President Obama, always on the campaign trail, is now on the road trying to explain why his class warfare strategy is not class warfare. In his State of the Union address, he once again invoked the “Buffett Rule”, which is little more than a fig leaf to allow Obama to raise taxes. But what about some other “Buffett Rules”?

Spending

What is the Buffett Rule on spending? Does Warren Buffett agree with President Obama that we should spend 150% of what we take in? Did Warren Buffett become one of the richest men on the planet by spending 150% of what he takes in and borrowing the shortfall? I think Buffett’s counsel would be to live within our means; don’t spend more than you take in, but I didn’t hear President Obama invoke the “Oracle of Omaha” when he submitted his budget to the Senate that was voted down 97-0. I didn’t hear Obama mention spending at all other than to say some nonsense about cutting spending by $2 trillion over ten years. At the rate we are going that level of spending “cuts” will mean we are $8 trillion deeper in debt ten years from now rather than $10 trillion. We need to cut $1 trillion in spending next year. So let’s hear what Buffett has to tell Obama about spending.

Investing

Warren Buffett is regarded as a masterful investor. What’s the Buffett Rule on investing? President Obama took credit for saving the auto industry. Really? If that is his idea of a good investment why does the price of GM stock have to rise to $52 before the American people’s investment to break even? GM stock is currently trading around $25. How many people are expecting GM’s stock to double in the near future? Or is it more likely that union contracts will once again, drag GM beneath the waves? My research indicates that Warren Buffett does not hold any GM stock. I wonder why? I do know that Warren Buffett made a very tidy profit by investing in Goldman Sachs. Meanwhile American taxpayers, you know, the ones who are under taxed, bailed out that company and many others. How much did Buffett invest in Solyndra? How much money is Warren Buffett investing in high-speed rail in California? Why should the American people believe that someone who has never held a job in private industry (Obama) is suddenly the smartest venture capitalist in America? How big of a portfolio do the real venture capital firms put in the hands of new hire fresh out of college? But this president takes billions of our tax dollars and squanders them on his pet projects and then lectures us how we need to invest in our future when they go belly up. When is Warren Buffett going to tell him to stop?

The Buffett Rule on Taxes

At the State of the Union address we were introduced to the famous secretary of Warren Buffett. She’s the poor woman who pays a higher tax rate than Mr. Buffett on her income. It is estimated that the poor dear makes between $200,000 and $500,000, otherwise she would not be paying double the tax rate of Buffett. That could put her solidly in the top 1% of earners in the country, if she is at the high-end of that range (the top 1% is earnings above $343,000). So Barack Obama actually lamenting that the top 1% is over taxed? Of course not. It is not about who is paying too much, it is about who is not paying enough.

The problem is spending, plain and simple. There are not enough rich people in America, even if taxed at 100% to close the budget gap. What Obama is doing is class warfare. Let’s get people angry enough at the wealthy so that Obama can then link the wealthy to the Republicans and sneak back into a second term.

If Obama thinks he is playing by the rules, Buffett’s rules, then he should at least play by all of them.

That’s my opinion; I’d like to know yours. Please comment below.

In his recent telephone town hall meeting, Tim Bishop expressed his support for the continued payroll tax holiday but making it clear that it would have no impact on the Social Security Trust Fund. Money for Social Security would continue to go into the trust fund from other sources. What other sources you might ask? I may have an answer for you.

In an article in HousingWire magazine, the author points out that:

The Federal Housing Finance Agency will increase guarantee fees on single-family mortgage-backed securities charged by the government-sponsored enterprises by 10 basis points effective April 1, 2012, in response to the new funding mechanism for the payroll tax cut extension passed by Congress.

So it seems that the Social Security Trust fund will get its money from Fannie Mae and Freddie Mac, or more accurately, from new home buyers. So for a two month extension of the payroll tax holiday that will prevent taxpayers from paying an additional $130 into the Social Security Trust Fund, that everyone expects to get back anyway, new home buyers will have to pay thousands in new fees.

The g-fee increase will remain in effect through Oct. 1, 2021. The Congressional Budget Office estimated the g-fees would offset about $35.7 billion in the costs of the tax cut. Mortgage Bankers Association CEO David Stevens said the increase could mean an extra $4,000 in fees on a $200,000 mortgage.

One of the problems facing Long Island is affordable housing. Our young people are leaving Long Island for areas were there is a larger rental stock that they can start out in, rather than living in mom and dad’s basement, and where they can afford to buy a house after saving a down payment for a couple of years. Apparently for the benefit of a political talking point Tim Bishop votes to slam an already weak housing marking with additional fees. After all who can really call a two month anything sound fiscal policy? Notice there is no spending cut mentioned here, it is an increase in taxes and fees. This is what Tim Bishop was telling his constituents not to worry about in his town hall meeting? What will become of his district, if nobody lives here but retirees? Is that his plan to solve the unemployment problem? Drive enough young people away until the number of jobs fits the remaining population?

