Debt/deficit FACTS
CBO: Bush Tax Cuts Responsible For Almost A Third Of Deficit In Last 10 Years
http://politicalcorrection.org/blog/201105130001
Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits
Economic Recovery Measures, Financial Rescues Have Only Temporary Impact
http://www.cbpp.org/cms/index.cfm?fa=view&id=3490&utm_source=twitter
The Bush Tax Cuts Just Did Not Deliver
http://politicalcorrection.org/factcheck/201011190001
How the Deficit Got This Big
In 2001, President George W. Bush inherited a surplus, with projections
by the Congressional Budget Office for ever-increasing surpluses,
assuming continuation of the good economy and President Bill Clinton’s
policies.
Bush, tax cuts and war spending were the biggest policy drivers of the
swing from projected surpluses to deficits from 2002 to 2009.
http://www.nytimes.com/2011/07/24/opinion/sunday/24sun4.html
Private sector loans, not Fannie or Freddie, triggered crisis
ReplyDeleteThe "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets
http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html
Most subprime lenders weren't subject to federal lending law
Community Reinvestment Act, blamed for home market crash, didn't apply to the banks that did the most lending.
http://www.ocregister.com/articles/loans-20542-subprime-banks.html
DUBYA FOUGHT ALL 50 STATE AG'S IN 2003, INVOKING A CIVIL WAR ERA RULE SAYING FEDS RULE ON "PREDATORY" LENDERS!
ReplyDeleteDubya was warned by the FBI of an "epidemic" of mortgage fraud in 2004. He gave them less resources. Later in 2004 Dubya allowed the leverage rules to go from 12-1 to 33-1 which flooded the market with cheap money!
Predatory Lenders' Partner in Crime
ReplyDeletePredatory lending was widely understood to present a looming national crisis.
What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge?
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative
washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html
The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets OCT 2008
Now to bad Dubya couldn't push through IN THE REPUGLITHAN CONTROLLED HOUSE (1995-2007) WHERE IT TAKES A SIMPLE MAJORITY F/F REFORM RIGHT?
ReplyDeleteONLY ONE BILL, HR1461-S109 IN 2005 PASSED THE HOUSE. DIED IN THE SENATE BECAUSE DUBYA OPPOSED IT (THREATENED VETO!)
Frank? The minority member Barny Frank? How can he stop ANYTHING in the House (like today)? lol
Thanks again to the Bush administrations financial deregulation of the mortgage & banking sectors & allowing the greedy & unethical brokers to operate at their will.
ReplyDeleteBush drive for home ownership fueled housing bubble
ReplyDeleteThere are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.
But the story of how the United States got here is partly one of Bush's own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.
nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html?pagewanted=all
Bush Increasing Homeownership
ReplyDeleteBut for much of Bush's tenure, government statistics show, incomes for most families remained relatively stagnant while housing prices skyrocketed.
He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.
Concerned that down payments were a barrier, Bush persuaded Congress to spend as much as $200 million a year to help first-time buyers with down payments and closing costs.
And he pushed to allow first-time buyers to qualify for government insured mortgages with no money down
nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html?pagewanted=all
FBI saw threat of loan crisis
ReplyDeleteA top official warned of widening mortgage fraud in 2004, but the agency focused its resources elsewhere
"We think we can prevent a problem that could have as much impact as the S&L crisis,"
They ended up with fewer resources, rather than more.
articles.latimes.com/2008/aug/25/business/fi-mortgagefraud25
DUBYA FOUGHT ALL 50 STATE AG'S IN 2003, INVOKING A CIVIL WAR ERA RULE SAYING FEDS RULE ON "PREDATORY" LENDERS!
Dubya was warned by the FBI of an "epidemic" of mortgage fraud in 2004. He gave them less resources. Later in 2004 Dubya allowed the leverage rules to go from 12-1 to 33-1 which flooded the market with cheap money!
Republican voter ID laws that could disenfranchise 5 million voters - according to New York University School of Law Brennan Center.
ReplyDeleteAllegations of voter fraud - someone sneaking into the polls to cast an illicit vote - have been pushed in recent years by partisans seeking to justify proof-of-citizenship and other restrictive ID requirements as a condition of voting. Scare stories abound on the Internet and on editorial pages, and they quickly become accepted wisdom.
"But the notion of widespread voter fraud, as these prosecutors found out, is itself a fraud. Firing a prosecutor for failing to find wide voter fraud is like firing a park ranger for failing to find Sasquatch. Where fraud exists, of course, it should be prosecuted and punished.
Yet evidence of actual fraud by individual voters is painfully skimpy."
http://peoplesworld.org/what-voter-fraud-one-republican-convicted/
Florida GOP Takes Voter Suppression to a Brazen New Extreme
ReplyDeleteFlorida Republicans have taken voter suppression to a brazen extreme. After the 2010 election, Gov. Rick Scott, a Republican, instructed Secretary of State Ken Browning to compile a massive database of alleged "non-citizen" voters. Browning resigned in February rather than implement Scott’s plan, saying "we were not confident enough about the information for this secretary to hang his hat on it."
http://www.rollingstone.com/politics/blogs/national-affairs/florida-gop-takes-voter-supression-to-a-brazen-new-extreme-20120530
A lot of Republicans complain about voter fraud. Indiana Secretary of State Charlie White actually committed it
ReplyDeleteSo long as you’re a Republican, you won’t spend any time in jail for voter fraud. And, if you’re Charlie White, Indiana’s lucky, now-former Republican secretary of state who received just one year of home detention for all of those crimes, you’ll likely be “elated,” just as White was after his sentencing hearing last week.
http://www.salon.com/2012/02/27/vote_fraud_retires_shameless_gop_official/
December 07, 2011
ReplyDeleteConviction in GOP voter-suppression scheme
aul E. Schurick, the 2010 campaign manager for former Maryland governor Robert L. Ehrlich Jr., was convicted Tuesday by a Baltimore jury of four counts stemming from a robocall that prosecutors said was intended to suppress the black vote.
Fortunately, other members of the former Republican governor’s team will also stand trial for their role.
http://www.washingtonmonthly.com/political-animal/2011_12/conviction_in_gop_votersuppres033951.php#
The irony is, the fraud Republicans are worried about is imaginary, while the real-world fraud is coming from their side of the political divide.
ReplyDeleteShark Attacks outnumber cases of Voter Fraud in Florida since 2008, GOP to steal FL elections anyway
ReplyDeletehttp://www.dailykos.com/story/2012/05/30/1095160/-Shark-Attacks-outnumber-cases-of-Voter-Fraud-in-Florida-since-2008-GOP-to-steal-FL-elections-anyway
Republican Lawyers Group's Own Study Undercuts Vote Fraud Claims
ReplyDeleteA Republican National Lawyers Association effort to discredit the NAACP backfires by showing voter fraud - impersonating other voters - barely occurs.
Viewing the data for the period 2000-2010, the report by its own account shows there is no link between voter fraud in states and the need for stricter voter ID laws.
A closer scrutiny of the RNLA data shows voter fraud has no correlation to needing strict voter ID laws.
In the states with higher convictions of improper voting, most involved voters improperly filling out registration forms, vote buying or a person with a felony conviction attempting to vote.
Vote buying occurs when a voter is paid or offered money for their vote.
Neither of these issues would be prevented by state photo ID requirement.
While the RNLA data shows 17 cases of non-citizen voting convictions over 10 years in Florida and one in both Alaska and Illinois, this hardly justifies the requirement of proof of citizenship requirement.
http://www.alternet.org/news/153435/republican_lawyers_group%27s_own_study_undercuts_vote_fraud_claims
A major probe by the Justice Department between 2002 and 2007 failed to prosecute a single person for going to the polls and impersonating an eligible voter, which the anti-fraud laws are supposedly designed to stop.
ReplyDeleteOut of the 300 million votes cast in that period, federal prosecutors convicted only 86 people for voter fraud – and many of the cases involved immigrants and former felons who were simply unaware of their ineligibility.
A much-hyped investigation in Wisconsin, meanwhile, led to the prosecution of only .0007 percent of the local electorate for alleged voter fraud.
"Our democracy is under siege from an enemy so small it could be hiding anywhere," joked Stephen Colbert.
A 2007 report by the Brennan Center for Justice, a leading advocate for voting rights at the New York University School of Law, quantified the problem in stark terms.
"It is more likely that an individual will be struck by lightning," the report calculated, "than that he will impersonate another voter at the polls."
http://www.thenation.com/blog/167217/voter-fraud-fraud
The GOP War on Voting
ReplyDeleteIn a campaign supported by the Koch brothers, Republicans are working to prevent millions of Democrats from voting next year
http://www.rollingstone.com/politics/news/the-gop-war-on-voting-20110830#ixzz1r5HSfVEp
To hear Republicans tell it, they are waging a virtuous campaign to crack down on rampant voter fraud – a curious position for a party that managed to seize control of the White House in 2000 despite having lost the popular vote. After taking power, the Bush administration declared war on voter fraud, making it a "top priority" for federal prosecutors.
In 2006, the Justice Department fired two U.S. attorneys who refused to pursue trumped-up cases of voter fraud in New Mexico and Washington, and Karl Rove called illegal voting "an enormous and growing problem."
Indeed, between 2000 and 2007, there were 32,299 UFO sightings in the United States, 352 deaths caused by lightning, but only nine cases of voter impersonation
ReplyDeleteYet conservatives continue to hype the extremely rare occurrence of election fraud as if it were something that happens every day and is somehow responsible for the election of Obama and Democratic candidates across the map.
http://www.thenation.com/blog/167217/voter-fraud-fraud
GOP outcries over the phantom menace of voter fraud escalated after 2008, when Obama's candidacy attracted historic numbers of first-time voters.
ReplyDeletehttp://www.rollingstone.com/politics/news/the-gop-war-on-voting-20110830#ixzz1r5HSfVEp
Actual Instances Of Voter Fraud Are Few And "Scattered"
ReplyDeleteSupreme Court Plurality Actually Found Only "Scattered Instances Of In-Person Voting Fraud."
Justice Department Report Shows Very Few Prosecutions For Illegally Casting Ballots.
NYU's Brennan Center: Allegations Of Voter Fraud "Simply Do Not Pan Out" And Distract From "Real [Election] Problems That Need Real Solutions."
Fallacy That Photo ID Should Be Required To Vote Because It's Required For Other Purposes..
But Election Experts Say That Such Analogies Are Invalid...
Loyola Associate Professor Levitt On Voting Analogy: "Drinking A Beer Is Very Nice," But "I Don't See That In The Constitution."
ACLU South Carolina Executive Director Middleton: "It's Not A Constitutional Right To Buy Sudafed Or Become A Frequent Flier."
http://mediamatters.org/research/201203130013
8 Kentucky Republicans Convicted Of Extortion, Vote Buying & Selling, Tampering With Voting Machines
ReplyDeleteome of the most powerful public officials in Clay County corrupted elections in recent years, buying and stealing votes in pursuit of power and money, a federal jury ruled Thursday.
The jury convicted all eight people on trial, including former Circuit Judge R. Cletus Maricle, 66, and former school Superintendent Douglas C. Adams, 58, on a charge that they engaged in organized criminal acts to rig elections.
After a seven-week trial, jurors deliberated about nine hours before convicting the defendants on all the charges they faced, which included vote-buying, mail fraud, extortion and money laundering.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x448284
Solyndra MORE CONservative nonsense!
ReplyDeleteBush Admin. Advanced16 Projects, Including Solyndra, Out Of 143 Submissions
http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8897
DOE Under Bush Admin. Set Out Timeline For Completing Solyndra Review
http://energy.gov/sites/prod/files/Solar%20Background%20Document%201.pdf
In March, The Same Credit Committee Of Career Civil Servants recommended Approval
http://thinkprogress.org/climate/2011/09/13/317594/timeline-bush-administration-solyndra-loan-guarantee/
DOE Official: "It's The Same Group Of Career Professionals That Were On The First Committee."
http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8897
What The Press Is Getting Wrong About Solyndra
ReplyDeleteCLAIM: Bush Administration Rejected Solyndra's Application
http://mediamatters.org/research/201109190020
Solyndra/Clean energy
ReplyDeletehttp://mediamatters.org/search/index?qstring=Solyndra&x=10&y=7
Solyndra=1% of DOE energy money
ReplyDeleteReuters: Venture Capitalists Point To Solyndra As One Of The Top 10 Companies "Ripest" To Go Public. Reuters reported in August 2009:
http://money.cnn.com/2009/08/19/news/companies/ipo_market.reut/index.htm
Market Conditions Shifted Significantly from 2009 to 2011
"advantages that were more important in 2009 when it received a $535 million U.S. loan guarantee to build a factory" than they are now, noting that the price of the silicon-based panels with which Solyndra was competing "has fallen 46 percent since then."
http://www.bloomberg.com/news/2011-09-15/obama-s-bets-on-abound-solopower-cut-costs-to-avoid-bankruptcy.html
Bush Admin. Advanced16 Projects, Including Solyndra, Out Of 143 Submissions
http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8897
DOE Under Bush Admin. Set Out Timeline For Completing Solyndra Review
http://energy.gov/sites/prod/files/Solar%20Background%20Document%201.pdf
In March, The Same Credit Committee Of Career Civil Servants recommended Approval
http://thinkprogress.org/climate/2011/09/13/317594/timeline-bush-administration-solyndra-loan-guarantee/
DOE Official: "It's The Same Group Of Career Professionals That Were On The First Committee."
http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8897
Fannie, Freddie, and the CRA are Not Responsible for the Financial Crisis
ReplyDeletehttp://www.cbsnews.com/8301-505123_162-39741513/fannie-freddie-and-the-cra-are-not-responsible-for-the-financial-crisis/
NYT: Mitt and Newt Hate Fannie and Freddie
http://www.democraticunderground.com/1002237332
Private Wall Street Companies Caused The Financial Crisis — Not Fannie Mae, Freddie Mac Or The Community Reinvestment Act
http://politicalcorrection.org/factcheck/201110140001
Media Conservatives Absolve Wall Street, Falsely Blame Barney Frank For Housing Crisis
ReplyDeletehttp://mediamatters.org/print/research/201111290002
The FCIC Investigation, Wallison on the GSEs and the Conservative Echo Chamber
http://rortybomb.wordpress.com/2011/07/14/the-fcic-investigation-wallison-on-the-gses-and-the-conservative-echo-chamber/
What Caused the Economic Crisis?
The 15 best explanations for the Great Recession.
http://www.slate.com/articles/news_and_politics/the_big_idea/2010/01/what_caused_the_economic_crisis.html
This is Bush after the signing where he proclaimed himself "The Homeownership President"
ReplyDeletehttp://img.photobucket.com/albums/v410/JohnnyRingo2U/21admin_600.jpg
Are Fannie Mae And Freddie Mac To Blame? No
ReplyDeletehttp://www.defendingthetruth.com/topic/21461-are-fannie-mae-and-freddie-mac-to-blame-no/
Another Conservative Myth Busted -- Did Fannie and Freddie Really Cause the Financial Sector Meltdown?
http://www.huffingtonpost.com/marvin-meadors/fannie-mae-freddie_b_1549411.html
Corporate Taxes as a Percentage of Federal Revenue
ReplyDelete1955 . . . 27.3%
2010 . . . 8.9%
Corporate Taxes as a Percentage of GDP
1955 . . . 4.3%
2010 . . . 1.3%
Individual Income/Payrolls as a Percentage of Federal Revenue
1955 . . . 58.0%
2010 . . . 81.5%
Corporate Profits Are At An All-Time High
'corporate profits are at an all-time high as a percentage of the economy, wages are at an all-time low.'
'Last year, corporations made a record $824 billion, which didn’t stop conservatives from continually claiming that President Obama is anti-business.'
http://thinkprogress.org/economy/2012/06/22/504853/corporate-profits-all-time-high/
The fortunate 400
400 tax returns reporting the highest incomes in 2009.
Six American families paid no federal income taxes in 2009 while making something on the order of $200 million each.
another 110 families paid 15 percent or less in federal income taxes.
http://www.reuters.com/article/2012/06/06/us-column-dcjohnston-top-idUSBRE85500720120606
The 400 richest Americans used to pay 30% of their income on the average to Uncle Sam(but 55% in 1955).
Today, they pay 18% on the average
http://www.forbes.com/sites/robertlenzner/2011/07/25/the-400-richest-americans-pay-an-18-tax-rate/
Overall, the top 400 paid an average income tax rate of 19.9 percent, the same rate paid by a single worker who made $110,000 in 2009. The top 400 earned five times that much every day.
ReplyDeleteJust 82 of the top 400 were taxed in accord with the Buffett rule, which proposes a minimum tax of 30 percent on annual incomes greater than $1 million.
http://www.reuters.com/article/2012/06/06/us-column-dcjohnston-top-idUSBRE85500720120606
How corporate socialism destroys: David Cay Johnston
ReplyDeleteA proposal to spend $250 million of taxpayer money on a retail project here illustrates the damage state and local subsidies do by taking from the many to benefit the already rich few.
Nationwide state and local subsidies for corporations totaled more than $70 billion in 2010
http://www.reuters.com/article/2012/06/01/column-dcjohnston-corporate-socialism-idUSL1E8GUAOO20120601
Social Security is not going broke: David Cay Johnston
ReplyDeleteWhich federal program took in more than it spent last year, added $95 billion to its surplus and lifted 20 million Americans of all ages out of poverty ()?
Why, Social Security, of course, which ended 2011 with a $2.7 trillion surplus.
http://www.reuters.com/article/2012/05/04/column-dcjohnston-socialsecurity-idUSL1E8G3N0C20120504
The richest get richer: David Cay Johnston
ReplyDeletehttp://www.reuters.com/article/2012/03/15/column-dcjohnston-rich-idUSL2E8EF0A920120315
9 Things The Rich Don't Want You To Know About Taxes
http://wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html
Corporate Tax Rates, Then and Now
ReplyDeletehttp://www.ritholtz.com/blog/2011/04/corporate-tax-rates-then-and-now/
50 Years Of Government Spending . . .
http://www.ritholtz.com/blog/2012/05/50-years-government-spending/
Fun With Predatory Lending
ReplyDelete“There was always a big financial incentive to make a subprime loan wherever one could.”
-affadavit of Wells Fargo Loan officer
http://www.ritholtz.com/blog/2012/06/fun-with-predatory-lending/
Federal debt as a percentage of G.D.P. fell steadily from the end of World War II until 1980.
ReplyDeleteBut indebtedness began rising under Reagan; it fell again in the Clinton years, but resumed its rise under the Bush administration, leaving us ill prepared for the emergency now upon us.
The increase in public debt was, however, dwarfed by the rise in private debt, made possible by financial deregulation.
The change in America’s financial rules was Reagan’s biggest legacy.
And it’s the gift that keeps on taking.
http://freethoughtpedia.com/wiki/Ronald_Reagan#Reagan.27s_responsibility_for_the_2000-era_economic_depression
When Ronald Reagan took over the leadership of the United States in 1981, he inherited an economy that was in terrible shape—the worst American economy, in fact, since the Great Depression of the 1930s
ReplyDeleteTax Cuts or Tax Redistribution?
When all was said and done, the total tax burden imposed on the American people from all sources—state and local taxes, federal income and capital gains taxes, and payroll taxes—remained basically unchanged throughout the 1980s. In the end, Reagan's reputation as a tax-cutter far outran his actual performance.
Reagan's tax policies did, however, redistribute the tax burden significantly, even if they failed to reduce it overall. By cutting income taxes, which are paid at a higher rate by the wealthy, while increasing payroll taxes, which are paid at a higher rate by the working poor and middle class, Reagan shifted the tax burden down the income scale. During the 1980s, the total effective federal taxation rate for the poorest one-fifth of American families actually increased by more than 16%. By contrast, the effective taxation rate for the wealthiest one-fifth of families fell by 5.5%, and the richest one percent of Americans saved even more: their tax rate fell by 14.4%
http://www.shmoop.com/reagan-era/economy.html
After Social Security and Medicare, the next largest government expense was the military—and Reagan, a staunch Cold Warrior, never considered cutting defense spending and instead increased it substantially.
