Red State

For a change, I'm thinking that maybe politicians are taking the rustbelt of Pennsylvania, the Motor City of Michigan and the backbone of the Agriculture Industry seriously.

We the people now have someone who sees eye to eye with us on issues like Energy Independence, National/Homeland Security, Education, and yes the Economy. Did I mention he/she isn't afraid of a fight even if it's in their own party.

*No more words I've heard enough empty promises from the groomed, scripted, Ivy league educated prop that the democratic party has presented, and his running mate that is deeply, and I do mean deeply entrenched same old argument senator. If they say it enough it must be true.

Maybe some of the supporters of the elite democrat have short memories, but we the people remember the candidates that do what they say and don't just respond to popular headlines to suit the crowd they are standing in front of at time.

When the media is hammering away at the GOP selections at every chance they get, it keeps people from asking questions about the DEM nominee. Character means everything and beliefs mean standing by your convictions. No one will question the convictions of the GOP nominee because they always put Country First.

The Democratic nominee Obama goes from one city to the next saying what he thinks the crowd wants to hear, never sure of his own convictions.

This is no game! We the people know this is no game, but please tell that to the party of the select who think they know best on how you should raise your children, pay your employees, heat your home, fuel your car, the ones who want to redistribute the wealth of the prosperous companies, and most of all sit down to talk unconditionally with terrorist states and give rights to known terrorists that have killed Americans!

1) Why was the RNC seemingly poorly attended last night? It seemed like half the seats were empty?

2) Why is everyone so upset with Campbell Brown who asked a simple question of Tucker Bounds who couldn't answer it.

3) Why were there almost no people of color in the RNC auditorium? I mean, I know there are a few black and hispanic R's, but the view on CSPAN was overwhelmingly white and elderly.

4) Why is it wrong to question a candidate (who is so vehemently anti-choice and so clearly in favor of abstinence only sex ed in schools) if her sex ed policy positions failed her unwed, teenage daughter? Nobody is knocking Bristle as a person. In fact, everyone with a heart wishes this poor child well with the heavy burden she has taken on at such a tender age. But to avoid the irony here is a disservice to thinking people?

5) Last, and most importantly, why was there virtually no mention of any of the serious policy issues facing many Americans last night? No discussion on gas prices (other than saying offshore drilling which, even GW's people agree will not impact prices in the near term)? No discussion of food prices? No discussion of health care? No discussion of education? No discussion of the war or the failure to kill Osama Bin Laden? Even Steve Schmidt is on record as saying that this campaign isn't about issues? Do you all really believe this? Is abortion more important than all these pressing issues?

I ask these things sincerely and being a thinking person of reasonable mind, I am capable of changing my beliefs if persuaded with well reasoned logic. Keep in mind, heartfelt answers may have the desired effect of bringing another person to the McCain camp. Vitriol and hatred will reflect poorly on the respondent.

Thanks!

This is supposed to be Blackie's job, but what the heck.

Just so that this doesn't get lost in the political news, in a flash look at this morning's current news....

o Crude is trading around $108/barrel - down over $7/bbl just this morning.

o The dollar is up sharply - now at $0.69, $1.07, and $0.56 against (respectively) the Euro, the Canadian "dollar," and the British pound (it was at $0.63, $1.00, and $0.50 just a few weeks ago).

o Gold is back below $800 an ounce.

That's the problem with the darned drought - it keeps on raining....

No one. No one is more middle class than Sarah Palin. No candidate, in my admittedly limited political memory, has ever really fit the definition of “one of us”. I always thought that if someone had the “pull”, connections and money to get elected President or Vice President , couldn’t really be one of us.

But Sarah Palin is still one of us. She is a small business owner. She and her husband belong to unions. She has five kids, and all of the common problems that every American family faces. She was on the freaking PTA!

The McCain campaign needs to use her to neutralize all of the identity and class warfare politics that Obama is trying to play. She can reinforce the twin ideas of personal responsibility and accountability. She can talk about what middle class mother face better than anyone. She can talk about the benefits of limited government and lower taxes, and they can’t paint her as out of touch.

I know this is short for a diary, and I apologize. But, I don’t have a lot of time and wanted to get this idea out for discussion.

Sarah Palin just gets better and better.

Yes indeedy--you read that right.

The Obama campaign responded by attacking the DNC delegates for hewing so closely to the discredited economic beliefs of the Bush-Cheney-McCain Administration. "This isn't change," remarked David Plouffe. "This is more of the same!"*

*I made this paragraph up. But admit it: It's plausible.

The pitch for putting some of the economic burden of $4-a-gallon gasoline on the oil industry served a dual purpose for Obama: It allowed him to talk up an economic issue, seen by many as a strength for Democrats and a weakness for Republicans. – As the Headline read out of Florida on Friday.

The "pitch" being referred to above is Democratic presidential candidate Barack Obama's push on Friday for a windfall profits tax to fund $1,000 emergency rebate checks for consumers besieged by high energy costs.

