The New York Times published a compelling opinion piece this weekend written by Alan Blinder, an economics professor at Princeton and Democratic advisor, titled, “Is History Siding with Obama’s Tax Plan?” In his article Blinder uses historical figures to make the statement that Obama’s tax policy will be better than McCain’s. On the other end of the spectrum, the Wall Street Journal published an opinion piece this morning by Martin Feldstein and John Taylor, economic professors at Harvard and Stanford and advisors to McCain, titled, “John McCain Has a Tax Plan to Create Jobs.” Both articles make great points, but the authors are obviously biased. So who are we to believe? Which Presidential nominee ultimately has a better tax plan?
Of course, what candidates say in a campaign and what they do in office can be completely different, but even if we assume that the winner will follow through on his tax promises, we can only make an educated guess. McCain plans to keep the existing Bush tax cuts in place, which will help wealthy Americans and investors who pay capital gains taxes. McCain also wants to cut business taxes among other things, which Feldstein and Taylor believe will create jobs, spur growth and benefit virtually everyone. That certainly sounds lovely, but Blinder makes some great points that seem to counter such praise of McCain’s plans.
Blinder makes the case in his article that Democratic Presidents have greatly outperformed Republican Presidents while in office, economically speaking. From 1948 to 2007 the U.S. economy has grown 1.64 percent per year under Republican Presidents and 2.78 per year under Democratic ones. Blinder estimates that this difference in growth over an 8 year period would mean an additional 9.33 percent of additional income for every American. Blinder then goes on to point out that income inequality widens when Republicans are in office and shrinks when Democrats are in office. This point of course is fairly obvious given the policy of Republicans and Democrats, but worth noting nonetheless.
So where exactly does this leave us? One article focuses on the future, while the other focuses on the past. Can one really look at the past as an accurate predictor the future? The past certainly does not guarantee future results, but by what other means can we make projections?
Blinder’s article had the bigger impact on me because he actually supports his points with statistical facts. Whether or not they accurately represent what the future holds for Obama or McCain, they do give us a basis for conjecture. Feldstein and Taylor claim that jobs will be created, but they don’t support this claim with anything. Though the logical side of my brain tells me that tax cuts for businesses will lead to job creation, where is the proof? After reading Blinder’s article one is certainly left to wonder.
Another interesting piece of information I learned watching I.O.U.S.A.was that the national debt has tended to increase at a much faster pace when Republicans were in office. This coincides well with the GDP growth mentioned in Blinder’s article, but also, as pointed out in the movie, is a result of tax cuts. This again leaves one to wonder and even rethink one’s perceptions about the validity of certain tax policy reforms, though one must still question whether the past performances of a few Presidents can accurately predict future results.
Are McCain and Obama likely to follow in the footsteps of past Republican and Democratic economic performance, or are their plans different? Voters must decide for themselves, and I urge anyone who hasn’t yet read these two articles to do so, as they might encourage readers to think more seriously about this issue.
President Bush signed the housing bill this morning, so the biggest housing legislation in decades is now officially on the books. The bill finally came together when opposing sides were able to agree that the bill as is was better than nothing. Republicans got their Fannie Mae and Freddie Mac support and Democrats got their foreclosure bailout. Neither side is 100 percent happy, but then, when does that ever happen in politics? So now that this housing bill is official, what happens? Can we expect to see dramatic changes in the housing market for the better now? Well, not exactly…
It is no secret how I feel about the housing bill, and if you aren’t familiar with my blog, read this prior post on the housing bill to get caught up. There are also officials who share my same discontent for the bill. According to BusinessWeek, a top official in the Bush administration admitted that this housing bill will probably help fewer people than the previous expansion of the FHA. This new housing bill is estimated to help around 400,000 people, compared to the previous FHA bill, which was slated to assist 500,000. This news, of course, made me even more upset because the FHA bill certainly didn’t live up to its billing (see previous post about FHA Secure loans). It turned out that many of the people the FHA bill helped were people who really didn’t even need the help, but instead elected to take a nice little government (read: taxpayer) subsidy for their mortgage. So if this new housing bill is going to help even fewer people, and cost us more, then pardon me if I don’t exude excitement.
I’m not sure of the exact cost of the bill, and to be honest, no one does. It ultimately depends on how many insured loans go bad and whether or not Fannie and Freddie will need the assistance that we are now offering. Estimates from the Congressional Budget Office put the price tag on the Fannie and Freddie package as high as $25 billion. As far as how many of the $300 billion in new FHA loans will go bad, your guess is as good as mine, but I’d assume it will cost us a few billion. In addition, there is a $3.9 billion foreclosure bailout provision included, along with a tax credit for first time homebuyers. I don’t know about you, but all the uncertainty of potential costs is a little scary to me. Sure, officials have made estimates, but those are just that: estimates. This is the equivalent of dropping your car off at the repair shop and getting a repair quote of between $500 and $10,000, but in order to get the repairs done, you have to agree to pay the final tab, regardless of where it might end up. I guess when you have debt approaching $10 trillion, what’s a few billion more?
