Obama Flip-Flops on on Taxing Health Care Benefits - Another Tax Increase

image by rees

Obama Is Willing to Consider Move to Gain Health Reform

By Ceci Connolly
from The Washington Post
June 3, 2009

President Obama, in a pivot from some of his harshest campaign rhetoric, told Democratic senators yesterday that he is willing to consider taxing employer-sponsored health benefits to help pay for a broad expansion of coverage.

Senate Finance Committee Chairman Max Baucus (D-Mont.) said Obama expressed a willingness to consider changing the existing tax exclusion. The decision would probably anger liberal supporters such as labor unions, but such a tax change would raise enormous sums of money as Congress and the White House are struggling to find the estimated $1.2 trillion needed to pay for health-care reform over the next decade.

"Yeah, it's something that he might consider," Baucus told reporters after the meeting between Obama and Democratic lawmakers. "That was discussed. It's on the table." Obama had summoned about two dozen senators to the White House to keep up the pressure to enact a comprehensive health-care overhaul this year.

White House officials moved quickly to clarify that taxing the health insurance provided by businesses is not Obama's first choice, but aides refused to rule out the possibility.

"The president made it clear during the campaign that he has serious concerns about taxing health-care benefits, and he has introduced his own revenue proposal, which he reiterated in today's meeting," spokesman Reid Cherlin said.

Obama instead urged senators to reconsider his proposal, which would raise federal revenue by reducing itemized deductions such as charitable contributions and mortgage payments for the wealthiest Americans, according to one adviser in the meeting. Obama included that idea in his budget, reporting that it would raise $317 billion over 10 years, a sizable "down payment" on the cost of health-care reform. But Congress immediately labeled the proposal a non-starter.

Private-sector businesses spend about $518 billion a year on their workers' health insurance, benefits that are not taxed. If workers had to pay taxes on their health coverage, it would raise $246 billion in revenue each year, according to the congressional Joint Committee on Taxation.

Tax treatment of employer-sponsored health care cuts across party lines: Prominent Republicans such as Sen. Judd Gregg (N.H.) support imposing a tax on certain health plans, while Democrats such as Sen. Sherrod Brown (Ohio) say that a tax would unfairly hurt middle-class workers with good benefits.

Health analysts from across the political spectrum have pressed for changing the tax treatment, arguing in part that the exclusion provides the greatest tax relief to high-salaried workers with generous insurance plans.

Last month, Baucus said he did not support eliminating the exclusion but was eyeing a benefit cap. Experts have outlined two likely approaches: taxing health benefits for workers above a certain income level; or taxing benefits over a certain value, perhaps $14,000 a year.

Administration officials meeting with lobbyists in recent days have projected that a benefit cap might generate $35 billion a year, though Finance Committee staffers said the number could be much higher.

Nevertheless, the issue represents treacherous politics for Obama, given his attacks on Sen. John McCain (R-Ariz.), who advocated a similar approach during the campaign.

"For the first time in American history, he wants to tax your health benefits," Obama said in September. "Apparently, Senator McCain doesn't think it's enough that your health premiums have doubled. He thinks you should have to pay taxes on them, too."

Strongly desiring to declare a health-care victory this year, Obama is now taking a more nuanced approach, aides said. "His style of leadership is to say, let's not get bogged down; let's keep moving forward," said one senior adviser who was in yesterday's meeting. "He's not ruling anybody's ideas out."

Staff writer Michael D. Shear and staff researcher Madonna Lebling contributed to this report
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What's Keeping Obama's Approval Ratings Up?

from Real Clear Politics
June 3, 2009
By Dick Morris

The Rasmussen poll conducted over the weekend of May 30-31 asked a key question designed to give us perspective on Obama's current popularity. The question was whether the current problems "are due to the recession that began under the Bush administration or to the policies Obama has put in place since taking office." In other words, who's to blame, Bush or Obama?

By 62-27, voters say Bush is still the culprit.

As long as this opinion remains prevalent, Obama will continue to enjoy high popularity. But when it changes, as it inevitably must, we will see him begin a long, long fall.

And this is the key measurement to watch.

The real recession - dating from the stock market collapse - began four months before Bush left office. And it is now four months since Obama was inaugurated. From this vantage, it still looks to voters like Bush's recession.

But it will become increasingly obvious that the large deficit Obama has incurred while pursuing his cure for the recession is, on its own, causing more problems than it solves. As high interest rates and, most likely, inflation, begin to set in - with no relief in unemployment - it will be obvious that Obamanomics isn't working and is, in fact, aggravating the economic trouble.

Obama, recognizing the danger, has recently begun to speak out - without even cracking a guilty smile - against the huge budget deficit he created. He is trying to blame the deficit, too, on Bush. But voters will not overlook the huge spending sprees of January and February, when Obama quadrupled the 2009 deficit. They will come to see that spending as a huge mistake and will shift their blame to the new president who proposed it.

Obama now faces a choice of poisons.

He can leave taxes as they are and take the poison of high interest rates, rapid inflation and a new recession, all caused by the massive borrowing he has forced on the Treasury. If the Treasury cannot sell enough bonds at a reasonable interest rate, it will, of course "monetize the deficit" - economics-speak for printing money so that there will be enough to buy the Treasury debt at moderate interest rates. But the process of so vastly expanding the money supply (or even just leaving the current expansion in place without trying to soak up the extra money) will cause its own runaway inflation.

