Economic Jihad

July 29, 2011

We are fast approaching the 10th anniversary of the horrors inflicted on our nation by ultra-fanatic and radical religious extremists intent on causing unspeakable physical damage and wholesale loss of life.

September 11, 2001 marked the first time that any foreign power had successfully invaded the U.S. causing major chaos and catastrophe.

Our nation responded swiftly and in a unified, bi-partisan and multi-faceted manner.

We may have failed to recognize the ultimate goal of Al-Qaeda in their plan to destroy the U.S. both physically and economically. It has been said, “The U.S. economy will finally collapse under the strain of too many engagements in too many places, making the world wide economic system which is depended by the U.S. also collapse leading to global political instability, which in turn leads to a global jihad led by Al-Qaeda and a Wahhabi Caliphate will then be installed across the world”.

What apparently has not been said (or if it has, not very loudly!) is that the Tea Party Extremists are playing right into Al Qaeda’s grand plan.

Where Al Qaeda expected it would take until 2020 to collapse the U.S. economy, the work that is presently being done by John Boehner, Eric Cantor, Michele Bachmann (and more) — under the careful and watchful oversight of shadow characters Grover Norquist, Mark Meckler, Jenny Beth Martin, Judson Phillips Dick Armey and others – has almost guaranteed early success!

It is also clear that the system developed by the Fathers of our Country in the late 18th century is no longer relevant or effective.

We have evolved to a political system where election to public office has virtually nothing to do with experience, ability or integrity. It is clearly all about selfishness, duplicity and shadow special interest groups.

The news this week from Standard & Poor’s about a probable downgrade of the U.S. credit rating is more alarming than the message sent during ‘the midnight ride of Paul Revere’.

Virtually all of my personal assets are in U.S. dollar denominated investments. I have lived conservatively, saved and scrimped to ensure that I would have a suitable cushion to weather future financial storms, and now I am terrified.

Each of us in the U.S. is being held hostage by radical extremist elected officials.

We — the people — need to take action. Now.

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Here is a short snippet from an interview with New York City Council Speaker Christine Quinn on The Brian Lehrer Show July 18, 2011:

“The Mayor and I have a good working relationship because that is what is in the best interests of the citizens of the City of New York for the Mayor and the Speaker to work together — every Mayor and every Speaker. And, for the Mayor and the Speaker to agree as much as they can, and when they can’t, to disagree agreeably…. That’s what the people deserve.”

Refreshing talk from an elected official in the U.S. circa 2011!

Some of our Congressional leaders – elected to Congress by their constituents, and appointed to those leadership positions by their colleagues – could greatly benefit from a lesson in civility and polite political discourse, if for no other reason than to serve as a positive example to our young people of responsible adult behavior.

Stop cyber-bullying in schools? One important ingredient is to show young people by example that public bullying and baseless political attacks are counter-productive.

Some of our elected officials in Washington seem to have lost sight of their responsibility to serve as positive examples to the next generation.

Is this too much to ask or to expect?

It’s a fact: there is no requirement that members of Congress (Senate and/or House of Representatives) have a college degree.

This fact raises an interesting question: ‘How many of those elected to the House and the Senate are college graduates?’

The answer is: Almost 95 percent of those serving in the 112th Congress have earned at least a bachelor’s degree.

The colleges and universities where our Senators and Congressmen earned their undergraduate degrees include: Harvard; Stanford; Yale; UCLA; Georgetown; University of Florida (Gainesville); University of Georgia; University of Wisconsin (Madison); University of North Carolina (Chapel Hill); Brigham Young; George Washington University; Louisiana State; University of California (Berkley); University of Missouri; and University of Tennessee.

Now, this information begs another question: ‘Have our colleges and universities failed to provide a sound basic education in economics to their graduates?’

It would seem so, based on the statements emanating from our elected officials in the most recent debate around our debt ceiling.

Which of these statements do you think is true?
1. Columbus was wrong: the earth is flat.
2. Global warming is a fraud, one of the greatest scams of the 20th Century.
3. Bernie Madoff is one of the best investment advisors ever.
4. Enron stock is a great buy.
5. Raising taxes will kill jobs.
6. “Cut, Cap & Balance” will solve our current financial crisis.

Yes, I know. This is a very tricky question, because the answer is “None of the above”.

Why are some of the elected officials serving in our 112th Congress unable or unwilling to grasp the basic principles of how an economy works?

One possible explanation: Some of the elected Republicans from south of the Mason-Dixon Line are really Al Qaeda operatives in disguise, sent here to create the ultimate Economic Jihad, certain to derail our economy and cause our country to become a North American subsidiary of the People’s Republic of China….

