Have Nots

Food Stamps For The Wealthy – Millionaires Meet Eligibility Requirements

January 19, 2012 by admin Leave a Comment

Newt Gingrich started a food fight at the last Republican debate by calling Barrack Obama “The Food Stamp President” and suggesting that food stamps were creating dependence on the government. Mr. Gingrich went on to say that he wanted to “help poor people learn how to get a job” so that they could get off the food stamp dole.

Although Mr. Gingrich’s pitch for individual self reliance and hard work resulted in a standing ovation from the Republican audience, the message may not play out as well across the broad spectrum of American society.

For decades, politicians have told the American public that they are entitled to all sorts of benefits and the public has grown to love them. Promises of benefit cuts or austerity measures do not win elections. In this regard, Mr. Gingrich may lose more votes than he gains by trying to reduce the number of food stamp recipients. (The food stamp program is now known as the Supplemental Nutrition Assistance Program or SNAP).

Courtesy: inquisitr.com

All well intentioned government entitlement programs expand exponentially over time. The number of food stamp recipients has exploded to a record 44.7 million people and this is a voting bloc to be reckoned with. Newt’s somewhat hostile message to food stamp constituents has probably lost him a considerable number of votes.

Mr. Gingrich, who has an incredible depth of knowledge on most topics, seems to be unaware that food stamps have become an entitlement not just for the poor, but also for many who are financially independent and chose not to work or have retired early.

Here’s an example I looked at for a married couple in Connecticut who both chose to retire at the age of 50 since they are financially independent with $5 million in liquid assets. Since they will live off their savings until they start receiving pensions at age 60, the couple has no “earned income” and can therefore qualify for a decade’s worth of food stamp benefits.

Exactly how can multimillionaires qualify for food stamps? The reasons lies in the lack of asset testing for SNAP eligibility. Connecticut, like 34 other states, does not limit eligibility based on assets. Most SNAP applicants, except for limited exceptions, do not have to report money in the bank, retirement assets, stocks or other assets.

According to the handy benefit calculator from the Connecticut Department of Social Services, the multimillionaire couple cited above are eligible for food stamps to the tune of $367.00 per month.

The food stamp program has grown not only due to tough economic times but to vastly widened eligibility guidelines. The SNAP program costs the taxpayers over $75 billion per year. Here’s a partial listing of who can qualify for food stamps.

Non-citizens
Unemployed
Retired social security recipients
Working people with low wages
Homeless
Legal immigrants
College students
Millionaires showing little or no earned income

The graph below from The Wall Street Journal shows the explosive growth in the SNAP program since 1970.

Courtesy: The Wall Street Journal

Mr. Gingrich drew some well deserved applause for trying to reassert the basic values of American free enterprise and self reliance. However, based on the vast voting constituency that is now on the food dole, reducing or eliminating the food stamp program is a political impossibility.

More on this topic:

The Entitlement Society – Million Dollar Lottery Winner Feels Entitled To Food Stamps – “I have bills to pay.”

Filed Under: Connecticut, Government Deficits, Government spending, Have Nots, Jobs, Layoffs, Unemployment Tagged With: food stamps, food stamps for millionaires, Newt Gingrich, self reliance

Census Bureau Report Portrays Destruction Of The American Dream

September 11, 2009 by admin Leave a Comment

It Already Is A Depression For Many

The latest report from the Census Bureau on income, poverty and health insurance coverage portrays a darkening economic picture for millions of Americans. Incomes and living standards fell without regard to geography, race or work profession. For many, the Census report only confirms the destruction of the “American Dream” of economic advancement.

For 2008 real median household income declined 3.6% to $50,303.

The official poverty rate in 2008 increased to 13.2% from 12.5% the previous year and is the highest since 1997. There are now 39.8 million people in poverty. The government definition of poverty for a family of four is an income below $22,025.

The number of people without health insurance increased from 45.7 million to 46.3 million. The number of people with private health insurance decreased slightly to 201 million.

Incomes declined across all racial groups.

Incomes declined in every geographic region except the Northeast where incomes remained unchanged.

Income inequality was unchanged in 2008 from the prior year, indicating that no income class was spared from a decline in income.