It is high time that news cycle sound bites and empty rhetoric end and we, as American voters, start paying attention to the actions, official statements and fundamental beliefs of a contender for the next President of the United States. This most recent example showing Senator Obama's lack of knowledge of fundamental economics should not only give Americans pause but is highly unsettling. Senator Obama's lack of an intelligent energy policy is obscured by lofty sound bites, empty rhetoric and political expediency. As we enter the last 90 days of this campaign, let us begin pressing the candidates on issues, demand substantive answers and intelligently decide who is best suited to lead this nation over the next four years.

Senator Obama announced Friday that he wants to enact a windfall profits tax on "Big Oil" the favored target of the Democratic Party as of late. A short study of history will bring one back to an earlier Windfall Profit Tax ("WPT") originally enacted under President Carter and lasting from 1980 to 1988. An obscure fact but one of significant importance is the definition of a windfall profit tax which is most simply defined as an excise tax on each barrel of oil produced. This differs greatly from an excess profits tax, which seems to me to be the implication that Senator Obama is suggesting as he demonizes the $11.6 billion of ExxonMobile profits as a disgrace. However this is unclear, therefore my first question to the Senator is, which is it Sir? The truth is, whichever way Senator Obama slices it, the Congressional Research Service postmortem published in 1990 concluded that the WPT of the 1980's was a disaster to say the least. Initial projections estimated that the WPT would yield revenue of $225 billion a primary driving force in its legislative vitality. The reality was a gross revenue effect of $79 billion; however, these gross numbers once tax effected resulted in a paltry net revenue yield of $40 billion, a fraction of the original estimate, over the eight years the WPT was law. Add to that the fact that the Government was spending on average $15 million to collect the tax and the GAO reported that the WPT was "perhaps the largest and most complex tax ever levied on a U.S. industry." Possibly the greatest misstep of the WPT was the impact on domestic oil production which fell to its lowest level in 20 years, while demand continued to rise and the result was an increased reliance on foreign oil supplies. Any effort to move the U.S. today in its current situation - importing approximately 12 million barrels a day from nations including Iran, Venezuela, Nigeria and Russia - to a system that will do nothing to impact oil prices and in fact raise our reliance on foreign oil is irresponsible and dangerous. It is quite inconceivable that a legitimate Presidential candidate is proposing such a policy considering the perilous energy situation the U.S. faces. Not to mention the enormous wealth transfer of nearly $700 billion to unfavorable and in some case rouge nations.

If the same old failed policies of the past being reenacted by Senator Obama's plan are not enough then let us consider what a further tax burden on U.S. oil companies will do to the average American. It is popular fodder these days to classify "Big Oil" as the Democrats and Senator Obama do as the villains, the robber-barons' of old. How is it conceivable that a for-profit enterprise would attempt and for that matter strive to increase profits or build revenue, it is unconscionable. Many in the news cycle led on July 31st with the headline . . . ExxonMobile reports record profits making $11.6 billion in the second quarter, with the connotation of how dare they make so much money all the while American's struggle in a down economy. While, the truth is our economy is experiencing some weakness however this does not fall squarely on the back of U.S. oil companies because despite high gasoline prices and high oil prices record profits and record revenues cannot be view from inside a vacuum as many Democrats would have American's do. The reality is record revenues yield record profits but it also yields record taxes paid, record capital expenditures and exploration and record distribution to shareholders. While ExxonMobile did make $11.6 billion and I guarantee many American's can recite that number but can they recite the $10.5 billion in tax paid in the second quarter or the $12.5 billion spent on exploration and alternatives energy sources or the $10.1 billion in distributions back to shareholders of ExxonMobile stock in the form of dividends and share repurchases. I highly doubt that and even if they could most would say well these shareholders are management and "Wall Street" types, but they would be wrong there as well because 41% of all stock holders in U.S. oil companies are retirement plans, pension plans and IRA's and a total of 64% of stock holders in U.S. oil companies are individual investors, everyday hard working Americans. Not "Wall Street" types. Compare those numbers to the 1.5% of stock that management owns. If Senator Obama would have his way he would raise the tax burden on U.S. oil companies driving down production and leaving the U.S. more reliant on foreign oil sources all the while hindering the performance of these enterprises that are majority owned by pensions, IRA's and individual investors further limiting returns on that equity capital and stymieing retirement plans and nest eggs for everyday, hard working Americans that he claims he is trying to help. These plans are flawed and inconsistent. American voters deserve more from their Presidential candidates and should demand more.

Yesterday, virtually any of you who listened to talk radio at all must have heard the CNN interview with a distressed Hillary supporter after the primetime speech at the convention.

One thing that particularly struck me was the woman's insistence that Hillary was going to give us the jobs and the economy we deserve. Every time I get wobbly on the entitlement state (because I'm a bleeding heart conservative), something like this comes along to stiffen my spine.

When will people come to understand that a president is not like some wizard pulling levers and producing a great economy? I can recall President Clinton acting as if the Paula and Monica scandals were somehow preventing him from keeping the American economy on track. Folks, it ain't like that. The economy represents the creation of value and productivity of efforts by American citizens in a system of relatively free exchange. The government is not doing the work.

