Taxes For Dummies (liberals)

If I hear that tired mantra - "Tax cuts for the rich" - one more time, I'm going to probably drop dead from "the big one". If you can't make a fucktard liberal understand tax cuts using this example, just walk away, and save yourself the grief.

The Tax System - Explained In Beer

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day the owner threw them a curve ball.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80."

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free, but what about the other six men, the paying customers? How could they divide the $20 windfall so that everyone would get his fair share?'

They realized that $20 divided by six is $3.33, but if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man, like the first four, now paid nothing (100% savings)
The sixth now paid $2 instead of $3 (33% savings).
The seventh now pay $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 ( 22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before, and the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, proclaiming, "But he got $10!"

"Yeah, that's right!" exclaimed the fifth man. "I only saved a dollar, too! It's unfair that he got ten times more than I did!"

"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks !"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important: They didn't have enough money between all of them for even half of the bill !

And that, boys and girls, journalists, politicians both corrupt and straight (OK...not many straight, but it's for them all), moaners, gloom and doom merchants, political activists with their heads up their asses, and college professors - this is how the tax system works:

The people who pay the highest taxes get the most benefit from a tax reduction...It's simple, basic Math.

Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier - an event that would have a devastating impact on every other sector of the economy.

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

H/T: Stephanie, via chain email.

Economics Made Easy

It is amazing to me how some comedians can cut through all the bullshit and explain things in a few minutes, as opposed to the talking heads on your favorite infotainment/news channel(s) blathering and bloviating on and on ad nauseum.

Here we have the trans-Tasman comedy duo of New Zealander John Clarke (the bald guy, aka "Fred Dagg") and Australian Bryan Dawe explaining a couple of our current economic issues, breaking it all down with some dry humor and wit from down under.

First up - the banking mess...



Second - the PIGS woes...

The Economy: How Bad Is It?

1. The economy is so bad... that I got a pre-declined credit card in the mail.

2. The economy is so bad... I ordered a burger at McDonalds and the kid behind the counter
asked, "Can you afford fries with that?"

3. The economy is so bad... that CEO's are now playing miniature golf.

4. The economy is so bad... if the bank returns your check marked "Insufficient Funds," you call
them and ask if they meant you or them.

5. The economy is so bad... Hot Wheels and Matchbox stocks are trading higher than GM.

6. The economy is so bad... McDonald's is selling the 1/4 ouncer.

7. The economy is so bad... parents in Beverly Hills fired their nannies and learned their
children's names.

8. The economy is so bad... a truckload of Americans was caught sneaking into Mexico .

9. The economy is so bad... Dick Cheney took his stockbroker hunting.

10. The economy is so bad... Motel Six won't leave the light on anymore.

11. The economy is so bad... the Mafia is laying off judges.

12. The economy is so bad... Exxon-Mobil laid off 25 Congressmen.

And finally...
Congress says they are looking into this Bernard Madoff scandal...
Oh, Great!! The guy who made $50 Billion disappear is being investigated by the people who made $1.5 Trillion disappear!

Hat-tip: Don

Green Employment Promises

I heard Obama has promised $$$'s for green employment. Employing 1/2 million people to go door to door checking each and all's green card is a worthwhile green job. Also, the need for transportation to the border would be a real money spinner, so anyone who has a few dollars floating around, take my advice and purchase a few cattle carriers as it will ease possible traffic blockages.

"The first step toward the president’s new green economy will come with the passage of the congressional stimulus package—a down payment ......will create 460,000 jobs in three years, save taxpayers $2 billion ......."

"But the centerpiece of President Obama’s new proposals seeks to change the way Americans drive, by giving states like California leeway to design their own tough ....... standards. Stay tuned."

Self-Reliance? What's That?

There's nothing to really comment on with this one; the article speaks for itself. Here are two key quotes:

And so the government keeps offering special deals to people who keep taking them, and people are so conditioned to believe that government is the only answer to every woe that besets them — in part because the politicians keep saying they will protect the people from harm and insulate them from their own bad choices — that people don’t just expect but demand the special deals.

"My guess is they will just print more money, and we’ll look like Zimbabwe," Stossel said. "I hope you have gold or real estate."

The Best Analysis Yet

With the US Senate voting for their pork-stuffed bail-out, we have ventured into a new realm of centralized state control of finance; and let me put that in a time frame - EVER.