Or Obama can break his pledge and raise taxes on everybody. His soak-the-rich approach will not be enough to cover the deficit. Especially when one factors in his healthcare proposals, big tax increases on the middle class become an increasing likelihood. And when we consider his cap-and-trade legislation, huge increases in utility rates also loom.

Either poison will make it clear that the economy is suffering from the medicine Obama administered, rather than the original disease that started under Bush.

And, of course, while we cannot predict precisely the start date of the Obama-generated misery, it's pretty clear that it will be a long-lasting pain. Neither inflation nor the pain of higher taxes is going to go away soon. And either approach will probably kindle a new recession.

Some economists think we will have an L-shaped recession from which we do not emerge for years and years. Others think it will be a W-shaped recession (not Bush's W) in which we emerge briefly and then go back down again. But a U-shaped recession, in which we go down and then come bouncing back, probably cannot happen with Obama's deficits now firmly in place. Then it will become clear that the cure was worse than the disease.

Morris, a former political adviser to Sen. Trent Lott (R-Miss.) and President Bill Clinton, is the author of "Outrage." To get all of Dick Morris’s and Eileen McGann’s columns for free by email, go to www.dickmorris.com.
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INSANITY - Current government debt per household is $546,688

from Hot Air.com
June 1, 2009
by Allahpundit

Ace despairs at the figures but I feel about this the way lefties felt when gas was more than four bucks a gallon and heading north: The higher the numbers go, the better. They figured only a full-blown meltdown would force a paradigm shift from fossil fuels to green energy; similarly, people like Robert Samuelson realize that only bankrupting Medicare and Social Security will make Congress face the fact that the two programs — which account for 81 percent of the debt load, per USA Today’s chart — will collapse under the weight of baby boomers. Everyone knows it, including and especially our chief creditor, so let’s get on with it.

China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China’s total U.S. dollar-denominated investments could be twice as high.

“Chinese assets are very safe,” Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

The $546K figure is based on current debt only, mind you. It doesn’t include universal health care or the fact that the FDIC’s going bust and will need to bailed out. According to some back-of-the-envelope math at the Atlantic, even with a hypothetical interest rate of 0 percent, each household now owes $22,274 per year … for the next 30 years. Average U.S. household income as of 2007: $50,233. Won’t be long now until the reckoning. Exit question: Blame Bush? Or blame Reagan?
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Chinese Audience Laughs At Geithner - He said their dollar assets were safe! ROFLMAO

from Reuters
By Glenn Somerville
June 1, 2009

BEIJING, June 1 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.

A major goal of Geithner's maiden visit to China as Treasury chief is to allay concerns that Washington's bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.

China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China's total U.S. dollar-denominated investments could be twice as high.

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

But later in the day, Chinese Vice Premier Wang Qishan said it was important for the two nations to show the world they are working together through their joint economic dialogue.

"We must through our dialogue send a clear signal that China and the U.S. are engaged in practical cooperation to address the crisis," Wang told Geithner, according to the Chinese Foreign Ministry's website (www.mfa.gov.cn).

"This is important for boosting confidence and encouraging global financial stability and economic revival," said Wang.

In his speech, Geithner renewed pledges that the Obama administration would cut its huge fiscal deficits and promised "very disciplined" future spending, possibly including reintroduction of pay-as-you-go budget rules instead of nonstop borrowing.

"We have the deepest and most liquid markets for risk-free assets in the world. We're committed to bring our fiscal deficits down over time to a sustainable level

"We believe in a strong dollar ... and we're going to make sure that we repair and reform the financial system so that we sustain confidence," he said.

Geithner, who is due to meet President Hu Jintao and Premier Wen Jiabao during two days of talks, described the recession as still "powerful and dangerous" in much of the world.

Recent signs of improvement were not enough to change an International Monetary Fund prediction that world output would shrink this year for the first time in 60 years. And credit was likely to be tight for some time, Geithner said.

But he added: "The global recession seems to be losing force."

Moreover, the U.S. financial system was healing and it now seemed assured that the world would avoid financial collapse and deflation.

CHINA ROLE

Geithner offered U.S. backing for a higher-profile role for China in running global institutions including the IMF -- a controversial proposition since it raises the sensitive issue of reducing Europe's voting share in the global lender.

"The United States will fully support having China play a role in the principal cooperative arrangements that help shape the international system, a role that is commensurate with China's importance in the global economy," he said.

Geithner said he was hopeful that General Motors Corp and Chrysler would be able to stand on their own feet once they emerge from bankruptcy.

GM will file for bankruptcy on Monday, U.S. officials said, forcing the 100-year-old automaker once seen as a symbol of American economic might into a new and uncertain era of government ownership.

"We want a quick, clean exit as soon as conditions permit," Geithner said. "We're very optimistic these firms will emerge (from restructuring) without further government assistance."
(Reporting by Glenn Somerville; Editing by Alan Wheatley/Toby Chopra)
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Gulp: U.S. to lose AAA debt rating?

from Hot Air.com
May 22, 2009
by Allahpundit

I guess my question would be, if we haven’t lost it already, how fantastically huge would our annual deficits have to be before we do lose it? $3 trillion? $4 trillion?

Something for Obama to shoot for now that national health care’s on the way.

