The Rich Do Pay Their Fair Share
From one side of this ridiculous debt debate going on in Washington comes the mantra that the rich simply do not pay their fair share in taxes and that they got rich on the backs of the middle class and what we call the poor in this country. In fact, in the President’s speech to the nation on the debt ceiling fiasco he actually had the audacity to say,
“Republicans in Congress are insisting on a different approach — a cuts-only approach -– an approach that doesn’t ask the wealthiest Americans or biggest corporations to contribute anything at all. And because nothing is asked of those at the top of the income scale…”
My emphasis added.
Really Mr. President, wealthy Americans are not contributing anything at all to this orgy of government spending? And exactly nothing is being asked of them, as if it is their responsibility to cover for you and your wife’s over-the-top-jet-set-vacations, endless golf outings and trips around the world as your contribution to the crisis we are now facing? This kind of rhetoric from the Propagandist in Chief who acts more like a king than a president, is designed to do nothing more than incite people into thinking that not only do the rich benefit from the poor, but in the process they also contribute nothing. As a supposed leader, the President is insinuating that the rich don’t pay any taxes.
The only thing further from the truth than the statement in quotes above, is that the person who now resides in the White House is actually qualified to be President.
Of course the rich are contributing to the revenue base that runs this country, they are contributing greatly. For example, a person who earns $100,000 per year pays approximately $22,000 per year in taxes, while someone who earns $1,000,000 a year will be paying $320,000 per year in taxes. So, a person who makes 10 times what a $100,000 per year earner makes, will pay 14.5 times the amount of taxes than the lesser earner does. I guess the government parasites are right, the rich don’t pay their fair share, they pay way, way too much.
Another way to look at this is to ask if the person making $1,000,000 a year actually uses $320,000 worth of government services in that year. Does the fact that they make that much money create such a burden on the system that they need to pay all that extra money? What about the money a top earner spends, does that contribute to the economic system that runs the wheels of commerce or should we just tax them more? Let’s have a look at that.
Not only does the high income earner spend lots of money, many times they also pay a premium for services that the rest of us never really see and all the money they spend obviously goes into someone else’s pocket whether that be profits for a business, wages to employees of those businesses or directly to individuals for goods and services. Let’s say a $1 million a year earner buys a $100,000 automobile, that money gets divided up amongst the:
Salesperson
Sales manager
Dealership owner
Receptionist that greets customers
Service advisers
Mechanics that service the car
Administrators that service warranty claims
Janitor that sweeps the dealership floor
Auto detailers
Auto shipper
And then we move on to the manufacturing process. These people also get a cut:
Auto assemblers
Assembly floor manager
Quality inspectors
Auto designers
Engineers
Parts fabricators
Tool makers
Inventory and stock personnel
Parts buyers
Parts expeditors
Parts suppliers
Material suppliers
Parts designers
Raw material suppliers
Parts shipping and transportation
Process engineers
Procedure writers
Assembly trainers
Facilities maintenance personnel
And then there’s the cut the government gets in:
Waste disposal fees
OSHA inspectors
Tire taxes
Battery taxes
Hazardous waste certifications
Emissions inspections and taxes
Permits
More permits
Environmental impact fees
Possible gas guzzler taxes
All that and more is paid by the rich person who injects their wealth into the economy of just buying an expensive automobile. Yes, wealthy people buy luxury items, but someone has to make and then sell those items and as you can see from the list above there are a lot of people along the process to getting an automobile to market and then to the consumer.
Beyond just purchasing transportation, rich people also buy the same things you and I buy. And then there are those extra premium fees mentioned earlier. We recently went to Ft Lauderdale and although I love this part of South Florida it can be very expensive to live there. Almost everywhere you turn you have to pay for items and services that the rest of us rarely see. Yes, we had to pay for those services while we were in Ft Lauderdale, but the people who live there pay for them every day. Some of those fees include parking at hotels and on the street. It costs a minimum of $20 a day to park at any of the hotels in town or on the strip or $6 for 2 hours while you go eat breakfast at a hotel. If you want to go downtown and shop add $6 to $12 on top of your purchases for the privilege of parking near shopping.