It appears that the proposed housing bill has all but passed now that the threat of a veto from the White House is gone. It is expected that the bill will easily pass through the House and Senate and then be signed by President Bush within the next week or so. Whether this bill will ultimately help or hinder our economy remains to be seen, but unless you are a bank, chances are this bill probably isn’t too exciting for you.
The main opposition to this bill all along has been that it represents a bailout of lenders and really doesn’t offer homeowners much relief. Now that Fannie Mae and Freddie Mac are on the ropes, Bush was willing to cut a deal and withdraw his veto in order to get a support measure for the two companies through. The following are some of the key components of the bill:
Allow the government to insure up to $300 billion in refinanced mortgages
$4 billion program for local governments to buy and rehab foreclosure properties
Regulation changes for Fannie and Freddie ($625,000 loan limit, oversight of top executive compensation)
Raise national debt limit to $10.6 trillion from $9.8 trillion
Of these, the most controversial one has been the $4 billion foreclosure program for local governments. On several fronts it represents a bailout of lenders, and considering the poor lending decisions they made, it is something that is hard to support. We will have to see how the $300 billion allocated for refinanced mortgages ends up helping, but if it goes anything like the other programs which have been rolled out of late, it is doubtful all that many homeowners truly in need will get assistance. Most likely, we as taxpayers will end up subsidizing the mortgages of a few homeowners who probably would have been okay (though they probably would have gone through some struggles) without our help.
Personally I’m against this bill, and I would have loved nothing more than to see it vetoed by President Bush. Unfortunately, it doesn’t appear like that is going to happen. If you want to know why we should be so opposed to this bill, look no further than the last bill component listed above. Our national debt is about to pass $10 trillion, yet we keep throwing more money at every problem we come across. The Fannie and Freddie rescue plan is probably something that needs to be in place, because if they fail, our economy is doomed for the most part. But we really need to look long and hard at whether these companies should be our long-term solution. I can probably live with bailing them out once, and learning from our mistake. But if they just keep doing what they are doing, what is to stop them from needing another bailout down the line? If we hang out an implied government guarantee then taxpayers are in essence subsidizing the shareholders of these companies. This is a long-term problem that needs to be evaluated and addressed. In the meantime, get ready for the latest attempt to resurrect the housing market. This attempt is bigger than ever, but unfortunately I foresee it falling short just like its predecessors. The housing market needs more than this housing bill to turn around--bottom line, it needs to get more affordable for the masses.
Democrats have been pushing a foreclosure bill that would provide $4 billion to states and cities to repurchase foreclosures and rehabilitate them, along with a more encompassing $300 billion housing bill. Republicans have strongly opposed the bills saying they represent a bailout of lenders, among other things. Now that the White House and Republicans want to get their Fannie Mae and Freddie Mac rescue bill passed ASAP, Democrats are trying to strike a deal.
The Fannie and Freddie rescue plan involves extending the government sponsored entities an unspecified line of credit (basically unlimited), along with establishing the right for the government to step in and buy equity positions in the company if they need to, according to the Wall Street Journal. The Congressional Budget Office estimates the cost of Treasury's proposals to the federal government to be in the tens of billions of dollars, according to the Wall Street Journal. This doesn’t sound so hot to us taxpayers, but if you consider what would happen if we let Fannie and Freddie fail, tens of billions of dollars doesn’t sound too bad. These two companies run the mortgage market, and if they go under, so too does the entire U.S. mortgage industry. It is one of those "you’re damned if you do, damned if you don’t" things.
While Democrats do recognize the importance of Fannie and Freddie, most are reluctant to give the companies a blank check. They want to make adjustments to the proposal, but Republicans want to see this thing done now. This is where politics comes into play: Now the Democrats are trying to push their foreclosure and/or housing bills to be passed in conjunction with the Freddie and Fannie one, and are threatening to hold talks up unless Republicans comply.
Whether or not Republicans give in remains to be seen, but I can’t help to think as a taxpayer that I’m getting the short end of the stick here. So you’re telling me that not only do you want to pass a bill that is going to cost us tens of billions of dollars, but now you want another $4 billion minimum (possibly $300 billion if the full housing bill is included) on top of that to bail out lenders who made dumb choices?