Can the government facilitate? Yes. Can it occasionally make a very good and well-supported public works investment? Clearly. But the influence the government has is all at the margins. Not at the core. If you want the jobs and the economy you deserve, then find the people who are innovating, find the people who are generating value. Join them and forget politics, which is all too often a parasitical activity in an era of big government.

That's the assertion.

It's wrong.

Here's some shocking economics for you...

The US ranks #1 among all nations in terms of GDP. The nations that rank #2 and #3 are two countries that the US defeated in WWII and then rebuilt in America's image: Japan (#2) and Germany (#3). Just the difference between the US at #1 and Japan at #2 ($9.4 trillion) is greater than the bottom 158 countries COMBINED. Wow.

The entire article (with sources) can be read here:

http://americanfreedomuniversity.com/blog/?page_id=2

And amazingly enough, if you point this out, people get huffy and accuse you of being out of touch.

I didn't think it was possible, but apparently, Nancy Pelosi has set the art of trash-talking back half a century or so.

We the hard working tax payers are in a tight spot.

The administration that promised to keep us safe from some foreign bandits, allowed another type of super bandits to raise the price of the oil and therefore gasoline.

In the process the administration became indebted to the eternal bandits called Communists.

Now the indigenous bandits want to drill more oil here which will not decrease even 10% of the oil imports.

What can the hard working taxpayers do?

Market mechanism has shown that consumer resistance is the greatest weapon we have.

The less we buy, the lower will be the demand and eventually the bandits will realize that their game is up.

BUT, the bandits have their committed consumers who will tell you that why should we lower our standard of living? They are the advocates of all that Satan is about. Consume more, live it up if you can afford it. And if you can not, then run up your credit cards. For to-morrow you will not live!

My Friends, the world has plenty of resources to meet our needs but not our insatiable wants.

The Christian work ethics should be followed by the Christian life style.: Example Warren Buffet.

We have in our power to consume less energy. We have in our power to car-pool and use more efficient cars.

Using up the God given reserves by excessive drilling will deplete the resources for our grand-children. We should conserve, conserve and conserve our resources!

Aptly summed up by Dan Griswold: "For a senator who prides himself on his foreign policy experience, Biden's record shows great ambivalence about American participation in the global economy."

That's just not good enough anymore. We deserve, as a country, to be more prosperous than people like Joe Biden would have us be.

That's what Buffett--one of Barack Obama's economic advisers--says. Wonder if Obama believes that to be true. We are experiencing that degree of slow growth right now which means that according to Buffett--and perhaps according to Obama--this is the best that can be expected from us.

Obama, of course, attacked John McCain for saying that the fundamentals of the country's economy are strong. Well, they are. But unlike Buffett--and perhaps, unlike Obama--McCain believes that we can do better economically.

If you believe that as well, you know who to cast your vote for.

I'm not a class warfare type. But Obama's Robin Hood mentality and misguided liberal policies are a danger to the proverbial "middle class" in particular. Let's look at the fictitious statistical average American family.

Mr. and Mrs. Average-American have some small savings in the stock market. By doubling the capital gains tax, Obama hurts everyday small investors. These parents saving for their child(ren)'s college tuition just found it more than a little harder to send their kid(s) to college through a responsible investment plan. Small businesses found it a little bit harder to make it in the marketplace because their financing sources have been disincentivized to invest. That means less jobs, less American businesses, and more of our manufacturing sector to be shipped overseas, which in turn again means less American jobs. He's increased the taxes on corporate America too, which in the international economy further incentivizes the outsourcing trend. Let's say Obama's tax plan hurt the small business owned by Mrs. Avg-American, but she's still hanging on.

But the Obama/Biden utopia is not done with her yet. Obama insists we must have fair trade for all people, not just Americans. Obama reneges on several of our free trade treaties in order to renegotiate environmental and labor protections and to trade American interests for his own international popularity. Her business may be one of the ones put under because she can no longer make money in foreign markets that she used to be able to do, or because similarly situated American businesses have similarly suffered from Obama shrinking the economy and her small business which supports other small businesses no longer has the customer base needed to survive.

Now Mr. Avg-American is still working a good job perhaps, but one income is not enough to support their two children. Why? Because the cost of living has gone up. The fair trade policies has shrunk competition in the marketplace meaning that, here and there, various things have become more expensive due to decreased marketplace competition. Also, Obama's utopia subsidizes those who are not earning as much as he is. He makes $X dollars per year, but the entitlement programs streaming through the Democratic Congress and being signed into law by Obama only qualify those who make a little bit less money than $X dollars to their benefits. Where does that money come from? Obama and the Democratic Congress raise taxes of course, just as every Democratic Congress with a Democratic President has done in the last century. Things are getting tight and they're eating into their savings. Like others, they spend less to make ends meet, further slowing the economy.

