Every one of the facts stated here are verifiable from multiple sources and are NOT disputed. The only policy question that is relevant is WHETHER WE PUT PEOPLE OR BIG BUSINESS FIRST in our priorities. The rest is obvious. HERE ARE SOME EXAMPLES:

1. HEALTHCARE: (AT LEAST $1 TRILLION IN DIRECT AND HIDDEN FAT IN THE SYSTEM). The U.S. health care system is a wealth transfer scheme, which takes money from the pockets of ordinary citizens and puts it in the hands of a few people who do nothing to earn it. This is a PRIVATE TAX that only exists because the government has interfered on behalf of big business starting with Keiser Permanente.

          a. We spend, on average anywhere from 5 to 40 times what other countries spend on drugs for two reasons (1) we are prescribed too many drugs and (2) we pay much higher prices from the same companies that sell the same drugs in other countries.

Instead of the money going through the government to the insurers, pharmaceutical companies and medical service providers, the government mandates the money go directly to these cartels.

These companies have applied a substantial portion of their excess profits towards placement of “news stories”, advertisements and other propaganda that have convinced most Americans that the U.S. health care system, while faulty, is still better than other countries. THIS IS A LIE. Check it out using any statistic you like.

• THE U.S. SPENDS 15.4% OF ITS GDP on heath care plus capital expenditures for equipment and buildings which brings it to around 18.5%. The amount of money spent is therefore $2,400,000,000 ($2.4 trillion dollars).
• U.S. patients take 65% more medication than any other country on earth because only our system allows access and payment for INTERVENTION and allows nothing for for PREVENTION and MAINTENANCE. Most of these medications eventually increase the risk of death and/or other diseases. The Food and Drug Administration is staffed by and funded by Pharmaceutical company employees (either past, present or future). Access to PREVENTATIVE protocols is denied by the FDA, insurance company and the propaganda disseminated by the medical industrial cartel.
• Not only is there sufficient funding already in the system to provide health care to every man, woman and child, along with social services that would reduce living stress and increase productivity, hope and innovation in the U.S. economy, there is actually about $400 billion dollars left over to contribute to other social programs (education, police, fire) that would make it possible for every man, woman and child at any age to be educated and trained to be competitive in the global economy. 
• NO OTHER COUNTRY IN THE WORLD SPENDS MORE THAN 11% OF ITS GDP ON HEALTHCARE. 
• ALMOST EVERY OTHER WESTERN COUNTRY (INCLUDING THOSE WITH NATIONAL UNIVERSAL HEALTHCARE) HAS MORE PHYSICIANS AND MORE HOSPITAL BEDS PER PATIENT THAN THE U.S.
• THE DEATH RATE, INFANT MORTALITY RATE, “UNNECESSARY” DEATH RATE, AND EVEN HEIGHT IS WORSE IN THE U.S. THAN, ON AVERAGE, 40 OTHER MODERN WESTERN COUNTRIES. (we have lost three years of longevity in the last 50 years and we have lost one inch of height).
• NO OTHER COUNTRY ALLOWS PRIVATE INSURANCE AS THE MIDDLE MAN BECAUSE INSURANCE AND MANAGED HEALTHCARE PLANS ADD NO VALUE.
• EVERY OTHER COUNTRY EMPHASIZES PREVENTATIVE HEALTHCARE AND GIVES BONUSES TO HEALTHCARE PROVIDERS WHO IMPROVE THE HEALTH OF THEIR PATIENTS.
• The only rational conclusion is that by deleting private insurance as the middle man in providing access to a public need (like education, police, public libraries and fire) and enabling a single payer to negotiate reasonable prices, the problem, and the deficit caused by healthcare spending would be eliminated. 

2. CREDIT AND DEBT: The U.S. credit and monetary system is a wealth transfer scheme, which takes money from the pockets of ordinary citizens and puts it in the hands of a few people who do nothing to earn it. This is a PRIVATE TAX that only exists because the government has interfered on behalf of big business starting with the credit card associations and companies that provide network access to credit imposing interest rates that have been known and understood for centuries to result in permanent debt.