In an interview with Fortune, Republican presidential candidate John McCain was asked what the single gravest long term threat to the U.S. economy was. This is not an easy question, with so many choices and all. Is it the housing crisis or the credit crisis? What about the huge deficit the country is running, or the rising cost of energy? How about Social Security? McCain didn’t select any of those options; instead, he said that radical Islam was the single biggest threat to the U.S. economy. Pardon me a moment while I let this sink in a bit…nope, still don’t see it…oh well, maybe it’s beyond me. Why don’t we analyze it a little more and see if that helps?
Okay, so 9/11 did a number on our economy, I give him that. I can also understand the argument that terrorist attacks, or even the threat of them, can upset consumers, thus affecting the economy. So radical Islam can have an impact on the economy, but is it really the biggest threat? Wait…I think I get what he is trying to say--maybe McCain is telling us that radical Islam is the biggest economic issue because it is forcing us into war and costing us not only billions of dollars each year to fight abroad, but also billions to fight here at home. Oh, and it is also a problem because the movement keeps growing stronger the more we fight it--kind of like using fire to put out fire. Wow, I totally understand now, this fight is going to go on forever--man, that is going to be a downer for our economy. Okay, so now I see why it is such a huge problem…
In all seriousness, I could go on for awhile about why radical Islam is, and has, been fueled by our actions, but for the sake of brevity I will not (for more information here is a good write up). Based on the fact that we in essence created (in many cases) and have fueled radical Islam, maybe the biggest long- term threat to the U.S. economy is not radical Islam, but rather poor foreign policy. That might not be such a bad selection after all. We could look at the national debt as a big one, but we can also say that a lot of that debt was created because of poor foreign policy decisions. We could make the same case for several other problems as well.
At the end of the day, we know exactly why McCain chose radical Islam as the biggest problem, and that is because he is riding the “national security” ticket. If any voter has serious doubts about our national security, McCain is their man. The politics of fear, as it is called, is probably the biggest thing McCain has going for him right now, and he wants to milk it for all he can. The more American voters he can convince that national security is an issue, the better chance he has to win. It also doesn’t hurt that Barack Obama, the Democratic candidate for president has family ties to Islam, a point which has unfairly caused accusations that he is supporting terrorists--despite the fact that Obama himself is a Christian, not a Muslim. Long story short, McCain chose this reason for political purposes, yet he might not be too far off in actuality--only he needs to focus less on the effect and more on the cause.
Senators Christopher Dodd (D-Conn.) and Kent Conrad (D-N.D.) have been implicated in a mortgage scandal involving Countrywide bank. This is obviously a touchy issue considering that Dodd is the chairman of the Senate banking committee, it is an election year and a $300 billion lender bailout is supposed to be voted on today in the Senate.
In Dodd's case, the accusations basically boil down to whether or not he was given special pricing in relation to a couple refinance loans he got from Countrywide in 2003. Dodd denies receiving any special rates and adamantly claims that the rates were at market, but he does admit that he was likely on Countrywide’s VIP list.
Dodd's accusers have e-mail evidence apparently showing that Countrywide did, in fact, give Dodd preferential treatment. Countrywide sent an internal e-mail message that said to give Dodd a 0.5 discount on his rates because he was a U.S. senator, according to Portfolio.com.
Dodd denies any wrongdoing and is prepared to fight all allegations against him. Considering the facts that I have read, I don’t think they will ultimately find him guilty, yet the effects could be hard-felt nevertheless. The major $300 billion mortgage bailout bill has already been delayed while this investigation is underway, according to the New York Times. In a time when Democrats are trying to support their presidential candidate, Barack Obama, any bad press for the party certainly affects him. Dodd is a high-ranking Democrat who was a candidate in the 2008 presidential election himself, and whether or not Obama has anything to do with Dodd, it won’t change how the Democratic party in general is perceived by some.
Personally, I’m all for the investigation. If Dodd did, in fact, take advantage of his position, then he should have to pay the consequences. More importantly, this has held up the $300 billion bailout bill. Since I am adamantly opposed to a mortgage bailout, I hope that this bill gets delayed permanently.
Does Barack Obama or John McCain offer the best hope for the U.S. economy? This, of course, is the number one issue on everyone’s mind for the upcoming presidential election. The candidate who is able to best answer this question, and do so in a way that Americans can understand, stands a great chance of becoming our next president. So which candidate does offer the best hope for our economy anyway? Well, it depends on who you ask.
Yesterday in Raleigh, Obama attacked McCain’s economic policy, calling it a repeat of Bush’s miserable failure. Obama’s own plans for the economy include an expansion of unemployment benefits, another economic stimulus package of $50 billion, tax cuts for the middle and lower classes and relief for homeowners facing foreclosure, according to the International Herald Tribune. Obama was quoted in the article as saying, "We were promised a fiscal conservative. Instead, we got the most fiscally irresponsible administration in history. And now John McCain wants to give us another. Well, we've been there once. We're not going back."
