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This Tax Is for You –

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This Tax Is for You –

For Oregon to enact punitive taxes on its homegrown beer industry makes as much sense as Idaho slapping an excise tax on potatoes or for New York to tax stock trading. Even without the tax increase, taxes are the single most expensive ingredient in a glass of beer, according to the Oregon Brewers Guild.

But Democrats who run the legislature are desperate for the revenues to help pay for Oregon’s 27.9% increase in the general fund budget last year. If they have their way, every time a worker steps up to the bar and orders a cold one, his tab will rise by an extra $1.25 to $1.50 a pint. Half of these taxes will be paid by Oregonians with an income below $45,000 a year. Voters might want to remember this the next time Democrats in Salem profess to be the party of Joe Six Pack.


Written by Ridgeliner7

Wednesday, May 13, 2009 at 11:58:49 AM

J-O-B-S or T-A-X-E-S: We Can’t Have Both

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By Brian Sullivan

Higher taxes and job creation are the oil and water of economics.  They simply don’t go together.

It’s a basic concept.  The more a business gives to the government, the less free cash it has to use on new salaries.   It’s why John McCain wants to cut the corporate tax rate to 25% from 35%.   That extra 10% can go toward hiring a lot of workers and keeping jobs in the U.S.   Remember America has the 4th highest corporate tax rate in the world.   It’s no wonder jobs continue to move overseas.

This is not a partisan argument.   Many Democratic leaders feel the same way and understand the damage higher taxes will mean for job creation.  Consider this excerpt from today’s Wall Street Journal:

The Obama plan is an incentive to hire fewer workers.   Barack Obama declared last week that his economic plan begins with “one word that’s on everyone’s mind and it’s spelled J-O-B-S.”. This raises the stubborn question that Senator Obama has never satisfactorily answered: How do you create more jobs when you want to levy higher tax rates on the small business owners who are the nation’s primary employers?  Loyal Democrats have howled over the claim that small businesses will get soaked by the Obama tax plan, so we thought we would seek an authority they might trust on the issue: Democratic Senate Finance Chairman Max Baucus of Montana.

Here is what Mr. Baucus wrote in a joint press release with Iowa Republican Charles Grassley on August 20, 2001, when they supported the income tax rate cuts that Mr. Obama wants to repeal: “. . . when the new tax relief law is fully phased in, entrepreneurs and small businesses — owners of sole proprietorships, partnerships, S corporations, and farms — will  receive 80 percent of the tax relief associated with reducing the top income tax rates of 36 percent to 33 percent and 39.6 percent to 35 percent.”. Then they continued with a useful economics tutorial: “Experts agree that lower taxes increase a business’ cash flow, which helps with liquidity constraints during an economic slowdown and could increase the demand for investment and labor.”. Twelve Senate Democrats voted for those same tax cuts.  And just to be clear on one point: An increase in “the demand for investment and labor” translates into an increase in J-O-B-S.

So if lowering these tax rates creates jobs, then it stands to reason that raising these taxes will mean fewer jobs.  From 2003 to 2007 with the lower tax rates in place, the U.S. economy added eight million jobs, or about 125,000 per month.  The Small Business Administration says small business wrote the paychecks for up to 80% of new jobs in 2005, for example.  Mr. Obama’s tax increase would hit the bottom line of small businesses in three direct ways.

Since Senator Baucus is on the record agreeing lower taxes are good for jobs, why has he and the other Democratic leaders who voted for this suddenly clammed up?    They have either done the world’s greatest flip-flop on the impact of tax hikes on jobs, or have spoken up privately and been ignored by the Obama camp.

So that’s small business.   But what about the big boys?    If you believe the hype that big business doesn’t pay taxes, consider this: last year ExxonMobil paid more in taxes than the bottom 50% of the entire population of American taxpayers.   So if you are one that has come to believe you should hate “big oil,” consider what your tax burden would be if that $30+ billion (which is on its way to $40 billion for 2008) in tax revenue paid by Exxon suddenly dried up.

