An Analysis of the Banking Fallout - Article Review

Yesterday Glenn Beck shared a letter he wrote to his sister about how we as a nation came to be in the situation we're in financially. I think he states a lot of it far better than I could hope to, and I appreciate that he did not point the finger at one party, but he did name names when particular individuals had acted or made statements clearly showing they played a role.

In simple terms, though, what he said was greed drove it all. I think he has hit the nail on the head. Politicians greedy for power, bankers greedy for profits, individuals greedy to have things NOW instead of waiting for when the time was appropriate, builders greedy to put up more and more homes while credit terms were so loose... greed greed greed.

It really is sad that such a base, animalistic drive got us here. Regulations were ignored, overlooked, or sequestered. Risk was ignored because it was all being passed on to someone else who didn't care about it. Everything spun out of control.

Fortunately, the economy is still functioning. Rampant inflation (caused at least in part by these slackening credit terms) has not managed to destroy it yet. People are still employed at high percentages, and they go to work and do their job, then come home and purchase goods and services from other people. We have not reached a total fallout, nor will we it would appear thus far. So hope remains. Today may seem dark, but tomorrow - or several hundred tomorrows from now - we can still hope for a brighter day. And maybe, just maybe, that day will bring with it the wisdom learned in the midst of these trials.

-- Robert

Tax Law

The tax law in the state of Georgia required that I file by mail this year to get a small credit related to a business I own. I believe that credit amounts to roughly $25 for me. Because of the paper filing, though, I will not receive my refund from the state until late May, despite having mailed it during the first week of March. My brother-in-law, who files in Virginia, got his refund from Georgia a week after he e-filed his return. I have written a letter of grievance to one of the legislators I know well, and I will probably share similar letters with two or three more. I have a real problem with a law that gives an advantage to an out-of-state taxpayer in receiving his refund over an in-state taxpayer. I also have a problem with a law that requires paper filing knowing they have every intention of taking two and a half months to actually return funds. I would probably not care, but I was expecting to pay a lot of taxes last year when I paid a large estimate in the first quarter, only to later realize I would not have to (because of changes to my business). So the state has had my money for over thirteen months now, but I will only get some interest back if they decide they have taken more time than they consider reasonable to return the money.

It is time to pass the FairTax, and to enact similar legislation in the states. It is ridiculous that a bureaucracy has taken this much control over our lives and our money, and that we simply stand by and let it happen. I agree with Lee Iacocca, who recently wrote in his book Where Have All the Leaders Gone about his concern for the lack of leadership in this nation with regard to numerous pressing issues, including energy, health care, taxes, and industry. I have not yet had the chance to read his book, but the excerpt I read hit home for me. Too many have chosen to maintain the status quo instead of leading the charge to make needed changes. Our our tax system is broken, as is our governmental policy on welfare and minimum wage, and without major reformations the economy could suffer catastrophic losses. It has already taken major hits, and policies demanding the creation of false economies to establish some new way of polluting - some would say of creating energy - are driving inflation at a mind boggling pace. The time for action is now. Really it was yesterday, but we must not stand by. I am tired of pretending I am satisfied with the state of things as they are. My business is being crushed. My paycheck is being bled dry more rapidly than ever. I am sick and tired of feeling sick and tired of the state of the world. I know I am not the only one who is fed up.

-- Robert

Dialogue Between Robert and Todd (Part 5)

