Published - Idaho State Journal, 09/19/10

On a daily basis the ruling elite in Washington and the media cast the blame for our current poor economy on George Bush, capitalism, Wall Street, banks, and Republicans in general. Facts do not support this oft-repeated creative fiction.

Tracing the roots of the financial meltdown of 2008 and the resulting recession, we must go back to the Community Reinvestment Act of 1977 (CRA). This Federal law intimidated lenders into not restricting their credit services to low-risk markets, a practice called “redlining.” The CRA required banks to submit regular reports proving that they were not avoiding home lending in impoverished regions. This started the process that has peaked over the past few years of lending with little proof of ability to pay. Lenders were pressured by government regulators to make creative interest-only loans, high-risk “no doc” and “liar loans,” in order to allow people to buy more housing than they could afford. We have come to know these loans as “sub-prime,” or loans with much higher risk of default.

In 1992, Boston's Federal Reserve funded a study that resulted in increased pressure on banks to fund questionable mortgages. It led to increased regulation of the mortgage market at the bank level to the point where four government agencies were monitoring banking activities relative to CRA demands. A ranking system was put into place where financial institutions were rated based on CRA lending, and the penalties could be stiff against banks whose CRA rating declined. The data and analysis of that research was later discredited.

In 1994 then Attorney General Janet Reno declared the Clinton Administration would be even more aggressive in pressuring lending institutions into full compliance with the CRA.

Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants, (GSEs, or Government Sponsored Enterprises) became the underwriters for most of the sub-prime mortgages. GSE leaders bragged in internal memos about their expansion into the sub-prime business and how that augmented their earnings.

Jim Johnson, CEO of Fannie Mae, was forced to resign in 1999 over accounting irregularities. Franklin Raines replaced him and perpetuated the questionable accounting and funding of sub-prime mortgages. Fannie was levied a $400 million fine by the SEC for their fraudulent bookkeeping and risk management but that didn’t even slow them down, let alone stop them. There is an additional political component to this as both Franklin Raines and Jim Johnson have served as economic advisors to Barack Obama.

In 2003 and 2005 the Bush administration attempted to reform the GSEs. Both Bush Administration Treasury Secretaries and Alan Greenspan repeatedly called on Congress to clean them up. Those attempts failed mostly due to the massive contributions by the GSEs to congressional reelection campaigns. The top recipients of those funds were Chris Dodd, Barney Frank and Barack Obama, some of the most ardent supporters of the GSEs.

Politicians created our recession with bad policy, bad regulation, and lack of regulation of the GSEs which resulted in a real estate market collapse. The GSEs sold the mortgages to banks and Wall Street as government guaranteed paper while rating agencies failed to make the distinction between quality loans and their sub-prime counterparts.

Congress has repeatedly exempted the GSEs from regulation that would hold them to a higher standard and would have likely prevented the financial market meltdown of two years ago and the resulting recession we still languish in. The new financial reform recently passed and trumpeted by the administration once again intentionally excludes the GSEs. Our problem is still not solved and it can happen yet again.

The media have been accomplices in this shakedown. There has been no accountability, and negligible factual coverage on who really caused this mess. It’s not Wall Street and the banks. They were writing and trading the mortgage paper that Fannie and Freddie wanted and the enabling congressional leaders encouraged. And the media have pointed the blame at everyone and everything except those who really caused it: their friends in government and the GSEs.

In short, the government created the problem by socially engineering the lending process by pushing lenders too far to make mortgages to too many and for too much. The foolhardy government mortgage lending policies led to a near collapse of our entire financial system. As the Investor’s Business Daily observes, the law of unintended consequences of government policy is now fully manifest.

When you hear causes of our recession, and they don’t list congress and bad regulation, they’re not telling you the truth. The causal elements of what brought us to this point were the creations of those most ardent in casting the blame elsewhere. They are most culpable, for they wrote the legislation and the regulations, refused to regulate the GSEs, and yet still they have the audacity to point blame at everybody but themselves. 

Published - Idaho State Journal, 09/12/10

For nearly ten years I’ve been living a lie. Ever since the first round of Bush tax cuts in 2001 I’ve been told that I was rich, because I got a tax cut. For someone living barely above subsistence level, I found it rather ennobling that all these anti-capitalists across the land thought I was rich. Now, all of a sudden, my bubble is burst as even Barack Obama is finally telling the truth that everyone, at every income level, got a tax cut from that despised former leader of the free world. All this time I thought it was among the “rich” that got those tax cuts.

Here’s a little primer for those who have been bitter clingers to the “tax cuts for the rich” nomenclature. President Bush in 2001 and 2003 led Congress to reduce tax rates for all taxpayers. The effect was record tax receipts starting in 2003 and a shifting of the tax burden increasingly to the wealthiest Americans. We can more easily see the effects by dividing taxpayers into five brackets. Those who benefited most were the lowest income, under $25,000 (a tax cut of 17.6%) per year, and those making about $60,000 per year (12.6%) according to IRS data. When the benefits of the second round of tax cuts are factored in, those in the $60,000 per year income level realized a total Federal tax savings of 24 percent. Those who made over $350,000 received a tax cut of 12.5%, while those who make over $1 million got about a 6% reduction.

The Wall Street Journal stated that the Bush tax cuts, in effect, triggered what may be the biggest increase in tax payments by the rich in American History. The top 1% of taxpayers, who earned $388,806 and higher, paid 40% of all income taxes with the Bush tax cuts, the highest percentage in at least 40 years. Taxpayers in the top 10% in income, those earning over $108,904, paid 71% of the total income taxes, again, the highest in at least 40 years.

When we look at the lowest income taxpayers, the figures are amazing. Those below median income levels paid a record low of 2.9% of all income taxes, while the top 50% paid 97.1% of federal income taxes.