It was once called USURY. Now it is called liquidity. The laws that made it illegal to charge rates of 35% on credit cards and 400% on payday advances were changed. So now it is still a crime under natural law but not under our legislative system. It’s government backed and therefore it is a PRIVATE TAX.

• Government spending, government subsidies to big business, and government laws allowing big business, large unregulated, to charge exorbitant interest rates has resulted in unprecedented consumer and government debt — Federal, State, local and individual — requiring SOMEBODY (either us or our children, grandchildren and great children) to pay interest amounting currently to more than $3 trillion dollars per year plus the loss of social services and safety nets that have existed for more than 50 years. 
• All of this debt has been funded by issuing U.S. currency equivalents that are now held in foreign investment vehicles, foreign exchange reserve accounts in central banks concentrated in the hands of China, South Korea and other countries whose commitment to the sovereignty and nationals security of the United States is best questionable.
• At least $1 trillion of interest, fees and costs associated with excess interest and/or excess debt could be eliminated from the expenditures of U.S. spenders, producing substantial capital for improvements to infrastructure, jobs, increased revenues from income taxes, sales taxes, excise taxes,etc., without raising the rate of taxation on any of these sources of revenue.
• The Mortgage Meltdown could be stopped by a commitment to keep people in their homes, preventing abandonment of homes that are not maintained. This would stop an ever-decreasing spiral of housing prices caused by REO homes coming onto the market at rates that demand could not possibly meet, reinstate the balance sheet of lenders and thus improve their capital position, and reinstate the balance sheet of investors who were tricked into buying junk securities which, with a little help and cooperation from business, government and people could be converted into ratable securities. 
• Devaluation of the dollar and inflation caused by devaluation would be slowed, stopped or even reversed if the U..> showed its resolve to responsible economic policies and responsible monetary management and responsible regulation of “securitization” which is merely a unregulated method of increasing monetary supply despite declining demand for the U.S. dollar.
• Reducing the debt service BY LAW to sustainable levels that would enable debtors to eliminate their debt. Banning advertisements that encourage consumers to buy goods and services they don’t need, or could wait to buy through savings, would convert a debt economy to a solid foundation of  savings economy. like many other countries in the world.

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April 27, 2008

3 Candidates With 3 Financial Plans, but One Deficit

By LARRY ROHTER and MICHAEL COOPER

The Republican and Democratic presidential candidates differ strikingly in their approaches to taxes and spending, but their fiscal plans have at least one thing in common: each could significantly swell the budget deficit and increase the national debt by trillions of dollars, according to tax and budget experts.

The reasons reflect the ideological leanings of the candidates, with Senator John McCain proposing tax cuts that go beyond President Bush’s and the Democrats advocating programs costing hundreds of billions of dollars. But for fiscal experts concerned with the deficit, both approaches are worrisome.

With the national debt soaring to $9.1 trillion from $5.6 trillion at the start of 2001, in part because of the Iraq war and Mr. Bush’s tax cuts, a crucial question about the candidates to succeed him is “whether they are helping to fill the hole or make it deeper,” said Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan organization that advocates deficit reduction. “With the proposals they have on the table, it looks to me like all three would make it deeper.”

Representatives of all three campaigns disputed such assessments, questioning the accounting methods analysts used to calculate the growing debt and saying they could enact their plans without making matters worse.

Mr. McCain’s plan would appear to result in the biggest jump in the deficit, independent analyses based on Congressional Budget Office figures suggest. A calculation done by the nonpartisan Tax Policy Center in Washington found that his tax and budget plans, if enacted as proposed, would add at least $5.7 trillion to the national debt over the next decade.

Fiscal monitors say it is harder to compute the effect of the Democratic candidates’ measures because they are more intricate. They estimate that, even taking into account that there are some differences between the proposals by Senators Hillary Rodham Clinton and Barack Obama, the impact of either on the deficit would be less than one-third that of the McCain plan.