Todd: I wonder often about the issue of health care and how well citizens understand the issue. I do believe that a society has a moral charge to ensure that people have access to high-quality healthcare. People have a fundamental right to receive treatment when they are sick. But...there's a caveat. People don't have the right to have someone else pay for it. THey don't have the right to a government program that ensures they have treatment when they need it. They don't have the right to ignore preventative measures and get treatment when they could have prevented the illness. There's a lot of caveats.
Todd: Unfortunately our present government (therefore the people) seem much more interested in this pie-in-the-sky notion of "universal health care." Now, universal health care sounds great! Everyone has a good doctor and everyone gets treated and everyone is healthy. Who wouldn't vote for that!??!? But, we know the reality is that we don't have unlimited health care resources. We know that health care organizations have a tough time making money under universal systems.
Todd: We know that employers need relief from health care costs as much as (more than) individuals who are uninsured.
Todd: We know we need a system that invests more heavily in preventative care than band-aid treatment.
Robert: One thing that could help that is to encourage people to take those measures. Let people write off all physicals, for instance.
Robert: Helping insurance companies form more co-ops for individuals without access to health care through their work place could help.
Todd: We also know that putting caps on drug prices doesn't necessarily work because drug companies need bigger profits to ensure that their shareholders will continue to invest in the HUGE cost of developing drugs. I'm not sure that deregulation is necessary the answer to drug costs because the bulk of costs aren't necessarily borne in getting a drug approved, and I would argue that ensuring research-based drugs get to market in this country is a justifiable duty of government.
Robert: Health care is definitely a huge monster for the government (and everyone) to tackle.
Robert: But the worst thing they could do to solve it is to get into the business.
Robert: Working with industry, instead of squeezing it, is definitely something the government needs to get back to. Continuing to treat corporations terribly does not encourage people to come to the table.
Todd: It's tough, but something isn't working right within the market. Drug companies are spending more and more to put out products and health insurers are making less and less money. Businesses can't afford coverage, individuals can't either. Businesses are struggling to offer health insurance to employees or even their owners for the self-employed. And every year, we have higher quality medical technologies in the USA, and each year we have higher infant mortality rates, and our life expectancy is no greater than other developed nations. Something isn't working right here.
Todd: I wish I knew what the answer was, but I just don't. There are a lot of proposals out there that I've yet to read, and with most things the answer probably is within a combination of them.
Robert: As Glenn Beck said the other day: we can now do things to people (medically) in this country that we can't afford to do.
Todd: And as we're having this discussion I just saw Hillary Clinton say at a rally something about freezing interest rates to ensure people "Keep their homes." It's solutions like that that make me cringe when both sides of the aisle start pandering like that. Not only would freezing interest rates accomplish nothing, it does not speak to the fundamental issues of bad usery laws that allow predatory lending and allow uneducated people to get credit that they cannot afford.
Robert: One thing I heard on the radio a few weeks ago was about what we're eating. We're too into processed foods that we microwave, and our bodies don't get the nutrients they used to from pasture fed meats and organic vegetables, so we have to eat a lot more to get those nutrients. We gain weight, and our health declines.
Robert: The telling statistic the author describing this pointed out: look at our spending on health care versus food from around 1960 (I think) and compare it to today. The percentages are inverted.
Robert: And it will lock more people out of homes, as people are denied loans because of the locked rates even though they might have been able to afford such rates.
Todd: The move to organic food is an excellent one, and one that the market is driving in a very real way. The government is doing well in states and at the federal level to provide some relief to smaller farmers to ensure they at least have access to the marketplace. More public education on the value of eating better and investing in organic research for mass-food production is a good use of public funds, personally. It's a much wiser investment of public money than continued public health care dollars going into a giant grave (literally).
Robert: Definitely, by finding ways to improve health from the beginning, we save a fortune down the road. Just like educating people on any subject will save society long-term.
Robert: That's one reason I support turning welfare into a training program, and even providing some child care for single parents who enter the program.
Robert: Help people get jobs and get off instead of staying on the dole.
Todd: Which is one of the reasons I believe in the agency I'm working for. Invest in early development, and you save bundles down the road on the child who turns into a functioning adult who can learn and improve him/herself
Todd: A question that I've personally struggled with is this. What is government's role in promoting or providing access to postsecondary education?
Robert: Well, if the government would remove a lot of the taxes from the equation that make it so hard to live on a low wage, then people who are not interested in post-secondary education can still make a living to survive.
Robert: But while they do keep those taxes in place, they should do what they can to help individuals who cannot afford it to find ways to fund further education. We should not have a system that puts everyone in college, and certainly not one that pays everyone's college costs, but we could have one that makes college loans more available, and gives grants to truly exceptional students (though I'm not sure how to determine who those students are).
Todd: Do you think that providing college tuition assistance would hinder research universities from making more money, in other words manipulating the marketplace to keep their costs low? Research universities need that revenue to do the research. Endowments alone don't pay for it.
Robert: Hard to say.
Robert: But imagine what corporations could do to work with colleges if they had more funds to invest with them thanks to the elimination of corporate taxes.
Todd: That's very true.



