Showing posts with label income redistribution. Show all posts
Showing posts with label income redistribution. Show all posts

03 November 2010

The Historic Divide

At New Geography there is an article by Joel Kotkin (28 OCT 2010) Suburban Nation, but Urban Political Strategy, and it looks at a theme I have been pointing out for awhile (like I did with this article) and what, exactly, it represents.  The demographic shift from the US being a rural and agricultural nation to an urban and industrialized one was finishing up just as the Great Depression hit.  How else could so much manufacturing go south and have such a huge impact on a Nation that was based on agricultural output?  The shift in population was largely finished by the early 1930's, and the Dustbowl drove others out from the agricultural areas that had utilized poor farming techniques pushed by the US Dept. of Agriculture in the late 19th and early 20th centuries to 'settle the land'.  In two generations masses of people left from those areas and Appalachia, where they followed railroad work and then took the railroads to the new urban industrial centers in the North East.

These two groups, the settlers, western mountain peoples and eastern mountain peoples all represented a common ethos of US culture: a DIY spirit, the attitude of being able to fend for oneself, and disliking having a boss over one who told you what to do and how much you got paid to do it.  The urban political machines of Chicago and New York, as well as other cities, exploited this and tension between the industrial sector and the incoming rural workforce and got political clout via pushing unionization and alleviating the worst of urban ills.  The 'Toddlin Town' of Chicago had been so from before the turn of the 20th century and the incoming European immigrants who stayed in the major east coast cities tended to bring with them Old World views on corruption and unionization.

But who were these people?

The migration across the Great Plains, westward, was a diverse set of peoples ranging from Hispanic origins (Spain, Florida and Mexico) in the Southwest to far Southeast, to Germans, Swedes, Norwegians, French and others moving first from the east coastal areas through the areas settled by the prior wave of settlers and picking up some of their attributes and attitudes towards this new Nation.  While the Southwest would garner its own groups with similar acculturation, it is those coming from the Old World, experiencing America on the move through the Appalachia region and heading westward that would begin to spread the earlier ideals of the Piedmont, Yankee backwoods and central states Hillbillies and brewers forward with them.

Those people we refer to as the Scots-Irish to represent the long term shift of peoples over nearly two centuries from Scotland and Ireland (and Scots living in Ireland) to America.  This would be more Irish towards the coastal areas, more Scots in the backwoods of New England and become an amalgamated culture in Pennsylvania.  If anything can be used to define this entire swath of post-Dutch, post-English settlers it can be seen in their attitudes towards the family, religion, self-defense and alcohol.  This potent combination was a result of the Clan fights in Scotland and then both Scotland and Ireland having to deal with the shift of the English into their lands.  That culmination of beliefs would become touchstones that would help put down a solid foundation of a new land: religious tolerance and freedom, limited government, ability to have a family unimpeded by government dictates, defending one's land and property as they represent the work of one's life, and giving a lot of leeway, socially, in a 'live and let live' atmosphere.  These were not Puritans, nor Amish, nor any other Protestant group back in the days of the Colonies and Founding, although the change from Roman Catholicism to Protestantism would take place in many non-urban settings and that would be influenced by that second wave of poor people from the Old World coming over through their lands.  To these first settlers ownership of the land was paramount, having a family and raising them right was mandatory, and being scandalized by one's neighbors and, in turn, them finding you scandalous was a way of life.

Note the role of government in that?

After the Revolution these would be the people who nearly brought the US under the Articles of Confederation down with the Shaysite Rebellion, and many similar to that demanding that the government actually pay out on its obligations to the unpaid soldiers of the Revolution.  They demanded reform and got the 1787 Philadelphia Convention which would form the US Constitution to help show that those in political power were not going to try and shaft the common man with the debt of the Revolution.  The Nation that took on debt with the French to win the Revolution, nearly went bankrupt and broke the poor rural farmers in the North East with that debt, now had to reconcile the prosperous South with the relatively poor North in a common Union.  Do remember it was the US South that held the economic cards for the Nation, not the North as this was before the Industrial Revolution.  In essence the Shayesites, although never a proper rebellion, brought down the Articles of Confederation and got a government that would stick to its obligations and not stick it to the little guy.

Note the role of government in that?

These would be the peoples that supported Andrew Jackson, POW from the Revolutionary War and war hero of 1812, as their icon and representative and the staid, puritanical, blue-nose, coastal elites have been trying to deal with them for decades before that and ever since.  They stand on the dividing line of the Nation and it is not Red nor Blue, Left nor Right, but Urban and Rural.  The political Left in America will point to the 'Trail of Tears' as the great disgrace to President Jackson's two terms and vilify him as 'racist' although he had adopted a Native American child into his home, told Congress to properly fund Native American trusts held by the government, made treaties and agreements with Native Americans, and then faced the nasty problem of the Georgia militia being larger than the US Army (as I went over in large part in this posting).  The political right has forgotten the signal achievements beyond that (as I go over here), as the vapors of the Left have clouded them: that States which have Representatives do have to pay federal taxes, which he threatened his home State of North Carolina over and kept the Union together, and the signal achievement of getting the political class out of banking by vetoing the National Bank of the United States.  That veto of the National Bank is one of the most far ranging documents on the problems inherent in the government attempting to guide a National economy that has come out of the 19th century and is still, to this day, perfectly understandable to any who wish to find out why a 'strong' federal government creates a weak Nation:

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society-the farmers, mechanics, and laborers-who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.

Nor is our Government to be maintained or our Union preserved by invasions of the rights and powers of the several States. In thus attempting to make our General Government strong we make it weak. Its true strength consists in leaving individuals and States as much as possible to themselves-in making itself felt, not in its power, but in its beneficence; not in its control, but in its protection; not in binding the States more closely to the center, but leaving each to move unobstructed in its proper orbit.

Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our Union have sprung from an abandonment of the legitimate objects of Government by our national legislation, and the adoption of such principles as are embodied in this act. Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union. It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union. If we can not at once, in justice to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many, and in favor of compromise and gradual reform in our code of laws and system of political economy.

That is directly taken from the 19 JUL 1832 National Bank Veto Message (Source: The Avalon Project) and yet it reads like a summary economic analysis done by a modern scholar.

It is at this point that the analysis of Angelo M. Codevilla on America's Ruling Class -- And the Perils of Revolution (Source: JUL-AUG 2010 American Spectator) comes into play.  He does an excellent job in outlining the Gentry Class, that is those in the ruling Elite precincts in politics and residents of the urban climates, and the Country Class which is the Do It Yourself common man who does not want to be interfered with by government.  The Country Class in the United States would now transform from its generic Scots-Irish roots (influenced by English, Roman Imperial and Nordic cultures) into the Jacksonians.  For the Elite Gentry Class it is who you know that is important: how well connected you are, what degrees you have, what institutions you are affiliated with will define you as being in the Gentry Class.  The Country Class exists via Meritocracy, honesty, hard work, and expecting that your voice will be heard and your liberties will not be trodden upon by government.

By comparing an earlier piece by Walter Russell Mead on the The Jacksonian Tradition (archived by Steven Den Beste at his site) the extreme similarities of honor, family, community, religious adherence, openness to civil movements, and rejection of elitism point to the cornerstones that identify the Country Class in America as Crabgrass Jacksonians.  From Mr. Mead the playing out of the Jacksonians in the US becomes a clear shift, over time, from rural precincts before industrialization to urban ones during the early industrial period and then the mass migration from the urban centers to the new suburban areas after World War II.  This echelon of the Country Class would support the Democratic Party for generations, starting in the 1830's and go through the 1960's and the party mascot represented the Jackass Jacksonians.

This block of voters are not 'conservative' in the sense of supporting a regime system mindlessly.  Nor are they 'retrenchment' minded as they believe that wherever they are is the embodiment of human liberty and freedom, and that it is the simple recognition of one's responsibilities towards oneself, one's family and one's society that makes each individual the most powerful thing in their own lives.  As Mead points out this can be co-opted, to a degree, by government if it can push the banner of 'help' on the actualization of one's liberty and freedom to use them.  Acceptance of such 'help' is not a co-opting of ideology, however, but of actualizing circumstances, thus the entire Elitist and Gentry Class mindset does not get backing from the Country Class and any misreading of that by the political class will lead to long-term problems as overbearing government bears down upon the civil right and liberties of individuals to succeed and fail by their own hand.  When 'help' becomes dictation as to who can and cannot succeed by political fiat, the Jacksonian Class begins to walk away from that 'help' as it is not worth any cost to lose liberty to government.