While the government is rolling out the press releases congratulating itself on an economic recovery, many Americans remain in an economic nightmare of unemployment, poverty and hopelessness. The latest stats from the Census Bureau provide little reason for optimism since without income growth there will be no economic recovery. The latest report on the number of homeowners in foreclosure signals no recovery to date in incomes or jobs.

U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month

Sept. 10 (Bloomberg) — Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments.

A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier…. One in 357 households received a filing.

Foreclosures rose from a year earlier as companies cut payrolls by 216,000 workers last month…

“The foreclosure numbers are largely unemployment related,” Davis, a former Federal Reserve Board economist, said in an interview. “As long as 15 million Americans are unemployed, record foreclosures will continue.”

With the real world unemployment rate approaching 20%, the government’s loan modification schemes merely delay inevitable foreclosure for many homeowners – without income any monthly payment is too high. Nor is unemployment the only cause of foreclosures. For those who still have jobs but are barely getting by, a decrease in income can easily lead to mortgage default.

We Need Income – Not More Debt

While the divorced from reality politicians in Washington decide on what new deficit financed spending program they should enact next, they are missing the big picture. Our future long term national prosperity will be based on promoting free enterprise job creation – something that does not appear to be on the agenda in Washington.

Filed Under: Economy, Government spending, Have Nots, Jobs, Stimulus Plan Tagged With: census report shows bleak economic future, it is a depression for many, we don't need debt - we need income

Loan Sharks “Salvation” For Many At 2,437% Interest Rates

September 3, 2009 by admin 1 Comment

Loan Sharks: The New Subprime Lenders With A Twist – They Expect To Get Repaid – And Why A Loan At 2,437% Interest Makes Sense

For every loser, there is a winner. Since the demise of the subprime lending industry, loan sharks have been reaping profits by lending to the same foolish crowd that used to be the target of subprime lenders.

In this country, the new subprime lenders are called payday lenders, who operate legally. In Britain, the new subprime lenders simply call themselves, well, loan sharks and operate without the courtesy of government sanction. The Wall Street Journal had an interesting article on loan sharking in the UK that should have been titled – “Why The Foolish Can’t Be Protected From Themselves”.

In a recent report, the U.K. think tank New Local Government Network said it expects the number of people with debts to loan sharks to jump to more than 200,000 in Britain this year, from an estimated 165,000 in 2006. A confluence of indebtedness, poverty and the diminished availability of regulated subprime credit are creating the conditions in which many are borrowing “from nefarious sources,” the report says.

But perhaps no country in the world was more addicted to debt than the U.K. By the end of 2008, the average British household had a debt-to-income ratio of 180% compared with 140% for the average U.S. family, according to the Organization for Economic Cooperation and Development.

That is coming back to haunt the U.K. The number of individual insolvencies rose by almost 30% year-to-year to 33,073 in England and Wales in the second quarter of 2009, the highest level since records began in 1960.

New Lending Lessons For British Borrowers

Apparently, over leveraged U.K. borrowers took every nickel they could from lenders foolish enough to lend to them, oblivious to rate or terms. The actions of these borrowers could almost be viewed as rational since the money they borrowed and spent that they couldn’t pay back is now being absolved in bankruptcy courts with little repercussions from now defunct lenders. U.K. borrowers who now have to deal with unlicensed loan sharks are shocked to learn that the loan sharks actually expect to be paid back – or else.

Some consumers are going to loan sharks to fund purchases for items including new televisions, overseas vacations or expensive clothing.

In mid-2007, Donna Ockerby, a 45-year-old auxiliary nurse in Manchester in northern England, turned to a local loan shark after her hours were cut at work. She borrowed £700 from Johnny “Boy” Kiely to help pay for a wedding dress.

Mr. Kiely, who charged interest rates of up to 2,437%, was jailed earlier this summer for five years for offenses including blackmail and illegal money lending. Ms. Ockerby now lives in a one-bedroom apartment on government benefits. She was moved out of her childhood home by police to protect her. Ms. Ockerby, who says she is on antidepressants, says the decisions to borrow from a loan shark ruined her life.

I’m sorry Ms. Ockerby but you are a financial idiot who deserved to pay the market rate of 2,437% interest. Did you ever hear of “if you can’t afford it don’t buy it”? What was the problem with buying or renting a used wedding dress for a fraction of the cost? Johnny “Boy” Kiely risked his capital, is now in jail and out his £700. Johnny “Boy” did not ruin your life – you did.

