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The Problem is Not My Policies, or Is It?

May 29th, 2011
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05.29.2011
04.11.2012 updated broken links

The Problem is Not My Policies, or Is It?

original article written by Net Advisor

Washington DC. The fight for the 2012 presidential election took off with President Obama coming out with new targets to blame. We are sure to hear now and then how most of the economic problems we have are still (former President) Bush’s fault as Obama has repeatedly stated (random examples: 2008, 2009, 2010, 2011).

The Obama Administration has also chastised the banks, especially the “fat cats,” the Wall Street banks as what seems to be the new Axis of Evil. Anyone earning more money that the government thinks you should earn are also part of the problem – they just are not paying their “fair share,” even though “they” (the “wealthy”) are in the top tax bracket.

In fact it seems that this “fair share” mantra has been attached to every problem. Congress created the laws and they were approved by a sitting president. Companies and individuals just follow what they can do to reduce tax liability using the existing laws, yet for some the law is not good enough. It seems that some people who achieve success just aren’t paying enough. So the focus of the Administration and its supporters is to politically damn the wealthy and the job creating corporations for making too much money.

Examples of the “fair share arguments”

11-18-2009 “Husband won’t pay fair share of mortgage” (Solution: Don’t buy a house that you can’t afford. Would not be surprised if this story ended up in foreclosure and divorce.)

02-27-2011 “Olympia should pay fair share for superior Amtrak service” (Solution: Charge only the people who use the service).

02-28-2011 New Jersey says, “Let New York pay fair share.” (Problem with argument: NJ has no jurisdiction over New York.)

03-07-2011 “Amazon should pay fair share of sales tax.” (Problem with argument: Corporations don’t pay sales tax, consumers do. Any consumers feel they are not taxed enough can voluntary send in extra payments to the IRS.)

03-16-2011 (PDF) “Bill Would Ensure Very Wealthy Pay Fair Share of Taxes.” (Problem with argument: Supported by unions who have a retirement pension and low cost to free health care system better than anyone who is not in a union? They feel that the “rich” who have the highest tax brackets by law, should be extra penalized for their successes, by paying more in order to protect the union’s own welfare system: General Motors, Chrysler, State of California, Illinois, name your state.

04-25-2011 “John Boehner: Oil companies should pay their ‘fair share'” (Agree. We don’t need to have taxpayers subsidize for-profit companies or politically based entities.)

05-24-2011 “‘Fair share’ being asked of farmers.”  (Problem with argument: If you add a tax to farmers, they will pass on that cost to consumers in terms of higher food costs.)

Fair Share Mantra is Fundamentally Wrong
Many of the fair share arguments are essentially, if I am not getting the welfare I am entitled to, then whoever is making more money than me, I am entitled to a fair share of their earnings, so my welfare isn’t cut. Unfortunately that is not the spirit of capitalism and that is not what built America. The more we attack those who have the means to buy things and put money in the economy, can actually hurt the economy. Those with means who buy things create demand for products, and that subsequently creates jobs to make those products. If you tax and regulated business to death, they will move out of state or out of the country where labor and regulation is more business friendly. Business is not a social structure it is a profit structure. Like it or not if a business does not have profit, none of us will have a job.

Perhaps the U.S. should take a look at which countries are growing, and what they are doing that is working and perhaps copy some of those policies.

Notice in the above chart, the USA, is not even on the list of leading economic nations. In fact, the USA is in the bottom quartile for growth projecting in 2011, just behind Denmark and ahead of Ireland. Keep in mind that Ireland is technically bankrupt (Sources: Business Insider, CS Monitor, The Guardian.UK).

Iraq, who effectively is in an internal civil war is ranked the second fastest growing country for 2011. Haiti, devastated by disaster, crime and poverty, is growing at a rate faster than China, and growing five times faster than the USA this year [Source: EconomyWatch.com (PDF)].

The Exemption?
The so called Democratic “rich” seem to be exempt from Obama’s political wrath. Mr. Obama had no problem raising a $35,000 a plate democrat campaign fundraiser in California recently. It’s only business and the Republican “rich” that need to pay more.