Machine Politics of the late 19th and early 20th century was a creation of the inculcation of the Progressive mindset with the corrupt, urban Gentry Class using a spoils system to 'reward' the working class in cities.  As the cities swelled with people, their political power became vested in the corrupt Machines that 'ran' cities.  In Boston, New York, Philadelphia and Chicago these Machines would cross party lines and co-opt both parties via their spoils systems.  Those seeking partisan favor could run 'against' the Machine of the 'other' party, but that Machine was the same for both parties and as faces would change the policies would remain the same. 

It is in this era that the transformation of the Constitutional system of the United States was altered so as to establish more power in the hands of the cities and urban areas under political Machines.  I wrote about this transformation of the system in The 10 years that changed the path of America, and it was a decade that radically altered the Constitution and legislative structure of the federal government, along with the application of regulatory power that is still with us to this very day.  This system we have for politics is one that is highly altered from the period of the Framing to the Progressive era and represents the instantiation of Progressivism as a system that displaces the system of Individual Liberty and Freedom from the Founders.

In the wake of the collapse of the structures set up by the Progressives in Banking with the Federal Reserve (reversing Jackson's removal of the National Bank style system), they continued under Hoover and FDR to push government as the 'solution' to problems caused by that structure: SEC, Social Security and National Firearms Act.  This would create drains on the economy, put heavy regulation on top of failed regulation by the Federal Reserve on businesses, and create new bureaucracies to do things that had never been seen in the US although they had been tried in places like Germany under Bismarck.  Under FDR the first National form of policing with the FBI would come into being, ostensibly to fight organized crime which had been deprived of its ready cash source via the repeal of Prohibition.  The NFA would see the first move to restrict weapons to the people, something never thought of beyond traditional localized State militia rules and requirements until the excuse of organized crime was cited for it. 

Only World War II would shake this system up enough to make it work, but what happened after veterans returned home was without precedent in US history: soldiers with their back pay married and bought houses outside of the cities and cars to commute to and from work.  The industrial boom in the one Nation to escape World War II unscathed would reshape the global economic order and landscape while, at the same time, putting down the roots of an unsustainable system within the United States as government extended its intrusion into home mortgage lending and then into other areas of regulation where it had never been before that post-war era.

The other major post-war shift, however, was fully supported by Jacksonians as pointed out by Mead, and that is the civil rights movement.  This movement was a continuation of a long-lasting presence of blacks seeking political equality and having it waxing, during the Revolution, waning in the South, then resurrected in the South after the Civil War, then repressed during Reconstruction and the Progressive eras, and then coming forward once more as part of the post-war shift that started with, of all places, the US Army.  Woodrow Wilson re-segregated the US Army during his highly racist terms and that remained through following Administrations up to FDR.  FDR wanted to continue racial segregation of the military, but the US Navy would have none of that as it is necessary to have an integrated crew on a naval vessel.  The US Army, however, succeeded in forestalling this via its command structure and outlasted FDR, the war and Truman only to have the Eisenhower Administration de-segregate the Army.  What followed was the US intervention in Korea with a largely de-segregated military that then had veterans return home to highly segregated societies in the US South.  These comrades in arms who fought, bled and died for each other re-forged the ties between them that traditionally last beyond enlistment or conscription with the men and their families after the fighting is over.  Racial intolerance in society would be in stark contrast to that comradeship as these men knew they were equal as all their blood was the same color.  While the Left will lionize those college students from the North, very few will ever look at the returning veterans from Korea some years before the Northern activists showed up and examine their work at the lower end to change the tenor of Southern culture.  In any event the civil nature of the protests, standing up for one's rights and an equal opportunity in society spoke volumes to the white Country Class, to the Jacksonians and to Americans as a whole.  Progressivism in support of racism and 'Jim Crow' laws via the Democratic Party were being confronted by those same individuals who were the back-bone of the party which would lead to contention within the party heading into the 1960's.

What is rarely pointed out is that JFK's Vice President, Lyndon B. Johnson, had worked to water down and substantially change the bill that would become the Civil Rights Act of 1957 via committee as he saw it as divisive inside the Democratic Party, especially in the South.  By stripping teeth from the enforcement of the provisions for voting rights the abuses of the South would continue and party unity retained by doing that.  When LBJ became President he pushed for the expansion of the Progressive structures put in place by FDR and Eisenhower to start the 'Great Society', Medicare and Medicaid.  The programs combined in the 'Great Society' to start the destruction of inner-city neighborhoods which represented the attempt of the poor and black Americans in urban settings to own their own part of the American Dream.  What this did was remove the basis for an ownership society from the inner-city and turn prior home owners into renters.  The addition of welfare services and rewarding those who did not work but had children became an intense system to break up the poor and black family structure and create a permanent urbanized class beholden to a single political party.  Protecting black voting rights and creating an enforced urban environment to keep blacks in that environment is not one of a civil rights leader, but one of a person using civil rights towards political ends.

With so long in power the Progressives in both parties had started to put in place a structure that threatened not just black Americans but all Americans by disintegrating the older system of schooling, housing, mortgages and then rewarding individuals based on race and ethnicity by an enforced system of racial quotas in education.  This was continued through multiple Administrations from FDR through to Obama, and while there have been attempts to reform this system or otherwise bring it back under the older ideals of personal liberty, they have been thwarted by the structure put in place to remove localized control of banking, home ownership and even such things as medical care and centralize them at the National level.  In examining the current 'housing bubble' the underpinnings for it date back to the FHA and the changes it was seeking through the Dept. of Housing and Urban Development brought in under LBJ as I looked at in It seemed like a good idea at the time.  The very first time the appreciation rate in homes increases above its post-war baseline is right after HUD is created, and that would start the idea of the home as an 'investment' not as property that provides shelter and is to be passed on to one's children. 

If the suburbs is where the Country Class was fleeing to, then they were beginning to get federal 'attention' to the fact that they were no longer behaving as good, urban residents in Machine politics.  At the behest of HUD President Nixon would create Ginnie Mae to 'securitize' home mortgages, which would start to change the Loan to Value ratio create a 'national' market for home mortgage lending that put the local and regional banks into direct competition with the heavily capitalized national banks.  Home mortgage rates rose during the 1970's mostly due to economic factors, but the belief that a home could become an 'investment' was further backed by the IRA system which would create investments beyond the reach of bankruptcy courts.  Thus your IRA was now a safer investment than your home was.  This did not stop the shift from urban to suburban venues, however, and even hastened it as home values rose so did government encouraged Loan To Value rates via the Community Reinvestment Act.  This was noted not only in some commercial venues, but in the FDIC in the 1990's as they were trying to figure out just where all the risk injection was coming from in the home mortgage market and how that impacted banks and covering deposits.  They identified the coincidence of events between the traditional S&L's getting hit by the hammerblows of lower interest rates from national banks and being unprepared to invest in profit making venues to help keep their local concerns afloat.  In other words the federal government was liquidating the local economic markets for housing and banking in one shot, and putting larger banks down with 'securitized' risks graded by the federal bureaucracy.

And this brings us back to Mr. Kotkin!

He identifies the clear distinction between suburban and urban political landscapes:

Now the earth is shaking under suburban topsoil -- in ways that could be harmful to Democratic prospects. “The GOP path to success,” according to a recent Princeton Survey Research Associates study of suburban attitudes, “goes right through the suburbs.”

The connection between suburbs and political victory should have been clear by now. Middle- and working-class suburbanites keyed the surprising election win of Republican Sen. Scott Brown in Massachusetts in January. Suburban voters were also crucial to the 2009 Republican gubernatorial victories in Virginia and New Jersey, two key swing states.

This is not 'white flight' suburbia, but modern suburbia in which a fraction of the black upper and middle class have been able to get out of the urban environment away from the corrosive influence of federal 'help'.  And yet this is Ground Zero for the home mortgage lending bubble spurred on by the CRA, 'securitization' and the gaming of loan risks at the behest of both parties so as to make your home something more than just 'property'.  Who gets rewarded for this activity?  The home owner or the lender?

Much of the suburban distress, of course, stems from the still perilous state of the economy. Obama’s mix of fiscal and monetary policies has provided much succor to Wall Street, where stock prices have soared 30 percent, and to big corporations, whose profits have risen by 42 percent. This has been great for Manhattan plutocrats -- but not particularly helpful for the suburban middle class.