Oil has gone sky high because Obama and the Democrats have failed to implement a meaningful energy plan. We have not built any nuclear power plants which puts us at a severe energy disadvantage to Europe. We are not increasing our domestic drilling. In fact, domestic drilling has decreased because oil companies have figured out that if they make more money it is stolen from them by the government under "windfall profits tax" schemes and their leases to explore have been cancelled under Obama's energy plan. No offshore drilling has occurred. Although Obama pledged tax incentives for alternative energy businesses, the feasibility of the alternative energies has not yet materialized because Obama never funded or incentivized the R&D necessary for the science to develop. They've inflated their tires saving 2-3% on gas mileage efficiency, which means they save about $0.45/week, except when the gas is consumed in rush hour traffic when tire inflation does not help gas-mileage efficiency.

Most of the jobs open in her community she is overqualified for perhaps, or they are too far at home to make economic sense with high gas prices. Plus there's the consideration of the kids daycare costs and babysitting costs to factor in. Obama has reduced the child tax credit, and unlike McCain, he did not increase the amount of the exemption per dependent. "Its getting harder to be able to support kids nowadays" she comments to her liberal friends. "Well, don't have kids then," the DINKs reply. The DINKs have little sympathy for her because they got an abortion, or perhaps just used birth control, (both of which Obama had the Avg-American family pay for through their taxes supporting the federal programs now financing their neighbors abortion and birth control) and the neighbors feel her decision to have kids was irresponsible.

Now the Avg-American couple have been able to save on daycare because she's staying home for a little while looking for a new job (which along with some similarly situated families dropping out of daycare has resulted in a few less jobs at the daycare institution), but they've also cut back on other luxuries and services. The tourism industry suffers as they and others like them skip their vacation, they stop using cable TV, stop eating out at restaurants, and they get rid of their 2nd car.

They are confused perhaps at why their next door neighbors who both have minimum wage jobs just bought a new SUV and does not seem to be having the same struggles. But then they remember that they probably qualify for a lot of government services whose steep phase-outs only benefit those making less money.

They start to wonder if they too will have to become dependent on government programs to make ends meet. They go to a town hall with Vice President Biden where they complain about the effects of these policies, but he tells them that they don't know what they're talking about because their IQ is much lower than his.

They take out a second mortgage to put their kid through college. There, their neighbor's kid got public financing because his parent's income was less than the Average-American family. They compete against each other on the same tests and essays as all college students must do, but Junior Avg-American gets a lower grade because the neighbor kid, let's call him Joe B., plagiarized and got away with it. Hey, even if he gets caught, he could always falsify his resume, and even if he gets caught again, he could one day become Vice President, right? Junior Avg.-American works extra hard while Joe B. goes off to parties on weeknights and manages to outperform him. They apply for the same job, but whoops, Junior Avg.-American does not get it because the affirmative action plan caused someone else to leap frog him.

Now, Obama's Secretary of Health and Human Services has helped create a health care plan that will cover all Americans (and other people living in America). The Avg-American taxes go up again, and since Mr. Avg-American works for a private sector health care company, he loses his job too. The new federal bureacracy hires him fortunately, but at a lower salary than what he had before. His wife gets a rare medical condition but the government won't treat it because its not covered in the drop-down menus of what they are entitled to coverage of. They cannot afford to take out a loan to see the specialist they need. Had they had the $5000/family health care credit under McCain's plan, they would have been able to pick an appropriate health insurance provider based upon their known family history and known medical conditions, but now they have less money and she is untreated.

Their mortgage goes into default. They plead with the bank to not foreclose. The bank has a glut of mortgages on its hands, but thanks to the Obama mortgage crisis plan, it now can sell homes that were foreclosed on more easily to buyers who now get a $7000 tax credit for buying foreclosed properties. The glut being resolved, the bank has no incentive to be patient while it unloads other foreclosed properties, and they lose their home.

Obama/Biden 2012 is up for reelection, and this time, Mr. and Mrs. Avg.-American vote Obama/Biden. Why? Because now they too are dependent upon all the government programs Obama is promising, without which they would no longer have any hope whatsoever.

Markets will be very, very quiet until next week as everyone finishes up his vacation. Inside the quiet backdrop, there was a lot of weekend chatter about the money markets, which continue to be essentially non-functional after more than a year. It’s impossible to imagine anything that will unfreeze interbank lending, especially in London. This is going to be a boot planted on the neck of the global economy, perhaps for another year or two.

Watch for signs of a major crackup involving Fannie Mae and Freddie Mac. The markets are going to wipe out the equity of both companies and force Treasury Secretary Paulson to show his hand. He has a handful of interesting choices, but one thing no one should expect is that there will be any impairment in the position of people who hold senior debt issued by Fannie or Freddie. The Chinese and the Russians (who between them are believed to own at least $1.1 trillion in agency paper) won’t like that, not one little bit.

So the only real question (apart from the fate of subordinated agency paper holders) is what Paulson will do about the equity of Fannie and Freddie. Or more precisely, how much of it will he expose US taxpayers to.