ReplyDelete"Defense is not a budget item," he told planners at the Pentagon. "You spend what you need."
With Social Security, Medicare, and defense all off the table, there just wasn't much left to cut; those three programs, combined with unavoidable payments on the national debt, accounted for fully 85% of the federal budget during Reagan's presidency.
http://www.shmoop.com/reagan-era/economy.html
A 2011 study by the CBO found that the top earning 1 percent of households gained about 275% after federal taxes and income transfers over a period between 1979 and 2007
ReplyDeletehttp://www.cbo.gov/publication/42729
CBO finds that, between 1979 and 2007, income grew by:
ReplyDelete275 percent for the top 1 percent of households,
65 percent for the next 19 percent,
Just under 40 percent for the next 60 percent, and
18 percent for the bottom 20 percent.
The share of income going to higher-income households rose, while the share going to lower-income households fell.
ReplyDeleteThe top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.
Most of that growth went to the top 1 percent of the population.
All other groups saw their shares decline by 2 to 3 percentage points.
http://www.cbo.gov/publication/42729
From 1992 to 2007 the top 400 earners in the U.S. saw their income increase 392% and their average tax rate reduced by 37%
ReplyDeletehttp://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph
It's the Inequality, Stupid
http://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph
The share of total income in America going to the lower earning 80 percent of American households (also after federal taxes and income transfers) has dropped to less than 1/2 in 2007.
ReplyDeleteTrends in the Distribution of Household Income Between 1979 and 2007
http://www.cbo.gov/publication/42729
Wage inequality
ReplyDeleteAccording to Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco,
...real hourly wages of those in the 90th percentile—where most people have college or advanced degrees—rose by 30% or more... among this top 10 percent, the growth was heavily concentrated at the very tip of the top, that is, the top 1 percent. This includes the people who earn the very highest salaries in the U.S. economy, like sports and entertainment stars, investment bankers and venture capitalists, corporate attorneys, and CEOs. In contrast, at the 50th percentile and below—where many people have at most a high school diploma—real wages rose by only 5 to 10%
http://www.frbsf.org/news/speeches/2006/1106.html
U.S. Tax Policy since 1964 has and does Perpetuate Economic Inequality
ReplyDeleteThe Great Compression and the Great Divergence
http://en.wikipedia.org/wiki/Tax_policy_and_economic_inequality_in_the_United_States#U.S._Tax_Policy_since_1964_has_and_does_Perpetuate_Economic_Inequality
The Loss of Tax Progressivity
ReplyDeleteEffective Family Federal Tax Rate (Income and FICA)1
Year Median Millionaire or Top 1%
1948 5.3% 76.9%
1955 9.1 85.5
1960 12.4 85.5
1965 11.6 66.9
1970 16.1 68.6
1975 20.0 --
1977 -- 35.5
1980 23.7 31.7
1985 24.4 24.9
1989 24.4 26.7
http://www.huppi.com/kangaroo/3Taxes.htm
Total Effective Tax Rates for All Families (Federal Income and Payroll Taxes)2
ReplyDeleteQuintile 1980 1985 1990 % change 1980-90
Lowest 20% 8.4% 10.6 9.7 16.1%
Second 20% 15.7 16.1 16.7 6.0
Third 20% 20.0 19.3 20.3 1.2
Fourth 20% 23.0 21.7 22.5 -2.2
Highest 20% 27.3 24.0 25.8 -5.5
Top 1% 31.8 24.9 27.2 -14.4
The above chart shows that tax rates were cut for the rich and raised on the poor.
Meanwhile, federal government has been shifting more of the tax burden to state and local governments
http://www.huppi.com/kangaroo/3Taxes.htm
October 24, 2003
ReplyDeleteTHE DECLINE OF CORPORATE INCOME TAX REVENUES
Deficits over the next decade are now projected to be enormous in size. A joint analysis
by the Center on Budget and Policy Priorities, the Concord Coalition, and the Committee for
Economic Development projects deficits totaling $5 trillion through 2013. An analysis by
Brookings economists reaches a very similar conclusion, while Goldman Sachs projects deficits
totaling $5.5 trillion.1 Despite the deteriorating fiscal outlook and the historically low corporate
revenue collections we already face, Congress nonetheless seems poised to shower more tax
breaks on corporations that would cause deficits to grow substantially larger over time (see box
http://www.cbpp.org/files/10-16-03tax.pdf
Corporate revenues represented only 7.4 percent of all federal tax receipts in
Delete2003. With the exception of 1983, this represents the lowest level on record (these
data go back to 1934).
Some Basic Facts on State and Local Government Workers
ReplyDeleteHow Do Their Pay and Benefits Compare to Those of Private-Sector Workers?
Studies find that public workers are paid 4 to 11 percent less than private-sector workers with similar education, job tenure, and other characteristics
http://www.cbpp.org/cms/index.cfm?fa=view&id=3410
Policy Basics: Where Do Our Federal Tax Dollars Go?
ReplyDeletehttp://www.cbpp.org/cms/index.cfm?fa=view&id=1258
States Continue to Feel Recession’s Impact
ReplyDeletehttp://www.cbpp.org/cms/index.cfm?fa=view&id=711
Why Obama's Economic Stimulus Worked
ReplyDeleteEveryone knows that the stimulus law didn't work, right? Except that it did.
http://www.usnews.com/opinion/blogs/economic-intelligence/2012/06/20/why-the-economic-stimulus-worked
Historical Source of Revenue as Share of GDP
ReplyDeletehttp://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205
No, the Reagan Tax Cuts Did Not Raise Revenues
ReplyDeleteSo here’s the rate of growth of real per capita federal revenues between successive business cycle peaks
http://krugman.blogs.nytimes.com/2011/06/22/reagan-and-revenues/
But real revenues per capita grew only 19 percent over the same period — better than the likely Bush performance, but still nothing exciting. In fact, it’s less than revenue growth in the period 1972-1980 (24 percent) and much less than the amazing 41 percent gain from 1992 to 2000.
ReplyDeleteSo here’s the annual rate of growth of real revenue per capita over some cycles:
1973-1979: 2.7%
1979-1990: 1.8%
1990-2000: 3.2%
2000-2007 (probable peak): approximately zero
http://krugman.blogs.nytimes.com/2008/01/17/reagan-and-revenue/
GREAT SITE:
ReplyDeleteReagan Tax Cuts: The Facts
Bush Tax Cuts: The Facts
http://www.obamaftw.com/blog/taxes/tax-decreases-do-not-increase-revenue#reagan
Do Tax Cuts Increase Revenues? No, Tax cuts do not Increase Revenue
ReplyDeletehttp://www.obamaftw.com/blog/taxes/tax-decreases-do-not-increase-revenue#reagan
No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves
ReplyDeleteIn point of fact, this assertion is completely untrue. Federal revenues were $599.3 billion in fiscal year 1981 and were $991.1 billion in fiscal year 1989. That’s an increase of just 65 percent. But of course a lot of that represented inflation. If 1981 revenues had only risen by the rate of inflation, they would have been $798 billion by 1989. Thus the real revenue increase was just 24 percent. However, the population also grew. Looking at real revenues per capita, we see that they rose from $3,470 in 1981 to $4,006 in 1989, an increase of just 15 percent. Finally, it is important to remember that Ronald Reagan raised taxes 11 times, increasing revenues by $133 billion per year as of 1988 – about a third of the nominal revenue increase during Reagan’s presidency.
The fact is that the only metric that really matters is revenues as a share of the gross domestic product. By this measure, total federal revenues fell from 19.6 percent of GDP in 1981 to 18.4 percent of GDP by 1989. This suggests that revenues were $66 billion lower in 1989 as a result of Reagan’s policies.
http://capitalgainsandgames.com/blog/bruce-bartlett/2276/no-gov-pawlenty-tax-cuts-dont-pay-themselves
Bush's GOP Legacy: A Third World America
ReplyDeletehttp://www.thepeoplesvoice.org/cgi-bin/blogs/voices.php/2008/05/04/bush_s_gop_legacy_a_third_world_america
Are Government Employees Overpaid? Still No.
ReplyDeletehttp://rortybomb.wordpress.com/2010/11/15/are-government-employees-overpaid-still-no/
Bush CEA Chair Mankiw: Claim That Broad-Based Income Tax Cuts Increase Revenue Is Not "Credible," Capital Income Tax Cuts Also Don't Pay For Themselves
ReplyDeleteBush-Appointed Federal Reserve Chair Bernanke: "I Don't Think That As A General Rule Tax Cuts Pay For Themselves."
Bush Treasury Secretary Paulson: "As A General Rule, I Don't Believe That Tax Cuts Pay For Themselves."
Bush OMB Director Nussle: "Some Say That [The Tax Cut] Was A Total Loss. Some Say They Totally Pay For Themselves. It's Neither Extreme."
Bush CEA Chairman Lazear: "As A General Rule, We Do Not Think Tax Cuts Pay For Themselves."
Bush Economic Adviser Viard: "Federal Revenue Is Lower Today Than It Would Have Been Without The Tax Cuts."
Bush Treasury Official Carroll: "We Do Not Think Tax Cuts Pay For Themselves."
Reagan Chief Economist Feldstein: "It's Not That You Get More Revenue By Lowering Tax Rates, It Is That You Don't Lose As Much."
Feldstein In 1986: "Hyperbole" That Reagan Tax Cut "Would Actually Increase Tax Revenue."
Conservative Economist Holtz-Eakin: "No Serious Research Evidence" Suggests Tax Cuts Pay For Themselves."
Tax Foundation's Prante: "A Stretch" To Claim "Cutting Capital Gains Taxes Raises Tax Revenues."
http://mediamatters.org/research/201201260010
Lets take a look at Revenues after the Reagan tax cuts adjusted for inflation:
ReplyDeleteYear - Revenues 2005$
1981 1251 <- Tax cut
1982 1203
1983 1114
1984 1174
1985 1250
Once you take out the effects of inflation, you see that for 5 years, all the increase in revenues was solely because of inflation.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200
You see the same effect when you compare revenues to GDP:
Year - Revenues - % GDP
1981 599.3 19.2%
1982 617.8 19.0%
1983 600.6 17.0%
1984 666.5 17.0%
1985 734.1 17.4%
1986 769.2 17.2%
1987 854.4 18.0%
1988 909.3 17.8%
Real revenues under Reagan fell for a number of years and lagged behind GDP. There was no relative increase at all.
However, Reagan raised taxes a number of times which offset the damage to revenues of his tax cuts.
The Bush tax cuts are even more pronounced in their damage to revenues
Year - Revenues 2005$
2000 2310
2001 2215
2002 2028
2003 1901
2004 1949
2005 2153
In real terms, revenues were down for 5 years with the Bush tax cuts.
And if you want the *real* effect on the Bush tax cuts, look at income tax revenues adjusted for inflation:
Year - Inc. tax revenues 2005$
2000 1133.1
2001 1096.9
2002 931.7
2003 843.5
2004 836.0
2005 927.2
2006 1011.0
2007 1095.4
2008 1056.1
After the Bush tax cuts, income tax revenues *never* even kept up with inflation, much less population and economic growth.
Here you can see the effect of the cuts in revenue relative to the economy:
Year - Revenues - % GDP
2000 2025.2 20.4%
2001 1991.2 19.4%
2002 1853.2 17.4%
2003 1782.3 16.0%
2004 1880.1 15.8%
2005 2153.9 17.0%
2006 2406.7 18.0%
2007 2567.7 18.2%
2008 2523.6 17.5%
For fun, compare what happened with Reagan and Bush and with Clinton, who raised taxes in 1993:
Year - Rev 2005$
1992 1467
1993 1511
1994 1617
1995 1691
1996 1775
1997 1889
1998 2040
1999 2136
2000 2310
You don't see inflation adjusted revenues decreasing in any year, much less several. Rather you see strong increases every single year.
And look at them compared to GDP:
Year - Revenues - % GDP
1992 1091.3 17.2%
1993 1154.4 17.3%
1994 1258.6 17.8%
1995 1351.8 18.2%
1996 1453.1 18.5%
1997 1579.3 19.0%
1998 1721.8 19.6%
1999 1827.5 19.5%
2000 2025.2 20.4%
Notice how revenues after the Clinton tax increase grew compared to GDP, whereas with Reagan and Bush, it fell after the tax cuts.
http://www.politicalforum.com/political-opinions-beliefs/199120-why-did-tax-revenue-increase-after-bush-reagan-jfk-tax-cuts.html
Your question didn't surprise this liberal mind at all, but merely shows you, like many who would ask this question or make this claim, don't understand the effect of inflation, population growth and economic growth on revenues. Either that, or they do understand it, and nefariously make these kind of claims to fool and deceive the ignorant.
ReplyDeleteTen Myths About the Bush Tax Cuts-and the Facts
ReplyDeleteHeritage Foundation Clings To Myths To Defend Bush Tax Cuts
Heritage "myths" disproven:
http://politicalcorrection.org/factcheck/201106230004
Charts: 6 Big Economic Myths, Debunked
ReplyDeletehttp://www.motherjones.com/politics/2011/10/charts-economic-myths-jobs-deficit-taxes
Do Tax Cuts Increase Revenues? No, Tax cuts do not Increase Revenue
http://www.obamaftw.com/blog/taxes/tax-decreases-do-not-increase-revenue#reagan
Tax cuts do NOT pay for themselves. -Alan Greenspan Former Federal Reserve Chairman
ReplyDeleteTax cuts don't leave deficits. That's just plan stupid. Spending leaves deficits.
When the government has future liabilities and obligations, they sure do. Tax revenue/rates do not exist in a vacuum.
“The Democrats are the party of government activism, the party that says government can make you richer, smarter, taller, and get the chickweed out of your lawn. Republicans are the party that says government doesn't work, and then get elected and prove it." - P.J. O’rourke
ReplyDelete“It's much harder to be a Liberal than a Conservative. Why? Because it is easier to give someone the finger than a helping hand.” - Mike Royko
There are lots of logical arguments against tax cuts. Number one is that unless spending is cut concurrently, it creates deficits.
ReplyDeleteWhether Govt taxes too little or too much is a matter of personal opinion.
What is not opinion is that, except towards the end of the Clinton administration, the Govt did not bring in enough tax revenue to cover outlays.
Your 'guys' are mostly responsible for the debt and past spending. And now your 'guy's don't want to pay for it. Typical.
ReplyDeleteDebunking the Heritage foundation myths.
ReplyDeleteAgain.
Why someone would cite to a repeatedly discredited source and expect anyone but the most partisan to find it credible is beyond me.
Myth #1: Tax revenues remain low.
Fact: Tax revenues are above the historical average, even after the tax cuts.
Fact: See for yourselves:
Year - Revenues as a % of GDP.
1962 17.0%
1963 17.3%
1964 17.0%
1965 16.2%
1966 16.6%
1967 17.9%
1968 16.8%
1969 19.0%
1970 18.6%
1971 16.6%
1972 16.7%
1973 16.7%
1974 17.6%
1975 17.0%
1976 16.3%
1977 17.5%
1978 17.4%
1979 18.1%
1980 18.5%
1981 19.2%
1982 19.0%
1983 17.0%
1984 17.0%
1985 17.4%
1986 17.2%
1987 18.0%
1988 17.8%
1989 18.1%
1990 17.8%
1991 17.6%
1992 17.2%
1993 17.3%
2000 20.4%
2001 19.4%
2002 17.4%
2003 16.0%
2004 15.8%
2005 17.0%
2006 18.0%
2007 18.2%
2008 17.5%
2009 14.8%
Sources: CBO.gov for revenues, BEA.gov GDP.
Only a biased, partisan, unreliable source like Heritage could claim that 14.8% revenues are "above the historical average."
That alone should be enough to put any semi-objective mind into question as to the veracity of Heritage's claims.
If the repeated demonstrations of their inaccuracy, bias and deceptions made frequency in this forum haven't been enough as it is.
Myth #2: The Bush tax cuts substantially reduced 2006 revenues and expanded the budget deficit.
Fact: Nearly ALL of the 2006 budget deficit resulted from additional spending above the baseline.
False, as you can see by the above chart, in 2006 revenues were 18.0% of GDP, 2.4 percentage points lower than the rate before the Bush tax cuts.
GDP in 2006 was 13.4 trillion. The 2.4 percentage points accounts for $321 billion dollars, which more than accounts for the $248 billion "total" deficit and most of the $434 "on budget" (excludes SS) deficit that year.
Myth #3: Supply-side economics assumes that all tax cuts immediately pay for themselves.
Fact: It assumes replenishment of some but not necessarily all lost revenues.
Translation -- tax cuts do not pay for themselves.
Myth #4: Capital gains tax cuts do not pay for themselves.
Fact: Capital gains tax revenues doubled following the 2003 tax cut.
Intentionally misleading.
Year-Cap gains tax revenues
2000 127.3
2001 65.7
2002 49.1
2003 51.3
2004 73.2
2005 102.2
http://www.treas.gov/offices/tax-pol...gain3-2008.pdf
Even though cap gain revenues were higher in 2005 than in 2000, cap gains tax revenues were lower because of the tax cuts.
Only the deceptive and partisan could argue that cap gains tax revenues doubled with the Bush tax cuts.
Myth #5: The Bush tax cuts are to blame for the projected long-term budget deficits.
Fact: Projections show that entitlement costs will dwarf the projected large revenue increases.
Projections show the Bush tax cuts will cost many hundreds of billions of dollars.
Long term SS and health care projections show large deficits as well, if current revenue and expenditure projections are unchanged.
Which is why we should repeal the Bush tax cuts completely.
Myth #6: Raising tax rates is the best way to raise revenue.
ReplyDeleteFact: Tax revenues correlate with economic growth, not tax rates.
False, as this comparison with Clinton and Bush shows.
Clinton tax increase:
Revenues
1992 1091.3
2000 2025.2
% Chng: 85.6%
GDP
1992 6,337.7
2000 9,817.0
% Chng: 54.9%
Bush tax cuts:
Year – Revenues
2000 2025.2
2008 2523.6
% Chng: 24.6%
Year – GDP
2000 9,817.0
2008 14,264.6
% Chng: 45.3%
Heritages false assertion is demonstrated plainly. Revenues do not grow with just the economy, they are greatly effected by tax policy, as anyone with a logical brain cell would expefct.
Following the 1993 tax increase, revenues grew far faster than the economy.
Following the 2001-03 tax cuts, revenues grew far more slowly than the economy.
Myth #7: Reversing the upper-income tax cuts would raise substantial revenues.
Fact: The low-income tax cuts reduced revenues the most.
This doesn't even make sense on its face, and blatantly demonstrates the pro-wealth bias of Heritage.
Myth #8: Tax cuts help the economy by "putting money in people's pockets."
Fact: Pro-growth tax cuts support incentives for productive behavior.
Such examples of productive behavior include the 2000 stock market speculative bubble and the 2008 real estate speculative bubble. In both cases, investors were incentivized by tax cuts for speculating in these assets.
Myth #9: The Bush tax cuts have not helped the economy.
Fact: The economy responded strongly to the 2003 tax cuts.
Fact, the Bush economy was the the worst among all presidents, including Carter, except for his dad.
Myth #10: The Bush tax cuts were tilted toward the rich.
Fact: The rich are now shouldering even more of the income tax burden.
The rich are paying less relative tax than anytime in the past 40 years. The pay a higher proportion of taxes only because they now earn a higher proportion of income.
http://www.politicalforum.com/political-opinions-beliefs/199120-why-did-tax-revenue-increase-after-bush-reagan-jfk-tax-cuts-3.html
Tax Cuts Do Not Increase Revenue
ReplyDeleteOne must keep in mind that revenues will rise virtually every year because of inflation, expansion of the job market, and increased productivity. During the period from 1976 to 2007, revenue increased at an average of 7.3%. The highest growth in revenue occurred in 1977, when revenues increased 19.3%. Other years with increases of over 10% are 1977-1981, 1984, 1985, 1987, and 2000.