The centerpiece of Mr. McCain’s economic plan is a series of tax cuts that would largely benefit corporations and the wealthy. He is calling for cutting corporate taxes by $100 billion a year. Eliminating the alternative minimum tax, which was created to apply to wealthy taxpayers but now also affects some in the middle class, would reduce revenues by $60 billion annually. He also would double the exemption that can be claimed for dependents, which would cost the government $65 billion.

“High tax rates are driving many businesses and jobs overseas — and, of course, our foreign competitors wouldn’t mind if we kept it that way,” Mr. McCain said, laying out his economic plan this month in Pittsburgh. “We’re going to get rid of that drag on growth and job creation.”

On the expenditure side, Mr. McCain has called not only for continuing an open-ended deployment of troops in Iraq, but also for spending $15 billion annually to expand the Army and the Marine Corps and to improve health care for veterans, among other programs.

Mr. McCain’s advisers have said the new tax cuts would be paid for by eliminating earmarks and making large spending cuts, but they have not identified specifics. And they have spoken vaguely about making entitlement programs like Social Security and Medicare less costly for the government. Mr. McCain’s chief economic adviser, Douglas Holtz-Eakin, said the campaign had simply presented its vision of what the tax code should look like and noted that some of the proposals would be phased in.

“I think what they ought to do is remember that the proposals are going to engender economic growth, which is the best thing you can do for near-term budget improvement,” Mr. Holtz-Eakin said, adding that Mr. McCain believed spending restraint was possible.

That vision for the tax code includes making permanent the Bush tax cuts, set to expire in 2010, which Mr. McCain once opposed in part because they were not accompanied by sufficient spending cuts.

“I voted against the tax cuts because of the disproportionate amount that went to the wealthiest Americans,” Mr. McCain said in 2004. “I would clearly support not extending these tax cuts in order to help address the deficit.”

In 2001 and 2003, Mr. Bush pushed through Congress tax cuts totaling nearly $2 trillion. The first set lowered income and estate taxes, and the second focused mostly on capital gains and dividends.

The McCain campaign does not figure the costs of extending the tax cuts into its deficit projections, although the Congressional Budget Office estimates that it would cost an extra $2.2 trillion over the next decade.

When Mr. McCain outlined his tax cut plan, he backed away from his pledge to balance the budget during his first term, but said that he would do so by the end of his second term. And in an interview last Sunday on “This Week With George Stephanopoulos” on ABC, Mr. McCain said he would push ahead with his tax cuts even if Congress did not approve his spending cuts.

Some conservative economists say that increased deficits in the short run are an acceptable tradeoff for tax cuts that they say will promote economic growth in the long run. And many liberal economists say that some of the Democratic spending proposals, like addressing the affordability of health care or improving education, are long-overdue investments that pay off handsomely even if they entail more red ink.

Mr. Obama and Mrs. Clinton have acknowledged that their various new programs would be costly but have outlined how to pay for them. But some fiscal monitors say they may be relying on overly rosy projections of how much savings their proposals would actually yield.

Mrs. Clinton has calculated that her universal health care plan would cost about $110 billion a year, while Mr. Obama’s somewhat more modest proposal would cost up to $65 billion annually, his advisers say. Both candidates have also talked of new government incentives and investment to encourage the development of alternative sources of energy, which would cost about $15 billion a year.

The Democratic candidates have suggested that they could finance these and other programs by allowing parts of the Bush tax cuts to expire. That, however, ignores projections of the Congressional Budget Office, which has already assigned those savings to deficit reduction.

In other words, unlike Mr. McCain, both Democrats say they would revoke the Bush tax cuts for the wealthy. “At a time of war and economic hardship, the last thing we need is a permanent tax cut for Americans who don’t need them and weren’t even asking for them,” Mr. Obama said.

But they would retain those reductions meant to benefit poor and “middle-class” families, which they defined as the 97 percent or so of the population that lives on less than $250,000 a year, and they would count the estimated $50 billion generated by higher taxes on the wealthy as new revenue.