The problems in the US residential real estate market are finally showing outward signs of spilling over into commercial real estate. (I say “outward signs” because it’s now showing up in news reports, whereas warning lights have been flashing quietly for those with eyes to see for nearly a year and a half.)

The problem with commercial real estate isn’t that valuations are wrong, as in housing. Nor are cash flows impaired too far beyond what you’d expect in a recession. The problem is that the people who have been using leverage to buy securities backed by commercial real-estate cash flows have lost their access to leverage. And there’s no one willing to buy securities that a knowledgeable and risk-tolerant real-money buyer could probably get for far below their stable long-term value.

These are the times that try the souls of some men. And make other men billionaires.

Side note: I’m sometimes asked what the effect of the political convention will be on the markets this week. Many market participants would probably say “what convention?” And that’s your answer.

-Francis Cianfrocca

Or even a minor one. Here is why.

Really, this is embarrassing stuff, even when one considers that it is Rich doing the writing. It shows no understanding whatsoever of the nature of international competition, the state of affairs in China, how China will be able to compete in and influence the world or the underlying strengths that continue to buttress America even in tough times.

Oh, and by the way, the Chinese had to cheat in order to win the women's gymnastics gold medals by misrepresenting the ages of several of their competitors and when the overall medal count is considered, the United States total beats China's total. Of course, none of this information is found in Rich's column, but then, no one should be surprised that Rich won't let facts get in the way of his nonsensical rants.

Ben Bernanke thinks that price pressures are easing up because of the strengthening of the dollar, the recent drop in oil prices and the weak overall economy. Let us hope that he is right; a stagflationary situation is scary beyond measure to think about. I suppose that it is too much to ask that we get another rate cut, given that inflationary pressures still exist and still are a cause of concern. But dare we hope that we can keep interest rates relatively stable so that we can perhaps spur some more growth?

Take a look. If people really are serious about keeping jobs in America, then corporate taxes ought, at the very least, to be cut significantly. Otherwise, we are getting the short end of the stick when it comes to being able to compete with the rest of the world in attracting business activity.

James Pethoukis provides motive. Pray that opportunity follows very quickly.

And lives to tell the tale. Once again: Isn't Meyerson's tale supposed to one from the "reality-based community"? And since it so obviously is not, what on Earth is the Washington Post doing allowing Meyerson to draw a salary?

It is one thing to have differing political opinions. Obviously, no one should think that we have or should have political uniformity to the degree that no dissenting opinions are allowed. At the same time, when a columnist's arguments are so clearly and consistently divorced from the facts, one must come to the conclusion that said columnist adds no value to the conversation and that better punditry can be found--and paid for--from others.

Yeah, right:

Crude oil prices fell more than 5.4 percent on Friday in the biggest one-day slide since 2004 as dealers turned their focus to rising supply levels and weakening global demand.

A rebound in the U.S. dollar encouraged the sell-off, applying downward pressure across the commodities markets by weakening the purchasing power of buyers using other currencies, dealers said.

The slide adds to a more than 20 percent fall in the price of crude since mid-July and could increase the chance oil cartel OPEC will cut official production limits when the group meets in Vienna on September 9.

U.S. crude fell $6.59, or 5.4 percent, to settle at $114.59 a barrel -- the biggest fall in percentage terms since December 27, 2004. London Brent crude fell $6.24 to $113.92 a barrel.

"People who were buying yesterday are taking profits today," said Peter Beutel, analyst at consultancy Cameron Hanover. "There is also renewed technical selling and talk again of demand destruction. The dollar is strong again too."

In a just world, this whole episode would remind people that fundamentals like the laws of supply and demand do much more to determine the price of oil than do ridiculous conspiracy theories such as those mocked in the title of this post. But of course, we know that the punditocracy and appreciably large portions of the political class will fall back anew on their tired, old shibboleths the next time that there is an uptick in oil prices. Some people, alas, continue to refuse to take that all-essential Economics 101 class.

And Chuck Schumer may need to get some consultants stat:

California's attorney general is reviewing a request by former employees of IndyMac Bancorp Inc to investigate whether a New York senator triggered the bank's collapse by releasing confidential information.

At issue is a much-publicized letter that Chuck Schumer, a Democrat, sent in June to the Federal Deposit Insurance Corp (FDIC) and Office of Thrift Supervision (OTS) questioning the company's ability to survive.

The FDIC took control of IndyMac on July 11 after depositors withdrew more than $1.3 billion over 11 days. It was the third-largest bank failure in U.S. history. At the time, OTS Director John Reich blamed Schumer's letter for causing the run on the bank.

In a letter to Attorney General Jerry Brown last week, 51 former IndyMac workers wrote: "From the day (Schumer's) letter was made public on June 26 until the closure of the bank, a run on the bank took place and the failure became inevitable."

Brown's spokeswoman Christine Gasparac said on Wednesday that his office was reviewing the letter and that a decision on whether to act on it could be made as early as next week.