Years with negative revenue growth are 1983, 2001, 2002, and 2003, with 2002 taking in just 93.1% of the revenue received in 2001. These years coincide with the Reagan and Bush tax cuts and show that, in the short run, tax cuts reduce revenue.
http://www.dailykos.com/story/2011/06/09/983695/-Tax-Cuts-Do-Not-Increase-Revenue
January 15, 2004
ReplyDeleteTOTAL REVENUES FROM ALL LEVELS OF GOVERNMENT DROP TO
LOWEST SHARE OF ECONOMY SINCE 1968
Government Spending at Lower Share of GDP Than in All Years from 1980-1996
In recent years, the overall fiscal position of the government — reflecting federal, state, and local governments combined — has shifted from one of surpluses to one of substantial deficits. Just-released government data show the principal reason for this shift is that revenue collections have shrunk markedly. Combined federal, state, and local revenues fell in fiscal year 2003 to their lowest level, measured as a share of the economy, since 1968.
http://www.cbpp.org/cms/index.cfm?fa=view&id=1418
Highlights
DeleteIn fiscal year 2003, as a share of the economy:
Total government revenues (federal, state, and local combined) declined to their lowest level since 1968.
Total federal revenues declined to their lowest level since 1959.
Federal income taxes fell to their lowest level since 1942.
State and local revenues were lower than since 1988.
Total government spending was not unusually high; it was lower than in every year from 1980 through 1996.
STUDY: These Charts Show There's Almost No Correlation Between Tax Rates and GDP
ReplyDeletehttp://articles.businessinsider.com/2012-03-30/markets/31259597_1_gdp-capital-gains-rates-taxes
Capital Gains Tax Rates and Economic Growth (or not)
If you read the editorial page of the Wall Street Journal (or surf around the nether regions of Forbes.com), you may come to the conclusion that no aspect of tax policy is more important for economic growth than the way we tax capital gains. You’d be wrong
http://www.forbes.com/sites/leonardburman/2012/03/15/capital-gains-tax-rates-and-economic-growth-or-not/
Economists: Higher Tax Rates On The Rich Won’t Hurt Growth
ReplyDeletehttp://thinkprogress.org/economy/2012/04/24/469864/economists-higher-tax-rate-growth/
uneven distribution gains since late 1970's different from earlier era when growth was widely shared
ReplyDeleteGRAPH
http://www.cbpp.org/images/cms/9-9-09poverty-f3.jpg
ALSO
http://www.cbpp.org/images/cms/3-27-08tax2-f2.jpg
Average Income in 2006 up $60,000 for Top 1 Percent of Households, Just $430 for Bottom 90 Percent: Income Concentration at Highest Level Since 1928, New Analysis Shows
ReplyDeletehttp://www.cbpp.org/cms/?fa=view&id=69
For Two Economists, the Buffett Rule Is Just a Start
Research done by Emmanuel Saez, left, and Thomas Piketty has shown that inequality among the middle class and the rich is nearly as acute as it was before the Great Depression.
http://willblogforfood.typepad.com/will_blog_for_food/inequality/
PRODUCTIVITY AND AVERAGE REAL EARNINGS GRAPH
ReplyDeletehttp://2.bp.blogspot.com/-iK0cbUskgxI/T4ozVvMkYsI/AAAAAAAABd8/JAcgt5d2zFQ/s1600/wage_productivity_gap.jpg
Conservative Politics, 'Low-Effort' Thinking Linked In New Study
ReplyDeletehttp://www.huffingtonpost.com/2012/04/07/conservative-politics-low-effort-thinking_n_1410448.html
"The Republican Brain: The Science of Why They Deny Science--and Reality"
ReplyDeleteHe has written quite a few articles on the web about his research.
Why Republicans Deny Science: The Quest for a Scientific Explanation
http://www.huffingtonpost.com/chris-mooney/why-republicans-deny-scie_b_1196823.html
Want to Understand Republicans? First Understand Evolution
http://www.huffingtonpost.com/chris-mooney/want-to-understand-republ_b_1262542.html
The Science of Truthiness: Why Conservatives Deny Global Warming
http://www.huffingtonpost.com/chris-mooney/the-science-of-truthiness_b_1379472.html
The Republican Brain: Why Even Educated Conservatives Deny Science -- and Reality
http://www.alternet.org/story/154252/the_republican_brain:_why_even_educated_conservatives_deny_science_--_and_reality/?page=entire
The Myth of Democratic Super Majority.
ReplyDeleteThe Truth is that the Democrats only had a filibuster-proof majority for 24 working days during that period. Here are the details:
http://factleft.com/2012/01/31/the-myth-of-democratic-super-majority/
Summary:
ReplyDelete1. 1/07 – 12/08 – 51-49 – Ordinary Majority.
2. 1/09 – 7/14/09 – 59-41 – Ordinary Majority. (Coleman/Franklin Recount.)
3. 7/09 – 8/09 - 60-40 – Technical Super Majority, but since Kennedy is unable to vote, the Democrats can’t overcome a filibuster
4. 8/09 – 9/09 - 59-40 – Ordinary Majority. (Kennedy dies)
5. 9/09 – 10/09 - 60-40 – Super Majority for 11 working days.
6. 1/10 – 2/10 – 60-40 – Super Majority for 13 working days
Total Time of the Democratic Super Majority: 24 Working da
Fox Revives Falsehood That Public Sector Pensions Are Bankrupting Governments
ReplyDeletehttp://mediamatters.org/research/201206270018
Reagan Adviser Bartlett: "Bush Is More Responsible" For "The Current Budget Deficit."
ReplyDeleteMother Jones: Without Bush Policies "We Would Have Entered The Great Recession With One Of The Lowest Debt Levels In The Advanced World."
Ezra Klein: Bush Policies Responsible For Vast Majority Of Debt Increase Under Obama Administration
Politifact: In Contrast To Bush, "Obama Has The Second-Lowest Increase" In Federal Spending "Of Any President In 60 Years."
http://mediamatters.org/research/201206130009
The truth about the Fast and Furious scandal
ReplyDeletehttp://features.blogs.fortune.cnn.com/2012/06/27/fast-and-furious-truth/
States That Cut The Most Funding Lost The Most Jobs: Analysis
ReplyDeletehttp://www.huffingtonpost.com/2011/06/27/state-funding-cuts_n_885438.html
Walmart's intentionally low wages force hard-working employees to need approximately $420,000 per year, per store, totalling $2.66 BILLION annually in Food Stamps and other taxpayer assistance ... to survive.
ReplyDeletehttp://www.dailykos.com/story/2012/06/20/1101630/-ATTN-GOP-SENATORS-Walmart-Is-The-Largest-Food-Stamp-Recipient-In-The-Country-Fine-Them
Founders Established 'The Common Good
ReplyDeleteJohn Adams, Founding Father and 2nd President; Thoughts on Government, 1776:
"Government is instituted for the common good; for the protection, safety, prosperity, and happiness of the people; and not for the profit, honor, or private interest of any one man, family, or class of men; therefore, the people alone have an incontestable, unalienable, and indefeasible right to institute government; and to reform, alter, or totally change the same, when their protection, safety, prosperity, and happiness require it."
James Madison, Founding Father and 4th President; Federalist Papers, No. 57, February 19, 1788:
"The aim of every political constitution is, or ought to be, first to obtain for rulers men who possess most wisdom to discern, and most virtue to pursue, the common good of the society; and in the next place, to take the most effectual precautions for keeping them virtuous whilst they continue to hold their public trust."
Alexander Hamilton, Founding Father and 1st Secretary of the Treasury, Citing David Hume, February 5, 1775:
"'Political writers,' says a celebrated author, 'have established it as a maxim, that, in contriving any system of government, and fixing the several checks and controls of the constitution, every man ought to be supposed a knave, and to have no other end, in all his actions, but private interest. By this interest we must govern him, and by means of it make him co-operate to public good, notwithstanding his insatiable avarice and ambition. Without this we shall in vain boast of the advantages of any constitution, and shall find, in the end, that we have no security for our liberties, and possessions except the good-will of our rulers—that is, we should have no security at all.'"
Benjamin Franklin, Founding Father, American diplomat, statesman, and scientist; letter to Robert Morris, December 25, 1783:
"All the property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it."
But wait! There's more ...
http://www.dailykos.com/story/2012/06/28/1104105/-Fouders-Established-The-Common-Good-Romney-s-Opposition-To-Taxes-For-Healthcare-Is-Unpatriotic
"We grudge no man a fortune which represents his own power and sagacity, when exercised with entire regard to the welfare of his fellows."
ReplyDeleteTeddy Roosevelt spoke impassionedly about great wealth, saying that it is "not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community.
Fannie, Freddie, and the CRA are Not Responsible for the Financial Crisis
ReplyDeleteIf we want to minimize the chance of another financial crisis, it's important for us to understand how it happened. If we get the causes wrong, our attempts to fix the problems in the financial sector are unlikely to be successful.
That's why I was so disappointed to see the new book by Gretchen Morgenson and Josh Rosner, Reckless Endangerment, blaming the financial crisis on Fannie, Freddie, and Democrats. The book has been highlighted recently by George Will and David Brooks, and it joins a chorus of conservative voices promoting the idea that government policies to encourage home ownership among middle and low income households is at the heart of the financial crisis.
The dispute over the cause of the financial crisis breaks down along standard ideological lines. Democrats generally argue that the crisis can be traced to misplaced faith in the ability of markets to self-regulate. According to this view, economists, regulators, and politicians on both sides of the aisle came to believe that large, economy wrecking financial meltdowns were a thing of the past. This misplaced faith in markets led to deregulation of the financial sector, less enthusiastic enforcement of the rules that remained on the books, and government inattention to important market failures in the financial industry.
The second explanation, one pushed by free market advocates, is that government involvement in housing markets to encourage home ownership caused the financial market problems. In this story of the crisis, the Community Reinvestment Act, Fannie and Freddie, Democrats promoting home ownership, and the middle and low income households that received home loans they couldn't afford are cast as the villains. Had government stepped out of the way and pursued laissez-faire policies, the crisis would not have happened.
However, the evidence does not support the second explanation. First, with respect to the CRA, the main culprits in the crisis were private sector financial institutions that were not subject to the requirements of the CRA. In the story being pushed by free market advocates, the CRA forced banks to make loans to unqualified, low-income households. When those loans blew up, it caused the financial crisis. But the largest players in the subprime market were private sector firms that were not subject to the CRA's rules and regulations. For example, "Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics." The largest losses had nothing to do with banks covered by the CRA.
Second, even if the banks themselves were subject to the CRA, not all loans that they made were covered by these rules. Even in banks where the CRA applied, most of the problems were in loans that did not fall under the CRA's jurisdiction.
Third, the CRA has been in existence since 1977. If the CRA was responsible, why didn't the crisis occur sooner? The timing simply doesn't match up.
Fourth, the CRA only applies to domestic firms, but the crisis occurred in many countries. If the CRA is the problem, why did countries that had nothing like the CRA experience similar problems?
Fifth, even if this story had any validity, both parties promoted an "ownership society," so blaming Democrats alone is about politics, not reality.
Thus, the evidence against the claim that the CRA was an important factor in the financial crisis is quite strong and, turning next to Fannie and Freddie, the evidence here is also compelling. First, during the important years in the build up to the crisis, from 2002 until late in 2006, Fannie and Freddie were losing subprime market share to private sector firms. For example, as noted by McClatchy News, "More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions," and "Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year." The loss of market share ended in late 2006, but by then the crisis was already set in motion.
ReplyDeleteSecond, one of the reasons that Fannie and Freddie lost market share is that they faced more restrictions on their activities than firms in the unregulated shadow banking sector. Fannie and Freddie eventually found ways around these restrictions as they moved aggressively to prevent further loss of market share in late 2006, but prior to that time the restrictions were effective. If firms in the shadow banking sector had been subject to similar rules and regulations, and had the rules and regulations been enforced aggressively, things might have turned out very differently.
Third, the targets for home ownership that supposedly led to Fannie and Freddie's aggressive entry into subprime markets were set in 1992. If these targets were the problem, why didn't the crisis occur sooner?
Fourth, if Fannie and Freddie had never existed, securitization would have likely happened anyway. As Barry Ritholtz notes, "securitized credit card receivables, auto loans, small biz loans, etc. took place without GSEs. I assume there would likely have been a private sector version for conforming loans, the way there was a private sector securitizing response to the demand for non-conforming (sub-prime) loans."
The bottom line is that the case that the CRA, Fannie, and Freddie ?€" and by implication Democrats supporting these institutions ?€" were key players in the crisis is at odds with the evidence. Don't get me wrong, there are lots for reasons to be concerned about Fannie and Freddie, and I'm not trying to defend them or their choices, but the idea that support of these institutions caused the financial crisis is wrong.
http://www.cbsnews.com/8301-505123_162-39741513/fannie-freddie-and-the-cra-are-not-responsible-for-the-financial-crisis/
This comment has been removed by the author.
ReplyDeleteWhat Caused the Financial Crisis?
ReplyDeleteQuotes by Bankers and Other Experts
Excerpts from many of these quotes are featured in our video,
“What Caused the Financial
Crisis? True Confessions from Bankers.”
http://www.responsiblelending.org/mortgage-lending/tools-resources/bankers-confess-badlending.
html
Ben Bernanke, Chairman of the Federal Reserve Board
“That conclusion suggests that the best response to the housing bubble would have been
regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective
and surgical approach to constraining the housing bubble than a general increase in
interest rates.”
“Monetary Policy and the Housing Bubble,” a speech given at the annual meeting of the American
Economic Association in Atlanta, Georgia -- January 3, 2010
“Although the high rate of delinquency has a number of causes, it seems clear that unfair or deceptive acts and practices by lenders resulted in the extension of many loans,
particularly high-cost loans, that were inappropriate for or misled the borrower.”
- Written statement by Chairman Bernanke, July 14, 2008
Jamie Dimon, Chairman and CEO, JPMorgan Chase & Co.
“The mortgage market meltdown occurred for a number of reasons, but new and poorly
underwritten mortgage products were a significant contributor… “
- Testimony to Financial Crisis Inquiry Commission (FCIC)
Washington, D.C. – January 13, 2010
David Einhorn, CEO of Greenhorn Capital
"What strikes me the most about the recent credit market crisis is how fast the world is
trying to go back to business as usual. In my view, the crisis wasn't an accident. We didn't get unlucky. The crisis came because there have been a lot of bad practices and a lot of bad ideas.” - Speech given at 17th Annual Graham & Dodd Investing breakfast (October 19, 2007).
Alan Greenspan, former chairman of the Federal Reserve board
“The big demand was not so much on the part of the borrowers as it was on the part ofthe suppliers who were giving loans which really most people couldn't afford.”
- Jon Meacham and Daniel Gross, “The Oracle Reveals All,” Newsweek online, interview with
Greenspan.
Speaker Jon Husted, Ohio House of Representatives (R)
ReplyDelete“We as a nation have $9.5 trillion in debt. This is $31,500 per consumer. We have a
consumer debt that is $8,300 per capita. That is crippling our economy as a result. We
have witnessed irresponsible lending as a major factor in slowing our economy. It's not just consumers, but its very large banks and firms on Wall Street.”
http://california.newamerica.net/blogposts/2009/a_free_market_republicans_take_on_payday_lending-24660
Brian T. Moynihan, CEO and President, Bank of America
“Over the course of this crisis, we as an industry caused a lot of damage. Never has it
been clearer how mistakes made by financial companies can affect Main Street, and weneed to learn the lessons of the past few years.”
- Testimony to Financial Crisis Inquiry Commission (FCIC)Washington, D.C. -- January 13, 2010
Scott Stern, CEO of Lenders One
ReplyDeleteThe truth is that many of us in the industry were deeply distressed by the growing
practice of pushing high risk loans on borrowers who had no reasonable expectation of being able to repay the mortgage. Disclosures were often less than adequate, and faced with a bewildering array of loan terms, borrowers tended to trust their mortgage banker or
broker. The broken trust that resulted has damaged borrower confidence in the mortgage industry. I liken the situation to that of a doctor and patient dealing with a medical procedure. The patient bears some reasonable risk. But they don’t bear the risk of malpractice by the doctor. In our industry, we have frankly seen too much mortgage malpractice.
- Testimony before the Senate Banking Committee
Washington, D.C.
April 10, 2008
John Robbins, long-time industry executive and former chairman of
ReplyDeletethe Mortgage Bankers Association
During the lending boom, the industry developed products that were "extremely risky that
were pushed by everybody up and down the food chain," Mr. Robbins said. "We forgot
about our customers, and making money and our commission checks were more
important,"
Most subprime lenders weren't subject to federal lending law
ReplyDeleteCommunity Reinvestment Act, blamed for home market crash, didn't apply to the banks that did the most lending
By RONALD CAMPBELL / THE ORANGE COUNTY REGISTER
Did a 31-year-old law giving poor people a break at the bank accidentally break the bank?
A lot of opinion leaders think so. From the editorial pages of The Wall Street Journal to talk shows to the op-ed page of The Register, people are charging that the Community Reinvestment Act of 1977 forced banks to make bad loans, leading to financial Armageddon.
There's just one problem: It isn't true.
A Register analysis of more than 12 million subprime mortgages worth nearly $2 trillion shows that most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act.And many of the lenders covered by the law that did make subprime loans came late to that market - after smaller, unregulated players showed there was money to be made.
Among our conclusions:
DeleteNearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the law.
State-regulated mortgage companies such as Irvine-based New Century Financial made just over half of all subprime loans. These companies, which CRA does not cover, controlled more than 60 percent of the market before 2006, when banks jumped in.
Another 22 percent came from federally regulated lenders like Countrywide Home Loans and Long Beach Mortgage. These lenders weren't subject to the law, though some were owned by banks that could choose to include them in their CRA reports.
Among lenders that were subject to the law, many ignored subprime while others couldn't get enough.
Among those standing on the sidelines: Bank of America, which made no subprime loans in 2004 and 2005; in 2006 and 2007 subprime accounted for just 2 percent of its loan portfolio. Washington Mutual, meanwhile, raised its subprime bet by 20 times to $5.6 billion in 2006 - on top of its already huge exposure through its ownership of Long Beach Mortgage.
Since the federal takeover of mortgage giants Fannie Mae and Freddie Mac in September and particularly since the federal bailout of Wall Street, some have argued that the reinvestment law is to blame for the mortgage meltdown and credit crunch.
DeleteIn a Sept. 22 editorial, The Wall Street Journal said that the law "compels banks to make loans to poor borrowers who often cannot repay them. Banks that failed to make enough of these loans were often held hostage by activists when they next sought some regulatory approval."
In a Sept. 15 editorial, Investors Business Daily wrote that by strengthening the reinvestment law in the late 1990s, President Clinton "helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but 'predatory.' "
In a Sept. 18 appearance on MSNBC, conservative economist Larry Kudlow said, "The Community Reinvestment Act literally pushed these lenders to make low-income loans. � Liberal, guilt(y) consciences forced banks and lenders to make lousy, substandard loans."
And in an Oct. 13 op-ed in The Register, Chapman University President James Doti, an economist, wrote that the law "pressured banks to make loans and mortgages to people who might not be the best credit risk. In fact, Clinton administration Attorney General Janet Reno threatened legal action against banks that didn't loosen up mortgage requirements."
The criticisms of the reinvestment act don't make sense to Glenn Hayes. He runs Neighborhood Housing Services of Orange County, which works with banks to provide CRA loans to first-time homebuyers. In its 14-year history, the nonprofit has helped 1,200 families buy their first homes. Score so far: No foreclosures and a delinquency rate under 1 percent.
Delete"It is subprime that's really causing it," Hayes said of the mortgage crisis. "But CRA did not force anyone to do subprime."
Bob Davis, executive vice president of the American Bankers Association, which lobbies Congress to streamline community reinvestment rules, said "it just isn't credible" to blame the law CRA for the crisis.
"Institutions that are subject to CRA - that is, banks and savings asociations - were largely not involved in subprime lending," Davis said. "The bulk of the loans came through a channel that was not subject to CRA."