The problem is spending. It was only last week that Joe Biden was attacking Mitt Romney’s policies by saying:

“His proposal would actually double down on the policies that caused the greatest economic calamity since the Great Depression and accelerated a decades-long assault on the middle class,” Biden added.

Decades long assault on the middle class? I guess he means you too, Bill Clinton. The greatest economic calamity since the Great Depression has been the Obama administration and if he were to get reelected it would finish America off. We have had the worst consistent unemployment since the Great Depression for the entire Obama administration. We have had the worst record of job creation, loss actually, since Herbert Hoover. The National Bureau of Economic Research says the recession ended in June of 2009. Does it feel like it to you? Most recoveries from economic downturns are mirror images of the slump. A gradual recession is followed by a gradual recovery; a sharp downturn is followed by a sharp upswing. Not this time. Just look at the job creation record of Team Obama.

This chart goes all the way back to Harry Truman and Obama’s performance stands alone.  Let’s put to rest the “eight years of failed Bush policy, yada, yada, yada” and face the fact that Obama and his spending, heavy-handed regulations, and insatiable appetite to fix everything by taxing more has put us into an economic winter. Tim Bishop has happily ignored the needs of his constituents to buy favor from the Democratic leadership and their special interest pals. They have done an awful job and we need to turn them out, before they turn us into Greece.

That’s my opinion; I’d like to know yours. Please comment below.

Congressman Tim Bishop held an online town hall meeting to hear questions from constituents and give his answers. Perhaps he thought this a safer forum than a live town hall meeting. Last year’s meeting in Setauket did not go well and was soon viral on You Tube.

I will comment on three of the topics from that meeting: the payroll tax cut, regulations, and manufacturing jobs.

Payroll Tax Cut

Congressman Bishop came out heavily pitching the extension of the payroll tax cut, from the normal level of 6.2% to the current level of 4.2% and even to go lower to 3.1%, for at least another year. He made the startling claim, quoting some experts that if the payroll tax cut wasn’t retained it would cost 400,000 jobs. It must be from the loss of all that spending power generated from a 2% cut in the payroll tax. I am sure pizza parlors will be devastated, as the weekly savings to a typical family will be about the cost of a pizza pie. The other statistic was that if the payroll tax was cut further to 3.1%, 750,000 new jobs would be created. Interesting. Raise the tax by 2% and 400,000 jobs would be lost, cut it by an additional 1.1% and nearly twice as many jobs would be created. Like prior predictions of how government intervention would affect jobs, we are supposed to believe that employers will start hiring if the cost of hiring a new employee  is reduced by 3.1% for just one year, before going back up. Only those people who never worked in private industry, like Bishop, Schumer, Obama, would believe that.

Bishop insisted that these cuts would have no impact to the Social Security Trust Fund. Considering that there is nothing in the Social Security Trust Fund other than a bunch of IOUs from Uncle Sam’s other pocket, he may be correct on that front, but he said that the cut would be paid for cutting spending elsewhere. Not surprisingly, he didn’t say where exactly “elsewhere” was.

Throughout the call, Bishop’s press secretary was conducting a dopey poll. To paraphrase, “If you are in favor of the payroll tax cut that will put $1,500 in your pocket, press 1, if not, press 2.” Who wouldn’t press 1? What would the results be if he asked, “If you are in favor of borrowing $600 from China that your children and grandchildren will have to pay back, so that we can give you $1,500 today, press 1, if you think more borrowing and debt is a bad idea, press 2,” I think the poll would turn out quite differently.

Regulations

A caller who owned a small construction company asked about all the regulations and paperwork that businesses had to deal with. Bishop said that President Obama had things well under control forming a commission to “zero base” all regulations and hundreds and hundreds of regulations have been taken off the books. In the Wall Street Journal today there is an editorial titled, “Regulation for Dummies,” that paints a very different picture.

To answer the most basic question—has regulation increased?—we’ll focus on what the government defines as “economically significant” regulations. Those are rules that impose more than $100 million in annual costs on the economy, though there are hundreds if not thousands of new rules every year that fall well short of that.