To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about ...”
The confusion of Chicago school economics on monetary issues is so profound as to lead its adherents today to support the largest government grab of private capital in world history. By adding their voices to those on the left, these confused free-marketeers are not helping to “save capitalism”, but contributing to its destruction.

Read the rest because the author spells it out better than anybody else.

The Writing Was on the Wall

This warning came from a NY Times article - in 1999.

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES
Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
- (snip) -
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

"From the perspective of many people, including me, this is another thrift industry growing up around us," said Peter Wallison a resident fellow at the American Enterprise Institute. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry."

So anybody who says that nobody could have foreseen this whole thing coming is full of shit. This guy saw it coming before it ever began.

Hat-tip: Don

Just So That We're Clear on This

Oh, this financial "pickle" we've found ourselves in. It amazes me how so many people have so many different explanations as to the "how" and "why" of it all, and how many of them get it wrong, facts be damned. Again, many on the right and the left want to politicize this, and the spin is making me dizzy. I hate the party politics because as much as I hate the Democrats, the Republicans are no angels, either, and what really gets me is how party hacks on both sides refuse to admit their own party's mistakes.

In this case, however, despite there being blood on hands from both sides of the aisle, the facts clearly indicate to me that it is the Democrats who have more blood on their hands, namely Barney Frank who said, "THE PRIVATE SECTOR got us into this mess. The government has to get us out of it." Too bad for Barney the facts just don't tell the same story.

Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods." Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

And here's the bottom line that sums it all up nicely:

All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices.

Read the whole article, please. There are many, many good links to various sources that spell this thing out. If you are a liberal/Democrat/socialist be honest enough with yourselves and your beliefs to admit that your guys got it wrong this time. I know that's asking a lot, but I know there are a few honest liberals out there that can see past their partisanship.

And please review the Gramm-Leach-Bliley Act of 1999, which enabled banks to become "one-stop shops" for all banking, insurance, and investment needs. That is where the Republicans have to own up to their blunders because, while the GLBA opened up competition and did away with a lot of the restrictions of Glass-Steagall, it invited corruption and perhaps stimulated competition where there was really no justification for it. Keeping banking and investment services to consumers separate was probably a good thing.

On the US Financial Crisis

Steel lays it out plain and simple.

Okay. Listen up. I am going to keep this as simple as possible because it really is that simple. Back in 1929, banks were letting everybody 'play' the stock market. From the guy who washed dishes at the local diner to the truck driver who transported the food to the wife in Waukegan who wanted to have her own nest egg - everybody could play - often with just pennies.

Back then, banks would take those pennies, nickels and dimes and combine them all into larger amounts and enter into the stock market orders to buy OR sell (short) the stocks chosen by all those 'little people'. Margins - the amount the bank required to make those trades of those 'little people' were very small - typically less than 10%. If the chosen stock moved in the wrong way a bit - the 'little people' would be asked to put up 10% of the total value of their holding in that stock. No big deal - confidence was high, the market was moving progressively upwards and everybody was getting rich.

One day, the market moved a lot in the wrong way. This caused a few banks to realize they did not have the funds on hand to 'cover' the trades made by all those 'little people'. But far worse, those banks didn't even have the money to cover the day-to-day transactions of those 'little people' and they were forced to close their doors. The 'little people' panicked and ran to the bank and demanded their money. Word traveled fast, and soon all the 'little people' were pounding on the doors of their own banks all across the land demanding their money, too.

All of this caused the Great Depression. Banks failed, people lost their entire savings and their mortgages went unpaid. At the time, 50% of all mortgages were in default, as compared to just 2% today. Businesses closed. Banks were shuttered. Brother can you spare a dime time. In their infinite wisdom, Democrats blamed the banks for allowing 'little people' to participate in what was obviously a far too complicated endeavor. So Congress passed the Glass-Steagall Act of 1933.

This forbade commercial banks from 'playing' the stock market and allowed for the creation of another kind of bank - the 'investment' bank. A place where smart rich people could risk their money, but whose account minimums and margin requirements were way out of reach of the 'little people'. 'Little people' were encouraged to save their meager funds in commercial banks with federally insured deposits and stay the hell out of the stock market. This was the law of the land until 1999.