Congress passed the Community Reinvestment Act to crack down on "redlining," the practice by banks of refusing loans to neighborhoods where most residents are minorities or earn low incomes. The law applies to all federally insured banks and thrifts that take deposits. It generally requires banks to help potential customers near their branches, typically by making loans, investing or providing other services such as financial education.
A companion law, the Home Mortgage Disclosure Act, requires every large home lender to report annually on every home loan application they receive. (No names or streets are listed.) Those reports feed a database that in turn allows regulators, community activists and others to monitor home lending in virtually every neighborhood in America.
DeleteBeginning in 2004, federal regulators also have required lenders to report on high-priced loans - those with rates at least three percentage points higher than U.S. Treasury notes of comparable maturity. While the mortgage industry defines subprime loans by credit scores, Federal Reserve Board analysts believe that subprime and Alt-A loans fall into their high-priced loan category.
The Register used that database for its analysis. During the four years covered by our analysis, lenders made 55 million home loans, including 12 million subprime loans.
In its glory days, subprime lending was a lucrative business that paid six-figure salaries to 20-something salespeople and made fortunes for top execcutives. Nowhere were the riches more evident than in Orange County, home to industry giants New Century, Ameriquest, Argent and Fremont.
But the money spread far beyond Orange County, thanks to Wall Street's years-long love affair with subprime. In 2005 and 2006, subprime lenders sold about 70 percent of their loans by dollar volume to investors - principally to finance and insurance companies or by packaging the loans in highly rated securitie
Fannie and Freddie, the federally sponsored mortgage buyers, were bit players in this market. Together they bought about 3 percent of all subprime loans issued from 2004 through 2007, most of that in 2007 alone.
DeleteIn 2007 Wall Street turned its back on subprime. That year, subprime lenders were forced to keep 60 percent of their loans on their own books or on the balance sheets of their affiliates.
That was the last fatal step in a financial high-wire act.
Since then, most of the 25 companies that dominated subprime lending between 2004 and 2007 have shut down or been sold at fire-sale prices.
Just eight of the 25 top subprime lenders were subject to the reinvestment law. But among those eight are two of the summer's most prominent failures - Washington Mutual and IndyMac Bank. Together with its Long Beach Mortgage subsidiary, WaMu made $74.2 billion in subprime loans. IndyMac specialized in "Alt-A" loans to customers who had good credit but couldn't qualify for top-drawer loans.
7,000 people made more than $1 million but paid no income tax.
ReplyDelete22,000 people made between $500,000 and $1 million but paid no income tax.
81,000 people made between $200,000 and $500,000 but paid no income tax.
381,000 people made between $100,000 and $200,000 but paid no income tax.
So that's 491,000 Americans who made more than $100,000 a year who paid no income tax.
Great News, Rich Americans, Looks Like Obama's Caving On Dividend Taxes!
ReplyDelete47% of all dividend income is earned by the 3.8% of American households that make more than $200,00 per year
The top 400 highest earning taxpayers collect about $10 billion a year in dividends, or $25 million apiece. This tax change will save these folks a BOATLOAD of money: About $2 billion in total, or an average of about $5 million apiece (2009 data)
In other words, if this change is agreed to, it will save a vast amount of money for some of the highest-earning Americans.
So, be happy this morning, rich Americans!
Mr. Boehner's cutting a great deal for you!
http://www.businessinsider.com/dividend-taxes-and-the-fiscal-cliff-2012-12#ixzz2FzP15F1w
1. A Socialist wrote the Pledge of Allegiance.
ReplyDelete2. Jesus healed the sick and helped the poor, for free.
3. Joseph McCarthy was an un-American, witch hunting sissy.
4. Jefferson Davis and Robert E. Lee were traitors.
5. The South lost the Civil War, get over it.
6. The Founding Fathers were liberals.
7. Fascism is a right-wing trait.
8. Sarah Palin is an ugly cow (said to conservative males).
9. The Earth is round.
10. Reagan raised taxes eleven times as President.
11. Reagan legalized abortion as Governor of California.
12. Nixon created the Environmental Protection Agency.
13. Ronald Reagan supported gun control.
14. Global warming is real.
15. Republicans hate illegal immigrants, unless they need their lawns mowed or their houses cleaned.
16. The military is a government-run institution, so why do Republicans approve the defense budget?
17. The Cold War is over and the Soviet Union no longer exists.
18. Paying taxes is patriotic.
19. Republicans: Peddling the same failed economic policies since 1880.
20. The Republican Party began as a liberal party.
21. The President's full name is Barack Hussein Obama and he was born in the United States of America.
22. George W. Bush held hands with the King of Saudi Arabia.
23. President Obama saved the American auto industry, while Republicans wanted to destroy it.
24. Hate is not a Christian virtue.
25. Jesus was a liberal
Ronald Reagan's Legacy Clouds Tax Record
ReplyDeleteReagan's budget director, David Stockman, explains the 1981 tax cut blew a much bigger hole in the federal budget than expected. So over the next few years, Reagan agreed to raise taxes again and again, ultimately undoing about half the savings of the '81 cut.
Mr. DAVID STOCKMAN (Former Director, Office Management and Budget): He wasn't very happy about it. He did it reluctantly. But at the end of the day, the math was overwhelming.
FLINTOFF: That's because Reagan was never able to match his 1981 tax cuts with a comparable cut in federal spending. A modest reduction in domestic spending was dwarfed by Reagan's big buildup in the Pentagon budget. And, Stockman says, Reagan never made a serious effort to challenge middle class entitlement programs, after an early proposal to curtail Social Security benefits was shot down.
Mr. STOCKMAN: The White House and President Reagan himself retreated within three days when it became clear the enormous political resistance that would occur if you were going to cut entitlements.
Prof. BRINKLEY: He seemed to get away with both. He seemed to really be kind of a centrist, big government deficit spender, but also be seen as a budget cutter. And it's because his persona was so great.
FLINTOFF: That persona is carefully cultivated by those, like Grover Norquist, who use Reagan's legacy as a weapon to fight off new taxes. Stockman says these myth-makers are distorting the real Reagan record.
Mr. STOCKMAN: I wouldn't call it merely airbrushing. I would call it outright revisionism if not fabrication of history.
http://www.npr.org/2011/02/04/133489113/Reagan-Legacy-Clouds-Tax-Record
The historical myth that Reagan raised $1 in taxes for every $3 in spending cuts
ReplyDeletePosted by Glenn Kessler
“In 1982, Ronald Reagan sat down with the Democrats and they had a deal — a $3 cut in spending for every dollar they raised in taxes. Guess what? They raised the taxes, and they never cut the spending.”
— oft-repeated story told in Washington during “fiscal cliff” negotiations
It had become an article of faith by conservatives that President Reagan reluctantly agreed to raise taxes in his first term in office — and that Congress then failed to follow though on promised spending cuts. The frequent recitation of this story during the current fiscal debate made us wonder: What actually happened three decades ago?
It’s not hard to find the source of this story — Reagan’s own memoir, “An American Life.” Here’s what he wrote: “I made a deal with the congressional Democrats in 1982, agreeing to support a limited loophole-closing tax increase to raise more than $98.3 billion over three years in return for their agreement to cut spending by $280 billion during the same period; later the Democrats reneged on their pledge and we never got those cuts.”
When Reagan made a nationally-televised speech in support of the tax hike — trying to refute charges that it was the biggest tax increase in U.S. history — he also cited a 3-to-1 agreement:
“Revenues would increase over a three-year period by about $99 billion, and outlays in that same period would be reduced by $280 billion. Now, as you can see, that figures out to about a 3-to-1 ratio — $3 less in spending outlays for each $1 of increased revenue. This compromise adds up to a total over three years of a $380 billion reduction in the budget deficits.”
The Washington Post did not have a Fact Checker column back then, and this speech certainly would have been ripe for fact checking. (We would have been suspicious of his use of the word “outlays.”) Let’s go back in time to show what really happened, using documents, news reports and memoirs of the period.
The Facts
Despite Reagan’s claim that he made a deal with the Democrats, the Senate at the time was controlled by Republicans. Sen. Bob Dole of Kansas — then chairman of the Finance Committee and later the majority leader and Republican nominee for president — was a driving force behind a big tax increase because he was concerned about soaring deficits after Reagan had boosted defense spending and slashed taxes.
Dole warned the White House that the final year of Reagan’s three-year tax cut was at risk unless revenue could be raised in other ways. Under Dole’s leadership, the Senate Finance Committee led the way in crafting a big tax bill, fending off efforts by Democrats to halt Reagan’s tax cut.
Key people on Reagan’s team — especially budget director David Stockman and White House Chief of Staff James A. Baker III — were eager to rein in the deficit. But others, such a Treasury Secretary Donald Regan, were skeptical of a deal. Regan, in his memoir “For the Record,” proudly notes that he demanded a ratio of $1 in tax increases for $3 in spending cuts.
Stockman, in an interview, acknowledged that “we needed a 3-to-1 ratio to get the deal accepted by Reagan and the Adam Smith tie boys (e.g. Ed Meese, et al).” But it appears that Reagan and Regan did not actually understand the mechanics of the agreement. It turns out that much of the savings were not from spending cuts — and many of the savings were dependent on actions by the Reagan administration.
Here’s the actual breakdown of the three-year agreement, according to a June 1982 chart prepared by the GOP-controlled Senate Budget Committee staff, which appears in the 1989 book “The Deficit and the Public Interest,” by Joseph White and Aaron B. Wildavsky. (Note: The numbers represent reductions from anticipated, inflation-adjusted outlays.)
Revenues: $98.3 billion (26 percent)
DeleteDefense cuts: $26.4 billion (7 percent)
Nondefense cuts: $34.8 billion (9.1 percent)
Entitlement cuts: $30.8 billion (8.1 percent)
Other reductions/offsets: $7.8 billion (2 percent)
Freeze federal pay raise: $26.1 billion (6.9 percent)
Management savings: $46.6 billion (12.3 percent)
Net interest: $107.7 billion (28.4 percent)
Total non-revenue: $280.2 billion (74 percent)
Total: $378.5 billion
We will never know if Reagan saw this specific breakdown. On the surface, one could plausibly believe there was a ratio of 3 to 1 in terms of lower outlays to higher taxes, as Reagan put it in his speech. But a reduction in “outlays” is not the same as cutting spending on programs.
Indeed, almost half of the “cuts,” such as interest savings on debt (from lower interest costs and reduced deficits) and “management savings,” were beyond the control of Congress. At best, the spending savings that Congress could deliver, including defense cuts, amounted to a 1-to-1 ratio.
Congress passed $30 billion in spending cuts (mostly on entitlement programs) at the same time as the tax bill, according to news reports; The Washington Post described the twin congressional actions as “enormous bills by historical standards.” Lawmakers then struggled much of the next year to cut spending even more. But news reports also show the administration repeatedly failed to deliver on its side of the spending-cut bargain.
Stockman says the $46 billion in management savings “was just a made-up target that never really had any content” in order to reach the 3-to-1 ratio. Meanwhile, Defense Secretary Caspar Weinberger simply refused to comply with the agreement, and so Reagan’s future budgets ignored the requirements for proposing defense cuts. Stockman says the entitlement cuts — mainly price controls on Medicare billing — were implemented but “got lost in higher-than-expected Medicare inflation.”
“In essence, the funny numbers, meant to impress voters and maybe the markets, fooled the president. They also fooled Donald Regan and Ed Meese,” write White and Wildavsky. “To Stockman, Baker, [Richard] Darman and congressional leaders, this sense of betrayal was ludicrous; no one ever said Congress would pass three-for-one. The [congressional budget] resolution was clear enough about that.”
Stockman, in his memoir, “The Triumph of Politics,” blames the late Rep. Jack Kemp (R-N.Y.) — later Dole’s vice presidential running mate — for convincing Reagan that he had been “hornswoggled” by Congress. By Stockman’s accounting, Congress did reasonably well in meeting the terms of the deal, but the administration failed to live up to its end of the bargain. “Reagan did get tricked — mainly by Weinberger and his own Cabinet,” Stockman said this week.
DeleteDole felt compelled to send Reagan a letter on Jan. 16, 1984, clarifying what had actually happened:
The most frequently voiced objections to packaging new spending cuts and revenue increases together is that Congress would enact the new taxes but renege on the spending cuts. These critics cite as evidence the alleged failure of Congress in 1982 to deliver any of the promised three dollars in spending cuts for each dollar of tax increase. I respectfully submit, Mr. President, that you were not “taken in” by this budget plan.
In fact, historical budget data show that Congress did reduce spending. From 1982 to 1983, nondefense discretionary spending fell from 4.3 percent to 4.2 percent of the overall economy (gross domestic product) — and then kept falling until it reached 3.4 percent of GDP in 1989. Defense spending kept going up until 1986.
The Pinocchio Test
It is time to abandon this myth. Reagan may have convinced himself he had been snookered, but that belief is based on a fundamental misunderstanding of the deal he had reached.
Congress was never expected to match the tax increases with spending cuts on a 3-to-1 basis. Reagan appeared to acknowledge this in his speech when he referred to outlays (which would include interest expenses), rather than spending cuts. In the end, lawmakers apparently did a better job of living up to the bargain than the administration did.
If people want to cite the lessons of history, they need to get the history right in the first place.
Four Pinocchios
http://www.washingtonpost.com/blogs/fact-checker/post/the-historical-myth-that-reagan-raised-1-in-taxes-for-every-3-in-spending-cuts/2012/12/13/58a33e4c-4555-11e2-8061-253bccfc7532_blog.html
The Myths of Reaganomics
ReplyDeleteMurray N. Rothbard (1926–1995) was dean of the Austrian School. He was an economist, economic historian, and libertarian political philosopher.
This memo to Mises Institute members was written in late 1987, and published in "The Free Market Reader," LH Rockwell, Jr., ed., 1988, pp. 342–362 and is posted on Mises.org in an edited edition.
come to bury Reaganomics, not to praise it.
How well has Reaganomics achieved its own goals? Perhaps the best way of discovering those goals is to recall the heady days of Ronald Reagan's first campaign for the presidency, especially before his triumph at the Republican National Convention in 1980. In general terms, Reagan pledged to return, or advance, to a free market and to "get government off our backs."
Specifically, Reagan called for a massive cut in government spending, an even more drastic cut in taxation (particularly the income tax), a balanced budget by 1984 (that wild-spender, Jimmy Carter you see, had raised the budget deficit to $74 billion a year, and this had to be eliminated), and a return to the gold standard, where money is supplied by the market rather than by government. In addition to a call for free markets domestically, Reagan affirmed his deep commitment to freedom of international trade. Not only did the upper echelons of the administration sport Adam Smith ties, in honor of that moderate free-trader, but Reagan himself affirmed the depth of the influence upon him of the mid-19th century laissez-faire economist, Frederic Bastiat, whose devastating and satiric attacks on protectionism have been anthologized in economics readings ever since.
The gold standard was the easiest pledge to dispose of. President Reagan appointed an allegedly impartial gold commission to study the problem—a commission overwhelmingly packed with lifelong opponents of gold. The commission presented its predictable report, and gold was quickly interred.
Let's run down the other important areas:
Government Spending. How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone's life? In 1980, the last year of free-spending Jimmy Carter the federal government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.
DeleteSophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direction, because the greater the amount of inflation generated by the federal government, the higher will be the GNP. We might then be complimenting the government on a lower percentage of spending achieved by the government's generating inflation by creating more money. But even taking these percentages of GNP figures, we get federal spending as percent of GNP in 1980 as 21.6%, and after six years of Reagan, 24.3%. A better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.
Also, the excuse cannot be used that Congress massively increased Reagan's budget proposals. On the contrary, there was never much difference between Reagan's and Congress's budgets, and despite propaganda to the contrary, Reagan never proposed a cut in the total budget.
Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions.
DeleteThis is by far the largest budget deficit in American history. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the current federal deficits now seem to be a recent, but still permanent part of the American heritage.
One of the most curious, and least edifying, sights in the Reagan era was to see the Reaganites completely change their tune of a lifetime. At the very beginning of the Reagan administration, the conservative Republicans in the House of Representatives, convinced that deficits would disappear immediately, received a terrific shock when they were asked by the Reagan administration to vote for the usual annual increase in the statutory debt limit. These Republicans, some literally with tears in their eyes, protested that never in their lives had they voted for an increase in the national debt limit, but they were doing it just this one time because they "trusted Ronald Reagan" to balance the budget from then on. The rest, alas, is history, and the conservative Republicans never saw fit to cry again. Instead, they found themselves adjusting rather easily to the new era of huge permanent deficits. The Gramm-Rudman law, allegedly designed to eradicate deficits in a few years, has now unsurprisingly bogged down in enduring confusion.
Even less edifying is the spectre of Reaganomists who had inveighed against deficits—that legacy of Keynesianism—for decades. Soon Reaganite economists, especially those staffing economic posts in the executive and legislative branches, found that deficits really weren't so bad after all. Ingenious models were devised claiming to prove that there really isn't any deficit. Bill Niskanen, of the Reagan Council of Economic Advisors, came up with perhaps the most ingenious discovery: that there is no reason to worry about government deficits, since they are balanced by the growth in value of government assets. Well, hooray, but it is rather strange to see economists whose alleged goal is a drastic reduction in the role of government cheering for ever greater growth in government assets. Moreover, the size of government assets is really beside the point. It would only be of interest if the federal government were just another private business firm, about to go into liquidation, and whose debtors could then be satisfied by a parceling out of its hefty assets. The federal government is not about to be liquidated; there is no chance, for example, of an institution ever going into bankruptcy or liquidation that has the legal right to print whatever money it needs to get itself—and anyone else it favors—out of any financial hole.
DeleteThere has also been a fervent revival of the old left-Keynesian idea that "deficits don't matter, anyway." Deficits are stimulating, we can "grow ourselves out of deficits," etc. The most interesting, though predictable, twist was that of the supply-siders, who, led by Professor Arthur Laffer and his famous "curve," had promised that if income tax rates were cut, investment and production would be so stimulated that a fall in tax rates would increase tax revenue and balance the budget. When the budget was most emphatically not balanced, and deficits instead got worse, the supply-siders threw Laffer overboard as the scapegoat, claiming that Laffer was an extremist, and the only propounder of his famous curve. The supply-siders then retreated to their current, fall-back position, which is quite frankly Keynesian; namely deficits don't matter anyway, so let's have cheap money and deficits; relax and enjoy them. About the only Keynesian phrase we have not heard yet from Reaganomists is that the national debt "doesn't matter because we owe it to ourselves," and I am waiting for some supply-sider to adopt this famous 1930s phrase of Abba Lerner without, of course, bothering about attribution.
One way in which Ronald Reagan has tried to seize the moral high road on the deficit question is to divorce his rhetoric from reality even more sharply than usual. Thus, the proposer of the biggest deficits in American history has been calling vehemently for a Constitutional amendment to require a balanced budget. In that way, Reagan can lead the way toward permanent $200 billion deficits, while basking in the virtue of proposing a balanced budget amendment, and trying to make Congress the fall guy for our deficit economy.
ReplyDeleteEven in the unlikely event that the balanced budget amendment should ever pass, it would be ludicrous in its lack of effect. In the first place, Congress can override the amendment at any time by three-fifths vote. Secondly, Congress is not required to actually balance any budget; that is, its actual expenditures in any given year are not limited to the revenues taken in. Instead, Congress is only required to prepare an estimate of a balanced budget for a future year; and of course, government estimates, even of its own income or spending, are notoriously unreliable. And third, there is no enforcement clause; suppose Congress did violate even the requirement for an estimated balanced budget: What is going to happen to the legislators? Is the Supreme Court going to summon marshals and put the entire U.S. Congress in jail? And yet, not only has Reagan been pushing for such an absurd amendment, but so too have many helpful Reaganomists.
Tax Cuts. One of the few areas where Reaganomists claim success without embarrassment is taxation. Didn't the Reagan administration, after all, slash income taxes in 1981, and provide both tax cuts and "fairness" in its highly touted tax reform law of 1986? Hasn't Ronald Reagan, in the teeth of opposition, heroically held the line against all tax increases?