So since the Congressional record proves that many Democrats understand the relationship between jobs and taxes as well as any supply-side Republican, their silence surrounding the proposed tax increases speaks volumes about where their true interests lie.

Examining the Causes of the Credit Crisis of 2008: A Primer

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A House GOP report blames lack of Fannie, Freddie restructuring for credit crisis. While the GOP’ers declare the credit crisis to be a “complex phenonemon,” they place much of the blame on Congress’s inability to reform Fannie Mae and Freddie Mac.

While this is not the complete Minority Report, it is the Executive Summary, and worth the rather lengthy read.  Reading it, you will have (at least) as good a grasp as most Members of Congress….



Examining the Causes of the Credit Crisis of 2008

Minority Staff Analysis
U.S. House of Representatives
Committee on Oversight and Government Reform
Tom Davis, Ranking Member
October 6, 2008


I. Executive Summary

In the midst of the most serious financial crisis in a generation, some claim that deregulation is entirely to blame. This is simply not true and more importantly serves to grossly oversimplify a problem whose roots run deep and involve myriad actors and issues. The simple truth is that many share the blame, and pointing to just one person or organization does a disservice to the American people.

In a time of crisis, the American people cannot afford the same old partisan finger pointing; they need and deserve real, non-partisan oversight. We need a series of hearings that will focus on the root causes and how we can fix a system in order to avoid financial meltdowns in the future. This minority staff analysis attempts to objectively explore the causes of the financial crisis we are in and how companies like Lehman Brothers and AIG contributed to this crisis.

The current credit crisis is a complex phenomenon with its roots in a number of places involving a myriad of people and institutions. Key players and institutions include Members of Congress, well-respected members of Republican and Democratic administrations, the Federal Reserve Board, Fannie Mae, Freddie Mac, the Department of Housing and Urban Development (HUD), the Securities and Exchange Commission (SEC), the major private sector credit rating agencies, banks, mortgage brokers, and consumers.

There is no single issue or decision one can trace as a cause of the current financial crisis; rather it was multiple decisions and issues involving many actors over time that led us to where we are today. However, we can point to organizations that contributed greatly to the problem and how their role was the catalyst for others to become involved and eventually fail. Fannie Mae and Freddie Mac fall into this category. They were the central cancer of the mortgage market, which has now metastasized into the current financial crisis. With the help of a loose monetary policy at the Federal Reserve, an over-reliance on inaccurate risk assessment and a fractured regulatory system, this cancer spread throughout the financial industry.

A few key elements are critical in understanding how we got to where we are today.

The Role of Fannie Mae and Freddie Mac in Creating the Credit Crisis

* If Congress had successfully restructured Fannie Mae and Freddie Mac in 2005 after the Office of Federal Housing Enterprise Oversight (OFHEO) reported on their fraudulent accounting activities, we would likely not be in the crisis we have today. The over $ 1 trillion dollar binge into subprime and mortgage backed securities that Fannie Mae and Freddie Mac embarked upon from 2005 to 2007 would likely not have happened.



* By 2005, Federal Reserve Chairman Alan Greenspan was so concerned that he characterized the concentration of systemic risk inherent in the ever-growing portfolios of Fannie and Freddie as, placing the total financial system of the future at a substantial risk. Recent events have unfortunately proved him right.

* The transformation of Fannie Mae and Freddie Mac into the Affordable Housing Center was a laudable goal, but to push predatory subprime lending to unspeakable heights and to encourage questionable lending practices believing housing prices would continue to soar was beyond reason.

* The politicization of Fannie Mae and Freddie Mac over the last decade seriously undermined the credibility of the organizations and prevented their restructuring and reform, with Democrats viewing any attempt at curtailing their behavior as an attempt at curtailing affordable housing. Between 1998 and 2008, Fannie and Freddie combined spent nearly $175 million lobbying Congress, and from 2000 to 2008 their employees contributed nearly $15 million to the campaigns of dozens of Members of Congress on key committees responsible for oversight of Fannie and Freddie. Those who opposed the restructuring of Fannie Mae and Freddie Mac were unwittingly helping to build a house of cards on risky mortgage backed securities.

