Yeas And Nays On Obama’s Stimulus Tax Cuts
Yeas And Nays On Obama’s Stimulus Tax Cuts
As reported yesterday, President-elect Barack Obama is planning to direct up to 40 percent of his proposed economic stimulus plan toward a variety of tax cuts.
Today, specifics about some of the cuts have come forward, and while a few are laudable, such as the initiation of Obama’s “Making Work Pay” proposal, others have precious little to do with stimulating the economy and seem intended only to entice conservatives into supporting the legislation.
Here are two of the tax cut proposals, one of which is a properly targeted cut for lower-income families, and another that’s simply a boon for corporations:
Yea - Expanding Child Tax Credit:
This proposal “would grant an estimated 5.5 million poor children access to the credit for the first time, and expand the tax benefit for millions more poor children who currently qualify for only a partial credit.” As former Secretary of Labor Robert Reich pointed out while advocating that the Child Tax Credit be fully refundable, “Giving American families more economic security during this meltdown isn’t just fair. It’s also good policy, because the money they get to buy goods and services keeps other people in jobs.” Indeed, under this proposal a part-time working mother earning $5,000 a year would receive $300 that would almost assuredly make its way back into the economy.
Nay - Refunds on corporate losses:
A separate proposed provision “would provide businesses with billions of dollars in refunds” by enabling companies who posted a loss last year “to get refunds for taxes paid as far back as five years earlier.” Projections indicate that there were 107 companies in the S&P 1500 that lost money in 2008. And, as Dean Baker points out, “really big losers, like Robert Rubin’s Citigroup, and other badly failing financial institutions, are losing much more money in 2008 and 2009 than they earned in 2006 and 2007″ and stand to reap huge benefits.
The Hill reported today that the tax cut announcement was “preceded by a lobbying push by businesses, which argued that providing tax relief may be a better way of reviving the economy than simply directing money to pay for road and bridge construction.” And even if Obama is including these business breaks for the sole purpose of drumming up widespread conservative support, it needs to be acknowledged that their stimulative effect would be decidedly minimal.
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5 Responses to “Yeas And Nays On Obama’s Stimulus Tax Cuts”
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Krugman’s right. I have old losses that I can’t apply to prior years and get a government check. Once again, businesses have more rights than individuals.
January 6th, 2009 at 6:11 pmIf those companies are able to recoop their losses, do the people that got the axe to make up for bad management get rehired or will the money go to upper management bonuses?
January 6th, 2009 at 10:56 pmObama doesn’t want the Dems to stick their necks out alone and so must throw the Repubs some bones. Seems like a waste but politically it’s wise. Not much change there……
January 7th, 2009 at 1:17 pmI don’t get the logic on this specific set of tax breaks. It seems like a clear “socialize failure” move.
OTOH, I’d love to see the base corporate income tax rate brought down to match those of our European competitors. That move rewards success, which we could use more of.
January 7th, 2009 at 9:06 pmLetter to Treasurer Henry Paulson Jr.
Henry M. Paulson Jr.
Dept of Treasury
Office of Treasurer
1500 Pennsylvania Ave., NW
Room 2134
Washington D.C. 20220
To Henry M. Paulson Jr
Thank you for all that you have done for our nation. You stepped up when other didn’t know what to do about the currant economic crisis. It would have been much better if it hadn’t occurred at all. I wrote a book in 1982, which outlined policies that would help make our economy more efficient. I believe that we rely on the Federal Reserve too much to manage our economy. Its policy of managing the economy by adjusting the money supply to control inflation and economic crises is too damaging to our economy when used by its self. I believe that the income tax should be automatically bought into play at the same time. When the government relies on the Fed to use its policies, it is like driving a tack in with a sledgehammer. There is a lot of damage done to the economy that is unnecessary and much to much misery is created. The government responsibilities increase as more people become government dependent.
Enclosed you will find an article I wrote, to be published in our local newspaper. I am also enclosing a policy paper on how to stabilize oil prices. When the economies of the world recover energy prices will rise. We consume 25% of the world oil supply. Our actions will have an enormous affect on world oil prices. I hope you will find these policy changes helpful.
Please let me know what you think and if I can be of anymore service.
Sincerely
Leonard Tekaat
e-mail economysflaw@Yahoo.com
leonardc@earthlink.net
Let me introduce myself. I am sixty-four years old. I am a retired Economic Analyst, Financier, Businessman, Investor, Author and former candidate for the California Congress. I have over forty years of being in the financial and business world.
There is a major flaw in our economic theories!