One has to wonder how the Democratic “rich” got their money? If they didn’t inherit money [ i.e. Jay Rockefeller IV – (D)-WV], or married into money [i.e: John Kerry (D)-MA], could have the democratic rich got money from some sort of other business? And how did that business have money to pay them? Answer: From making profits. Such where those profits were sufficient enough to pay people for working and being involved in a business.

Where Money Comes From in the Entertainment Industry
In the entertainment industry there is a ton of Democratic wealth. As if the millions celebrities and actors get their wealth because of their political views? Generally speaking, movie studios don’t always take on the full cost and risk of a new movie. The money from the movie business comes from risk taking venture capital and private equity firms putting up their own cash without any government sponsored program. In-turn they create and maintain tens of thousands of jobs. If they make a film that people like, the movie makes money. If the movie makes money, profits go back to the investors and the movie participants are well paid. Next time you see a movie, watch all the opening credits. Look for their movie partners such as:

Main studio name (Warner Brothers, Walt Disney Pictures, Universal Pictures, etc, – usually the only one people remember because they are distributing the film. Then looking for names of businesses before name of the actors such as (hypothetical names/examples): WWW Productions, then 1×1 Pictures, then Ahha Films, then a QQQ Film Production, then “in association with…” (i.e. XYZ Partners, 123 Entertainment, etc). These companies (249 real-life examples) were created to produce films, and the money didn’t come from government or out of thin air. It came from investors.

Private Equity & Stock Market Capital Makes it All Possible
If it wasn’t for individual risk takers and venture capital, we would have no one to invest in America. Can anyone name one American billionaire who made their money from government sponsored programs? The answer is none. What one will find is no matter how far one looks, at some point, there was capital from “the wealthy” to invest in innovative ideas, and if the ideas produce wealth, that in turn produces jobs.

Apple’s Steve Jobs, Microsoft’s Bill Gates didn’t start out as millionaires or billionaires. There was money that helped fund these businesses. Apple had private venture capital and Microsoft had a unique partnership with IBM.  Along with capital, their corporate product vision and correct marking made a lot of people money.

Companies such as Facebook, Twitter, LinkedIn, and 1,000’s of other companies all had or currently have money from private venture capital firms and private investors.

If they didn’t, this technology would not exist. Think government would have come up with the idea? They didn’t, nor have they come up with any successful business idea. Government ideas seem to always cost more and more money and profits are no concern for government because its not their money at risk.

Obama’s Money Machine
The Obama Administration has a different kind of wealth creation. Mr. Obama made his money not from entrepreneurship, running a business and creating jobs. The bulk of Obama’s money came from writing a book while running for office.

“Mr. Obama and his wife, Michelle, reported a $3.9 million net profit from books, a sum that dwarfed their combined salaries of $260,735 (for FY 2007).”

— Source: New York Times, 04-17-2008 (PDF)

If you factor out the 2008 book Mr. Obama made, $157,102 was his annual salary as Senator of Illinois. Michelle Obama made $103,633 as her salary while employed at the University of Chicago Hospitals, as the NY Times reported. If you then factor out book sales and government work, Mr. Obama’s income would be zero (or what Michelle Obama made, $103,633).

[Math: $4,160,735 income – $3.9 Million factor out profit from book sales = $260,735; then factory out Senate salary of $157,102 = $103,633 which is Michelle Obama’s salary as Vice President for Community and External Affairs at University of Chicago Hospitals.]

In 2008, the Obama’s brought in another $2.5 Million, mostly from more books sales, and royalties from previous year’s book sales. The rest of their income was from government work.

— Source: Washington Post, 03-20-2009

Serving in public office is what made Mr. Obama wealthy. Naturally, Obama could conceivably think that there is no need for business to make money. Government is the answer. All you have to do is get involved with government and you will make money?

But where does government get their money?

Answer: Taxes.

Question: What if government runs out of tax money to spend, where does government get more money fast?

