Major Issue is NOT the Economy

Richard Salbato 4-26-2008


When Ronald Regan ran for president against Carter, the economy was in shambles, with lines at the gas pumps, interest rates on 30 year mortgages at 20%, inflation out of control, and taxes too high.  Regan asked, “Are you better off now?”  When Clinton ran for president he also ran on economic issues, saying:  “It’s the economy, stupid.”  In fact, most people thoughout the democratic world vote their pocket-books and mostly with their hands out one way of the other.  Liberals and Socialists want the government to give them something; Conservatives want the government to stop taking something from them. In both cases it is their pocket.

When this election process began the war was the major issue, but when the housing crisis began and the war improved, the number one issue became the economy.  I would like to talk a little about the economy first and then show what the real issues should be, knowing all the time, that no matter what I say, people will still vote their pocket book.    

We are in an economic slow down caused by high gas prices and sub-prime house loans with adjustable mortgage rates. First let us understand who caused both of these problems.  In both cases it was what the Congress and Senate did and did not do. 

The Housing Problem

In the case of the housing crisis, it was the government that wanted people who could not afford homes to have them. They opened the door to the stupidest program in America history, “No down payment - adjustable mortgage loans for homes. They also changed the credit requirements, and paid no attention to people’s ability to pay in the long run.

When I bought my first home, you had to have a 20% down payment, good credit, and an income four times your monthly payments.  Houses were cheap and sales were great.  Today they allow people to buy homes with payments equal to more than half their monthly income even when there are two incomes in the family. 

In truth, this housing crisis is the best thing that could happen to the economy in the long run. Twenty years ago, anyone with an average income and good credit could by a home.  But because of the change in income (two people working per household), and because of no-money down rules, and because of adjustable mortgage payments, house prices got out of control.

In the last 30 years, when income increased 200%, houses increased by 600%.  Contractors made a 20% profit 30 years ago, but before this crisis they were making 200%.  Considering inflation, the cost of property and the cost of construction, houses are over priced from 30% to 50% depending on the area.  For instance, a house selling for $600,000 may only be worth $300,000 and a house selling for $250,000 may only be worth $125,000.  The reason for this is that builders, banks and assessors worked together for maxing out profits, and because of the laws stated above they got away with it.  The government allowed this and the banks took advantage of it.

Why then did the Banks also get hit badly when it all fell apart when the adjustable mortgages re-set?  First you have to understand banks and government regulations.  When I was young we said that Banks had a license to steal because they could leverage their deposits seven times.  That means that if they had $1,000,000 in deposits, they could lend out $7,000,000.  Because of the change from regular banks to Security Companies and Mortgage Companies, this leverage went from 7 times to 30 times.  When you hear of a company writing off billions of dollars in equity, they are not loosing billions of dollars, they are simply being honest about what their equity is worth.  Banks are no difference than homes.  If I have a home that I think is worth $1,000,000 and have other assets worth $100,000 and cash money of $50,000, I can say I have a net worth of $1,150,000.  If I find out that my house is only worth $500,000, I can say I lost $500,000 in equity but in truth I lost nothing.  I simply corrected my false understanding. 

If governments would simply leave the free market alone, with reasonable regulations for justice, the markets would correct themselves.  The market his time will correct itself, but because of government interference it will not correct itself quickly.  Without this correction, an average household wage-earner could never afford a home. 

I understand that years ago the government wanted to help everyone own a home, but instead of building cheaper homes, they came up with these stupid mortgages, which made temporary renters out of people who thought they owned houses. 

What they could have done is mandate areas where zoning regulations would allow smaller homes, without two car garages, and without mandatory garbage disposals and dish-washers. In Panama, the government wants everyone to own a home.  They have banking and building systems that will allow a new buyer to own a home with nothing down.  These homes are on large lots but the homes are very small, no garages, no frills, one bedroom, one bath.  The banks are paid directly from the company they work for, so that payments are made first before anything else.  Because the lots are large, they can expand the houses little by little as their family grows or as their income increases.  The system costs the government nothing, but they gain in property tax.