The McCain campaign didn’t take the attacks sitting down, though. "While hardworking families are hurting and employers are vulnerable, Barack Obama has promised higher income taxes, Social Security taxes, capital gains taxes, dividend taxes and tax hikes on job-creating businesses," McCain spokesman Tucker Bounds said in a statement issued before Obama's remarks, according to the International Herald Tribune. "Barack Obama doesn't understand the American economy, and that's change we just can't afford.” McCain’s plans for the economy include keeping the Bush tax cuts in place as well as tax cuts for businesses.
In the end it comes down to two schools of economic thought. Obama believes that government spending and policies can help us get out of the economic rut. His policies are going to increase government spending, and overall government involvement in the economy. McCain, on the other hand, belongs to the school of thought that says the economy revolves around businesses. In his mind, the best way to stimulate the economy is to put money into the hands of businesses, who will then be able to add more workers and so on, which ultimately will lead to improvement in the economy.
One thing I haven’t talked about yet is the Iraq war. Obama, of course, wants to start drawing troops out of Iraq, potentially saving us a lot of money (money he wants to put back into our economy). On the other hand, McCain plans to keep troops there for a long time, continuing to add to our government spending on the war (much of this spending is not directly aiding America's economy). That being said, Obama’s overall plans for government spending far exceed McCain's. For the most part I tend to agree more with McCain’s policies than Obama’s, but I do side with Obama in relation to the Iraq war. While I don’t agree with pulling out altogether at this point (because it would hang those Iraqis who trusted us with their lives out to dry), I do think we need to figure out a better plan. The plan to occupy Iraq indefinitely is not a good plan. We never should have gone there in the first place, in my mind. It has cost us billions of dollars and many American lives, but that is another post for another day.
The bottom line is these two candidates differ greatly in their policies: One thinks the government can get us out of this mess, and the other is going to rely on business and the markets to turn things around. Which one is correct? We will have to wait and see. Either way, though, the new president is going to have their hands full, and I seriously doubt either one is going to be able to come up with the magic elixir that rights this thing over night. Turning this ship around is going to take some time and diligence.
With all the talk coming from politicians about how they plan to use the FHA to save the housing market and the economy, it may be a shocker to know that the FHA is struggling mightily right now. The FHA had to withdraw $4.6 billion from its $21 billion capital reserve fund in May to cover losses, according to the New York Times.
“Let me repeat: F.H.A. is solvent,” FHA commissioner Brian Montgomery said Monday in a speech at the National Press Club, according to the New York Times. “However, no insurance company can sustain that amount of additional costs year after year and still survive. Unless we take action to mitigate these losses, F.H.A. will soon either have to shut down or rely on appropriations to operate.”
Something has to change or else the FHA will soon be under water. This is a bit scary to think about because right now, FHA loans make up a good portion of the mortgage market, and an even larger portion in many low income areas. If the FHA were shut down, the real estate market would be in for a huge blow. In reality, though, it is unlikely the FHA will actually shut down even if they become insolvent. Instead, the government would float them the money they needed to continue operations until such a time as they could stand on their own two feet again. As you probably guessed that means taxpayers would ultimately be subsidizing the FHA.
There is one glaring reason why the FHA is struggling right now, according to Montgomery. He blames the seller financed down payment program, otherwise known as down payment assistance. In this program the seller donates the required down payment (typically 3 percent) to a non-profit corporation which then gives the money (minus a fee, of course) to the buyer, who uses it as the necessary down payment. Sound a little sketchy to you? I can assure you I feel the exact same way. Nonetheless, this program has been around for years--and it has been a problem for years as well. 60 percent of the FHA losses can be directly attributed to this program, according to the New York Times, even though these loans only make up around 35 percent of the FHA’s portfolio.
The FHA has been trying to get rid of this program for years, but has met strong resistance and been unsuccessful. Backers of the program say it provides much-needed assistance to low income and minority families who would otherwise be unable to buy homes, according to the New York Times. Naturally, the FHA is continuing its fight against the program, but based on their past experience, it doesn’t appear they are likely to be successful.
“If there’s any justice in this country, they will fail yet again,” Scott Syphax, president of Nehemiah Corporation of America, which provides such loans, said in the New York Times. Wow, you’ve got to love that mentality--if there is any justice in America, we should continue putting people in houses they can’t afford and potentially break the FHA, which would cost taxpayers billions upon billions of dollars. Is it just me or is this guy’s idea of “justice” a little skewed?
Ultimately, whether the down payment assistance programs stay or go, the housing market will likely suffer. If they stay, the FHA will probably need taxpayer support; if they go, then we are losing 35 percent of the FHA loans out there which means we would have even fewer people buying homes. In my mind, though, the right way to go is to ban these programs. The statistics show beyond a doubt that these loans result in an extremely high default rate (about 3 times the FHA norm) and it is not fair to pass this burden on to taxpayers.