* The motivations for Fannie Mae and Freddie Mac to gamble with taxpayer money on bad nonprime mortgage bets was not entirely a matter of good intentions gone awry. Greed and corruption were unfortunately part of the equation as well. The size and growth of Fannie Mae and Freddie Mac leading up to their collapse were nothing short of astonishing. From 1990 to 2005, Fannie Mae and Freddie Mac grew more than 944% to $1.64 trillion, and their outstanding liabilities grew 980% to $1.51 trillion. These liabilities were equal to 32.8% of the total publicly-held debt of the U.S. Government, which in 2005 stood at $4.6 trillion.


Lehman Brothers, AIG and the Challenges of Statistical Risk Modeling

* Lehman Brothers didn’t cause this mess but it certainly jumped head first into trying to make money on securitizing mortgage-backed instruments. They followed on the heels of Fannie Mae and Freddie Mac and for precisely the same reasons. If we understand the initial cause of the cancer at Fannie and Freddie, then we can understand how it metastasized to Lehman Brothers, Wachovia, Countrywide, and beyond.

* AIG is somewhat different; bad management decisions were made in thinking that the mortgage-backed securities and derivatives could be insured. Yet underlying its bad decisions was the same mistaken reliance on sophisticated but inaccurate computer models, trusting the rating agencies were accurate and that Fannie Mae and Freddie Mac couldn’t possibly fail.

Regulation and the Credit Crisis



* Democrats are wrong in insisting that de-regulation is the primary cause of the financial crisis. Deregulation is not the problem, rather it is the fractured regulatory system that has banks, investment institutions, mortgage brokers, and insurance companies all being overseen by different and often competing federal and state agencies. The problem is a lack of coherent regulatory oversight that has led mortgage brokers and lending institutions to write questionable loans and investment institutions to play fast and loose with other peoples money in purchasing bad mortgage-backed assets.

* The words regulation and deregulation are not absolute goods and evils, nor are they meaningful policy prescriptions. They are political cant used to describe complex policy discussions that defy simplistic categorization. The key to successfully regulating markets is not to either create more or less regulation in an unthinking way. Government needs to design smart regulations that align the incentives of consumers, lenders and borrowers to achieve stable and healthy markets.

Credit Rating Agencies and the Practice of Rating Shopping

* Some firms that bundled subprime mortgages into securities were engaging in rating shopping – picking and choosing among each of the three credit rating agencies in order to find the one willing to give their assets the most favorable rating. Rating agencies willing to inflate their ratings on subprime mortgage-backed securities lobbied Congress to prohibit notching – the downgrading of assets that incorporate risky, unrated assets – by their competitors, on the grounds this constituted an anti-competitive practice. Unfortunately, the Republican Congress was swayed by this argument and codified it in law.

II. Mortgage Markets: A Primer

Prospective homebuyers apply for mortgages from primary market lenders such as banks, thrifts, mortgage companies, credit unions, and online lenders. Primary lenders evaluate borrowers ability to repay the mortgage based on an assessment of risk that combines such factors as income, assets and past performance in repaying loans. If a borrower does not meet the minimum requirement, the borrower is refused a loan.

Prime mortgages are traditionally the gold standard and go to borrowers with good credit who make down payments and fully document their income and assets. Borrowers with poor credit and/or uncertain income streams represent a higher risk of default for lenders and therefore receive subprime loans. Subprime loans have existed for some time but really took off in popularity around 1995, rising from less than 5% of mortgage originations in 1994 to more than 20% in 2006.  Borrowers who fall in between prime and subprime standards who may not be able to fully document their income or provide traditional down payments are sometimes referred to as near-prime borrowers. They generally can apply only for Alternative-A (Alt-A) mortgages.  Starting in 2001, subprime and near-prime mortgages increased dramatically as a proportion of the total mortgage market. These mortgages increased from only 9% of newly originated securitized mortgages in 2001 to 40% in 2006.