And that was where our one night chat ended. Now I hope the readers of this blog understand why I appreciate Todd contributing. He brings a lot to the table that helps me think and expand my knowledge. I hope anyone still reading at this point has enjoyed these posts. Hopefully we will get to post a chat like this again soon.

A Dialogue Between Robert and Todd (Part 4)

Robert: Who would be harmed by the FairTax?
Robert: Other than people who thrive on the current system?
Todd: Well its different degrees of harm, but there's the probability that those who now pay no income tax pay more. Whether that's right or wrong is beyond me to decide, I'm simply pointing out that they would be adversely affected. That's my whole point that there's no means of collecting from the public that won't adversely affect someone.
Robert: With a prebate to everyone up to the poverty level, it's unlikely people who are not paying now would start to pay.
Todd: That's an excellent point
Robert: The fact is, the Fair Tax is well named. It might actually give a "welfare" effect to the poor, if they are wise about spending money for new goods only on food and buying all they can used.
Robert: They'd actually get some help paying for those with the prebate.
Todd: I think that the prospectg of a Fair Tax is appealling. I think the threat of the "underground economy" is a reasonable concern, and one I'd like to learn more about. I think proponents make sense when the reference existing tax laws. I'd like to read more about the pros and cons of the Fair tax when compared to a VAT.
Robert: What's VAT?
Robert: There would not need to be an underground economy. The FairTax is only imposed on new goods and services.
Todd: Value Added Tax
Robert: And if all income taxes (and federal taxes in general) are removed, then people will have far more funds available to pay the tax that way.
Robert: So what does the VAT do?
Todd: No I understand that, but I believe the critic's point is that you may have a widespread desire to avoid the tax by purchasing the goods as a business rather than from the retailer. The proponents of a VAT argue that this could be avoided by taxing the good throughout the cycle of transactions up to and including the retail transaction. That's just one concern I'd like to learn more about.
Robert: So in other words, tax at each step of the building process to avoid cheating?
Robert: Well, one thing to note about enforcement of the FairTax: with 80% of all tax returns removed (only business would file, no individuals), the government would have more ability to handle oversight and cut out cheaters.
Todd: I think that's a fair argument, plus businesses are already required to have a sellers license to purchase tax exempt goods and the laws are already on the books.
Robert: Exactly, so the VAT complicates things more than necessary, it would seem.
Robert: By moving the tax to only the final transaction, you simplify the market processes and help businesses grow by cutting red tape.
Todd: It's disheartening that only Mike Gravel, Ron Paul (sort of) and Huckabee are the ones talking seriously about tax reform, although to be fair McCain, Romney and Giuliani said they would sign the fair tax act if passed.
Todd: Tax reform is a bipartisan issue because the current system, in my view punishes the working American as much as it does the super-wealthy.
Robert: It punishes the worker more.
Todd: And tax relief doesn't have to be an issue that you cast aside whenever you are talking about promoting a healthy economy or protecting American jobs. Frankly I don't see how they don't go hand-in-hand.
Robert: It pushes out corporations that the working man can work for. It makes the necessary wage so high that people hire illegals to avoid taxes or just move overseas to avoid them legally.
Todd: Tax reform is a middle class issue, frankly, and it makes sense that it should be as important as the Environment or Health Care. This is a complicated system that all pieces fit together.
Robert: That's probably my main irritation with the current "solution" being pushed by the President. It's a one-time tax rebate, giving people back their own money. If that is an answer, why not give back more of the people's money and stop taking it away?
Robert: Absolutely.Robert: And that is also one thing I hate about our current tax system. It gives people the false impression that the government "gives" them something around April every year (if they're among the fortunate folk getting a refund) and they go spend it in many cases.
Todd: This all leads back to the issue of public will. You need public will to accomplish things in government, and to have public will to solve problems, you need an educated public that sees practical realities. I'm not so sure America has EVER been that way.
Robert: Indeed, that is why the framers were so afraid of giving the "common man" the right to vote.Robert: They felt such people could not be trusted to understand what was best.