The International Energy Agency (IEA) has created a comprehensive plan on how the world should combat global warming. The price tag? $45 trillion. Essentially the goal of the IEA is to have the world cut greenhouse gas emissions by half by 2050. Their plan to accomplish this feat, among other things, includes the creation of 1,400 nuclear power plants and approximately 700,000 new wind turbines, according to the Associated Press. The catch--beyond the price tag, that is--is that we can’t wait to act. All of these things take time to build and the longer we wait, the worse things will get and the higher our chances of a cataclysmic environmental disaster.
When I read this report I thought it sounded like a good and fairly reasonable solution. After all, the IEA is only trying to spur action, and in order to do so, wanted to prove that it could be done. Are there other ways to accomplish the same end? Of course, but now we can physically see at least one of these ways. Since the report projects 40-plus years out and only uses technology available to us today, there will certainly be adjustments made, but it acts as a great starting block.
I’m not a scientist by any right, and I can’t even opine on whether or not global warming is real. But what I can see is that there are without a doubt changes going on in our environment, things that don’t make sense to me. I don’t know if these changes are natural, or if they are being caused by humans, but I can see they are causing damage. At the end of the day I know for a fact that pollution is harmful to humans and animals; whether or not it has anything at all to do with global warming is a separate issue. So in my mind I feel like we are better off assuming that global warming is being caused by humans and working towards reducing harmful pollutants. Worst case, if in 100 years we find out that global warming was a natural occurrence, so be it; at least we made the earth a cleaner and healthier place to live. But on the flip side, what if global warming is caused by humans? If we fail to take action now it will soon be too late, and then not only do we still have all the harmful pollutants, but we also are going to have to deal with a bunch of new environmental problems. We are talking rising oceans, the extinction of numerous species (in fact, just today it was announced that the Caribbean monk seal is extinct) and so on.
My investment philosophy has always been to plan for the worst and hope to be pleasantly surprised. When I look to buy a property I take the worst case projections, and if the numbers still work, I do the deal; if not, I walk. I would much rather be pleasantly surprised (which I typically am) than be overly optimistic going in and end up with a money-sucker. I think the same philosophy can be used in regard to this issue as well. The worst case scenario if we fail to act is much worse than the worst case scenario if we act but are proven wrong. The difference is so incredibly skewed toward the one side that it seems like this decision should be a no brainer. So what’s the hold-up?
Ultimately, as you probably guessed, the hold-up revolves around money. Any action we take to attack global warming is going to come at the expense not only of governments and taxpayers, but of big fossil fuel businesses. The last thing these businesses want is added expenses for the clean-up of their pollution, or loss in revenue because people are using other energy sources. It is bad for their business, and since they have money, they also have a lot of clout with politicians. They are going to hire scientists to disprove the global warming theory, and they are going to talk about how many jobs would be lost and how the economy would suffer. In addition, another of the big hold-ups is with developing countries such as China, which rely heavily on fossil fuel to power their economic growth. In their mind it isn’t fair that the U.S. got to enjoy the economic benefits of growth spawned by fossil fuel usage while they don’t get the same opportunity.
There is certainly some weight to the economic argument, however, they are likely forgetting the fact that many jobs in the fossil fuel industry would be replaced by new jobs in the alternative fuel industry. Instead of working at the coal power plant, now workers will have to be trained to work at the nuclear power plant, and so on. Sure, in the end some jobs will probably be lost, but better a few jobs lost than a world ruined by the effects of global warming.
In response to the developing country dilemma, this one is much harder, as these countries certainly have a case to be made. In my mind, the developed countries who contributed the most to the problem should have to compensate for that. So the U.S., for example, should have to pay a large portion of China’s expenses to combat global warming and help pay for new alternative energy sources or the cleaning up of their coal power plants and so on.
What does this mean for investors? Well, if the world starts getting behind the IEA’s plan, or some similar one, there is going to be a huge surge in the alternative energy industry. 1,400 new nuclear power plants and 700,000 new wind turbines is a huge number by any stretch and since there are only so many companies that can make these things you can bet they are going to be extremely busy.
After the military coup in 2006, which stopped Thailand’s surging markets in their tracks and created fear in the eyes of investors, the last thing Thailand needs now--after rebuilding that confidence somewhat--is another coup.
After Samak Sundaravej was elected prime minister, many people feared that another coup may be imminent. After all, Samak is a close ally of the former prime minister Thaksin Shinawatra, who was the one ousted by the coup, so the precedent for such action has been established. Already protests have begun in opposition of Samak, just as they were going on in protest of Thaksin. Many Thais believe that Samak is just a proxy for Thaksin according to the BBC.