“Remember, you can only use this money once,” said Mr. Bixby of the Concord Coalition, “and with all the Bush tax cuts scheduled to expire, that money is already scheduled to come into the Treasury. But on the campaign trail, this has become a source of new spending.”

Mrs. Clinton’s aides have been perhaps the most specific in explaining how they would offset the costs of their proposals, and her campaign speaks of moving toward balanced budgets. “We’re not going into debt for the war in Iraq and tax cuts for the wealthiest of Americans,” Mrs. Clinton has said, “but instead we are taking care of the needs of our people at home.”

Regarding gas taxes, Mr. McCain has proposed a one-time “tax holiday” for the summer. Mrs. Clinton also calls for suspending it in a new advertisement in Indiana, while Mr. Obama says that is a “bad idea” but opposes any increase in the tax.

On the spending side, Mr. Obama has argued that ending the Iraq war is one way to pay for some of the new programs, including creating a national infrastructure investment bank and increasing the foreign aid budget. But such savings, which Mrs. Clinton does not count on, would not immediately make their way into the Treasury, and some experts say it is not clear whether they would be sufficient to finance all the programs Mr. Obama has enumerated.

Mr. Obama has talked of spending that money on a variety of initiatives whose costs amount to about one-third of the war’s estimated annual cost of $150 billion. “It is clear that there ought to be some distinction between a candidate who says a withdrawal should start immediately and a candidate who says let’s maintain the war at the highest level,” said Austan Goolsbee, Mr. Obama’s senior economic adviser.

The fiscal outlook has been made even murkier by the explicit “no new taxes for the middle class” pledge that both Democratic candidates made at their debate in Philadelphia this month, exempting taxpayers making $250,000 a year or less from new levies.

Hearing such a promise “makes you very sad,” said Len Burman, director of the Tax Policy Center. “First of all, we don’t have enough revenue coming in to pay our bills.” In addition, he said, the notion that all the revenue that would be lost in a middle-class tax freeze can be made up by higher taxes on the wealthy “is not tenable.”

Whether Krugman is right in today’s New York Times, predicting a massive bailout between $450 billion and $3 trillion at taxpayer expenses, or the “free marketers” have their way and let everyone collapse, or some people finally get it and move toward a consensus of policy that forgives everyone their transgressions but keeps them in the game as we have suggested repeatedly in these posts, it is clear that perception of risk, trust, confidence and integrity has been changed. This change will be reflected in world and domestic financial markets rights down to a car loan, credit card, home equity loan or business loan. 

• The recent rise of ankle biting between home equity lenders (many of whom have frozen home equity loan accounts making the credit limit unavailable to borrowers), borrowers and fist mortgage lien holders on short and long sales and refinancing, shows what has happened: Nobody trusts anybody anymore and credit is going to decline not only because of availability of money, not only because of viability of short-term credit instruments and the auction markets that drive them, but because rising borrower distrust of all lenders for all reasons is going to lower demand for credit.
• Just as there isn’t enough money in the world to bailout everyone in this mess, there isn’t enough equity, income or assets to cover the credit that exists, much less putting on more. But more is what we are getting in the form of inflation fueled by the Fed churning out money supply like it was candy from a machine.
• Borrowers seem to have learned that what lenders tell them can’t be trusted. It is a valuable lesson. They are realizing that lenders have a vested interest in keeping borrowers in debt and to maximize the debt of every man, woman and child in the United States. 
• The number of homes going upside down either because of overvaluation of the home for purposes of the purchase money mortgage or over valuation for purposes of home equity loans is increasing daily. Sorry to hit a sore point but the chickens are coming home to roost. The motivation of change lifestyle from home owner to renter has never been greater. It seems likely that people will do just that.
• This might be a paradigm change that could forever change the landscape of the American economy. retail buying sprees of things that nobody needs, and that nobody wants after they make their purchase, are on the decline. They might be on their way out as a way of life. That accounts for 70% of the U.S. economy.
• This new perception of risk and the new distrust, have taken on the same dynamics as the politics of division which was bound to be reflected in the marketplace eventually. Basic assumptions and formulas currently used in economics are now cast under a cloud of doubt, as are the policies based on current assumptions and current measurements of things that might not matter as much in the future as they did in the past.
• Doubt and uncertainty create bad environments for doing business, investing and living. We might be in for some hard times, but it is probably high time for the AMerican economy to “get real.”