Answer: It borrows it. In fact the U.S. government now borrows 40 cents on every dollar it spends.

“The federal government now has to borrow about 40 cents of every dollar it spends.”

— Source: The Economist, 1-13-2011

This borrowing doesn’t even factor in the daily interest cost on that debt. One might now imagine what would happen if interest rates suddenly went up or we had inflation?

So just tax business and the wealthy more, and government will simply redistribute the wealth as it sees fit. And if we run out of money, print it.

All you have to do is be part of government and you’ll get rich? With the guaranteed life-time fat government pensions, no worries about their health care costs (paid for by taxpayers), and cost of living adjustments (COLAs) (paid for by taxpayers), the Obama’s will never have to worry about tax increases or money again. Good for them. It’s America, and like it or not, they made it.

For the rest of us without the big book deals, safe government jobs, free to low cost healthcare, and life-time pensions we have to think about what we are going to do. And taxing us more won’t help.

So instead of more taxes for the first two years of the Obama presidency, because it’s hard to tax people where they are out of work, we had spending – a lot of spending.

However didn’t Mr. Obama say he was going to cut more than he was spending during the 2008 Campaign? let’s take a look shall we?

Flashback Presidential Campaign 2008 @50 to 58 seconds into video. Notice candidate Obama stumbles over the words “net spending cut.”

“…actually I’m cutting more than I’m spending so that it will be a net spending cut.”

— Presidential Candidate Obama, 2nd Presidential Debate, 08-07-2008 (Page 8 Transcript) (Source: CNN Video/ Full Transcript/ Full Video)

Let’s go back to some more campaign text:

“You know, you may have seen your health care premiums go up. We’ve got to reform health care to help you and your budget.”

— Obama 08-07-2008 Presidential Debate

Is there anyone you know who has seen their health care premiums go down at any time in history, or at least since Obama care was enacted? Under Obama Health Care, costs will go up an estimated $1.6 Trillion over 10 years, not down.

“We are going to have to deal with energy because we can’t keep on borrowing from the Chinese and sending money to Saudi Arabia.”

— Obama 08-07-2008 Presidential Debate

We’ll we are still doing that, but borrowing twice as fast as Bush did — and in just half-the time. That’s government efficiency, borrow and spend twice as fast but in only half-the time? We are going to deal with energy? You mean cut back or just stop major oil drilling in the USA so gas prices can go up? Energy (oil) prices are up 170% since Obama took office.

Oh, but it’s the “speculators” that drive the price of oil up.
We’ll, short term, market speculation can contribute to influence prices, but not control prices long term. If speculators could control prices on everything, then a loaf of bread would be $60,000. Here is the problem:

The U.S. has a weak Dollar policy. Though the way the officials say it, its like an alcoholic denying they have a drinking problem, or a heroin addict says they can quit anytime.

Here are some of our recent Tweets on the subject and accompanies articles that discuss the weak dollar problem.

04.26.2011:

  • 2-4 (05-25-2009) “Geithner says strong dollar in U.S. interest” (Reuters) http://t.co/bsDHa7m
  • 3-4 (04-21-2011) Analysis: Has the U.S. forgotten it has a strong dollar policy? (Reuters) http://t.co/yiZOkKH
  • 4-4 (04-21-2011) Dollar at three-year low, gold on hot streak (Reuters) http://t.co/KRRFsgE // What “strong Dollar Policy” again???

Ignore the political rhetoric, and judge by their actions. The Obama Administration clearly has shown by their actions over the last two years thus far to NOT have a “strong dollar policy.”

About Oil, the US Dollar & what drives oil & food prices higher

  • A weak $Dollar increases commodity prices such as oil.
  • Commodities, such as oil, gold, silver, corn, oats, soy, wheat, coffee, OJ, cattle, pork, etc., are all priced in U.S. dollars. Thus, if the U.S. dollar goes down in value, commodities priced in dollars, go up in price.
  • A weak dollar comes from U.S. government deficits not oil “speculators.”
  • The other side of the coin is demand: There has been increasing demand for food and other commodities especially in China & India. But the bottom line is if the U.S. continues to rack up debt, that will only cause more oil and food inflation.