DeleteThe answer, unfortunately, is no. In the first place, the famous "tax cut" of 1981 did not cut taxes at all. It's true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined. The reason is that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was "bracket creep," a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall. Not only that, but soon thereafter; when the Social Security System was generally perceived as on the brink of bankruptcy, President Reagan brought in Alan Greenspan, a leading Reaganomist and now Chairman of the Federal Reserve, to save Social Security as head of a bipartisan commission. The "saving," of course, meant still higher Social Security taxes then and forevermore.
Since the tax cut of 1981 that was not really a cut, furthermore, taxes have gone up every single year since, with the approval of the Reagan administration. But to save the president's rhetorical sensibilities, they weren't called tax increases. Instead, ingenious labels were attached to them; raising of "fees," "plugging loopholes" (and surely everyone wants loopholes plugged), "tightening IRS enforcement," and even revenue enhancements." I am sure that all good Reaganomists slept soundly at night knowing that even though government revenue was being "enhanced," the president had held the line against tax increases.
The highly ballyhooed Tax "Reform" Act of 1986 was supposed to be economically healthy as well as "fair"; supposedly "revenue neutral," it was to bring us (a) simplicity, helping the public while making the lives of tax accountants and lawyers miserable; and (b) income tax cuts, especially in the higher income brackets and in everyone's marginal tax rates (that is, income tax rates on additional money you may earn); and offset only by plugging those infamous loopholes. The reality, of course, was very different, In the first place, the administration has succeeded in making the tax laws so complicated that even the IRS admittedly doesn't understand it, and tax accountants and lawyers will be kept puzzled and happy for years to come.
DeleteSecondly, while indeed income tax rates were cut in the higher brackets, many of the loophole plugs meant huge tax increases for people in the upper as well as middle income brackets. The point of the income tax, and particularly the marginal rate cuts, was the supply-sider objective of lowering taxes to stimulate savings and investment. But a National Bureau study by Hausman and Poterba on the Tax Reform Act shows that over 40% of the nation's taxpayers suffered a marginal tax increase (or at best, the same rate as before) and, of the majority that did enjoy marginal tax cuts, only 11% got reductions of 10% or more. In short, most of the tax reductions were negligible. Not only that; the Tax Reform Act, these authors reckoned, would lower savings and investment overall because of the huge increases in taxes on business and on capital gains. Moreover savings were also hurt by the tax law's removal of tax deductibility on contributions to IRAs.
Not only were taxes increased, but business costs were greatly raised by making business expense meals only 80% deductible, which means a great expenditure of business time and energy keeping and shuffling records. And not only were taxes raised by eliminating tax shelters in real estate, but the law's claims to "fairness" were made grotesque by the retroactive nature of many of the tax increases. Thus, the abolition of tax shelter deductibility was made retroactive, imposing huge penalties after the fact. This is ex post facto legislation outlawed by the Constitution, which prohibits making actions retroactively criminal for a time period when they were perfectly legal. A friend of mine, for example, sold his business about eight years ago; to avoid capital gains taxes, he incorporated his business in the American Virgin Islands, which the federal government had made exempt from capital gains taxes in order to stimulate Virgin Islands development. Now, eight years later, this tax exemption for the Virgin Islands has been removed (a "loophole" plugged!) but the IRS now expects my friend to pay full retroactive capital gains taxes plus interest on this eight-year old sale. Let's hear it for the "fairness" of the tax reform law!
But the bottom line on the tax question: is what happened in the Reagan era to government tax revenues overall? Did the amount of taxes extracted from the American people by the federal government go up or down during the Reagan years? The facts are that federal tax receipts were $517 billion in the last Carter year of 1980. In 1986, revenues totaled $769 billion, an increase of 49%. Whatever that is, that doesn't look like a tax cut. But how about taxes as a percentage of the national product? There, we can concede that on a percentage criterion, overall taxes fell very slightly, remaining about even with the last year of Carter. Taxes fell from 18.9% of the GNP to 18.3%, or for a better gauge, taxes as percentage of net private product fell from 27.2% to 26.6%. A large absolute increase in taxes, coupled with keeping taxes as a percentage of national product about even, is scarcely cause for tossing one's hat in the air about a whopping reduction in taxes during the Reagan years.
DeleteIn recent months, moreover; the Reagan administration has been more receptive to loophole plugging, fees, and revenues than ever before. To quote from the Tax Watch column in the New York Times (October 13, 1987): "President Reagan has repeatedly warned Congress of his opposition to any new taxes, but some White House aides have been trying to figure out a way of endorsing a tax bill that could be called something else."
In addition to closing loopholes, the White House is nudging Congress to expand the usual definition of a "user fee," not a tax because it is supposed to be a fee for those who use a government service, say national parks or waterways. But apparently the Reagan administration is now expanding the definition of "user fee" to include excise taxes, on the assumption, apparently, that every time we purchase a product or service we must pay government for its permission. Thus, the Reagan administration has proposed not, of course, as a tax increase, but as an alleged "user fee," a higher excise tax on every international airline or ship ticket, a tax on all coal producers, and a tax on gasoline and on highway charges for buses. The administration is also willing to support, as an alleged user fee rather than a tax, a requirement that employers, such as restaurants, start paying the Social Security tax on tips received by waiters and other service personnel.
In the wake of the stock market crash, President Reagan is now willing to give us a post-crash present of: higher taxes that will openly be called higher taxes. On Tuesday morning, the White House declared: "We're going to hold to our guns. The president has given us marching orders: no tax increase." By Tuesday afternoon, however, the marching orders had apparently evaporated, and the president said that he was "willing to look at" tax-increase proposals. To greet a looming recession with a tax increase is a wonderful way to bring that recession into reality. Once again, President Reagan is following the path blazed by Herbert Hoover in the Great Depression of raising taxes to try to combat a deficit.
Deregulation. Another crucial aspect of freeing the market and getting government off our backs is deregulation, and the administration and its Reaganomists have been very proud of its deregulation record. However, a look at the record reveals a very different picture. In the first place, the most conspicuous examples of deregulation; the ending of oil and gasoline price controls and rationing, the deregulation of trucks and airlines, were all launched by the Carter administration, and completed just in time for the Reagan administration to claim the credit. Meanwhile, there were other promised deregulations that never took place; for example, abolition of natural gas controls and of the Department of Energy.
DeleteOverall, in fact, there has probably been not deregulation, but an increase in regulation. Thus, Christopher De Muth, head of the American Enterprise Institute and a former top official of Reagan's Office of Management and the Budget, concludes that "the President has not mounted a broad offensive against regulation. There hasn't been much total change since 1981. There has been more balanced administration of regulatory agencies than we had become used to in the 1970s, but many regulatory rules have been strengthened."
In particular, there has been a fervent drive, especially in the past year; to intensify regulation of Wall Street. A savage and almost hysterical attack was launched late last year by the Securities and Exchange Commission and by the Department of Justice on the high crime of "insider trading." Distinguished investment bankers were literally hauled out of their offices in manacles, and the most conspicuous inside trader received as a punishment (1) a fine of $100 million; (2) a lifetime ban on any further security trading, and (3) a jail term of one year, suspended for community service. And this is the light sentence, in return for allowing himself to be wired and turn informer on his insider trading colleagues. [Editor's note: Ivan Boesky was sentenced to three years in prison.]
All this was part of a drive by the administration to protect inefficient corporate managers from the dread threat of takeover bids, by which means stockholders are able to dispose easily of ineffective management and turn to new managers. Can we really say that this frenzied assault on Wall Street by the Reagan administration had no impact on the stock market crash [October 1987]?
And yet the Reagan administration has reacted to the crash not by letting up, but by intensifying, regulation of the stock market. The head of the SEC strongly considered closing down the market on October 19, and some markets were temporarily shut down—a case, once again, of solving problems by shooting the market—the messenger of bad news. October 20, the Reagan administration collaborated in announcing early closing of the market for the next several days. The SEC has already moved, in conjunction with the New York Stock Exchange, to close down computer program trading on the market, a trade related to stock index futures. But blaming computer program trading for the crash is a Luddite reaction; trying to solve problems by taking a crowbar and wrecking machines. There were no computers, after all, in 1929. Once again, the instincts of the administration, particularly in relation to Wall Street, is to regulate. Regulate, and inflate, seem to be the Reaganite answers to our economic ills.
DeleteAgricultural policy, for its part, has been a total disaster. Instead of ending farm price supports and controls and returning to a free market in agriculture, the administration has greatly increased price supports, controls and subsidies. Furthermore, it has brought a calamitous innovation to the farm program; the PIK program ["Payments In Kind"] in which the government gets the farmers to agree to drastic cuts in acreage, in return for which the government pays back the wheat or cotton surpluses previously held off the market. The result of all this has been to push farm prices far higher than the world market, depress farm exports, and throw many farmers into bankruptcy. All the administration can offer, however, is more of the same disastrous policy.
Foreign Economic Policy. If the Reagan administration has botched the domestic economy, even in terms of its own goals, how has it done in foreign economic affairs? As we might expect, its foreign economic policy has been the exact opposite of its proclaimed devotion to free trade and free markets. In the first place, Adam Smith ties and Bastiat to the contrary notwithstanding, the Reagan administration has been the most belligerent and nationalistic since Herbert Hoover. Tariffs and import quotas have been repeatedly raised, and Japan has been treated as a leper and repeatedly denounced for the crime of selling high quality products at low prices to the delighted American consumer.
DeleteIn all matters of complex and tangled international economics, the only way out of the thicket is to keep our eye on one overriding question: Is it good, or bad, for the American consumer? What the American consumer wants is good quality products at low prices, and so the Japanese should be welcomed and admired instead of condemned. As for the alleged crime of "dumping," if the Japanese are really foolish enough to waste money and resources by dumping—that is selling goods to us below costs—then we should welcome such a policy with open arms; anytime the Japanese are willing to sell me Sony TV sets for a dollar, I am more than happy to take the sets off their hands.
Not only foreign producers are hurt by protectionism, but even more so are American consumers. Every time the administration slaps a tariff or quota on motorcycles or on textiles or semiconductors or clothespins—as it did to bail out one inefficient clothespin plant in Maine—every time it does that, it injures the American consumer.
It is no wonder, then, that even the Reaganomist Bill Niskanen recently admitted that "international trade is more regulated than it was 10 years ago." Or, as Secretary of Treasury James Baker declared proudly last month: "President Reagan has granted more import relief to U.S. industry than any of his predecessors in more than half a century." Pretty good for a Bastiat follower.
Another original aim of the Reagan administration, under the influence of the monetarists, or Friedmanites, was to keep the government's hand completely off exchange rates, and to allow these rates to fluctuate freely on the market, without interference by the Federal Reserve or the Treasury. A leading monetarist, Dr. Beryl W. Sprinkel, was made Undersecretary of the Treasury for Monetary Policy in 1981 to carry out that policy. But this non-intervention is long gone, and Secretary Baker, aided by the Fed, has been busily engaged in trying to persuade other countries to intervene to help coordinate and fix exchange rates. After being removed from the Treasury after several years, Sprinkel was sent to Siberia and ordered to keep quiet, as head of the Council of Economic Advisors; and Sprinkel has recently announced that he will leave the government altogether. [Editor's note: Sprinkel was later rehabilitated, and given Cabinet status, in return for his agreement to take part in the disastrous Baker dollar policy.]
Moreover, the policy of foreign aid and foreign lending conducted or encouraged by the government has proceeded more intensely than even under previous administrations. Reagan has bailed out the despotic government of Poland with massive loans, so that Poland could repay its Western creditors. A similar policy has been conducted in relation to many shaky or bankrupt third world governments. The spectre of bank collapse from foreign loans has been averted by bailouts and promises of bailout from the Federal Reserve, the nation's only manufacturer of dollars, which it can produce at will.
DeleteWherever we look, then, on the budget, in the domestic economy, or in foreign trade or international monetary relations, we see government even more on our backs than ever. The burden and the scope of government intervention under Reagan has increased, not decreased. Reagan's rhetoric has been calling for reductions of government; his actions have been precisely the reverse. Yet both sides of the political fence have bought the rhetoric and claim that it has been put into effect.
Reaganites and Reaganomists, for obvious reasons, are trying desperately to maintain that Reagan has indeed fulfilled his glorious promises; while his opponents, intent on attacking the bogey of Reaganomics, are also, and for opposite reasons, anxious to claim that Reagan has really put his free-market program into operation. So we have the curious, and surely not healthy, situation where a mass of politically interested people are totally misinterpreting and even misrepresenting the Reagan record; focusing, like Reagan himself, on his rhetoric instead of on the reality.
What of the Future? Is there life after Reaganomics? To assess coming events, we first have to realize that Reaganomics has never been a monolith. It has had several faces; Reaganomics has been an uneasy and shifting coalition of several clashing schools of economic thought. In particular, the leading schools have been the conservative Keynesians, the Milton Friedman monetarists, and the supply-siders. The monetarists, devoted to a money rule of a fixed percentage increase of money growth engineered by the Federal Reserve, have come a cropper. Fervently believing that science is nothing else but prediction, the monetarists have self-destructed by making a string of self-confident but disastrous predictions in the last several years. Their fate illustrates the fact that he who lives by prediction shall die by it. Apart from their views on money, the monetarists generally believe in free markets, and so their demise has left Reaganomics in the hands of the other two schools, neither of whom are particularly interested in free markets or cutting government.
DeleteThe conservative Keynesians—the folks who brought us the economics of the Nixon and Ford administrations—saw Keynesianism lose its dominance among economists with the inflationary recession of 1973-74, an event which Keynesians stoutly believed could never possibly happen. But while Keynesians have lost their old eclat, they remain with two preoccupations: (1) a devotion to the New Deal-Fair Deal-Great Society-Nixon-Ford-Carter-status quo, and (2) a zeal for tax increases to moderate the current deficit. As for government spending, never has the thought of actually cutting expenditures crossed their minds. The supply-siders, who are weak in academia but strong in the press and in exerting enormous political leverage per capita, have also no interest in cutting government spending. To the contrary, both conservative Keynesians and supply-siders are prepared to call for an increasing stream of goodies from government.
Both groups have also long been keen on monetary inflation. The supply-siders have pretty much given up the idea of tax cuts; their stance is now to accept the deficit and oppose any tax increase. On foreign monetary matters, the conservative Keynesians and the supply-siders have formed a coalition; both groups embrace Secretary of Treasury Baker's Keynesian program of fixed exchange rates and an internationally coordinated policy of cheap money.
Politically, the Republican presidential candidates can be assessed on their various preferred visions of Reaganomics. Vice-President Bush is, of course, a conservative Keynesian and a veteran arch-enemy of supply-side doctrine, which he famously denounced in 1980 as "voodoo economics." Secretary of Treasury James Baker is a former Bush campaign aide. White House Chief of Staff Howard Baker is also in the conservative Keynesian camp, as was Paul Volcker, and is Alan Greenspan. Since former White House Chief of Staff Donald Regan was a fellow-traveller of the supply-siders, his replacement by Howard Baker as a result of Iranscam was a triumph of conservative Keynesians over the supply-siders. This year, in fact, our troika of Economic Rulers, Greenspan and the two Bakers, has all been squarely in the conservative Keynesian camp.
Senator Robert Dole, the other Republican front-runner for president, is also a conservative Keynesian. In fact, Bob Dole carried on the fight for higher taxes even when it was relatively unfashionable inside the administration. So devoted to higher taxes is Bob Dole, in fact, that he is reputed to be the favorite presidential candidate of the Internal Revenue Service. So if you like the IRS, you'll love Bob Dole.
Congressman Jack Kemp, on the other hand, has been the political champion of the supply-siders ever since supply-side was invented in the late 1970s. Kemp's call for higher government spending, and approval of deficits, monetary inflation, and fixed exchange rates, all attest to his supply-side devotion.
DeleteJack Kemp, however, has for some reason not struck fire among the public, so Mrs. Jeanne Kirkpatrick stands ready in the wings to take up the cause if Kemp should fail to rally. I confess I have not been able to figure out the economic views of the Reverend Pat Robertson, although I have a hunch they do not loom very large in his world outlook.
Although there are a lot of Democratic candidates out there, it is hard at this point to distinguish one from another, on economic policy or indeed on anything else. As Joe Klein recently wrote in a perceptive article in New York magazine, the Republicans are engaged in an interesting clash of different ideas, while the Democrats are all muddily groping toward the center. To make the confusion still greater, Klein points out that Republicans are busily talking about "compassion," while the Democrats are all stressing "efficiency." One thing is fairly clear; Congressman Gephardt is an all-out protectionist, thoroughly jettisoning the old Democratic commitment to free trade, and is the most ardent statist in agricultural policy.
On monetary and fiscal policy, the Democrats are the classic party of liberal Keynesianism, in contrast to the Republican policy of conservative Keynesianism. The problem is that, in the last decade or two, it has become increasingly difficult to tell the difference. Apart from supply-sider Kemp, we can expect the president of either party to be a middle-of-the-road liberal/conservative Keynesian. And so we can expect the next administration's economic policies to be roughly the same as they are now. Except that the rhetoric will be different. So we can, therefore, expect diverse perceptions and responses to a similar reality by the public and by the market. Thus, if Jack Kemp becomes president, the public will wrongly consider him a champion of hard money, budget cutting, and the free market. The public will therefore underestimate the wildly inflationist reality of a Kemp administration. On the other hand, the public probably perceives the Democrats to be wilder spenders relative to the Republicans than they really are. So should the Democrats win in 1988, we can expect the market to overestimate the inflationary measure of a Democratic administration.
All of this, along with the universal misperception of Reaganomics, illustrates once more the wisdom of those incisive political philosophers, Gilbert and Sullivan: "Things are not always what they seem; skim milk masquerades as cream."
http://mises.org/daily/1544
The historical myth that Reagan raised $1 in taxes for every $3 in spending cuts
ReplyDeleteDavid Stockman clarified this many times since those days, but it's one of those zombie lies that always returns as common knowledge.
Let's see-- Reagan's own Wunderkind budget expert, former Congressman David Stockman, head of his Office of Management and Budget (OMB), and then Senate Finance Committee Chairman Sen. Bob Dole, agree that it didn't happen, but Reagan thinks it did? Gosh, who is more believable on this issue? "Who are Stockman and Dole, Alex?"
Reagan's Real Legacy
ReplyDeleteAs the nation embarks on a celebration this Sunday of the hundredth anniversary of President Ronald Reagan’s birth—with conferences, museum exhibits and lots of speeches—let us not forget that many of the serious problems facing America today began or worsened during Reagan’s presidency.
Why not let Reagan, who died in 2004, rest in peace? Because a growing chorus of journalists, politicians, and pundits are using this hundredth-birthday milestone to rewrite history and bestow on Reagan a Mount Rushmore–like status as one of our greatest presidents.
That’s hogwash.
During his two terms in the White House (1981–89), Reagan presided over a widening gap between the rich and everyone else, declining wages and living standards for working families, an assault on labor unions as a vehicle to lift Americans into the middle class, a dramatic increase in poverty and homelessness, and the consolidation and deregulation of the financial industry that led to the current mortgage meltdown, foreclosure epidemic and lingering recession.
These trends were not caused by inevitable social and economic forces. They resulted from Reagan’s policy and political choices based on an underlying “you’re on your own” ideology.
Reagan is often lauded as “the great communicator,” but what he often communicated were lies and distortions. For example, during his stump speeches, while dutifully promising to roll back welfare, Reagan often told the story of a so-called “welfare queen” in Chicago who drove a Cadillac and had ripped off $150,000 from the government using eighty aliases, thirty addresses, a dozen Social Security cards and four fictional dead husbands. Journalists searched for this “welfare cheat” in the hopes of interviewing her and discovered that she didn’t exist. But this phony imagery of “welfare cheats” persisted and helped lay the groundwork for cuts to programs that help the poor, including children.
Reagan’s most famous statement—“Government is not a solution to our problem. Government is the problem”—has become the unofficial slogan for the recent resurgence of right-wing extremism. The rants of Glenn Beck and Rush Limbaugh, the lunacy of Tea Party, the policy ideas promulgated by propaganda outfits like the Cato Institute and the Heritage Foundation masquerading as think tanks and the takeover of the Republican Party by its most conservative wing were all incubated during the Reagan years. Indeed, they all claim to be carrying out the Reagan Revolution.
