onpolitics

It was interesting to watch the dialoge between McCain and Obama on the topic of “Joe the Plumber.”  Obama ran into Joe during a campaign rally, and Joe remarked that he would not be able to purchase the plumbing company that employees him because the company earns more than $250k and therefore Joe’s taxes would increase under Obama’s plan.  If that was the case, Joe didn’t want to pay more in taxes and it would no longer be feasible to purchase the company.

Joe thought it was incredibly unfair that he would be taxed more.  Just because a company earns $250k on a tax form doesn’t mean the business owner sees those funds.  Joe mentioned that he would be paying off the company over a number of years.  So those funds the company earns, and Joe is taxed on, go right back to the bank, or the original owner who is financing the purchase.  If Joe has to purchase equipment for his business and doesn’t depreciate it all in one year, he’ll be taxed on income that he used to purchase equipment for his business.  He doesn’t have the income because it was paid to the equipment company. But he’s being taxed on it.

Sole Proprietorships and Partnerships are currently being taxed at 37.9% and under Obama’s plan, it will rise to a staggering 50.3%.   Joe is going to owe over $94k in taxes under the current plan, and over $125k under Obama’s plan. On paper the company may have earned $250k, but in reality there may not $125k sitting in the bank at the end of the year. 

This is the problem with raising the individual tax rate for those “earning” over $250k.  The business “income” is not true income to the individual.  The individual did not “earn” that income, and did not receive a check for the money.   But Obama is ready to spend it. 

The best line of the debate was by John McCain, who in response to Obama’s repeated accusation of four more years of the Bush policies stated: “I am not President Bush. If you wanted to run against President Bush you should have run four years ago.”

I don’t believe John McCain has ever stated that he intends to stick with the economic policies of President Bush. I do believe that our economy is in serious trouble and it will be quite some time before we have another economic boom. But I question anyone who puts all of the blame for this on President Bush.

Many of the policies that have contributed to the state of our economy today were passed by Democratic Presidents and a democratically controlled congress. No President can act alone. Policies, budgets and spending must have the support of Congress to pass. Both parties are at fault and both candidates recognize there needs to be a change.

A notable comment by Barak Obama was: “We can’t drill our way out of the problem” when discussing our energy policy and drilling offshore. We use 25% of the worlds’ oil but only have 3% within our borders. We do need to implement alternative technologies.

The most noteable fruedian slip was by McCain, who called Obama “Senator Government” in a flustered statement surrounding Obama’s beliefs in bigger government.

Political Author William Safire defines Creeping Socialism as “Measures increasing the sphere of government activity that are accused of having the cummulative effect of undermining private enterprise.” Safire’s Political Dictionary, 2008, Page 157. Safire points out that this phrase went out of favor with Eisenhower in 1953, as it was deemed the “hallmark of the Old Guard Republicans.” Perhaps it is time we resurrect the term.

Karl Marx claimed that socialism was the transitional stage between capitalism and communism. Socialst principles are that wealth should be redistributed to make a more even society, because capitalism concentrates power and wealth into a small section of society.

Over the last month we have seen government stepping in to “save” aka “purchase” major US institutions in the banking, automotive, insurance and brokerage industries. Add to this, the increasing incidents where our democratic candidate for president, Barack Obama, proudly proclaims we need to redistribute the wealth.

It is a noble ideology that everyone in the United States be on equal financial footing. However it is unpatriotic to achieve this through taking the money from some and giving it to others. What we NEED to do, is create an even playing field for all; give everyone the opportunity to succeed. And we can start by eliminating wasteful government spending. Don’t raise taxes on anyone. Lower government spending instead.

What is our government’s role? To take from the rich and give to the poor? No. I don’t think so. This has been the primary distinguishing point for me when I call myself a Republican, and why the Republican party is so obviously the party of my choice.

Our government should provide basic services, those listed in the Constitution, and leave the rest to the private sector. Somehow we have morphed these fundamental principles into a a multi-trillion dollar beomoth which even the most prosperous nation in the world can not manage or fund.

A basic refresher, these are the functions of our Government as listed in the Preamble of our Constitution: establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.

 We are quickly and irrevocably moving toward the path to socialism, and what lies beyond that is incomprehensible.

As the owner of a couple of restaurants, I watch with interest each candidate’s plan for helping small businesses.  This morning I watched Obama claim his plans begin with “J-O-B-S” and he will give a tax credit for every company that hires a US worker.  What he didn’t say was “at what salary?” Will I get a tax break for hiring someone at $28k?  Probably not.  Can my restaurant afford to hire someone at $60k a year? Absolutely not.  So chances are that tax break which is part of the Obama plan isn’t for my small business.  Obama’s plan calls for a 90 day moratoriam on all foreclosures; $10k from your 401k without the 10% tax on early withdrawal and a Federal Reserve bailout on states and cities who have overspent and find themselves in financial troubles.   This may help cities that planned to fund themselves with building permit fees, but none of these will keep open the doors of my restaurant. 