According to an analysis of the Federal Register by George Mason University’s Mercatus Center, the Cabinet departments and agencies finalized 84 such regulations annually on average in President Obama’s first two years. The annual average under President Bush was 62 and under President Clinton 56

As the graph clearly shows the number of “economically significant” regulations under Obama has skyrocketed. This is what is causing the uncertainty that is hindering employment. How can this be curtailed? A bill just passed in the House of Representatives called the “Regulation from the Executive In Need of Scrutiny Act (REINS)”. This would require any of these economically significant regulations to be sent to Congress for approval before becoming being enacted. What the process is today is that Congress can vote against regulations, but that can be vetoed by the President. If the regulations are coming from the president, wouldn’t you expect him to veto it? This turns it around so that the Congress has to approve the regulations, if they don’t, there is nothing for the president to veto. The Democrats say this is a Congressional encroachment of the Executive.

“The REINS Act would undermine our ability to protect children from harmful toys, prevent asthma and lung ailments resulting from pollution, and ensure that our small businesses can compete fairly in the marketplace,” House Minority Whip Steny Hoyer added. “At the same time, it would force Congress to play a larger role in the regulatory process, leading to even more gridlock in Washington.”

Surely he forgot to mention killing bunnies in there somewhere. But let’s look at the process: Congress passes a law; departments in the Executive branch write regulations to carry out the law Congress passed. So why is it an outrage that Congress reviews economically significant regulations to see if the Executive is actually implementing what they passed? Tim Bishop voted against the REINS Act. This is another case of Democrats focusing on piddling regulations while saying “hands off” the really impactful ones.

Manufacturing Jobs

Another caller asked the Congressman about manufacturing jobs. He patted himself on the back for helping to bail out the auto industry. He said if he and others hadn’t done that that hundreds of thousands of jobs would be lost. I addressed the implausibility of this in an earlier post. In that post I argued that if GM and Chrysler went bankrupt and even if they didn’t come out of it leaner and meaner, people still needed transportation. They would buy Fords, Toyotas, Nissans, Hondas, etc., that are currently built here in the U.S. Those car companies would need to increase their purchases from suppliers and those who formerly supplied GM and Chrysler would be well situated to supply the remaining car companies. The argument that we don’t manufacture here anymore is a myth. On a dollar volume basis, we still manufacture more than any country on earth. A few miles from where I am writing this, in Georgetown, Kentucky, is the largest Toyota factory outside of Japan. Due to a free trade agreement with South Korea that the Democrats blocked for years, that Toyota plant will begin exporting about 6,000 Camrys a year from Kentucky to South Korea.

One of the reasons we don’t build more here is our lousy tax code. Fix it. A reason there is not more manufacturing in Mr. Bishop’s district on Long Island is high electric rates. Factories run on power and power on Long Island is expensive. One of the reasons for that is that government approved the building of a $5 billion nuclear power plant on Long Island, and then when it was ready to throw the switch, they changed direction and said it couldn’t open. So Long Island rate payers had to find and buy electric from other sources and pay for the mothballed plant that produced nothing. Once again, the government helping us out.

But Tim Bishop has a solution. He wrote a bill to ban offshore call centers from federal contracts or loan guarantees for five-year. Nothing like micromanaging a corner of the economy while the rest of it burns. Why not look to the root cause? Tax structure, too much regulations, ObamaCare, out of control government spending. If Congress would fix those problems maybe companies wouldn’t look offshore to set up call centers.

The Budget

Tim Bishop also touched on the deficit and debt. He said we need to cut spending, but he never said what he would cut; he said we needed to control entitlement spending, but he didn’t say how he would do that; and he said we needed to add revenue, but he knew exactly how to do that, tax the rich. Here’s how I see it. The government got us into this mess by spending too much money, they should get us out of it by spending less money. Asking for any more tax revenue is just shirking their responsibility for which they are paid handsomely, and passing the problem on to us. Who couldn’t solve the problem with enough money?

That’s my opinion; I’d like to know yours. Please comment below.

With the economy in shambles and his campaign sound bites and early interviews as president coming back to haunt him, President Obama has ramped up the class warfare rhetoric. Let’s put the lie to these strategies.

The Payroll Tax Cut

The issue here is that President Obama wants to help the middle class and he claims the Republicans do not. The famous payroll tax cut puts about $8 a week in the pocket of individuals. But everyone who pays the payroll “tax” expects to get every dollar back, and then some, after they retire. So what is really going on here? The government forces you to participate in the Social Security system. It offers a lousy rate of return compared to alternatives and if you die before you start collecting, everything you paid into it is gone. Your heirs get nothing. If Obama believes in cutting back on payroll taxes, why not convert everything to private accounts and eliminate the tax altogether? Let people save for their own retirement. Let them put more away in the good times, and be able to scale back in the bad times.