You will note that this housing crisis has not spilled over to the rest of the economy, and before the elections it will be 70% corrected and over.

The Gas Problem

There is no question that the first gulf war was for oil because Saddam Hussein invaded oil rich Kuwait and would have invaded Saudi Arabia after that.  If, however, we had become oil independent before this, we could have said that we did not care.  The fact is that today, oil is money and without it we could not survive as a nation.  Today we get 60% of our oil from other countries, and half of that from countries that want to eliminate us.  Way back at the time of President Carter, we had a friend in Iran and in Saudi Arabia. We were building Nuclear Power Plants and finding oil in Alaska, and off shore.  We are also exploring the oil shale in the mid states, but Carter and the Congress closed all these things down. 

As we have stopped drilling for oil in Alaska, Russia is now trying to move in a do it from their side of the pool of oil reserves.  As we have stopped drilling for oil off shore in the Gulf, China and Cuba are drilling like mad.  Canada is selling the USA 20% of our oil and it is from oil sands. And yet we have the largest deposit of oil in the world in oil shale, larger that all the oil producing countries in the world, and the technology to take it out of the ground at $50 a barrel.  Most of these reserves of Oil Shale are on government lands from Colorado and Utah to South Dakota.

Oil companies are drilling in these areas but have no incentive to go quickly at it considering the government climate and what seems to be coming, a completely Democratic Government, whose only ideas are conservation and alternative fuels.  They want no more oil at all.

Even the companies that are making fuel from corn and other farm crops admit that even if they use all the land they can they will never get better that 50% of our needs and they will not reach 10% by 2030. 

What about conservation?  Hybrid cars are the greatest thing since the invention of electricity, but even if everyone who buys a new car buys a Hybrid, in 17 years it will only be 30% of the cars and trucks on the road and by then we will be using the same amount of oil we do now. That means by 2025 we would not reduce our need for oil by one drop. 

The real long term solution is all electric cars, which are almost developed, but -------.

Look at our highways and freeways and imagine all those cars running on electricity. Where is all that electricity going to come from?  Our electric grid is already over loaded – maxed out.

We have not built a Nuclear Power Plant in over 30 years and during that time American companies like Brown and Root have built over 100 plants world wide but not one in America.

We are not building Coal Powered plants but China is opening a new Coal Powered Electric Power Plant every week.  If we have electric cars, where is the electricity going to come from.

It has been over a year now that I wrote $5.00 Gas or World War III because unless we get off of foreign oil now, we will be seeing a shut off of all foreign oil and our economy will stop dead. Forget about gas prices, there will be no gas.  

It's time for consumers to strike back against the real culprits behind rising gasoline and food prices.  Who deserves blame? Middle East sultans? Oil company executives? Commodities speculators?

How about blaming our very own United States Congress? For decades, Congress has led our government into disastrous decisions by being the patsy of radical environmentalists, naysayers and prophets of doom. Recent presidents have done little to resist.

Now American consumers pay the price while politicians try to evade and shift the blame.

However, we can lower gas prices by reversing misguided federal policies, and lower food prices, too. It's all about what we learned (or should have) in Economics 101 – supply and demand.

The stifling of domestic oil and gas production and the suppression of new refineries and nuclear power plants have choked off the supplies of domestic energy, forcing us to rely on foreign oil. In the international market, we must bid against the growing energy appetites of China and India, and we're held hostage by the oil cartels of OPEC. The world market is unstable and expensive, and we shouldn't be at its mercy.

Politicians keep promising a plentiful supply of alternative energy, but that remains far in the future, and much of it will be more expensive than $4-per-gallon gasoline. Ponder this: How could you afford any fuel that needs government subsidies to compete with $120-a-barrel oil? Those will never be affordable for consumers.