Filed Under: Deleveraging, Have Nots, Interest Rates, loan sharks, Payday lenders Tagged With: 2400% interest rate no problem for some borrowers, loan sharks deserve some respect

Extended Unemployment Benefits Make Little Sense

September 2, 2009 by admin 18 Comments

Do Extended Benefits Reduce Job Seeker’s Motivation?

Excluding the depression of the 1930’s we are fast approaching a new official high in unemployment. During the depths of the last worst recession of 1981, unemployment exceeded 10% vs 9.4% today. If we include marginally attached and involuntarily part time workers in the unemployment numbers, the current unemployment rate exceeds 16%.

In response to the high level of unemployment and the difficulty of obtaining employment, Congress has enacted legislation that allows the unemployed in 24 states to collect up to 79 weeks of unemployment benefits. The other states allow unemployment benefits from 46 to 72 weeks. In more normal economic times, the limit on unemployment benefits was usually up to 26 weeks.

Washington legislators are now proposing another extension of benefits for up to another 13 weeks that would cost up to $70 billion. The additional extension of benefits was prompted by the fact that up to 1.5 million unemployed Americans would soon be losing their unemployment checks as they reach the current payment limits.

In addition, the duration of unemployment has reached new highs not seen since record keeping began.

Duration of Unemployment

Given the unprecedented level of unemployment, the duration of unemployment and well reasoned arguments on why unemployment will continue to increase, the entire concept of unemployment benefits should be reconsidered.

Should Unemployment Benefits Be “Free”? – Some Alternatives

Is the constant extension of unemployment benefits reducing the motivation of the unemployed to seek new employment? In the past year I have tried to hire unemployed people for an entry level position in which the starting pay was comparable to or slightly above the level of unemployment benefits the job seeker was currently receiving. In almost every instance, the job seeker declined the job offer, preferring instead to postpone employment until benefits ran out. I have also heard this same story from other people. To maintain unemployment benefits, many states require that a benefit recipient contact a certain number of employers per week to seek work – how many of the unemployed merely go through the routine of seeking employment to maintain benefit payments?

Should the economy weaken further and job losses continue, does it make sense for Congress to constantly extend costly unemployment benefits with zero obligation from the recipient? Bill Clinton reformed welfare by requiring benefit recipients to work. Why not do the same with the unemployed who are receiving benefits? Many charities, local governments, hospitals and companies could employ additional manpower in a variety of productive endeavors. The unemployment benefits would still be paid by the government, but the benefits would have to be earned. From a self worth perspective, getting engaged back into the real world would benefit the unemployed as well – sure beats watching television all day.

Instead of spending hundreds of billions on unemployment benefits and getting nothing in return, the government could establish job training programs or put the unemployed to work on infrastructure projects that the country sorely needs. This was done in the 1930’s with the Works Progress Administration (WPA) and the country still benefits to this day from the roads, bridges, dams and buildings that were constructed. The preferred way to do this would be for government bureaucrats to get out of the way and contract projects to private industry. Paying people to do nothing accomplishes nothing.

Ideally, the economy recovers and private industry rehires many of the unemployed. Realistically, the country may face continued massive job losses or at best a slow recovery where the unemployment rate remains in the 10% plus range for an extended period of time. Maintaining an army of paid and unemployed workers to sit idle makes no sense.

More on this topic

When The Laid-Off Are Better Off

Would it surprise you to learn that survivors can suffer just as much, if not more, than colleagues who get laid off? “How much better off the laid-off were was stunning and shocking to us,” says Sarah Moore, a University of Puget Sound industrial psychology professor who is one of the book’s four authors. “So much of the literature talks about how dreadful unemployment is.”

Filed Under: Economy, Government spending, Have Nots, Jobs, Layoffs, Regulatory Reform, Unemployment Tagged With: are unemployment benefits a "right", should unemployment benefits be earned?