Property taxes are also much higher in areas like Ft Lauderdale. On top of the cost of your dwelling and property taxes, there are then either condo association and maintenance fees or home owner association fees that pay for people to keep the outside of you building from crumbling or the common areas of your neighborhood mowed and tidy looking. Gee, those silly maintenance and lawn workers, they have to eat too you know.
No, we’re not done quite yet. If you have a lot of money and can afford to stay in Ft Lauderdale in the more exclusive hotels, beyond the cost of either paying for parking at the hotel or renting a car that puts money into the local economy there is that rip-off hotel tax we have in Florida. All Florida hotels have the tax, but when you stay in an expensive hotel, such as in Ft Lauderdale, you obviously pay more for that. For instance, if you were to stay at the W on Ft Lauderdale Beach for 3 nights at a cost of $400 a night (a cheap rate by the way), your 3 day stay will cost you $1,200 plus $72 state sales tax, plus $78 Florida State Hotel Rip-Off tax because apparently the money tourists are bringing into the state by vacationing here, just isn’t quite enough. Did you get that? Someone who stays at the W in Ft Lauderdale Beach for 3 nights pays an extra $78, on top of all the other fees and taxes, just because the state of Florida demands it.
It is obvious that people who have money, spend money, and that money doesn’t just go into a black hole, it goes to pay the salaries of people who provide the goods and service that cater to people with wealth. It keeps the economy humming along at a pretty good pace but, according to our President and many members of Congress who continue to beat the class warfare drum, what the wealthy are doing to contribute to the economy is absolutely nothing.
Government acts as if the money they spend belongs to them, when in fact, it doesn’t. The height of absurdity and propaganda comes from this White House infographic where it is shown how much the policies of George W Bush added to the national debt vs what Barack Hussein Obama policies added to the debt. The evidence that this group of thieves who are now running the show thinks that government money actually belongs to them is at the bottom of the infographic where the Bush tax cuts are being blamed for adding $3 trillion to the debt. That’s like me going over to my neighbors house and stealing $100 and then claiming that it cost me money when I decide to return $50 to him out of the goodness of my heart. It wasn’t my money to begin with and it costs me nothing to return any or all of the money to him.
The bottom line is that the rich do pay their fair share as do the rest of us. We give enough money to the parasites in Washington, they don’t need any more money. The real question is, when is the government going to stop creating more social programs, more bureaucracies, more government Czars and more inventive ways to spend our hard earn money and start reigning in the orgy of spending?
We are waiting…
The Failed Social Experiment Of The Community Reinvestment Act
Sometimes the obvious is hidden in plain sight, but the obvious is cloaked by a noble name disguising a grandiose scheme. The scheme? It is referred to as the Community Reinvestment Act and if you don’t know about it you should because it played a significant part in the economic meltdown back in 2008 and if it is allowed to continue on its collectivist trajectory, it will spell disaster on a much larger scale than what we experienced just three years ago.
The Community Reinvestment Act or CRA was meant to encourage banks to invest in real estate and lend to people that are otherwise passed over because of their poor economic situations. The main gist of the law was to get home loans to those that would not normally qualify for a mortgage. Innocuous sounding enough, the CRA was born in 1977 and largely unenforced and ignored until President Bill Clinton’s overhaul of the anti-redlining rules under the act in 1993. (Redlining is a practice of banks not investing in an area of a city or charging more for financial services in that area because they determine it to be hazardous to business) At that point, the CRA was systematically used to begin to terrorize banks into giving out loans not only to people who could not afford them but, who had no intention of paying them back. Thus began the first ripples in the pond that would eventually nearly sink the economy some 15 years later.
You may be thinking, ‘What did an obscure law revamped back in 1993 have to with an economic crisis 15 years later?’ and my answer is, everything. While many would, and do, suggest this is an absurd notion, it is important to understand the unfolding of the economy is a slow process in most cases. Bad financial laws implemented and enforced on a small scale, take time to do their damage as they grow and and are enforced on a much larger scale. As in the case of the CRA, it was originally used by Attorney General Janet Reno after the Clinton revamping in 1993 to prosecute many banks for supposedly racist lending policies against blacks even though there was zero evidence to back up these charges. As time progressed and more cases were brought into the courts and more banks were intimidated (read terrorized) by thug organizations such as ACORN, this sent a chill into the banking industry and many banks simply rolled over and made risky loans to avoid prosecution.
