Finally some sanity out of Washington

The Obama administration announced today that GM and Chrysler had 60 days to get their act together. Not likely to happen, they have been around for decades and have not been able to do it in that time.

He said bankruptcy was the best solution. What took so long? Most of us knew that months, if not years ago.

The market did not like the announcement but they had just been asleep at the wheel for a while. This will eventually make the market and GM stronger. Not so sure Chrysler should not just go away.

AIG bonus tax

Ok, this blog was not intended to be a political rant. There is just so much stupidity going on in Washington that I just can’t refrain from commenting. I had hoped to use this space for some good financial common sense, to address questions my clients ask, to address tax issues and the overall economy. But Washington is like that tooth ache that will just not go away. It’s a pain that keeps you up at night and invades every aspect of your life. What ever happened to the land of the free?

The proposed tax on bonuses will assure that banks and other institutions that need help from the government do not take the funding and that the talent that is desperately needed at these institutions will hit the door at the first opportunity

Once again, this is bad law. This is a terrible precedent to set for two reasons: First Congress rushed to approve law that granted the bonuses, and then acted outraged when the bonuses were paid. If we do not honor these bonuses we will turn contract law on its head. It is also unconstitutional to not honor the contracts. Second, if congress will not stand behind contracts that it endorses with the legislation it passes what are our treasury securities worth? NOTHING!!! Who is going to buy them? “China, we will pay you 12% interest on these bills, but we are going to pass a law after we get your money to withhold 90% of the interest as a tax.” Who will trust our government? “The US government will enter into a deal with you but we are going to figure out how to take it back after you have done what you agreed to do?” Come on, the ire should be directed at congress not the poor saps at AIG that entered into legally binding contracts. That may have been stupid but it was not criminal (I must admit that at this time of year I have not researched this point beyond what I have seen in the media). What congress is doing should be criminal.

Congress should have broken this company up and not put a penny into it from the beginning. Keep the profitable units, provide guarantees for the junk and let them go. I do not believe in the too big to fail bunk. Failure does not mean it is going to go away; just that it will have a different structure.

What troubles me most is that I am not sure if congress is this incompetent or if what they are doing is intentional so they can act outraged and pass more bad, (read socialist) tax law. I fear it is the former.

Enough already

A quick review of the broad stock market performance from Election Day, November 4, to March 6 shows a decline of 31% on the DOW and a 32% decline on the S&P. The markets are an indicator of future results not just a reflection of the current day news stories. You hear the national media outlets quote a decline of 20% since inauguration but the true reflection of Mr. Obama’s policies on the economy should be reviewed from Election Day.

After absorbing all of the bad news of September the market fell to 8,176 on 10/27/08 and then climbed to 9,625 on 11/4/08 an increase of 18%. So the markets open on election day with optimism. The instant it was assured Mr. Obama would be the new president the markets started to fall.

As I said previously everytime the new administration comes out with a new policy proposal the markets sell off. Fortunately the US economy is historically robust and will survive even Mr. Obama and his wrong headed policies. The question is how strong a recovery we will experience. If we keep on the track we are now on, the recovery will be weak. If the new administration will take note of what not only the US market is telling it, but what the world markets are telling them we will have a robust recovery.

We already have some bad law to absorb with the latest stimulus plan. The make work pay credit is a terrible idea. What this credit does is refund social security taxes on the first $6,452 of wages for what the administration claims will be 95% of all taxpayers. What this means is that we are going to take funding from a program that most would agree is already almost bankrupt. Not only that, we are doing this as the largest demographic in our country, the baby boomers, are approaching retirement age.

If that was not bad enough I do not see anywhere in the legislation where the 95% of Americans who will now be paying less into the social security system will have a corresponding reduction in their benefits. How does Mr. Obama propose to pay for this? There is no direct source of funds to social security for the reduced funding. However, he does propose to offset the reduction in revenue by implementing a cap and trade system. This stealth tax will more than off set the cost to taxpayers. We will see everything we buy go up in price. Our utility bills will most likely increase more than the $400 credit the legislation gives us.

This provision of the bill alone should have been enough to cause it to fail. Mr. Obama claims that there will be no off budget items, yet I have not seen this disclosed anywhere. Nor have I seen any one show a calculation of how much the cap and trade will cost hard working American families who are already stretched to meet their monthly obligations.

This administration is employing smoke and mirrors with great skill. We must look behind the curtain. The policies being proposed will create more poor people and make everyone poorer. The unemployment rates will sky rocket and we will have more people dependent on the government. Could that be Mr. Obama’s desired end result?

Obama fans: Had enough yet????

 

Every time the Obama administration makes a proposal about the mortgage mess the markets go into free fall.  That should tell them something about their approach.

 

Most people in this country do not want to become France lite. 

 

The socialist policies being espoused by the Obama administration will put us on even footing with most of Europe. 

 

Is that where we really want to be?

 

Europe’s economies are dependent on the US’s economy.  If we become equal with them who is going to be the engine of the world economic train?  China!!

 

No one should be surprised with what we are getting.  Mr. Obama told us exactly what he wanted to do if he was elected.  Every proposal he has made is either a disaster or will be a disaster.  The markets are a good gauge for what will happen if we implement these risky proposals.  Generations of Americans will be paying for this debacle.

 

It is up to us to make sure this does not become law.  Contact your representatives and senators (www.usa.gov/Contact/Elected.shtml) today and every day until this is defeated and the administration gets the message that we are not going to just give away our country, much less our wealth. 

 

Mr. Obama’s policies will create more poor people in this county.  Perhaps that is what he wants, more poor people means more people dependent on the government and more votes for his party.

 

Wake up before it is too late!  It is time for some good old American common sense in Washington (notice I did not say European common sense, because there is no such thing).