We don't have a shortage of oil and gas reserves; they've just been placed off limits. They include parts of Alaska, other public lands, the Gulf of Mexico and offshore areas. The American Petroleum Institute, or API, reports that opening up these areas would provide enough oil to power 60 million cars for 60 years, plus enough natural gas to heat 60 million homes for 160 years. But 85 percent of coastal waters have been declared off limits, along with similar restrictions on 75 percent of the onshore prospects.

That's why 60 percent of our oil is now imported. And these restrictions caused America to lose more than 1 million jobs in oil and gas during the past 25 years. How many "green collar" jobs have we gained to replace them?

Similar federal policies have blocked construction of oil refineries and nuclear power plants for more than 30 years, again increasing our dependence on foreign supplies of energy.

Yes, our modern technology can produce the energy we need without harming the environment. Unfortunately, liberals have sought to demonize the oil and gas industry, hoping to destroy its credibility so the public will see it as a greedy bunch of rich polluters.

With gasoline so expensive, oil executives were called before Congress to discuss record-high profits. The hope was to justify taxing them for another $18 billion, on top of the $90 billion they already pay. Politicians then would give that $18 billion to subsidize other types of energy that are too expensive to operate profitably

Yet the profit margin for oil and gas is about 7 cents for each dollar invested, according to Business Week. That's about the same margin as Avon Cosmetics, and Bed Bath & Beyond, and toothpaste maker Colgate-Palmolive. Apple, with high-tech gurus, was twice as profitable. So were Coke and Pepsi. And Microsoft and Google made four times the average oil company's rate of return.

But is anybody angry about the high cost of toothpaste, iPods or soft drinks? Why don't more profitable companies get raked over the coals by Congress? Because Congress doesn't need them as scapegoats. Lawmakers have messed up America's energy supply so badly that they need someone and something else to blame. They're creating a diversion – trying to brainwash the public into how to think and who to accuse.

Another reason for high gas prices: federal and state regulations that require dozens of "boutique fuels," dictating different blends of gas for different regions. As a result, we no longer have an efficient national market that enables a surplus in one area to be shifted to another part of the country. Boutique fuels require expensive refinery shutdowns to change output from one formula to another, lowering production and risking overproduction for one area and underproduction for someplace else. Consumers pay the price.

A big part of boutique fuels is the ethanol mandate, now set by Congress at $18 billion a year, which shifted the corn supply from food to fuel. The mandate set off a domino effect as the government pays farmers to grow corn rather than other grains, and to sell it for fuel instead of food. And because corn is the major feed for livestock, the prices of meat, eggs, milk and so on climb along with prices for grain, flour, baked goods, etc.

Nobody wants to be blamed for food riots and world hunger, but the public is realizing those are the outrageous results of ethanol subsidies.

Besides, ethanol reduces all-important gas mileage. As the Heritage Foundation's Ben Lieberman put it, "America's energy policy has been on an ethanol binge, and now the hangover has begun."

Unfortunately, we've lost time while we were on that binge. Now, if we want to get serious about lower gasoline prices (and food prices), here's a simple five-point checklist:

1. Understand the causes, especially the role of government

2. Open up reserve areas

3. Build refineries and nuclear power plants

4. End expensive and wasteful mandates, especially ethanol

5. Let the free market develop alternatives for the future

Finally, remember patience: These problems didn't develop overnight and can't be solved overnight. America's consumers should wake up and realize taxes aren't the only way elected officials reach into our pockets. It's time to slap away those hands.

The War Problem

What about the war in Iraq?  As I said before the first war was to protect the oil supply but even then we should not have needed it.  Now, 16 years later we still need it. The problem I have with the war is not why we fought it, because I will show below the truth about that.  My problem is the way we fought it.  The traditional conservative philosophy of war is that 1st war is fought by a nation and not a government.  Bush should have convinced the American people first, and then went to war.  The 2nd thing is that war should be planed to be short and fast with few lives lost.  This was done in the first Iraq war but not the second.  I might blame Clinton for this because he cut the Military Man-power in half.  But there is also the 3rd thing and Bush did not do this.  That is to have a recovery plan for the country we went to war against.  The mistake of the war was to destroy the entire infrastructure, including the army.  Then we were faced with no government at all, no army, no police and no utilities.  They were now open to be taken over by Iran and we could not let that happen.  We still cannot let that happen.  That is the problem we face now.