The bottom line here for Thailand is that if they want to restore investor confidence they need to quell this problem, and fast. The bigger these protests grow, the more speculation of a coup there will be and the lower investor confidence will shrink. Already Thailand’s stock market has fallen for five straight days, and the rumors of a coup are mounting, according to the BBC. If Thailand can put an end to the uprisings (in an acceptable manner) and cool down the rumors, it would go a long way towards proving that this administration is here to last.
Investors don’t like uncertainty, and when you are investing in a foreign country in particular, the last thing you want to see is problems with the country’s leadership. Thailand is a beautiful country with loads of potential, but in order to maximize this potential the country is going to have to establish some level of stability within their government.
Over President Bush’s pleas to the contrary, the Senate almost unanimously (97 to 1) approved a measure that will halt the further purchase of strategic oil reserves. Since it was passed by such a large majority, the measure cannot be vetoed by the President, so it looks as if President Bush has lost this battle for good. "Why on earth should we be putting oil underground at a time of record high prices?" Sen. Byron Dorgan (D-N.D.), the measure's chief sponsor, argued in a LA Times article. Democrats have been calling for this action for quite some time, but more recently Republicans have taken their side on the argument as well. Considering how much oil has been going up, though, this hoarding of oil might prove to be one of President Bush’s best investment decisions yet.
Under President Bush’s guidance the government has been adding about 70,000 barrels of oil a day, in comparison to the approximately 21 million barrels of oil the U.S. consumes each day, according to the LA Times. Since the amount being hoarded is minimal compared to total usage, the impact of suspending further stockpiling won’t be that great, but some economists figure it could save consumers as much as 3 to 5 cents per gallon on gas, according to the LA Times.
It is not hard to see that the motivations of many of these politicians is to get re-elected, but Bush doesn’t have that problem, so logic would say his only incentive is to do what is best for the country going forward. The main reason he gives for the stockpiling is energy security, which certainly has validity, yet I think it is proving to be an even better investment.
Here are some numbers to consider: Our national oil stockpile sits at approximately 702.7 million barrels, with an average price paid of $28.42 a barrel, according to the U.S. Department of Energy website. Since oil is more than $125 a barrel, that means that thanks to the policies upheld and pushed by Bush, we have created almost $68 billion of “oil equity,” so to speak. Considering many of the other dumb decisions Bush has made over the years, this might actually be one of his better ones, so let’s cut him a little slack. If the U.S. were now to release oil reserves to ease oil prices until we hit the stockpile point we would have been at had we listened to the previous Democratic oil outcries, we would be able to reduce gas prices by much more than the 3 to 5 cents we may see because of the current measure just passed by the Senate. So maybe there really is some method to Bush’s madness.
By now everyone knows the Rev. Jeremiah Wright and what he has done to the Obama campaign, but what about another of Barack Obama’s friends, Deval Patrick, the governor of Massachusetts? I just read an interesting opinion piece in the Wall Street Journal by Jon Keller in which Keller essentially called out all of Patrick’s faults and proceeded to say that Obama would end up just like Patrick. The article brings up many similarities between Obama and Patrick: They are both African American, they both attended Harvard Law and they both frequently focus on “change” in their rhetoric. Earlier this year in a campaign speech, Obama even borrowed some words from one of Patrick’s speeches and was accused of plagiarism. The two are close friends, and may be similar in some ways, but is the assumption that Obama will follow the same path as his friend really fair?
I am not personally an Obama supporter, and I am not planning to vote for him come election time, but this is not because of the actions of his friends and acquaintances. To judge him solely on that would be short-sighted, and I feel for the guy for enduring so much judgment, even if this sort of scrutiny does come with the territory. While I do think Obama might be promising more than he can deliver, the main reason I don’t support him is that I don’t agree with many of his major policies. One of Keller’s major criticisms of Obama in the article revolves around these promises of change. Deval Patrick has failed on several occasions to see his promised changes through, and Keller thinks Obama is likely to do the same. I, too, question whether Obama will be able to carry his changes to completion, as I am always skeptical of politicians that make grand promises, but one thing makes me think that he perhaps isn’t just paying lip-service.
A gas tax holiday has recently been proposed, which McCain and Clinton are supporting and Obama is opposing. I firmly agree with Obama on this, and I respect that he is holding his ground. Most Americans don’t understand economics all that well, and many will jump on the gas tax holiday bandwagon. It would have been easy for Obama to support the tax holiday along with Clinton and McCain and gain the goodwill of millions of Americans who are faced with the reality of $4 a gallon gas, but it wouldn’t have been the best move for the country. Obama may be more perseverant than people think, and these allegations that he will be another Deval Patrick may prove to be a bit premature.
