More Bailouts

Fannie Mae reported a $58.7 Billion loss for 2008, and has asked the government for an additional bailout of $15.2 Billion.

Also, Treasury Department said last week it was doubling its financial support to Fannie Mae and Freddie Mac, to $200 billion dollars each, in an effort to stabilize real estate markets.

General Motors is asking for an additional $16.6 Billion dollars plus $7.5 Billion in loans from the Energy Department to build more fuel-efficient cars (from today's Wall Street Journal - subscription required for link).

Taxpayer Protests Across the Country

Citizens protesting bailouts and government spending showed up in over 40 cities Friday:

Atlanta 300-400 people
Chicago 400+
Nashville 300
Wichita 300-400
Lansing 120
St. Louis 1000+
Oklahoma City 400
Los Angeles
Tulsa 200
Seattle 300
Houston 250
Tempe AZ 150
Sacramento
Denver
San Diego 350
Jacksonville FL 80
Buffalo, NY
Greeneville, SC 1000
Dallas 250

Proposed Ethics Investigation Killed

The House killed a resolution that called for an ethics investigation to probe possible relationships between campaign contributions by lobbyists and the subsequent actions of legislators (such as requests for special projects or earmarks related to that lobbyist).

Earmarks Live On

So much for getting rid of earmarks.....

The Omnibus Spending Bill for 2009 was passed this week with approximately 9,000 earmarks costing all of us $7.7 billion. Included were earmarks from former Senators Obama, Clinton and former Representative Rahm Emanuel. Just a sampling of the earmarks:

• $2.2 million to study grape genetics,
  
• $1.8 million for swine odor and manure management,
  
• $1.7 million for a honey bee laboratory,

Yes, these are small amounts compared to the rest of government spending, but it does add up.

(Earmarks are where spending items are added to a bill to fund specific projects, typically for the legislator's constituency or special interest group.)

Obama's Proposed 2010 Budget

You should be paying attention to this - there are lots of things hidden in the details, including:

• measures to combat global warming that will increase utility rates and energy costs
• increasing foreign aid, with a goal of doubling it
• moves toward expanding government health care
• reducing deductions for mortgage interest, charitable contributions and state and local taxes for wealthier citizens (couples making more than $250,000)

A more detailed plan will be submitted in April. The total budget proposed is $3.6 Trillion, with a planned deficit of $1.75 Trillion (meaning our tax revenues will only be $1.85 Trillion so we have a huge shortfall).

Can We Just Tax the Rich?

President Obama's solution to the deficits and national debt are to raise taxes on the wealthiest 2% of Americans; those whose households earn more than $250,000. He promises not to raise income taxes for anyone else.

Regardless of whether this will have unintended effects (many of these taxpayers are small business owners who may cut back or pass along costs) or whether it is fair (those who make more than $200,000 pay 62% of all federal income taxes), will it even solve the problem?

Even if you took 100% of taxable income from everyone who earned more than $75,000 in 2006, that would yield about $4 Trillion -- the Obama Administration's proposed budget for 2010 alone is $3.6 Trillion. Our national debt at the end of 2009 will be at least $12 Trillion.

And obviously, you can't tax people at 100% or they won't work. So there is no mathematical way that the budget can be balanced only by raising taxes on the rich.

Talk versus Action

Remember these words from Obama in the debates:

"what I've done throughout this campaign is to propose a net spending cut.... What I want to emphasize ... is that I have been a strong proponent of pay-as-you-go. Every dollar that I've proposed, I've proposed an additional cut so that it matches."

That didn't last long. After the 2009 budget was approved earlier this week, President Obama presented his budget for fiscal 2010, showing a net deficit of $1.75 Trillion for just that one year.

It makes our fiscal 2008 deficit look great at a mere $455 Billion (although that was the largest deficit ever at that time).

So our national debt continues to grow....

2009 Omnibus Spending Bill Passed by the House

The U.S. House of Representatives voted 245 to 178 (largely along party lines) to approve a $410 Billion “omnibus” bill combining nine appropriations measures needed to fund the federal government through September, the end of its fiscal year.

This bill is needed because Democratic lawmakers couldn't agree with former President Bush on a budget for this year. They had managed to pass spending bills for the Departments of Defense, Homeland Security and Veteran Affairs, but the rest of the government has been continuing to operate at 2008 spending levels. Some major items of note are:

• $410 Billion in spending, which is an 8.7% increase over 2008
  
• 8,500 to 9,000 earmarks totaling between $5 billion - $7.7 billion
• Travel restrictions to Cuba eased
  
• Washington, DC school voucher program killed
  

The Senate now must consider its own version. Current funding runs out March 6.

Remember, this is in addition to all of the recent spending that has been passed (bailouts, stimulus, etc.).

Budget Deficit vs National Debt

You may have heard the President has set a goal of "reducing the federal budget deficit to $513 Billion by 2013". What does that really mean? First of all, let's define a few terms.

