I am constantly challenged to understand the relationship between stimulating the economy vs. what is being done by the current administration. I don't have a PHD in Economics, but I do have an ID in common sense... and really did pass Economics 101 in high school.
So, I keep wondering if my solutions are just a gift from God and I should just forward HIS thoughts and conclusions. Maybe my conclusions will be read by someone else who will "get it" and take it seriously.
Here are a few of my thoughts. I heard on the news yesterday that the "new" health bill will contain new taxes on private health care companies to help fund the government health care proposal. Hmmmmmmmm... Now wouldn't that make private plans more expensive since they must add the taxes into their cost of doing business and therefore raise premiums to their customers. And, as I understand the new bill you MUST have health insurance or pay a penalty. And "they" said you could keep your present health care provider. But, if the government can impose taxes against "your" current provider and make it more expensive, doesn't that give the government the ability to price them "out of business?" That's like the government saying that you can still own a gun in America but you can't buy bullets anymore.
Does it seem like the government has all the power and private enterprise is loosing them? Is this the way the "FREE" enterprise system will work under the current administration. Seems like FREE means the government is FREE to do whatever it wants, including taking over banks, auto companies, insurance companies, health care and on, and on, and on.
Guess what? I don't like it and I have just decided to support a simple slogan entitled "Undo Obama". You know, like you can do on your computer if you make a mistake and want to reverse it. Just click on the undo button represented by a curving arrow.
How can we undo the mistakes of the current administration?
Here's another thing that I'm having a problem with. The government just offered a billion dollars worth of $4,500 cash credits for a new car buyer plus a credit of $4,500 if you trade in your old drivable gas guzzling clunker. I'm not against car companies giving incentives to stimulate sales, but I do have a problem with the government using "my" money to help fund another person's purchase. Of course, the public was so excited by the offer that the $1 billion was gone in 4 days. So, the government is approving another $2 billion to continue this giveaway at tax payers' expense. The government has just created a welfare system for new car buyers.
Is there no end to their creativity when it comes to taxpayer funded giveaways?
You understand that the money is borrowed from the Treasury and we, the taxpayers, must pay it back? For the record, if the car companies were funding this $4,500 trade-in and $4,500 credit, the car companies would go broke because they don't make that much profit per car. They would loose money on EVERY purchase and have to go out of business. Wait, isn't that what GMC and Chrysler already did and the government (you and me) loaned them money and then took over the company? That way the companies didn't have to go bankrupt and renegotiate the UNION contracts and lower their unsustainable payments to the unions. So, isn't this additional $3 billion incentive program just additional bailout money? So the taxpayers continue with the bailout. Lee Iacocca where are you when we need you?
And that is hardly the end. What's most upsetting to me now is the bailout of homeowners who are getting big reductions in their mortgage balance and in their monthly payments. Why? Doesn't everyone know that these "readjustments" are REAL losses and someone has to pay for them? Well, I figured that out to. It was easy because so far the same people come up with the bailout money every time....no exception. We will pay for the bank's loss and subsidize those who made bad choices and didn't know that homes prices wouldn't keep going up forever. Since they made a bad deal we (taxpayers and bank customers) will cover the losses. But wait!!!! Common sense kicks in and I have a BETTER idea and it is a win - win for everyone. Here's my idea.
First, recognize that if you borrowed $600,000.00, you must repay $600,000.00. Can we agree that this is the normal way of doing business? The exception to that is the bankruptcy route. So, to begin, let's assume the home owner borrowed $600,000.00 to buy a $750,000.00 home. They got a very attractive option ARM loan with starting rate of 1% interest and mortgage payments they could afford knowing that the rate was adjustable and that the payments WOULD go up. Are we together so far? However, the prices didn't continue to go up but the payments did. So, now the house is worth $500,000.00 and the homeowner demands a reduction in the mortgage balance and the interest rate so they can keep the house they can't afford. So, the homeowner hires a firm to negotiate a reduction in the payment and the mortgage balance. The net result is they keep their house and the new mortgage balance goes to $450,000 ($150,000.00 loss to the bank) and the interest rate goes down by 40% (no loss to the bank as the government has a 0% discount rate to the bank. So, the bank just took a loss but they now have a conforming loan on their books versus a home in foreclosure, which they must carry at market value (mark to market rule), which is heavily discounted. So who pays the loss? We do as taxpayers and bank customers.
But, like I said, I have a better plan based upon "common sense" and the "American Way" of being responsible to repay what you borrowed. So, the bank meets with you and offers you a combo loan of a new first T.D. at low rates and a second trust deed structured as an Option ARM and the results are like this. You now have a new first T.D. at $450,000 with a lower monthly payment. You must make that payment every month on time or you will loose your home quickly because the bank would fast track it. You would also have a new second T.D. that doesn't require any payment (an option) but if you ever sell the house it must be paid off. So, if the house you bought for $750,000.00 goes back up in price (remember my inflation prediction) and is worth $850,000.00 or more you would pay off the first and second if you sold your home and the bank would have all their money back and we (taxpayers and bank customer) would not be subsidizing the homeowner. Now that is my solution. Has any government brain trust offered that suggestion? Too bad, because it accomplishes the same thing but every one wins and either the bank or the tax payers are stuck with the bill to cover the losses. Because there is no loss. I wish I could have a beer with the President to go through this with him but I don't want to risk being called "stupid" for thinking like an American and doing my duty.
So, here's the bottom line on health care legislation as I understand it. The administration says their goal is to cut the cost of health care and make it affordable to all Americans. Now comes the big question. Where are you going to cut costs and increase membership? If you tax the rich, tax optional medical procedures, insurance companies, raise taxes on the middle class by adding VAT, more gas and liquor tax and cutting Medicare and Social Security benefits, etc. The shortfall to accomplish the health care goals is quoted at $1,500,000,000,000.00 (one and one/half Trillion)
So... we are going to go broke creating an affordable health care program to replace the finest heath care system in the world. Now I am seriously thinking about the benefits of retiring in Costa Rica. No government health care there. Just hospitals and clinics manned by former American Doctors and health care professionals. Wonder why?
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Thank you,
Chuck Salisbury
TenPercentDown.com