All of this will come at a cost of $60 billion.  Plus Obama has suggested $115 billion in additional spending; $65 billion of which is tax savings and $50 billion is spending like stimulus checks. Originally Obama had planned on paying for this from a windfall tax on the oil companies (tax the rich and give to the poor just like Robin Hood), but since the oil price has dropped, the campaign is no longer planning on this as a revenue source.  So where are we getting the money for this new stimulus package?  Questions to ponder.

Coming soon, Part II.  McCain’s plan.  Eventually, we’ll hear it.  And then we can make a choice as to who will really help the small businesses.

Many people have asked me over the last several days my thoughts on Senator McCains’ Vice Presidential running mate. My response: “She’s my hero.” It was an emotional moment when I found out that it was a woman that McCain choose for Vice President. And then as I watched Governor Sarah Palin’s acceptance speech that morning I was astounded to find out she was an outspoken woman who had taken on the old boys network and eliminated corruption in the government around her. A woman who believes that government should work for ALL of the people, not the special interests that control politics today. A woman who believes in less taxes and less government; two issues on which I had recently campaigned.

Her description of her Mayoral platform was especially interesting to me: “My agenda was to stop wasteful spending, cut property taxes and put the people first.” I eagerly watched her Republican Convention speech later that week, and I came away even more impressed. She’s not perfect and she’s not polished. But she stands up for what she believes in. And Senator McCain told the World that a strong, outspoken woman is someone we want on our side.

I believe Governor Palin represents a new hope for women, and especially woman in politics. It is okay to speak up about issues that affect us. It is okay to not go along with the status quo. It is okay to question the good ole’ boys. It is okay to point out and to fight corruption. It is okay to be a soccer mom and to let the World know how important your family is to you. And it is okay to balance a career and a family.

Our Country learned a valuable lesson after the Great Depression; a lesson which the children of those leaders quickly forgot in their quest for power and greed. Now we find ourselves once again facing the collapse of our financial markets, the responsibility of which lies directly on the shoulders of our elected representatives. After the fall of the stock markets in the 1930’s a new policy was implemented, the Glass-Steagall Act, which separated our mortgage institutions from our investment banks and thus separated our banks from the stock market. It prevented a commercial bank from owing a brokerage and was an effort to eliminate the affects of speculation and conflicts of interest. But we forgot. We defined the “American Dream” as including owning your own home. And we became enraged because banks were deemed too conservative with their money and everyone didn’t qualify for a home loan.

So in 1977 Congress passed and President Carter signed into law the Community Reinvestment Act, which eliminated “red-lining” and required banks to grant mortgages on all properties within their service area. In 1995 Congress passed and President Clinton signed into law an amendment to the CRA, which forced banks to grant loans to those who had previously not qualified due to their net worth, income and credit histories. And so became the “sub-prime” loan. And it didn’t stop there. Greed kicked in.

Those huge banking, insurance and brokerage institutions wanted to become colossal and they grouped together to purchase a repeal of the Glass-Steagall Act. In 1997 and 1998 alone, the three industries spent over $300 million on the lobbying effort, contributing massive amounts to the campaigns of candidates of both parties. In 1998 Citibank leader Sandy Weill merged his company with Travelers to form Citigroup. This merger was a blatant violation of the Glass-Steagall Act, and an indication that our legislative and executive branch of government had been bought. Not surprisingly then, in 1999, President Clinton signed into law with the support of Alan Greenspan, Senator Phil Gramm and both sides of Congress the Gramm-Leach-Bliley Act, (also known as the Financial Services Modernization Act) which allowed the merger of financial, lending and insurance institutions. Critics at the time warned that allowing the combination of commercial banking with other industries might result in costly Federal bailouts.

In 2000 President Clinton signed into law the Commodity Futures Modernization Act. This act was lobbied for by Enron and sponsored by Senator Phil Gramm, who slid in the 262 page Act during the last minute negotiations of a $384-billion omnibus spending bill. The Act excluded Enron’s energy futures contracts from government oversight. In addition, it legalized mortgage swaps where the company writing a mortgage packaged it up and sold it to a third party. This encouraged lending institutions to grant questionable mortgages, sell them, and laugh all the way to the bank.

 Mortgage brokers became wealthy. The real estate market became wealthy. Banks used these sub-prime loan packages as collateral for other investments. And it was all unregulated. And guess what happened?

Robert Rubin left his role as Treasury Secretary under the Clinton Administration to take a multi-million dollar job at Citigroup. Citigroup has since written off over $18 billion in sub-prime mortgages and is exposed to $33 billion. Phil Gramm left the Senate to take a multi-million dollar job at Swiss bank UBS and is lobbying for even more deregulation. Shortly after the passage of the Gramm-Leach-Bliley Act UBS purchased brokerage PaineWebber Group. It has since written off over $37 billion in sub-prime debt. Wendy Gramm, the wife of Phil Gramm, served on the Enron board.

McCain has included Gramm as his economic advisor during the campaign however he is not listed on the Leadership Team on McCain’s website. Rumors are that McCain intends to install Gramm as Treasury Secretary should McCain win the election, however McCain has denied this. Among Obamma’s largest contributors is Swiss Bank UBS. Both of candidates need to assure the American voters that they will fight the self interest that runs rampant in Washington. 

