Politics, Posturing
and Puffery
 

Four Fundamental Facts To Keep In Mind
When Listening to Politicians!

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All of the recent talk about debt, entitlements, taxes, unemployment and other major issues seems to lose sight of facts that we must continually consider.  These facts can provide a background when we are considering just what issues we choose to support.  These four points may also be addressed in whole or part under other specific discussions. These four underlying facts are different from the "Four Crucial Root Problems."

First: It is the fault of and/or neglect of Congress that created the current financial crisis.

  1. Congress allowed the housing bubble to grow uncontrolled.
  • The FBI warned Congress in 2004 that the extent of fraud could bring down our financial system.     

  • Since 2004, 79%- 80% of sub-prime loans involved predatory lending and/or application fraud.

  • Since 2004, about 47% of sub-prime loan applications inflated applicants’ income by 40% or more.

  • Congress pressured Freddie Mac and Jennie May to reduce lending standards and then pressured these agencies to reduce their reserves for bad debts.  Eventually these agencies failed. 

  1. Congress failed to control Derivatives and Credit Default Swaps based upon these risky sub-prime loans.   This neglect has cost individuals and investment funds billions of dollars both in the U.S. and abroad.  
  2. Both political parties have promoted their agendas regardless of the long-term damage to the economy.

Summarizing: Congress cannot be counted upon to protect individual consumers, investors or businesses.  Congressional allegiance remains with campaign contributors and lobbyists.

Second: We, as a nation, have been spending and making commitments beyond our income expectations –

  1. National debt and consumer debt (External Debt owed to foreign entities) is now surpassing the entire national Gross National Product.  National debt is approaching 80% of GNP and personal debt has surpassed 16 Trillion dollars.
  2. We are now caught in a squeeze – If we cut spending alone, unemployment will increase.  If we raise taxes alone, employment growth will be stifled.  Unfortunately, political agendas are preventing us to find a common ground. 
  3. Political personalities, including the President, are pursuing class warfare rhetoric and special interests.  Talking heads on TV and on the Internet are spewing increasing volumes of half-truths and distortions that serve only to distort the facts and increase the national divide while we need to find complicated solutions.
  4. “Look out for Number One” and “He Who Dies with the Most Toys, Wins!” are not viable American values.  These are not the values that made this nation the greatest in the world!

Summarizing: As individuals, we must be prepared to review our positions and accept that we may need to change our expectations and be prepared to make sacrifices if we are to dig out of this mess. 

Third:  It’s not getting any better!  Nor are there signs that the environment will change in the near term.

1.      Increasing political posturing and rigidity is paralyzing chances of effective leadership.  We remain unable to effectively control our national debt.  It is primarily for this reason that Standard & Poors has downgraded the U.S. debt and Moody’s is warning of the same downgrade by 2013.

2.      “Entitlements” like Social Security and Medicare are being viewed as targets to reduce costs even though these funds are secured by U.S. treasury bonds.  The treasury has assured the world that they would pay interest on the debt to foreign nations but reimbursing Social Security for the loss of revenue created by "Economic Stimulus" may be delayed indefinitely according to some members of the recent "Super Committee." .

3.   The current "Employment Tax Relief" is draining the Social Security trust fund at an estimated rate of about $1.3 billion @ year. 

4.      Republicans have proposed allowing individuals to “opt out” of Social Security and manage their own accounts.  However, at the same time, Republicans are attempting to cut support for agencies that help protect consumers and investors.  Specifically:

  • 1.      Proposed, Cutting $129 million (-43%) from the Consumer Financial Protection Agency

  • 2.      Proposed, Cutting $56.8 million from the Commodities Futures Trading Commission.

  • 3.      Proposed, Cutting $25 million from the Securities and Exchange Commission.

  • 4.      Strongly opposing Dodd-Frank Wall Street Reform and Consumer Protection Act.

  • 5.      Strongly opposing the Volcker Rule limiting proprietary trading, etc.

5.      Meanwhile, the Democrats are attempting to load hundreds of new and revised regulations into the above agencies and commissions to such a degree that businesses are refusing to move forward with investments and hiring due to this extensive uncertainty.  Not the least of which is the changing health care legislation.

6.      Now, add in the phobia against allowing the government to increase taxes to help balance and/or reduce our national debt.  We do need tax reforms but political rigidity is tying our hands.  Some taxes do need to be raised and some taxes need to be reduced. 

Summarizing: Political self-interest, phobic rigidity, finger pointing and over-zealous attitudes pro or against business have crippled the nation’s ability to find an effective future path. The individual citizen is being sacrificed for political interests.

 Fourth:  If you still think that we still have a “Two Party” system in Congress, Think Again!

1.       The Democratic side is now split between the old-guard Democratic members and the 83 member ultra-liberal Progressive Caucus.  This caucus operates within their own wants and some have even suggested a primary challenge to Obama because he made a deal with “Satan” i.e., the Republicans.

2.       The Republican side is now split between the old-guard and the 60 member ultra-conservative Tea Party Caucus.  The Tea Party members have no specific allegiance to the GOP and openly oppose compromise with the GOP when it means moving away from their specific agendas.

3.       We now have four distinct factions that rigidly function independently and show little signs or any intention to negotiate away from their philosophical base.  Still too early to know if the "occupy" movements will become a political factor. 

4.       And, there are even more significant caucuses: Black Caucus, Hispanic Caucus, Women’s Issues Caucus, Urban Caucus, Dairy Caucus – and the list goes on and on! 

Summarizing:  No one faction has sufficient votes to set national policy but have sufficient votes to block progress and compromise.  The extreme levels of rigidly and hostility is becoming ingrained in these factions even if it paralyzes our government.  Dogma has risen to such levels  that Congress has become dysfunctional

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Important Considerations

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Our national debt has now surpassed our entire annual GNP.

Unemployment has been above 9% for over 2 years.

The Great Depression of the 1930's had a rebound for about 2 years and then crashed even deeper because of government policies.  Can history repeat?

 

Political Pledges lock in Congressional deadlock.  Both political parties have created pledge lists reflecting ridged positions that prevent any true negotiation or cooperation.

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The Sociopath Next Door, by Martha Stout Ph.D. is an intriguing look at these devious, tricky people who live a life without a conscience. "As many as 4% of the population are conscienceless
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