.JPG) THE ARIZONA CONSERVATIVE |
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ECONOMY AND FINANCE
QUOTES
“However it is
done, transferring wealth is not creating wealth. When government uses
transferred wealth to hire people, it is essentially transferring jobs
from the private sector -- not adding to the net number of jobs in the
economy.” People with low
skills or little experience usually get paid low wages. Passing a
minimum wage law does not make them any more valuable. At a higher
wage, it can just make them expendable. Raising the minimum wage in
the midst of a recession was guaranteed to increase unemployment among
the young -- and it has. None of this is peculiar to the current
administration. The Roosevelt administration created huge numbers of
government jobs during the 1930s -- and yet unemployment remained in
double digits throughout FDR's first two terms. "The fact is
there is no pile of TARP money sitting there unused that would be
essentially free to use for new programs," he explains. "Any dollar
spent on a new jobless program is one dollar less that the taxpayer
has, and one dollar less that could be used for deficit reduction."
There is another
way of reducing the cost of government-imposed mandates. That is by
hiring temporary workers, to whom the mandates do not apply. The
number of temporary workers hired has increased for the fourth
consecutive month, even though there are millions of unemployed people
who could be hired for regular jobs, if it were not for the mandates
that politicians have imposed. "In the most advanced countries the following will be pretty
generally applicable: a heavy progressive or graduated income tax." FACTS President Obama's proposed budget would add more
than $9.7 trillion to the national debt over the next decade,
congressional budget analysts said March 5th. The 10-year outlook
released by the nonpartisan Congressional Budget Office (CBO) is
gloomier than White House projections, which found that Obama's budget
request would produce deficits that would add about $8.5 trillion to
the national debt by 2020. The Obama Administration reported that $761,420
in federal stimulus spending in Arizona's 15th congressional district
saved or created 30 jobs. The administration also reported that $34
million in stimulus expenditures in Arizona's 86th congressional
district was given to the Navajo Housing authority. There is just one
problem with these reports: Arizona only has eight congressional
districts. Similar reports of federal stimulus spending "job creation"
in non-existent congressional districts cropped in other states as
well, including Oklahoma, Iowa and Connecticut. Arizona's state government is spending
$855 per second. In 1977, Congress passed the Community Reinvestment Act (CRA) to
address alleged discrimination by banks in making loans to poor people
and minorities in the inner cities. The act provided that banks have
"an affirmative obligation" to meet the credit needs of the
communities in which they are chartered. In 1989, Congress amended the
Home Mortgage Disclosure Act requiring banks to collect racial data on
mortgage applications. In 1995, the Clinton Administration's Treasury
Department issued regulations tracking loans by neighborhoods, income
groups, and races to rate the performance of banks. The ratings were
used by regulators to determine whether the government would approve
bank mergers, acquisitions, and new branches. The regulations also
allowed groups such as the Association of Community Organizations for
Reform Now (ACORN) and the Neighborhood Assistance Corporation of
America to file petitions with regulators or threaten them to slow or
prevent banks from conducting their business by challenging the extent
to which banks were issuing these loans. Some groups were able to in
effect legally extort banks to make huge pools of money available to
the groups which was in turn used for loans. The banks and community
groups issued loans to low income borrowers who often had bad credit
or insufficient income. These loans became known as the "sub-prime"
loans, for which 100 percent of financing was available without
referencing credit scores or documenting income. In 1992, the Department of Housing and Urban Development pressured
two government-chartered corporations -- Freddie Mac and Fannie Mae --
to purchase large bundles of sub-prime loans for the conflicting
purposes of diversifying the risk and making even more money available
to banks to make further risky loans. Congress passed the Federal
Housing Enterprises Financial Safety and Soundness Act and mandated
that these companies buy 45 percent of all loans from people of low
and moderate incomes. So a second market was created for these loans.
In 1995, the Treasury Department established the Community Development
Financial Institutions Fund, providing banks with taxpayer funding to
encourage more high-risk loans. When measuring household taxes, the U.S. has the most progressive
tax system and collects the largest share of taxes from the richest 10
percent of the population, placing a heavier tax burden on high-income
households than other industrialized nations do. When others sounded the alarm over this
high-risk loan practice, Democratic Congressmen Barney Frank and
Senators Chris
Dodd and Chuck Schumer and others ignored the warnings as unfounded.
They opposed efforts to scrutinize Freddie Mac and Fannie Mae with
oversight. Administrators running the programs resisted reform,
actually cooked the books and awarded themselves bonuses in the tens
of millions of dollars. The top 1 percent of income earners in the U.S. paid 39 percent of
federal income taxes while earning 18 percent of pre-tax income. The
top 5 percent of income earners paid 61 percent of federal income
taxes while earning 31 percent of pre-tax income.
The bottom 40 percent of income earners paid no federal income tax
and received 3.8 percent from the tax system. The middle 20 percent of
income earners paid only 4.4 percent of federal income taxes. Unemployment shot up in 2009 from 7.7 percent in January to 10.1 percent in October before settling at 10 percent in December. Behind those percentages were more than 4.1 million people who lost their jobs during the year. According to data from the Bureau of Labor Statistics, that’s the most job losses in a year since 1940. Bureau of Labor Statistics In its
“Long Term Fiscal
Outlook” report, the GAO states that “absent policy actions aimed
at reforming the key drivers of our structural deficits – health
spending and Social Security – the federal government faces
unsustainable growth in debt. The longer that action to deal with the
federal government’s long-term fiscal outlook is delayed, the greater
the risk that the eventual changes will be disruptive and
destabilizing.” The Federal Reserve's role in the
housing bust cannot be exaggerated. The Federal Reserve slashed
interest rates repeatedly from January 2001 to June of 2003, from 6.5
percent to 1 percent. This led to inflation, so the Federal Reserve
began to steadily raise interest rates, up to 5.25 percent by June of
2006. When the Federal Reserve abandoned its role as steward of the
monetary system and used interest rates to artificially and
inappropriately manipulate the housing market, it interfered with
normal market conditions and contributed to the destabilization of the
economy. The Troubled Asset Relief Program
(TARP) was enacted so the government could buy risky or nonperforming
loans from financial institutions. Within just weeks, the purpose of
TARP changed so the government could purchase equity positions in
financial institutions, to inject cash into them. An oversight panel
discovered that $350 billion of TARP money could not be accounted for. Related Reading Tax Cuts for the Rich? A Primer
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