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A mother’s perspective–Sarah Palin concerned for Trig 8 August, 2009

Posted by David Anderson in Healthcare, Sarah Palin.

Former Governor Sarah Palin is concerned about what some of the health care proposals mean to her son with special needs. She calls one potential plan evil because it could short change the disabled.

Hidden in the numbers 4 August, 2009

Posted by David Anderson in Budget, federal, Tax Hikes.
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You all saw the news about plummeting tax receipts to the federal government. Revenues are down 18% over last year, but what you may not have noticed is social security has moved closer to payout more than it brings in. Estimates put it closer to the worst case scenario of 2013. Democrats blocked President’s Bush’s reform effort. Now they will need their own on top of everything else. Demagoguery has a price.

Democrats you own this problem now solve it.

Sarah Palin on Cap and Tax 14 July, 2009

Posted by David Anderson in Economic Policy, Energy, Sarah Palin.
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Governor Sarah Palin wrote on the dangers of the Cap and Trade proposal in the Washington Post today.

I am deeply concerned about President Obama’s cap-and-trade energy plan, and I believe it is an enormous threat to our economy. It would undermine our recovery over the short term and would inflict permanent damage.

American prosperity has always been driven by the steady supply of abundant, affordable energy. Particularly in Alaska, we understand the inherent link between energy and prosperity, energy and opportunity, and energy and security. Consequently, many of us in this huge, energy-rich state recognize that the president’s cap-and-trade energy tax would adversely affect every aspect of the U.S. economy.

There is no denying that as the world becomes more industrialized, we need to reform our energy policy and become less dependent on foreign energy sources. But the answer doesn’t lie in making energy scarcer and more expensive! Those who understand the issue know we can meet our energy needs and environmental challenges without destroying America’s economy.

Job losses are so certain under this new cap-and-tax plan that it includes a provision accommodating newly unemployed workers from the resulting dried-up energy sector, to the tune of $4.2 billion over eight years. So much for creating jobs.

In addition to immediately increasing unemployment in the energy sector, even more American jobs will be threatened by the rising cost of doing business under the cap-and-tax plan. For example, the cost of farming will certainly increase, driving down farm incomes while driving up grocery prices. The costs of manufacturing, warehousing and transportation will also increase.

The ironic beauty in this plan? Soon, even the most ardent liberal will understand supply-side economics.

Lessons from the Lost Decade: Protecting Yourself 9 July, 2009

Posted by David Anderson in Economic Policy.
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What if the policy makers don’t make the right decisions? How can we protect ourselves?

The first lesson has to be avoid excessive debt. Outside of the home, I am not a big believer in debt. If you can’t pay your credit cards off in two months, you have a problem. It is better not to have a car payment. If you do, keep it 4 years or under.

The best way to keep from getting into debt unexpectedly is to save. Emergencies happen. You will either let Visa be your emergency fund or you will have a real one. Every family should make their first priority to have $1000 in an emergency fund then eventually build it to a minimum of 3 months of expenses.

The second lesson is that stocks can be a good investment, but don’t fall into a buy and hold mentality. Watch your investment’s fundamentals (not price fluctuations). Buying Worldcom or Enron and holding them would not have been smart. The best way to protect your IRA’s and other investments into individual stocks is to use protective puts. The best way to afford them is to combine them with covered calls.

Don’t be afraid to use dollar cost averaging. Buying good stocks when they are down is a great deal.

We have to take action locally to encourage business formation. In spite of tough budgets, we need to ensure that we have a the infrastructure to take advantage of the resources available to encourage economic development.

Advocate for sound policies. Educate your leaders. Our tax code is our number two enemy. The fact that we spread out depreciation and equipment as much as we do discourages expansion in this country. The fact that we tax our country’s companies and allow imports to go almost untaxed hurts us. The fact that we are geared to consumption and very little to savings makes long term growth unstable. All of these problems are solved with the Fair Tax. Our biggest enemy is the ignorance of the public and the policymakers about the nature and value of free markets.

We need to join together with like minded individuals. Whatever one’s view of Glenn Beck, he is scaring the establishment because he understands this fact. He went from talk to action with his support of the tea parties and the 9/12 project. That is the key for all of us. We need to organize to effect the political process not just in the parties but forming PAC’s, 527’s and (c) 4 organizations. There is a PAC citizens for prosperity getting off the ground. It needs to be supported. The only way that we will protect our future prosperity from government is to invest in a better government.