I wrote a book and several articles outlining new policies to cure economic crisis, now and in the future. It is a guide to correct a major flaw in our economic theories. John Maynard Keynes the British economist gave us a guide to help the economy out of the recession economic cycle. The problem is, he did not leave a handbook on how to correctly slow down the economy when it is so strong that it is creating an economic crisis. If you agree that these changes need to be enacted, support me in getting them enacted. In this way you will be doing something that will really improve the lives of the people of and families of America. The stock market should go up, replacing some of the value they have lost.
We do not need a government jobs program or a bailout to cure the economic crisis. They were tried in the Great Depression and were only partially successful. It was World War II that finally restarted the economy. We do not want that to happen again! Recently we had the housing bubble, which got us into this mess, and the oil bubble in the commodities market. The Federal Reserve could not do anything about them, without killing our economy and disrupting the world economies. Find out why! The book INFLATION THE ECONOMY KILLER by Leonard Tekaat is available at Amazon.com free info. http://www.American Solutions.com articles by happyashell
HOW TO STABILIZE THE VALUE OF YOUR HOME
According to recent articles in newspapers and financial magazines, Bakersfield has seen the price of single-family homes drop an average of 31% or more in the past two years. A recent article by Courtenay Edelhart , Californian staff writer, it is predicted we might see another 21% decrease in the median priced home in 2009! The state and national economies are in terrible shape. Our economy is experiencing an economic crisis. It is very sick because of decades of mismanagement. State and local governments are close to being broke. The federal debt is expected to triple. People are losing their jobs and homes. Business large and small are going bankrupt. People are giving up hope of a better future for themselves and their families.
We have been treating the symptoms of the economic crisis, not the disease. We must try something different. What we are doing is not working!
Investors must be encouraged to invest in long-term bonds and securities to restart the economy. There are four questions that investors ask before they will get off the sidelines. Will I make a profit? Will my investment retain its value? Will it pay a good return on investment? Will the economic future be better than the past? If we can satisfy these concerns, investors will get off the billions of dollars they are sitting on and reinvest them in our economy. Breathing new life into it. The government will not have to bailout the economy, if investors and consumers are confident of the future.
There is a major flaw in our economic theories. John Maynard Keynes (1893-1946) was the British economist who revolutionized economic theories of the 1930s. Keynesian economics works well. The trouble is he did not leave a handbook on how to correctly slow down the economy when it is so strong, that it is creating an economic crisis. We recently had the housing bubble, which got us into this mess, and the oil bubble in the commodities market. The Federal Reserve was not able to do anything about either one of these bubbles. WHY?
We need a new method to cure economic crisis and control inflation psychology. Our economy has become so big and electronically sophisticated, the old ways no longer work. One of the reasons we are experiencing an economic crisis is we have made investing in capital assets and commodities with rising prices very profitable. Since inflationary investments are taxed at 15%(long term capital gains tax rate) and money investments are taxed at 38%, making the money investments worth 23% less. In fact to offset the capital gains rate on personal residences, which is 0%, and the homes annual appreciation rate is 30%, which we had in 2003-2005, interest rates on bonds, securities and bank savings accounts would have go up to 48.5 a.p.r to have the same return on investment. Add in the effect of the interest deduction. Is it any wonder that we had a housing bubble and the Fed could not do anything about it, without killing our economy, and disrupting the world economies?
To halt the falling housing prices, save our auto industry and put people back to work, mortgage rates must decrease 2 to 3%. When the economy refinances, at a lower interest rate, people’s disposable income will increase. The unemployed will be employed, and have more income. People’s confidence level will rise and they will start spending money again! They will be able to afford a new car, there-by saving the auto industry. If the vehicle’s loan interest is made tax deductible again, more vehicles will be sold and at a faster pace.
Banks no longer hold mortgages. They sell them to investors. So we must induce an economic climate so investors are willing to purchase, during this economic crisis and the inflation cycle, long-term bonds and securities, I wrote a book “Inflation the Economy Killer” containing “The Zero Inflation Taxation Policy”, which correctly cures the economic crisis. It correctly controls inflation and solves the problems of under investment in the long-term bond and securities market, during economic crises. As inflation or under investment in the bond and securities market begins to occur, the tax on money investments should automatically be decreased and the interest deduction should be decreased by the same percentage rate, based on the inflation rate. When money investments are taxed at 15%, money investments will be as valuable as inflationary investments. All capital gains must be taxed at the same rate to correct this imbalance. If a real estate, stock market or a commodities market bubble is occurring raise the capital gains tax rate on that item or all long-term investments. Income taxes in general should not be raised. Investments in the commodities market must be made without credit until the day of delivery. It is a simple plan, but so was Keynesian economics.