But let’s go back to why we went there in the first place, and what the liberal media knows but will not admit.  Saddam Hussein had weapons of Mass Distruction and was going to use them on Israel and in Lebanon.

Iragi General George Sada was one of Saddam Hussein's top military advisors and the only man who disagreed with him and lived to tell about it.

Iraqi General George Sada said:  

“I was No. 2 in the air force. I worked since the revolution of 1968. I was retired in '86 and then I was recalled again when Iraq invaded Kuwait.  I want to make it clear, very clear to everybody in the world that we had the weapons of mass destruction in Iraq, and the regime used them against our Iraqi people. It was used against Kurds in the north, against Arabs — marsh Arabs in the south.”

“Up to the year 2002, 2002, in summer, they were in Iraq. And after that, when Saddam realized that the inspectors are coming on the first of November and the Americans are coming, so he took the advantage of a natural disaster that happened in Syria, a dam was broken. So he announced to the world that he is going to make an air bridge.

With this air bridge, he moved these weapons of mass destruction to Syria in 2002.

“They were moved by air and by ground, 56 sorties by jumbo, 747, and 27 were moved, after they were converted to cargo aircraft, they were moved to Syria.

The Syrian government knows exactly where these weapons are today?  These weapons have landed in Damascus. Where could they have gone?

Iraq had used that weapons, especially when it was used against our people, Kurds in the north and Arabs in the marsh areas, and it was used when the Iranian used to penetrate our defenses in our territories. Iraq had some projects for nuclear weapons but it was destroyed in 1981.

We were so supposed to attack Israel by like eight aircraft, all equipped with nuclear — chemical weapons in two waves, one wave through Jordan and the other wave through Syria, without telling Syrians and Jordan about that.  But I mentioned to the president, "Sir, this is going to be a disaster, because Israelis have got plans to destroy these airplanes before they go to Israel. Although whatever air defenses are good, but still some aircraft can penetrate."

Now let’s face it, we will have to go to war with Iran and Syria sooner or later. Who do you want as President when we do? The economy will be over in a year but the war with Radical Islam will be around for 20 years. 

The Problem of Money

But like all other elections, if people are going to only think of themselves, and their pocketbook, who is better for your money?

The Tax Problem

Taxes under Clinton 1999                 Taxes under Bush 2008 
Single making 30K - tax $8,400           Single making 30K - tax $4,500 
Single making 50K - tax $14,000         Single making 50K - tax $12,500 
Single making 75K - tax $23,250         Single making 75K - tax $18,750 
Married making 60K - tax $16,800       Married making 60K- tax $9,000 
Married making 75K - tax $21,000       Married making 75K - tax $18,750 
Married making 125K - tax $38,750     Married making 125K - tax $31,250 

If any democrat is elected, ALL of them say they will repeal the Bush tax cuts.