It is important to note that many of the banks sued during the Reno tenure and beyond had already passed CRA inspections that found no such discriminatory lending practices. While statistically it was true that blacks and other minorities were in fact not getting loans at the rate white people were, the reason this was happening was not racist at all, it was based on the borrowers ability to pay and their past credit history. The only criteria used in determining whether an applicant could have a loan was based on their credit score and income statements. For the most part, if your credit score and ability to pay was good, you got a loan regardless of your ethnicity. While blacks got fewer loans as a percentage than did whites, Asians received many more loans as a percentage than did whites, yet there was no outcry of racism or lawsuits on the parts of whites who felt they were being discriminated against because Asians got more loans than they did.
To make a very long story shorter, the ensuing result of such practices of suing banks on behalf of blacks and American Indians took some $6.1 trillion, yes that’s trillion, out of the hands of banks and gave it to the housing market to build hundreds of thousands of homes over the course of 10 or so years that could not afford to be paid for. While this was a serious problem in and of itself, former President Clinton further exacerbated the situation through Housing And Urban Development (HUD) by requiring that Fannie May and Freddie Mac guarantee these risky mortgages from default. Also, under threat of further regulations and investigations, the nation’s largest subprime lender Countrywide Financial also played a part in the game by agreeing to lower their standards for obtaining a mortgage for minorities who were not deemed creditworthy.
It gets worse. The problem again gets compounded when HUD lets Fannie Mae And Freddie Mac purchase mortgage backed securities of subprime loans as credit for their HUD implemented goals of lending to more minority and unqualified mortgage borrowers. Freddie and Bear Stearns then create more securitized loan investment products that are just CRA mortgages supposedly guaranteed by Freddie Mac via the US Treasury. Finally, other banks then buy these risky mortgage backed securities because they get CRA credits (to avoid being investigated or sued) for investing in low income mortgages. See how complicated this gets?
So what you have now is hundreds of thousands of mortgages going to people that can little afford to pay them back, that came from bank money which was forced out of their vaults by lawsuits, fines and threat of lawsuits. All this is then backed up and secured by the federal government through mortgage giants Fannie Mae and Freddie Mac. Is any one starting to see a recipe for disaster? If you are, then let’s proceed to the next step where we’re going to place this mess in an oven and cook up a near full fledged economic meltdown. It should be fun.
Because of the enforcement of the CRA by the justice department at the hands of Janet Reno, lending standards across the mortgage industry are starting to be relaxed to try and be competitive with the institutions that have been forced to lower their standards. The result in all this is that between the years 2001 to 2005 just about anyone could qualify for a loan, even if you couldn’t afford it. To make matters worse (is there no end in sight?), President George W. Bush in 2002 directed his HUD Secretary, good old Republican, Mel Martinez to “help families who have bad credit histories to qualify for home-ownership loans.”
At this point you would think someone with half an economic brain would say, “Why are we giving home loans to people with bad credit histories in the first place?” Unfortunately, anyone who did that, at any time in this journey, was branded a racist by champion class hate instigator Jesse Jackson, Barney Frank and a whole host of organizations such as ACORN which once employed our Organizer In Chief, Barack Obama.
George W. Bush then continues to pour gas on the fire of the coming economic collapse by signing into law the American Dream Down Payment Act which sets aside $200 million a year for poor minorities to help them get into starter homes, by making their down payments for them. Again, almost everyone in government who voted for this nightmare thinks that giving down payment money to people who can’t come up with it themselves is a good idea. Lawmakers who agree with what will become the American Nightmare Down Payment Act also fail to realize that requiring these borrowers to have an actual stake in their home by putting their own money into it provides an incentive to actually keeping their home.
But wait, since our lawmakers fail to see impending doom and House and Senate Banking Committee Chairmen Barney Frank and Chris Dodd think that everything is just rosy at Freddie Mac and Fannie Mae, HUD raises the bar on its minority home ownership program to require that Freddie and Fannie make 52% of their loans to low or moderate income buyers. Subsequently, Fannie Mae pumps another $350 billion into risky subprime mortgages and sews the seeds of its own eventual demise and takeover by the government.