The Contradiction Of Empty Homes And Rising Apartment Vacancies

July 8, 2009 by admin 1 Comment

A Housing Surplus

Huge increases in foreclosures have resulted in millions of homes sitting vacant as bank REO managers struggle to sell the empty homes. Theoretically, people who have been evicted or lost their homes to foreclosures would be new renters. Consider, however, the increase in apartment vacancies to a 22 year high:

U.S. apartment vacancies rose to their highest in 22 years in the second quarter as job losses cut tenant demand and more units came to market. Vacancies climbed to 7.5 percent from 6.1 percent a year earlier, New York-based real estate research firm Reis Inc. said today. The last time landlords had so much empty space was in 1987,

“Vacancies continued to rise despite what has traditionally been a strong leasing period for apartment properties,” said Victor Calanog, director of research at Reis.

Job losses and falling wages are shrinking the pool of potential renters, defying forecasts that prospective homebuyers would rent rather that purchase as house prices decline. The U.S. unemployment rate rose to a 26-year high in June and U.S. payrolls dropped more than forecast in June, the government said last week.

Rents paid by tenants, also known as effective rents, fell 0.9 percent from the previous quarter to $975, said Reis. Effective rents were 1.9 percent lower than a year earlier.

“New buildings coming online over 2009 and 2010 will face higher initial vacancy levels, and will work to increase the pressure on leasing managers,” Calanog said.

The brutal economic fact is that those losing their homes cannot afford to rent. In many cases dispossessed adults are now sharing homes with children, friends or relatives. In addition, USA Today reports children are moving back into their parents’ homes:

Matthew Costigan is young, single and a recent college graduate.

So what does he do? He gives up his nice pad in the trendy Shadyside neighborhood of Pittsburgh and moves in with mom and dad. To his boyhood home. In the suburbs.

Costigan and many others in the most educated generation of young adults are seeking refuge under their parents’ roofs from skyrocketing housing prices, mounting college debts and a tight job market.

A survey of 2004 college graduates shows that 57% planned to move back in with their parents. MonsterTRAK, an online job site for college students and young alumni that conducted the survey, found that 50% of 2003 graduates are still living at home and 35% are still looking for work.

The Families and Work Institute for the first time asked 3,504 employed adults whether they have grown children living at home. The findings were surprising, says Ellen Galinsky, president of the New York research group. “Fully 25% of employed parents have children from 18 through 29 years of age living at home at least half of the time,” she says.

Forced by economic hardship, children are moving back in with parents and parents are moving in with their children. Meanwhile, apartments and homes sit vacant, causing bank losses on homes and commercial loans.

Foreclosed empty homes and increasing rental vacancies are just one more sign of an over leveraged, cash poor consumer. Forecasts predicting an economic recovery based on increased consumer spending are certain to be wrong. Major job losses and wealth destruction of the past two years are forcing consumer to do what they must to survive. With job losses increasing and unemployment reaching depression levels, an economic recovery remains a fantasy at this point.

Filed Under: Deleveraging, Economy, Have Nots, Housing Tagged With: empty homes - empty apartments, grown childen forced to move in with parents, the fantasy of economic recovery

Profile Of A “Making Home Affordable” Homeowner – Everyone Should Do It

July 7, 2009 by admin Leave a Comment

Overburdened Homeowner Subsidized

Home Sweet Home?

Loan modification programs have been seen as the answer to preventing foreclosures and allowing the housing market to stabilize. The programs have become progressively more aggressive as foreclosures continue to mount and housing prices continue to slide. The current government program, Making Home Affordable, has a dual approach whereby a homeowner not eligible for refinancing (at loan to values up to 125%) can then attempt to have the mortgage modified to lower payments. Eligibility requirements are quite simple – if the borrower has suffered a hardship (such as reduced income), is having trouble making the payment or simply bought more house than he could afford during the exuberance of the housing mania, relief in the form of lower payments may be available.

Here’s an actual example of a borrower granted mortgage concessions under the US Government’s Making Home Affordable program.

Home owner purchase the home in 2005 for $153,000 with a stated income mortgage, 100% financing.

Home owner refinanced a year later and received $30,000 cash with a stated income $190,000 mortgage at 7.125%. The home is now worth about $165,000.

Home owner works at a grocery chain and earns $43,000 with limited prospects for increased income. Credit card debt amounts to $22,000 with monthly payments of $315.