DeleteWhat did that revolution bring us?
Many Americans credit Reagan with reducing the size of government. In reality, he increased government spending, cut taxes and turned the United States from a creditor to a debtor nation. During his presidency, Reagan escalated the military budget while slashing funds for domestic programs that assisted working-class Americans and protected consumers and the environment. Not surprisingly, both George H.W. Bush and George W. Bush followed in Reagan’s footsteps.
But, unfortunately, so did Bill Clinton. During his first campaign for the presidency, Clinton correctly observed that “the Reagan-Bush years have exalted private gain over public obligation, special interests over the common good, wealth and fame over work and family. The 1980s ushered in a Gilded Age of greed and selfishness, of irresponsibility and excess, and of neglect.” But a few years later, as president, Clinton proclaimed, echoing Reagan, that “the era of big government is over,” which he carried out by slashing welfare benefits for poor children.
Indeed, Reagan’s most important domestic legacy is our government’s weakened ability to do its job protecting families, consumers, workers and the environment.
How did Reagan revise America’s thinking about the role of government? Before Reagan took office, the American public was already growing more skeptical about government and politicians, exacerbated by the lies told by Presidents Lyndon Johnson and Richard Nixon about the Vietnam war, Nixon’s Watergate scandal and President Jimmy Carter’s inability to deal with the twin problems of rising prices and unemployment, often called “stagflation.” But Reagan—with his avuncular style, optimism and just-plain-folks demeanor—turned government-bashing into an art form
And he had a lot of help. Accompanying the Reagan era was the rise of a well-oiled corporate-funded conservative propaganda machine—including think tanks and lobby groups, endowed professorships at universities, legal advocacy organizations, magazines, and college student internships to train the next generation—designed to demonize activist government and glorify unregulated markets. Years before Rush Limbaugh began his radio ministry to his conservative congregation of ditto-heads, Reagan and this right-wing echo chamber were on the job.
DeleteReagan’s fans give him credit for restoring the nation’s prosperity. But whatever economic growth occurred during the Reagan years mostly benefitted those already well off. The income gap between the rich and everyone else in America widened. Wages for the average worker declined and the nation’s homeownership rate fell. During Reagan’s two terms in the White House, the minimum wage was frozen at $3.35 an hour, while prices rose, thus eroding the standard of living of millions of low-wage workers. The number of people living beneath the federal poverty line rose from 26.1 million in 1979 to 32.7 million in 1988. Meanwhile, the rich got much richer. By the end of the decade, the richest 1 percent of Americans had 39 percent of the nation’s wealth.
After signing the Garn–St. Germain Depository Institutions Act in 1982, Reagan presided over the dramatic deregulation of the nation’s savings-and-loan industry. The law allowed S&Ls to end their reliance on home mortgages and permitted banks to provide adjustable-rate mortgage loans. The S&Ls began a decade-long orgy of real estate speculation, mismanagement and fraud. The industry indulged in a wild ride of merger mania, with banks and S&Ls gobbling each other up and making loans to finance shopping malls, golf courses, office buildings and condo projects that had no financial logic other than a quick-buck profit.
When the dust settled in the late 1980s, hundreds of S&Ls and banks had gone under, billions of dollars of commercial loans were useless and the federal government was left to bail out the depositors whose money the speculators had looted to the tune of over $130 billion.
Under Reagan, government’s role shifted from policing Wall Street and protecting consumers to a see-no-evil enabler, encouraging banks to engage in irresponsible practices. This was just the first chapter in the slide towards today’s financial crisis. Things got even worse—much worse—in the decades after Reagan left office. Both Bushes, as well as Clinton, took up where Reagan left off in granting banks and insurance companies permission to wreak havoc on consumers and the economy. This lead to the epidemic of subprime loans and foreclosures of the past three years and the costly federal bail-out of “too big to fail” Wall Street banks.
DeleteReagan’s indifference to urban problems was legendary. Early in his presidency, at a White House reception, Reagan greeted the only black member of his Cabinet, Housing and Urban Development (HUD) Secretary Samuel Pierce, saying: “How are you, Mr. Mayor? I’m glad to meet you. How are things in your city?”
Reagan not only failed to recognize his own HUD Secretary, he failed to deal with the growing corruption scandal at the agency that resulted in the indictment and conviction of top Reagan administration officials for illegally targeting housing subsidies to politically connected developers. Pierce and others rigged the allocation of subsidies for housing projects to favor Reagan’s campaign contributors and GOP lobbyists, such as former Interior Secretary James Watt. Fortunately for Reagan, the “HUD Scandal” wasn’t uncovered until he’d left office.
Reagan didn’t invent the pay-to-play game or the revolving door of top government officials becoming well-paid lobbyists and government contractors. But his hands-off attitude toward government oversight contributed to the deepening culture of corruption in our nation’s capital.
The 1980s saw pervasive racial discrimination by banks, real estate agents and landlords, unmonitored by the Reagan administration. Community groups uncovered blatant redlining by banks. But Reagan’s HUD and Department of Justice failed to prosecute or sanction banks that violated the Community Reinvestment Act, which prohibits racial discrimination in lending. During that time, of the 40,000 applications from banks requesting permission to expand their operations, Reagan’s bank regulators denied only eight of them on grounds of violating CRA regulations.
DeleteThe declining fiscal fortunes of America’s cities began during the Reagan years. By the end of his second term, federal assistance to local governments had been slashed by 60 percent. Reagan eliminated general revenue sharing to cities, cut funding for public service jobs and job training, almost dismantled federally funded legal services for the poor, cut the antipoverty Community Development Block Grant program and reduced funds for public transit.
These cutbacks had a disastrous effect on cities with high levels of poverty and limited property tax bases, many of which depended on federal aid to provide basic services. In 1980 federal dollars accounted for 22 percent of big city budgets. By the end of Reagan’s second term, federal aid was only 6 percent. The consequences were devastating to urban schools and libraries, municipal hospitals and clinics, and sanitation, police and fire departments—many of which had to shut their doors. Many cities still haven’t recovered from the downward spiral started during the Gipper’s presidency.
The most dramatic cut in domestic spending during the Reagan years was for low-income housing subsidies. In his first year in office, Reagan cut the budget for public housing and Section 8 rent subsidies in half. Congress thwarted his plan to wide out federal housing assistance to the poor altogether, but he got much of what he sought. In the 1980s the proportion of the eligible poor who received federal housing subsidies declined substantially.
Another of Reagan’s enduring legacies is the steep increase in the number of homeless people, which by the late 1980s had swollen to 600,000 on any given night—and 1.2 million over the course of a year. Many were Vietnam veterans, children and laid-off workers.
DeleteIn early 1984 on “Good Morning America,” Reagan defended himself against charges of callousness toward the poor in a classic blaming-the-victim statement. He said that “people who are sleeping on the grates…the homeless…are homeless, you might say, by choice.”
Since his death, we’ve named a major airport, many schools and lots of streets after Ronald Reagan. Perhaps now, as we celebrate the centennial of his birth, a more fitting tribute to his legacy would be for each American city to name a park bench—where at least one homeless person sleeps every night—in honor of our fortieth president.
http://www.thenation.com/article/158321/reagans-real-legacy#
Wall Street, Not Fannie and Freddie, Led Mortgage Meltdown
ReplyDeleteJan 17, 2011
Mortgage giants Fannie Mae and Freddie Mac have been cast as the major villains of the financial crisis, but Michael Hudson reports that Wall Street firms were the prime offenders.
There’s a problem with this narrative: The numbers tell a different story, a Center for Public Integrity review finds.
The evidence indicates Fannie and Freddie contributed to the mortgage meltdown, but they played a secondary role to Wall Street. Wall Street firms and the mortgage lenders they bankrolled led the growth of the market for subprime loans and other risky mortgages.
Government data show Fannie and Freddie didn’t take the same risks that Wall Street’s mortgage-backed securities machine did. Mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.
Tagging Fannie and Freddie as the primary suspects in the mortgage debacle diverts attention from bigger offenders and from policy decisions that helped create the climate for out-of-control lending.
“The idea that they were leading this charge is just absurd,” said Guy Cecala, publisher of Inside Mortgage Finance, an authoritative trade publication. “Fannie and Freddie have always had the tightest underwriting on earth…They were opposite of subprime.”
http://www.thedailybeast.com/articles/2011/01/17/wall-street-not-fannie-and-freddie-led-mortgage-meltdown.html
The Myth of Fannie Mae, Freddie Mac, Barney Frank, the Housing Bubble and the Recession
ReplyDeleteStart with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.
Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.
Fannie and Freddie were not completely innocent they basically started having special sales Fannie’s “Expanded Approval” and Freddie’s “A Minus”- all under Bush’s watch and as Republicans controlled the House 1997 to 2005 ( the place where Frank has super duper legislative powers).
In the video below Frank sits in a 9/10/03 House Financial Services Committee hearing and says Fannie and Freddie are sound, and there is no housing disaster coming.
http://thelonggoodbye.wordpress.com/2010/08/12/the-myth-of-fannie-mae-freddie-mac-barney-frank-the-housing-bubble-and-the-recession/
ReplyDelete‘Repeal’ of Glass-Steagall Irrelevant to Financial Crisis
Although we’ve heard a great deal about how “deregulation” caused the financial crisis, specific cases of repealed legislation that would have prevented it are few and far between. The one some progressives seem to have settled on is the “repeal” of the Glass-Steagall Act of 1933, which separated commercial from investment banking. The “repeal” involved only one provision of the Act, the one preventing the same holding company from controlling both a commercial bank and an investment bank.
I’ll try to write more on this when I have time (for now, I’ll note that I cover the subject in Rollback, my book from earlier this year). When we recall that stand-alone institutions, both commercial and investment, also failed during the crisis, and that all of them acquired mortgage-backed securities (which they had always been allowed to do, by the way), the Glass-Steagall “repeal” looks more and more like a red herring that appeals to people whose belief system requires them to find some way a Fed-fueled bubble could have been stopped had the right regulatory structure been in place.
(The problem with those who point to Glass-Steagall is not that they’re radical. It’s that they’re not nearly radical enough. They think the system as is, shot through with moral hazard at every level, and presided over by a market-defying central bank, is of its nature stable and without fault; we just need a few regulations.)
http://www.tomwoods.com/blog/repeal-of-glass-steagall-had-nothing-to-do-with-the-crisis/
Repeal of Glass-Steagall: Not a cause, but a multiplier
ReplyDeleteThe repeal of Glass-Steagall may not have caused the crisis — but its repeal was a factor that made it much worse. And it was a continuum of the radical deregulation movement. This philosophy incorrectly held that banks could regulate themselves, that government had no place in overseeing finance and that the free market works best when left alone. This belief system manifested itself in damaging ways, including eliminating regulation and oversight on derivatives, allowing exemptions for excess leverage rules for a handful of players and creating dangerous legislation.
As the events of 2007 to 2009 have revealed, this erroneous belief system was a major factor leading to the credit boom and bust, as well as the financial collapse.
I have been unable to find any evidence that the Gramm-Leach-Bliley Act — the legislation that repealed Glass-Steagall — was a primary cause of the financial crisis. Imagine a “but for” scenario where Glass-Steagall had not been overturned but the rest of the deregulatory actions had still taken place. Would the crisis have occurred? Without a doubt, yes.
The Fed still would have taken rates down to unprecedented low levels. This would have led to a global spiral in asset prices. The nonbank, lend-to-sell-to-securitizer mortgage originators were still going to make subprime-mortgage loans to unqualified borrowers. Bear Stearns and Lehman Brothers would still have overwhelmingly increased exposure to subprime mortgages. AIG would still have written trillions of dollars in credit-default swaps and other derivatives with zero reserves set against them. The largest security firms and deposit banks would still have charged headlong into the subprime securitization business. And Fannie Mae and Freddie Mac would still have belatedly chased these banks into the same subprime market, just at the peak of the housing boom.
Lastly, housing prices would still have run up to absurd levels and then collapsed.
So no, the repeal of Glass-Steagall was not a proximate cause of the crisis. But its impact was both nuanced and complex. Consider the context in which it occurred:
● The repeal of Glass-Steagall in 1999 was part of a broad deregulatory push, championed by the likes of Fed chief Alan Greenspan, Sen. Phil Gramm (R-Tex.) and Treasury Secretary Robert Rubin, that eliminated much of the oversight on Wall Street. Freed from onerous regulation, the banks could “innovate” and grow.
● After the repeal, banks merged into more complex and more leveraged institutions.
● These banks, which were customers of nonbank firms such as AIG, Bear Stearns and Lehman Brothers, in turn contributed to these firms bulking up their subprime holdings as well. This turned out to be speculative and dangerous.
So we can say that Glass-Steagall’s repeal allowed the credit bubble to inflate much larger. It allowed banks to be more complex and difficult to manage. When it all came down, the crisis was broader, deeper and more dangerous than it would have been otherwise.
Glass-Steagall’s repeal, after 25 years and $300 million worth of lobbying efforts, culminated decades of deregulation.
Newfangled derivatives? No oversight, reporting or reserves necessary, courtesy of the Commodities Futures Modernization Act of 2000. Subprime-lend-to-sell-to-securitizers business model? Those are the financial innovators! At least, that is what Greenspan called them, and why he refused to oversee them as Fed chairman. Rules on SEC leverage? Let’s create a special exemption from the law for just five investment banks.
Of course “reputational risk” would serve as a deterrent to poor decision making! No bank would ever behave so recklessly as to put their own hard-won status on the line — or its very existence.
How’d that idea work out?
What we should be discussing is the corrupting influence of crony capitalism and radical deregulation.
http://www.ritholtz.com/blog/2012/08/repeal-of-glass-steagall-not-a-cause-but-a-multiplier/
"The relative market share of Fannie Mae and Freddie Mac dropped fairly dramatically during the 2000s bubble, from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent at the height of the bubble in 2005 and 2006. Notably, this decline occurred contemporaneously with the unsupported rise in housing prices and the deterioration in underwriting standards that virtually all observers blame for the collapse of the housing markets.
ReplyDeleteSimilarly, the market share of financial institutions for which CRA applied has been steadily declining since 1977, when CRA was passed. CRA-regulated institutions, primarily banks and thrifts, accounted for only 28 percent of all mortgages originated in 2006 (the height of the bubble), a significant decline from their share in the late 1990s and early 2000s. As with Fannie and Freddie, this market share drop occurred in lockstep with the rise of the housing bubble."
Oops. Cause and effect don't seem to be going your way. Unless you believe that tails wag dogs.
http://www.ritholtz.com/blog/2011/02/politics-most-blatant-conservative-ideas-can%E2%80%99t-escape-blame-for-the-financial-crisis/
Politics Most Blatant: Conservative Ideas Can’t Escape Blame for the Financial Crisis
ReplyDeleteThe onset of the recent financial crisis in late 2007 created an intellectual crisis for conservatives, who had been touting for decades the benefits of a hands-off approach to financial market regulation. As the crisis quickly spiraled out of control, it quickly became apparent that the massive credit bubble of the mid-2000s, followed by the inevitable bust that culminated with the financial markets freeze in the fall of 2008, occurred predominantly among those parts of the financial system that were least regulated, or where regulations existed but were largely unenforced.
Predictably, many conservatives sought to blame the bogeymen they always blamed. In March of 2008, Sen. Jon Kyl (R-AZ) blamed loans “to the minorities, to the poor, to the young” as causing foreclosures. Not long after, conservative commentator Michele Malkin went so far as to claim that illegal immigration caused the crisis.
This tendency to shift blame to minorities and poor people for the financial crisis soon developed into a well-honed narrative on the right. Swiftly and repeatedly many conservatives blamed affordable housing policies—particularly the affordable housing goals in place for the two government sponsored mortgage finance giants Fannie Mae and Freddie Mac and the 1977 Community Reinvestment Act that applies to regulated lenders such as banks and thrifts—for the massive financial crisis that occurred. This despite the fact that as recently as 2006 prominent conservatives, including FCIC Republican member and American Enterprise Institute Senior Fellow Peter Wallison, were arguing that Fannie and Freddie needed to do more lending to low-income communities and minorities.
Last week, the Republican minority on the congressionally created Financial Crisis Inquiry Commission continued this tradition of willful blindness, issuing their own self-described nine-page “primer” on the financial crisis—one that attempts to lay the blame once again on Fannie Mae, Freddie Mac, and the Community Reinvestment Act. The picture they paint is reflective of a mindset they displayed last week when all four Republican members tried to ban the phrases “Wall Street,” “shadow banking,” “interconnection,” and “deregulation” from the final report.
These terms are important to understanding what happened in the 2000s. But equally damning is this—the minority members of the FCIC got their facts wrong, their time frames jumbled, and their selection of relevant facts skewed to reflect their libertarian biases. The ideological imperative to blame the government, and more importantly to avoid the culpability of laissez faire economics, have overridden all other considerations, including those of actually looking at the facts.
As the FCIC staff reports released so far in the run up to the final report have demonstrated, the primary fuel of the financial crisis was a hands-off approach to regulation. This ideologically driven lack of regulatory oversight allowed tremendous growth of the “shadow banking system,” a largely unregulated web of complex financial transactions that essentially served the same functions as the existing banking system—attracting short-term funds from those seeking safe, liquid investments and using these to finance long-term loans, particularly residential mortgages—but without government oversight to ensure that these activities were being done safely and soundly.
As the FCIC staff reports demonstrate fairly conclusively, it was the shadow banking system’s unregulated private securitization of mortgages that caused the financial crisis, not affordable housing policies. The FCIC staff has done an excellent job of compiling the facts, and we encourage you to check out the FCIC’s comprehensive reports to date. In our view, below are their most persuasive arguments.
Look at the market share
DeleteThe market activities of the relevant parties clearly show the problem with the argument made by the minority FCIC members. The market shares of Fannie Mae, Freddie Mac, and CRA-regulated lending institutions dropped tremendously during the housing bubble. Meanwhile, the market share of private mortgage securitization, which the FCIC majority largely blames for the crisis, and which the FCIC minority completely ignores, grew in lockstep with the rise of the housing bubble.
The relative market share of Fannie Mae and Freddie Mac dropped fairly dramatically during the 2000s bubble, from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent at the height of the bubble in 2005 and 2006. Notably, this decline occurred contemporaneously with the unsupported rise in housing prices and the deterioration in underwriting standards that virtually all observers blame for the collapse of the housing markets.
Similarly, the market share of financial institutions for which CRA applied has been steadily declining since 1977, when CRA was passed. CRA-regulated institutions, primarily banks and thrifts, accounted for only 28 percent of all mortgages originated in 2006 (the height of the bubble), a significant decline from their share in the late 1990s and early 2000s. As with Fannie and Freddie, this market share drop occurred in lockstep with the rise of the housing bubble.
In contrast, the market share of private mortgage securitization, a pillar of the “shadow banking system” that was not backed by the federal government and not regulated for safety and soundness in the way that Fannie, Freddie, and regulated banks and thrifts were, rose sharply and contemporaneously with the rise of the housing bubble. In 2002, the share of mortgages originated by private securitization was just over 10 percent of the total market. Over the next four years, this share grew rapidly, accounting for nearly 40 percent of all mortgage originations by 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006.
Look at the default rates
Equally conclusive are the default rates of mortgages originated for these various lending channels. If the conservative view was correct, one would expect to see mortgages originated for Fannie and Freddie securitization, as well as those originated for purposes of CRA, to default at higher rates, since these were the loans directly subject to affordable housing policies. In fact, we see quite the opposite, as these loans have performed exponentially better than those originated for private securitization, which the FCIC Republicans ignore.
Mortgages originated for private securitization defaulted at much higher rates than those originated for Fannie and Freddie securitization, even when controlling for all other factors (such as the fact that Fannie and Freddie securitized virtually no subprime loans). Overall, private securitization mortgages defaulted at more than six times the rate of those originated for Fannie and Freddie securitization.
Similarly, mortgages originated for CRA purposes have performed at much higher rates than loans originated for private securitization, going into foreclosure 60 percent less often than loans originated by independent mortgage companies that were key to providing the mortgages needed to supply private securitization.