Indeed the indicators most important to suburbanites – private sector employment, weekly earnings, home prices and disposable income – have all stagnated or even fallen since Obama took office. Fifty-three percent of suburban residents, according to the Princeton study, described their financial situation as “bad.” The vast majority have either lost their job or know someone who has lost theirs. Almost 40 percent have either lost their home or know someone who did – up from 27 percent in 2008.

President Obama is trying to play both 'Good Cop' and 'Bad Cop' with the banking executives, bailing them out and then saying he is the only one to stand between them and the pitchforks.   Yet he is no obstacle to pitchforks as he is also telling the general populace that it is those banking executives who are to blame, while he never, once, addresses the toxic policies that led to the crisis in the first place.  Instead he seeks more power over the entire economy via unread, huge bills that create autonomous government offices beholden to no one and accountable to no one, but funded by the Federal Reserve.  Anyone caught 'underwater' will see this as a pure hoax and feel that they have been played by politicians.  They are right in that assessment and it dates back to HUD and Ginnie Mae, brought in under Progressives in both parties to the benefit of their backers.  The backers know that the 'Good Cop/Bad Cop' is a charade as they seek to eliminate the lowest level of banking and finances, those run locally, and secure the market share under a guaranteed oligopoly that is enforced by the financial regulations that decides who is 'too big to fail'.  They get guaranteed market share and the ability to work out with government just how much you will pay for the privilege of having your cash held by someone else.

What this is, all of this charade with banking and mortgages, is to do to middle class America what was done to poor and black Americans back in the 1960's: force it into State designed and run housing schemes.

When the president visits suburban backyards, it sometimes seems like a visit from a “president from another planet.” After all, as a young man, Obama told The Associated Press: “I’m not interested in the suburbs. The suburbs bore me.”

More recently, Obama made clear that he is more interested in containing suburbia than enhancing it. In Florida last February, the president declared, “the days of building sprawl” are “over.”

Much of the Obama policy agenda – from mass transit and high-speed rail to support for “smart growth” policies – appeals to city planners and urbanistas. Transportation Secretary Ray LaHood has spoken openly of “coercing” Americans out their cars and the Department of Housing and Urban Development is handing out grants to regions which support densification strategies that amount to forced urbanization of suburbs.

Isn't that sweet?

Inner-city life coming to a suburb you aren't in because you need to be 'densified' closer to a city and since you already unwisely had a home mortgage that went under you can't really help the need for 'affordable' government housing.

Right?

I mean the black community successfully waged a campaign to end the worst of the housing complexes... twenty years after the destruction of the traditional black neighborhoods and family structure had been accomplished.  If that is what the Progressives want to do to the poor and black of this Nation, imagine what is in store for the middle class of all colors!

Utopia, isn't it?

No?

What is at work is the conception known as a 'fantasy ideology' at work, and I examined it for this concept of cities in the piece Fantasy Ideology and its fallout.  A 'fantasy ideology' is the belief that taking certain actions will, under a belief system, yield definitive results that are unconnected to the actions.  Thus al Qaeda had a belief that the US would crumble with massive attacks on the business and military centers of the Nation, not just rile up the largest Nation on the planet against them.  It is an unconnected belief system in which a given effect is believed to have a cause that, if you can just do it, will get you the effect.  To do this requires creating a fantasy of reality in which anything that fits with what your ideology agrees with is lauded, out of proportion, and anything that doesn't is ignored or explained as contrary actions by those you disagree with trying to stop you.  Thus standing up and spraying bullets around from an AK-47 is seen under the direction of Allah, while a sniper from a mile away depends on his skills to take out said person standing up on the 'spray and pray' method.  Skill trumps ideology and knowledge of cause and effect as seen from real world evidence trumps ideologically based actions in pursuit of given effects.

To reprise my previous piece, the creation of an urban setting is one that puts the works of man over and on top of the works of nature.  Thus we 'control' nature on the local level.  Cities come together for needs from various societies for business, government and other purposes that are suitable to those domains.  Thus cities arise from trade routes, ports, or center on a local, regional or National capitol.  Other investments for transportation also take place there due to the ready market that is within a city for goods and services outside of it.  Due to the number of people in cities, the government needs to be involved in road, sewage and other systems to keep the infrastructure of the city running.  That begets urban planners who know how to plan cities ever so well, and then can't explain why some projects just never do work out to be cost effective.  The growth of suburbs vexes urban planners because these people aren't listening to them and build what works for themselves in an uncontrolled environment.  To those inside cities the idea of having centralized services makes sense, like sewage maintenance, say.  In suburbs that is a less centralized proposition as each community has to work with neighbors to get things achieved, and there is, from that, diversity needing to come to common agreement.

Cities have top-down control structures being highly integrated constructions.

Suburbs, small towns and rural areas have lateral control structures needing to work in agreement with each other.

The love of cities creates Homo Urbanis and the strange belief that everything can be well controlled from a centralized system, which is a very European idea that comes from the old cities of Europe and the Roman Empire and, indeed, every city ever made as that is what is required with highly dense human living conditions be it in Mayan cities, Chinese cities, African cities, Imperial cities, or your struggling hometown of 80,000 trying to keep city status.  The idea of regulating life is seen as an artifact of cities, not rural and suburban communities, as the idea that you can perfect man, just as you have perfectly covered over Nature, means that all you need is the right circumstances and right regulations and mankind will be perfect.

In cities.

That is a fantasy ideology and even in cities it doesn't work as it creates the other form of human that you get when you have so many regulations that you have to become a law breaker just to get anything done:  Homo Criminalis.  Situational criminalism is where the environment sets up the preconditions that require criminal activity to occur and that is the perfect description of the highly regulated system that Progressives of any stripe strive towards.  Progressives detest individual liberty and want to see you controlled, as an individual, in all aspects of your life so that you are restricted from doing anything, at all, outside of the Progressive mindset. 

This they call 'good'.

Everyone else calls it 'tyranny'.

Thus, as Walter Russell Mead predicted, the next great movement from American culture would be a Crabgrass Jacksonian one.  Or a Country Class one, as they are the same thing in American culture.

Remember that in everything you do, every form you fill out for government, every tax you pay and every goody you seek to get from government: that is their control on you.  You might want to keep track of that for a few days, and mark it down on a piece of paper with hash-marks or keep a clicker handy... you just might be surprised to see how controlled you actually are, already.  And you have, probably, broken at least one law amongst them over a week. 

Don't worry, its not as if they want to 'densify' you or anything, right?  Or find some way to deprive you of property, money, and coerce you into a different life.

Oh, wait...

19 September 2009

Instead of 'shovel ready'

Interesting days on the financial side of things, no?

Take, for example, Fannie Mae's draw on the US Treasury after a $14.8 billion loss (Source: Al Yoon, 05 AUG 2009 at al-Reuters):

NEW YORK (Reuters) - Fannie Mae, the largest provider of U.S. home mortgage funding, on Thursday reported a $14.8 billion quarterly net loss that it said would force it to go to the U.S. Treasury trough a third time for money to stay in business.

The company noted a "significant uncertainty" of its long-term financial health in reporting its eighth consecutive quarterly loss, which illustrates its struggle to make money in the face of rising defaults and pressure to do more to stabilize the housing market.

Say, isn't Fannie Mae supposed to be one of those lovely government backed organizations that does so much 'good' for borrowers? If so, then what is up with the big, bad nasty loss after the 'stimulus'?

Ah, just a drop in the bucket that, after all...

How about Freddie Mac? Doing great, huh?

From Trading Markets, 07 AUG 2009 we can find that Freddie is turning a profit:

(RTTNews) - Friday, government-sponsored home mortgage finance company Freddie Mac (FRE Quote Chart News PowerRating), reported a swing to profit in the second quarter of 2009 from a loss a year ago, driven by higher net interest income reflecting a $4.2 billion gain on its derivative portfolio. On account of funding commitment to the Treasury Department, Freddie Mac has paid out a dividend of $1.14 billion on the its senior preferred stock. The dividend payment has left Freddie Mac with a loss attributable to common shareholders, however, one that narrowed from last year. Further, the mortgager noted that it would not request any additional financial support from the federal government. Freddie Mac indicated signs of slowing in home price declines, however, remains cautious due to rising foreclosures, growing unemployment, tight lending standards and buyers' reluctance to re-enter the market.

The McLean, Virginia-based company reported that its second quarter net income attributable to the company totaled $768 million, compared to a loss of $821 million in the prior-year quarter.