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The next aspect that helps increase oil prices is the lack of domestic oil drilling
In March 2010, the Obama Administration placed a moratorium (no drilling) policy for six months after the 2010 BP spill. Then six months was changed to three years. Then three years was later changed to 7 years – until 2017.

“President Barack Obama will not be allowing new drilling in the eastern Gulf of Mexico for at least seven years, Interior Secretary Ken Salazar announced…”

— Source: CNN, 12-01-2010

How’s that for a domestic energy policy?

Q: So where will the oil come from?

A: The Arab countries in part.

Q: How will we pay for it?

A: Borrow… just like always.

Here is a strange correlation.

“We are mortgaging our children’s future. We’ve got to have a different energy plan.”

— Source: CNN, 12-01-2010

Actuality energy or oil isn’t killing the economy. We have been using oil for a hundred years or so. But policies to limit energy use when consumers demand energy won’t work. Alternative energy won’t work overnight either. It’s reckless government spending that is killing the economy. Bleeding money from the wealthy until they are equally poor, regulating business until they leave the country with the jobs, and trying to get consumers to buy government approved (energy efficient (PDF), but environmentally destructive) light bulbs, and tell them what to drive is like an intrusive foreign parent no one wants. The energy plan Obama envisioned just has not worked – at all.

Education:
Obama also stated in 2008:

“We’ve got to invest in college affordability.”

— Obama 08-07-2008 Presidential Debate

Is there anyone in America who thinks college is “affordable?” Is there anyone in America who thinks if they just drink from the Obama Kool-aide that college will someone become affordable for them?

This is what has happened:

The Administration decided to take over the entire student loan program in late 2009, making people become in debt to the government instead of private banks, and in the process, government lost another 2,500 private sector jobs.

Obama has largely kept his 2008 promise on education spending, however a chunk of it is borrowed money. This spending should be maintained through at least 2012-2013, and is expected to create an extra $20 Billion federal deficit during that time (Source: USA Today).

There is only one problem with the lending to student loans. Many are having high difficulty paying the loans back. When they get out of school, there are fewer jobs. In the USA, unemployment for college grads is the highest since the 1970’s – when government began keeping records (Source: USA Today). So students are defaulting on what are no longer (private) bank loans, and now are government (tax payer backed) loans. Here are some headlines:

“Student Loans: Default Rates Are Soaring” — Wall Street Journal, 04-21-2009

“Student Loan Default Rate Is Continuing to Increase” — New York Times, 09-13-2010

“Student loan debt rising among Americans” — CBS News, 04-12-2011

Here are the statistics:

1 out of 4 students, who attended “for-profit” schools, defaulted on their loans within three years.

1 out of 10 students, who attended public four year schools, defaulted on their loans within three years.

— Source: Colorado Independent, 04-29-2011

There’s nothing like a government takeover to insure failure. And if this is not a potential tax liability, call China for an education loan – a big one:

“Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year (2011)…”

— Source: New York Times/ MS-NBC, 04-12-2011

I’d argue that the reason education costs are going up has little to do with some new technically advanced text books, it has to do more with the free to low cost healthcare and large pensions educators are receiving. Students are not just paying for an education, they are also paying someone’s pension to whom they never had a single class.

Financial Reform: Costly to Consumers
Next, Obama implements “Financial Reform,” which did nothing but raise banks fees on consumers.

“Experts are predicting banking fees will increase this year for customers. The increase stems from a change in a financial reform…”

— Source: ABC News, 01-06-2011

Obama’s “financial reform” did not address the main problems of the housing bust either such as social verses rational fiscal policies related FHA, HUD, Fannie Mae and Freddie Mac.

The ideological political mantra of this Administration has not worked to do anything but increase regulations, penalize those who obtain success, reward those who fail, seek higher taxes, borrow more money, spend more money, create record deficits, devalue the U.S. dollar, increase energy dependency on foreign oil, and debt burden students before they get a job. Is this the “change” you were looking for?

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