The average homeowner who deducts interest on his mortgage does get what can be called a middle class tax advantage. However, it is not what the left describes as a major benefit.
Most taxpayers do not figure the actual comparison of taking a standard deduction versus itemizing deductions. You give up what the IRS gives in the standard deduction, to get the itemized amount, so you profit only from the difference. Calculate your benefit by doing your taxes both ways.
We keep hearing more and more about “black swans” and protection in finance and business. These are highly improbable events that occur despite all we do to prevent them. This reflects the fact that there are rarely any black swans to be found in nature.
So, we keep attempting to protect ourselves against future black swan-type debacles. We’re spending a fortune in corporations to do so.
The U.S. Congress, with its propensity to spend, is great at outlays. The Dodd-Frank legislation is a perfect example of over-action and resulting unintended consequences, which you can be certain, will not prevent the next black swan incident.
One objective of Dodd-Frank was to make banks smaller, not too big to fail. The result in less than a year is that smaller banks cannot exist amidst the new regulation, and larger banks are getting ever-larger.
Listen to the leftist politicians and you have a conjured picture of a fat cat, smoking a cigar with his feet on a desk, or better still, a fishing rod in his hand.
Not so. The so-called rich are usually the ones employing you, the ones who run small and large companies, with emphasis on small. After all, anyone with income over $250,000 before taxes is now considered rich. Those over $250,000 a year income are often employers. By the way, how many jobs will that cover?
The rich from one measurement to the next are not even the same.
Here is another basic economics lesson not taught in expensive colleges. It has to do with the Obama administration’s past failed efforts to revive the economy by getting into enormous debt.
To name a few: Unnecessary bank bailouts, stimulus outlays that were merely slush funds for government funds, and let’s not forget giving new car buyers a $4500 cash allowance for clunkers when buying a certain type of new car.
It was not successful for many reasons I pointed out early on.
One: The government mixed an economic stimulus concept with an environmental objective so it confused the public.
Two: Cars sold in this manner meant that none would be sold normally for a couple of years after the program terminated. The public’s appetite was temporarily stimulated but then held off from future buying.
Three: Because of the way clunkers were being disposed, the used car and parts markets were adversely affected.
If money of this kind were used for clunker cars, what about clunker washing machines, or lawn mowers, and so on? Or government funds for buying clothes?
Most folks are beginning to care about a weak dollar. The media is catching up with the subject.
Still, too many are still certain about government being able to offer them more goodies. That’s because they are often influenced by media sound bytes when it comes to political news. It’s sports and other circuses that get too much of their attention.
So a weak dollar that concerns whether foreigners or foreign governments buy U.S. Treasury bonds have no importance to them.
But when they have heavy inflation because the government has to literally print money to balance the budget, they will notice. By then they will blame the wrong folks for their financial woes, taking their cue from the same faulty media sound bytes.
This morning’s news flash from a major news network is a daily repeated example of the leftist slant of conventional news sources.
The report is of gasoline prices at the pump hitting a new high. Immediately followed by news of record oil company prices. The connection is obvious and so the public remains ignorant of the fact that oil company profits average only 8 cents on a dollar of revenues.
And that the Obama administration is holding back new drilling and refining capability.
So what else is new?
When liberal politicians get together and try to legislate from their hearts and secular religious beliefs, you are certain to get a hodgepodge of unintended consequences. The Dodd-Frank legislation of 2010, on which I’ve commented many times, is a perfect illustration.
Just one example I would like to point out because it’s happening before our eyes and it’s an event Dodd-Frank was supposed to actually prevent.
Dodd-Frank regulations are killing smaller banks, It’s tough enough for large banks to contend but the added costs of keeping up with regulations add to administrative costs and financial requirements that banks simply cannot afford.
Higher gasoline prices are only a harbinger.
With extraordinary government spending and extreme budgetary deficits, it is only a matter of time before we see frightful inflation. It may take a year or two to really show up but it will come.
The Federal Reserve’s original primary job was not to protect against systemic financial risk, as is being proposed by the Obama administration. but primarily to maintain the value of the currency. Not so it seems.
Since 1978 the Fed has to help enforce the Full Employment and Balanced Growth Act, also known as Humphrey-Hawkins. That conflicts with the Fed’s prime stated activity. That’s because the Act’s enforcement creates an inflating bias, not one of dollar stability.
So there is always a conflict of interest being overlooked by financial media comment.