Subprime borrowers, in addition to being below the standard risk threshold lenders traditionally deemed creditworthy for mortgages, were increasingly taking advantage of so-called alternative mortgages that further increased the risk of default. For example, low- or zero-down payment mortgages permit borrowers who cannot afford the traditional 20% down payment on a house to still receive a loan. Instead some mortgages allow them to pay 10%, 5%, or even 3% of the purchase price of the home. The riskiest loans even allow borrowers to pay no money down at all for 100% financing. Another option is to allow borrowers to take out a piggyback or silent second loan – a second mortgage to finance the down payment. This is possible because the larger first mortgage means some lenders give borrowers a more favorable rate on the second mortgage. Interest-only mortgages are another alternative type that allows borrowers to for a time pay back only interest and no principal. However, either the duration of the mortgage must be extended or the payments amortize the remaining principal balance over a shorter period of time, increasing the monthly payment, and ultimately the total size of the loan, a borrower must repay. Negative amortization mortgages are even riskier, allowing borrowers to pay less than the minimum monthly interest payment, adding the remaining interest to the loan principal and again increasing the payments and size of the loan.

Adjustable rate mortgages (ARMs) are the most common of the alternative mortgages. ARMs offer a low introductory mortgage rate (the cost of borrowing money for a home loan; it is generally related to the underlying interest rate in the macro economy) which then adjusts in the future by an amount determined by a pre-arranged formula. There are different formulae used to determine the new mortgage rate on an ARM, but in general one can think of these new rates as being related to the performance of the U.S. economy. If interest rates go down during the introductory period of the ARM, the adjusted mortgage rate will be lower, meaning the borrowers monthly payment will go down. If interest rates go up, the borrowers monthly payment will be larger. The prevalence of ARMs as a percentage of the total mortgage market increased dramatically during the housing bubble, from 12% in 2001 to 34% in 2004.

Unlike other alternative mortgages, however, there are sound reasons for borrowers to take out ARMs, under certain macroeconomic conditions. In 1984, for example, 61% of new conventional mortgages were ARMs. However, this was a rational response to the very high interest rates at that time. High interest rates translate into high mortgage rates. This meant that borrowers at that time were willing to bet that when their mortgage rates adjusted, they were likely to adjust downward due to falling interest rates. This was a sensible bet and one that turned out to be correct.

From 2001 to 2004, however, interest rates were abnormally low because the Federal Reserve led by Chairman Alan Greenspan lowered rates dramatically to pump up the U.S. economy following the attacks of September 11, 2001. Correspondingly, from 2004 to 2006, mortgage rates on 30-year fixed-rate mortgages were around 6%, relatively low by historical standards. Borrowers responding only to these macroeconomic conditions would have been wise to lock in these rates with a traditional 30-year fixed-rate mortgage. The continuing popularity of ARMs, at least until about 2004, relates in part to the abnormally wide disparity between short- and long-term interest rates during this period. Since ARMs tend to follow short-term rates, borrowers could get these mortgages at even lower costs and, as long as they were confident that housing prices would continue to rise, plan on refinancing before their ARMs adjusted upward.

Low short-term rates until 2004 are only part of the puzzle, however. By 2005 short-term interest rates were actually rising faster than long-term rates, yet ARMs remained very popular. By 2006 housing prices had started to slow significantly and yet introductory periods remained popular. In the words of a report by the Congressional Research Service, The persistence of nontraditional terms could be evidence that some borrowers intended to sell or refinance quickly – one indicator of speculative behavior. However, the report goes on to note that, in addition to speculation, alternative mortgages were marketed as affordability products to lower income and less sophisticated borrowers during the housing boom.  Some other force was clearly at work.

III. The Role of Fannie Mae and Freddie Mac in Creating the Credit Crisis

Successive Congresses and Administrations have used Fannie Mae and Freddie Mac as tools in service to a well-intentioned policy to increase the affordability of housing in the United States. In the process, the U.S. Government created an incentive structure for Fannie and Freddie to facilitate the extension of risky nonprime and alternative mortgages to many borrowers with a questionable ability to pay these loans back. Ultimately, Fannie and Freddie may have purchased or guaranteed up to $1 trillion of risky nonprime mortgages. This, along with a healthy dose of unethical and corrupt behavior by the management of Fannie Mae and Freddie Mac, has contributed perhaps more than any other single factor to the growth of the subprime housing bubble from 2005 to 2007, which in turn was the root cause of the current financial crisis.