Then came the Gramm-Leach-Bliley Act of 1999. The pie chart above shows the Senate vote allowing the final passage of GLB - the vote was 90-8 in favor. Only seven Democrats voted against the GLB Act. Bill Clinton signed it into law. This allowed banks to once again offer 'investment' services to 'little people'. Portfolio management. 401Ks. Retirement funds. All vehicles which traded the various markets - primarily the stock market, REITs and equity funds.

But once again, in their infinite wisdom, Congress allowed those commercial banks to seek their own asset protection. This was usually in the form of 'insurance' or trading into 'hedge funds' to alleviate or mitigate the risk involved. All was good. Everyone was getting rich again. They were getting so rich in fact, that they needed to find creative ways of avoiding taxation. The best way to avoid taxes for most people is to have a mortgage.

Well, the banks were only happy to oblige. They began offering mortgages to anyone. You may recall how several banks were even offering home loans to illegal aliens with nary a blush. The chairman of the Senate Housing Committee, Barney Frank, demanded that the requirements for home loans be reduced even further - to allow the participation of all races, colors and creeds - even more 'little people'. The banks knew there was an inherent risk in doing this and they balked. So Fannie Mae and Freddie Mac were created. Basically government entities which guaranteed all those risky loans. Subprime loans. Ninja (no income, no job, no assets) loans.

Along comes an Internet bubble burst, a spike in oil, unrest in the Middle East and WHAMMO! Lots of those 'little people' once again were unable to pay their mortgages, many now 'adjustable rate mortgages' - liberally offered as additional enticements to the 'little people'. Nothing down! Pay later! A few banks fail, no thanks in part to Chuck Schumer (who is the second most powerful Senator and who just happens to sit on ALL the committees involved in this mess) and large investors became uneasy. They withdrew their money and put it in safer places. This caused a liquidity problem, more banks failed, equity funds shrank to nothing, investment banks which had been buying all of that risk and the companies which insured all of that risk failed. Fannie Mae and Freddie Mac failed.

That brings up to today. Let's review, all of the Democrats who are screaming bloody murder about this crisis now - voted in favor of allowing it to happen - even in the face of historical fact. They repealed Glass-Steagall. They once again allowed banks to service 'little people'. They created government organizations to underwrite the risks. They DID NOT creat any new mechanism of overseeing any of it. In their infinite wisdom, they left that to organizations which were created in the 1930s along with Glass-Steagall. The SEC etc. We were driving Ferraris on dirt roads, all thanks to an accommodating Congress.

Now, you may ask yourself 'why' in THE hell would those idiots do that? Welp, that's easy. Fannie Mae and Freddie Mac became money machines for the Democratic party. Even though they were supposed to be 'quasi-governmental' entities, they were spreading around millions and millions in campaign contributions. And guess who got the lion's share? Yep. Democrats. In fact, Barack Obama, even though he's only been in the Senate for a couple of years was the second largest recipient of those donations in the entire Senate - over half a million dollars in just over three years. Oddly enough, the Democrat who sits at the chair of the Senate Banking Committee was the only guy who received more - Chris Dodd (D-CT).

I won't even mention Charles Rangel, currently under investigation for numerous tax evasion questions, who sits at the chair of the House Ways and Means Committee - the committee which writes all the laws pertaining to taxation and oversight. Are you starting to see a pattern here? Now, just today, Harry Reid and Nancy Pelosi have stated that this mess is 'just too hard' to solve and they are going to adjourn Congress early and let it all fester until after the elections. Both received lots of money from Freddie Mac and Fannie Mae and both voted in favor of repealing Glass-Steagall.

None of what is happening comes as any shock to George Bush. A independent bipartisan panel recommended to him that this might happen over five years ago and he asked Congress for some oversight. They did nothing. They continue to do nothing. Because everyone of those bastards has been bought and paid for by the various entities which are going belly up faster'n fish in a drying lake right now. In fact, most of 'em are so dirty with the money, they have given 'filthy lucre' a new definition - 'campaign contribution'.

You want change? Throw every incumbent legislator out of office in November - especially Democrats. Elect John McCain. He turned down private contributions and stuck to his pledge to use public funding for his campaign - unlike Barack Obama, who after pledging to do the same - reneged and is currently raking in millions from the same dirty sources. John McCain has fought 'special interests', like Freddie Mac, Fannie Mae and corporate lobbyist pork his entire political career. With a group of new and previously unpurchased politicians, he might be able to get some things done.