The Republicans are not opposed to Obama’s plan, their only requirement is that we cut somewhere else in the budget to make up for the shortfall. This is nothing new. Former Kentucky Senator Jim Bunning raised this very point nearly two years ago, when the Democrats held both houses of Congress. In this enormous government can’t we find anything to cut? Find the cuts and the Republicans will sign on. If not, this is just another case of piling debt on our children and grandchildren, because they will have to make up the difference when we retire.

Taxing the Rich

This week we saw former senator and former New Jersey governor, Jon Corzine testify before Congress to say how sorry he was that he couldn’t find over a billion dollars of his customer’s money. But since he resigned from MF Global he doesn’t have access to any of the records to help in the search. Is the Justice Department beginning a criminal investigation?

Has anyone been charged with a crime for what happened in the fiscal meltdown of 2008? Has anyone collected more campaign cash from Wall Street than Obama? So is it unusual to conclude that President Obama, other than giving speeches, is perfectly fine with Wall Street ripping off the American people, as long as he can rip off the most successful people in America and claim he is looking out for the little guy. Let his pals get boatloads of government money to bail out their companies so they can keep getting richer and then say he wants to tax them more. Is it any surprise that a lot of rich Democrat supporters are coming out and saying they are all for paying more. Who wouldn’t?

President Obama says you can have billions of tax dollars and I just want a kickback in the form of higher taxes so that I can keep spending recklessly. However, ask anyone of these guys to write a check to the Treasury voluntarily, and they all balk. Why? Nobody gets any credit for donating their money to the government. They want the government to take it, not just from them but from every successful business person.

An Economic Winter

If President Obama gets another term, we may face an economic winter from which we may never recover. If the last three years were painful, the next four could be even worse.

That’s my opinion; I’d like to know yours. Please comment below.

Jon Corzine, one of those very smart Wall Street guys, the former head of Goldman Sachs, testified before Congress today to answer questions as to what happened to his firm MF Global, which is now one of the largest bankruptcies in US history. There is over $1 billion unaccounted for. He simply doesn’t know where it went. This is the guy that Obama and Biden praised when they took office as the first guy they would turn to in the midst of the economic crisis. It explains a lot about where we are today.

http://www.youtube.com/watch?v=xm3VMrKqJSA

It seemed that as long as Corzine sat in the cat bird seat of crony capitalism, where if your big bets pay off you rake in the dough and if they go south, you hand the bill to the taxpayers in the form of bailouts because you are too big to fail. Take him out of that role and he acts the same way, but without the safety net you see the results.

What Corzine did, after driving New Jersey into a ditch that Chris Christie is digging out of, he bet heavily on the debt of foreign countries. Oops! It seems like he believed that governments never run out of money, but sadly they do. And we will face the same fate, but who is steering our economic ship? The two guys who think Jon Corzine is brilliant. Jon Corzine is the first guy that Joe Biden and Barack Obama called upon taking office. Is there any wonder that their plan has been a disaster? Is there any wonder that no one on Wall Street has been pursued by the Justice Department? Is there any wonder that they are trying to kill the free market economy by regulating out of existence the things that people actually want to buy and heavily subsidize things that they don’t? Every day we hear a new report of more billions going into green programs that we will never see a return on.

It’s time to drop the curtain and get the hook. These clowns are not the least bit funny.

That’s my opinion; I’d like to know yours. Please comment below.

President Obama Speaking at Solyndra

Congressman Tim Bishop has not been able to keep from spending, no matter what. The Postal Service has an $8.5 billion deficit, and Tim Bishop is out there fighting to keep an unneeded post office open. We are trillions of dollars in debt and he comes out blasting the Tea Party, because they want Congress to not waste anymore money on green boondoggles like Solyndra.

At issue is a Continuing Resolution, that is, a bill to provide temporary funding to the government. At the heart of the issue is that the Federal Emergency Management Administration (FEMA) has run out of money, so there is an issue of whether to give them $3 billion more or $6 billion more. In addition the Republicans want to cut funding for such green projects like Solyndra, which just declared bankruptcy after getting a $500 million taxpayer-funded loan guarantee. How heartless can those Tea Party people be to not want to send good money after bad for progressive boondoggles? But of course we should listen to Tim Bishop. After all he has been such a trusted steward of our money so far, right?

The above chart shows how much debt limit has been increased by Congress to keep the government functioning, since 1940, when it was almost zero. Tim Bishop was sworn into Congress in January of 2003, from a point where it had leveled off, the line almost goes vertical. That is eight trillion dollars in additional borrowing in just ten years in office, and he has the utter gall to say the Tea Party’s calls for restraint are unwarranted? Somebody has to do it. If Tim Bishop and Nancy Pelosi had not spent trillions of dollars that the government didn’t have, maybe we wouldn’t be quibbling over $3 billion.