The bottom line is that the Federal reserve is fast becoming irrelevant for reasons described below (and foecasted by Alan Greenspan in 1996), proprietary currencies already out number fiat currencies worldwide, and a return to local government chartered bank currencies and other trusted issuers is probably the only way we can restore order to the markets. Holding onto the current assumptions and policies is like holding onto the railing of the Titanic.

It is becoming apparent that two things are true about derivatives and their current pernicious effect (actual and perceived) on the financial markets and world economies: (1) the true total of derivatives held in the marketplace actually approaches $500 trillion and (2) all $500 trillion of them are suspect now because of the unconscionable actions of a few people who used their creativity with as much concern for consequences as a three year old playing with matches.

Let’s put this in some perspective. The pendulum is swinging too far, as it always does. Yet it is pretty obvious that it has not even hit the half way point in its swing. Debt securities of all types are going to get hammered, credit is going to dry up, and equities are going to take a massive hit, along with the U.S. dollar. Eventually the market will reach some plateau (I wouldn’t call it equilibrium) and there will be a realignment of power, privilege and values.

Just using the most obvious indicators it is clear that the first order of business is to keep people in thier homes, immune from foeclosure at all costs regardless of who is to blame. The way to do that is for all players to realize that they have a dog in this hunt and that lower returns and some write-offs are better than complete write-offs and an economic depression.

The second order of business is to take on regulatory actions in the U.S. and abroad that over time will re-assert the appearance and reality of a fairly fair marketplace. Monetary policy — loosening credit, is not going to help the lenders who are already out of balance in their capital accounts.

Restoring the nomimal value of loans, even at lower levels and lower interest rates will soften the blow that we all see coming now. The only way to do that is to forget punishing anyone, and use the channels in place to restore order to the real estate, debt markets and equty markets.

The patchwork attempted every night by senior economic players in government and Wall Street cannot work except in spurts. It should be abandoned in favor of policies and regulation that reflect more concern for the integrity of the marketplace, the welfare of the constituents, and the return of honor, character and truth.

The truth is that there is not enough money in the world to bail out anyone in the current situation. It is obvious that central monetary policies are worrisome at best. It is equally obvious that power is trending back toward the states from the Federal government that is paralyzed by competing well-paid lobbyists. There is another obvious observation: power, control, and value is trending fast to other monetary centers and currencies other than the U.S. dollar.

We are now in the same place on an even trading field, as everyone else. This means our dollar must be backed by real value, real productivity, and a real economy that runs independent of impulse purchasing by buyers going deeper and deeper into debt.

What does this mean for the U.S. Citizen? Start with safety. The number of homes at risk is now around 7 million. This presents the prospect of over 20 million people displaced, seeking, finding or not finding alternative housing. The total humer of hosueholds at risk for debts other than mortgages appears to be over 35 million, which means that there are over 100 million people whose next meal is in doubt. Social “unrest” is a certainty unless an entirely new mindset is adopted by those who purport to be leaders.

For people with money, there are options that must be considered immediately. Holding U.S. dollars or assets that can only be valued in U.S. dollar denominations, presents a far greater risk than holding even a bad investment in some other currency. Diversification has never been more important because of the uncertainties. But the probability of a U.S. dollar recovery of any meaningful proportion is dim at best. Holding non-U.S. dollar denominated assets is probably the best route even if it means taking some losses now. But remember that real esatate can be sold for any currency. It will decline another 20% or more in many places but it will also recover.