“It’s very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term,” Geithner said in an interview with Bloomberg Television yesterday. He added that the target is reducing the gap to about 3 percent of gross domestic product, from a projected 12.9 percent this year.

The dollar extended declines today after Treasuries and American stocks slumped on concern the U.S. government’s debt rating may at some point be lowered. Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. “eventually” will lose its AAA grade…

It’s “critically important” to bring down the American deficit, Geithner said.

It’s “critically important,” and by The One’s own admission our debt is “unsustainable,” and yet his two attempts at reducing spending thus far produced an initial budget cut of .0029% followed by a further cut of roughly one-half of one percent, later cannibalized by an upward revision in spending. Believe it or not, S&P was sounding alarms about America’s debt rating eight months ago, after the financial crisis first hit and Bush dumped $85 billion in AIG’s lap. Trillions of dollars in bailouts and stimulus later, with enormous new entitlements on the way, the problem’s considerably worse — and yet The One’s defenders insist there’s technically zero risk of a lower rating because the U.S. could simply print more money to pay off its debt and avert any looming default. Which, as far as I understand, means we’re facing the following choice eventually: Either increase the monetary supply to meet our obligations and risk massive inflation, or refuse to meet our obligations and suffer a lower debt rating, thereby triggering even more massive deficits. What am I missing here?

Fortunately, The One has a super secret plan by which nationalizing health care will actually bring down spending, so let’s look forward to that.
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US speeding towards financial crash - But Obama will say it's Bush's fault...

from Hot Air.com
May 13, 2009
by Ed Morrissey

Two related stories signaled investors today to push the dollar lower in overseas trading last night. First, former GAO chief David Walker notes a bond warning from Moody’s that US Treasury bonds may lose their top rating — and that could cost us dearly:

Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.

That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding.

Prices have risen on credit default insurance on US government bonds, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit. It even, briefly, cost more to buy protection on US government debt than on debt issued by McDonald’s. Another warning sign has come from across the Pacific, where the Chinese premier and the head of the People’s Bank of China have expressed concern about America’s longer-term credit worthiness and the value of the dollar.

Why does McDonald’s make a better risk? McDonald’s doesn’t run massive deficits. And the Chinese are right to be worried about their investments, as the AP reports on how much worse those deficits will become, and much sooner than the political class admitted:

Social Security and Medicare are fading even faster under the weight of the recession, heading for insolvency years sooner than previously expected, the government warned Tuesday. Social Security will start paying out more in benefits than it collects in taxes in 2016, a year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner, trustees reported.

Medicare is in even worse shape. The trustees said the program for hospital expenses will pay out more in benefits than it collects this year, just as it did for the first time in 2008. The trustees project that the Medicare fund will be depleted by 2017, two years earlier than the date projected in last year’s report.

The trust funds — which exist in paper form in a filing cabinet in Parkersburg, W.Va. — are bonds that are backed by the government’s “full faith and credit” but not by any actual assets. That money has been spent over the years to fund other parts of government. To redeem the trust fund bonds, the government would have to borrow in public debt markets or raise taxes.

As the boss recalss this morning, George Bush tried in 2005 to warn about the looming crisis in entitlements. What kind of response did that get? Democrats like Harry Reid accused Bush of fearmongering and panic, and assured Americans that “the so-called Social Security crisis exists in only one place — the minds of Republicans. In reality, the program is on solid ground for decades to come.”

Obviously not. Last month, I noted several more of those Democratic demurrals in 2005, along with the news that Social Security surpluses have already disappeared. As I wrote earlier, Treasury’s website shows that we lost money in February for the first time ever — and that will only get worse as the economy slows, unemployment rises, and more people start drawing Social Security.

Why did this hit the dollar today? If the US loses its top rating as a bond issuer — which really only means as a borrower — we will have to pay higher interest rates on our bonds in order to attract investors. This has already started to happen even with the top rating, but a markdown will force the issue. That will make our debt service significantly higher than we anticipated at either the OMB or the CBO, and these deficit projections will start extended a lot farther downward in the next couple of years:



Not only will the deficits increase, the cost of deficits will increase, and eventually the debt service will become the biggest part of the federal budget — unless Washington massively increases taxes to close the gap.

And that is why Tea Parties have erupted across America. The free-spending policies of today will lead to massive taxation or collapse in the near future, and anyone with a calculator and an iota of sense can see it.
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Tim Geithner the Tax Cheat Wants to Cut Down on Tax Cheating

GM To Layoff Additional 21,000 By Year's End

Th e 21,000 is the GM number only. It obviously doesn't reflect all the workers that will be laid off by the subcontractors and businesses that support GM. The total number will be staggering. I'm sure we're going to see the Obama administration adjusting their numbers over the next several weeks. I don't believe we've seen the bottom of this recession yet, and probably won't until at least next sometime next year.
Rees

GM Scrambles to Survive
from The Wall Street Journal
By KERRY E. GRACE
April 27, 2009

General Motors Corp. said Monday it will continue to reduce its work force and dealer network and eliminate its Pontiac brand by the end of next year as the auto maker works furiously to survive

GM is also starting an exchange offer for $27 billion of its unsecured public notes as part of its restructuring plan, saying a successful exchange offer would allow it to restructure out of bankruptcy court.

The company said by the end of the year, it will employ 21,000 fewer hourly workers than it does now.

The company is offering to exchange 225 common shares for each $1,000 principal amount of outstanding notes. The stock closed Friday at $1.69 a share and shares were recently up 11% at $1.87 in premarket trading.

The exchange will commence only if 90% of bondholders agree to the terms. Under the plan, if GM fails to get adequate participation, it would file for bankruptcy protection.

GM, which is surviving on federal loans, is racing to restructure by June 1 under close watch of the Obama administration.

The U.S. Treasury will extend an additional $11.6 billion to GM, in addition to $15.4 billion in existing loans. The government will forgive half the debt in exchange for equity in a restructured GM.

GM, in setting forth tough terms for a bond exchange and requiring almost compete participation, has stepped up the likelihood for a Chapter 11 filing on June 1 without further government intervention.

The company said it will focus on four core brands in the U.S. -- Chevrolet, Cadillac, Buick and GMC -- as it looks to make fewer different models and focus on product development programs.

It will also restructure its U.S. dealer organization, reducing its U.S. dealer count by more than 40% by the end of next year, a reduction of 500 more dealers four years sooner than its earlier viability plan.

Chief Executive Fritz Henderson said the company is taking "tough but necessary actions" that are critical to GM's long-term viability.

The company added that negotiations regarding contract changes with the United Auto Workers union are still ongoing.

Write to Kerry E. Grace at kerry.grace@dowjones.com
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Taxes Are Not The Problem!

from Drinking With Bob

The BO Tax and Spend Rap Video - Get Your Groove On!

from Michelle Malkin.com
By Michelle Malkin
April 12, 2009

A little something to get you in the mood for the Tax Day Tea Party.

Here is a comment from Michelle Malkin's blog:

On April 12th, 2009 at 12:10 pm, beenthere said:

Tea Parties are good — as a first step. However, a lot of people, Left and Right, think they will be a last step as well; that the whole tea-party thing is just a one-time fad. See here. I hope they are wrong, but in the past the Right has show little ability to sustain resistance, one of the reasons the Left has been running circles around us — for decades. In public, of course, the Left whines about big, bad, right-wing thugs comin’ to get my mama! but in private they laugh at us.

Let’s prove them wrong, not just this week, but in the weeks, months, and years to come. Be warned: the more we succeed, the more the Left will attack — in all senses of the word.
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Taxes, Death and wait a minute...more taxes!

Marriage is until Death do we part - Taxes follow the White Light!

from The Real World

April 05, 2009

It appears that Democrat pols in Congress are doing their very best to bring back the onerous death tax on the estates of those who have passed into the great beyond. For most people who own property, be it their own home or the family farm, the vacation cabin or a rental property, that means you.

Thus after a lifetime devoted to working, earning, saving and investing, when you reach your expiration date, the government is going to take one last bite out of your backside on your way out the door. (What does that mean if government controls health care and denies your life saving surgery in order to accelerate access to your estate? But I digress.)

So here is how the tax man will be knocking at your door over the course of your existence.

1. Federal income tax on every penny you earn;

2. State income tax on same in most states;

3. Sales tax on almost everything you buy from first to last;

4. Car tax, gas tax, airport tax, hotel tax, and so on;

5. Fees and licenses of every kind imaginable;

6. Oops, don't forget property taxes!

Thus after paying taxes of all varieties throughout life, the government decides to once again tax what you have left over and managed to save and invest. Seems fair, doesn't it? Work, earn, pay taxes, pay the cost of living for yourself and your family, save what you can, invest what little might be left over after all of that expense and thereafter, in the end, pay taxes on the money leftover upon which you have already paid taxes. Earn a lot, keep a little. Great.

Government is not the solution, it is without a doubt the problem. Even into the hereafter.

Death, Taxes And A Very Bad Budget

from INVESTOR'S BUSINESS DAILY

Budget: Hidden in a footnote deep in the budget is a resurrection of the death tax. If you think this only affects rich people handing down their silver spoons to spoiled children, you're sadly mistaken.

Part of the Bush tax cuts was a provision that would wind down the estate tax from its existing 55% to 45% in 2009 and then to zero in 2010.The estate tax had taken the majority of a dead person's estate valued at over $3.5 million for an individual or $7 million for a couple.

Like the rest of the tax cuts, it was temporary. The estate tax repeal, unless made permanent, would rise like Dracula from the grave in 2011 to once again wreak havoc with those seeking to pass on their success to their heirs.

For the Obama administration, a year without an estate tax is a terrible thing to waste.

If you actually read the budget, which few do, particularly congressmen, you find this footnote on Page 127: "(T)he estate tax is maintained at its 2009 parameters."

The first Bush tax cut has been, in effect, repealed — part of the age of "fairness" we now all inhabit.

We are determined to keep or raise the capital gains tax, for example, even though to do so would lose revenues. As President Obama said when it was explained to him, we should still do it in the name of fairness.

It is the same with what many call the death tax. You can't take it with you, but the government can take it from you in the name of fairness and spreading the wealth, your wealth, around.

Some say the death tax only affects the very, very rich. But that's not the point. It's still their money.

What exactly is fair about a tax that taxes everything twice? Those who make good have already paid taxes in many forms accumulating that wealth.

Why should they be taxed because they worked hard, became successful, and want to pass on the fruits of their labor to their children?

While dubbed the "Paris Hilton" tax, the death tax hurts everybody.