The fact that the Ron Paul Revolution is still kicking, despite the fact that the Republican nominee has already been decided, could potentially help Barack Obama and hurt John McCain’s chances at the presidency. I read an interesting blog post from Tommy Christopher at the Political Machine that brought up a key point. According to Christopher, one of the strongest ties of the Ron Paul revolutionaries is that they strongly oppose the war in Iraq. Since McCain plans to keep the Iraq war going indefinitely, this will likely lead to many Ron Paul supporters crossing party lines to vote for the Democratic candidate, which will likely be Obama.
McCain’s party hasn’t worried too much about the Ron Paul fallout, probably assuming that it would taper off once he clearly won the nomination, but that doesn’t appear to be happening. In the recent Pennsylvania primary, Ron Paul won 16% of the vote, which in itself is not a huge number, but if a majority of these Ron Paul supporters turn to Obama come election time, they could easily swing the race.
Ron Paul seems intent on continuing to use his platform as a presidential candidate to spread his revolutionary ideas for as long as he can. The more people who hear Paul’s message, about the Iraq war in particular, the more people who could demand the end to this war, which would likely only come if Obama is elected president.
By staying in the race Ron Paul is in effect helping Obama. I don’t think that Ron Paul supporters are truly excited about the prospects of McCain or Obama, or they would be supporting one of these candidates by now. Which way they go in the end though could possibly decide the presidential race, and it is hard to ignore that the biggest issue in many of the Ron Paul Revolutionaries minds is the Iraq war. I can’t imagine many things more upsetting to Republican leaders than the idea of the Ron Paul Revolution helping Obama win the presidency, but it just might happen.
There have been some interesting turns of events in the Presidential race. Last month, Barack Obama enjoyed a huge lead over Hillary Clinton, and was largely favored to win over John McCain. Obama is now only slightly ahead of Clinton, and the margin seems to be getting tighter. Even worse for the Democratic Party, the new Reuters/Zogby poll released on Wednesday shows that McCain is now favored over Obama.
The problems began for the Democrats for two main reasons: 1) McCain clinched the Republican nomination early on, and has been able to focus his full efforts on the race for the Presidency. 2) Tactics and arguments have gotten dirty between the two Democratic nominees. Clinton especially has bombarded Obama with attacks in an effort to expose alleged weaknesses.
Whether or not the attacks on Obama are warranted, they have changed public opinion. If nothing else, they have worked to cast doubt in voters’ minds about the chances of Obama to win against McCain. During the Republican primaries, McCain’s biggest problem was fundraising, and his early victory has aided him greatly. Not only was he able to conserve funds, but his clear nomination allows him an advantage in raising additional funds going forward.
Results differ greatly from poll to poll, and many voters don’t really decide until the very end, so no poll will be perfectly accurate. Democrats probably shouldn’t worry about the Reuters/Zogby poll at this point, but they should be aware that the longer the battle for the Democratic nomination draws out, and the more intra-party fighting goes on, the more advantage McCain will gain.
Obama wants to increase the dividend and capital gains tax rate to 24 percent. At the same time, Obama recognizes the power of start-up companies to create jobs, and wants to eliminate capital gains tax on them. Obama would also like to raise the top income tax bracket to a 39.6 percent tax rate.
Hillary Clinton
Clinton is essentially advocating for the same rates as when her husband was in office, before the Bush tax cuts. That would mean capital gains taxes would be raised to 20 percent from their current 15 percent rate, and dividend income would be taxed at a maximum 35 percent. Clinton also supports a raise in the upper tax bracket rate to 39.6 percent, same as Obama.
John McCain
McCain wants to keep the current tax rates, but Siegel points out that he may not be able to. The Bush tax cuts are set to expire in 2011, and taxes will revert to pre-Bush rates if the cuts are not re-approved. Seeing as the Democrats strongly oppose the Bush cuts, and that they are likely to control Congress, McCain could have a difficult time getting the necessary laws passed. It should be noted that McCain and several other Republicans voted against making the Bush tax cuts permanent, which is why Bush had to settle for a test run of the current rates.
Barack Obama is getting attacked from all sides now, and it appears that no place is safe for him. On the left he is being attacked by Hillary Clinton, with accusations of plagiarism among other things. On the right he is being bombarded by supporters of John McCain, who are setting him up as a supporter of terrorists. I sincerely feel bad for the guy right now.
I’m not a big supporter of Obama, but I’m also not a supporter of low blows (I don’t support Obama because of his huge spending proposals and other polices, not personal issues). The latest blow coming from McCain supporters at a recent rally was especially distasteful. There the speaker who introduced Obama repeatedly called out his full name Barack Hussein Obama, and suggested that he was being friendly with our terrorist enemies. I was upset with Clinton’s plagiarism accusations, but this is 100 times worse. It would be one thing if they had proof that he is working with terrorists. But to accuse him of what amounts to treason just because the guy was born into a Muslim family (although it is debated whether they were even practicing) and has the middle name Hussein...give me a break. Not that religion even matters, but they guy is a renowned Christian now, not Muslim. All this does is make the McCain campaign look like an ignorant bunch of bigots, which is not exactly the image one wants to portray in a campaign.