(to be continued tomorrow)

A Dialogue Between Robert and Todd (Part 3)

Robert: Stepping away from Kyoto and emissions, just anything: should the government make choices for us that we do not want?
Todd: No, by definition it shouldn't. I’m not suggesting an elitist or non-constitutional approach. I used the words "public will" deliberately. We, as the citizens, need to be more educated and more rational about how we combat harmful emissions. When we have the support of the business community and their influential dollars, this makes it easier. It's up to us, not some phantom government that is going to decide for us.
Robert: There are things that make some sense - like protecting people from being murdered for trying to vote, even though those people are in the minority. But if the vast majority of people don't want something, should the government be doing it?
Robert: One good place to start helping corporations invest more in the research you suggest: eliminate the corporate tax, which has no reason to exist in the first place.
Robert: It hinders our economy, causes inflation, hampers the job market, increases illegal immigration.... it is responsible for much of what's wrong with our country.
Robert: Put the money back in the hands of the corporations so they can do the research, they can hire the staff, they can grow the economy... I know it's not going to happen in this very liberal environment, but that's what would help the most.
Todd: I think tax relief for corporations always has that sort of bad taste to many working Americans. I don't know how you get by that, but in principle I agree with you. You have to provide a financial, profit-driven incentive to get corporations to do anything. Corporations aren't a person that has altruistic intentions; corporations need to show shareholders benefit to anything they do. And the easiest way to do that is not to hand them a check, but relieve their burden to the Government.
Todd: The less a corporation has to "render unto Caesar" the more willing they are to talk to Caesar.
Robert: Not just tax relief: tax elimination. Tell me one reason that corporations should pay taxes?
Robert: All you do by that is take money out of the hands of employers.
Robert: Corporation owners already pay taxes on dividends and gains, why should corporations pay taxes, too?
Todd: Corporations shouldn't pay taxes. The corporation isn't anything the government protects. And corporations don't pay taxes anyway. There's nobody to pay it. You and I, the customer and the employee and the shareholder pay it. So yeah, that's what I'm saying. Lessen the burden that the employee and the customer and the shareholder pay to the government, and you have relieved the American of some of his burden overall.
Robert: Then we agree on that.
Todd: That allows decision-makers in corporations to invest their money in things that help them make more money, and when that's coupled with public will (who are the customer and shareholder) you have the ability to improve a host of social and environmental ills because you are letting the market do what it does best.
Todd: In other words, you're working within industry and not trying to manipulate an industry. Robert: Exactly.
Robert: And again, exactly.
Robert: That is what people need to understand.
Robert: The government is harming the economy and harming the market's ability to respond to some of what its customers want because it is robbing the corporations of money.
Todd: Well that's kind of what taxation is all about unfortunately. The question, is there a balance? I can't imagine a taxation system that doesn't harm someone. Even the Fair Tax would do that. The issue is one of costs and benefits. If I harm the middle class worker just a little bit here, are the returns going to be that we can reduce significantly the chances of his daughter getting sick from mercury poisoning and hindering her development that makes her less productive and makes her earn less and pay less taxes and so on and so on.....



(to be continued)

A Dialogue Between Robert and Todd (Part 2)