Surplus: Government receives more money than it spends.

Deficit: Government spends more money than it receives in a given year. In order to do so, it must borrow money (go into debt) and then pay interest on that.

Debt: The total amount of money that the government has borrowed over the years, which it has not yet paid back, and is still paying interest on.

Each year since 1969, Congress has spent more money than its income. The Treasury Department has borrowed money to meet Congress's appropriations. The total borrowed is more than $10,000,000,000,000 ($10 Trillion).

Back to the President....

So President Obama's goal is to get the 2013 annual deficit to $513 Billion. Reducing the annual deficit merely slows the pace at which we are adding to our debt. He still plans to spend $513 Billion more than the government will receive in 2013.

This also does not affect the huge deficit incurred this year (at least $1.3 Trillion), or those he will incur in 2010, 2011, or 2012.

For perspective, before now our largest deficit ever was $455 billion in fiscal 2008. Therefore Obama's goal for fiscal responsibility is to have a bigger deficit than any previous Administration's deficit.

By the end of 2009, our national debt will be at least $12.1 Trillion. There is no way to pay that off unless we begin to run budget surpluses.

The 92% Group

A new group, called the 92% Group, is working to oppose the new mortgage plan proposed by President Obama, which helps those who aren't paying their mortgages at the expense of those who are paying their mortgages (see earlier detailed post).

The group is named after the 92% of Americans who are current on their mortgages.

Culture of Corruption

Congressman Charles Rangel (D-NY), Chairman of the Ways and Means Committee since 2006 (this committee writes our tax laws):

• Failed to report $75,000 in income (and thus underpaid his taxes) from a rental property in the Dominican Republic.
  

• Had at least 28 omissions on his financial disclosure forms (required by law for public officials) and failed to account for at least $239,000 in assets.

• Leased 4 rent-controlled apartments (at a low price) from a major real estate developer

• Used his official Congressional stationery to solicit donations for an educational center at the City University of New York that will be named for him.

• Is accused of receiving donations from those who are affected by his committee, including $1 million from one executive who claims that had nothing to do with Rangel's helping to preserve a lucrative off-shore tax loophole.

Senator Chris Dodd (D-Connecticut), Chairman of the Senate Banking Committee since 2006:

• Received favorable (below market) rates and saved $75,000 on two mortgages in 2003 through a VIP program at Countrywide. Countrywide (now owned by Bank of America) has been the focus of allegations that it gave favorable loan terms to lawmakers.

• Received $165,400 in contributions from Fannie Mae and Freddie Mac (the Banking Committee is responsible for overseeing them) -- he received the most contributions of anyone in the House and the Senate (in second place was Barack Obama with $126,349).

• Is being scrutinized for a deal on a house in Ireland, where he declares a value of less than $250,000 for a property that some say would sell for at least $1 Million.
  

Current members of Congress (Republicans and Democrats) have received a total of $4.8 million from Fannie Mae and Freddie Mac from 1989 through 2008.

Representative Charles Murtha (D-Pennsylvania) is under investigation by federal prosecutors for possibly receiving bogus campaign contributions via PMA Group, a prominent lobbying organization headed by a former staffer of Mr. Murtha. Mr. Murtha is the chairman of the House defense appropriations subcommittee.

• In the first half of 2007, the PMA Group and its clients contributed more than $500,000 to three congressmen, including Mr. Murtha.
  

• These lawmakers earmarked more than $100 million in defense spending for PMA clients in the appropriations bills for 2008 (according to a study by Taxpayers for Common Sense, which tracks earmarks).

These issues are investigated by House and Senate Committees, who rarely take action. Neither committee holds public hearings, and they rarely discipline their members.

Just because these are mostly Democrats does not mean that Republicans don't have their issues as well. Former Senator Ted Stevens (R-Alaska) was convicted last fall by a federal jury of five counts of making false statements on his Senate personal financial disclosure forms. He was defeated in his bid for re-election.

Does Foreign Aid Help Africa?

Dambisa Moyo, a native of Zambia with degrees from Harvard and Oxford says no.

When asked "What do you think has held back Africans? " she replied:

"I believe it’s largely aid. You get the corruption — historically, leaders have stolen the money without penalty — and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people."

Interesting.

Review of Guantanamo Finds it Meets Geneva Conventions

President Obama ordered a review of conditions at the Guantanamo Bay Detention Facility.

The review showed that Guantanamo does meet the criteria of the Geneva Convention, although they recommended allowing more religious and social interaction for the prisoners in the highest security camps (the most dangerous prisoners).

ACORN Training Begins

Notice how the newscaster uses the term "train homeowners on peaceful ways to remain in their homes".

News report...

TAX Time is Upon Us...

February 15th was the deadline for institutions to provide you the information you need to prepare and file your taxes. Here are a couple of items that you may find helpful.