Darn it, there goes another broken Obama campaign promise. Seems like I remember him saying, “No family making less than $250,000 a year will see any tax increase.” Looks to me like all of us will see our taxes go up if the Bush tax cuts are allowed to expire. Those who have decried the “tax cuts for the rich” for the past decade have been lying to you.

This week in Cleveland Obama said the tax-cuts for the wealthiest Americans must be allowed to expire, while extending the lower tiered income bracket tax cuts. He said, “This isn't to punish folks who are better off -- it's because we can't afford the $700 billion price tag." Only in a Marxist world can individual assets be thought of as an entitlement for the government! If he truly believes he can do more job creation with that extra income to the government rather than those entrepreneurs and sole proprietors who fall into that tax bracket, his track record doesn’t support it. The stimulus bill “guaranteed” that unemployment wouldn’t exceed 8%. I say, let the “rich” keep it. They’re much more likely to put it to good use in economic expansion and job growth than the ruling class in Washington is.

In August of last year, Obama declared accurately, “You don't raise taxes in a recession.” I don’t believe the economy is out of the doldrums yet, Mr. President. While technically we may be out of a recession, it surely doesn’t feel like it, as attested by the high unemployment rate, low consumer confidence, barely-positive GDP growth, and a housing market in the throes of depression.

According to the Investor’s Business Daily, two-thirds of small businesses fall into the top income tax bracket. They are also the ones we depend on most for job creation. IBD also points out, “Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. Of crucial importance to entrepreneurship and job creation, the top capital gains tax rate rises from 15% to 20% next year, while the top rate for taxation of dividends rises from 15% to 39.6%.”

A surefire way to reduce activity is to tax it, or increase the taxes on it. If you want less capital investment, tax the gains on it. If you want less income growth, tax it. If we want to ensure that the economy remains moribund for the foreseeable future, allow the tax cuts to expire on all income levels. But mostly, allow them to expire on the “rich.”

Published - Idaho State Journal, 09/05/10

An old Buffalo Springfield song from another tumultuous time in American history starts out, “There's something happening here. What it is ain't exactly clear.” Judging from the hundreds of thousands who turned out at radio and TV commentator Glenn Beck’s “Restoring Honor” rally in Washington last weekend, something’s definitely happening here. And while it may not be exactly clear, there are some pretty good indications of what it is.

What’s amazing is the fact that Beck’s rally was more of a cultural event than it was a political one. He asserted that it was a “reflection of who we are, where we are, where we're going, what each of us have to do. How do we get our way out of this? And it's not politics, gang. It's not politics.” It was a visual and aural feast for anyone who feels we’re forgetting our roots as a Judeo-Christian nation, codified by our founding documents and the writings of our Founding Fathers. Indeed the whole rally centered on a need for this God-fearing nation to return to the faith of our forefathers, and the need for all of us individually to live with honor and integrity. As Beck asserted, those were traits in ready abundance at the time of our founding but seem in short supply today.

While not overtly political, the political underpinnings were clear. And it’s not just that our national leaders have been lying to us about what Obamacare is going to do or not do, or the promises of no more than 8% unemployment if the stimulus was passed. Misrepresentation and dishonesty is all too common from the ruling class in order to bring us lowly subjects into accord with their statist and big government solution ideas.

There is a backlash that is building like a tsunami in the country, and it’s represented only in part by the contemporary Tea Party movement. And again, it’s not just over policy and politics, it’s fundamentally about what America is as a nation and what we as Americans are all about. This notion that we all have to think a certain way, because the power elite in Washington states it, the mainstream media parrots it, academics teach it as orthodoxy, and we’re all supposed to abandon our common sense and our sense of values to be good subjects and an acquiescing proletariat.

Americans are tired of being called every pejorative name in the book because we have opinions or values that don’t ape those of the ruling, reporting and academic elite. We’re tired of being called homophobes because we believe in the sanctity of traditional marriage. We’re tired of being called bigots or racists because we believe the nation needs protection at the borders. We’re tired of the attempts to belittle, disparage, and trivialize our beliefs because they don’t happen to coincide with those of the effete self-identified “elites” and “enlightened” of the country. We’re tired of the mischaracterizations of us, and abject incomprehension of our traditional values and belief systems, as “bitter clingers” and as people who have “antipathy toward people who aren't like them.”

As Charles Krauthammer said in the Investor’s Business Daily last week, “liberals have lost the argument in the court of public opinion. Majorities — often lopsided majorities — oppose President Obama's social-democratic agenda (e.g., the stimulus, ObamaCare), support the Arizona law, oppose gay marriage and reject a Ground Zero mosque. What's a liberal to do? Pull out the bigotry charge, the trump that pre-empts debate and gives no credit to the seriousness and substance of the contrary argument. The most venerable of these trumps is, of course, the race card.” And those cards are played, pardon the pun, liberally.

We’re unifying as a country, but not on the coattails of those who want to strip us of our liberty and convert us all to collectivists. No, we’re an obstreperous bunch and likely to become increasingly so as more force is exerted to make us cower in the shadows of the burgeoning monolithic government, calamitous national debt, and a godless society. If, as Hillary Clinton has said, dissent is patriotic, we’re the most ardent of patriots for we object to the hijacking of our nation and imposition of tyrannical, liberty-destroying statutes and court judgments that denigrate and invalidate the will of the people.

Arthur Brooks of the American Enterprise Institute claims we live in a 70/30 nation, where poll after poll indicates 70% of us are supporters of the free enterprise system, and 30% prefer European-style statism. And it’s not just regarding economics, it spills into cultural and social areas as well, he asserts. In other words, we are not a minority to be whipped into submission by the statists, we’re a clear majority and it’s high time for us to stand up and defend what has made America exceptional.