But even if these facts didn’t exist, the FCIC Republican narrative fails miserably in explaining the financial crisis. To illustrate why it fails, let’s perform a simple thought experiment our colleague Matthew Yglesias has suggested: Let us suppose that the GOP’s argument is correct, and that government affordable housing policies were 100 percent responsible for the housing bubble and the flood of unsustainable mortgages that were originated during the 2000s.
How could the FCIC Republican argument possibly explain the analogous housing and financial bubbles that occurred contemporaneously in other countries such as Iceland, Ireland, the United Kingdom, and Denmark, which did not have Fannie or Freddie Mac or CRA? The FCIC majority argument has a plausible and compelling explanation for the global credit bubble—that an unregulated and overleveraged shadow banking system systematically underpriced credit risk. The FCIC Republican minority has no explanation for these contemporaneous bubble-bust cycles that occurred in other countries.
DeleteOr consider that a virtually identical bubble occurred in the U.S. commercial real estate mortgage market. There is no government policy FCIC Republicans can point to that encouraged lenders to loosen underwriting standards for malls or office buildings. (see graph)
What’s more, this commercial real estate had a large exposure to private securitization, as did credit card debt, student loans, and auto loans, all of which experienced bubble-bust cycles that were similar to that which happened in residential real estate. (see graph)
Moreover, the FCIC minority narrative fails to explain the huge private-sector demand for subprime and Alt-A mortgages, or the mortgage-backed securities created out of these mortgages. The crux of the FCIC Republican argument is the affordable housing goals and CRA created the demand for risky subprime and Alt-A mortgages, which in turn created the huge demand for the private mortgage-backed securities that led to the 2000s housing bubble.
But this ignores the huge existing demand for private mortgage-backed securities. Even after Fannie and Freddie plunged into the market for these mortgage-backed securities, they never accounted for more than a fraction of the demand for these securities. (see graph)
Instead, the common thread was under-regulation at every level of the financial system leading to a general real estate bubble. The bursting of the bubble first in the subprime home mortgage market was a symptom of just how little consumer protection was left, as federal regulators told state authorities who tried to stop more abusive mortgage companies to stand down due to federal preemption doctrines.
Deletehttp://www.ritholtz.com/blog/2011/02/politics-most-blatant-conservative-ideas-can%E2%80%99t-escape-blame-for-the-financial-crisis/
"In contrast, the market share of private mortgage securitization, a pillar of the “shadow banking system” that was not backed by the federal government and not regulated for safety and soundness in the way that Fannie, Freddie, and regulated banks and thrifts were, rose sharply and contemporaneously with the rise of the housing bubble. In 2002, the share of mortgages originated by private securitization was just over 10 percent of the total market. Over the next four years, this share grew rapidly, accounting for nearly 40 percent of all mortgage originations by 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006."
ReplyDeleteMore Proof To Debunk The Big Lie About Fannie & Freddie
ReplyDeletehttp://www.dailykos.com/story/2012/03/07/1072095/-More-Proof-To-Debunk-The-Big-Lie-About-Fannie-Freddie
Examining the big lie: How the facts of the economic crisis stack up
It’s fair to say that our discussion about the big lie touched a nerve.
The big lie of the financial crisis, of course, is that troubling technique used to try to change the narrative history and shift blame from the bad ideas and terrible policies that created it.
Based on the scores of comments, people are clearly interested in understanding the causes of the economic disaster.
I want to move beyond what I call “the squishy narrative” — an imprecise, sloppy way to think about the world — toward a more rigorous form of analysis. Unlike other disciplines, economics looks at actual consequences in terms of real dollars. So let’s follow the money and see what the data reveal about the causes of the collapse.
Rather than attend a college-level seminar on the complex philosophy of causation, we’ll keep it simple. To assess how blameworthy any factor is regarding the cause of a subsequent event, consider whether that element was 1) proximate 2) statistically valid 3) necessary and sufficient.
Consider the causes cited by those who’ve taken up the big lie. Take for example New York Mayor Michael Bloomberg’s statement that it was Congress that forced banks to make ill-advised loans to people who could not afford them and defaulted in large numbers. He and others claim that caused the crisis. Others have suggested these were to blame: the home mortgage interest deduction, the Community Reinvestment Act of 1977, the 1994 Housing and Urban Development memo, Fannie Mae and Freddie Mac, Rep. Barney Frank (D-Mass.) and homeownership targets set by both the Clinton and Bush administrations.
When an economy booms or busts, money gets misspent, assets rise in prices, fortunes are made. Out of all that comes a set of easy-to-discern facts.
Here are key things we know based on data. Together, they present a series of tough hurdles for the big lie proponents.
•The boom and bust was global. Proponents of the Big Lie ignore the worldwide nature of the housing boom and bust.
A McKinsey Global Institute report noted “from 2000 through 2007, a remarkable run-up in global home prices occurred.” It is highly unlikely that a simultaneous boom and bust everywhere else in the world was caused by one set of factors (ultra-low rates, securitized AAA-rated subprime, derivatives) but had a different set of causes in the United States. Indeed, this might be the biggest obstacle to pushing the false narrative. How did U.S. regulations against redlining in inner cities also cause a boom in Spain, Ireland and Australia? How can we explain the boom occurring in countries that do not have a tax deduction for mortgage interest or government-sponsored enterprises? And why, after nearly a century of mortgage interest deduction in the United States, did it suddenly cause a crisis?
These questions show why proximity and statistical validity are so important. Let’s get more specific.The Community Reinvestment Act of 1977 is a favorite boogeyman for some, despite the numbers that so easily disprove it as a cause.It is a statistical invalid argument, as the data show.
For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions.
What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.
The market share of financial institutions that were subject to the CRA has steadily declined since the legislation was passed in 1977. As noted by Abromowitz & Min, CRA-regulated institutions, primarily banks and thrifts, accounted for only 28 percent of all mortgages originated in 2006.
Delete•Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom. Check the mortgage origination data: The vast majority of subprime mortgages — the loans at the heart of the global crisis — were underwritten by unregulated private firms. These were lenders who sold the bulk of their mortgages to Wall Street, not to Fannie or Freddie. Indeed, these firms had no deposits, so they were not under the jurisdiction of the Federal Deposit Insurance Corp or the Office of Thrift Supervision. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06.
•Private lenders not subject to congressional regulations collapsed lending standards. Taking up that extra share were nonbanks selling mortgages elsewhere, not to the GSEs. Conforming mortgages had rules that were less profitable than the newfangled loans. Private securitizers — competitors of Fannie and Freddie — grew from 10 percent of the market in 2002 to nearly 40 percent in 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006
These firms had business models that could be called “Lend-in-order-to-sell-to-Wall-Street-securitizers.” They offered all manner of nontraditional mortgages — the 2/28 adjustable rate mortgages, piggy-back loans, negative amortization loans. These defaulted in huge numbers, far more than the regulated mortgage writers did.
Consider a study by McClatchy: It found that more than 84 percent of the subprime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. And McClatchy found that out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations.
A 2008 analysis found that the nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations.
A study by the Federal Reserve shows that more than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. The study found that the government-sponsored enterprises were concerned with the loss of market share to these private lenders — Fannie and Freddie were chasing profits, not trying to meet low-income lending goals.
Beyond the overwhelming data that private lenders made the bulk of the subprime loans to low-income borrowers, we still have the proximate cause issue. If we cannot blame housing policies from the 1930s or mortgage tax deductibility from even before that, then what else can we blame? Mass consumerism? Incessant advertising? The post-World War II suburban automobile culture? MTV’s “Cribs”? Just how attenuated must a factor be before fair-minded people are willing to eliminate it as a prime cause?
I recognize all of the above as merely background noise, the wallpaper of our culture. To blame the housing collapse that began in 2006, a recession dated to December 2007 and a market collapse in 2008-09 on policies of the early 20th century is to blame everything — and nothing.
http://www.washingtonpost.com/business/examining-the-big-lie-how-the-facts-of-the-economic-crisis-stack-up/2011/11/16/gIQA7G23cN_story_1.html
Competition and Crisis in Mortgage Securitization
ReplyDeleteCompetitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis. This article provides original evidence that when competition was less intense and securitizers had more market power, securitizers acted to monitor mortgage originators and to maintain prudent underwriting. However, securitizers’ ability to monitor originators and maintain high standards was undermined as competition shifted market power away from securitizers and toward originators. Although standards declined across the market, the largest and most powerful of the mortgage securitizers, the Government Sponsored Enterprises (“GSEs”), remained more successful than other mortgage securitizers at maintaining prudent underwriting.
However, securitizers’ ability to monitor originators and maintain high standards was undermined as competition shifted market power away from securitizers and toward originators. Although standards declined across the market, the largest and most powerful of the mortgage securitizers, the Government Sponsored Enterprises (“GSEs”), remained more successful than other mortgage securitizers at maintaining prudent underwriting. This article proposes reforms based on lessons from the recent financial crisis: merge the GSEs with various government agencies’ mortgage operations to create a single dedicated mortgage securitization agency that would seek to maintain market stability, improve underwriting, and provide a long term investment return for the benefit of taxpayers.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1924831
How George Bush and the Private Mortgage Market Created The Perfect Storm
ReplyDeletehttp://mixermuse.com/blog/2010/10/14/how-george-bush-and-the-private-mortgage-market-created-the-perfect-storm/
The Big Lie of the Crisis, Called Out By the Press
ReplyDeleteThe false “banks didn’t do it” meme takes hold on the right, as Romney showed last night
This is flat false, as anyone who’s taken a cursory and intellectually half-honest look at the crisis knows. So how did the press cover it?
Pretty darn good, actually.
The Wall Street Journal quotes Romney in its piece and then all but says he’s empirically wrong (emphasis mine):
“Markets work. When you have government play its heavy hand, markets blow up and people get hurt,” Mr. Romney said, blaming Democrats for rules that he said force banks to make ill-advised loans.
Some conservative academics have said that Fannie Mae and Freddie Mac fueled the financial crisis because they had to meet federal quotas to finance low- and moderate-income homeowners.
But academic research has shown that those mandates didn’t spur the types of exotic lending at the heart of the subprime-loan crisis. Many of the worst mortgage lenders weren’t banks and weren’t subject to federal regulation.
The New York Times is even better, running a fact-check sidebar along with its main debate story, and it gives readers five full paragraphs on why these assertions are false. Here are three of them:
Several candidates made the argument at the debate that the government forced mortgage lenders to make bad loans. But in reality, most subprime loans were made by companies that were not subject to any kind of federal regulation.
Furthermore, there was no need to force anyone to make the loans. Financial companies jumped into the market. The major investment banks lined up to purchase subprime lenders, the major retail banks created subprime lending divisions, and a generation of upstart subprime lenders like Ameriquest and Countrywide were briefly celebrated as rising stars of American business.
No executive of a major mortgage company said at the time that the government was forcing them to make subprime loans. They said they did it because they thought they would make money. And even now, after the crash of the housing market, with all the temptation to point fingers, it is awfully hard to find a mortgage executive who echoes the argument of the Republican candidates.
And the Times debunks the “Fannie and Freddie Did It” meme to boot.
http://www.cjr.org/the_audit/the_big_lie_of_the_crisis_call.php
Fannie, Freddie, and the CRA are Not Responsible for the Financial Crisis
ReplyDeletehttp://www.cbsnews.com/8301-505123_162-39741513/fannie-freddie-and-the-cra-are-not-responsible-for-the-financial-crisis/
Are you saying that we should hear from the more conservative economic "experts"?. That it will be helpful to hear more from the same "experts" who:
ReplyDelete-- have been saying for the past four years that inflation and interest rates will start to skyrocket at any second.
-- have told us that tax cuts pay for themselves.
-- have told us that the financial meltdown was not the fault of the Wall Street banks.
-- told us that there was no housing bubble and that there was no chance of a recession.
-- are telling us that the way to prevent cuts in Social Security benefits in the future is to cut future Social Security benefits now.
Yeah, that will be helpful.
Lest We Forget: Why We Had A Financial Crisis
ReplyDeleteIt is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it.
http://www.forbes.com/sites/stevedenning/2011/11/22/5086/
Do you remember 2001 when we had a budget surplus. Alan Greenspan testified before Congress in favor of the Bush tax cuts,"we are in danger of paying down the debt too fast". How absurd is that statement today! By the way, not a single GOP senator voted for the 93 reconciliation act that led to the balanced budget and eventual surplus.
ReplyDeleteThe Republicans would not pay down the debt when times were much better. Now they want to focus on deficits.
I hear the GOP calling for austerity, for cuts and for being the adults on the issue of debt.
ReplyDeleteWhere were they when Bush ran up five+ trillion in debt?
Where were they when the regulations on banks were being dismantled?
Remember when the GOP claimed tax cuts would make the economy better?
Remember how George Bush senior called Regan's "Trickle Down" theory "voodoo economics"?
Where are they now? They, like the people who sold you survivor kits in 1999 and 2011, have all run off laughing, to the bank.
American corporations are sitting on billions of cash because demand makes expanding and hiring more people unprofitable. Banks are borrowing at near 0% interest but charging 20% on personal credit and paying 0.015% on savings accounts. We have a 15 trillion dollar economy and yet we act as if we're a third world country.
It's time to think big and think smart!
Republicans Censor What They Can’t Refute
ReplyDeleteOn Sept. 14, the nonpartisan Congressional Research Service published a report, one of hundreds it puts out every year, titled “Taxes and the Economy: An Economic Analysis of Top Tax Rates Since 1945.” Although the C.R.S. reports are not released directly to the public, they tend to leak out within days. The New York Times posted this one on the Economix blog on Sept. 15 because of its provocative conclusions.
In essence, the report, written by the economist Thomas L. Hungerford, who has a Ph.D. in economics from the University of Michigan, concluded that changes in the top statutory tax rate and the rate on capital gains had no discernible effect on economic growth in the period since 1945. It noted that the top rate was over 90 percent in the 1940s and 1950s, 70 percent in the 1960s and 1970s, 50 percent during most of the 1980s and has been below 40 percent ever since.
These changes were correlated with various measures of saving, investment, productivity and gross domestic product growth. No relationship could be found.
Intuitively, everyone knows this is true. The 1950s are today considered almost an idyllic era, economically, in which most families could prosper with only a single breadwinner. The top tax rate was well above today’s top rate of 35 percent in the 1960s and during Ronald Reagan’s administration, two periods of exceptional growth.
And, as I often note, growth increased after Bill Clinton raised the top rate to 39.6 percent in 1993 from 31 percent, contrary to every Republican’s expectations, and growth has been stagnant since George W. Bush reduced the top rate to 35 percent in 2003, as well as slashing the tax rate on capital gains and dividends to 15 percent.
Republicans assured us that these measures would lead to rapid growth. They did not.
Right-wing think tanks were quick to jump on the Congressional Research Service report. In brief blog posts on Sept. 17, both the Heritage Foundation and the Tax Foundation simply dismissed its conclusions without offering any remotely convincing evidence of error. Their purpose was not to offer a serious critique but rather to send a signal to Republicans in Congress that the study contradicted party dogma.
Republicans believe, as we know from the infamous video of Mitt Romney speaking to supporters or the interview with the financier Edward Conard in the New York Times Magazine in May, that the world is divided between makers and takers. The rich are the makers, and they must be given the maximum incentive to work, save and invest. The takers contribute nothing; the rich carry them on their backs.
Tax cuts for the rich and for corporations are the core Republican idea for how to jump-start growth.
http://economix.blogs.nytimes.com/2012/11/06/republicans-censor-what-they-cant-refute/
This comment has been removed by the author.
ReplyDeleteFormer congressman Tom Allen: GOP speaks a different language
ReplyDeleteTwelve years in Congress. Daily conversations with Republican members of Congress. Bipartisan trips abroad with time to talk at length. Work on legislation of mutual interest with members across the aisle that I respected and admired. But those dozen years left me alarmed and frustrated by the inability of Republicans and Democrats to comprehend each other well enough to work together on our country’s major challenges. We share the same titles and vote on the same legislation, but we see the world through dramatically different lenses.
http://www.salon.com/2013/02/09/former_congressman_tom_allen_gop_speaks_a_different_language/
The inability to compromise is primarily driven by the growing ideological rigidity of Republicans, which has become hostile to almost any form of government action across a wide range of disparate subjects.
DeleteRepublicans have been told they represent and are entitled to emphasize the opposite view of Democrats, in most cases, to right the wrong, or "balance" "liberal" media and "liberal" views. Anything which opposes or disagrees with what they want is seen as "liberal". To simply call something a "liberal" view suffices for them and their voters. Glenn Beck of course takes it a step further, calling Obama a Communist and Socialist, which, again, is enough reason to hate Obama, without any details needed, or given. Many Republican followers agree that hate is enough. Fortunately, not enough of them believe this to win the Presidency, but the Red States gave them the House, barely, so that, to them, is a "mandate". We have a cult of zealots who respond to Beck's hyperbole and phony pseudo-religious emotional displays. If you ask for facts, you will be cut off from further discussion.
ReplyDeleteThe debt in the 2000 calendar year decreased by 114B we cut taxes and increased spending and by the 2008 calendar year we were adding 1470B to the debt. The 2009 fiscal year saw the debt increase by 1885B. Over the last 4 years we have average adding less debt than we did in the 2008 calendar year. In 2012 we added 260B less than in 2008 calendar year(18% less)
ReplyDeleteFederal revenue as a % of GDP in 2000 was a little over 20%. If it had remained at that level over the last 12 years we would have a 10.7T debt today instead of 16.5T. Revenues at 2000 levels in 2012 we would have added a little over 500B to the debt instead of the 1210B added.
Higher taxes isn't savings, it's less debt. Lower taxes without less spending is more debt. Worst yet lower taxes with more spending is a lot more debt. 2001 2009 saw a lot of the last.
ReplyDeleteTHE HIDDEN HISTORY OF THE SECOND AMENDMENT
ReplyDeleteOne of Virginia's main concerns was that the federal government would abolish or directly interfere with the slave system.
During the Constitutional Convention, Pierce Butler of South Carolina declared: "The security the Southn. States want is that their negroes may not be taken from them which some gentlemen within or without doors, have a very good mind to do."
Madison's colleagues in the House and Senate almost certainly considered the Second Amendment to be part of the slavery compromise. Many members of the First Congress had been delegates to the Constitutional Convention in Philadelphia and were well aware that without the slavery compromise it would have been impossible to include both the Northern and slave holding states in a common Union. The Southern delegates had made it clear that there was no point in even drafting a constitution if the federal government had the power to abolish slavery. "The true question at present is whether the Southn. States shall or shall not be parties to the union," John Rutledge of South Carolina had told them
From that point on the delegates worked mightily to produce a constitution palatable to both North and South.
Actually makes a pretty good argument for the 2nd being part of a compromise for the southern states to continue their use of the state militia as a means of slave control.
HIDDEN HISTORY SECOND AMENDMENT
"Slavery was not only an economic and industrial system," one scholar noted, "but more than that, it was a gigantic police system."
ver time the South had developed an elaborate system of slave control. The basic instrument of control was the slave patrol, armed groups of white men who made regular rounds.
Virginia, South Carolina, and Georgia all had regulated slave patrols. By the mid-eighteenth century, the patrols had become the responsibility of the militia
http://www.saf.org/lawreviews/bogus2.htm
The Second Amendment is all about state militias. Patrick Henry, the governor of Virginia, first wrote the Second Amendment's opening proviso, "A well regulated militia being necessary to the security of a free state," in a resolution in the Virginia legislature, although James Madison perfected the language in the Bill of Rights. Militias were valuable, particularly in Virginia and the Carolinas, to round up runaway slaves and suppress slave revolts and also to keep Indians under control. Henry and other Southerners worried that the new Constitution's authorization for the federal government to raise an army threatened the state militias.