These institutions became too big and too greedy, and both sides of Congress have, over the last eight years, failed the people who elected them to office. The $700 billion that President Bush has offered for the bail out is money taken from the American taxpayers. It’s our money.

As a Republican I agree with the principle of less government and thus less regulation. However if the U.S. taxpayers are going to be forced to foot the bill for insuring deposits, or bailing out an industry that fails, that industry needs to be regulated. To have repealed a law that was passed as a direct result of a previous financial disaster was irresponsible and an example of what is wrong with our elected representatives.

As the media engages in the predictable skeleton search in an attempt to discredit Governor Palin, I have attempted to investigate the multitude of rumors that are taking up an increasingly large amount of air time and column space.

The first is Palin’s alleged attempt to ban books from her local library. I’m not a proponent of book banning. In fact when any institution, or religion for that matter, attempts to ban inquires or knowledge or texts, it’s a clear indication of ulterior motives. Palin has admitted she asked what the process was for banning a book. No one has provided any evidence that Palin did anything more than inquire about a process. I will not hold an inquiry against anyone.

Another rumor that was concerning to me is Palin’s attempt to ban the teaching of evolution from Alaskan schools. Palin is on the record as stating that she believes evolution should be taught in science class. She also has stated that she would not oppose a science class discussing the theory of creationism if a student brought it up in class. I have no problem with this. In fact, I believe the theory of intelligent design is an interesting theory with some scientific basis that merits discussion. Banning the discussion of a theory puts those against discussing intelligent design in the same light as those who want to ban the teaching of evolution. One can’t claim to be open minded yet insist on stifling discussion or debate.

Other interesting statements she has made are that she is against same sex marriage, but believes it is unconstitutional to prohibit individuals from choosing same-sex partners for insurance benefits or hospitalization visitation. She also has made an interesting statement on abortion rights; claiming that abortion in cases of rape is a personal decision, and that she would choose life, which indicates to me that she recognizes abortion is a woman’s choice and not the government’s decision. She has stated she is a “feminist” and believes in equal rights for women.

She is outspoken on her own beliefs on these hotpoint issues, however she has no record that I know of attempting to legislate morality; instead focusing her administration on energy issues and weeding corruption out of our government process. I admit I was disappointed with her interview with Katie Couric. I was angry with the McCain campaign for not preparing her for those questions. But we all have off days. Whether Palin wasn’t prepped, or was distracted during the interview perhaps we’ll never know.

I thought Governor Palin’s performance at the debate with Senator Biden was spectacular. Going up against a long time incumbent is no easy task. The other guy knows details that can’t be learned in a month of campaigning. However Palin had done her research, gave articulate answers, kept her cool and kept Senator Biden on edge. Go Sarah go!

If you want to see a politician squirm ask the question “Why don’t you go to the people directly and offer them the option of refinancing their home?” Then just to be cruel, ask “And why don’t you expand these new low interest loans to the people who aren’t in default yet, but qualified for their loan at the time they received it?” Our Washington politicians voted to give the money to the banks who abused the process and got us all in this mess in the first place, but won’t consider giving a loan to the PEOPLE they represent. Think of what you could do with a 3.5% mortgate and an extra $1,000 in your pocket each month. Make a call or send an e-mail to your Senator and Representatives today. Ask the question and DEMAND an answer.
http://www.senate.gov/general/contact_information/senators_cfm.cfm
https://forms.house.gov/wyr/welcome.shtml

How did a $250k mortgage result in a financial crisis? A family without sufficient income purchases home from a local bank or mortgage broker The mortgage is sold to an investor during a process called securitization. These investors purchase the loans and package them up into a product called a mortgage backed security (MBS). The MBS is sold to investment banks, which then package multiple MBS’s into Collateralized Mortgage Obligations (CMO’s) The CMO is sold to institutional investors, investment banks, pension funds and insurance companies who re-package them into different risk categories. The result is that the balance sheets of these large firms depend on the payback of these sub-prime mortgages. Add into the mix dropping home values and a larger than expected default rate on those sub-prime loans, and those companies that insured the mortgages against default could no longer pay the insurance premiums to the holders of the CMO’s. So now no one knows how much the assets are really worth, since the insurance companies may or may not pay if the mortgage holder defaults. And this resulted in banks ceasing lending to other banks because they don’t know the value of the assets of those other banks. But how does this all result in another depression? I still eagerly await someone to clearly articulate the doomsday that was touted as a foregone conclusion without “The Bailout.” An economist pontificating on television the cause of the Great Depression blamed bigger government and more regulation as the cause – something we just spent $700 billion implementing. Back then FDR raised taxes on businesses which caused businesses to shut down. This may have been a major factor prolonging the Great Depression. The answer is not bigger government – any Republican should know this. You can’t legislate yourself out of a depression. Obama has listed many admirable but expensive goals which result in bigger government and more spending. McCain has vowed to put a virtual spending freeze on the federal government. However both voted for the bailout. Both will be equally to blame for its ineffectiveness.