One of the main reasons for need of ObamaCare was the fact U.S. lagged behind so many others in the world in delivery of proper health care. The proof given was in statistics provided by a World Health Care study in the year 2000.
It showed that the United States ranked 19th in national life expectancy for 1980 to 1999. During that period, Japan, Australia, Canada, Spain, Italy, France, Germany and the United Kingdom ranked higher.
The study, it turned out, had politically-induced flaws. For example, if fatal injuries such as auto fatalities were omitted, the United States had the best life expectancy.
Also important: The WHO study did not bother to evaluate the quality of health care, nor did it ask care unhappy recipients in the various countries what they felt about services they were getting.
So which statistics do you believe were expounded as the reason for America to take on socialized medicine as in Europe and elsewhere? The questionable figures induced by America’s extensive auto use and accident rate or those the politicized World Health Report was designed to show and ObamaCare was glad to employ?
The Obama administration is taking credit for the amount of domestic oil we happen to be now drilling. But this is oil we had planned for in the previous Bush administration. The truth is, the Obama administration has been holding back approvals for new drilling.
And to add to this misinformation, the administration claims there are already sufficient oil leases extant and approved on which to drill. A very amateurish statement indeed.
Simply, not all oil-lease acreage can be drilled. Studies by the oil companies are made on them and they remain idle for the probable reason that they are not productive nor economically feasible.
The truth of our energy policy is that the U.S, has enormous sources of petroleum for at least the next century. Right now, Economic sources of wind and solar power, preferred by the green environmentalists, are decades away.
We need more economic reality and less political chatter.
I have constantly commented on ways to make health care cheaper, without impacting the entire system with a socialized version.
One way would be to reduce provider costs. Physicians and hospitals say this could be done if they would curtail defensive practices.
The accounting firm PricewaterhouseCoopers says that about 10% of medical expense is attributable to medical malpractice lawsuits. Only about 2% is caused by direct lawsuit costs.
Add about 5% to 9%, due to MDs having to practice defensive medicine. That is, they add tests in case a plaintiff lawyer asks them in court: Questions such as “Why didn’t you do this procedure…?”
“Taxing the rich” is an excellent populist campaign slogan for those who are seeking votes from voters who are economically ignorant. It appeals to those who are in that category and to those who know the facts but would rather get votes any way they can.
Even if they must lie to acquire them.
The truth is from past experience, actual tax rates are not important; it’s the tax revenues those rates produce that count. And experience shows that lowered rates have produced more revenues from the so-called rich in the past.
But politicians who talk down to voters love to “tax the rich” because the level of intelligence they appeal to loves to hear the phrase.
Remember: High tax rates do not automatically mean high taxes revenues in the real world.
The U.S. government failed home owners but you probably will never see an inept media take the blame for repeating the bytes that populist politicians-in-power cited in promoting the fiasco.
The U. S. government saw to it that everyone who wanted one owned a home whether they could afford it or not.
Uncle Sam provided loan guarantees where tiny down payments were made. The U,S also set mortgage payments out to 30 years, and permitted interest-only loans.
We had to have U. S. Government-guaranteed Fannie Mae and Freddie Mac instruments to create a subprime problem and eventually all the excuses to bail out banks.
How come, our neighbor to the north, Canada, has had no problem and no deep housing recession? It has no concerted program for all of this mortgage aid. Canada does not go in for the liberal housing subsidies that the U.S. has to this date, and for which Congress has never taken responsibility.
You constantly hear about Gross Domestic Product or GDP. It reflects a country’s economic activity, actually the value of all a country’s products and services are produced in a period or a year. It generally represents a good indicator of the county’s economic health.
It can be skewered when natural disasters such as hurricanes and earthquakes or tsunamis or wars influence unusual economic activity. But the GDP can be a standard against which we can truly measure our debts and national and social accounts.
Especially our debts.
The idea behind Cap and Trade is to cut down on carbon emission pollution, the type from using fossil fuels. Politicians in charge get to designate which industries get what quotas for emissions with which they can befoul the air.
Then there are fees involved and penalties. That’s where the hidden taxation arises, and accumulates as a giant tax gimmick that will directly and indirectly hit industry and the consumer. The answer to any entrenched statist politician’s dream.
The Chinese and India want nothing to do with it because it destroys economies. New Zealand tried it for a couple of years and quit. The Australians put it on hold after some sober thought. Yet, the Obama administration appears ready for the fiasco.