ReplyDeleteVirginia, the Carolinas and Georgia required all white men to keep a gun and ammunition so that they would be ready when they were summoned for slave patrols. They were closely regulated by law. A South Carolina act in 1690 said each white man specifically had to have "a good sufficient gun, well fixed, a good cover for their lock, with at least 20 cartridges of good powder and ball, one good belt or girdle, one ball of wax sticking at the end of the cartridge ox, to defend their arms in the rain, one worm, one priming wire and four good spare flints, also a sword, bayonet or hatchet."
Before the Civil War, runaway slaves or revolts were never a big problem here in the natural state, but the territorial legislature in 1824 passed a law requiring every township to keep a militia of up to 11 armed white men to capture and punish fleeing or obstreperous Negroes. There were worries and rumors about blacks getting guns and revolting before and long after the Civil War.
http://www.arktimes.com/arkansas/the-truth-about-guns/Content?oid=2650230
As any objective history will show, the Republican party has been the conservative party for at least the past 90 years. The trend accelerated when FDR incorporated previously neglected white ethnic minorities and people of color into his New Deal coalition. By 1968, the transformation was nearly complete when Nixon's campaigned on "law and order," which was widely understood to be thinly veiled racist rhetoric.
ReplyDeleteIn the United States racism and conservatism dovetail.
Today's conservatism is basically a reaction to progressive politics. In particular, the Bretton Woods era, when a continuous process of social democratic reforms began to integrate previously neglected groups into society and in the process, erode corporate profits.
Beginning in the mid-1970's there was a proliferation of right-wing think tanks and a rise of money in politics. Rather than encourage further reform, the politics appealed to a white working class whose wages had already begun to stagnate and faced increased competition for jobs from African-Americans.
Whereas modern conservatism is essentially a reactionary movement, liberalism is an elite response to popular movements, designed to moderate their demands through an incremental reform process.
And because the underprivileged belong to minorities growing as a share of the population, the conservative movement will increasingly rely on obstructing the democratic process.
Ayn Rand was writing FICTION. we all theorize and hypothesize and imagine "what if?". when people start to implement fiction into their own realities, they are sociopaths. I too would love to have a world where CAPITALISM actually worked, but it doesn't. GREED ruins it all.
ReplyDeleteTo understand this you need only go back to Lee Atwater and Newt Gingrich who developed the "scorched earth" political philosophy -- before that time though there may have been strong philisophical differences between the parties, no difference was too big that the welfare of the country didn't come first. Beginning with the "Gingrich revolution" compromise came to be seen as a weakness among Republicans and that is where we stand today...Just look at the vitriolic reaction from Republicans when Chris Christie committed the unpardonable sin doing what was best for his state by working with the president
ReplyDeleteLong story short. Democrats believe in the scientific method and Republicans "believe".
ReplyDeleteYes, the GOP do speak a different language, the language they speak is lies and distortion, the language they speak is double-talk to promote the upward concentration of wealth, a 30 year trend in this country.
ReplyDeleteThey mask it in the misdirection of "personal responsibility" and "individual initiative" but, in the end, it's all lies. You have one party that believes in governance and one party that simply does not, that simply wants to sell out to the highest corporate bidder.
Name me one industrial segment that has not benefited from government start up seeding? (and no, the porn industry does not count).
The rational majority understands that government exists to lay the foundation of infrastructure and development that the private market overlays itself unto, with both benefitting from it. It is only the hopelessly misinformed that cling to the myth of "the self-made man".
No one is a self-made man, unless they are a medical marvel that dropped out of the womb fully-formed, with a digital Rolodex full of key business contacts, all of us are the beneficiaries of those who came before us, and the government programs that paved that road on our behalf.
The right wing ideology, at its roots, is based on fear instead of reason
ReplyDeleteNo president in US history has ever been handed such a mess as Obama inherited from the disasterous Bush administration in which the economy was in absolute free fall, the GDP plunging 9% in just one quarter. That's equivalent to THREE years of robust growth literally wiped out in three months! US foreign policy was in a shambles, and 750,000 jobs were being lost each and every month.
ReplyDeleteJust go back to Sept. of 2008 to honestly admit that Obama & company have performed a veritable miracle; we are much better off today than we should have been able to expect we would be, when viewed from the bottom of that deep chasm 4 years ago.
Over 5 million private sector jobs have been created---over three years of steady job creation.
ReplyDeleteThe audience for Limbaugh ( OxyContin addicted alcoholic, sexual and racially bigoted, old white dude that's wed to a woman young enough to be his grandchild) Fox News (nonfactual, biased, conjecture, lies and half-truths) and the editorial pages of Wall Street Journal have the demographics of the core Republican base: middle-aged white men, churchgoers (non-spiritual) and hateful, bigoted Southerners.
ReplyDeleteGOP 'partially' to blame. They dug the fiscal hole, they set up a tax policy that resullted in the enrichment of a few and the impoverishment of most. Their lessaiz-faire regulatory policies crashed the economy, they doubled the size of the war budget and engaged in foreign wars of choice. They despise the poor, the working man, and the civil servant. They place corporate interests above citizen interests. Yeh, I'd say the GOP is 'partially' to blame
ReplyDeleteP. T. Barnum . . . The worst part about elephants is cleaning-up their messes
ReplyDeleteThe Republican Record:
ReplyDeleteTax companies that ship jobs overseas - BLOCKED
The Dream Act - BLOCKED
Political Ad disclosure Bill - BLOCKED 2x
Small Business Jobs Act - BLOCKED 2x
Anti- Rape Amendment - BLOCKED
Benefits for Homeless Veterans - BLOCKED
Affordable Healthcare for America - Voted 33x to Repeal
Healthcare for the 9/11 First Responders - BLOCKED
The Jobs Bill - BLOCKED
Wall Street Reform - BLOCKED
Oil Spill Liability - BLOCKED
Immigration Reform - BLOCKED
Fair Pay Act of 2009 - BLOCKED and DEFEATED
Unemployment Extension Bill - BLOCKED
VETERANS JOBS BILL- BLOCKED
100s of Judge appointments - BLOCKED
Violence Against Womens ACT - BLOCKED
Bills obstructed by the Republicans AND AynRandPaulRyan
Delete:
H.R. 466 – Wounded Veteran Job Security Act became H. R. 2875.
H.R. 1168 -- Veterans Retraining Act
H.R. 1171 – Homeless Veterans Reintegration Program Reauthorization
H.R. 1172 -- Requiring List on VA Website of Organizations Providing
Scholarships for Veterans
H.R. 1293 -- Disabled Veterans Home Improvement and Structural
Alteration Grant Increase Act of 2009
H.R. 1803 -- Veterans Business Center Act
H.R. 2352 – Job Creation Through Entrepreneurship Act
For the Last Time, Fannie and Freddie Didn't Cause the Housing Crisis
ReplyDeleteThe housing bubble occurred during a period when Fannie and Freddie's market share of high-risk mortgages dropped.
1. A SUBPRIME DEFINITION OF 'SUBPRIME'
First, central to Wallison's argument that affordable housing policies (including those advocated by Rep. Frank in 1992) caused the mortgage crisis is his claim that the federal government is responsible for 19.2 million "subprime" mortgages (with Fannie Mae and Freddie Mac being responsible for 12 million of those). But what Wallison fails to tell the Atlantic's readers is that he is using his own made-up definition of "subprime," a definition that no one outside of his think tank, the American Enterprise Institute, uses. By way of comparison, the non-partisan Government Accountability Office has estimated that there were only 4.58 million subprime and other high risk loans outstanding, with very few of these attributable to the federal government.
http://www.theatlantic.com/business/archive/2011/12/for-the-last-time-fannie-and-freddie-didnt-cause-the-housing-crisis/250121/
Importantly, as I've argued elsewhere, Wallison's vastly expanded definition of "subprime" does not stand up to serious scrutiny. In fact, the overwhelming majority of the "subprime" loans Wallison attributes to the federal government have defaulted at about the same rate as the national average. This delinquency rate is about one-third the rate of actual subprime mortgages.
DeleteWallison also omits the fact that most of the "subprime" mortgages he attributes to federal affordable housing policies could not have been motivated by these policies, either because the loans were ineligible (typically because they were made to higher-income borrowers) or because the lenders were not subject to these policies (such as in the case of the non-bank lenders, which did not have any applicable federal affordable housing requirements; non-bank lenders made up 24 of the top 25 subprime lenders in 2006).
2. TIMING IS EVERYTHING
Second, Wallison fails to inform his readers that Wall Street's "private-label securitization" of mortgages, which objective analysts identify as the primary source of most subprime and other high-risk loans, experienced a dramatic increase in market share that was exactly contemporaneous with the housing bubble, rising from about 10 percent market share in 2003 to nearly 40 percent by 2006. Overall, loans originated for private-label securitization have defaulted at about six times the rate of Fannie and Freddie loans. Indeed, Wallison does not explain--cannot convincingly explain--why the housing bubble occurred during a period when Fannie and Freddie's market share dropped precipitously. Wallison's answer to this central problem with his thesis is simply to claim that the housing bubble began in the early 1990s (Gretchen Morgenson and Joshua Rosner, who advance a similar argument about the central role of Fannie and Freddie's affordable housing goals in the housing bubble in their book Reckless Endangerment, deal with this problem in a different, but equally anemic way--claiming that Fannie and Freddie created a "cultural" shift in mortgage banking, teaching Wall Street that lobbying and increased risk-taking could lead to greater profits).
3. WHAT CAUSED THE COMMERCIAL BUBBLE?
DeleteThird, Wallison ignores the parallel bubble-bust cycle we experienced in commercial real estate, which does not have affordable housing policies of the sort he criticizes for Fannie and Freddie. Commercial real estate values experienced a peak-to-trough price decline of 45 percent, which was considerably worse than the 33 percent peak-to-trough price decline we saw in residential real estate. If, as Wallison contends, it was affordable housing policies that caused the residential real estate bubble, then what caused the bubbles in commercial real estate? Moreover, why did we have similar surges in credit liquidity in student loans, auto loans, and credit cards? The mainstream narrative advanced by Rep. Frank and most others--that it was unregulated securitization on Wall Street that drove the financial crisis--explains these parallel bubbles fairly well; the argument advanced by Wallison does not.
Moreover, as Wallison's fellow Republican-appointed commissioners on the FCIC noted, many other countries, including the United Kingdom, Australia, Ireland, and the United Kingdom, all had contemporaneous housing bubbles. Again, the mainstream narrative--that poorly regulated new forms of financing drove asset bubbles--explains this fact rather well; Wallison's argument does not.
In short, there are many reasons, of which I've provided just a few, why Peter Wallison's argument has been rejected by his fellow Republican-appointed FCIC commissioners.
Unfortunately, some people will, for ideological and other reasons, always believe that any market failures must necessarily be the fault of government intervention, no matter how convincing and overwhelming the evidence is against this proposition. I believe we should join with the more nuanced view taken by Rep. Frank, who has rejected the proposition that U.S. housing policies caused the financial crisis, while at the same time acknowledging that these policies were flawed and need major revisions.
Dear GOP: Fannie, Freddie Did Not Cause the Financial Crisis
DeleteIt's time to put to rest a lingering myth that, all evidence to the contrary, just won't die. On the Senate floor this morning, Senate Minority Leader Mitch McConnell (R-Ky.) repeated, for the umpteenth time among Republicans and conservatives, a pernicious misconception that places most, if not all, of the blame for the financial crisis on the government-sponsored housing corporations, Fannie Mae and Freddie Mac:
"[The financial reform bill] does nothing—nothing—as I indicated, to rein in Fannie Mae and Freddie Mac, the main protagonists in the financial meltdown. This is absolutely worse than irresponsible; it's the legislative equivalent of wrongful conviction."
Not only is McConnell's basic grasp of storytelling wrong—if Fannie and Freddie are to blame, shouldn't they be the antagonists?—but his understanding of what caused the financial crisis is deeply flawed. Sadly, this misconception is a longstanding meme among Republicans and conservatives.
In 2008, then-Republican presidential candidate John McCain said Fannie and Freddie were "the catalyst for this housing crisis" and thus the spark that ignited the broader economic meltdown. House Majority Leader John Boehner has said, "How you can attempt to fix [the financial system] without going to the root of the problem, Fannie Mae and Freddie Mac, is really beyond me." And a roster of conservative pundits has played the Fannie-Freddie blame game so many times it's hard to keep track.
DeleteBut a look at the actual data shows that Fannie and Freddie—while certainly plagued with problems—are not the root causes of the subprime mortgage meltdown nor the financial collapse. First, context: Fannie and Freddie's roles, in part, consisted of buying up lots of mortgages in the secondary mortgage markets, i.e., taking them off the books of mortgage originators, and allowing those originators to extend more credit to potential homeowners. Over time, the two GSEs' positions as secondary purchasers of mortgages was used to try to expand homeownership to groups of Americans that traditionally didn't have access to this kind of credit—namely, low-income citizens.
Now to Barry Ritholtz. An financial expert and wildly popular blogger, Ritholtz has written time and time again about the lunacy of blaming Fannie and Freddie. He's so sure of his position that he's offered $100,000 to anyone who can prove him wrong. Here's Ritholtz debunking the Fannie and Freddie meme:
DeleteThe origination of subprime loans came primarily from non-bank lenders not covered by the [Community Reinvestment Act, a law pushing the two GSEs to purchase more loans in the secondary markets and thus expand access to housing loans to low-income neighborhoods];
The majority of the underwriting, at least for the first few years of the boom, were by these same non-bank lenders;
When the big banks began chasing subprime, it was due to the profit motive, not any mandate from the President (a Republican) or the Congress (Republican controlled) or the GSEs they oversaw;
Prior to 2005, nearly all of these sub-prime loans were bought by Wall Street—NOT Fannie & Freddie;
In fact, prior to 2005, the GSEs were not permitted to purchase non-conforming mortgages;
The change in FNM/FRE conforming mortgage purchases in 2005 was not due to any legislation or marching orders from the President (a Republican) or the the Congress (Republican controlled). It was the profit motive that led them to this action.
http://www.motherjones.com/mojo/2010/05/dear-gop-fannie-mae-freddie-mac-cause-financial-crisis-subprime-mortgage-gse
The GOP believe this stuff, they will continue to repeat, and no amount of data to the contrary will change their rhetoric or their emotional positions.
ReplyDeleteBush was able to keep the GOP coalition together after 9/11:
1) ending family planning support where abortion was mentioned in foreign countries for the religious-minded…
2) tax cuts for the uber wealthy (damn the fiscal consequences)
3) re-created the Defense coalition with the “War on Terror”
Do free markets need an umpire as ascribed by Milton Friedman: "But we cannot rely on custom or conscious alone to interpret and enforce the rules; we need an umpire. These then are the basic role of government in a free society; to provide a means where we can modify rules, to mediate differences among us on the meaning of rules, and to enforce compliance with the rules on the part of those few who otherwise would not play the game."
ReplyDeleteRep. Frank wrote:
ReplyDelete"Under Republican President George W. Bush, many federal agencies turned a blind eye to activities which would later precipitate the global financial meltdown. The Securities and Exchange Commission decided to allow the nation's largest financial institutions to "self-regulate;" the Federal Reserve under Alan Greenspan declined to use its power to regulate subprime mortgages; the Comptroller of the Currency decided to preempt state consumer laws on subprime mortgages."
This last point referencing the obscure Office of the Comptroller of the Currency is important because President Bush actually made it illegal for state attorneys general to crackdown on predatory lending by mortgage lenders. According to former Gov. Elliot Spitzer in a editorial in the Washington Post: "The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules."
http://www.huffingtonpost.com/marvin-meadors/fannie-mae-freddie_b_1549411.html
Time's Carney falsely suggested Clinton "pin[ned] the blame for the mortgage crisis on Democrats"
ReplyDeletehttp://mediamatters.org/research/2008/10/01/times-carney-falsely-suggested-clinton-pinned-t/145366
For the Last Time, Fannie and Freddie Didn't Cause the Housing Crisis
ReplyDeletehttp://www.theatlantic.com/business/archive/2011/12/for-the-last-time-fannie-and-freddie-didnt-cause-the-housing-crisis/250121/
Private Wall Street Companies Caused The Financial Crisis — Not Fannie Mae, Freddie Mac Or The Community Reinvestment Act
ReplyDeletehttp://politicalcorrection.org/factcheck/201110140001
2005, Republicans and blue dogs joined efforts to force Fannie & Freddie Mac to take on trillions in mortgage debts from private lenders, while relaxing the rules that clearly state that bad loans, when discovered, must be bought back by the originating lender. After 2005, the private sector refused to buy back these loans.
ReplyDeleteYet republicans:
ReplyDeleteFought the new banking legislation while watering it down.
Campaigned on repealing it and lost.
And continue to fight regulation and oversite.
Again, who's representing you?
Published: July 28, 2005 at 4:03 PM
ReplyDeleteWASHINGTON, July 28 (UPI) -- White House efforts to trim the portfolios of mortgage lenders Fannie Mae and Freddie Mac drew criticism from the Senate's top Democrat.
Sen. Chuck Hagel, R-Neb., introduced a measure now headed for a floor vote, to create an independent federal regulator with enhanced authority over Fannie Mae, Freddie Mac and the Federal Home Loan Bank.
The measure is seen as a way to trim the portfolios of the entities, which have come under attack from Federal Reserve Chairman Alan Greenspan among others, as bloated.
"The legislation from the Senate banking committee, passed today on a party line vote by the Republican majority, includes measures that could cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership," said Sen. Harry Reid, D-Nev., the Senate Minority Leader Thursday.
"While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process," Reid said.
Read more: http://www.upi.com/Business_News/2005/07/28/Dems-rip-new-Fannie-Mae-regulatory-measure/UPI-20231122581039/#ixzz2Kl1ETHiu
ReplyDelete7 of the Nastiest Scams, Rip-Offs and Tricks From Wall Street Crooks
How many high-level Wall Street players have been put in jail for the crimes that led to the financial crisis? Not. Even. One.
http://www.alternet.org/story/153530/7_of_the_nastiest_scams,_rip-offs_and_tricks_from_wall_street_crooks?page=0%2C3&akid=8055.268655.3o_hvx&rd=1&t=2
; if you are left with a purchasing power far beyond what is required to live the most indulgent of lives then your tax rate is irrelevant. People who are motivated to accrue ever-more wealth beyond these excesses are deficient, and are using a busily-bodied chase as a surrogate to broader developmental obligations.
ReplyDeleteLoans that were under government regulation did better than private loans, especially if they were regulated by the "Community Reinvestment Act."
ReplyDeleteI swear to God that this virus of conservatives not believing the facts right there in front of them is contagious-- and you rd have caught it big time. Just because you say something it doesn't change FACTS and make it so--that is how three year olds expect life to be.
ReplyDeleteKeynes wrote "The End of Laissez Faire" in 1926. He was correct then, and his insight remains more valid than any economics that conservative Libertarians propound ad infinitum and ad nauseum. Laissez Faire is nothing more than a childish Christmas wish of no substance; just hope and myth, and smoke and mirrors. Fails every time we try even the tiniest bit.
ReplyDeleteAll told, the Center for Public Integrity reported in 2011, mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.
ReplyDeletea large portion of the the riskiest loans were taken out by speculators looking to cash in on the bubble. It wasn't just the underprivileged, financially illiterate primary residence seekers who were being pressured to sign the papers in same the way a car dealership pressures its customers. Had investors been informed that the securities they were buying were backed by speculative loans, it's unlikely that the bubble would've been as bad as it was.
ReplyDeletethey were told by the banks that the loan was affordable?
ReplyDeleteOr did you miss the part when home owners signed papers thinking it was a 30 year fixed rate, when page eleventy-tween said in tiny type "BTW this is an adjustable ARM that's going to skyrocket in 3 years"?
And Banks, while making record profits from the sale of mortgages to people who were “[stupid] enough to knowingly buy houses they [couldn’t] afford”, intentionally made record amount of loans to people who were “[stupid] enough to knowingly buy houses they [couldn’t] afford”.
ReplyDelete"Fannie Mae and Freddie Mac tried to benefit from subprime lending only when the housing boom was well under way, The Huffington Post's Ben Hallman writes in a new blog post. And their loans were often less risky, Hallman writes:
ReplyDeleteAll told, the Center for Public Integrity reported in 2011, mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie."