American Elephants


The Edge Of A Fiscal Cliff? How Did We Get Here? by The Elephant's Child

The Phrase “The Fiscal Cliff” has entered the public dialogue, but it is uncertain that very many have any understanding of what it is. Just something scary that might happen because the Republicans are blocking whatever President Obama wants to do, or something like that. According to a new CNN/ORC  poll, 45% say that they would blame Congressional Republicans, while just 34% would blame the President.

You probably remember when the economy took a terrible fall in 2008, when the “Financial Crisis” hit. The financial crisis was the collapse of the housing bubble. It was not caused by the Iraq war, nor by the Bush Tax Cuts, nor even by the Drug program for Seniors.

The Community Housing Act  in the Carter Administration attempted to get more poor minorities into their own homes. It was believed that  people who owned their own homes took more pride in their neighborhoods, and worked for improvements in society like better schools, better community regulations and laws — that sort of thing. Statistics seemed to prove it.

Democrat efforts to provide housing for the poor had often ended up in crime-ridden ghettos — the projects. So they increased pressure to get more poor minorities into their own homes. The Clinton administration gave that a big boost, and  Barney Frank and Christopher Dodd signed on. They put pressure on banks to grant more loans. Banks cited the rules of prudent banking. You can look at household income and expenditures and the payments needed to service a loan, and tell who can and who cannot pay back their loans. Democrats pushed banks, suggesting that they were “redlining” and discriminating against black Americans.

That’s a favorite trick of Democrats — to accuse anyone who disagrees with being “racist.” Community organizers encouraged their people to protest and picket banks.  And yes, that’s what our well known community organizer was doing, but nobody mentions that.

These questionable loans were sold to mortgage giants Fannie Mae and Freddie Mac, who sold them in bundles to Investment Banks, who further bundled them and sold them as investments all over the world. Fannie and Freddie had sorta/kinda guaranteed them as good investments, but nobody knew which parts were good and which bad.  Because mortgages were easy to get and home prices were climbing so fast, many people saw a dandy get-rich-quick scheme and bought up quantities of houses for little down, expecting to flip them for a quick profit. Overblown bubbles collapse, and houses aren’t worth as much any more.

That put the economy in the tank. General Motors was about to collapse, they were almost out of cash. Chrysler was not in much better shape, nor was Ford. George W. Bush, at the advice of his economic experts, signed a check for TARP (Troubled Asset Relief Program) which allowed the Treasury to purchase “troubled assets,” allowing the institutions to stabilize—the institutions had to pay the money back. This was October, 2008, after Obama was elected, but before he took office.

That, of course, did not keep Obama from blaming the financial crisis on Bush. He continued to do in every speech for the next four years. You repeat anything often enough, and at least some  people will believe it. Thus freed of any responsibility for the financial crisis, but free to take full credit for “saving GM,” Obama took over the auto industry, put his own people in charge, ordered up the all-electric Volt, shafted the legally entitled bondholders, fired dealers and their workers, and gave the unions full benefits and seats on the board.

That disposed of, Obama got a huge “stimulus” bill passed by the Democrat-controlled Congress. A stimulus seldom works to rescue an economy, yet this Keynesian remedy is a favorite of the Left. The funds were wasted, and most of it went to cronies. That taken care of, Obama embarked on health care, which he turned over to Congress to put together in back rooms, and turned his attention to doing fun things like picking favored industries to support and selecting the environmentalists’ favorite kinds of energy to support.

There is no such thing as “government money” there is only taxpayer money. And when that doesn’t seem to be enough, you borrow from China. Mr. Obama has had a wonderful time spending. It’s great fun. You get to throw fancy dinners in elaborate tents on the White House lawn ($4,000+ a plate), support $100,000 Fiskars electric sports cars, reward all your bundlers from the campaign, and go around to the factories making interesting new stuff, for photo-ops. No benefit for the taxpayers whose money supported this nonsense.

And when you rack up $1,000,000,000,000 every year added to the national debt, the debt ‘unexpectedly‘ gets very large. Business is not hiring, too much uncertainty and new regulation. The debt is downgraded. The rolls of the people who have dropped out of the labor market are soaring. The numbers on food stamps now exceed the population of 24 states. Poverty is increasing.

With an economy in such a really dreadful state, Mr. Obama wants to raise taxes on “the rich”— those with incomes of $250,000 or more. But some of those same people are Americas’ small businesses. Over 900,000 businesses with more than 50 employees, whose owners file their taxes as individuals, have been soaked with rising energy costs, drastically increased regulation, and all the new costs coming January 1, from ObamaCare. Small business is not hiring, as the rolls of the unemployed attest. President Obama wants to make it worse so that he will have more revenue to “redistribute.” He believes in a big active government and what an active government does is spend money.

Republicans fear that the President is initiating a second, deeper recession, if not collapse. On November 17, Treasury Secretary Tim Geithner told Bloomberg that “we ought to just eliminate the debt ceiling.”The debt ceiling is the only thing even vaguely resembling a control on the runaway government. On November 17, the national debt was $16.28 trillion, only $113 billion short of the national credit limit. But eliminate the debt ceiling as a restraint on Presidential Spending sounds — um, unwise.

Will Congress and the President act to avert disaster and another recession? After much posturing, there will probably be a deal of some kind. Obama is determined to tax the rich, because he has talked about that for months. It’s because of “fairness.” If he succeeds in increasing taxes on the rich,  it will do essentially nothing to reduce the deficit, and do a lot of damage to the economy, but it isn’t about reducing the deficit nor about increasing revenue. It is about “fairness” so the President can say to the poor — see, I took more money away from the rich to redistribute to you—and then he’ll spend it on a some useless new green project.

That’s just what you voted for, isn’t it?

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1 Comment so far
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Comment by Daniella




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