60% say no to second Stimulus 7 July, 2009

Posted by David Anderson in Economic Policy.
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60% of voters surveyed oppose a new federal stimulus bill. This may explain the administration’s reluctance in asking for another one. Voters are divided into three camps about the first one. 31% say that it hurt the economy, 30% say that it helped, and the rest are not sure. That would explain why only 27% of the people favor another one. Japan had ten stimulus packages with little effect during its lost decade.

The Lessons from the Lost Decade Pt. 2 7 July, 2009

Posted by David Anderson in Economic Policy.
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What are the policy do’s and don’t’s of which we need an awareness. I want to put a particular emphasis on lesson 5 of the Japanese scholars, “Until the focus of disease is removed by surgery, no macroeconomic medicine will be effective.”

Do work with other nations to allow an increase in money supply without panicking them. Japan only came out of the “Lost Decade” by an aggressive monetary policy.

Only a comprehensive monetary policy which allows the market to clean up the bad assets and provides enough liquidity to do so will achieve it. The financial institutions need to be able to borrow at near zero rates from the Fed not at the rates in the TARP. Even though Americans hate to admit it, South Korea showed that aggressively dealing with troubled assets is vital. It had a rough couple of years, but it returned to strong growth while Japan remained mired in difficulty.

Keynes is dead. Lesson 4 of the Japanese scholars was that fiscal stimulus does not work in these circumstances. We have to make economic policy based first upon if it helps business to flourish not based upon some left wing social engineering. The Great Depression became long because “Others say government did not do enough to restore business confidence, or did too much to damage it, piling on taxes, regulation and labor unions,” as Howard Jenkins put it. I believe that a good fiscal policy helps to blunt the trauma and is desirable. I believe that tax cuts, aid to states to prevent more unemployment, accelerating existing projects, increasing food stamps, unemployment, medicaid, tax credits for purchases like fuel efficient cars and first time home buyers, and other safety net programs are desirable. They help keep the economy from collapsing while we allow a couple of years for the monetary policy and the markets to work their magic. Otherwise the public panics. When that happens the sanity of the market could be endangered. What I do not believe is that we can spend our way into prosperity. The stimulus money should have been closer to the GOP version and less like the Democrat version. It could have been a little more than half what it was and the rest of the money should have addressed foreclosures which goes back to lesson 4.

We need to address foreclosures. We should have a window where no doc modifications of ARM’s (adjustable rate mortgages) convert to fixed rates. Then we could give banks tax credits to compensate for the opportunity loss. Trying to deal with the bank balance sheets first without dealing with the problem which caused the balance sheets to be in trouble is backward. The second step seems to be bankruptcy reform. We have to allow bankruptcy judges to modify mortgages in Chapter 13. It used to be allowed until the Carter Administration as a trade off for the Community Investment Act and other bills. It also protected the banks when they were forced to give out 21% mortgages. The only way to save the banking industry is to allow real value to set the assets and income to start flowing on half of the non performing loans. That is by loan modification inside and outside the bankruptcy court. Those who won’t take the second and third chances will just be foreclosed upon. We can allow big government to intervene and try to redo the balance sheets of 80 million people all of whom are different, or we can allow people to do it themselves. Not taking the former approach will lead to a decade’s long reliance on the government by millions at a staggering cost.

A final difference between today’s bust and most other big banking crises is the importance of household debt. Historically, serious banking busts have mainly involved overborrowing by firms. In Japan, for instance, corporate borrowing soared in the 1980s against the collateral of rising share and property prices.

Today, however, household profligacy, which underpins much of the other debt, has been the problem. After the dotcom bust, American firms held back. Virtually all the rise in non-financial debt since 2000 was among households, as Americans tapped into the rising equity in their homes. Although troubled business debts, such as commercial property, are rising, households are the worst hit.

That has important implications. Household balance-sheets are more difficult to restructure than corporate ones, which involve far fewer people. Politically, the process raises questions of fairness. How far, for instance, should taxpayers bail out reckless homeowners who bought mortgages they could not afford? On the other hand, the economic dislocation from unwinding a household-debt binge may be less disruptive than restructuring swathes of firms. As Anil Kashyap of the University of Chicago points out, one reason Japan was so loth to acknowledge the depths of its banking problems was the knowledge that a banking clean-up would require a large-scale restructuring of Japanese firms which, in turn, would throw many people out of work. Restructuring household debts may be political dynamite, but it would not require a wholesale remaking of corporate America.
Nonetheless, the rebuilding of American households’ balance-sheets is likely to force a reliance on government demand that is bigger and longer-lasting than many now imagine.