Legislative enactment is highly unlikely, so the Obama administration is enhancing the provision its own way, through the Environmental Protection Agency action, literally behind the public’s backs.
No matter how good your credit is, the lender must still have funds to give you. Or an inclination to take the risk of giving you funds despite good credit standing.
Conventional bank profits came from lending money to worthwhile credit risks. That convention isn’t any longer as simple as that.
U. S. regulators now have a habit of investing their populist political reasons. After all. consumers vote and banks do not. It is also a form of state socialism.
When officials feel existing mortgage terms have to be changed, they “suggest” them. When they feel the bank’s books need strengthening, the customers’ good risks cannot be taken. And so on.
Credit availability is thus on the line.
To elaborate on the Obama administration’s emphasis on the use of almost a trillion dollars as an anti- recession slush fund for political purposes.
It was supposedly a pick and shovel job proposal but the funds were used primarily to pay unionized state employees.
But proposed pick and shovel job proposals are meaningless to women and skilled workers who make up such a large part of the work force. This did not help in the 1930’s when women were a small part of the workforce. It certainly is of no use in today’s high-tech industrial society.
What is more, government jobs emphasis create poor psychology. This job program philosophy creates just the opposite employment atmosphere, if we must overcome fear and gloom to get over a deep recession.
Liberals often refer to the opinion of John Maynard Keynes, to accommodate the idea of economic pump-priming. But he, himself, was not decisive in such methods of producing prosperity, as those who claim to be his followers.
Examples of the left’s misuse of Keynes’ theory:
Prosperity depends little on investment in industry, That did not produce jobs and income in the 1930s.
Lower interest rates did not help during the Great Depression of the 1930s. Lots of bank reserves and deposits didn’t help when the banks were afraid to make loans to industry.
Large public works also did not create meaningful jobs. And higher taxes were poisonous.
Yet, we continue to hear Keynesian suggestions. ( See the Earl J Weinreb NewsHole® comments.)
Less venture capital deals are available because of a recession. Capital is also tight because the exit door is smaller for the venture capitalists with ample funds. In other words, it’s not as easy for them to sell what they have to the public via underwritings.
There is no shortage of funds for new business. There are simply less willing underwriters to get the VCs off the hook. Less buyers to speculate on the wares investment bankers have.
The price of oil and other energy products that Americans pay is completely controlled by American will. Unfortunately, the vast majority of Americans don’t know this and do little about it.
They therefore place the blame on the pricing policy of producers outside American borders.
The truth is, America is awash in its own supplies of oil sources, in addition to other sources of energy. All it needs is oil extraction and refining now, until it can fully develop wind and solar and atom sources, so called renewable resources, and develop them when they make economic sense.
But groups of politicians in America see to it that we do not drill for abundant domestic oil, nor refine it.
The OPEC monopoly should have no affect on America. They can adjust their own supplies at will, to suit whatever pricing OPEC wants. No matter what OPEC does.
OPEC may control oil prices no matter how much America produces by adjusting supply, but U.S. oil makes us independent of oil politics and saves the U.S. dollar from being attacked. It would also create a vast number of American jobs And American foreign policy independence.
America can be rid of economic and international pitfalls with its enormous reserves, were its anti-drilling, anti-refining politicos were amenable.
The CBO or Congressional Budget Office can become a major tool of lots of foolish shenanigans in Congress if taken out of context. Thanks to the media which never explains, exactly, what the auditing function of the CBO is.
The CBO does the bookkeeping for Congress. It calculates whatever Congress puts before it to calculate. If congressmen in the past put in garbage, the CBO turned out garbage. The CBO gives no opinions or interpretation. Congress has lied about its numbers in the past and the CBO had to report the same lies.
So look to figures from Congress for their validity before you have them validated by the CBO.
I repeat now what I said a couple of years ago. It’s worth retelling.
There could have been a quick solution to the financial meltdown on Wall Street. It was overlooked by “experts” and the Federal Reserve.
The government could have bought up all the excess empty tract developments in California, Nevada, Arizona and Florida, and razed them. They would be off the market. No surplus real estate to undermine other property values.
There would have been a stop to the psychological real estate contagion that spread to the other states. The law of supply/demand would have applied. Much smaller bank assistance would then be needed to clean up the banking books.
We would have had a normal recession, not what has become an excuse for government-meddling. At a cost of multi-trillions that will entangle the economic and social lives of future generations of Americans.
Mark-to-market financial accounting recurs as a topic from time to time. It hurt banking in the 2008 financial meltdown.