The company paid out a dividend of of $1.14 billion to the U.S. Department of the Treasury on the senior preferred stock during the second quarter.

After the dividend pay out, Freddie Mac posted a loss attributable to the common shareholders of $374 million or $0.11 per share, compared to a loss of $1.05 billion or $1.63 per share in the same quarter last year.

Oh, it only moved in a profitable direction. It still posted a loss after getting Treasury help. And from that nasty 'derivatives' sector that everyone decried from SEP to DEC 2008, you remember the folks who supposedly played lots of games with the market? Well Freddie Mac is helping them to do that, it appears.

That must mean all is going swimmingly with FHA, right?

From Friday Morning Federal Newscast at Federal News Radio 18 SEP 2009:

The Federal Housing Administration, hit hard by the mortgage crisis, is in need of a cash infusion. For the first time, cash reserves will drop below the minimum level set by Congress according to FHA officials. The FHA part of Housing and Urban Development insures mortgages against losses and guaranteed about a quarter of all U.S. home loans made this year. The Washington Post reports rather than raise fees or go to Congress for a bail out the agency is considering a proposal that would require banks and lenders to keep a million dollars in capital to repay the agency for losses due to fraud to make up the shortfall.

Say, instead of asking others to cover for the FHA, how about taking the regulations off the books that allow people with No Income, No Jobs or Assets (NINJAs) to get loans? That might help a whole lot more by getting creditworthy borrowers into the system and ease the un-creditworthy ones out as they default on loans.

Do remember that one of the groups to push for that was ACORN Housing Affordable Loans, LLC, with the help of many:

"Bank of America is proud to participate in the launch of ACORN's mortgage brokerage," said Glenda Gabriel, Bank of America Neighborhood Lending Executive. "Working with ACORN, this valuable partnership will make Bank of America's suite of safe and affordable mortgage products more accessible to first-time homebuyers interested in achieving the American dream of home ownership."

"Over the last 12 months, we have worked diligently together to get ACORN established as a broker, provided training and support as they set up their broker operations and strategy. The launch today is a culmination of these efforts. We are proud to announce this alliance with Acorn Housing Corporation," said Danny Gardner, National Director of Strategic Markets for CitiMortgage. "In the current climate, we feel the mortgage products we are offering through this relationship will not only help first-time homebuyers looking for a home but also may help those faced with rising mortgage payments."

"First American Title has been a committed partner in the industry in serving low-to-moderate income and multicultural families in achieving the American dream of homeownership. We are happy to take another step forward with this partnership with ACORN Housing Corporation, " said Lionel Savage, Vice President for Lender Services and Industry Relations, First American Title Insurance Company. "First American Strategic Markets is fully equipped with assisting in this partnership with our multicultural escrow and closing services and tools that directly address the need for education about the homebuying process amongst the multicultural community."

"Fannie Mae is proud to work with ACORN Housing, " said Thomas Collins, Director, Single Family Business, and Fannie Mae. By working with ACORN and lenders like Citibank, we can support their efforts to expand homeownership opportunities for underserved communities at affordable price points achieve sustainable homeownership."

Yup and the ACORN folks are a small business by the SBA rules on such, so can get preferential treatment! It has truly taken a great number of swell hearted fools handing out federal money hand over fist, no money down, low interest for the first year, no questions asked to get the mortgage sector into this mess.

But 'cash for clunkers' was a glorious success, no?

From Gary E. Sattler at BloggingStocks comes this analysis:

Analysts are also pointing out that consumers who purchased vehicles during this period paid higher prices on average for those vehicles than purchasers in the previous month. It is believed that the Clunker vouchers dampened the spirit of wheeling and dealing by helping to reduce initial sticker shock.

The data also shows that the average age of traded-in vehicles during this period almost doubled. In this regard, the Clunkers program was a great success. While consumers put new cars into service, saving themselves fuel expense and short-term maintenance costs, they also created a flurry of new consumer debt. However, negative equity of trade-ins dropped to its lowest point of the year, thereby considerably reducing the "rollover debt" factor.

Another noteworthy sales dynamic I garnered from the article is the fact that the value of vehicles sold during this period actually trended downward, indicating that the program's vehicle value cap did in fact limit or direct consumer choice. People bought less car for more money. The facts speak for themselves.

To get the 'good' of lower mileage cars, consumers paid more for lower end vehicles and got lesser vehicles for their purchase. In other words the net effect of the vouchers was a higher end cost for a lower end value, because there was less haggling in the market on trade-in values and new car values. Buyers would have been better off without the vouchers, without the 'help', gotten cars for less money and better value. To balance that people purchased cars below what they normally would have gotten which did help banks, somewhat, but removed market incentive to do more for less.

Good job!

And today we find out that there are some minor problems at another place, this at WSJ 18 SEP 2009:

WASHINGTON -- Federal Deposit Insurance Corp. Chairman Sheila Bair said Friday her agency may tap its $500 billion credit line with the U.S. Treasury to replenish its deposit insurance fund, though she appeared cautious about doing so.

"We are carefully considering all options" including borrowing from the Treasury, Ms. Bair said Friday after a speech in Washington.

Ms. Bair has already warned banks that they may face an assessment increase to bolster the fund. Friday, she said there are also other little-known options available to the agency, including requiring banks to prepay assessments. The FDIC board of directors will meet at the end of this month to consider how to replenish the fund, she said.

Ms. Bair appeared cautious about resorting to the Treasury credit line, saying there are different views on when it should be used. She said some believe it should be reserved for emergencies only, rather than for covering losses that are already known.

Congress acted earlier this year to allow the FDIC to borrow as much as $500 billion from the Treasury if the Treasury, the Federal Reserve and the White House believe it is warranted. Otherwise, the agency can borrow up to $100 billion.

So let me get this straight:

  • We have major problems in the mortgage market that go unaddressed to stop giving out mortgages to those who can't afford them.
  • We have the two federally backed mortgage groups losing money, even with cash infusions and playing with the derivatives market.
  • We have the FHA dropping below its minimal required cash reserve levels, which should mean that it will stop handing out cash but, instead, will seek to put good money after bad.
  • We have just one group that helped stimulate all these loans finally getting some scrutiny nearly a decade after the regulations were loosened under the Clinton Administration.
  • We have a federal program which ends up costing the consumers money in order to get federal largesse to trade in cars.
  • We have the FDIC, that much vaunted institution that everyone always points to as the one great good of the FDR Administration now pointing out that it is running out of money to cover depositors.

The 'We' is you, me and every other citizen of the United States.

That is our cash they are playing with, and treating our hard earned money as play money.

Mind you this was all done with federal regulations and the close observation of federal regulators and 'oversight' by the swell minded idiots Upon the Hill. No one can complain that there weren't ENOUGH regulations as it was the regulations that caused these problems IN THE FIRST PLACE.

And now that 'We' are still in a recession, with high unemployment rate, these bozos Upon the Hill refuse to STOP playing with our money and start addressing the problems that has been caused by our elected representatives in the House, Senate and White House for decades. Thus they are lengthening and deepening the recession and just as 'We' begin to get a little economic footing under us, the bill for all that lovely government spending comes due and that will get us a devalued currency with inflation, to boot. To pay out all that money will require a huge cash infusion into the system over the next few years just to cover the debt that our government has put into place. Plus the hugely expanded deficit that will then kick into high gear about 5-6 years down the road when the huge amounts of interest on all that lovely new debt comes due for us to pay out. That being 'We'.

We the People.

We have an agreement.

This is not forming a more perfect Union.

The agreement is being violated.

This government, even if it changed over to Republican majorities overnight, would leave the Nation with a huge debt, climbing deficits, and, as Republicans are so fiscally management oriented, with a political class that will want to KEEP the new status quo of spending.

That is a Charlie Foxtrot no matter which way you go.

The last time Democrats had any concept of fiscal sobriety was in the 19th century.

For Republicans that last time was in the early 20th, probably around the Taft Administration.

The much vaunted two party system is SOS.

Stuck on Stupid.

Both parties, without exception.

They can't even recognize that before spending on 'shovel ready' things they need to spend on 'hole ready' things, because the holes already exist and they need to be filled and closed off so that the filling doesn't melt away.

Our swell Ignoramuses Upon the Hill can't figure that out.

We have a problem when our government will not do things necessary to get out of our way so that We may build a more perfect Union.

Activism FOR more government regulation and control has purchased us this problem. It is the problem, not a solution.