Volunteer Income Tax Assistance Program

The VITA Program offers free tax help to low- to moderate-income (generally, $42,000 and below) people who cannot prepare their own tax returns.

Early Tax Refund Loans - BEWARE!

Tax return preparers will offer you the ability to receive your "refund" immediately to within 3 days. These are generally not in your best interests.

First of all, the fact that you are receiving a "refund" means that you overpaid your taxes during the year, and provided Uncle Sam an interest-free loan!

Second, it usually takes just a couple of weeks for you to receive your refund (if you file electronically). So why pay the exorbitant annualized interest rates that you are charged for an "early tax refund" of your taxes which you have already overpaid!?

Of course, there may be cases where you really need the money immediately and can't borrow from friends/family. Just be informed/aware of what you are doing.

PS. Clark Howard provides consumer advice on how to save money and avoid scams. He has a syndicated radio-show and has recently added TV. You might want to check him out.

Taxpayer Protests Spring Up Across Country

Many citizens are unhappy with the spending happening in Washington. Protests so far have been held in Seattle, WA (150 people), Denver, Colorado (500+ people), Mesa, Arizona (500+ people), and Overland Park, Kansas (400 people).

More protests are planned in the next few weeks in cities such as Chicago, Washington DC, Atlanta, Dallas, Fayetteville, San Diego, and Omaha.

Snowing in Chicago - May Not Post Today

If there is something you want us to research.... leave a comment or send us an email.

Guess it's time to go out and shovel (again...)

Rick Santelli Speaks His Mind... Instant Classic

Here are some clips from yesterday and today.... I STRONGLY recommend you view these. These are listed in chronological order.

Thursday's Initial Clip (Rick Santelli & the Rant of the Year)

Friday Morning on MSNBC (Debate with Steve Liesman, resident "talking head")

Friday CNBC (with Ken Langone, founder of Home Depot)

Housing Plan Unveiled Yesterday

The president announced his much awaited housing plan on Wednesday. Major items are:

1. $75 billion in direct spending to provide incentives for lenders (and borrowers) to not foreclose or enter bankruptcy
   
   Lenders will be paid $1,000 to $1,500 for each mortgage that they modify. They will receive up to an additional $3,000 over the next 3 years if the homeowner makes all their payments. Borrowers who make their payments could receive a $1,000 reduction in their principal balance each year for the first 5 years. This part of the bill does not provide relief for speculators/house flippers.
   
   The purpose of these incentives is to decrease foreclosures and keep folks in their homes. For neighborhoods that have a large number of "at risk" mortgages, a decrease in foreclosures should stop further declines in housing values. Of course, this is helping many folks who made poor decisions to begin with and there is a high probability that they will not be able to make the payments on the revised mortgage.
   
   
2. Making it easier for people to refinance, assuming they have been "doing the right thing" and are not speculators/house flippers
   
   Interest rates are very low now, and almost everyone would benefit by refinancing their existing mortgage. The problem is that many people do not qualify, because the value of their home has declined so much that they do not meet the existing requirement of 20% equity in their home. This plan loosens that restriction for homeowners whose mortgages are already with Freddie or Fannie.
   
   This part of the plan assists people who have "done the right thing" and are still in trouble due to circumstances out of their control. However, the restrictions are not removed entirely. So, someone who is underwater by more than 5% will not qualify. (eg. Their home is currently valued at $200,000 and they owe more than $210,000).
   
   
3. $200 billion additional investment in Fannie Mae and Freddie Mac
   
   The Treasury will invest $100 billion more in each entity. It also increases the size of the mortgage portfolio that each can keep by an additional $50 billion (up to $900 billion now). This is intended to "prop up" the mortgage market on the whole, and allow Freddie and Fannie to buy more mortgages / mortgage-backed securities.
   


4. "Cram Downs" available for bankruptcy judges to use.
   
   Cram downs allow bankruptcy judges to reduce the outstanding principal and/or change payment terms on mortgages for homeowners filing for bankruptcy. Some argue that this will end up increasing mortgate rates because lenders will charge higher rates overall to cover the risk that bankruptcy judges may decrease the principal.
   

The White House has published an executive summary of the plan (PDF) and an online Q&A.

We Are All Socialists Now....

This is the title of the latest Newsweek cover story.

Government intrusion into our economy has grown. Ten years ago U.S. government spending was 34% of GDP (Gross Domestic Product). Projections for 2010 are for U.S. gov't spending to be 40% of our GDP (40% of our economy). GDP is a measure of the total output of our economy.

European governments, which follow a more socialist model historically, spend about 48% of their GDP. We are catching up!

Spending on entitlement programs (Social Security, Medicare) is going to increase, so the percentage of the economy (GDP) taken by the government will get bigger. Who knows, maybe we will surpass the French!

Unless you believe in socialism, the fact that this is the cover story of a major news magazine here in the United States of America has to make you take pause.