September 23, 2008

The problem with deregulation

Posted in 2008 Elections, Rove and Rovian attack politics, U.S. Economy tagged , , , , , , , , , at 3:04 am by realitytax

Even if the Department of the Treasury recovers some the Wall Street bailout funds over time, the idea of spending perhaps $700 billion or more on top of our current national deficit is mind-boggling. Can somebody justify for me why countless families are losing their homes while executives at these “failed” and restructured corporations earned hundreds of millions of dollars but aren’t being asked to return any of it? Can you tell me?

Professor Roy GrowI heard an analogy from Professor Roy Grow, the Frank B. Kellogg Professor of International Relations in the Carleton College‘s Department of Political Science, to help you think about what’s set up the crisis on Wall Street. The international relations program was originated in 1937 by former Secretary of State and Nobel Peace Prize winner, Frank B. Kellogg, through the establishment at Carleton of the Kellogg Foundation for Education in International Relations.

I’ll paraphrase Professor Grow’s dialectical discussion:

Imagine you’ve got ten large, healthy, competitive men gathered together. Set the task for them: win a game of basketball. They’ve all played basketball before. In fact, they’re quite good at it. But this isn’t college, with some fans of both teams cheering them on, there won’t even be a referee to call fouls or out-of-bounds. All the rules they’ve dealt with learning the game? Effectively gone, because you’ve deregulated the game.

Who will win?

Why?

There’s a fundamental problem with deregulation of the kind – and scope – that has taken place on Wall Street. Once there’s no reward for playing by mutually agreeable rules the ONLY reward is winning – at any cost. The value of deregulation seemed so great: let free markets determine what’s best; let competition determine the practices without the restricting burden of oversight.

In what other industry would you have confidence enough to let the people with the most to gain act without regulation? Would car companies be so concerned with passenger safety without regulation? Would you want doctors to practice unregulated- no assurance they’d act with YOUR best interest in mind? Lawyers? Accountants? Toy Manufacturers? Food processors? I’m not suggesting there’s nothing good about a free-market economy, nor am I suggesting every insurance company or investment firm is run by greedy executives, but there have been snake-oil salesmen preying upon the unwary since before the dawn of history as nearly as I can determine.

At one time we might have run such fast talkers out of town, or even applied tar and feathers, or worse. The notion that we’d let them leave smiling, with everything they’d pilfered intact, on their own schedule and terms? That, my friends, is a farce.

We’ve got a big problem. We’ve left foxes guarding the chicken coop. To borrow a phrase freighted with partisan overtones, we need to be “as careful getting out as we were careless getting in…” to this mess. I don’t pretend to know what the solution is; economics is not my forte, nor that of most of my close associates. I do know this: hasty proposals abound in any perceived crisis, but unless you’ve already been expecting the problem and have a plan in place taking time to consider several reasoned solutions often yields superior outcomes to adopting either the first idea or the one advanced by the loudest voice.

I’m disappointed, but not surprised, that some have tried to use the crisis for their own political and/or financial gain. That confirms the readiness of snake-oil salesmen and their ilk to exploit any suffering for their own personal advancement, and demonstrates one peril of trusting the lofty ideal of a free-market to work to everyone’s mutual benefit in the never-ideal real world.

Given that it’s tax dollars about to be put to use to repair the damage, given the complexity of the system(s), and balancing that complexity against the obvious repercussions to inaction, I hope a transparent set of priorities will allow wiser men than me to conceive and begin to implement the kind of oversight that has obviously been missing from this segment of the economy for years.

Given, lastly, that Senator Barack Obama had the foresight to write publicly to both Fed Chairmen Bernanke and Treasury Secretary Paulson about his concerns over looming repercussions from the questionable lending practices at the foundation of this crisis in March of 2007: Obama’s got both the fundamental familiarity and the network of advisors to facilitate identifying fiscal policy changes that should be on the table. It’s unfortunate that such an exercise would likely disrupt Obama’s presidential campaign, but he and his team have already given the problem serious thought; they must be included in the process.

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September 11, 2008

Obama on Capital Gains and Housing Foreclosures – in APRIL 2008

Posted in 2008 Elections, John McCain's campaign, Senator Barack H. Obama, taxes, U.S. Economy tagged , , , , , , , , , , , , at 1:24 am by realitytax

Well before we had to bail out mortgage lenders, Obama was trying to get people to pay attention to the foreclosure crisis… but the thrust of this segment is a clear answer to a toughly worded question about Capital Gains taxes.

 

Gibson tried to get him to back off his stance in the early spring, but here we are in autumn and he’s maintaining the exact same answers. Obama understood the pressure the housing market was under, he’d written to Bernanke and Paulson over a year earlier – in March of 2007. He gets how taxes and the credit crisis he saw coming relate to the larger structures of our economy overall.

Obama vs McCain on taxesSo, if you’re getting rumors in your email about Obama taxing water, or IRAs, or other accounts explicitly designed to be tax free, and wondering why the Wall Street Journal and Bloomberg prefer his policies?  Do your homework, because Obama has a clear understanding of our economy and the value of genuinely responsible “pay as you go” fiscal policies.

If you’ve heard Obama has a plan to double our taxes, or tax the profits from home sales or other capital gains at a higher rate than McCain? Find an objective, non-partisan source, and soak up the facts.

The media has no interest in informing you; they sell commercials to earn their living so they will entertain you and use the language of an announcer calling a horse race.  They are trivializing a critical national election, and hoping you won’t notice because you’ll be too awed by their fancy graphics and analysis – is this Monday Night Football, or an election for the U.S. President?

An informed electorate can pick the superior candidate.  You may or may not agree with my views, but you owe it to yourself, your family, and future generations to be well-informed before you vote.

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