Waste and Fraud

It remains to be seen if Solyndra was a massive fraud or the Democrats thinking they are really investment bankers and venture capitalists rather than elected officials, but we could have used that $500 million rather than waste it. But Bishop objects:

“Even worse, the Republican bill calls for much of that sum to be funded by cutting federal loan programs that have encouraged new job creation by U.S. automakers and clean energy manufacturers.” — e-mail message from Tim Bishop to his constituents.

$39 billion in stimulus dollars have been earmarked for green energy jobs. So far, $19 billion has been spent and 3,500 jobs have been created. That’s $5.4 million per job, people, do you think we can do better than that in the private sector? But what is a “green job?” According to Labor Secretary Hilda Solis, if you drive a hybrid bus, it’s a green job, if you drive a gas-powered bus it is not a green job.

http://www.youtube.com/watch?v=1scrqqWpFlM

As one pundit put it, Washington is the only place where the circus never leaves town. This is what Congressman Bishop decries that Republicans are trying to cut. Do you think your hard-earned money is being well spent?

There is a report out today that the federal government paid about $600 million to federal workers who are DEAD! The Justice Department buys muffins for a meeting that cost $16 each! Medicare and Medicaid routinely have $60-$100 billion per stolen, and Tim Bishop has no suggestions how to cut, and even takes the time to write his constituents that, “I am sick and tired of this divisive posturing we have come to expect from the Republican Tea Party Caucus.”

I have a piece of news for you, Congressman, in case you have not been paying attention. The last Democrat who thought it would be a great idea to attack his opponent as beholden to the Tea Party was a guy named David Weprin in the 9th Congressional District of New York special election. In a district that was 3:1 Democrat registered voters, he lost big. Many Tea Party members from the heart of your district traveled on their own time and at their own expense into Brooklyn and Queens to get out the vote for Bob Turner. If you think it is a winning strategy to attack the Tea Party, I have three words for you. Bring it on.

That’s my opinion; I’d like to know yours. Please comment below.

When  does the decent interval end? When does the clock run out on giving the president the benefit of the doubt and when is it time to call it as you see it, no holds barred?

President Obama is losing on all fronts. If he wants to survive he needs to do what Democrats do best, find a slogan that can be repeated mindlessly by as many adherents as possible and whip up the crowds to turn out and vote for him. If in doing so it means telling massive lies to the American people, so be it. As Saul Alinsky put it in Rules for Radicals

Means and ends are so qualitatively interrelated that the true question has never been the proverbial one, “Does the End justify the Means?” but always has been “Does this particular end justify this particular means?”

Alinsky, Saul (2010-06-22). Rules for Radicals (p. 47). Vintage. Kindle Edition.

Think about Paul Ryan’s serious plan to get the budget under control, save Medicare and eventually balance the budget. President Obama invites Congressman Ryan to a speech about the budget, where he then mocks the plan. That is shortly followed by the commercial showing a Paul Ryan look-alike pushing an elderly woman in a wheelchair off a cliff. Nice. What is Obama’s plan? Simple, keep everything the same, except pay doctor’s and hospitals less. Okay, let’s remember some basic economics and supply and demand. If you keep the demand constant (we’re not changing any services for seniors), but we are going to lower the price (less money for doctors and hospitals), what do you suppose will be the impact on the supply of doctors and hospitals? Yes, they will drop out of the Medicare program. So while this administration thinks it can keep from impacting seniors health care financially, it will lead to shortages and long lines. So, if grandma needs an MRI to diagnose her ailment, she may have to wait six months to get  one. Oh, you say she died in the mean time, too bad, at least she didn’t have to make a co-payment.

The Buffett Lie

The so-called Buffett rule came from billionaire Warren Buffett saying that he paid a lower tax rate than his secretary, and Obama has latched onto this. What better way to win the class warfare battle than to get a custom fitted fig leaf from Warren Buffett? The problem is that Warren Buffett makes most of his money from capital gains, whereas his secretary pays income taxes on her earnings. Different taxes, different rates. It is different because of the source  of the income, not the size of the income. But how was Buffett able to make a capital gain?

Capital gains come about when you buy an asset and later sell it for more than you paid for it. But where did Warren Buffett get the money to buy the asset in the first place? At some point he had to earn it. When he earned it he paid income taxes on it, the same kind of income taxes as his secretary. So he made an income and paid taxes on it. He then took what was left and invested it. While he held the investment, if it paid any dividends he would have paid taxes on the dividends, and when he finally sold it for a gain he paid capital gains taxes on the profit. So Buffett paid taxes several times on the same money, but the “Buffett Rule” only refers to the last tax he is paying. Despite being a mufti-billionaire, he only pays himself about $100,000 a year in salary, the rest is capital gains.