Finally in 2008, under the weight of trying to provide loans to thoroughly unqualified borrowers as mandated by the government following the guidelines of the good old Community Reinvestment Act, Fannie Mae and Freddie Mac collapse when to everyone’s surprise, low income borrowers do in fact default on their loans en masse. The Treasury then takes over Fannie and Freddie and they become wards of the state. Countrywide Financial also becomes a casualty of mass loan defaults by low income borrowers and is purchased by Bank of America. Not even bending to HUD extortion and trying to avoid being sued by the Justice Department can save Countrywide as they become the bad boy scapegoat of criminal government policy gone mad.
While Countrywide CEO Angelo Mozilo must take plenty of blame for assuring everyone in his organization all was fine despite the coming collapse he was well aware of for nearly 4 years, nevertheless this problem would have not existed at all had it not been for HUD’s extortion and intimidation of the mortgage giant to relax its underwriting standards.
Equally, none of the real players in the entire mortgage debacle have been asked to account for their actions. The Financial Crisis Inquiry Commission’s investigation and 576 page report failed to mention actions taken by Janet Reno, Bill Clinton, HUD Charimen Henry Cisneros, Mel Martinez and Andrew Cuomo, George W Bush, Janet Reno deputy Eric Holder (our present Attorney General), Alicia Munnell (whose thoroughly discredited report on lending while at the Boston Fed lead to the strengthening of the CRA), Roberta Achtenberg, Barney Frank, Chris Dodd and a whole host of other government criminals who used every means available to extort money from private banking institutions all in the name of fairness.
Further, none of these individuals were called before the commission to testify of their knowledge of, their destructive policies and their ultimate roles in the financial crisis. It seems as though the organized, bureaucratic criminals that truly lead us into this mess have been able to completely insulate themselves from even any implied wrongdoing much less investigation and subsequent prosecution.
Rather than take the blame for the crisis their direct policies were instrumental in creating, amazingly, many of the same players have been asked to help fix the problem. Barney Frank and Chris Dodd who were tasked with knowing what was going on at Fannie and Freddie and then completely missed the boat have now written and sponsored the new financial reform bill passed in July of 2010. Barney Frank even adamantly exclaimed that there were no problems and the “two entities” back in 2003.
What is most alarming abut the new financial reform bill and its 2,319 pages of obfuscation is that it does nothing to address the problems of Fannie Mae and Freddie Mac. Instead of letting these 2 now Treasury owned organizations fail and their assets be sold off, they are now essentially protected by the the new Dodd-Frank reform bill. Even though they failed miserably to implement the so-called affordable housing dreams of Democrats in Congress we will probably see these beasts rise again. Democrats still need a financing vehicle for their ever wilder social experiments and Freddie and Fannie played their part in buying constituent’s votes for nearly two decades.
Because the Financial Crisis Inquiry Commission completely failed to mention that it was radical government policy that was mostly responsible for the housing collapse and resulting financial fallout, the Dodd-Frank act actually increases government meddling in banking institutions and on Wall Street. Instead of reforming the way government makes policy and looking deeply into the books of Fannie and Freddie to see where the money came from, where it went and who benefited from the transactions and profit of this mortgage behemoth gone bad, our leaders have expanded their borders and created even more bureaucratic government agencies such as the Financial Services Oversight Council and the Consumer Financial Protection Bureau. Heaven help us all.
No matter the government’s destructive ways, the billions (or now, trillions) spent, the thousands of pages of regulations and the coercive ways of the fed that eventually end up giving little to zero results and are even proven harmful, the answer is always we didn’t spend enough, regulate enough or take enough in taxes therefore, we need more.
When will we realize that the we need more answer is not the answer? Will it happen when members of Congress in their infinite wisdom ask for 50%, 70%, 90% or 99% of our earnings to finance more of their schemes just to keep themselves in power? While enforcement of the CRA did not require that tax money be used to pay for the risky mortgages (the American Dream Down Payment Act was at taxpayers expense), banks were extorted into giving up the money they loaned and the bailout of Fannie and Freddie did obviously involved your tax money.
If someone comes up to you on the street and demands your money, they are referred to as a thief, yet we are forced to obey those that legislate this same thievery, calling it social justice, from the halls of Congress.
It is time to start thinking of our government as the despotic parasite that it is.