Home owner’s current housing expense and other debt payments result in front end and back end debt ratios of 46/55. A back end debt ratio is calculated by dividing borrower’s total mortgage payment, taxes, insurance and all other minimum monthly debt payments divided by gross income. After debt payments and payroll taxes, home owner is left with about $950 per month to cover all other expenses. Home owner is 45 years old, has minimal savings and a negative net worth of around $50,000.

Home owner is not eligible for the Making Home Affordable refinance program since the debt ratios would still be too high even with a rate reduction to the current prevailing mid 5% mortgage rate.

Homeowner therefore applies for a mortgage modification. The basic requirements are that you are having trouble paying your mortgage and your front end debt ratio exceeds 31%. The front end debt ratio is the monthly mortgage payment, taxes and insurance divided by gross monthly income. Homeowner is approved for a mortgage modification that lowers the rate to 2% fixed for two years, with an increase to 3% in year three, 4% in year four and then fixed in year five at the prevailing conforming rate. No principal reduction of the loan was granted. The initial rate reduction lower the home owners debt ratios to 31/40, a ratio that should allow debt payments to be handled without undue stress.

Comments – Who Won and Who Lost?

If the homeowner decides to sell the home, $30,000 cash would be required at closing due to negative equity, commissions due, etc. Since the homeowner has no cash, a sale of the home would have to be a short sale, with the mortgage holder (or taxpayer) taking the loss.

The homeowner in this case received a mortgage rate that is unavailable to the best A+ borrower. In addition, there were no closing costs to receive the 2% rate. The average homeowner pays thousands in closing costs on a refinance.

The taxpayer winds up paying, one way or the other, for the cost of the mortgage subsidy.

The subsidized 31% debt ratio puts the loan modification homeowner in a vastly better off position than millions of other homeowners with much higher housing debt ratios who are unable to get a loan modification or a refinance.

The homeowner cited would never have been a homeowner if not for the 100% financing, no income verification programs that prevailed during the housing/mortgage bubble years.

Not everyone was victimized by the liar loans and sub prime lenders. The homeowner in this example has nothing to complain about. Besides the $30,000 cash received on the refinance and a zero investment in the property, the homeowner also has a super low 2% government subsidized mortgage rate .

As property values continue to decline, expect ever more costly, aggressive and futile government efforts to reflate the burst Humpty/Dumpty housing bubble.

Filed Under: Bailout, Have Nots, Housing, loan modification, Making Home Very Affordable, Mortgages, Uncategorized Tagged With: how to get a 2% fixed rate mortgage, the Humpty/Dumpty housing bubble, who benefits from Making Home Affordable?

Financial Sense Eludes Most Americans

May 29, 2009 by admin 2 Comments

Financial Quiz – Which Option Is Better?

Savings - A Lost American Virtue

1. Spend $2.50 today and receive $92 back over the next four years.

2. Spend 25 cents 10 times over the next four years plus spend $92, at easy payment terms of $1.91 over the next four years.

It seems that most Americans are making the idiotic choice of selecting option #2, according to the WSJ.

Consumers Spurn Fluorescent and LED Models That Can Save Money Over Time

WSJ- The spiral-shaped “compact fluorescent,” around for years, produces the same amount of light as its incandescent ancestor with one-quarter the energy. It lasts for years, provides light in an array of hues, and, by lowering electricity bills, pays for itself in about seven months.

Studies say improving the efficiency of the light bulb is among the easiest ways to start meaningfully curbing fossil-fuel consumption. Lighting accounts for some 20% of residential electricity use in the U.S. — a lot to fritter away as wasted heat. Yet about 80% of all bulbs sold to U.S. consumers are incandescents, which often cost less than 25 cents apiece, about one-tenth the price of a compact fluorescent.

“I buy the cheap ones,” Dallas resident Betty Ferrell said the other day as she reached for a pack of incandescents at a local Wal-Mart store. “They may not be cheap in the long run,” she said, “but they’re cheap for what I have in my purse now.”

In fact, Americans have been so reluctant to buy the new bulbs that the federal government is about to force their hand. A recent law will, in effect, ban incandescent bulbs for most uses by 2014.

But sales of compact fluorescents have dropped in the current recession, to 21% of total U.S. consumer light-bulb sales in 2008 from 23% in 2007, according to the DOE.

Compact Fluorescent Light Bulb (CFL) Math

Calculating energy cost savings
We need two things to calculate how much it costs to light a lightbulb over 10,000 hours: total kWh of electricity used and cost per kWh.