If Warren Buffett doesn’t like this, there are a number of things he can do to assuage his conscience without mucking up things for the rest of the economy.

1. Write a big fat check to the government, if he feels he is not paying enough in taxes. Why?
2. He could pay himself a bigger salary equal to the capital gains, he currently takes and leave the gains in his investments.
3. Structure his secretary’s compensation to match his by paying her more of her income in capital gains and less in salary.

Has the tax code become an unmanageable mess? Yes. Let’s chuck the whole thing and replace it with a flat tax. But President Obama should stop lying that the most productive job creators in the country are not taxed enough. We need them to keep their money in the private economy created more jobs, not sending it to Washington for President Obama to spend.

That’s my opinion; I’d like to know yours. Please comment below.

Photo by cursedthing

We saw the beginnings with the Battle of Wisconsin. The one place were unions were growing robustly was in the public sector, surpassing the private sector for the first time in 2009. But then 2010 happened.

With states’ fiscal situations worsening and the runaway spending in Congress, voters across the country turned to Republicans, or should I say, the Tea Party. Promising to return to Constitutionally limited government and to go to Washington and state capitals, not to start a long new career but to fix the problem, the Tea Party backed candidates wasted no time getting to work.

From Chris Christie in New Jersey to Scott Walker in Wisconsin, they did not flinch from taking on the public sector unions. They knew that the current trajectory was unsustainable. In Wisconsin, the unions descended on Madison and threw everything they had into the fight. Democrat senators fled the state to prevent a quorum from voting on Governor Walkers measures, union thugs took over the state capital building, inflicting millions in damage to the people’s property, tried to defeat a conservative judge so that the law, if passed, could be struck down by the court, and if that didn’t work they tried to recall six Republican senators at the ballot box. All measures failed, Walker’s policies were implemented and job growth in Wisconsin started chugging along.

In other states like Ohio, Tennessee and Indiana similar setbacks for unions were proceeding more quietly. Meanwhile in the private sector, which has only about 7% union representation, the next major showdown is coming to a head.

The United Auto Workers’ contract with GM, Ford, and Chrysler expires on September 14th. It will be interesting to see how this plays out. As written in a previous post, the unions will be sitting on both sides of the bargaining table, as the Obama administration granted them large chunks of GM and Chrysler stock as part of the bailout package, while stiffing the bond holders, and now the unions as labor will be negotiating with the union as owners. And if they drive GM and Chrysler out of business again, who gets stuck with paying for the cleanup? That’s right, the American taxpayer. Why?

Because the Obama administration couldn’t keep their nose out of the automobile business, thinking if their didn’t bring their collective genius to the limited intellect possessed by the average business owners, how on earth could the auto companies ever function? They should have let the bankruptcy courts handle it, but they decided to drag the rest of us into the mess and now we own a stock that is worth about $31 per share that must climb to $52 for us to break even.

So will the unions commit suicide by making unreasonable demands, drive the auto companies out of business and at the same time kill their own investment in their stock? Or, will they quietly get rid of all of their stock before they trash the auto companies and then demand that the government step in again and bail them out?

Get ready to take it in the neck again, America. The most inexperienced president in US history with his most excellent panel of advisers who never worked in the private sector are about to tell the rest of us how it is supposed to all work. Brace for impact, my friends.

That’s my opinion; I’l like to know yours. Please comment below.

Photo by Dave Makes

Two news items yesterday, when put together, start to tell an interesting story. Warren Buffett invested $5 billion in Bank of America in a private sweetheart deal that will guarantee him a 6% return (that’s $300 million per year) and he is hosting a fund raiser for Barack Obama in New York where the tickets start at $10,000. What’s going on?

Barack Obama is the worst jobs president since Herbert Hoover (see previous post on this); the economy is flat lining; and yet Buffet thinks Obama is doing a great job. Think of some of Obama’s other supporters among the captains of industry: Jeffrey Immelt of GE and Howard Schultz of Starbucks.

Crony Capitalism

What is crony capitalism? Crony capitalism is where we have a capitalist economy but instead of truly free markets, some business leaders get cozy with government to tilt the playing field in their favor. Those on the left like to paint conservatives as the champions of big business and the wealthy, but if you look at the campaign contributions of many big business CEOs you will be surprised at who they support. Let’s look at two examples, Warren Buffett and Jeffrey Immelt.

Warren Buffet

In the financial meltdown triggered by the housing bubble bursting, the government stepped in to prevent large financial institutions from failing. This creates what is known as a moral hazard. A moral hazard is where the risks associated with a particular transaction are covered by someone else such as the government or insurance, so the investor is willing to take overly large gambles. Why? Generally, the bigger the risk, the bigger the payoff if you are right and if the downside is protected by government or other parties you have less to lose. Big upside, small downside, let’s play!