Of course, it should go without saying that the allegations and the facts behind them raise a lot of concerns. Senators are supposed to act with tact and discretion and publicizing a letter that basically calls into question the ability of a particular bank to survive during a period of economic uncertainty does not tact and discretion make.

James Pethoukis delivers a one-two between the eyes of Obamanomics. In addition to the economics lesson Pethoukis properly delivers, we have yet another lesson in just how much the media is in the tank for Barack Obama. Of course, all of this fawning only serves to reinforce the Obama-is-just-a-celebrity narrative, though the only people who don't seem to understand or accept this are Obama and his media enablers.

In any event, we are not picking the next American Idol. We are picking the next President of the United States. Journalists are supposed to be critical and serious observers in that process, not groupies. Too bad they have chosen to abandon their responsibilities in that regard.

Gold prices are collapsing, says Bloomberg:

Gold fell below $800 an ounce Friday, capping the biggest weekly slide in 25 years, as the dollar surged against the euro, reducing the appeal of the metal as an alternative investment. Silver dropped as much as 14 percent.

The dollar headed for a fifth straight weekly gain against the euro as economies in Europe slow. Gold generally moves in tandem with the euro as an alternative to the dollar. The metal plunged into a bear market this week, declining as much as 25 percent from a record $1,033.90 an ounce reached on March 17.

So much for that Weimar Dollar and new Depression.

Somehow, I don't think that this will come about. The question, of course, is why we should have to put up with similar pronouncements when other industries are forced to adapt to changes that fundamentally alter the nature of those industries. Resorting to knee-jerk protectionism in the hypothetical that Dan Griswold discusses is plainly silly. But there are a whole host of other situations as well in which the protectionist response is similarly silly and yet, in those situations, no one bats an eyelash when an economically antediluvian diatribe is put forth.

Today's trading has the dollar stronger than $1.47 against the euro. It started the week in the neighborhood of $1.53. Oil is down around $111 and gold is below $800. I told you folks that this shift would be rapid, once it got started. :-)

The original 1862 Homestead Act fueled western expansion and unleashed the economic power of millions of American families.

In thinking about our current housing crisis, I believe it might be worth considering whether we can harness that individual initiative once again.

Briefly, I propose that instead of forcing banks to pay $10,000 to get rid of unwanted property, and instead of razing neighborhoods at a cost of $50,000 per house, municipalities be enabled to offer foreclosed and abandoned homes for free to any legal resident under the following conditions:

• You must stay in the residence for at least five years.
• During your stay, you must maintain the house in reasonable condition and not engage in any illegal activities in the house.
• It must be your primary residence for those five years.
• You must pay all property taxes and government fees associated with homeownership, such as for trash removal, water and sewage, etc.

At the end of the five year period, title is passed to the homesteader free and clear.

American families who are willing to work at achieving the dream of homeownership, but have not been able to do so due to financial reasons, can take a chance by moving into an abandoned house, repairing it, maintaining it, and then ultimately owning it.

Nothing defeats urban blight more than homeowners who want to make a nice place for themselves and their children. Nothing inspires harder work than the hope of improving one's own life.

The fact of homeownership itself would help open further doors. If through homesteading, a neighborhood can be turned around, the value of that house will rise, enabling families to take out home equity loans to start businesses, to send their children to college, and a myriad other purposes for which they have never had capital.

I don't believe it is necessary to establish any particular qualification beyond legal residency, but it would not offend me to make the program available only to low-income families.

The cost to taxpayers will be minimal, in my opinion. When banks are paying to rid themselves of homes, municipalities can simply offer to take them over in exchange for waiving back taxes and fees. Rather than paying $50,000 to homeowners to entice them to move, just so the city can raze all the buildings, it can simply open up abandoned homes to families who want to make a go of it.

Whatever the cost, however, it cannot possibly be more than the untold billions that the Save Fannie act may end up costing us. The size of the bureaucracy would be magnitudes smaller, as most of the programs can be administered at the local level.

And most importantly, for once, we would actually offer a way for poor families to break out of their cycle of poverty starting with the most elemental fact of building wealth: a home of their own. Yes, they would have to work at it, just as the original 1862 Homesteaders did. But at the end of it, they would become property owners, with pride in their accomplishment.

It's time to consider it.

-TS

It seems our respective presidential candidates miss the most important message about the economy: The people for which it serves.

Obama offers quasi-socialist policy; bleed the rich to support the poor and middle class, it's a classic and failed Democratic answer.

McCain suffers from tax cut tourette syndrome, sure it's a fine remedy but it only eases the pain before death. You have to go deeper than just cutting taxes.

Here's the cure for the economy's common cold:

1. Encourage individual invest: It's important, now more than ever to save. Americans, no matter how much they make should put some of that away, in a bank account. Even if it's one dollar or ten.

Build your foundation through investments and business ventures. Expand your knowledge by talking with financial advisers and the like.

The reason why rich people in America survive during economic turn down is because of their savings and investments that grow overtime. It's time for the middle class and lower class to get in on the action.