The Financial Accounting Standards Board, or FASB, again is considering the use of this standard, which pegs values of financial assets to the volatility of the securities markets. Banks hate it because it helps put their earnings and balance sheets in constant flux.
I have always maintained that the rule was one of the main factors in the subprime financial meltdown. Because it was always hard to price volatile securities, some of which had too limited a market for reliable evaluation. And as a result of the mispricing, short sellers were able to wreak havoc on banks even further, to the extent of the collapse we witnessed.
Yet. instead of taking this discrepancy into account early to prevent disaster, mark-to-market financial accounting rules were kept on. After the meltdown, rule adjustments were allowed, A case of closing the barn door after the horses left.
I speak from experience as a former Wall Street senior banking analyst: When the books allow for the sequestering of questionable assets and the analysis is done correctly, you avoid disaster by posting conventional bookkeeping numbers during financial emergencies. It can prevent short-term psychological disasters that fester into long-term catastrophes. ( See the Earl J Weinreb NewsHole® comments.)
Make sure you do not rely too much on “experts” to control your destiny; that is, with government or its agencies.
I am referring to the “experts” in the Treasury and Federal Reserve, the administration, Congress or anyone in official Washington, in a position to try to micromanage our government.
Notice that they go to the same Ivy League schools? Outfits which never give students bad marks? The same schools which turn out students we hear about and see on TV? Which, as a result, hire fellow alumni because they are like-minded?
I have reported before about their financial and business flubs. More in future comments. (See my Earl J Weinreb NewsHole® comments on college).
Stimulus attempts by government most often are a political ruse. That they have failed in the past always seem to be forgotten by some academics. So they, along with willing politicians, occasionally rehash them.
What was used was actually “slush funds” to prop up favored state governments, to meet budget deficits. The latter have been primarily due to outlandish, public employee union contracts.
Very few private jobs were created by so-called stimulus funds. It was slush fund money that helped temporarily preserve government union jobs.
Further to my recent comments on college attendance and its problems.
We see shortages of skilled labor all around us, but plenty of unemployed college grads.
Much of this is the result of the going-to-college-marketing fluff. It’s not only expensive, it puts so many young people into huge debt that makes it almost impossible for them to get a firm grip on a decent career path. Yet, constant pressure to go to college is preventing students and parents alike from seeing through this dilemma. (See my Earl J Weinreb NewsHole® comments on college).
Contrary to popular conception, don’t go to college just to make money. You can work at many skills, jobs and professions without a college degree.
Should you need a degree for window dressing or social reasons, you can acquire one, part-time, and cheaply, from recognized schools via the internet. And while you are creating your career at a paying job.
Make up a list of job categories or small businesses you would like to be in. You will see how just a few require college expense. Some might need trade school training for a short time.
When academics tell you that college grads earn more, the numbers are often suspect. Comparisons are made with those close to minimum wage, not at skilled, non-college jobs. .(See my Earl J Weinreb NewsHole® comments on college).
Unions help employees for the short term in getting wages and benefits, often beyond what supply/demand would provide. But the same employees may not be better off in the long run. Not if their jobs become insecure, as a result.
With unionism, there is often an arrangement forced on employers that has little to do with economic requirements or sense for work done. So there is frequently a poor allocation of economic resources.
In economic life for the long run, employees get what they are worth to an employer. The law of supply and demand works. If your skill is needed, an employer will pay dearly for it. If the worker cannot provide value, the job will pay less or disappear.
Unless it’s subsidized by the consumer or taxpayer.
Psychology of facts, as opposed to steadfast beliefs, is part of politics. It has unfortunately evolved into a religion-like atmosphere that often affects economics and business.
Conservatives claim their economic stance is based on the written constitution, and on historic economic fact, events that actually happened in this country and the world. They are reacting to such events.
Liberals tend to react, almost religiously, on the basis of beliefs, the way life ought to be. If the constitution does not remedy what liberals believe is wrong, simply adjust the meaning of the constitution. And if the majority of voters don’t want that heart-felt change, liberals would find a like-minded judge to rule for the change.
Unfortunately, many dictatorships have started with precisely this method of adapting government constitutions to what well-meaning folks think ought to be.
Yes, health care costs may be rising, but how much?
It is said that health costs are rising as much as three times as much as inflation. But this is not the case. You cannot compare costs when new advances in medicine defy any true comparison of medical procedure and achievement.
So, much of the health care inflation talk is bogus, and used for political objectives.