The don’t’s are simple. Don’t raise taxes as the Democrats plan to do when the Bush tax cuts expire. Instead let’s have comprehensive tax reform (pt 3). The Japanese tried raising taxes twice and each time triggered real recessions. Don’t keep Zombie businesses on the public dole. Don’t pile up public debt in the vain hope of spending your way to prosperity. Don’t discourage the markets from reshuffling resources to the efficient. Don’t engage in anti-growth energy policies like Kyoto.

What was the Lost Decade of Japan and what can we learn from it 7 July, 2009

Posted by David Anderson in Economic Policy.
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The Economist said earlier this year that the lost Decade may look good in comparison to what may be in store for us. It may be smart for us to look closer at the Lost Decade. I plan a three part examination.

The nation of Japan suffered through over a dozen years of almost no economic growth. The nation had a huge increase in public debt as the government put up one stimulus after another. It protected banks as too big to fail. It tried to protect favored corporations. All of this was to no avail. Japan 101 described the problem.

The economic miracle ended abruptly at the very start of the 1990s. In the late 1980s, abnormalities within the Japanese economic system had fuelled a massive wave of speculation by Japanese companies, banks and securities companies. Briefly, a combination of incredibly high land values and incredibly low interest rates led to a position in which credit was both easily available and extremely cheap. This led to massive borrowing, the proceeds of which were invested mostly in domestic and foreign stocks and securities.

Recognizing that this bubble was unsustainable (resting, as it did, on unrealizable land values – the loans were ultimately secured on land holdings), the Finance Ministry sharply raised interest rates. This popped the bubble in spectacular fashion, leading to a massive crash in the stock market. It also led to a debt crisis; a large proportion of the huge debts that had been run up turned bad, which in turn led to a crisis in the banking sector, with many banks having to be bailed out by the government.

It sounds very similar to our current crisis. There are many lessons that people have drawn from the Japanese economic problem in the nineties. First, allow the market to work. No one should be considered too big to fail. You may have to manage it but don’t stop it. Second, it is okay to recapitalize institutions. Third, it is not caused by lack of demand and fiscal stimulus by spending won’t work. Fourth, avoiding two years of pain is not worth a decade and a half of distress. Fifth raising taxes is not smart. Sixth, monetary policy matters most. Having enough liquidity in the system is vital because credit will no longer increase the money supply.

The power of a comprehensive monetary strategy can not be over stated. If our policy leaders or the Republican opposition wants to be serious about offering solutions, they must become serious about developing one and marketing it to the public. Merely spending like the Democrats wish to do or cutting taxes like Republicans wish to do (as vital as tax policy is) will not solve the current problem.


Taxes, Taxes, and ,more Fees 30 June, 2009

Posted by David Anderson in State, Tax Hikes.
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In his inaugural speech, Lt. Governor Matt Denn blasted the late President Reagan for encouraging people to hold their government responsible results. He called for sacrifices of us but not from the governing class. That was a signal of what was to come– taxes, taxes, and more fees.

The Democrats in the Delaware General Assembly had to accept the concept of sunset clauses to many of their tax bills in order to avoid a government shut down. Even then they voted down 1 year sunsets and voted in 4 year sunsets. This allowed them to get 1 republican vote so they could get their super majority. We have hundreds of millions in tax increases and tens of millions more in fee increases. Death taxes, income taxes, gross receipts taxes, cigarette taxes, and fees on practically everything are going up. If you get too depressed about it, and go drinking (not recommended)  you had better hurry because that will be taxed too as soon as they can get one more vote. The only other thing left on the table are certain corporate taxes that take a 2/3 majority.

Democrats had to agree to cutting the state workforce by another 2% through attrition. There is no early retirement so far. There is no reform of the purchasing system that is losing us $200,000,000 a year which happens to equal the income tax hike. Various posts here have shown savings of over $300,000,000 which could be achieved before cutting a single service or laying off one person. The irresponsibility of funding the addiction instead seeking treatment has to stop. The sad fact is that it will not stop without some tax fighting reformers in legislative hall.

When the choice was between reforming government or taxing the people, the Democrats choose taxing the people. They couldn’t be persuaded to give the little guy a break even though he was hurting any more than a shark could be persuaded not to go after a bleeding fish. They should be ashamed. All I can say is that it is on. It is time to retake the house. 5 to survive in 2010.

