Thursday, February 26, 2009

It's good to see that Billmon is writing again

Billmon has a post where he compares Milo in Catch-22 to our financial traders buying and selling the Big Shitpile. He then expands this allegory to explain how the Big Shitpile led to the collapse of our financial system. A very good read if you can slog thru the technical details.

Thursday, February 19, 2009

In Defense of Social Security

I think it is time we start working to defend Social Security. This so called "fiscal responsibility summit" is going to be used by some to once again try to destroy social security. Obama has said he wants to "fix" social security, but has not clarified what he means by "fix". If he wants to cut our benefits we need to fight him along with anybody else, democrat or not, who means cutting benefits when they say "reform". Below is a letter I sent to Obama which I think frames the debate as it should be framed.

I intend to modify it slightly so I can send it to my Senator & Representative. We need to start asking our Reps where the stand and finding who supports cutting benefits and who wants to work to maintain or increase them. Don't let them just say they want to reform Social Security. Press them to find out what kind of reforms are necessary.

If you don't think this can happen while the Democrats control the House, Senate & Presidency you need to remember it was Clinton who ended Welfare and passed NAFTA, it was Bush I who raised taxes on the middle class. The elite have a way of getting the Party whose base would most oppose something to pass legislation that directly contradicts the demands of their base. While the base trusts their Party leaders and ignores what they are saying and doing those same leaders write and pass such legislation.

The "fiscal responsibility summit" will take place next week. It is the responsibility of anybody who supports social security to speak up now.

Dear President Obama,

I have read that you are planing to have a "fiscal responsibility summit" early next week. Social Security is sure to be a part of that discussion. I want you to know that I do not believe that there is a Social Security crisis and that cuts in benefits to Social Security recipients and the raising of the age at which future retirees will become eligible for benefits should not even be on the table.

The income to the federal government from the Social Security tax exceeds the benefits paid for Social Security and this will continue to be the case for several years. The fact that current projections claim that benefits will exceed revenues in the not to distant future does not mean that the program is insolvent.

The rest of the Federal government is insolvent. Surpluses generated by the Social Security taxes have been used for decades to cover shortfalls in the rest of the budget. When Social Security attempts to draw on it's reserves it will cause a double budget shortfall. There is no reserve, so the shortfall in SS will have to be covered by the General Fund, and an excess of SS revenues will no longer be available to cover other General Fund expenses.

This is called a Social Security Crisis. But, the crisis is not is the Social Security program and it is not the beneficiaries of Social Security who should bear the brunt of a general budget crisis. For years I have paid into the SS system and I do not feel that the money I will eventually draw in benefits is a gift from the Federal Government. It is a return on my investment in the system. It is not a hand out, it is truly something that I and millions of others are entitled to.

Medicare is a whole different picture. It also is funded by payroll taxes so the two programs often get lumped together. I think for the purpose of your summit next week it is critical the two programs are dealt with separately.

Medicare is truly facing frightening shortfalls caused mostly by run away medical cost and an aging population. Medicare budget concerns can not be solved without addressing the medical delivery system in this country as a whole. I do not know the answer the medical crisis but I do believe that the sooner and more completely we remove private insurance carries from the medical system the better of we will be. I support a single payer health care system and if Congress people want to talk about "fiscal responsibility" that should certainly be part of the discussion.

However, I am not writing to advocate for health care reform, that I believe will be addressed later in your administration. I am writing to advocate against benefit cuts in Social Security. If some Congress people insist on "fixing" Social Security , raise revenues if you must, but do not under any circumstances cut benefits. Eliminating, or raising, the maximum income which are subject to payroll taxes should be the first option considered.

In closing, I want to reiterate the problem is not Social Security. Revenues raised by payroll taxes are not the only revenue to the Federal Government. Since the shortfall is in the general fund, other taxes can be raised to increase cash flow into the general fund.

Leave our Social Security benefits alone.

Thank you for your time and keep up the good work.

Monday, February 16, 2009

Don't touch that Republican, hand me the pliers...

I don't like people trying to take advantage of that [outreach]. This is why actually if you watch my political interactions. I am always best as a counter-puncher. You know, somebody comes at me I will knock them out. If not, I will try to understand their point of view and that actually serves me well. I give people the benefit of the doubt; I try to understand their point of view -- if I perceive that they try to take advantage of that then I will crush them. -- Mr. Barack H. Obama, circa 2007

Tuesday, February 10, 2009

Welfare to wealthy people

TARP and related expenditures by the FED are a blatant direct transfer of the public wealth of America to the richest people in the world. As such I believe we should start from this day forward to campaign against Welfare Kings. Welfare Kings are people who can't afford to live on less than 500 hundred thousand dollars a year, but due to hard times on the financial market need transfusions of Trillions of dollars from the Federal Government directly into their, and their friends, bank accounts.

Below is a letter I wrote to my Representative asking for his help.

I am writing to ask you to look into ways to limit the current FED program to guarantee bad assets currently held by US banks, and to demand that the FED submit to a full accounting of such guarantees already issued by the FED.

The February 10th NY Times Article titled "Geithner said to have prevailed on U.S. bailout" includes the following passage,

It intends to call for the creation of a joint Treasury and Federal Reserve program, at an initial cost of $250 billion to $500 billion, to encourage investors to acquire soured mortgage-related assets from banks.

It wants the Fed will use its balance sheet to provide the financing, and the Federal Deposit Insurance Corp. might provide guarantees to investors who participate in the program, which some people might call a 'bad bank.'

A second component of the plan would broadly expand, to $500 billion to $1 trillion, an existing $200 billion program run by the Federal Reserve to try to unfreeze the market for commercial, student, auto and credit card loans. A third component would involve a review of the capital levels of all banks, including projections of future losses, to determine how much additional capital each bank should receive.

The capital injections would come out of the remaining $350 billion in the Troubled Asset Relief Program, or TARP.

Lets look at the math 500 Billion + 1000 Billion - 200 Billion = 1300 Billion. Yet the last sentence quoted above says the initial cash for this will come of TARP's 350 Billion. Where is the other 950 Billion coming from?

Today's Washington Post, in an article titled "New Bailout May Top $1.5 Trillion" included this paragraph,

In announcing the plan, Treasury Secretary Timothy F. Geithner will not ask Congress for more funds than the roughly $350 billion that remain in the Treasury Department's original rescue package for the financial system, though congressional sources said such a request could come later if the new programs are unsuccessful. The rest of the money would come from other government agencies, such as the Federal Reserve, as well as private-sector contributions.

The private sector contributions are a joke, and should be an insult to the intelligence of anybody who has been paying attention for the last twenty years. Private contributions to the Federal Government are made either purchasing bonds, which is really a loan to the Government, or paying taxes which wealthy people have systematically worked to reduce their obligations for years. Are we supposed to believe they have suddenly had a change of heart. Give me a break.

Which means that the FED is going to hand out close to another Trillion dollars to the banks. Is there anyway that we, the American public or the Congress for that matter, can see where that money goes and how it used by the recipients.

Bob Riech, in a post on TPM Cafe, dated January 24, 2009, titled "How America Embraced Lemon Socialism" claims,

While Washington debates TARP II, the Federal Reserve Board continues to buy or guarantee or provide loans for a vast and growing pile of questionable financial and corporate assets, much of which are likely to be worth far less than the Fed has paid or guaranteed or accepted as collateral. We're talking big money here -- so far over $2.4 trillion.

If Mr. Riech is correct we the American taxpayer will be on the hook for 3.4 Trillion dollars for FED expenditures alone. Yet you have no oversight over, or even leverage to cap, the FED's expenditures. The Senate is arguing over peanuts, 100 Billion used to be more than peanuts, while the bankers are robbing us blind out the back door.

Please tell me what you are doing to try to reign in this outrageous theft. (Note: I am not talking about the stimulus plan. I am talking about TARP and this little discussed and unauthorized program that the FED is currently implementing). If we are going to give, and I do mean give, as in handout (i.e.: welfare for wealthy people), Trillions of dollars to people who cannot live on less the 500 hundred thousand dollars a year, then it should be done above board. Please insist that it be done in a way that all Americans can clearly can see who aided these scoundrels in this crime.

Thursday, February 5, 2009

Letter to Kay Hagan

I am writing to ask you to support the stimulus bill as it has come to the floor, If there are to be any amendments to that the bill it should be to add spending and/or reduce tax cuts. In specific I am asking you to reject the amendment being put forward by Senator's Collins & Nelson.

The economy is crashing and burning out here beyond the comfortable confines of Washington DC. We need spending by the federal government to help offset the significant drop in spending both by commercial interests and by consumers. Loosening the credit markets, which is the stated objective of TARP, will not be enough.

We consumers are tapped out. We have withdrew all we can from our retirement funds. We have borrowed as much as we can on our houses. We have maxed out our credit cards. We are not spending because we have nothing left to spend. (Note: I have not personally done all of the above. But, the point is as a group we have collectively reached the conclusion that our financial survival depends on us spending less and saving as much as we can. Savings, may mean to many reducing personal debt not actual savings. Either way it is not being spent on consumption.)

Business are not going to invest in increasing productive capacity if nobody is buying what they sell. So, any sensible business is also cutting back, reducing staff, reducing inventory if possible, closing plants etc... In short, trying to hoard whatever cash and assets they have. Hoping that at some point in the future those assets can be put to use for a reasonable profit.

Increasing access to credit will not help business or consumers. Since neither group wants to borrow money right now. Government is the only sector that can afford to increase spending now. We need that spending out here to create some kind of demand. Without it a deflationary spiral will hit us all, most likely before the year is out.

Tax cuts are supposed to increase capital available for investment. Investing that capital is supposed to stimulate job growth. That is the theory which proponents of tax cuts cite as the reason we must cut taxes. Leaving aside that eight years of tax cuts resulted in very little job growth here in the US. There is plenty of capital available to invest right now. What is missing is demand. Without increased demand capital accumulated by tax cuts will be hoarded to be invested in better times. That is why I am asking you to vote for increased spending and reduced tax cuts.

Look at the spending that Collins and Nelson want to cut. "State stabilization money", without assistance States and local municipalities across the country are also going to be forced to cut back. So in addition to consumers and businesses reducing economic activity a huge percentage of the government will also reduce economic activity. "State Incentive Grants", all the talk of the green economy is hog wash if States don't spend massive amounts of money on "greening" their properties. These investments will provide the seed money which will allow companies trying to produce "green" products get into business, develop/improve their products and become financially sound so that future growth will be possible. Funding for education, health care and transportation, all of which will go directly into the economy and generate or maintain jobs while providing much needed service to us, the general population.

These cuts are ridiculous and ideological. While some in Washington are playing politics and posing for photo opps, we are facing a major crisis. You campaigned on the slogan that "Washington is broken". I called hundreds of people on your behalf and told them just that. The absurd "debate" ( a very polite term for what is happening ) that is taking place around this bill is a prime example of the problems in Washington. Voting for increased spending and reduced tax cuts in this bill is a great opportunity for you to begin to make good on your promise to "fix Washington".