had the gigantic amount of bad mortgages went tits-up: there still would have been banking collapses, but not the wholesale run on the international economy.

He stopped short of decrying free market deregulation, but implied that the ideology had failed him and that the 700BB bailout package was both required and up to the task of shoring up the markets, evidence is being seen already. He was also optimistic that, although there will be a rather severe “correction” (read recession, lots of gnashing of teeth and rending of shirts) that the economy will bounce back and that in due time, “investors will readdress their association with risk” ie., at some point, they’ll start investing in the stock market again.

Wow. Glad he cleared that up.

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posted by perkiset on Oct 22

Why you should read this: It explains the financial crisis and how it relates to this election cycle. It is fair and well researched and can be used in discussions and debate.

One of PinkHat’s and my dearest friends sent us an email this morning, containing an argument asserting that it was Democrats who caused the financial meltdown, not the Republicans and how we must really make sure that this doesn’t happen again with an Obama Presidency.

At the core of the argument, is an inaccurate, but compelling assertion that Republicans tried to tighten the rules around the housing industry and it was the Democrats that loosened everything up and created the problems.

Setting aside, for just a moment, the fact that Republicans are the party of deregulation and continually assault the Democrats for wanting more government “intervention” in the form of regulation – does this argument have any basis in fact at all?

So what I decided to do was outline exactly what did happen. My opinion is at the bottom. This next section is research conducted by myself with an unbiased eye – since I now own mortgage houses, insurance companies and banking institutions with a lot of you, I decided to do a little due diligence on exactly what’s going on. Any good lie is constructed of some truth, so I thought I’d pass on what I found. (BTW, I’m not going to provide links to all my sources, but this is all REALLY easily Googled). This is perhaps my longest post ever, but I implore you to take a moment to read it - I think it will be very worth your time for next time when someone you talk to is confused about “how we got here.”

In the beginning…
In 1933, a new law called the Glass-Steigal act built a wall between investment organizations and commercial banking operations to avoid and head off the problems that had originally caused the Great Depression.

In the late 90s, Clinton was under enormous pressure to relax the restrictions on the banking and investment community. The primary dike in their way was Glass-Steigal. Part of the impetus here, was that Alan Greenspan had, for so long now (at that time) been simply lowering interest rates to continue goosing the economy – but the when we hit about zero % as the prime rate, there was no where else to go and something had to be done to keep the money merry-go-round spinning.

The Camel and the Straw
So Senator Phil Grahm and his supporters authored the Grahm-Leach-Bliley act (GLBA), which essentially dismantled the Glass-Steigal. In 1999, under pressure by a majority Republican Congress and (to a certain extent) left powerless by the Monica Lewinsky fiasco, a neutered President Clinton allowed the passage of Senator Grahm’s legislation. As an aside, Clinton has now claimed that he does not think passage of the act contributed in a major way to the current crisis, and, ironically, the legislation allowed for a component of the bailout (the purchase of Merril Lynch by BofA) that would have been considerably more difficult, if possible at all, while Glass-Steigal was in effect. It remains, however, a keystone point (if wonky and difficult to understand) that this deregulation was the genesis of the dance that commenced thereafter.

A Perfect Blend
Another interesting parallel problem was that mortgage rules and restrictions had been eliminated in a host of minor deregulatory moves where, it seems, no one anticipated the “perfect storm” they would create when the whole became greater than the sum of the parts. Two of the most damaging issues were the rise and mass sale of reverse-mortgage loans with teaser rates (pay only 1% for the first year!) combined with No-Doc loans (No Document, meaning that you could simply say, “I make [x]” and not have to prove it) – meaning that people who could not afford a traditional mortgage could now purchase a big house on the assumption that the value would go up, they’d be able to sell in a couple years at a big profit and they didn’t even need to prove that they could afford the entry rate. (A reverse mortgage has the interesting effect that it is still at the real interest level of the loan, but since you only pay the teaser rate of 1% for a year, the 5.5% unpaid interest gets lumped back into your capital investment hence the “reverse” part of the mortgage).

So now, Fannie Mae and Freddie Mac, which do not actually directly lend money, but in fact back up people that do, were now being forced to accept mortgages that were considerably less secure than before. They, along with other organizations that purchased mortgages were beginning to have lots of tiny pinholes in their portfolio that didn’t look very good.