According to Reuters, U.S. Federal Reserve Chairman Ben Bernanke told Congress this week he is ready to ease monetary policy further if economic growth and inflation slow.

The central bank has already cut interest rates to near zero and last month completed a $600 billion round of bond-buying designed to lower borrowing costs still further.

Asked whether the Fed would be willing to launch another bond purchase program if the economy slumps, Bernanke said on Wednesday: “We have to keep all the options on the table. We don’t know where the economy is going to go.”

Bernanke listed several potential easing options, some of which he also included in a more detailed speech he made in August 2010.

Meanwhile, Tea Party Republicans in the House and the Senate reiterated their mandate to “…rock the credit and stock markets and force up the interest the federal government has to pay on its bonds.”

Senate Republican Leader Mitch McConnell said the debt problem belonged squarely in Obama’s lap.

McConnell said, “Republicans will not be reduced to being the tax collectors for the Obama economy. Don’t expect any more cover from Republicans on it than you got on health care. None.”

House Speaker John Boehner (R-Ohio), told reporters that he thought Senate Minority Leader Mitch McConnell’s so-called “last resort” option for resolving the debt ceiling stalemate should be left on the table.

House Majority Leader Eric Cantor (R-Virginia) has emerged as a key player in the negotiations between the Congress and the White House in talks over how to resolve the debt problem. And, not in a very productive or popular way…

“Eric, don’t call my bluff,” President Barack Obama warned late Wednesday after a dramatic back-and-forth with the Virginia Republican that made some in Cantor’s party wince. “Enough is enough.”

One has to pause and ask, “Did growing up amid Republicans in Richmond, Va., the capital of the Confederacy, somehow taint Rep. Cantor’s ability to deal with modern diversity and reality?”

And, Donald Trump (with Sarah Palin close by his side) was heard weighing in on the rancor in D.C.

Apparently not at all impressed by congressional Republicans Eric Cantor and John Boehner and their brand of negotiating, Trump appeared on Fox News to proclaim, “…the Republicans are doing another ‘el foldo’. This is incredible. It is unbelievable what is going on. The fact is, they are terrible, terrible, frightened negotiators. And I just can’t believe they are doing this.”

It all leaves me thinking that maybe the Civil War never was really resolved.

Here we have a President from Chicago — clearly north of the Mason-Dixon line — surrounded by some of the most capable and best educated economic experts in this country, working to fix an economy which tanked due to bad decisions which took place between 2001 and 2009, doing battle with Southern Republicans, many of whom are newly elected on the Tea Party platform.

I keep hearing Billie Holiday singing “Strange Fruit”.

Am I missing something here?

Some amazing stuff going on in Washington this week.

According to an article published in the Wall Street Journal today, “Senate Minority Leader Mitch McConnell (R., Ky.) unveiled a proposal that would allow President Barack Obama to raise on his own the federal borrowing limit by $2.4 trillion in three installments before the end of 2012, unless two-thirds of Congress votes to block it.
Mr. McConnell’s proposal to allow the president to raise the debt ceiling came after he said in a Senate speech that the country cannot solve its fiscal problems with Mr. Obama as president. “After years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is unattainable,” he said.

House Majority Leader Eric Cantor (R., Va.) suggested they consider temporarily lowering corporate tax rates as a way to offset revenue increases from closing tax loopholes, a Republican familiar with the discussion said.”

All of this rhetoric has the 21st century tingle of the Billie Holiday song, “Strange Fruit.”

Every time I turn on the radio, I seem to hear a Republican Senator or Congressman representing a state below the Mason-Dixon line denouncing our President as though he caused our economic dilemma.

Bear in mind: The last time our country had a balanced budget was in 2001.

Prior to Mr. Obama taking office, we experienced almost a decade of overspending, compounded by tax cuts.

Today, July 13, 2011, Senator Jim DeMint (R-S.C.), rejected the McConnell plan to give President Obama the authority to raise the debt ceiling.

So, we have various factions of the white male republicans from south of the Mason-Dixon line in dispute over exactly how to derail the Obama administration.

Should we lynch him? Shoot him? Starve him?

Stand by for more in the early morning news….

In April 2011, Speaker of the House John Boehner said, “Washington has a spending problem, not a revenue problem.”

Variations on this statement have been made by other Republicans, including House Majority Leader Eric Cantor, who said, “Most people understand that Washington doesn’t have a revenue problem, it has a spending problem” and added “We can’t raise taxes.”