Inflation is starting to take on a hockey stick trajectory if you look at a basket of goods purchased by the bottom 2/3 of the population.  The divide between those who have investments and can take protective measures outside U.S. currency, and those who do not have that luxury will be ever widening.  The average working stiff is going to continue to get paid in U.S. dollars that are worth less and less each month, while the number of dollars he or she receives remains constant.

My radical suggestion is that states and state banks go back to issuing proprietary currency. Deals should be made with holders of precious metals and financail isnitutions to give credibility and integrity to the new currencies and a new common exchange medium other than the U.S. dollar should emerge as the balancing mechanism.

Here is a little secret for you: most of the governors sitting on the Federal Reserve Open Market committee are well aware of the probability that new currencies will emerge.

Here is another secret, the use of derivatives has created “money” in volumes far in excess of all the fiat currencies in the world — so we have alrady gone private with currency when nobody was watching.

The Federal Reserve has been reduced to an inefficient bookkeeper when the transactions happen to flow through as ACH and wire transfers.

The state governments are on the right track — taking matters into their own hands. They should get support of the people — if they do not adopt the corporatocracy rules of Washington. In some states it is too late.  But we can always hope…..

Mortgage Meltdown: Get Out of Jail Free Card from Paulson

In the usual way of floating trial balloons before committing to anything, and without the whole hearted support from any of the many entities and people who have a dog in this fight, Paulson is “outlining” the proposal for “subprime relief.”

All information points to another intentional diversion from dealing with and getting disgorgement of money from hundreds, perhaps thousands of investment bankers, mortgage brokers, lenders, “retailers” and institutional sellers who converted assets to fees in a very simple scheme — churning, covered over by the complexity of “creative” derivative securities. 

Anyone can sell something if the cost is zero and the buyer actually thinks he is getting value. In fact, the sky is the limit because at no time is the market saturated with such a product. That is precisely why the “subprime mess” got so out of hand. And as Krugman points out today in the New York Times, we don’t know where or how how much toxic waste is buried. 

Paulson’s outline presents a plan that does little for the borrowers. It creates the illusion of a bailout when the investment world will not accept our word for anything (and so the illusion is doomed to failure). And the new wrinkle is that it puts the burden on the states and cities to do something about it, which in classical Washington political terms meaning that they are creating someone else to blame. 

Cities and states, already struggling are going to see significant declines in tax revenues and investment income, the value of investment funds and their assets specifically as a result of this mess. And it isn’t just a “subprime mess.” It is about the whole credit market. “Innovation” is just a code word for saying that we are going to create the illusion of money, everyone is going to buy into it because it looks free, and we will collect real fees while everyone else goes into the toilet.

And while we are all sleeping, CDOs and similar securities have been sold for 20 years based upon mortgages, credit card debt and dozens of other exotic theories of risk, none of which have any Triple-A merit but all of which have mysteriously been given the extremely high ratings as risk instruments. They have converted junk bonds to Triple A bonds with a stroke of the ratings pen. 

Meanwhile the co-conspirators, the U.S. Government and Wall Street innovators together with lenders with plausible deniability, and retailers of derivative securities that were sold not just deceptively but with outright lies and fraudulent ratings — they all get a free pass.

The sad truth is that investors are beginning to suspect that most of our market indexes are a hoax. They are probably mostly right. Vapor has been sold with the clothing of kings and queens. Unsuspecting people, government finance officers, financial institutions, fund managers, have been misled into destroying the value of what were real assets until they were invested into these exotic derivative securities, with the fraudulent ratings. 

The economy has been driven by consumer spending. Without liquidity offered by these exotic plans to lend money on credit cards and other consumer debt, whether securitized or not, the economy can’t run. Liquidity is drying up. Pumping more “money” into the system is not a long-term solution, it is a suicide pact for the dollar and for inflation. 

If we REALLY want to save our economy and its place in the world, we need to do something real, own up to the mistakes, hold the people who did it accountable, and make amends to the world as best we can.