ECON 101

Joe Biden had a rally recently. He posed the question to his audience, “We had a $2 trillion tax cut last year. Did you feel it?”

The crowd screamed overwhelmingly, “NO!”

Joe responded, “Of course not. Of course not. All of it went to the folks at the top.”

Even that bastion of liberal journalism, the Washington Post felt it necessary to respond to Joe’s comment. They printed the following. “82% of people making $50 – 75K received tax cuts AVERAGING nearly $1000.” Overall unemployment is at a 50 year low at 3.6%. Black and Hispanic unemployment are at the lowest point ever recorded since the federal gummamint started tracking unemployment by race and ethnicity in 1948.

Wage increases in the last two years have been 25% higher for production workers than for their supervisors. Compare this to the last 5 years of Obama’s administration when supervisors received wage increases 40% greater than their workers. The economy added 263K workers in the past month. Liberals like to say that the soaring stock market has no benefits for the average people. That might be true except that anyone with a 401K or a pension plan is benefiting greatly from the stock market growth.

I have to wonder about Joe’s supporters. Not one of them received a tax cut. What does that tell you about his supporters?

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ANOTHER INTERESTING FACTOID

One of the thinnest spots in the earth’s crust is also the lowest point in the USA – Death Valley, California. It is only 16 miles thick. Some points in the earth’s crust, like the Himalayas, are over 40 miles thick. The interesting thing is that the crust under Death Valley is getting even thinner every year.

INTERESTING FACTOID

I have pointed out in previous postings that North Africa was a lush verdant land until 5,500 years ago when, in less than 200 years, it became the Sahara Desert. I thought some might find additional information about the Sahara’s history interesting.

Scientists say that what is now North Africa was a shallow sea until 20 million years ago. At that point the African tectonic plate began to move north. As it pushed against the European plate the edge of it was pushed upward until it was above sea level and became North Africa. At that time there was no rain fall in that area so it quickly dried out and became a desert. It remained that way for thousands of years. Then it changed. It began to rain. This rain was the beginning of a cycle of change every 20,000 years. These cycles have taken North Africa from a lush verdant land full of life to a hot dry lifeless desert with every cycle. The predominate theory about the cause of these cycles is that they are caused by a wobble of the Earth’s axis. But it’s just a theory. No one knows for sure. What scientists have been able to demonstrate is that the cycle has been reliably repeating every 20,000 years.

The Great Lakes in America were long said to contain the largest single source of fresh water in the world and 20% of the world’s total. Recent research has revealed that this fact must be modified. Scientists now maintain that until 5,500 years ago fully 10% of North Africa was covered with lakes. Lakes so big they are called “Mega Lakes.” They were three times larger than the Great Lakes and connected by an extensive river system. It is known that extensive farming was taking place and the raising of animals. Fossils have been found of elephants, gazelles, hippos and crocodiles. Cave art has been found in the desert of people swimming. Perhaps the most interesting thing about that hot dry Sahara Desert today is that underneath of it there is still more water than is in the Great Lakes. Plans are afoot to pump that water to the surface for irrigation to allow the desert to be farmed. The problem is that it will be several thousand years before that reservoir under the desert will be refilled when the cycle returns to a rainy clime.

UNCLE BERNIE SEZ …

Uncle Bernie says heath care is a right. As you know, without health care, there is a possibility you might get sick. And if you get sick there is a even chance you may die. But when it comes to food there are no possibilities or chances. WITHOUT FOOD YOU WILL DIE. Why, then, is food not a right?

Uncle Bernie also says that health care should be “single payer.” You go to the doctor and endorse a bill for the services you receive. The doctor presents that bill to the gummamint and the gummamint pays him/her.

It would seem that the right to food, too, should be “single payer.” You go to the supermarket and fill up your cart with food. You go to the checkout counter and the clerk scans all your food items and you swipe your “right to food” card. The supermarket sends your food list to the gummamint and the gummamint reimburses the supermarket for your food.

This is going to be great. I see those gigantic shrimp in the seafood section and the thick fancy steaks for sale. Of course, I’ve never been able to afford that stuff in the past. I’m really looking forward to this new gummamint program.

Prostate Specific Antigen

Well, I guess it’s official. I am a cancer survivor. Of course, there are no guarantees so continued vigilance is vital. I would like to reiterate an earlier observation I posted. Many of you may be suffering under a common misconception that prostate cancer progresses so slowly that you’re likely to die of old age before the cancer gets you. This is often true, but there are aggressive forms that don’t wait around for old age. You guys out there need to talk to your doctor about when you should start getting PSA tests. And you ladies out there who are not anxious to get rid of your not so better half need to encourage your man to have that talk with his doctor. Early detection is very important. If any of you have questions you’d like to ask feel free. Of course, you may need to stow your tender sensibilities, because there’s a shortage of tender topics with prostate cancer. Just so you’ll know …

OCTOBER 9, 2008 … FANNY AND FREDDIE

Today, the Washington Times incorrectly accused the White House of ignoring warnings of trouble ahead for government-sponsored enterprises (GSEs) and neglecting to “adopt any reform until this summer,” when it was too late. “Neither the White House nor Congress heeded the warnings, Fannie and Freddie retained strong bipartisan support during the 1990s and early part of this decade.” (Editorial, “Hear, See And Speak No Evil About Fannie And Freddie,” The Washington Times, 10/9/08)

Over the past six years, the President and his Administration have not only warned of the systemic consequences of failure to reform GSEs but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. In fact, it was Congress that flatly rejected President Bush’s call more than five years ago to reform the GSEs. Over the years, the President’s repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems with the GSEs.