Why The Economic Stimulus Program Was A Big Scam
It has been just over 2 years now since the $787 billion economic stimulus plan passed and you have to ask yourself one question, did it do any good? Was spending all that stimulus money worth it? To answer that question you have to not only look at the things that are seen such as infrastructure improvements (roads and bridges) and additional welfare such as food stamps and unemployment, you also have to look at the things that are hidden. In other words you have to look at the things the money didn’t go to because it was instead spent on so-called stimulus projects.
Frankly, the economic stimulus plan was a big scam and did nothing to actually stimulate anything because of this one simple point - someone had to lose something, so others could benefit. That isn’t the way to run a prosperous economy. For the economy to hum along as it should, monetary transactions have to be a win win situation. Someone needs to receive real goods or services in exchange for a fair market payment of money or some other compensation. Before you start to say, but what about scams, what about mortgage fraud and overpriced lawyers and dishonest car salesmen that rip people off, I just want to say we’re talking about a simpler economic situation for illustration purposes. Simplicity will help us better understand why economic stimulus from the government can never really work.
Sure, there are anomalies in the form of these criminal elements and situations that are somewhat exceptions, but these exceptions should never be the basis of law and lawbreakers should be dealt with accordingly. It is never right to willingly break the law to enrich oneself to the detriment of others. Furthermore, existing laws and regulations must be enforced (unlike what happened in the Bernie Madoff case), but that is another discussion.
Since the staggering figures of nearly a trillion dollars are hard to comprehend, let’s simplify things and look at a much less costly example. Even though what I’m about to explain is only an infinitesimal fraction of the gigantic sums of money the government is dealing with here, the example will still work on a large scale so, put on your thinking caps and stay with me.
I’m going to use my wife and something that happened in her counseling business about a year ago. My wife came to her office one day, which is in another larger building, and found that her office door was locked. No big deal you think, but the problem is that there is no key to the door, so this is actually bad news. For the purpose of illustration and the only thing that is important right now is that what my wife owned was a door to her office that opened. That’s all, just a door that previously did open. That is important to remember.
Since the door was now locked, she obviously needed someone to open it and since it is a commercial grade door with a commercial grade lock, unless you are probably a criminal or a locksmith, you have a very slim chance of getting the door open. Rather than choose a criminal from the government, my wife chose the locksmith option and paid him $70 to open the door and install a new lock. The big question to figure out now is, was the economy stimulated in a win win situation? My wife got the door opened and she can now get into her office. The locksmith got $70 for his business to spend on some gas for his van, locksmith tools, an office manager, other business expenses and some profit to maybe go out for a cheap dinner with his wife. Everybody is happy and this is a good example of the economy humming along properly…or is it?
What did my wife get out of this situation? In the end, she got a door she could open and get into her office. Is there a problem here? Well yes, there kind of is. My wife already had a door she could open. She just paid someone $70 to give her something she already had. This is exactly where government economic stimulus programs go wrong because they are just moving money around, they aren’t really creating anything new.
Paying billions to people to be unemployed for an additional 99 weeks takes money out of the economy to finance new businesses that could hire those people. Additional unemployment benefits are a quick fix to what is certainly a desperate situation, but it is a horrible long term solution. What we don’t see in what government gets its big nose into is the same thing we don’t see in the example of my wife’s locked door, where the money could have been spent if it had not been spent on, as in my wife’s case, something she already had.
But the locksmith benefited, what’s the problem? The problem with my previous example and with all government stimulus is that there is a missing step that further stimulates the economy and that is critical. My wife could have spent that $70 on groceries for a week for her and myself and not only would have the local Publix store seen a benefit, so would have my wife and I. Publix would have had our $70 and we would have had a weeks worth of groceries instead of just a door that opened, which we already had.
So if you are thinking it isn’t such a big deal to help out the locksmith and pay him $70 to stimulate the economy, let’s extrapolate that out a little bit. I mean, we can afford that $70 loss and we moved commerce along a little bit, so why all the fuss? What if we just purposely locked the door, destroyed the key and called in the locksmith again, and then did it 100 times, or why not do it 1,000 times, wouldn’t that really stimulate our local economy? We would pump $70,000 into the local Central Florida economy and everybody would be happy. That is, except for us…
We would be just like the government in this example and we would be broke.
Do that last $70,000 example 11 million more times and you have the government economic stimulus program in a nutshell. The $787 billion had to come from somewhere and someone.
That someone, somewhere isn’t going away. One day, they will want their money back.