Proposed changes in taxes after 2008 General election: 
MCCAIN 15% (no change) 
OBAMA 28% 
How does this affect you? If you sell your home and make a profit, you will pay 28% of your gain on taxes. If you are heading toward retirement and would like to down-size your home or move into  a retirement community, 28% of the money you make from your home will go to taxes. This proposal will adversely affect the elderly who are counting on the income from their homes as part of their retirement income. 
MCCAIN 15% (no change) 
OBAMA 39.6% 
CLINTON 39.6% 
How will this affect you? If you have any money invested in stock market, IRA, mutual funds, college funds, life insurance, retirement accounts, or anything that pays or reinvests dividends, you will now be paying nearly 40% of the money earned on taxes if Obama or Clinton become president. The experts predict that 'Higher tax rates on dividends and capital gains would crash the stock market yet do absolutely nothing to cut the deficit.'  And businesses will go overseas.
MCCAIN (no changes) 
Single making 30K - tax $4,500  
Single making 50K - tax $12,500 
Single making 75K - tax $18,750 
Married making 60K- tax $9,000 
Married making 75K - tax $18,750 
Married making 125K - tax $31,250 
OBAMA and CLINTON (reversion to pre-Bush tax cuts) 
Single making 30K - tax $8,400   
Single making 50K - tax $14,000   
Single making 75K - tax $23,250   
Married making 60K - tax $16,800   
Married making 75K - tax $21,000   
Married making 125K - tax $38,750 
MCCAIN 0% (No change, Bush repealed this tax) 
OBAMA and CLINTON keep the inheritance tax 
How does this affect you? Many families have lost businesses, farms and ranches, and homes that have been in their families for generations because they could not afford the inheritance tax. Those willing their assets to loved ones will not only lose them to these taxes. 
* New government taxes proposed on homes that are more than 2400 square feet 
* New gasoline taxes (as if gas weren't high enough already) 
* New taxes on natural resources consumption (heating gas, water, electricity) 
* New taxes on retirement accounts 
and last but not least.... 
* New taxes to pay for socialized medicine so we can receive the same level of medical care as other third-world countries!!! 
Can you afford Clinton or Obama? I can't!!!!! 
(in case you want more information on Obama's tax and spend agenda: 
If Sen. Barack Obama (D-IL) Could Enact All Of His Campaign Proposals, Taxpayers Would Be Faced With Financing $874.35 Billion In New Spending Over One White House Term: 

The Medicare Problem

Ben Stein, the economist, commentator, and one-time Nixon speechwriter, also well known for film and TV roles, says the cost of Medicare is already completely out of hand.

In fact, the future cost is beyond our ability to pay — period.

“Medicare is such a crisis you can hardly imagine,” Stein said in a video commentary for Fortune magazine. “Actuarially, the U.S. is bankrupt right now.”

He isn’t speaking theoretically. Stein says that the locked-in, required spending — figures not up for debate — simply overwhelm not only the potential income from taxes, but the actual value of the assets themselves.

“The liabilities foreseeable up until the year 2050 discounted back to present value exceed the total wealth of the nation,” Stein said.

“Every building, every warehouse, every K-Mart, every Wal-Mart, every Target, every Sears, every ship, every plane, every acre of wheat or corn, every oil well, put them all in one big bond, it would not equal the liabilities of Medicare,” he said.

According to the American Academy of Actuaries, Medicare spending in 2006 hit 3.1 percent of gross domestic product (GDP). That figure will jump to 6.5 percent of GDP by 2030 and rise to 11.3 percent by 2080.

Remember, too, that Medicare is not 100 percent coverage, so these estimates are not the total cost of health care, just the government’s liability.

Add Social Security entitlements, and things at first blush don’t seem so bad. Social Security payments added on are projected to total 12.7 percent of GDP by 2030, rising to 17.6 percent in 2080, according to the actuaries.

It can be easy to presume that the economy can potentially grow its way out of the entitlements mess — until you realize that GDP is the whole economy and not the federal budget.

Consider, for a moment, that federal revenues average 18 percent of GDP. This means that in 2007 — this year — 40 percent of federal revenues already goes to entitlements.

All things remaining equal, the Medicare and Social Security “bite” climbs to 80 percent of the budget by 2040.

Entitlement spending consumes the entire federal budget by 2080, bankrupting the government. Education, security, defense, disaster aid, housing, environment, science, transportation — everything else — gone.

“So it’s a real serious problem,” Stein said. “The solution to this problem is extremely difficult to figure out.”

Means-testing — simply put, requiring wealthier Americans to pay more out of pocket rather than rely on Medicare — is probably inevitable, Stein said.

That puts people who are doing the right thing and saving in a bind, since it adds an inestimable new cost to retirement: health care.

“As a close friend of mine says, this is the joker in the deck: What are your medical costs going to be when you retire?” Stein said.