So if more government is not the solution, then how about less of it?

Or are we afraid to build our more perfect Union with less government and more from ourselves?

Just how much do you fear that face that looks back at you in the mirror?

Just how much do you want to be controlled by government?

This isn't about other people and helping them, it is about you and you giving up your voice, your money, your liberty and your freedom to those that don't give a damn about you. Do you really want someone else to take a major role in deciding if you live or die, and that can change with a misfiling of a form? An accidentally dropped number?

Are you a number?

Or are you a person?

29 March 2009

SOS from Robert Reich: Stuck On Stupid

Yes from Robert Reich we get great assurances via an article in the Online WSJ on 28 MAR 2009 that: Obamanomics Isn't About Big Government.

Of course he starts with President Reagan's tax cuts, who on the Left doesn't like to start there?  Yes if you must tell a lie, tell a big one, and say that letting those who make money KEEP IT is the same as TAXING IT and having government do anything with it:

Twenty-eight years ago, Ronald Reagan used the severe economic downturn of 1980-82 to implement an economic philosophy that not only gave force and meaning to a wide range of initiatives but also offered a way back to sustained economic growth. Is there a similarly powerful animating idea behind Obamanomics?

I believe there is -- and it's not a return to big government.

The expansive and expensive forays of the Treasury and the Federal Reserve Board into Wall Street notwithstanding, President Barack Obama's 10-year budget (whose projections may prove wildly optimistic if the economy fails to rebound by early next year) presents a remarkably conservative picture. In 10 years, taxes are expected to fall to around 19% of GDP, a lower level than the late 1990s. Spending is expected to drop to around 22.5% of GDP, about where it was under Ronald Reagan -- including nondefense discretionary spending at about 3.6% of GDP, its lowest since data on this were first collected in 1962.

'The expansive forays of the Treasury and Federal Reserve Board' notwithstanding?

You mean the wants of Mr. Geithner and President Obama to be able to oversee executive payments not only in banks but in any financial institution that may have grown 'too big to fail'?

That is trying to micromanage the economy from the Federal Reserve Board and, strangely enough, Congress and the President are not given those powers to hand out in the US Constitution.  Really, if you have to tell a huge lie, you might as well try to pass it off as a mere nothing, an incidental, just a minor little thing that really doesn't matter.  Shame about all those peasants, but you can see such nice villages as we go past them on the train... don't mind them being mere fronts and not real buildings, they are just the same as the 'real thing'.

So lets see the powers granted to the federal government in the monetary arena as part of the US Constitution.  I have italicized the passages of interest.

Section. 7.

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

[..]

Section. 8.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow Money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;--And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

Section. 9.

The Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person.

The Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it.

No Bill of Attainder or ex post facto Law shall be passed.

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

No Tax or Duty shall be laid on Articles exported from any State.

No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another; nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.

No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.

So are these powers that Mr. Geithner wants to have over non-bank institutions given in the Constitution.

Well they aren't part of Section 7, that's for sure.  In Section 8 we can go by the pieces handed out.

Is this part of the Impost, Duty, Excises and Taxation power?  No, clearly not.

Is this part of the borrowing money on credit for the US?  Nope.  In theory the Federal Reserve is supposed to figure this out, but the actual duty and responsibility of the burden is on Congress and Treasury.

Is this part of regulating commerce - With foreign Nations (and I include Indian Tribes with that)?  Only by treaty agreement.

- Amongst the several States? This does involve interstate commerce, but going after executive pay and bonuses is not part of commerce which is the transportation of goods and procurement of services.  These people have legal residences in one State and abide by that State's laws for those jobs.  If an organization is criminal and using multiple States to hide those operations, that is one thing.  Doing legal business with legal contracts and paying individuals on that contractual basis is not something Congress can step into without being a part of that contract, and once the contract is agreed to, Congress cannot write a Bill of Attainder.  Even on those areas where Congress sets pay levels for government contracts, they are adjusted by locality and even local economy... to the point of being near useless in the modern age.

Is this part of the uniform Laws of Bankruptcies?  No.  That is something that is put down for private companies to properly have a legal method for either shutting down or for re-organizing.  That does have federal oversight, but must be applied equally without bias or preference across the board.  As these are private concerns, government may not come in to 'pre-liquidate' or judge some worth saving and others not.

Is this part of the coining money and regulating value?  Examine the paragraph and we see fixing weights and measures added in, which indicates this is real value monitoring for set amounts of precious goods.  That then tells how much of such precious goods must be in each coin, and the value is regulated by that.  For overseas work and other such things the Treasury takes care of that for Congress.

Is this part of punishing counterfeiting?  Just how fast is the money coming off the presses, anyways?  Damn someone needs to check into that, as having so many dollars going out will surely impact the value of the currency...

Is this part of the establishment of Post Offices and Post Roads?  Well, AIG sure used those a lot, but, no, that is not the case for the entire industry that Mr. Geithner and the President want to get their fingers into.

Is this part of supporting, arming and maintaining the armed forces?  Nope, not a bit of it.

How about the authority over buildings for federal use?  No.  In fact when the federal government arranges securities backed by the government that may have actual physical property fall into government oversight without consulting the States PER PIECE OF PROPERTY as is the clear and abundant verbiage of that, the federal government is acting in a manner outside the US Constitution.  But then I am a 'strict constructionist' as we are told to be in Amendments IX and X to safeguard our liberty and freedom, and don't cotton on to the Teddy Rooseveltian 'expansive' powers concept of government in relation to the people.  That gets us into a whole can of worms that is the start of a warehouse full of burgeoning worm cans as this is the PROBLEM: government getting involved in private property transactions as guarantor and ending up holding the bag when folks default on government backed loans.  So I would say a resounding NO is what is called for here.

Noted previously is the Bill of Attainder part.

How about taxation?  Ahhh... here is where the 'Progressives' got us to Amend the Constitution so that Congress could IGNORE equal taxation either by amount or percentage and go to proportionate taxation via income, not proportion of population in any State.  This was changed with:

AMENDMENT XVI

Passed by Congress July 2, 1909. Ratified February 3, 1913.

Note: Article I, section 9, of the Constitution was modified by amendment 16.

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Hey!  All you 'fair taxers' out there, how about getting rid of this Amendment?  Same with the 'flat tax' folks.  Can we all have purely equal government over us that doesn't think that it can tell us who can and 'should' pay more?  Who elected them as the Angels to figure out what is due from the hearts and wallets of men?  How about this equal treatment under the law business?

Yeah I got a lot of problems with the 'Progressive' era junk put in to gut the internal controls of the US Constitution so that Congress can feel free to discriminate on taxation and no longer see us as equal citizens under the law.  No direct taxation upon you and me... but that is a rant for another day and multiple previous ones.  But the abuse of Congress to now think it can go after a tiny sub-set of the US population, that being those people in AIG, is the end result of this Amendment.  When Congress can decide to go after such a small group in can go directly after YOU without hesitation.  Is that what you really and for true want government to do?  And if you are pointing out, from the Left, on the apportionment part, do note that ONE INDIVIDUAL is a proportion and can be apportioned properly on that basis.

To continue - Is this part of not taxing or putting duties on goods exported from any State?  Nope.  Quite the opposite, this would prohibit Mr. Geithner and President Obama from doing a damned thing on the interstate part of things.

Is this part of the commerce regulation via ports and such?  No.  Even if it was applicable, it would prohibit such acts.

Is this part of drawing of funds via Congressional approval via law?  No.  Just the opposite as this would allow the Executive to do as it pleases with private companies contrary to the preceding logic of the US Constitution.

 

Thus, government cannot do this.

 

That is the lie that Robert Reich is glossing over, and it is a huge area of the economy that he passes off as 'forays'.  There is in no sense of the term 'foray' that he really wants to attach to this.  Consider this from Webster's Revised Unabridged Dictionary (1913):

Foray \For"ay\ (?; 277), n. [Another form of forahe. Cf. Forray.]

A sudden or irregular incursion in border warfare; hence, any irregular incursion for war or spoils; a raid. --Spenser.

     The huge Earl Doorm, . . . Bound on a foray, rolling eyes of prey.--Tennyson.

Foray \For"ay\, v. t. To pillage; to ravage.

     He might foray our lands.--Sir W. Scott.

Yes a sudden incursion for war or spoils.  Why its almost as if Mr. Geitherner and President Obama see the private credit market as 'enemy territory'.  And they wish to pillage or ravage it.