In the 1980s, even through interest rates went up to 21%, they were only 100% above the then currant annual inflation rate of 11%. The currant inflation rate is approximately 0%, some economist say we may even be lower than that (deflation). The currant interest rate to buy a home is approx.6%. That is at least 600% above 2008’s inflation rate. If a person has credit card debt, the interest rate is even worse. It can be 2500% or more above the annual inflation rate. If a person has credit card debt equal to their annual gross income, of say $25,000.00, they will pay more interest to the financial institution than income taxes to the state and federal governments combined! The economy cannot function efficiently under these conditions. We must stop the destruction of our economy every 7 to 10 years.
ENCOURAGE FINANCIAL INSTITUTIONS TO LOWER THEIR LENDING INTEREST RATES.
Banks have become their own worse enemy. If interest rates for mortgages were lowered there wouldn’t be as many foreclosures. The value of their collateral would stabilize. The money they are lending can be obtained at the Federal Reserve for .5% or .5% above the inflation rate. Banks kept the interest rates approx. 300 to 500% or more above the inflation rate all through the 1930s, causing the Great Depression to be worse than it would have been with lower interest rates. They may be keeping interest rates high so they will not loose their depositors. If this is true, then the Federal Reserve must purchase the new mortgages through the following financial institutions. As the old mortgages are refinance they will change from a delinquent assets to a viable assets and be taken off the bad debt list. After the economy restarts and gets strong again, interest rates should rise. The Fed should never let interest rates rise more than 100% above the annual inflation rate. This means that mortgage interest rates and other loans must also follow the annual inflation rate down. Interest rates must be maintained fifty to 100% above the inflation rate. We have special circumstances in our economy at the currant time. With the government providing lower interest rate mortgages than the banks and financial institutions, the banks will have to lower their interest rates to be competitive or they will loose business. Which is their income to pay depositors
The Home Loan Bank, Federal Housing Authority, Fannie May, Freddie Mac and any other financial intuitions that are government sponsored, have deposits insurance by FDIC, or are partially owned by the government would not be allowed to purchase any mortgages or other debt that had an interest rate greater than 200% to 300% above the annual inflation rate. If any of these financial institutions make loans to the public, the same policies would apply to the making of mortgage loans. When the mortgages are bundled into securities, only those loans that had the same lending criteria and purpose would be allowed into the security. With this policy in place the securities could be correctly rated as to value. Adjustable Rate Mortgages (ARM) could not have a starting interest rate lower than the 15yr fixed rate government sponsored or insured loan or 3%,which ever is the lowest. The loan interest could not be raised or lowered more than one-quarter percent per year or greater than an apr of 5%. The new buyer must qualfy for the mortgage at the highest interest rate the mortgage will obtain. I believe that if home loans were made assumable, home prices would not have decreased as much as they have. The selling expenses connected to transferring the home to the buyer is considerable less and occurs much quicker, increasing demand, thus there is less time for the home to devalue. If there is no equity left in the home, the seller is not going to pay the extra expenses to sell it in a conventional manner. The homeowner will just let it go back to mortgage holder. Approval of the new buyer, by the lender, must be done before they could assume the mortgage. The mortgage should be adjusted to the current selling price of the house. A 3% pay down of the unpaid principle amount would be required. If equity is less than 20% mortgage insurance is required. The assumption expenses to the buyer should only be the actual expenses of the mortgage service company. The title insurance should be assumable by the buyer, for a small fee to cover the actual cost of assumption and a title search.
You might be thinking these changes to our financial system would decrease the investor’s willingness to invest in the new securities. Currently investors are not as concerned about the rate of return. They are more concerned about the borrower’s ability to repay the loan and the value of the collateral. People do not abandon their homes because the loan is greater than the current resale price. They have not given up hope that the selling price of the home will increase in the future. They are mainly moving out of their homes because they cannot afford the mortgage payments. They will give the home to the bank, if they have to move, to find less expensive housing or find employment. This is why the loan should be assumable. If the monthly payment is affordable to the buyer, it is better to own the home than to rent. Even if it’s current selling price is less than the mortgage owed. The new buyer will be allowed a tax deduction for the interest and property taxes. This advantage makes their housing cost cheaper than renting. Also it is possible they may make some money on the sale of the home in the future. Even if they do not make money on the sale, they are better off than renting, because they will eventually pay the home mortgage in full. For those people who own a home that the mortgage is greater than the currant selling price a clause should be included in the refinanced mortage that states the bank will discount the mortgage, an amount equal to the principal amout credited, of each monthly payment for the first five years,if the mortgagee agrees to pay off the entire unpaid balance due. The morgagee must also buy mortgage insurance. Again the mortgagee must qualfy for the loan at the highest rate of interest the mortgage will obtain.The insurance company could either take possession of the home or pay the differents between the currant selling price and the unpaic balance of the mortgage minus any repairs that need to be made to the home to obtain the highest possible selling price. The bank does not care who is making the mortgage payment. They do not want the house back. They just want someone to continue making the monthly payments.