Robert: What if we study how to combat emissions in our air?
Todd: I'd like to believe that the answer lies somewhere in the middle. It is proven that we can reduce emissions by doing certain things that help Americans save money. When we invest in public transport, carpooling promotion and cheaper fuel alternatives we can help raise standard of living while reducing emissions.
Robert: So far there are no cheaper fuel alternatives.
Robert: Ethanol is far from an answer.
Robert: Without government subsidies, right now nothing save perhaps nuclear power has shown promise as a viable alternative.
Todd: We (as a government, I suppose I'm saying) will invest billions in combating the spread of HIV/AIDS and various Cancers. We do this because everyone can more or less agree that using public money to try and save lives around the world is a good thing to do. This public funding makes sense for drug companies and health care conglomerates because it helps them make money.
Todd: I would argue that providing that same type of public health, if not on the same scale, is just as reasonable when we talk about reducing mercury emissions from coal mining operations, for example. We know that Coal Miners are going to be able to make more money, employ more, expand more and produce more energy more profitably if we can make it more worth their while to make the considerable investments in cleaner technologies.
Todd: Now we know mercury in the air ends up in the soil and water. We know it poisons fish, and it poisons humans eventually and disproportionately poisons children. When the coal companies make more, and our air, soil and water get cleaner, we now have an opportunity for all sides to step back and say, "Y'know, we think that's a pretty good thing."
Robert: So what we need to do is help corporations get benefits from using those technologies, instead of penalties from failing to.
Todd: Right now, the Clean Water and Clean Air Acts regulate without proportionate investment. That's one-sided and shortsighted. We should keep in mind a conservative (Nixon) saw the potential in reducing emissions, but unfortunately the public will to push public money toward cheaper technology is simply not there.
Robert: And here's the question that has to be answered: is it the place of government to take our money and spend it on things we, as a public, do not want?Todd: The voting public seems to collectively think that the only assistance should be to the individual, and markets won't work that way. Public investment SHOULD help the corporations that pollute, but vilifying polluters is a much easier way to get votes. Kyoto has some good market-based principles in it, but the encouraging of public investment falls short of what it needs to be in a nation like the USA.

(to be continued tomorrow)

A Dialogue Between Robert and Todd

Todd and I were discussing the election, and our conversation turned towards the subject of greenhouse gases, but then to regulations and taxes in general. I asked him if I could share our conversation to show our two different, but intertwined points of view. I hope it makes sense and makes for interesting reading. It all came out of one conversation we had over chat, but I broke it up into five posts. Hope everyone enjoys it.

Robert: Meaning complying with Kyoto will do a lot of damage to our economy.
Robert: What we NEED is the Fair Tax, and then some serious deregulation.
Todd: I think that a modified Kyoto compact among more developed nations has to be implemented soon. The ability for reductions in greenhouse gas emissions MUST be coupled with aggressive public investment in private research into new technologies that can affordably and profitably bring our emissions lower. It is quite easy to draft a plan that works for developing nations who do not have the private energy infrastructure that the US of A has. What is more difficult and less palatable to the extreme environmentalist is that we have to make "going green" an attractive business proposition.
Todd: Once we do that, we now have solutions that businesses will be more than happy to accept tougher government standards for. Regulation must always be married with the benefit of the corporation in mind. To do so otherwise is to simply ignore human nature and is a recipe for policy failure.
Robert: Tell me honestly, are you suggesting you believe in Global Warming as a human-caused phenomenon?
Todd: I would not even approach Global Warming as an end goal to alter when we know that emissions have such harmful public health effects on even the smallest scale. Here in Phoenix as our population grows our per capita rates of Asthma-related hospital discharges have erupted.
Todd: Harmful emissions in our atmosphere are a public health concern that government rightly should be concerned with. We must carefully study climate change data and if we are to accept the postulate that global warming is being caused by anthropogenic emissions, and we know that these emissions constitute a public health threat even in the short term, then I believe we have steady ground on which to make policy changes. Even if we don't accept that global warming is anthropogenic, we should continue to fund research into it to be certain. We do know that period s of global warming are occurring now. We believe that they have occurred in the past. We disagree on its possible effects. We KNOW that carbon dioxide, ozone, nitrous oxide and particulate matter emissions are harmful to humans.
Todd: Let's start with what we know.... that's all I'm suggesting.
Robert: Right now, there is no viable alternative to oil that works on a large scale. Emission reduction must come as a function of the economy, or in the end, it will just continue to wreck our economy.
Robert: Right now our standard of living is being stilted by government policies regarding oil restrictions and emissions.
Todd: Well there are two schools of thought on this, and I'm not certain I'm willing to subscribe to one of the other. One school says that humans invariably are going to have to change their behavior if they want to change the amount of harmful emissions we generate. Okay, that sounds logical. The other says that maybe humans don't have to change their behavior if we simply bring the most serious offenders in line with newer technologies.
Robert: There's also the school of thought that humans are somewhat arrogant to assume they can truly influence the whole environment in the way people like Al Gore think we do.






(to be continued tomorrow)