1. Cutting Taxes on every American, not just the rich, the poor who pay little or no taxes at all, or the middle class.

So often we look to demonize rich people in this country. For the simple fact that they're successful and well, we aren't. So our answer to every economic problem is to put it on the shoulders of the rich. Tax the rich until they pay for Universal Health Care, gas money for lower income folks, wealth redistribution will bleed and trickle down. Eventually you'll have to redistribute the wealth of the middle class as they improve from the wealth of the rich. It's a counterproductive measure that fails.

1. Cut taxes for business to prevent relocation and outsourcing.

Businesses don't seek production or workers overseas just to destroy America or to purposely put the American working man out of a job. They do so because of lower taxes. For instance China won't raise taxes on let's say, Tyson Foods because China knows Tyson Foods will offer millions of jobs. So what we have to do is stop this persecution of Corporate America so that the average American won't lose their factory job.

1. Lower Corporate Tax

2. Promote Fair Free Trade, Avoid Protectionism

3. Prevent American owned ports from being used by foreign nations

4. Create new jobs through public demand.

5. Cut Government Spending.

We need to limit the amount of money being spent in Washington. I don't care if the polar bears need a helping hand I reject any measure put forth that requires over a million or so dollars to save an animal who was last recorded to have increased its numbers after Democrats lied and said Polar Bears were endangered.

I find it idiotic that the government spends your money on beach research, polar bears, and a Woodstock Museum. Shouldn't your money go toward something that will benefit you? I mean if you like drugs, sexual expression, and peace then maybe that Woodstock Museum is a good idea.

1. Last and most important, take risk. But be responsible.

The most dangerous mistake someone could make is to be irresponsible with their finances. Live within your means and don't expect handouts or bailouts. Accountability is one of the most important steps in living a good life. If you see a good business venture go on that gut instinct and invest in that venture. Time and money that is. If you see something you're not sure about then pull back and seek ventures elsewhere. But all in all Risk, Responsibility, Accountability, and Restraint will provide the safety net you need whether the economy is booming or experiencing slow down.

One of the things we do for you here at RedState is to cut through the noise and spin so you’ll know what’s really going on. If you were reading the headlines yesterday, you doubtless heard about a new government study showing that a great many business corporations don’t pay any income taxes.

Well, no [excrement], Sherlock. If you don’t make any money in a given year, or if you carry forward losses from prior years, or you have expenses that offset profits, you won’t have a tax liability in that year.

But Senator Byron Dorgan of North Dakota (who along with Sen. Carl Levin of Michigan requested the study from the GAO), made a point of saying that “it’s shameful that so many corporations make big profits and do nothing to support our country.”

Now that the actual GAO report has been published, we can go through it to see what it’s really all about. And I did so.

Senators Dorgan and Levin asked the Government Accountability Office to update a earlier study of the differences in tax payments between foreign-controlled domestic corporations (FCDCs) and US-controlled corporations (USCCs).

What they basically want to know is this: are foreign companies engaging in transfer-pricing abuse, in order to reduce their US tax liability?

What does that mean? Well, I touched on it in my post yesterday. Basically, if you’re a corporation with operations in several different tax jurisdictions (most likely different countries), you might try to contrive sales of goods and services across different business units within the same corporation.

For example, you do final assembly of a product in China and sell it in the US. Your books will show this as a sale by the Chinese business unit and an offsetting purchase by the US unit, which in turn will book the revenue from your eventual customer. Another good example would be a German automaker that ships subassemblies and components to the US and does final assembly here.

The tricky thing is that you can manipulate the value of the intra-company transactions so that they don’t necessarily reflect the true value added at each point in the chain, but rather allocate relatively more value to the locations with lower tax rates or otherwise more-favorable tax treatment.

This is called transfer-pricing abuse, and it’s illegal. It should be illegal, because it defrauds shareholders (by presenting a less-than-true picture of the company’s operations).

Anyway, the point of the report that GAO delivered to Senators Levin and Dorgan on July 24 and published yesterday was this:

GAO discovered that foreign-owned companies operating in the US reported lower tax liabilities overall during the 1998-2005 period than did US-controlled companies.

That’s about it. They basically did a forensic analysis of a large sample of tax returns that they got from the IRS.

What GAO did not do is try to explain the disparity. They didn’t ask whether it was likely caused by transfer-pricing abuse, or instead by the many other factors they note in the report.

So, like any good consultant, they answered the question that was asked but didn’t actually make any policy recommendations or otherwise interpret the results. So we’re no closer to a solution than we were before.

But a solution to what problem? That’s where I have interesting questions.

What are Senators Dorgan and Levin (both Democrats) trying to protect? I think they’re trying to protect the extremely high income tax rate that the US imposes on corporate profits. At 35%, it’s the highest in the world, among large economies.

And such an extreme rate of income tax directly challenges the ability of the US economy to generate growth. The economy would grow much more strongly and generate more good jobs if the corporate income-tax rate were sharply reduced, perhaps to no more than 5%. John McCain has promised to reduce it to 25%, which is at least a good start.