Warren Buffett invested in Goldman Sachs in the midst of the financial crisis in 2008, as a result of his $5 billion investment he reaped “$10 billion in interest, fees, and dividends,” according to Mark DeCambre at the New York Post. If you know that the government won’t let the bank fail, what is your downside risk? The upside turned out pretty sweet. Warren Buffett was an adviser to candidate Barack Obama and you can be sure the topic of how to handle the fiscal crisis was discussed. Buffett is now investing in Bank of America where his company, Berkshire Hathaway stands to make another killing. Would the government stand by and let Bank of America go under? What do you think?

Warren Buffett has also been making the rounds calling for more taxes on the rich. This writer and others have suggested that if Warren Buffett thinks the government deserves more of his money, go ahead and write the check, but he balks at that suggestion. Why? Depending on when you measure it, Warren Buffett is one of the three richest people in America. No matter how high to raise the tax rates, he will be able to afford it. Other entrepreneurs and small businesses may not be able to afford the higher taxes and thus find their companies financially squeezed. Buffett’s company Berkshire Hathaway has made a lot of money buying up good companies. Could his high tax advocacy be a way for the government to create some new investment opportunities for him?

Buffett has also invested in a Chinese company to build electric cars. Why didn’t he invest in GM to help sell the Chevy Volt? In the midst of this lousy economy President Obama announces new CAFE standards that would require car companies to build cars that would get over 52 miles per gallon by 2025. That will probably drive GM and Chrysler out of business with their heavily unionized companies already at a severe cost disadvantage of around $2,000 per car. What a great opportunity this would create for a company with an electric car! Slap a GM or Chrysler nameplate on it and voila, problem solved.

Jeffrey Immelt

For all the talk about higher taxes, General Electric paid no taxes in 2010. During the fiscal crisis GE got large sums of money from the government.

During the wild Congressional spending spree of the last couple of years, GE miraculously became the largest beneficiary of the government’s Troubled Asset Recovery Program (TARP) bank bailout. Although GE did not initially qualify for TARP, the company’s $18 million annual investment in battalions of Washington DC lobbyists convinced Administration regulators to push that “reset” button and extend TARP guarantees and subsidies to GE. Public records demonstrate GE Capital, the company’s massive financing arm, pocketed $120 Billion in loans from the Federal Deposit Insurance Corporation at interest rates of less than 1% and snatched 25% of the entire $340 billion in subsidies from “Temporary Liquidity Guarantee Program” (TLGP) rescue fund. — Chriss W. Street

Immelt has also been appointed as the head of President Obama’s job council. At the same time Immelt is entering into an agreement with China to build airplanes to compete against Boeing. Meanwhile do you recall Boeing and the government being in the news lately? Well the National Labor Relations Board has told Boeing that it cannot open another factory that will hire 5,000 employes in South Carolina. In the midst of 9% unemployment, Obama said that the NLRB was an independent agency and his hands were tied. How convenient?

What’s that Smell?

While the engines of job creation, small businesses, are stuck wondering what will hit them next, the crony capitalists are cozying up to President Obama and getting fat while stymieing their competition. I don’t know if this is illegal or not, but how much different from insider trading, at least from appearances, is this? The heads of major corporations give advice to President Obama, go out and make spectacular deals, and the economy continues to languish while they get rich. They get rich not because they have a better idea, or are more nimble, but because taxpayers are absorbing much of the risks while they make the dough. Perhaps Congressman Issa can use his Government Oversight committee to ask a few key questions.

That’s my opinion; I’d like to know yours. Please comment below.

Photo by Sillgwailo

Starbucks CEO Howard Schultz wrote an open letter to his fellows CEOs about the current economic situation. (Howard Schultz CEO Letter) In it he calls for action. The letter and Mr. Schultz are interesting both for what they say and what they don’t.

Over the last few weeks and months, our national elected officials from both parties have failed to lead. They have chosen to put partisan and ideological purity over the well-being of the people. They have undermined the full faith and credit of the United States. They have stirred up fears about our economic prospects without doing anything to truly address those fears. They have spent a resource even more precious than the dollar: our collective confidence in each other, in the future, and in our ability to solve problems together.

So begins Mr. Schultz’s letter. A failure to lead and partisan and ideological purity are the root cause. There seem to be good doses of that going on in Washington. Mr. Schultz has a two step solution. He continues:

First, we aim to push our elected leaders to face the nation’s long-term fiscal challenges with civility, honesty, and a willingness to sacrifice their own re-election. This means not kicking the can anymore. It means reaching a deal on debt, revenue, and spending long before the deadline arrives this fall. It means considering all options, from entitlement programs to taxes.

