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September 22, 2008

Comments

It's easy to "monday-morning-quarterback" this debacle, but the fact is it happened and blame can be cast in every direction. Of course we don't want government intervention and the screw-ups don't deserve a bailout, but without liquidity and capital this economy will sink. The medicine is bitter and may be too little too late, but there is a glimmer of hope. In the meantime, hold hard assets and not cash.

Whatever is left of the economy after the current round of crisis interventions by the Fed could go down the drain if Obama is elected and carries out his plans for sharp increases in taxation. Even if Obama does not understand the linkage, most Americans do and will turn sharply against Obama’s tax plans if McCain hammers away at the risk they pose for us all.

During the Great Depression, Congress raised taxes sharply in the Revenue Act of 1932. The top rate went from 25% to 63%. As a result, the real GDP dropped by 13.3% and unemployment rose from 15.9% to 23.6%.

In 1990, Bush Sr. famously broke his “read my lips – no new taxes” pledge of the 1988 campaign and raised the federal gasoline tax, federal excise taxes, and imposed 10% surtax on the top income bracket, raising its taxes to 31%. The recession which followed in 1991-1992 cost him re-election.

It is obvious that increasing capital gains taxes by a minimum of one-third and possibly doubling them, both of which Obama has proposed during his campaign, would send a clear signal to investors to keep their money under the mattress. Who would buy stock now knowing that the tax on any profits he or she will make is going to go up sharply if Obama becomes president?

Look at what happened just last year in Michigan. Democratic governor Jennifer Granholm raised taxes on almost everything in 2007. Income taxes shot up 11.5% and the state’s 6 percent sales tax was expanded to dozens of new services like investment advice, janitorial services, landscaping, ski lifts,=2 0carpet cleaning, and tanning. The $1.75 billion tax package shook the economy to its foundations. Michigan became the only one of the fifty states with a shrinking gross domestic product (GDP). The value of all goods and services produced in the state fell by one half of one percent while the national GDP rose by 3.4%. The state fell from 23rd in GDP to 35th. Taxes caused a disaster.

In a strong economy, Obama’s tax hikes would raise questions. In a weak economy, they portend a catastrophe. It would be like bleeding a sick patient, the medicine of two hundred years ago, depriving him of blood even as he needs more not less circulating through his arteries.

McCain’s populist rhetoric, including his pledge to fire SEC Chairman former Congressman Christopher Cox, is important for a Republican candidate. But his focus should shift to the tax issue. With firms suffering, withering, and dying for a lack of capital, tax increases on those who invest would be a horrible mistake. Americans will realize this obvious fact and McCain should use it to gain the advantage in discussing the economy. There is no reason for the economy to work to Obama’s advantage when he is committed to a doctrinaire program of tax increases and spending hikes. McCain can use the issue to run rings around him, if he's smart enough to do it.


Condor, Obama does not want to increase taxes for everyone; and what he does when he gets in, you don't know about McCain either. We are in a mess and our government is borrowing money that currently costs $.22 of every tax dollar just to pay the interest. Do you believe that can go on? You ignore the connections between McCain and what has happened, all those working with him who have had a hand in this and profited from it. You ignore anything that would show McCain and Palin as inept because you want to vote for them. I obviously don't know you but could it be you don't want to vote for a black man even if he's half white and you can't admit the truth? To me it doesn't make logical sense to look at McCain's connection to all of this and think he can fix it. He will get us into another war (maybe two) and then where will we be? You appear not to be thinking aboutyour vote, other than justifying it to yourself, but I hope you will look at where our country is and think about whether those who got us here can be trusted to get us out! Obama is not the danger. I hear some say well I have black friends. Maybe they do but are they somehow afraid a black can't be trusted to lead them? The only time my husband got asked if he minded having a switch to a new boss, it was to a black man. My husband didn't mind and the black man was one of his best bosses. I hope those who are secretly bigots will stop and look at what they are going to get by that attitude. Not saying you are one, Condor, but you might ask yourself what Republicans have done for you personally and where our country is right now with their leadership and then look at the possibility that change is needed badly!