"By and large, the death tax is borne by people who own small businesses, who haven't had the benefit of big corporate lawyers and big corporate accounting offices to prepare them for paying this tax," says William Beach, a senior fellow in economics at the Heritage Foundation.

"People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farms in order to pay the taxes," says House Minority Leader John Boehner, R-Ohio.

In an economy that is starved for capital, the death tax is dangerous. Even Obama's top economic adviser, Larry Summers, said in a study he co-authored in 1980: "The evidence presented indicates that intergenerational transfers account for the vast majority of aggregate U.S. capital formation."

Two of President Clinton's chief economic advisers, Joseph Stiglitz and Alicia Munnell, have written extensively on the impact of the death tax on capital formation.

The Joint Economic Committee has calculated that the death tax has reduced the stock of capital by $847 billion, money that can't be used to expand or start businesses or hire more people.

A new study by the American Family Business Foundation, written by economist Douglas Holtz-Eakin, finds that the death tax is responsible for lowering overall employment by 1.5 million jobs. It takes capital out of the productive hands of entrepreneurs' descendants and heirs and into the unproductive hands of government.

The death tax is about class envy, every bit as much as was the famous luxury tax of the 1990s, meant to punish yacht buyers. Remember that one?

It only succeeded in punishing yacht builders and the workers they employed, not yacht owners, and when the damage to jobs was surveyed, it had to be repealed.

As has been said, families shouldn't be required to visit the undertaker and the tax collector on the same day.

We doubt that those who said give us liberty or give us death meant death to be a taxable event

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Geithner Needs More Power - Voids The Constitution

U.S. May Oust CEOs at Banks Needing ‘Exceptional’ Aid

By Jesse Westbrook
April 5, 2009

(Bloomberg) -- Treasury Secretary Timothy Geithner said he’s prepared to oust the senior management and boards of directors at banks that require “exceptional” assistance from the U.S. government.

“If in the future, banks need exceptional assistance in order to get through this, then we will make sure that assistance comes,” while ensuring taxpayers are protected, Geithner said today in an interview on the CBS “Face the Nation” program. “Where that requires a change in management and the board, then we will do that.”

Geithner noted that American International Group Inc., Fannie Mae and Freddie Mac had their chief executives removed after it became clear the companies couldn’t survive without government rescues. The Treasury is reviewing how much capital the biggest U.S. financial companies need in order to endure a severe economic downturn.

“Where we’ve had to do exceptional things,” the government has replaced management and boards of directors, Geithner said.

Geithner’s pledge comes as signs emerge that the world economy may be stabilizing. Confidence among U.S. consumers climbed last month from the lowest level on record, according to the Conference Board. U.K. house prices rose in March for the first time since October 2007, while Chinese manufacturing increased, reports last week showed.

Compensation Limits

The Treasury secretary pledged to enforce congressional legislation that limits pay at companies receiving government loans. Geithner said the Obama administration has no intention of letting banks get around the rules.

“Our obligation is to apply the laws that Congress just passed,” he said. “We want the American taxpayer’s assistance going to generate greater lending, not providing excess compensation.”

Treasury last month proposed a public-private partnership to spur investors to buy -- and banks to sell -- the illiquid real estate assets clogging lenders’ books. The program relies on financing from the Federal Reserve and debt guarantees from the Federal Deposit Insurance Corp., and it could use up to $100 billion from the government’s bank-rescue fund.

Geithner, responding to a question about whether rules approved by the Financial Accounting Standards Board last week may deter banks from participating, said Treasury will make sure companies do what’s needed to clean up their balance sheets.

‘Do What’s Necessary’

“We will do what’s necessary to make sure our banking system emerges out of this stronger,” he said. He declined to say whether Treasury will force banks to sell assets.

Norwalk, Connecticut-based FASB voted on April 2 to let banks use “significant” judgment in gauging how much securities are worth. Richard Dietrich, an accounting professor at Ohio State University, said the change may discourage financial companies from selling securities because it may allow them to avoid writing down the value of their holdings.

Geithner, who accompanied President Barack Obama to London last week for the meeting of the Group of 20 policy makers, also said the administration will “keep acting as forcefully as we can” to pull the nation out of a recession.

At the summit, the world leaders called for tougher oversight of hedge funds, executive pay, credit-rating firms and derivatives trading. They also boosted funding for the International Monetary Fund, increasing its resources to $1 trillion.

‘Turning Point’

Obama called the event “historic” and predicted it will be a “turning point” for economic recovery across the world.

Geithner is pushing for an overhaul of financial rules that calls for putting big hedge funds and private-equity funds under stricter federal supervision, as well as regulating derivatives markets. He’s also seeking new powers for the government to seize and wind down nonbank financial companies whose size poses threats to the stability of the financial system.

The World Bank is warning of an “unemployment crisis,” and the U.S. lost 663,000 jobs in March, the Labor Department said April 3. The jobless rate jumped to 8.5 percent, the highest level since 1983.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net. Last Updated: April 5, 2009 13:11 EDT
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YOU'VE BEEN WARNED!...

from Breitbart.com
by Derek Broes
April 4, 2009

Over the past three months we have witnessed some truly amazing movements by the Obama administration.