But I think Sens. Dorgan and Levin are looking for talking points they can use to oppose cutting the corporate tax rate. And indeed, Barack Obama has promised to raise corporate taxes rather than lower them, which will be an economic disaster for all Americans.

One of the often-heard objections to the high corporate income-tax rate is that it encourages transfer-pricing abuse, as businesses (presumably) seek to minimize their tax exposure. The EU is constantly hollering about this problem, because they hate the fact that low-tax countries tend to get all the new business sitings, while high-tax countries go begging. (When you hear the pleasant-sounding word “harmonization,” that’s what the Eurocrats are talking about: they want every country to have basically the same tax rates and eliminate competition among them.)

So I think Dorgan and Levin wanted a government report that they could use to say that transfer-pricing abuse (not the too-high US tax rate) is the real problem.

That’s not what they got, but of course they’ll spin it any way they see fit. I thought you should know what was really going on.

-Francis Cianfrocca

ABC News, by way of the Associated Press, is reporting that "most" US corporations, and foreign corporations doing business in the US, paid no income taxes between 1998 and 2005.

What reportedly happened is that Senators Dorgan (D-ND) and Levin (D-MI) went to the Government Accountability Office (GAO) and asked them to find them a stick to hit business over the head with.

Supposedly, this report is going to be published today, but as I write, it hasn't yet appeared on the GAO web site. Dorgan's page at senate.gov has nothing to say about it.

So obviously we'll want to revisit this when the actual report comes out, but in the meantime the news spin (which more than likely was the point of the exercise) is already out. And it's worth responding to.

The short answer is: How stupid do you think we are, Senators Dorgan and Levin?

Here's what Dorgan had to say: "It's shameful that so many corporations make big profits and pay nothing to support our country."

Ok, so it's shameful. Now that we know where you're coming from, Senator, let's take a closer look.

According to the (still unreleased) GAO report, some 1.2 million business corporations paid no federal income tax. They account for about $2.5 trillion in revenues.

That's revenues. Not profits. You don't pay taxes if you don't make any money. And we're talking about less than one-fifth of all the business revenue in the country. The other four-fifths of business sales are profitable, and most certainly pay federal taxes.

The news reporting is admitting that GAO didn't bother to ask the simple question: why aren't these companies paying any federal taxes? Well, of course not, since that would have dampened the headline value, which is intended to make you, dear Reader, think that businesses are ripping you off.

As far as paying something to support the country: Senator Dorgan, what do you think about all the people who are being paid salaries to work for all those unprofitable or marginally-profitable corporations? Don't they pay income and payroll taxes? I can tell you, as a guy who signs paychecks every two weeks, that labor costs are a big part of the reason why it's hard for businesses to make a profit.

Income and payroll taxes paid by individuals are where the vast majority of Federal revenue comes from, after all. That's not good enough for you, is it, Senator Dorgan?

Let's ask the question that the GAO didn't bother to: why don't corporations pay taxes? Because some of them aren't profitable every single year.

And even when businesses are profitable (and thus pay Federal income taxes), the numbers aren't large. In many years, the total Federal income tax paid by corporations amounts to a smaller number than the Federal budget deficit alone.

And that's rational too. Why would you contrive to be highly profitable as a C corporation, when your income will be taxed twice? First at the corporate level, and again as ordinary income when it's paid out to shareholders?

No wonder the managers of American corporations are paid by their shareholders not to deliver high profitability, but rather steady profitability with high growth rates. It's because the tax code distorts their incentives.

John McCain has proposed to reduce the corporate income tax rate from 35% (one of the highest in the world) to 25%. It's a start, but the rate should be no more than 5%.

Let's take care of two of the obvious objections here: corporate welfare, and income shifting.

Yes, corporate welfare is real. There are plenty of very large businesses who lobby their way into getting exceptions, exemptions, special tax treatment of certain assets and income, forbearance of regulatory activity, and many other goodies. All of that falls into the realm of government distorting free-market incentives for the purpose of accomplishing some social goal.

When you look really hard at those items (and how about asking the GAO to do so?), a lot of the "social goals" that are addressed by corporate welfare, are to direct spending to particular states and Congressional districts. How about that, Senator Dorgan? How about you set a good example and remove all the special tax treatment for any business that operates in North Dakota?

Income shifting: this is hard to measure, but there probably is a certain amount of "shifting" of profits between the subsidiaries of large corporations that either have a non-US domicile or have foreign operations.

It's not kosher, it's not legal, and I'm most definitely not excusing it, but if and when it happens, the intent is to recognize revenue in the lowest-cost tax jurisdiction. So rather than go to ABC News to get a cheap headline, Senator Dorgan, how about this instead:

How about you call up your colleagues in the House and ask them to reduce the corporate tax rate, as Senator McCain has proposed? Reduce it at the very least to the world average, if not well below. That way, if there is significant income shifting, it'll get shifted here rather than somewhere else.

And while we're at it, let me tell you what really honks me off: why are US Senators