2001

•April: The Administration’s FY02 budget declares that the size of Fannie Mae and Freddie Mac is “a potential problem,” because “financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.” (2002 Budget Analytic Perspectives, pg. 142)

2002

•May: The Office of Management and Budget (OMB) calls for the disclosure and corporate governance principles contained in the President’s 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

2003

•February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market.

•September: Then-Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact “legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises” and set prudent and appropriate minimum capital adequacy requirements.

•September: Then-House Financial Services Committee Ranking Member Barney Frank (D-MA) strongly disagrees with the Administration’s assessment, saying “these two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis … The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” (Stephen Labaton, “New Agency Proposed To Oversee Freddie Mac And Fannie Mae,” The New York Times, 9/11/03)

•October: Senator Thomas Carper (D-DE) refuses to acknowledge any necessity for GSE reforms, saying “if it ain’t broke, don’t fix it.” (Sen. Carper, Hearing of Senate Committee on Banking, Housing, and Urban Affairs, 10/16/03)

•November: Then-Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any “legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk.” To reduce the potential for systemic instability, the regulator would have “broad authority to set both risk-based and minimum capital standards” and “receivership powers necessary to wind down the affairs of a troubled GSE.” (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

2004

•February: The President’s FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital and calls for creation of a new, world-class regulator: “The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore … should be replaced with a new strengthened regulator.” (2005 Budget Analytic Perspectives, pg. 83)

•February: Then-CEA Chairman Mankiw cautions Congress to “not take [the financial market’s] strength for granted.” Again, the call from the Administration was to reduce this risk by “ensuring that the housing GSEs are overseen by an effective regulator.” (N. Gregory Mankiw, Op-Ed, “Keeping Fannie And Freddie’s House In Order,” Financial Times, 2/24/04)

•April: Rep. Frank ignores the warnings, accusing the Administration of creating an “artificial issue.” At a speech to the Mortgage Bankers Association conference, Rep. Frank said “people tend to pay their mortgages. I don’t think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren’t there.” (“Frank: GSE Failure A Phony Issue,” American Banker, 4/21/04)

•June: Then-Treasury Deputy Secretary Samuel Bodman spotlights the risk posed by the GSEs and calls for reform, saying “We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System.” (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

2005

•April: Then-Secretary Snow repeats his call for GSE reform, saying “Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America … Half-measures will only exacerbate the risks to our financial system.” (Secretary John W. Snow, “Testimony Before The U.S. House Financial Services Committee,” 4/13/05)

•July: Then-Minority Leader Harry Reid rejects legislation reforming GSEs, “while I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process.” (“Dems Rip New Fannie Mae Regulatory Measure,” United Press International, 7/28/05)

2007

•August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying “first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.” (President George W. Bush, Press Conference, the White House, 8/9/07)

•August: Senate Committee on Banking, Housing and Urban Affairs Chairman Christopher Dodd ignores the President’s warnings and calls on him to “immediately reconsider his ill-advised” position. (Eric Dash, “Fannie Mae’s Offer To Help Ease Credit Squeeze Is Rejected, As Critics Complain Of Opportunism,” The New York Times, 8/11/07)

•December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying “These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I’ve called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon.” (President George W. Bush, Discusses Housing, the White House, 12/6/07)

2008

•February: Assistant Treasury Secretary David Nason reiterates the urgency of reforms, saying “A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully.” (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

•March: President Bush calls on Congress to take action and “move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages.” (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

•April: President Bush urges Congress to pass the much needed legislation and “modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes.” (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

•May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

“Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow state housing agencies to issue tax-free bonds to refinance sub-prime loans.” (President George W. Bush, Radio Address, 5/3/08)
“The government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator.” (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)
“Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans.” (President George W. Bush, Radio Address, 5/31/08)
•June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying “we need to pass legislation to reform Fannie Mae and Freddie Mac.” (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

•July: Congress heeds the President’s call for action and passes reform legislation for Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

•September: Democrats in Congress forget their previous objections to GSE reforms, as Senator Dodd questions “why weren’t we doing more, why did we wait almost a year before there were any significant steps taken to try to deal with this problem? … I have a lot of questions about where was the administration over the last eight years.” (Dawn Kopecki, “Fannie Mae, Freddie ‘House Of Cards’ Prompts Takeover,” Bloomberg, 9/9/08)