- He has proposed more spending than all Presidents in history combined;
- He has trampled the Constitution by allowing the Treasury to take on a dictator style infringement on private companies, and now the democratically lead Congress has proposed the “Pay for Performance Act” which passed Thursday with even some Republican Congressman voted for it.

This bill essentially allows the Treasury to define “fair pay” for all employees, at any level. Worse, the Treasury would like to be able to take over any company it deemed as important enough to take over regardless of whether or not it had accepted bailout funds.

Worse still, the Serve Act proposes to make volunteering for the government mandatory (with pay, of course). Last time I looked, working for pay was called A JOB.

The scariest part of the bill is that while you’re serving as a “volunteer,” you’re prohibited from participating in worship and church activities, political rallies and being involved in a union. In short, your essential freedoms are gone. I keep hearing about Obama being a socialist but, I have to disagree. Based on these measures he appears to more like a person pursuing Communism or Fascism.

Let’s face it; if you wanted to tear down the Republic and install a Communist Oligarchy you would first have to take over all major industries where corporate power resides, then you must get the wealth away from the rich — but how would you do that? Well, you create an even larger economic crisis so the country thinks your massive debt spending is a way to help the country when your real plan is to incur so much debt that the only way to prevent the country from bankruptcy is to impose a tax system that depletes the wealth of the top 1% until we’re all equally “wealthy.” …Well, except for those wealthy people who helped you get there. You know the ones I’m talking about. I don’t mean to HARPO on the subject, but we seemed to have forgotten what we’re protecting. What about the Republic? Is it already gone?

When the government ignores legal contractual obligations because they judge someone’s bonus as unfair the law has been ignored, which means it was violated and this violation occurred at the highest level of government. I’m not saying the AIG bonuses weren’t excessive. My point is, we don’t know what these people did to deserve or NOT to deserve them because this was never mentioned or examined. Maybe some of those people brought in a billion dollars of business and their bonuses were based? Maybe the CEO is the main reason the company is failing? Does that mean that some guy who worked hard to bring in that billion dollars in business shouldn’t be rewarded? But Obama needs a way to regulate pay and the bill proposed doesn’t even stop at executives, it doesn’t even stop at dollar amounts. In fact, it has no specification whatsoever.

So we can all look forward to government cars, government jobs, paid civilian volunteers who watch our every move and the the loss of our ability to reach for our dreams. The sad part is that Obama told us exactly what he was going to do and 52% of you refused to hear what he said. In fact many of you cheered at these things. Let’s remember just of few of the things he said.

1. The Constitution is fundamentally flawed. It only protects the rights of the people but does not allow the government to do anything on your behalf.
2. He wants a civilian Army as large as our military, and as well funded ($650 billion annually).
3. He wants to “spread the wealth.” Oh, don’t pretend you don’t remember Joe the Plumber.

And let’s not forget good ole Reverend Wright whose teachings about America being evil and unequal ring in Obama’s ears. Funny … It’s equality that got Obama elected. Change? Oh yes, there’s change and if we don’t act soon the meaning of hope will have a very different meaning.

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Fannie, Freddie Set to Pay $210 Million in Retention Bonuses

Hey Barney Frank:

Are you going to get all self-righteous and demand that the names of all the recipients be released just like you did for AIG? Oh wait! That's right. You'll probably won't since Fannie and Freddie have been your babies that you've gone out of your way to protect. What was I thinking?
Rees

from The Wall Street Journal
April 3, 2009

In a compensation program that has drawn angry protests from politicians, Fannie Mae and Freddie Mac expect to pay about $210 million in retention bonuses to 7,600 employees over 18 months, according to a letter from the mortgage companies' regulator to Sen. Charles Grassley.

The maximum retention bonus for any individual executive under the plan will total $1.5 million during the 18 months ending in early 2010, according to the letter, which provides previously undisclosed details about the bonuses. The regulator, James Lockhart, director of the Federal Housing Finance Agency, said in a letter to the Iowa Republican senator that ...

The Quiet Coup

Image credit: Jim Bourg/Reuters

from The Atlantic

One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.

Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.

No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders

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Another Slippery Slope - Why don't we just get it over with and let Obama control everything? This is like dieing from paper cuts!

According to Obama, all the actions he has taken are now starting to take effect and the situation is slowly starting to improve. If this is the case, why do they need these additional powers?

This is financial terrorism.

Rees

Obama Seeks Expanded Power to Seize Firms

Goal Is to Limit Risk to Broader Economy

By Binyamin Appelbaum and David Cho

Washington Post Staff Writers

Tuesday, March 24, 2009; A01

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury's role, are still in flux.

Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers.

The administration's proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed's other responsibilities, particularly its control over monetary policy.

The government also would assume the authority to seize such firms if they totter toward failure.

Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG's most troubled unit.
The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan.

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Attention White House and Congressional hacks: If you get caught in bed with a hooker, it's too late to condemn prostitution!

Attention White House and Congressional hacks: You can't go hop into bed with a hooker, have your little party, pay her and then express shock, outrage, condemn the hooker and ask for your money back when the American Taxpayer finds outs what happened.

Considering the financial condition of AIG at the time the bonuses were officially given to their executives, and the fact that the American Taxpayer had already injected billions of dollars into AIG in an attempt to rescue the company, the bonuses were a hideous, immoral example of greed. Unfortunately, the bonuses were legal and contractually agreed upon by all parties.