In the mortgage market, primary lenders may choose to hold a mortgage until repayment or they may sell it to the secondary mortgage market. If the primary lender sells the mortgage, it can use the proceeds from the sale to make additional loans to other homebuyers. This increase in the funding available to mortgage lenders to lend was the goal behind the creation of Fannie Mae and Freddie Mac.

Prior to the existence of the secondary mortgage market, there was no national U.S. mortgage market. Instead, the mortgage industry was mainly concentrated in urban centers, leaving broad swaths of the country unable to afford home financing. In response, Congress created the Federal National Mortgage Association, or Fannie Mae, in the National Housing Act of 1934 as a purely public agency. After a number of legislative iterations, Fannie Mae morphed into a private company, a government-sponsored enterprise (GSE), with no federal funding by 1970.

Written by Ridgeliner7

Thursday, October 16, 2008 at 5:58:00 AM

Pelosi Attacks Needed Republicans Before Bailout Vote – Sinks It

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Stocks spiraled downward 777 points (The Dow’s largest one-day point loss) on Monday as a $700 billion bailout of Wall Street ended in defeat in the House of Representatives after the failure of leadership on the part of Speaker Nancy Pelosi.

Opponents said part of the reason for the opposition from Republicans was what they termed a partisan attack speech by House Speaker Nancy Pelosi, said one GOP source. House Minority Whip Roy Blunt said he thinks Republicans could have provided a dozen more votes had Pelosi not given her speech.

Pelosi had said that Congress needed to pass the bill, even though it was an outgrowth of the “failed economic policies” of the last eight years.

“When was the last time someone asked you for $700 billion?” she asked. “It is a number that is staggering, but tells us only the costs of the Bush administration’s failed economic policies — policies built on budgetary recklessness, on an anything goes mentality, with no regulation, no supervision, and no discipline in the system.”

House Republican Conference Chairman, Rep. Adam Putnam, R-Fla., said “he was disappointed that the process that yielded a bipartisan approach took a very marked, partisan tone at the end of the debate.”

This is not a partisan crisis, this is an economic crisis,” said Deputy Minority Whip Rep. Eric Cantor, who said that 94 Democrats also refused to go along with the bill. He described the vote as the result of “Speaker Pelosi’s failure to listen and failure to lead.” He was referring to the Speaker’s highly partisan speech before the vote blaming the Republicans and President Bush for the crisis.

Pelosi said that Republicans have not received the message from the White House that bipartisanship was needed, in spite of President Bush’s dozens of calls to House members and public statements calling for bipartisan cooperation.

“We delivered on our side of the bargain,” Pelosi said, congratulating Democratic leaders for getting 60 percent of the caucus to support the White House bill. “We extend a hand of cooperation to the White House, to the Republicans so we can get this issue resolved” even though Speaker Pelosi as the leader of the House Majority could not muster her own members to approve the measure.

In a statement by senior policy adviser Douglas Holtz-Eakin. “Barack Obama failed to lead, phoned it in, attacked John McCain, and refused to even say if he supported the final bill,” said Holtz-Eakin. “Just before the vote, when the outcome was still in doubt, Speaker Pelosi gave a strongly worded partisan speech and poisoned the outcome. This bill failed because Barack Obama and the Democrats put politics ahead of country.”

Written by Ridgeliner7

Monday, September 29, 2008 at 12:00:19 PM

Governor Palin Hits Wall Street Crisis Hard

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Sarah Palin opened up her remarks here focusing on the current Wall Street financial crisis and how a McCain-Palin administration will put an end to the “mismanagement and abuses” on Wall Street.