For this exercise, we’ll use $.12/kWh:

CFL: 230 x $.12 = $27.60
incandescent: 1,000 x $.12 = $120.00

Now that we have the cost to light both bulbs for 10,000 hours, subtracting the two gives us a cost savings of $92.40 by using a 23 watt CFL instead of a 100 watt incandescent bulb.

Please note: The purchase price of the bulb was not factored into energy cost savings. The typical 100 watt incandescent bulb will last 1,000 hours, therefore, 10 bulbs would have to be purchased to last as long as one 10,000 hour CFL. However, since a single CFL is about the same price as replacing 10 incandescent bulbs, we chose not to factor price into energy cost savings.

Lack of Financial Sense or Flat Broke?

So why would anyone chose option 2? The savings of $92 over four years was based on replacing only one light bulb. A $10 investment today for four light bulbs would effectively yield a return of $368 over the next four years. It’s hard to imagine any other investment producing this type of return.

If the average American can’t come up with $2.50, the economy is probably in worse shape than anyone imagines.

The US is spending billions of dollars each month on imported oil, yet the Government can’t come up with a plan to utilize existing technology that would massively reduce foreign oil imports? Here’s two easy options – a) impose a tax on incandescent light bulbs that would effectively raise the price above that of a fluorescent bulb, b) instead of sending out another round of “rebate” checks, mail each American 4 florescent bulbs.

On a positive note, the incandescent bulb will be gone in 2014.

Filed Under: Have Nots, Saving Money Tagged With: CFL vs incandescent bulbs

Tea Parties Draw Small Crowds – Are Taxes Too Low?

April 16, 2009 by admin 1 Comment

2009-04-15-hartford-tea-party-106 Hartford, CT Anti-Tax Rally

Anti-tax tea party rallies took place across the nation on tax day, April 15th. All things considered, including the warm spring weather, the size of the crowds protesting seemed oddly small.

MSNBC -Whipped up by conservative commentators and bloggers, tens of thousands of protesters staged “tea parties” across the nation Wednesday to tap into the collective angst fueled by a bad economy

“Frankly, I’m mad as hell,” said businessman Doug Burnett at a rally at the Iowa Capitol, where many of the about 1,000 people wore red shirts declaring “revolution is brewing.” Burnett added: “This country has been on a spending spree for decades, a spending spree we can’t afford.”

In Boston, a few hundred protesters gathered on the Boston Common — a short distance from the original Tea Party — some dressed in Revolutionary garb and carrying signs that said “Barney Frank, Bernie Madoff: And the Difference Is?” and “D.C.: District of Communism.”

Tens of thousands nationwide, 1,000 in Iowa and only a few hundred in Boston, the site of the original Tea Party! What gives? Tens of thousands, in a nation of 300 million, is a statistical non event.

Who Cares, If You Are Not Taxed?

Did the small number of protesters indicate that people are not upset by taxes, or was it a case of “why waste my time – nothing will change”? Perhaps it was something else, such as the fact that a relatively small number of households pay virtually all of the individual income taxes collected. Consider the following:

NEW YORK (CNNMoney.com) —

The top fifth of households made 56% of pre-tax income in 2006 but paid 86% of all individual income tax revenue collected, according to the most recent data available from the Congressional Budget Office.

But once the various tax breaks to which they’re entitled are counted, the burdens of low- and middle-income tax filers as a group has been fairly low.

The Tax Policy Center estimates that for 2009, 43% of tax units (most of which are lower income households that may or may not file a return) will have no income tax liability or will have a negative income tax liability, meaning the government will actually pay them.

Wall Street Journal–

The federal version of this spinning top is the tax code; the government collects its money almost entirely from the people at the narrow tip and then gives it to the people at the wider side. So long as the pyramid spins, the system can work. If it slows down enough, it falls.

It’s also what’s called redistribution of income, and it is getting out of hand.

A very small number of taxpayers — the 10% of the country that makes more than $92,400 a year — pay 72.4% of the nation’s income taxes. They’re the tip of the triangle that’s supporting virtually everyone and everything. Their burden keeps getting heavier.