Ah, so good of Mr. Reich to say what he thinks is just a quick trip or roundabout and actually mean something different and yet get his true meaning across.  This is the part where we would also get 'to hear the lamentation of their women' added on.  Yes by paragraph three Mr. Reich is trying to hide something huge and claim it is a mere nothing, a day journey into the wilds of your backyard that just needs a bit of trimming.  Yes, indeed, later use of the word has pared down the length of time, we consider it to be, but it is still considered one of a venture into ENEMY TERRITORY.

Hey!  Is Mr. Reich telling us that Mr. Geithner and President Obama sees non-banking institutions as the ENEMY?

Why yes, yes he is.

Strange he isn't more forthright about that, isn't it?

 

So are there any other big lies in what Mr. Reich is saying?

Well, lets go on just a bit to the next few paragraphs:

The real distinction between Obamanomics and Reaganomics involves government's role in achieving growth and broad-based prosperity. The animating idea of Reaganomics was that the economy grows best from the top down. Lower taxes on the wealthy prompts them to work harder and invest more. When they do so, everyone benefits. Neither Reagan nor the apostles of supply-side economics explicitly promised that such benefits would "trickle down" to everyone else but this was broadly understood to be the justification.

Reaganomics surely marked the beginning of one of the longest bull markets in American history and generated enormous gains at the top. But its benefits were not widely shared. After the Reagan tax cuts, growth in the median wage slowed, adjusted for inflation. After George W. Bush's tax cuts in 2001 and 2003, the median wage dropped. Meanwhile, an increasing share of total income went to the top 1% of income earners. In 1980, before Reagan took office, the highest-paid 1% took home 9% of total national income. By 2007, before the economy melted down, the richest 1% was taking home 22%.

Now in the very first two paragraphs of this section and Mr. Reich seems to think that the government has some role to play in growth and prosperity.  And he is right!

It has a NEGATIVE role to play.

As I have looked at elsewhere, Mr. Reich has the problem that Oscar Wilde pointed out:

"What is a cynic? A man who knows the price of everything and the value of nothing."
Oscar Wilde, Lady Windermere's Fan, 1892, Act III
Irish dramatist, novelist, & poet (1854 - 1900)

This is the cost/valuation problem in spades.  In asserting that monetary wealth is the only measure of wealth, he ignores the rapid pace of technical progress that has caused a rapid decrease in the prices of many goods that have enhanced the lives of so many.  In 1972 the US Census finally got rid of trying to track lack of indoor plumbing: it had become ubiquitous.  Similarly trying to track washers and driers, cars, television set ownership (color!), telephones... by 1972 goods that had been pure luxuries in the 1920's and earlier (or weren't even available) had now become affordable to even the poorest in America.  Indeed, the poor, today, live longer, better, healthier lives with more material goods than they did a mere 50 years ago when poverty meant 'a hunger problem'.  Now poverty, for the first time in any civilization's history, means and OBESCITY PROBLEM.  So, what part of this wasn't 'widely shared'?

Cell phones, perhaps?  Going from rich man's toys to common, every day commodities with competition amongst service plans?

Affordable food?  See the 'obescity crisis' near you for that one.

Lack of cars?  The poor have cars, lots of them by all counts.

Lack of clothing?  Have you seen what is available at the low end of the clothes rack for a few bucks?  When the poor can afford $100 sneakers for their children, they aren't that poor.

How about that other affluent toy, the VCR?  Well its the DVR and now everyone seems to have at least the old VCR tape versions and many now have fully digital DVRs.

Computers with which to do your taxes as they are too complicated to figure out?  Cheap and home penetration for PCs will be overtaken when cell phones take over those functions, along with pagers and delivery of entertainment.

What is it, exactly, that sets the rich and poor apart in America?  Ownership?  But Americans now have invested more into owning the means of production, for good and ill, than ever before at any time in the history of any Nation EVER.  And not through government, either.

The difference between an old rust bucket to get a poor man to work and a Porsche?  Tens of thousands of dollars and about the same gas mileage and the poor person has much lower insurance rates.

How about lack of health care?  Well we used to have an excellent charitable and learning hospital system in the US before subsidizing health care got into full swing which made everything more expensive, less available and saw charitable institutions get taken over and then closed by their subsidized for-profit counterparts... who now don't deliver low cost health care too well.  Amazing what happens when you get rid of the low cost competition, isn't it?  Prices go up.  And subsidized commodities and services get over-used, less available and more costly.  All of that by government 'helping' us... you know, if this were imposed upon us by space aliens, we would have a revolution on our hands...

Now here is the amazing thing about looking at percentages and for this I am going to draw on the larger look I did at Running the Numbers: Polarized America looking at the work by Nolan McCarty, Keith T. Poole and Howard Rosenthal about Polarized America.  Now these folks used a good rough'n'ready set of indicators on party-line votes in the House and how much 'bipartisanship' there was and plotted that against how much the upper 1% of America was owning.  I did some sub-demarcations and put things into periods, like the Heart of the Great Depression, US WWII years and the Cold War.  And it is an interesting graph to say the least:

MPR_Figure_1_2_A_Eras

We have a few interesting artifacts, first of which is that income share is not tracking wealth.  Coming into the 1980's income and actual wealth holdings are coming out of the lowest period of wealth held by the top 1% during the middle of the Cold War.  Indeed the 'Great Society Programs' and aggressive taxation was moving the actual wealth ownership of the top 1% to 8% of the the Nation's total wealth.  What is damned striking is that political polarization had started an upswing just BEFORE those programs got put in place and that polarization would lead a shift in wealth share by the top 1%.

Now flip back to the Great Depression era and the follow on Roosevelt Recession (1928-1941 total) and we find coming in during the 1920's a slow shift to lessening of polarization that LEADS reduction in wealth held by the top 1%.  You would think in an era of the poor getting poorer that you would have INCREASED polarization, but that is not the case.  The downturn of wealth would follow decreased polarization and the top 1% would not be leading polarizing trends but FOLLOWING them with a lag time of 3-5 years in the Pre-WWII era.  Going into the post-WWII years and heading into the Cold War polarization would level off and wealth distribution to the top 1% would lag that by nearly a decade.  Once the 'Great Society Programs' and higher taxation started to go into effect, there was increased polarization even as the top 1% share of all wealth was STILL lagging by the previous plateau of polarization.  By the end of the 1970's the 1% wealth share was now picking up the political polarization trend and increasing.

Mr. Reich has a major problem in his analysis:  if the amount held by the top 1% is a true political problem, then why is it trending AFTER the political trend and not LEADING IT?

If the Leftist analysis were in any way correct, then we would see directly opposite trends and the graph trend for polarization would be flipped as the mean, rotten, nasty, money grubbing  rich controlled political trends and only the storming back of the brave working class would prove divisive and take wealth away.  But that is not what is going on.

If America is coming together starting BEFORE the Great Depression and Rooseveltian Recession, then what is the cause of that?  The two graphs cross in the 1920's as polarization goes DOWN and wealth holdings by the top 1% go to levels of 19% of all wealth in the Nation.  That also takes the Conventional Wisdom concept out behind the barn and shoots it in the head for pre-Depression Era political polarization.  What we were getting is a slow increase of common Americans investing in the system until its collapse, and then that sudden set of hard hits made everyone, rich and poor, lose wealth and the rich lose it far faster and harder than the poor, with the middle class getting squeezed down into poverty while the rich were still wealthy but not as affluent as before and unwilling to spend money for investment  after 1937 due to government policies.  The massive amount of pay going out to US Servicemen during WWII and being unable to be spent draws down the percentage disparity very hard, even as the Nation would head down into some of the lowest polarization levels, ever, and families would own homes like never before.

What is the signal event that will start seeing political polarization and have wealth accumulation at the top 1% lag it?

The Baby Boomers start to get involved in society.  As a general class they will increase political polarization, over time, and lead a march back up for the top 1% in wealth holdings.  The lag time between 1966 and 1981 is 15 years, or about what it takes to get fully established in your mid-30's to late-40's for the Boomers who are shifting the demographics of the market.  The salient point for the early Clinton years and late Bush I years, is that wealth disparity has a temporary plateau, again lagging political polarization by 3-5 years.  When the Cold War finally ends, the historical trend gap time lag has now fully re-appeared, but this time on the upside of polarization, not the downside.  And the trend at the end of the late Clinton years ending with the graph in 1997 show an increasing trend in both polarization and wealth distribution still lagging.  Thus you would expect to see the top 1% capture more overall wealth as the political trend of polarization is upwards 3-5 years ahead of it.  And if we are seeing more of the same today, and nothing leads me to think otherwise, then the increase of political polarization will mean increased disparity of wealth distribution unless we are reverting to a WWI to Pre-Depression set-up.