In her usual folksy language calling the crowd “guys and gals”, she addressed the excited throng of a few thousand saying that the country’s economic problems need some “shaking up and some fixin’.” She added that she was pleased to see taxpayer money wasn’t being used to bail out Lehman Brothers unlike the Bear Stearns bail out:

“It’s taking a toll on our economy and that means people’s life savings and I’m glad to see in this case the Federal Reserve and the Treasury have said no to using taxpayer money to bail out another one–this time Lehman Brothers. Every effort has to be made.’’

She blamed the government and Wall Street for today’s financial turmoil, “Guys and gals, our regulatory system is outdated and needs a complete overhaul. Washington has ignored this. Washington has been asleep at the switch and ineffective and management on Wall Street has not run these institutions responsibly and has put companies and markets at risk,” Palin told the cheering crowd, “They place their own interests first instead of their employees and the shareholders who actually own these companies.”

She pressed how important it was for America to“remain the strongest” financial market in the world and pledged that a McCain-Palin administration will restore the “integrity” and “confidence” in our markets, “We are going to reform the way Wall Street does business and stop multi-million dollar payouts and golden parachutes to CEOs who break the public trust.”

Her economic remarks come on the same day the McCain campaign released a new ad touting the duo’s ability to fix the ailing economy. The ad explains how they will do it, “Tougher rules on Wall Street to protect your life savings. No special interest giveaways. Lower taxes to create new jobs. Offshore drilling to reduce gas prices.”

Palin hit Barack Obama during her speech saying he will raise taxes, “Our opponent wants to raise income taxes and raise payroll tax and raise investment income taxes and raise business taxes and raise the death tax.”

“I knew that as I lowered taxes and got rid of business inventory taxes and then on a state level, suspended our fuel tax, those things do add to a vibrant economy, and we do have some wonderful economic indicators of success in my hometown,” Palin said. “We became part of the fastest growing area of the state because businesses wanted to be there. They knew that government would be on their side.”

Palin’s remarks were in front of an enthusiastic crowd at the Jefferson County fairgrounds. The crowd screamed her name and held signs that read, “Read my Lipstick, “Taxpayers for McCain-Palin,” and “Working Moms for Palin.” There were protestors outside of the event, one with a sign that read “The Antichrist Wears Lipstick.” But, it seemed as though only one lone protestor came inside the event–she screamed “Liar!” and “You don’t have the experience!” throughout the speech.

Written by Ridgeliner7

Monday, September 15, 2008 at 2:13:50 PM

More Government, Socialism & No Drilling Or The Change We Need?

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Today, U.S. Senator John McCain issued the following statement on the situation in the financial markets:

“The crisis in our financial markets has taken an enormous toll on our economy and the American people — first the decline of our housing markets followed by the collapse of Bear Stearns, Fannie Mae, Freddie Mac and now Lehman Brothers. I am glad to see that the Federal Reserve and the Treasury Department have said no to using taxpayer money to bailout Lehman Brothers, a position I have spoken about throughout this campaign. We are carefully monitoring the financial markets, including the duress at Lehman Brothers that is the latest reminder of ineffective regulation and management. Efforts must also be focused on ensuring that the deposits of hardworking Americans are protected.

“It is essential for us to make sure that the U.S. remains the pre-eminent financial market of the world. This will be a highest priority of my Administration. In order to do this, major reform must be made in Washington and on Wall Street. We cannot tolerate a system that handicaps our markets and our banks and places at risk the savings of hard-working Americans and investors. The McCain-Palin Administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street. We will rebuild confidence in our markets and restore our leadership in the financial world.”

Do a Google search.  John McCain has been speaking out about the recession, the U.S. Economic situation since 2006 and 2007!  He was telling us we were in a recession before any other Republican, and most Democrats.  He was warning about the government bailing out poorly run investment companies years ago! We need to elect a President who tells us what we need to hear, not someone like Obama who tells us what his polls say we want to hear.

Written by Ridgeliner7

Monday, September 15, 2008 at 12:32:40 PM

What About ANWR & Drilling?

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When Congress established the Alaskan National Wildlife Refuge, it set aside a very small fraction of the northern coastal tip for oil exploration and drilling.  Check the record, this is true.  So why hasn’t this been done, ten years ago?  Watch this video and understand more than perhaps you do now……