They say cut spending first. 23 June, 2009

Posted by David Anderson in Budget, State, Tax Hikes.
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Thomas H. Kovach, House of Representatives

North Wilmington Republican Representatives Tom Kovach, Greg Lavelle, and Debbie
Hudson joined together today to call on the Legislature to reject increases in the personal
income tax and short-sighted state employee pay cuts, instead promoting meaningful and
sustainable reductions in state expenses.

Representative Lavelle (R-Sharpley) said that, “We recognize that we must make difficult
decisions in order to move Delaware beyond this current budget crisis. Balancing the
budget on the back of Delaware’s working families through the administration’s
proposed tax increases is simply unacceptable. The budget proposals offered by the
Democrats are too quick to increase the tax burden and fall far short of the necessary,
sustained and sustainable cuts in state government. Without these changes, tax
increases like we are seeing now will become an annual event.”

The Legislators argue that state government needs to operate in a fashion more like that
of the private sector. According to Representative Kovach (R-Brandywine East), “We
must address the government’s economic problems in the same fiscally responsible
manner that the private sector does. This means we must not raise what we charge our
customers, but we must cut staff and spending to balance the budget, while keeping the
necessary, good employees at their current pay.”

The Legislators said that the current proposal of state employee salary reductions simply
masks the real problem: an oversized and unsustainable state government.
“The alleged savings on a 2.5% state employee pay cut result in approximately $30
million for the state and will last for one year,” said Representative Hudson (RFairthorne).
“Not only is this reduction significantly less than 1% of the state’s operating
budget, the Democrats now seeking to impose this pay cut will surely seek to avoid the
same cut in the upcoming election-year. The resulting shortfall will have to be paid for
with yet another increase in personal income tax for the majority of Delawareans.” In
their battle against irresponsible taxes, all three agreed that they will also fight to put a
one-year “sunset” to any Democratic imposed tax increase—a proposal the Democrats
have already rejected.

“The tax increases pushed by the Democrats shift the burden from the state to Delaware’s families and small businesses,” said Rep. Kovach. “The proposed personal income tax increases, which will result in an additional burden on working-class families and individuals making over $50,000, is a terrible idea at a time when many are trying their best just to make ends meet. Coupled with the 25% property tax increase imposed by New Castle County, these increases will be unbearable to the average citizen.”
Republican-offered solutions, such as the elimination of redundant school administrative
positions, cutting the Community Transportation Fund, and a temporary reduction in the
prevailing wage paid by the state to contractors (often from out-of-state), have been
largely ignored by the administration. Other possibilities include exploring a tax amnesty
program and offering an efficiency rewards program.

“Quite simply, we must require that the state reduce the size and expense of government
and avoid the placing the burden of oversized and bloated state government on the
taxpayers,” said Rep. Kovach. “There are plenty of solutions that have been left off the
table, contrary to what the Governor and House Democrats have claimed,” said Rep.

Rep Lavelle, Hudson, and Kovach stand firm together, “We remain opposed to all tax
increases until the government can certify that it has taken all immediately practical
actions to reduce waste and inefficiency. At this point, we are not even close.”

Senior Exemption at Risk 23 June, 2009

Posted by David Anderson in Action Item, State, Tax Hikes.
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Today, I spoke with a contingent a Legislative Hall regarding the repeal of the Senior exemption. Our group opposes it.

Senator Bonini said, “Its absolutely true – “means testing” (see eliminating for most seniors) the up to $500.00 tax exemption for Senior Citizens is part of Governor Markell’s proposed budget solutions (see his March budget speech). Per usual, there hasn’t been a bill yet – probably will be a late-night June 30th vote. This is a tax increase targeting Senior Citizens exclusively. I don’t know the current status of the proposal, but I know its in the Governor’s and the Democrats budget numbers”.

I think an interesting take is by Frank Knotts.

It is being floated in the usual Delaware style, here in Delaware our legislators don’t just come out and sponsor a bill , first they let it get around that they might sponsor a bill , or in this case might slip one in in the midnight hours at the end of the legislative session.

This time it has to do with the repealing of the tax exemption for seniors of up to five hundred dollars of the school portion of their property tax.

No one is willing to drink the political poison in public yet by saying that they support this idea, though some have said it is possible that a bill of this type could get slipped in at the end of the session. Also Gov. Markell has hinted at support of such a proposal.