President Obama has proposed that the Bush tax cuts should be allowed to expire for the wealthiest taxpayers, and Alan Greenspan proposed that these tax cuts should expire at all income levels.

Federal revenues come from taxes on individual and corporate income; payroll taxes for social insurance programs (such as Social Security and unemployment compensation); excise taxes; estate and gift taxes; remittances from the Federal Reserve System; customs duties; and miscellaneous fees and fines.

The two largest sources are individual income taxes and social insurance taxes, which together produce more than 80 percent of the government’s revenues.

Over the past 40 years, federal revenues have ranged from nearly 21 percent of gross domestic product (GDP) in fiscal year 2000 to less than 15 percent in fiscal years 2009 and 2010.

If we look back to 2001, we can see the last balanced Federal budget, when spending was about 18% of GDP, with revenues of about 20% of GDP.

In FY 2010, we have revenues of about 15% of GDP and spending of 24%.

I’m no rocket scientist, but I primarily see a revenue problem (in addition to a spending problem).

Clearly, the spending problem has been exacerbated by astronomic increases in defense spending relative to the wars in the Middle East, plus increased spending on homeland security.

Fact is: The Pentagon’s budget has increased dramatically since 2001.

The Pentagon’s base budget (excluding war and nuclear weapons funding), increased from $390 Billion in FY 2001 to $540 Billion in FY 2011, a real increase of 38 percent.

In inflation-adjusted dollars, the total defense budget has grown from $432 Billion in FY 2001 to $720 Billion in FY 2011, a real increase of approximately 67%.

No political commentary here. Merely a reality that you can’t spend more than you take in without incurring a budget deficit. It’s really that simple.

So, I’m patiently waiting for our Senators and Congresspeople to start telling us that they understand this simple reality.

The reason why we have a budget deficit? It has very little to do with the Obama Administration. It is mostly due to a decade of rampant spending balanced against tax preferences to the very wealthiest Americans.

It only seems reasonable to equalize income tax collections across economic lines.

Let’s allow our income tax code to become more progressive, and eliminate some of the archaic tax preference items that create tremendous inequity in our economy.

And, let’s work toward a system that tries to eliminate the “shadow economy” — in some estimates greater than $1 Trillion — where there are no taxes paid, all cash, completely “off the grid.”

We really don’t need or deserve any more political rhetoric from our elected officials in Washington.

What we do need – and truly deserve – is responsible action to put the U.S. back on track to leadership in the world economy.

We must expect nothing less from our elected officials. Let the partisan rhetoric stop, and let real leadership take center stage.

For those who are interested, here is a link to a recent analysis from the Congressional Budget Office: http://www.cbo.gov/doc.cfm?index=12085

Thanks for listening. If each of us were to do a bit of digging and take an honest informed position, we could probably fix the problems.

The Walrus has tried to stay on the sidelines on this stuff, thinking that reason and common sense would prevail.

Late on Saturday, July 9, House Speaker John Boehner said that he had given up on the potential for a bi-partisan effort to reach a rational $4 Trillion deficit-reduction plan tied to a proposal to increase the federal debt limit.

The major impediment seems to be an unwillingness among Boehner’s fellow Republicans who seem determined to oppose any package containing proposals that could be construed as a tax increase.

I happen to be a member of that small group of people who rely almost entirely on earned income, and fall into the Alternative Minimum Income (“AMT”) calculation for federal income tax purposes.

My sense is that any ‘tax increases’ contemplated in the proposed deficit reduction legislation would actually result in tax relief for me and my family.

I’m thinking that in a reformed income tax strategy, some of the Hedge Fund guys will no longer be able to claim that their income should be taxed as capital gains – at a 15% rate.

Hedge Fund Managers make their money by charging their clients two fees. The first fee is a “management fee”, frequently two percent of the assets under their management. The second fee is a “performance fee”, typically twenty percent of the income from those assets above a threshold level.

This 20 percent share of the investment returns from hedge funds is known as “carried interest” and under current tax law, hedge fund managers are allowed to claim carried interest as a long-term capital gain, currently subject to a maximum tax rate of 15 percent, rather than being taxed as ordinary income, currently subject to a maximum federal tax rate of 35 percent.

My reaction: That’s a racket.

These folks are often betting to crash the U.S. economy and take the rest of us down, and when they win, they pay taxes at 15%, where the rest of us are getting raped and pillaged at 35% or more.

If they only understood what is really going on, the TEA Party folks would have a valid reason to be pissed off…..