With that as analysis, the next two paragraphs then become the focus:

Obamanomics, by contrast, holds that an economy grows best from the bottom up. The president proposes to increase taxes on the highest 2% of income earners starting in 2011. Those tax increases will fund more Pell grants allowing lower-income children to attend college, better pay for teachers that show they're worth it, broader access to health care, improved infrastructure, and more basic research. These and related expenditures are designed to help Americans become more productive. You might think of it as "trickle up" economics.

The key is public investment. Reaganomics did not view any public spending as an investment in the future except when it came to spending on the military. Hence, since 1980, federal spending on education, job training, infrastructure and basic research and development (apart from defense-related R&D) have all shrunk as a proportion of GDP. And apart from a modest expansion of health insurance available to poor children, there has been no significant attempt to make health insurance broadly affordable to Americans.

Now, leaving aside all lovely good intentions of Grants, which have a non-proven track record for anything, save political corruption, what is it that Mr. Reich is saying?

First 'bottom up' growing is the exact, same sort of thing that was put in place by President Roosevelt in the 1930's with the bill coming due starting in 1938 which caused a recession.  He compounded that with higher taxation on the rich.  There is a problem with 'soaking the rich':  who is going to pay for high capital private expenditures to increase production and increase jobs?  This is a non-trivial question in a large economy as government has no track record of actually creating prosperity or economic growth.  Famously President Roosevelt was able to get rid of unemployment by having a World War to fight, and it is after that and those coming back that we see so much wealth 'distributed' far and around that private individuals investing to buy new homes are able to support new families and then cause the realization that no one is really 'making it' any more.

Thus, when government actually did spread the wealth around, it was only by not telling people what to do with it that families would be raised to believe this was the 'norm' and then wonder about the other American Dream of 'making it big'.  When 'social consciousness' implied that the top 1% were STILL too rich and attempted to make them poorer and cap off ANY chance for success, did political polarization start to rise DURING the Cold War and that would be followed by those resisting that political ideology by actually doing and making things.  Tax policy certainly does play a role in things, and when it became draconian and the Federal Reserve put in restrictions to 'help solve' the Depression it got worse, and those looking around and seeing the same thing going on WITHOUT the benefit of accumulated wealth did things start to change.  The 'Rust Belt' during the late 1970's showed just what does happen when you do not continually and robustly re-invest from the private capital side in industry: it gets out-competed.

Now Mr. Reich is trying to put forth that the shift downward in government spending in R&D is a bad thing.  Consider this from the perspective of the late 1970's when so much R&D was being done in government that there was little innovation going on in the private sector and Japan was, famously, overhauling the US industrial sector.  High government spending in R&D towards 'targeted goals' (and it doesn't matter if it is better bombs or better 'green energy' sources) is NOT market led nor driven and cannot address short or long term market concerns as government has no clue as to what to invest in for R&D to keep a robust economy going.  The loss of the old-line industrial capacity that was over-taxed, over-regulated and had far too many union problems stifled the advance of the industrial base all the way to the point that it was LOST in major ways in the 1970's.  The prescription that this is 'good' is only one that Luddites can make.

And don't get me started on the subsidy problem for health care along with the economic inefficiencies of health care 'insurance' that doesn't have to act like any other known form of real insurance on the planet.

What happened after removing some of the regulations, government 'help' and lowering taxation was to spur on innovation and technical expansion to where the US would lead the world starting in 1981 and going on up to the present.

If we don't screw it up and trust government to 'invest' by taxing the hell out of those who like to make money by supporting industry, innovation, expansion and growth.

Mr. Reich should know better than to push this pile of garbage into cans and sell it as a nostrum cure-all.

I came from Buffalo during the 'Rust Belt' era, and government 'help' is the last thing anyone ever wants.  I have seen the wages of that with my own eyes, and I place the blame for that and so much else on the lack of trust our political class has placed in industry, even when it is business and industry that have led to the greatest expansion of wealth, greatest access to health care, and greatest material good for all citizens in the Nation, especially the poor, by trying to make them better off than give them a hand out.  They are the ones teaching folks how to fish on the turbulent waters.  Our government is handing out a sardine or two and calling it salmon.

Thanks, but no thanks.

22 May 2008

Bipartisanship the opposite of good government

Consider a bit of what Congress is trying to get through when you hear about the splendidness of 'bipartisanship' and how it is such a good thing for America. Really, those folks wanting 'across the aisle' agreement should be very wary of what they are asking for. Lets take a look at what Senators Richard Shelby (R-AL) and Christopher Dodd (D-CT) are cooking up there, Upon the Hill (Source: National Low Income Housing Coalition) (h/t: W.C. Varones at Polipundit):

WASHINGTON, DC - Responding to pressure from Ranking Member Senator Richard Shelby (R-AL), the Senate Banking, Housing, and Urban Affairs Committee appears to be on the verge of diverting funds designated for a housing trust fund for housing for the poorest Americans to pay for Committee Chairman Christopher Dodd’s (D-CT) new program to refinance homeowners facing foreclosure.

In his bill “The Federal Housing Finance Regulatory Reform Act of 2008,” Chairman Dodd proposes to allow the Federal Housing Administration to insure refinanced mortgages of homeowners who face foreclosure. The Congressional Budget Office estimates this new program creates a potential liability for the federal government of $1.7 billion.

Reports are that Senator Shelby will only agree to the new FHA program if it is paid for by non-taxpayer funds. Senator Dodd’s bill also creates a housing trust fund with resources from Fannie Mae and Freddie Mac to build or preserve rental housing for extremely low and very low income people. Senator Shelby wants those funds to be used to pay for the new FHA program instead.

All well and good, then, right? I mean if you are 'facing a foreclosure' because you made a bad deal on your mortgage, the federal government needs to bail you out. Right? We certainly need another part of government just to 'oversee' those unwise enough to take mortgages beyond their means, right? And if the poor have to be put at risk as they have little to spend on housing, why that is just fine and dandy! Yes, make sure the poor don't have the ability to *rent* while those who *bought* a home under dodgy finances get away scot-free. Good job! Steal from the poor and give to the rich...

Dick Armey and Steve Forbes would like you to give a jingle on this at angryrenter.com and you, as a non-renter, can also support them against the anti-Robin Hoods in the Emirate of Incumbistan.

Then there is the category of 'we want to pander the public's money so fast we forgot to do our work' end of it, as seen by Michelle Malkin looking at the over-riding of the Bush veto on the Agriculture bill. And stealing from her linked article to the AP on this, there is a feeling of da-daist unreality:

The House overwhelmingly rejected President Bush’s veto Wednesday of a $290 billion farm bill, but what should have been a stinging defeat for the president became an embarrassment for Democrats.

Only hours before the House’s 316-108 vote, Bush had vetoed the five-year measure, saying it was too expensive and gave too much money to wealthy farmers when farm incomes are high. The Senate then was expected to follow suit quickly.

Action stalled, however, after the discovery that Congress had omitted a 34-page section of the bill when lawmakers sent the massive measure to the White House.

Yes, the bipartisan pig trough made it to the President's desk, he vetoed it. Congress, intent on getting the pig trough filled, was set to pay farmers already getting very wealthy off of high food prices even more so that they could be wealthier. Plus extra incentives NOT to plant crops! But, the little, eensy-teensy problem is: they didn't send the entire bill to be signed! Missing 34 pages, Congress now is in the position of trying to pass an incomplete bill...

So the anti-Robin Hood bipartisan coalition shows up and in their hurry to get the taxpayers money to wealthy farm supporters they just forgot a part of the bill. The White House then kindly pointed out that Congress was going to be back at square one and this is how Speaker of the House Nancy Pelosi's (D-CA) office responds:

A spokesman for House Speaker Nancy Pelosi, D-Calif., shot back.

“Partisan sniping won’t solve this clerical error that even the White House failed to catch,” said Drew Hammill.

Clerical error? The White House is not in the business of catching 'clerical error's in bills sent to it by Congress. Nope, that is solely the job of Congress.

And people call Bush 'stupid'!

