Obama’s New Deal

If the Messiah wins, we will have a liberal house, a liberal senate and a liberal executive. Not a good sign for any economic conservative out there. James Pethokoukis dissects parts of a possible Obama economy.

1) Direct refinancing for homeowners.

2) Direct government involvement in the management of failing financial institutions that are recapitalized by government money, through something like the Reconstruction Finance Corporations of the Roosevelt era.

3) A transfer tax on stock and bond transactions, both to raise needed revenue and to damp down the kind of speculation that led to the meltdown.

4) Substantial public spending to pull the wider economy out of the hole. Most of that can be raised by surtaxes on the wealthy and by transaction taxes on speculation, but it will also require a temporary increase in public deficits.

5) Raise enough revenue to cover about $700 billion of financial recapitalization in year one, and in years two through eight use the proceeds for public works, infrastructure, good jobs, universal health coverage, expanded pre-kindergarten and child care.

How is he going to pay for all this new spending? He promised not to raise taxes on any couple making under 250,000 and any single person making under 200,000 and the Messiah would not lie about that right? At the Barackropolis, the Messiah said he would pay for any new spending “by closing corporate loopholes and tax havens.” Factcheck noted the fallacy in this. They estimate that his supposed tac cuts (economic redistribution) will cost government 130 billion in revenue, but closing tax loopholes (he doesn’t know what that means) would generate only 80 billion.

In order to pay for this massive increase in the size of government, there are two possible options.  One, Barack lied and middle class taxes go up also. Big Time. Alternatively, McCain’s assertion that an Obama presidency would be Jimmy Carter’s second term becomes a self-fulfilling prophecy.  We could see hikes in the payroll tax and 70 percent marginal tax rates for top income earners.  This could encourage flight from the U.S. to other areas such as Canada or Britain where tax rates would be lower. Higher taxes also empower creation of new tax shelters.

Also note that countries with higher marginal tax rates suffer ridiculously high levels of unemployment

Right now we are hovering around 6% unemployment. At the end of the Carter administration it was over 12%. Higher taxes will lead to lower hours for wage earners and early retirement for employers who don’t see a point in working 9 months out of the year to pay federal taxes. Let’s not forget, state and city taxes as well as sales, payroll, capgains, etc.

Gloves. Off

McCain about to get awesome:

Our current economic crisis is a good case in point. What was his actual record in the years before the great economic crisis of our lifetimes?

This crisis started in our housing market in the form of subprime loans that were pushed on people who could not afford them. Bad mortgages were being backed by Fannie Mae and Freddie Mac, and it was only a matter of time before a contagion of unsustainable debt began to spread. This corruption was encouraged by Democrats in Congress, and abetted by Senator Obama.

Senator Obama has accused me of opposing regulation to avert this crisis. I guess he believes if a lie is big enough and repeated often enough it will be believed. But the truth is I was the one who called at the time for tighter restrictions on Fannie Mae and Freddie Mac that could have helped prevent this crisis from happening in the first place.

Senator Obama was silent on the regulation of Fannie Mae and Freddie Mac, and his Democratic allies in Congress opposed every effort to rein them in. As recently as September of last year he said that subprime loans had been, quote, “a good idea.” Well, Senator Obama, that “good idea” has now plunged this country into the worst financial crisis since the Great Depression.

To hear him talk now, you’d think he’d always opposed the dangerous practices at these institutions. But there is absolutely nothing in his record to suggest he did. He was surely familiar with the people who were creating this problem. The executives of Fannie Mae and Freddie Mac have advised him, and he has taken their money for his campaign. He has received more money from Fannie Mae and Freddie Mac than any other senator in history, with the exception of the chairman of the committee overseeing them.

Did he ever talk to the executives at Fannie and Freddie about these reckless loans? Did he ever discuss with them the stronger oversight I proposed? If Senator Obama is such a champion of financial regulation, why didn’t he support these regulations that could have prevented this crisis in the first place? He won’t tell you, but you deserve an answer.

We’ll know this worked if, by the time 8:00 rolls around, flapping heads are picking this apart for supposed innacuracies.  Stand up and kick some tail!

Great New Ad

O’Reilly Gets Frank with Frank

I saw this mess before the debate.  The audio was off, but it looked brutal.  Weird thing is that I listened to Glenn Beck two days ago for the first time and O’Reilly was on shilling his book. He told Glenn that he was about to take Frak apart and it looks like a self-fulfilling prophecy

Fannie, Freddie, Worldcom, Enron…

From Hotair, via Taxpayers for Truth

Wolf: On the Suspension of Mark to Market

Leon H. Wolf of Redstate:

One of the items in the proposed bailout that a number of Republicans seem to be insisting on is either a suspension or outright end to mandatory mark to market accounting rules. It is supposed by many people that this will somehow aid the unfreezing of the credit markets and/or provide liquidity to the market. Count me among those who are not so sanguine about the long-term prospects of suspending MTM; in fact, I suspect that it may make the situation worse.

In the very, very short term, the suspension of MTM may help certain companies who have built in balance sheet triggers in contracts, credit agreements, or corporate charters and/or bylaws to avoid immediate catastrophic consequences. But as a systemic matter, the suspension of MTM would seem to inject more uncertainty into the market, which is frankly the very last thing the market needs right during the middle of a crisis of confidence.

To review, the accounting fiascos of 1999-2002 that brought us mandatory MTM accounting taught us that traditional accounting methods make it easier for a company – through “aggressive” accounting – to appear solvent for much longer than the company actually is solvent. Everyone in the lending world remembers this. To further review, a large part of the genesis of the current crisis is a widespread fear that certain assets are toxic, and that it’s impossible to identify the toxic assets from the good ones. So… I guess we’re supposed to assume that allowing a change of accounting rules which leads the credit markets to believe that companies might be (but no way to tell for sure) faking solvency is a good thing?

If we suspend MTM in the current climate, what exactly is supposed to happen? Will companies hire accountants to come in and hastily rewrite their accounting books? If they do, will any lender actually extend them credit without forcing them to crack open the old MTM books instead? And if they can’t force that, will they lend at all? Like I said, the market will go from widespread uncertainty about certain classes assets to having widespread uncertainty about every company, especially in these uncertain times. I fear that this may make the credit markets freeze even tighter than they are, even if we inject a bunch of liquidity into the system.

 

Interesting take as I have hear mixed things on both sides about mark to market