As a result of the 2001 tax cuts enacted by a bipartisan Congress and signed by President George W. Bush, the share of taxes paid by the top 10% increased to 72.8% in 2005 from 67.8% in 2001, according to the latest data from the Congressional Budget Office (CBO).

According to the CBO, those who made less than $44,300 in 2001 — 60% of the country — paid a paltry 3.3% of all income taxes. By 2005, almost all of them were excused from paying any income tax. They paid less than 1% of the income tax burden.

It’s time to create an Economic Growth Code whose purpose is to fix and grow the economy, not redistribute massive amounts of wealth. A new tax code that creates growth and reforms our entitlement system is the only way to dig our way out of the hole we’re in.

Not only is the current code flawed from top to bottom, it is used by politicians to divide the public along class lines and fails to promote prosperity.

I’d also create a mechanism so tax rates go up or down for everyone — no more dividing the country by lowering taxes for some or raising them only for others. A revenue system whose purpose is to pay the government’s bills should apply fairly to one and all. If Congress wants to raise or cut taxes, it should do so for everyone.

Another benefit is that such a system will create an environment in which spending programs receive the scrutiny they deserve. It’s funny what happens when everyone pays the bills; Americans may want less spending so they can pay fewer bills.

Many Had No Reason To Protest

The stats on who actually pays taxes explains the low turnout of tax protesters. If you are not paying taxes, which is the case for over 50% of the country’s wage earners, what do you have to protest?

Why the no show turnout for the 40% of workers who pay 30% of the taxes? My guess is they probably couldn’t afford to take the day off. And as for that exalted group in the top 10% of wage earners who pay 70% of the taxes, they were probably doing what got them into the top 10% – working hard to support the 50% that don’t pay taxes.

The federal tax code was never meant to tax “fairly” but has instead been used as an instrument for implementing social policy and income redistribution. Redistribution of wealth, necessary to some extent, has now reached a dangerous point when 50% of wage earners pay no taxes. Those who are not taxed can chose to be wrongly indifferent to the level of taxation or spending since it has no impact on them. Politicians, of course, understand this situation and by promising more to the majority of voters who pay the least, keep themselves in office thus perpetuating trillions in deficit spending. Those who pay the most have effectively been disenfranchised from the political process due to their small voting numbers. At some point this untenable situation collapses of its own weight as the small number of people supporting the system are eventually taxed out of existence.

More On This Topic

More States Look To Raise Taxes

The Tax Capital Of The World

Hartford, CT Tea Party

Craig Stahl, Connecticut, who participated in the Hartford, CT Tea Party had this comment for Comrade Obama:

“Remember the focus of the TEA Parties is not just taxes, but the massive
spending by all Governments (state & federal), and the sudden shift toward
socialism. That will result in massive debt for our grandchildren.”

Filed Under: Government spending, Have Nots, Tea Party Tagged With: Are taxes too low?, Tax protest draws small crowds, Tea Party

Economists Give Obama Grade Rating of F – An Ugly Ending

March 12, 2009 by admin Leave a Comment

The First Test Results Are In

Obama, Geithner Get Low Grades From Economists

U.S. President Barack Obama and Treasury Secretary Timothy Geithner received failing grades for their efforts to revive the economy from participants in the latest Wall Street Journal forecasting survey.

The economists’ assessment stands in stark contrast with Mr. Obama’s popularity with the public, with a recent Wall Street Journal/NBC poll giving him a 60% approval rating. A majority of the 49 economists polled said they were dissatisfied with the administration’s economic policies.

However, economists’ main criticism of the Obama team centered on delays in enacting key parts of plans to rescue banks. “They overpromised and underdelivered,” said Stephen Stanley of RBS Greenwich Capital. “Secretary Geithner scheduled a big speech and came out with just a vague blueprint. The uncertainty is hanging over everyone’s head.”

Mr. Geithner unveiled the Obama administration’s plans Feb. 10, but he offered few details, and stocks sank on the news. The Dow Jones Industrial Average is down almost 20% since the announcement, as multiple issues have weighed on investors’ confidence.

Despite spending and borrowing trillions of taxpayer dollars in the past two months, Mr Obama has failed to inspire confidence in the business community. Investors have expressed a resounding vote of no confidence as seen by the ugly 20% slide in stock prices since the new administration took over. At the current pace of events, the country will be insolvent and the Dow at 800 by year end 2009.