If the interest rate for a mortgage is reduced by 2 to 3 % the price of the collateral will stabilize because of the increased number of qualfied buyers that would qualify for a mortgage. The foreclosed housing inventory will quickly be sold increasing the value of all the other homes in the neighborhood. When the mortgage is made assumable, the monthly payments will continue to pay down the loan, there-by maintaining the value of the security. The investors will be making a good return on their investment if the interest rate they are collecting is up to 200% to 300% above the annual inflation rate. With The Zero Inflation Taxation Policy enacted, the security instrument will maintain its resale value because the Fed will not have to raise interest rates as high to control inflation and inflation psychology. There is a second wave of foreclosures on the way, starting in 2009 or 2010, when another set of (ARM) mortgages adjust. If we act quickly, they will adjust down instead of up. With the above policies enacted interest rates will come down, avoiding the possibility of hundred of thousands of more foreclosures and the prolonging of the recession or even developing a depression. The Policy should stabilize the long-term bond and security market, creating a market for 30 year fixed rate mortgages, at the lowest possible interest rate. . If you agree that these changes need to be enacted, support me in getting them enacted. In this way you will be doing something that will really improve the lives of the people of and families of America. The stock market should go up, replacing some of the value they have lost.
We do not need a government jobs program or more bailouts to cure the economic crisis. They may do more harm than good. With the government borrowing such large amounts money, treasury securities will rise in price. Banks and investors will then put their money into treasuries and not into the economy and mortgages. Housing prices must have a floor put under them before more equity is lost. Banks will then not loan homeowners money because of a lack of equity. Job programs were tried in the Great Depression and were only partially successful. It was World War II that finally restarted the economy. We do not want that to happen again! These policy changes will cause mortgage rates to drop and the stock market should go up. The economy will stand up on its own, without a government bailout. Additional info, Inflation the Economy Killer, available at Amazon.Com. Leonard Tekaat is an Economic analyst, Author Businessman, Financier, Investor and former candidate for California Congress. E-mail leonardc@earthlink.net economysflaw@yahoo.com copyright Jan 4, 2009
HOW TO STABILIZE OIL FUEL PRICES AND
ENOURAGE A CHANGE OF OUR
TRANSPORTATION VEHICLE’S PROPELLANT
There always has been a problem with the price of oil being able to come down, which discourages the change over to another propellant for our transportation vehicles. Oil has been relatively cheap (not counting the cost of pollution) to produce based on the BTUs and the other products that can be obtained from a barrel of oil. Even at the currant price, a profit can be made from an existing oil well. So how do we stabilize the price of oil, to encourage the change to another propellant for our transportation vehicles?
If our nation and President Elect Obama are serious about reducing the amount of oil we import
and the amount we use, this is the perfect opportunity to do something about it. Transportation fuel prices have fallen considerable in the last few months. Now is the time for our State and Federal governments, to add the $1.50 or more per gallon Oil Preservation Exchange Contribution (OPEC), charge onto transportation fuels. Instead of adding the OPEC at the pump, we could add a $100.00 per refined barrel of oil at the refinery. At the same time decrease the income tax by the same dollar amount, so there is not an increase in revenues. The program must be revenue neutral. The law that will create this program must have a provision that unconditionally guarantees, that the OPEC will remain revenue neutral.
The people who’s income is below the national poverty level and do not pay income taxes should get a monthly check, even if they don’t own a transportation vehicle. The amount of the check should equal the cost of the OPEC that the average person would pay each month. This provision would encourage mass transit use. Or we could issue debit cards that can only be used for rides on mass transit systems. The people who pay taxes must change their E-4 and estimated tax statements so their monthly income will increase based on the lower amount on income tax that they will be paying because of the OPEC.
Transportation fuel prices can only go up so much before people start changing their driving habits. This change would be good for the economy and the environment. At a certain price, the use of oil diminishes and alternative means of propelling transportation vehicles takes place. If the government increases the price of transportation oil fuels, with the OPEC, then Opec or the oil companies cannot increase them. They cannot come down either because of the OPEC.
Please send this information to as many people and groups as you can. The last four letters in American are I__CAN. We can do this together and as a nation of free people. We are responsible for how our economy is managed and what laws are enacted. All for one and one for all!
Leonard C. Tekaat
January 8th, 2009 at 10:35 amleonardc@earthlink.net
economysflaw@yahoo.com Copyright 12-1-08