I'm someone who has seen their 401k destroyed. I can't describe how disgusting it is to watch watch has gone on at AIG, in the White House and in Congress. However, I don't agree with the whiplash legislation to tax the bonuses at a 90% rate.

First of all, the White House, the Federal Reserve and our Congressional Representatives all agreed to the bonuses. Now they're trying to cover their rear end because they see the outrage of the American Taxpayer.

This article by Rep. John Campbell explains why he voted against the legislation for the 90% tax on bailout bonuses. I just read this morning that it appears the bill won't even be voted upon by the Senate. That's the right thing to do. We don't need anymore slippery slopes.
Rees

John Campbell's AIG Tax Vote Explanation

from the website The Club For Growth
by Andrew Roth

Here's Rep. John Campbell's explanation for why he voted "no" on the AIG tax bill. It's very well reasoned and principled.

I firmly opposed and voted “no” on HR 1586. Let’s first understand exactly what the bill does. It imposes a 90% federal income tax on any bonus paid to any employee of any company that has received over $5 Billion in federal rescue funds. Such companies include, Bank of America, Wells Fargo Bank, Chase Bank, JP Morgan, CitiBank, Morgan Stanley, Merrill Lynch, Wachovia, Washington Mutual, Countrywide, Goldman Sachs, AIG, Fannie Mae, Freddie Mac amongst others. The tax would only apply to people with total joint incomes over $250,000 or single individuals with income of over $125,000. When combined with California Income taxes which now top out at 10.55%, this can be a tax just short of 101% of the income.


Under this law, a bank teller at Wells Fargo could receive a bonus of $1,000 for doing a great job. If that bank teller was married to a physician who made $175,000 and they had some additional investment income, that bank teller would pay a tax of $1,055 on the bonus of $1,000 that they received for doing a good job. This is horrible!

This is not raising revenues, this is punishment. It is a terrible precedent to use the tax laws for punishment. If we go down this road, the government can impose a 100% tax on anyone they don’t like, or anyone they believe is paid too much. Employees of other companies, doing the same thing for the same bonus, will not receive this tax. That probably makes it unconstitutional and I hope it does.

I understand the public outrage over these bonuses and I share much of it. But this is not the way to fix it. Sue them to get the money back. But don’t do this.

You may or may not realize it, but embezzlement income is taxable today, but at normal rates. So if you steal money, you will not have a tax higher than normal. You may be forced to give the money back because you stole it, but it will not be taxed away from you. This bill makes a bonus from Bank of America a more egregious offense under the tax laws than bank robbery.

All of this was caused because we nationalized companies that are created to make a profit. Throughout time, governments have shown themselves to be particularly inept at such an enterprise. This is another example of why.
Click to go to the article

Obama's Economic Board has yet to meet publicly-Hold a big press conference to impress the public with all the high profile members, then do nothing!

Obama's all about getting his mug on TV - That's right! Hold a big press conference to impress the public with all the high profile members you've appointed to this board, and then have them do nothing!

from Politico

March 23, 2009

by JOSH GERSTEIN

Six weeks after President Barack Obama appointed a blue-ribbon panel to help him dig America out of its economic crisis, the board has yet to hold an official public meeting.

The White House initially said that the 16-member Presidential Economic Recovery Advisory Board, headed by former Federal Reserve Chairman Paul Volcker, would meet “every few weeks.” Last month, a spokesperson told POLITICO the group would meet monthly. More recently, the White House said the high-powered board, set up to address what Obama has called the worst economic emergency since the Great Depression, would gather only about four times a year, with the next session due in “late spring.”

But comments from board members and Obama himself indicate that some members of the panel are meeting, in smaller gatherings that have not been announced or opened to the public. And that raises the question of whether an administration that prides itself on openness and transparency is in fact finding it more convenient to conduct public business in private.

Now, the administration finds itself in a Catch-22: It does not want to say that the president’s economic panel, announced amid much fanfare, is not meeting during the worst economic crisis in generations. But if it is meeting, where’s the announcement, the agenda, the minutes? In short, where’s the sunshine? “

If the president wants to talk to his advisory committee, it seems to me he ought to do that in the open,” said Sidney Shapiro, a law professor at Wake Forest University. “There ought to be accountability for private people who address the government. It seems to me it becomes even more important, not less important, when you have a presidential advisory committee.”

Asked about Obama’s right to solicit candid suggestions, Shapiro said, “If he wants private advice, he should pick up the telephone. He can call anybody he wants. If he wants to form a presidential advisory committee, they ought to meet in public.”

Through an aide, one board member told POLITICO of a board meeting at the White House on Feb. 26. The White House did not respond to a question about that session.

So far, none of the commission members’ meetings have been public or officially announced in accordance with the 1972 federal law which governs such groups, the Federal Advisory Committee Act, or FACA.

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A Chilling Harbinger: Confiscation as Taxation

Taxation Without Representation or beter yet, Confiscation without Representation - how history repeats itself

By J. Robert Smith
from American Thinker
March 23, 2009

Congress' lopsided vote on Thursday to tax AIG executives' bonuses at no less than 90%, and to apply the same to other bailout recipients, undermines Constitutional and contract law and is a clear abuse of power. Americans who applaud this act may want to think twice. If Congress is willing to break the law to confiscate these executives' bonuses, what will stop it from extending legislation to those who receive no government bailout money?