To his credit, McCain did repeatedly apologize for the remarks made by his supporters, and he said that he expects that it won’t happen again. I certainly hope that is the case.
In every election, things eventually turn nasty, and it has been one of the biggest turn-offs to me for politics. For once, I would like to see the candidates fight a nice, clean fight and stick to the issues. If you have a problem with a candidate’s proposals...great, let’s debate them. Topics involving religion, race, and family...lets keep those out of it. Here’s hoping for a good clean Presidential race, whichever candidates it may involve.
A report released this morning by the BLS showed an increase in the consumer price index (CPI) of .4 percent for January. The year-over-year CPI grew to 4.3 percent from 4.1 percent the month before (and this is just what is being reported, see a previous inflation post for an alternative view on what the real inflation numbers are). The policies being implemented by the government and the Fed are not favorable to containing inflation, and this news is no surprise to most people in the financial world . Yet somehow these numbers seem to surprise the Fed each month, and then they downplay inflation in order to back up their policies.
I have to believe that the Fed knew good and well what the consequences were going to be for all of their rate cuts and cash injections, They are simply telling people, ‘Be happy now and don’t worry about the future,’ as they keep sweeping the dirt under the rug. That’s certainly how Greenspan ran the Fed, and it doesn’t seem like Mr. Bernanke is any different, but they can’t just keep passing the broom because the rug is going to run out of room someday.
As long as the Fed continues with their easy money policies, inflation will continue to get worse and worse and the dollar will continue to decline. Other countries are already taking notice. The U.S.’ enormous debt is being financed by foreigners, namely China and Japan. As their investments continue to lose value, they might have second thoughts about lending, and if the U.S. loses its ability to borrow at low rates, the economy could be in for a shock like nothing seen before in this country. Since the U.S. relies on borrowed funds even to pay on the current debt, the U.S. would have only the two options: defaulting on the debt, or printing more money. Default probably isn’t the first choice, so that leaves printing a lot more money, which would lead to astronomical inflation.
Financing debt with debt can’t go on forever. It may not be today or tomorrow, or even in the next 20 years, but eventually this thing will have to right itself. I sincerely hope that Bernanke, or even our next Fed chairman, can grow a spine and do what has to be done. It won’t make people happy in the short term, but when they are old and living on their fixed retirement incomes, they will be grateful that the country was able to rein in inflation.
Ron Paul is one of the few politicians that has acknowledged this problem and been willing to speak up about it. His willingness to do so, however, and how the majority of people have responded to it is evidence that it might be some time—and only after some painful realizations—before people truly embrace this message. I don’t expect it to happen anytime soon though, and will be making my investment decisions with that in mind.
The gloves are apparently off in the race for the Democratic nomination…well at least Hillary Clinton’s gloves are off. Clinton has now accused Barack Obama of plagiarizing one of his speeches from Massachusetts Governor Deval Patrick.
All I have to say is: Who cares? Obama responded that borrowing a few lines without attribution—and from a close friend I might add—was not a big deal. I agree that it isn’t a big deal, and I think most people would agree as well.
Message to the Clinton campaign: Focus your energy on stuff that matters…maybe the fact that Obama is proposing an enormous amount of new spending (even more than you) and has not yet explained how he intends to fulfill any of his wonderful promises. If you can force yourself to visit the GOP website, you might enjoy their Obama Spend-O-Meter.
Obama is certainly on a roll, and it appears Clinton is feeling desperate. Obama has done a great job drumming up support among the masses with his public speaking and rallying among youth and celebrities. Just for kicks, I even watched Obama’s YouTube video, and it was actually pretty amusing. More importantly, the video has received over 4 million hits, and there are other non-official Obama campaign videos with even more hits. A search for Hillary Clinton on YouTube brings up countless videos which poke fun at her, it takes some effort sifting through them to find a positive one. The point is, Obama is doing a much better job marketing himself and appealing to the masses than Clinton is.
I don’t think Clinton really stands much of a chance right now, but if she wants to make a run for it, she needs to start focusing her attention on things a bit more important than weak plagiarism claims. Considering that Clinton has herself been accused of plagiarism in the past it also seems a bit ironic. Accusing Obama of plagiarism of this sort just makes her look desperate. In addition it undermines faith in her maturity and belies a lack of confidence in her own campaign (and a potential hypocrisy, as stated in my last comment): unattractive features for a potential leader.