The Genesis of a Monster
So came the creation of Mortgage Backed Securities (MBS), which are a direct result of the GLBA. These huge and confusing packages were essentially lots and lots of mortgages (think dozens of thousands) into a single package that could now be sold to investment firms as a security, rather than a retail mortgage, again, normally controlled and restricted to the commercial banking industry.

Here’s where it started to get interesting: houses that bought these securities would dismantle them and reconstruct them into new securities – using complicated and utterly incomprehensible mathematics created by academics, mathematicians and physicists (Really! Even Physicists!) the mortgages and security bundles were recombined into packages that were sold yet again, and again. Obviously, along the way the effort was to eliminate the risk inherent in such securities from MY firm and pass them on to others. Unfortunately, the mechanisms were so pervasive and ubiquitous that while I was selling one out my front door, the investment people on the back side of my operation are buying some from other vendors. The net result was a convoluted web of bad mortgages spread not just across our banking, investment and insurance companies, but in fact around the world.

Then it got really bad.
The next problem was that people started to catch on that these were crappy securities, so how to sell them and get them off the books? Well, insure them of course! Sell them with insurance that will “guarantee” to another investor that they’ll get the assets in the investment as well as insurance that they won’t lose value! But how to do this? Insurance is regulated like crazy, so a new mechanism was necessary.

The Placebo
Enter, Credit Default Swaps (CDS). This essentially allowed investment houses to “swap” money for risk against a security – since they used the word “swap” it is not insurance, but the action is the same. So now there’s people betting on the come, that these MBS would not fail and they’d walk away with the insurance/swap money paid.

Disease Strikes
Next problem: the housing bubble that kept driving prices up, up, up was now beginning to deflate and houses were not being sold at the rate or value initially hoped. And the adjustable rate mortgages and reverse mortgages that people had purchased were now adjusting – in some cases people’s monthly note went up as much as 200% in a single month. No longer able to pay the rate but unable to sell the home, they began to default. And default they did, to the tune of about 1.5 million homes by the beginning of this year.

Now banks that held these mortgages were suddenly in a crunch: there were no longer receiving the income from mortgages, but still needed to have lots of cash on hand for the swing loans and credit lines that a VAST number of American businesses rely on to operate. As the MBSs failed, they started to call in the CDSs, putting insurance holders into a bad place, because they never thought there’d be such an amount of failure. As they failed and were unable to pay the MBS holders the MBS holders began to fail.

Finally it was like a house of cards that no longer had any support – as critical banking and investment first started failing they caused the failure of others… which began to infect the entire rest of the world, which meant that international credit started to dry up furthering the tailspin.

Net Results
The financial “Bail Out” package that is so confusing to everyone is essentially a mechanism to try and stop the tailspin. By lending money to investment and banking institutions, then can continue to support businesses with their credit lines and swing loans, keeping people in business – because the next step in this maelstrom is that businesses start going out of business en masse – meaning more unemployment, meaning more mortgage defaults… meaning more failed securities, meaning more credit default swap failures, meaning more failed financial institutions, meaning less available money and trust, meaning more tightening of the financial system, meaning more businesses going out of business… it’s pretty ugly.

My Opinion
If you made it this far I’m impressed and grateful. There was a lot of research that went into that. Note that at virtually every turn in this fiasco, it was the lack of regulation that allowed something to slip outside of a safe band. Republicans can argue all day long that it’s regulation that inhibits business growth, but in this case, we can see that the lack of regulation allowed businesses to essentially eat themselves. The argument is made that “Banks know and understand risk better than the government, so we should allow them to do what they think is best.” Well, it just doesn’t seem so in this case, now does it?

At the core of all this is a greed-based ponzi scheme – or a sort of pyramid party where the first people into the MBSs made out like frigging bandits, and the people that came to the pyramid party late got left holding the bag.

Ironically, it is the Republicans that say We The People suffer greater taxes because regulation inhibits industry. I submit that we’re paying WAY more now because the lack of regulation allowed the shark that is rampant, unrestricted capitalism to eat itself.

John McCain is a deregulator – he’s been a proud supporter of that position since his earliest days in Congress. Barack Obama is in favor of much more stringent regulation. While you watch your IRA and 401(k) sink, consider hard which you think is a better policy. Those that would evangelize an unrestrained free-market economy probably live on Wall Street and have the knowing to get into the pyramid party before you and I. They are wrong and we’re the ones paying for it.

Vote for Barack Obama and a Democratic Congress on November 4th.

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