You may say that's absurd. This is a special case. Congress is merely recovering taxpayer money from ill-managed and profligate enterprises. But Charles Krauthammer writes:

"[T]here is such a thing as law. The way to break a contract legally is Chapter 11. Short of that, a contract is a contract. The AIG bonuses were agreed to before the government takeover and are perfectly legal. Is the rule now that when public anger is kindled, Congress will summarily cancel contracts?

"Even worse are the clever schemes being cooked up in Congress to retrieve the money by means of some retroactive confiscatory tax. The common law is pretty clear about the impermissibility of ex post facto legislation and bills of attainder. They also happen to be specifically prohibited by the Constitution."

Consider this: What have we witnessed over the past one hundred years, the advance or retreat of the national government? The national government has grown beyond anything the Founders envisioned. Its tentacles stretch into virtually every facet of our lives. Its heavy hand is felt on businesses, big and small. It dictates to automakers mileage standards. It meddles in doctor-patient relationships. It even decides what our children will or won't eat in local public school cafeterias. Among other innumerable activities.

So why do you think that the legislation passed by Congress on Thursday is a special case and not a precedent? Why isn't it the first slip on a slippery slope?

Perhaps as the economy worsens, Congress will next train its sights on government contractors. With widespread economic distress, why should executives at solvent enterprises doing business with the national government collect obscenely large salaries and bonuses?

And then what about the vendors who provide services, products and materials to government contractors? Aren't they benefitting, albeit indirectly, from taxpayer largesse? Why shouldn't Congress make a special case out of them as well?

With the president and Congress piling debt upon debt; creating deficits in the unimaginable trillions; pushing to create new, broad, expensive and, ultimately, permanent spending programs; and, at some point, having reached the upper limit of soaking the "rich;" might it not be time for any executive at any business to do his or her patriotic duty and turnover even more generous portions of their incomes and bonuses to the government?

But if they're not willing to step up and do their patriotic duty, as Vice President Biden may suggest they do, might it not be altogether appropriate for Congress, backed by the full-throated outrage of fearful and vengeful citizens, to make them special cases as well? After all, isn't patriotism about sacrifice and sharing pain? Certainly, a posturing president and a blustering majority in Congress say so.

For those who say that the logic here is stretched or tortured, the response is simple: Why do you think that Washington politicians are governed by logic or sensibility? Much less fairness or right? As the Founders might comment from their heavenly perches, politicians are inflamed by passions, full of self-interest and mean in virtues. They are as flawed as any of us, with the caveat that they have the power to overreach and abridge our rights. The last one hundred years of national government history bolster the argument. It is the Constitution that has been stretched and tortured.

And then there's the federal tax code. The federal income tax began in earnest with the passage of the 16th Amendment in 1913. The tax was modest; the code, simple.

Ninety-six years later, the tax code has grown into a leviathan. It is rich with laws and rules that are contradictory or vague. It is manipulated by Washington politicians to reward or punish interest groups and various constituencies. It can -- and is -- used as a club not just against tax cheats, but innocent taxpayers. No one can figure out the code, not you or your accountant. Or, he claims, the Secretary of the Treasury.
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Barry: What Part of NO more money is available, do you not understand???

Given the current state of the economy and the projected deficits based on the budget currently in place, how does Obama justify implementing new programs and making monumental changes to existing programs, knowing full well that the subsequent impact will bury this economy and possibly guarantee a depression? It's absolutely financial suicide!

We better start calling our Congressional Representitives and Senators and head this off at the pass.

Obama's enormous ego and unlimited arrogance just embolden him to basically say to us that he doesn't care what we think. He's going to do what he has always planned to do and he dares anyone to try and stop him.
Rees

When his budget estimates were just blown out of the water by the CBO, how can he say his Agenda is still on track?

from My Way

By ANDREW TAYLOR
March 22, 2009

WASHINGTON (AP) - President Barack Obama's budget would produce $9.3 trillion in deficits over the next decade, more than four times the deficits of Republican George W. Bush's presidency, congressional auditors said Friday.

The new Congressional Budget Office figures offered a far more dire outlook for Obama's budget than the new administration predicted just last month - a deficit $2.3 trillion worse. It's a prospect even the president's own budget director called unsustainable.

In his White House run, Obama assailed the economic policies of his predecessor, but the eye-popping deficit numbers threaten to swamp his ambitious agenda of overhauling health care, exploring new energy sources and enacting scores of domestic programs.

The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his Democratic allies controlling Congress would have to consider raising taxes after the recession ends or else pare back his agenda.

[my comments - Obama wants to get his programs in place and all the users addicted, so he can then turn around and say, "Gee, the economy is much worse than we anticipated. Unless we make severe cuts to each person's favorite program, we'll have to raise taxes." We know from history that there won't be anyone that wants their ox gored. The end result will be higher taxes. Wow! What a surprise!]

Worst of all, CBO says the deficit under Obama's policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.

White House budget chief Peter Orszag said that CBO's long-range economic projections are more pessimistic than those of the White House, private economists and the Federal Reserve and that he remained confident that Obama's budget, if enacted, would produce smaller deficits.
Even so, Orszag acknowledged that if the CBO projections prove accurate, Obama's budget would produce deficits that could not be sustained.
[what if the CBO is right and Orszag is wrong? The CBO has a better track record.]
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