Let’s Talk History

We are in the midst of the silly season as they call it.  Politicians are promising us whatever they think is needed to buy our votes. 

Mr. Obama (or Mr. McCain) is going to raise taxes and give your money to others.  Mr. McCain (or Mr. Obama) is going to end up starting a war with Iran.  Mrs. Palin is not qualified to be President but Mr. Obama is.  Mr. McCain has a better understanding of international relations than Mr. Biden. 

Who do you believe?  What is important 

Historians tell us that history is our best window into the future.  From an understanding of what has happened in the past we can better predict the future.  From a person’s past actions, we can better predict his future moves.

A favorite bromide of mine is, “Your actions speak so loudly, I can hardly hear your words.”  Maybe our best way to evaluate the candidates is to ignore their words and review their actions.  I am troubled by the many promises made by the candidates and the fact that they often drop them in a flash when it appears that such promises might lose them a vote or two.

Two glaring examples: 

In September, 2007, Mr. Obama was asked in a questionnaire from the Midwest Democracy Network, “If you are nominated for President in 2008 and your major opponents agree to forgo private funding in the general election campaign, will you participate in the presidential public financing system?”  Mr. Obama answered, “Yes.”  In June this year, after discovering he could raise a great deal of money more than would come through the public financing system, Mr. Obama opted out of the public campaign financing system.  For over six months he had used his support of public financing as a change from the old politics and as proof that he was a new kind of politician not controlled by the money and influence of lobbyists and other contributors.  What do his actions tell us?

For almost two years (since February, 2007), Mr. Obama has been running a campaign based on the premise that he would bring needed change to Washington, that he was an outsider who would shake up the Washington Elites.  Mr. Obama’s history is not encouraging if “Change” is your mantra.  He has voted down party lines 96% of the time in the current congress.  He has been supported by the lobbies for Freddie Mac and Fanny Mae more than most anyone and in a shorter time.  He has contributed more money to the campaigns of sitting members of Congress than any other candidate or member of Congress.  That financial support gives more power to incumbency, the biggest barrier to political change.  Do you think he did that to curry favor with Super Delegates when he was still trying to defeat Hillary?

Mr. Obama’s actions speak volumes.

Why Vote for Mr. Obama????

I have asked this question of lots of folks who are proudly displaying their Obama lawn signs, or bumper stickers, or campaign buttons.  I am puzzled that I have yet to receive a good answer.  I hear things like, “He is not Bush,”  ”He is smarter than McCain,” He went to Harvard Law.”  I have heard no one say he is a good leader and explain why they think that.  Nor have I heard anyone question his background.  I have some serious reservations about his background (the subject of another post, I am sure).

If you are considering voting for Mr. Obama, I would appreciate knowing why.

Please just hit the comment button and let ‘er rip.

Thanks

Fix the Mortgage Mess

Want to fix the mortgage mess?  

First, It is important to know who is to blame so we don’t turn the solution to the problem over to the same people who caused the mess.

There is plenty of blame to go around. Let me list a few:

•  The people who took out mortgages who were not qualified or capable of repaying them. – They are responsible for knowing enough to make the right decisions for their own financial situations. 

•  The Congress and the state legislatures for passing laws, intended to stop “redlining”, but, which in my opinion prevented lenders from properly qualifying loans. Most of the anti-redlining laws have resulted in lenders offering loans they would not have considered safe prior to the oversight for redlining, and, prior to Fannie Mae and Freddie Mac ‘guarantees.’

•  The Fed for keeping interest rates artificially low for the past many years.  The Fed was created to prevent the very economic panics of the type we now enjoy (enjoy?).  In this case, it has made mortgage money too cheap and too available, encouraging too much risky lending.

So how do we fix the problem?  We certainly don’t look to Congress or the Fed to do more of what caused the problem.  I’m looking for your suggestions but to start things off, I have an idea below that you might consider:

Hire Warren Buffett, Charlie Munger, and three other proven private investors.  Give them control of $500 Billion for the ‘bailout.’  Pay them nothing.  Give them an incentive (4% each of the value of the portfolio minus the $500 Billion four years hence) to increase the value of the mortgage portfolios of Fannie Mae and Freddie Mac.  Presumably, they would select from the devalued loans in Freddie and Fannie’s portfolios those with the potential for the best return.  I’m betting they would greatly increase the value of the portfolios, greatly increase the value of the $500 Billion government program, and stabilize Freddie, Fannie, and the mortgage market at the same time.  If Congress or the Fed use the same $500 billion, they will use it to buy votes and golden parachutes by directing the money to where it will give them the most influence.

How would you fix this mess?

How Much Should We Be Taxed?

How Much Should We Be Taxed?

The current Presidential debate is looking closely at Mr. Obama’s stated intent to raise taxes on “the rich” to fund new and better programs (see http://www.barackobama.com/pdf/taxes/Factsheet_Tax_Plan_FINAL.pdf ) and Mr. McCain’s position that we should cut taxes, especially for businesses (see http://www.johnmccain.com/Informing/Issues/1a8640f0-b2e3-4edb-b2a9-236df79d2579.htm )

Unfortunately, both candidates have it wrong. The question is not how much to raise or lower taxes so much as it should be, “How Much Should We Cut Expenditures?”

In the past few months as our economy has slowed and many of us have faced the economic reality of higher prices (gas, food, etc.) most of us have looked first at where we can save money. Where can we cut our expenditures? Since none of us has access to the Treasury’s printing presses, we rarely think first, “How can I increase revenue?” Congress needs to act the same way: Cut expenditures first, then look at revenues.

We have created a Congress that now has no incentive to cut costs anywhere but with huge incentives to increase programs everywhere. This needs to Change.

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years. These nations have progressed through this sequence: ‘From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.’” - Alexander Fraser Tytler Lord Woodhouselee (1748-1813)

Please send me your suggestions as to how to give incentives to Congress to reduce government spending.

For example:

All Congressmen and women and all Senators will be bound to the same rules they make for the Military. That means they will have the same medical benefits, the same retirement program, the same drug testing, the same security clearances, etc. Only the laws under which they would perform their duties would be different. I would make them subject to the laws they create for all of us, not to the military justice system. I would also pay them five times the pay of a Colonel in the Army, Navy (Captain) or Air Force with time in grade allowances. If we don’t pay them enough, they may resort to taking money from those who would influence their votes (parish the thought).

Okay. That’s a start. Got any thoughts?