Now if anyone needs some help on oil prices and production capacity, lets step through some basics, so we can get to the latest bit of 'bipartisan' views on this. To help us out we can go back to 1999 and the testimony given to the US Senate Committee on Energy and Natural resources by Steve Layton, President and CEO of Equinox Oil Company, part of the Independent Petroleum Association of America:

Today’s hearing is intended to examine the current state of the petroleum industry. I must say at the outset that I have never seen the domestic petroleum industry facing a more complicated and potentially devastating set of problems than it now does. The industry has faced a low oil price crisis for the past year, but today’s problems are very different and far more threatening than the ones that began the problem.

A year ago, the price crisis was started by a combination of eventsthe collapse of Asian economies, a warmer than normal winter in the northern hemisphere, and ultimately a market share fight between Venezuela and Saudi Arabia. The events created a surplus of oil in the international market and prices fell. The production most at risk was marginal oil wells in the United States – wells that produce about 20 percent of America’s domestic production, an amount equivalent to our imports from Saudi Arabia. And, I might add the wells from which I make my living.

Now, we have experienced a year of low oil prices – historically low prices that threaten the very heart of U.S. oil production. Domestic oil production is divided into three general areas – the onshore lower 48 states, offshore, and Alaska. The onshore lower 48 states account for about 60 percent of total domestic oil production. The Energy Information Agency has released a recent report that over 60 percent of this onshore lower 48 production comes from independents, a percentage that has increased by ten percent over the past ten years. It reflects an irreversible trend. Major oil companies are leaving the onshore lower 48 states. Particularly since 1986 when the last price crisis occurred, major oil companies have turned their attention away from the onshore lower 48 states shutting in or selling off their production. They have concluded that these wells do not produce the volumes they need to meet the return on capital that they seek. Majors now operate in the United States primarily in the offshore and Alaska, but more and more they are seeking their new production overseas.

Remember, the year is 1999 under the Clinton Administration with Republicans in charge of the Senate. During a period of slack due to the 'Asian Tigers' going bust, plus a warm winter and a race to undermine each other by Venezuela and Saudi Arabia, gas was cheap, oil was cheap and no one was worrying about future supplies, except the Independents. And who was in the catbird's seat for oil prices? Here is a very interesting part and looks at who was undermining the US oil production capability via market manipulation:

In fact, we would submit that Iraq now controls world oil prices. We would submit that the current U.N. sanctions program has failed on two counts. First, it has failed in its primary mission to provide humanitarian aid to the Iraqi people. Second, it has handed Saddam Hussein the victory he lost in the Gulf War. He invaded Kuwait to control oil prices; now he does and he is penalizing his enemies.

How quickly people forget, no? Then he lays out exactly why the IPAA believes this:

First, world oil prices are essentially set by the last barrel sold. A year ago, Iraq exported about 700,000 barrels/day. In December 1998, it exported about 2.3 million barrels/day. By March it will have another 500,000 barrels/day of capacity on line. Iraq was the only OPEC country to boost its oil revenue in 1998. As other OPEC countries have reduced production to stabilize oil prices, Iraq has become the swing producer of world oil. The swing producer sets the price.

Second, Saddam’s objectives differ from other oil producers. He wanted higher oil prices when he invaded Kuwaitmoney he needed to build his military forces. Now, he can’t spend money to buy arms. But, he can – by keeping oil prices low – punish his enemies, first by reducing the income to Saudi Arabia, Kuwait, Iran, and others; second, by driving critical U.S. production to be shutdown and plugged forever.

Third, looking purely at demand and productive capacity, today’s surpluses should not drive prices to their historic depths. We estimate that worldwide production capacity currently exceeds demand by about 4 percent.

Now for those who haven't taken a look at oil wells: when you plug a well you can't 'unplug it' to start it back up again. The need for constant pressure and maintenance means that geophysics get to that hole pretty quickly and once its plugged you now have to drill a brand new hole if you want production again. Shutting down wells means that to re-open production requires new capital expenditure. The IPAA was hoping to get some way of keeping production going because of an artificially set low market back in the late 1990's. You didn't hear about that little tidbit recently, did you?

This economic warfare, aided and abetted by US environmental laws and prohibitions on production and drilling, would mean that once the artificially low market was gone, the US would be at a much lower production capacity and there would be economic hell to pay. For those in the 'no blood for oil' camp, this was 'oil profits for tyrants', which is not only no better, but a damned sight worse as it is aiding and abetting economic war under the thin veil of a cease fire. When the prices went low, many of the marginal companies suffered economic problems and the oil and gas industry underwent consolidation.

Then the US Senate Judiciary Committee, led by Sen. Arlen Specter (R-PA) was looking at this consolidation as it might lead to 'gouging' of consumers. The Cato Institute looked at this on 24 MAR 2006 which examined the cause of price fluctuations and two GAO reports that had been criticized:

Both studies are problematic. The GAO study has been criticized by the Federal Trade Commission for questionable methodological assumptions and practices. Oxedine and Ward concede that their study is incapable of distinguishing between mergers that create more efficient (albeit higher) prices and mergers that produce market power and correspondingly inefficient prices.

Regardless, even if the studies were methodologically flawless, the effect on consumers (I cent a gallon) is trivial. How then to explain the gibberish on display at the Senate hearing last week?

Only two conclusions are possible. First, the senators on the committee might be unfamiliar with the economic literature pertaining to oil markets and the insights it provides. But many experts have made similar arguments over the last 30years, and the congressional idiocy does not dissipate with time.

This suggests another conclusion: Committee members don't care about economic facts or logic. All they care about is scoring points with swing voters who have a deep-seated religious belief that price increases at the pump are always and forever manifestations of some corporate conspiracy. Pandering to the lowest common intellectual denominator is the name of the political game.

We're not sure which is worse.

Remember, now, this is Republicans complaining about high gasoline prices and not understanding the market. Now, as many of those exact, same Senators are still around as Elder Emirs in Incumbistan, they were also present at the ones on 21 MAY 2008 as seen by John Hinderaker at Powerline:

The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum. Shell's John Hofmeister explained, eloquently:

While all oil-importing nations buy oil at global prices, some, notably India and China, subsidize the cost of oil products to their nation's consumers, feeding the demand for more oil despite record prices. They do this to speed economic growth and to ensure a competitive advantage relative to other nations.

Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people.

Senator Sessions, I agree, it is not a free market.

According to the Department of the Interior, 62 percent of all on-shore federal lands are off limits to oil and gas developments, with restrictions applying to 92 percent of all federal lands. We have an outer continental shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium on the Pacific Ocean, an outer continental shelf moratorium on the eastern Gulf of Mexico, congressional bans on on-shore oil and gas activities in specific areas of the Rockies and Alaska, and even a congressional ban on doing an analysis of the resource potential for oil and gas in the Atlantic, Pacific and eastern Gulf of Mexico.

The Argonne National Laboratory did a report in 2004 that identified 40 specific federal policy areas that halt, limit, delay or restrict natural gas projects. I urge you to review it. It is a long list. If I may, I offer it today if you would like to include it in the record.

When many of these policies were implemented, oil was selling in the single digits, not the triple digits we see now. The cumulative effect of these policies has been to discourage U.S. investment and send U.S. companies outside the United States to produce new supplies.

As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.

The problem of access can be solved in this country by the same government that has prohibited it. Congress could have chosen to lift some or all of the current restrictions on exportation and production of oil and gas. Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development.

Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Democrats' latest efforts to block energy independence:

HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.

HOFMEISTER: Not at all.

HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?

HOFMEISTER: That's correct.

HATCH: It could be recovered at somewhere between $30 and $40 a barrel?

HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...

HATCH: Well, somewhere in that area.

HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.

HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.

HOFMEISTER: I believe we could.

HATCH: And we could help our country alleviate its oil pressures.

HOFMEISTER: Yes.

HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.

HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.

The committee's Democrats attempted no response. They know that they are largely responsible for the current high price of gasoline, and they want the price to rise even further. Consequently, they have no intention of permitting the development of domestic oil and gas reserves that would both increase this country's energy independence and give consumers a break from constantly increasing energy costs.

This is not *just* the Democrats who have been negligent on the issue - this has been a bipartisan panderfest for nearly a decade of 'screw them when they are down' and 'bitch when they are up'. Yep, that's America, all right. That legislation didn't get passed *just* by Democrats and there is more than enough blame to go around on this. So if you want the Clowns in Congress to be held accountable: don't re-elect them.

Especially if they have been in there for a decade. There really is no excuse at that length of time *not* to know how things work.