Axis of Right

Three Native Rhode Islanders Commenting From the Right on Politics and Anything Else

Posts Tagged ‘economy’

AIG Bailout Shortens Path to Socialism

Posted by Sal on September 17, 2008

The AIG bailout by the Federal Reserve involves the FED “loaning” AIG $85 billion in exchange for nearly 80% equity in the company.  Now, it is within the Fed’s charter to loan money;  however, the fact that the Government has now nationalized a major private insurance company (although the Fed denies that this is what was done) is tantamount to socialism.  There seems to be a gradual move for the government to take over these large companies and run them, when it was government “oversight” and regulation that caused this crisis to begin with.  There is simply no legitimate reason that AIG should have this and not Lehman Brothers.  The move is may have been necessary from a practical standpoint, as the failure of AIG would probably have caused several other major U.S. companies to fail as well, but it is a dangerous road we as a nation are embarking on with this new corporate socialism.

Posted in economy | Tagged: , , , , , | Leave a Comment »

The Financial Mess

Posted by Sal on September 16, 2008

With the collapse of Lehman Brothers to Bankruptcy, and with Merrill Lynch being absorbed by Bank of America, our financial system is foremost on many people’s minds this week.  Add to that the federal takeover of Fannie Mae and Freddy Mac last week, and the Bear Sternes collapse earlier this year, and we have a financial mess.  All of this primarily has to do with the collapse of the mortgage market, as Bear Sternes, Merryll Lynch, and Lehman Brothers all had significant holdings in mortgage-backed securities that have sharply dropped in value.  Both McCain and Obamaare calling for reform and increased government involvement and regulation into the financial sector.  This is precisely the wrong prescription. 

The problems we are seeing in the current mortgage crisis have very little to do with the free market, and more to do with government regulation.  In a free-market system, there is risk and reward.  It is natural that if a company is not run right, that company will fail, so there is every incentive to run the company correctly.  Since Frannie Mae and Freddy Mac were government-backed, in the sense that there was always an understanding that the mortgage under-writings were backed by the U.S. government.  In addition, the Federal Government, beginning with Bill Clinton and continuing with Bush, began mandating increased loans for low-income home buyers, creating the sub-prime industry that created billions of dollars in loans that people could not afford.  (This is also to say nothing of the corruption and back-scratching between Fannie and Freddy and various Democrats.)  It is because of this government intervention that we are in the crisis we are in.  The Freddy and Fannie takeover was necessary, but as Larry Kudlow reports, it is a good thing that the government did not bail out Lehman Brothers.  The concept of risk/reward has to remain in our free-market system, no matter what the short-term pain is. 

We are in a financial mess — one that will take some time to resolve.  It is not a crisis, depression, or recession.  It will resolve itself, as the fiscal crisis’ of the past always have.  The question is, are we going to make things worse with increased regulation, or are we going to reform, put sensible regulation where needed, but deregulate the mandates and allow the free market to work.

Posted in Politics | Tagged: , , , , , , , , , , , , , | Leave a Comment »

Economy Then and Now; Democrats Then and Now

Posted by Mike on April 10, 2008

The fact that The Corner’s David Freddoso can report economic data from 2008 compared to economic data from 1996 and juxtapose the statistics with Democrat quotes all in about a minute and half is proof positive of the media’s laziness, dishonesty, or both.

UPDATE: The Anchoress has a great roundup of this one, complete with cartoon.

Posted in Media Bias, Politics | Tagged: , , , , , | 1 Comment »

An Education: Democrats on the Economy

Posted by Ryan on March 27, 2008

We’ve finally learned something (on the record for a change) about Democrat’s vision for the today’s ailing economy!  Here’s a sample of Obama’s take on what he to do in tough economic times:

“To renew our economy — and to ensure that we are not doomed to repeat a cycle of bubble and bust again and again — we need to address not only the immediate crisis in the housing market; we also need to create a 21st century regulatory framework, and pursue a bold opportunity agenda for the American people….  We do American business — and the American people — no favors when we turn a blind eye to excessive leverage and dangerous risks….  If we can extend a hand to banks on Wall Street, we can extend a hand to Americans who are struggling.”

OK, let me get this straight:  Regulation.  Government handouts.  Ending the Business Cycle.

Been there, done that.

  • One of the things we learned from the 1970s (before Obama met Reverend Wright and while She Who Must Not Be Named was still wearing those dorky glasses) is that the more regulation the government imposes the less economic activity takes place from those targeted companies/industries, which will destroy job growth and diversification. 
  • Plus, government hand-outs to the “struggling” might be good mid-20th Century populist/class-warfare politics, but we’ve seen the abject failure of wealth redistribution in our own country: “War on Poverty” anyone?  
  • Back in the 1990s people were also talking about the end of the business cycle.  I don’t want an end to the business cycle because, quite simply, that means the end of capitalism.  Bad companies must be made to account, bad behaviors by consumers must be stymied by market realities, and bad investments must be punished if an economy is to learn and grow in the fastest and most natural way. 

So, what did I learn about the Democrat candidates and the economy today? 

Same old populist-socialist dribble that won’t fix anything but would continue the cycle of dependency.  But that’s what I expected them to say.  The bigger question to ask is:

Will John McCain take advantage of these scary policy positions that his opponents are putting forward on the record? 

One hopes.

Posted in Election 2008, Politics | Tagged: , , , , , , | Leave a Comment »

The Economic anti-stimulus Package

Posted by Sal on January 24, 2008

President Bush and Congress are close to a deal on a $150 billion economic “stimulus” package.  The package includes a temporary suspension of the 10% income bracket, meaning that everyone who fell in this bracket would receive up to $800 ($1200 for married couples) in the form of a rebate.  In addition, the plan would include business tax write-offs, business investment write-offs, and plans for rescuing those who being foreclosed on by allowing Fannie Mae and and Freddy Mac to purchase mortgages that are greater than the current $450,000.00 cap (those poor people who really couldn’t afford their $600,000 houses). 

This plan is nothing but a show and will do very little to stimulate the economy.  It will provide a short-term boost in consumer spending and saving, but will not do anything long-term to stabilize and grow the economy.  The economy, and Wall Street in particular, is based on future long-term projections.  The best way to grow the economy is to provide long-term, permanent solutions.  While I don’t particularly object to the tax rebates (I never mind when the government gives me back some of my money) or the write-offs, they are minor, temporary, and probably low-impact changes.  Below are a few ideas on how to really grow the economy: 

  • Make Bush Tax Cuts permanent:  Due to the sunset provision in the Bush tax cuts, there will be an automatic tax increase in 2010 for all Americans, the re-invention of the Marriage penalty, the complete reversal of the cut in the death tax, and numerous other increases.  These tax cuts were in a large way responsible for the sustained economic growth of the past 5 years.  Making them permanent would be a good first step in assuring long-term growth. 
  • Corporate Income Tax Cut or elimination:   This is one proposal that would surge the economy, create more jobs, and make America more competitive in the global marketplace.  One of the reasons that countries such as India and China are so attractive to businesses is the low or non-existent corporate income tax.  Cutting this tax would provide for further investment, more jobs, and a surge in wall street. 
  • Capital Gains Tax Cut or elimination:  This cut would surge investment in Wall Street.  A cut in capital gains makes investing more profitable, and would stimulate investors to buy. 
  • Further Income Tax Cuts / Simplification:  Cutting the income tax rates further, or even more daring, going to a low-rate flat tax or national sales tax would provide a boost in the economy.  The major expansions of the last 30 years have all included personal income tax cuts which have given people more of their money to spend, save, invest, and start their own businesses. 
  • Social Security:  This may not seem obvious, but allowing people to invest their payroll taxes into private accounts in the market would in effect take billions from the buerocratic sink-hole that is Washington, and move it into investments in American Business. 

Any of these proposals would not only stimulate us out of the current market correction, but also put us on a track for unprecedented economic growth and make us more competitive in the world market.  America has to discard its socialist tendencies that started with the New Deal, massively expanded with the “War on Poverty”, and continues today with the current crop of Democrats.  President Bush is doing this country a disservice by abandoning the economic principles he once adhered to, and pushing this anti-stimulus package. 

There has been much talk of elections and the current Republican field.  While there are numerous problems in other areas, as Mike has indicated in his previous post, most of the Republican candidates would provide a better economic leadership than any of the Democrats (Mitt and Rudy in particular).  Hopefully whoever the next Republican president is can work to enact economic policies that will grow the economy the way that the Reagan policies of the 80s, the Gingrich policies of the 90s, and the Bush policies of this decade have led us to sustained economic growth, with fairly mild corrections/recessions in between. 

Posted in Politics | Tagged: , , , , , , | 1 Comment »