“It could be much, much larger than you think. That means you have to save even more,” he said.

The Problem of the Congress

I watch c-span whenever I can to see what the house and senate are doing day by day.  I was very unhappy with the Republicans and their excessive spending before, but now that the Democrats are in power, I just want to throw up.  The political games played here are beyond reason.  Two years of the stupidest government I have ever seen.  The house is the worst, where Nancy Palosi acts like a dictator.  Even when both Democrats and Republicans get together for something and have the votes, if she does not agree with it, she simply will not bring it to the floor for a vote.

You are not going to believe this, but what body of people have the following: 36 accused of spousal abuse, 7 arrested for fraud. 19 accused of writing bad checks, 117 have directly or indirectly bankrupted at least 2 businesses, 3 have done Time for assault, 71 cannot get a credit card due to bad credit, 14 have been arrested on drug-related charges, 8 have been arrested for shoplifting, 21 currently are defendants in lawsuits, and 84 have been arrested for drunk driving in the last year. This is not the NBA or NFL.  It is the 535 members of the United States Congress.

The s
ame group that cranks out hundreds of new laws each year designed to keep the rest of us in line.
Gun Control

Since one of these people running for President wants to do away with all guns in America, I think people should look at what happened in Australia, as told by Australian Police officer, Ed Chenel.

Hi Yanks, I thought you all would like to see the real figures from Down Under.  It has now been 12 months since gun owners in Australia were forced by a new law to surrender 640,381 personal firearms to be destroyed by our own government, a program costing Australia taxpayers more than $500 million dollars. The first year results are now in: Australia-wide, homicides are up 6.2 percent, Australia-wide, assaults are up 9.6 percent; Australia-wide, armed robberies are up 44 percent (yes, 44 percent)! In the state of Victoria alone, homicides with firearms are now up 300 percent. (Note that while the law-abiding citizens turned them in, the criminals did not and criminals still possess their guns!)

While figures over the previous 25 years showed a steady decrease in armed robbery with firearms, this has changed drastically upward in the past 12 months, since the criminals now are guaranteed that their prey is unarmed. There has also been a dramatic increase in break-ins and assaults of the elderly, while the resident is at home.

Australian politicians are at a loss to explain how public safety has decreased, after such monumental effort and expense was expended in 'successfully ridding Australian society of guns.' You won't see this on the American evening news or hear your governor or members of the State Assembly disseminating this information.

The Australian experience speaks for itself. Guns in the hands of honest citizens save lives and property and, yes, gun-control laws affect only the law-abiding citizens.

Take note Americans, before it's too late!

What then are the Major issues?

The answer is first:  1. Oil Independence, and second: 2. Islamic threat, and third: 3. Taxes with less government, and forth: 4. Legal Immigration.  The first and second go together, because we cannot keep sending millions of dollars per day to our enemies and expect to win the war with Radical Islam.  As for taxes, we are now in a world economy, where even our own businesses can go anywhere in the world, to build cars, pump oil, make clothes, or any other product.  If we yoke them with higher taxes then their competitors in Europe or Asia, they will be forced to leave.  Even now the biggest problem for American businesses is getting educated workers.

No one is taking about Immigration in the Presidential Primaries because they all want the Spanish vote.  Just like the crimes above, politicians are willing to brake the law or allow the law to be broken to get elected.  The truth is that we need good immigration at the rate of a million a year to support this economy but we do not need illegal people coming with drugs, crimes and terrorists.

America Alone

Since the United Nations and NATO have become both worthless safeguards against protecting the freedoms of democratic societies, we need to form a new alliance of countries that hold like values and are willing to defend those values, without thinking in terms of geography.  We have alliances with Europe but countries like Japan, South Korea, Panama, Columbia, Israel, Poland, Brazil, India and Canada would be more dependable allies than Italy and Spain.

We need to go alone or form better allies, who have the same moral courage to protect democratic freedoms. 

Richard Salbato  4-26-2008