Investment Adviser In Chief Fuels Despair

The Obama Administration finally seems to have noticed that all of their policy announcements so far have only fueled economic despair, not alleviated it. So President Barack Obama took the rare opportunity yesterday of offering some investment advice to the American people: “What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it.” In other words, Obama wants Americans to Buy! Buy! Buy!

But before you rush out and follow President Obama’s investment advice, consider this: last week Obama’s Treasury Department announced that the government would take a 36% stake in Citigroup by converting $25 billion of its preferred shares into common stock. The Treasury paid $3.25 a share for the stock last week, which after a weekend’s worth of government nationalization rumors fell to $1.20 by Monday. So to recap, President Obama managed to lose billions of taxpayer invested dollars in just a few days. But that’s not even the worst part. So far the government has poured $50 billion into Citigroup. Meanwhile, Citi’s market capitalization is only $6.54 billion. In other words, taxpayers could have bought Citi eight times over already for all the money they have thrown at it already.

What the Citi story does highlight though, are the perils and conflicts that make massive and intrusive government intervention in the economy a disaster for all involved. Congress has no idea how to run a bank, and that is why all the political posturing in the House and Senate is completely undermining the stabilization of the banking sector. Meanwhile, the private sector has no incentive to create jobs since they are facing a $1.3 trillion tax hike in the coming decade. Then there is the $646 billion tax hike every American will see in their energy bills from President Obama’s promised carbon capping plans. It is no wonder that nobody is taking Obama’s investment advice.

The only sector of the economy that is sure to grow under Obama is the public sector. Our own Center for Data Analysis estimates that President Obama’s budget will require over 250,000 new government employees. Other expert estimates put the number at 100,000. Another big winner under Obama’s big government: lobbyists. Democratic staffers are now commanding $350,000 to $450,000 salaries at prestigious K Street lobbying firms. At least somebody is benefiting from this Obama economy.

Investors don’t invest precious cash on hope – they invest money based on viable plans that will lead to future economic growth and prosperity. So far, all that investors have seen are plans for massive spending related to “tax rebates” and increased social spending.

Logical minds have questioned why so much of the “stimulus” plan spending would be directed to social spending and wealth transfer expenditures, when critical sectors of the American economy (banking, insurance, manufacturing, etc.) are effectively insolvent and on the edge of collapse. An interesting theory that makes sense comes from Michael Boskin, economic professor at Stanford University. (Courtesy of financialsense.com)

“New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president’s budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government.’

“Have Nots” The New Majority – courtesy financialsense.com

First off, let’s start with comments on the new Barack “Pinocchio” Ob@ma Administration and the public servants inside the beltway of WASHINGTON DC. Several words and comments come to mind: Morally and fiscally bankrupt and absolutely corrupt. Their betrayal of doing what is good for their constituents/country and creating the conditions for economic growth versus doing what is good for their political ambitions and power over the economy is on PLAIN display in their activities and proposals.

Contrary to their words, their actions can only lead to one conclusion: They are PURPOSELY driving the economy off a cliff to gather power in the UNFOLDING crisis by destroying every corner of what is still working at the public’s expense and MISERY. Please notice how they IMMEDIATELY jump on any public figure who murmurs anything contrary to the headline illusions.

The only reason they are reducing the deduction for charity for those earning over $250,000 dollars, at a time when we need charity more than in the last 70 years, is so the people relying on charity will have to rely on government.

As I mentioned in previous newsletters, the stage is set for the emergence of a new dictator, and my bet is that we shall see Ob@ma and the gang of 535 morph into it over the next two years. Two recent articles have caught my eye, both are about Narcissism; one is by Dr.Ali Sina entitled “Understanding Ob@ma: The Making of a Fuehrer at http://www.faithfreedom.org/obama.html

Is it possible that the economic well being of the country is being sabotaged so that the ruling elite in Washington can maintain their seats of power? When the “have nots” outnumber those able to sustain them, massive social upheaval will follow. America’s failed experiment to create wealth through debt may be laying the groundwork for a future that few of us dare to contemplate.

Filed Under: Corruption, Economy, Government spending, Have Nots, Stimulus Plan Tagged With: chief investment advisor, have nots the majority, obama - the making of a fuehrer, obama gets F on economy