That is a pretty bold start to actually push our leaders to put country ahead of re-election. For the first time that I can recall there are actually politicians who are saying the same thing, the Republican Tea Party freshman. They have said they were sent to Washington to fix the problems and that is what they intend to do whether it means getting reelected or not. The same sentiment among the Tea Party goes for not kicking the can down the road. It practically sounds like Howard Schultz is a Tea Party supporter, or should be. Is he? More on that later.

This is what so many common-sense Americans want. That is why we today pledge to withhold any further campaign contributions to the President and all members of Congress until a fair, bipartisan deal is reached that sets our nation on stronger [sic] long-term fiscal footing. And we invite leaders of businesses — indeed, all concerned Americans — to join us in this pledge. {emphasis mine}

Common-sense Americans? Concerned Americans? Fair and bipartisan? Isn’t it years of bipartisan spending that got us into this mess? Where was the outrage when the Democrats controlled both the White House and Congress and were spending like there was no tomorrow? The closet group to what Schultz is saying is the Tea Party, but rather than try to rally support behind them, he pulls back to a bowl of bipartisan mush. Why? I guess than can best be answered by asking who is Howard Schultz?

Howard Schultz

Howard Schultz is the CEO of Starbucks, a very successful company. But a search of political contributions in the Federal Election Commission data base will turn up that Mr. Schultz, over the last fourteen years has given $116,700 to political candidates or organizations, of which $115,700 went to Democrats and $1,000 went to Republicans, namely John McCain in 1999, which may have been more an anti-Bush contribution than pro-McCain. Who were some of those he gave to?

• Max Baucus
• Maria Cantwell
• Bill Bradley
• Hillary Clinton
• Tom Daschle
• John Edwards
• Ted Kennedy
• Patty Murray
• Barack Obama
• Chuck Schumer

Just about a who’s who of the biggest, and most liberal spenders in recent Congressional history. So when he preaches fairness and fiscal responsibility, is it sincere or just a crony capitalist trying to save the presidency of Barack Obama and raise enough taxes to turn the spending spigots back on. Howard Schultz is apparently an unapologetic liberal Democrat. In his letter there is not one specific program he mentions that should be cut, just the “everything should be on the table” platitudes. As far as his pitch to withhold contributions, based on his history I would applaud him to keep on withholding them regardless of what Congress and the President do.

His Second Suggestion

He then kicks off his second pledge.

The only way to break this cycle of fear is to break it. The only way to get the country’s economic circulatory system flowing again is to start pumping lifeblood through it. That is why we today issue a second pledge. Our companies are going to hire. We are going to accelerate growth, employment, and investment in jobs.
We do this because we want to set in motion an upward spiral of confidence. We are not waiting for government to create an incentive program or a stimulus. We are not waiting for economic indicators to tell us it’s safe to act. We are hiring more people now. We invite leaders of businesses across the country to join us in this pledge as well – and to bring their stakeholders into the effort. Confidence is contagious. The best thing we can do now is to spread it.

Instead of letting business people follow their assessment of the marketplace, the hell with it, just start hiring. This had a familiar ring to it. And it was Herbert Hoover who was doing the ringing.

“Hoover’s wage ideas sounded good to some. And they were indeed the opposite of federal policies in the last downturn. But they did not really make sense: to force business to go on spending when it did not want to was to hurt business. And in some areas — wages, especially — the president’s policy was dramatically counterproductive. As the crash continued, profits began to drop. Yet businesses could not adjust: if they wanted to be good citizens, they had to keep their pledge to Hoover and sustain employment and wages. The president was, essentially, requiring that companies take the hit in profits instead of employment.” — The Forgotten Man: A New History of the Great Depression by Amity Shlaes, p. 93

It seems to me that it could not be possible for a group of people to try harder to recreate the Great Depression than President Obama and his supporter have done. Between the runaway spending and now this idea from Mr. Schultz, if we make it to 2012 it could well be amazing if we don’t have another Great Depression. It’s time these people took a hard look at what they have put in place and how damaging it has been. It has been tried before and failed miserably with the employment practices under Hoover and the spending under Roosevelt. If we are to get out of this hole we have to stop digging deeper and start filling the hole back in. We can start by repealing ObamaCare and placing a two year moratorium on new regulations. Once certainty returns to the marketplace businesses will start hiring again. We do not need Mr. Schultz’s stimulus plan of unnecessary jobs any more than we needed President Obama’s. It didn’t work, neither will this.

That’s my opinion; I’d like to know yours. Please comment below.