I also oppose the immediate bail out. We may need to do something but looking at what Paulson proposed would lead us to more of the same with no fix and a lot deeper in debt. Blank checks to the ones who got us here? That's crazy!

For anyone who has not read Naomi Klein's 2007 book 'The Shock Doctrine, The Rise of Disaster Capitalism,' you see how this is playing out once more. Will the American people again fall for it? I hope not.

http://twocanpete.blogspot.com/
Of course the Democrats are to blame! More importantly it's Bill Clinton's fault. In fact Bill Clinton is directly responsible for every evil act in the world! Don't you people know anything? When Obama takes over next January everything will be his fault and he will be the third most evil indivual to walk the planet, just behind Bill and Hillary Clinton. Don't believe me? Just ask any repub.

Rains comments are in quotes:

"Do you believe that [govt. borrowing] can go on?"

...Your question was rhetorical I hope, but in case it wasn't the answer is: of course not. The bleeding must stop.

"You ignore the connections between McCain and what has happened,"

...Come on. This thing has been a long time coming and McCain's role is miniscule compared to the delusional mass consciousness of indiscriminate and irresponsible use of debt. The fault runs from the bottom up, and from the top down, political left or right. Greed knows no party lines.

"You ignore anything that would show McCain and Palin as inept because you want to vote for them."

...Man, now there's a pot calling the kettle black.

"could it be you don't want to vote for a black man even if he's half white and you can't admit the truth?"

...OK. So, you are saying that the only reason I could be crazy enough to vote for McCalin is that deep down I am a racist?

I think a lot of white people are crazy enough to vote for Obama because he is black. It's whites who need to convince themselves that they are egalitarian and non-racist.."I'm so open-minded that I am voting for a black man for president." You know there are those types. Are you one? It's to soothe some kind of guilt trip and atone for the wrongs of past generations, I guess, which is a lousy reason to put someone in office.

You know the black vote is purely racist when 96% of them, according to polls, will vote for Obama. So, don't get on me about being racist, if I was, when most blacks are voting along racial lines. Whites are not the only racists.

But I agree even more significant is the fact that there are many whites who WON'T vote for a black president. Some will admit it straight up, but that breed is gradually vanishing. There are the silent racists who, while they have cordial relationships with blacks, deep down harbor a subtle prejudice and feel uncomfortable with them in positions of power although they would never admit it. I think this factor will play a major role in this election even though it's effect will never be known because it is difficult to quantify subconscious motivations.

"you might ask yourself what Republicans have done for you personally and where our country is right now with their leadership and then look at the possibility that change is needed badly!"

...I might ask myself what have republicans OR democrats done for me lately? Like the wonderful Barney Frank, democratic chairman of the House Finance Committee who actually encouraged conditions that led to this debacle by encouraging sub-prime loans to people who never should have gotten them. Or, the scintillating accomplishments of the democratic congress led by Ms. Pelosi. Or the massive debt incured by the city of San Francisco under the leadership of the ultra liberal democratic mayor. I have no reason to trust dems or republicans.

Of course change is needed, but it's not democrat or republican leadership that we need, it's COMPETENT leadership we need. Both parties tend to suck because most of them are politicians first and servants of the people second if at all.

"I also oppose the immediate bail out."

...I oppose it in principle, but without it we're in a depression for sure. As it is, it looks like that's what we're in for anyway, but at least the bail out gives us a chance if it's structured properly. Also, there is the possibility the bad paper assumed by the government, at pennies on the dollar, could actually be a money maker for Uncle Sam if the economy turns around and they liquidate the debt for more than they paid for it.

"Blank checks to the ones who got us here? That's crazy!"

--As bad as they are we need the big financials operating with some liquidity right now. Otherwise, we sink. Sometimes you have to walk hand in hand with the devil until the bridge is crossed.

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