America's Economic CrisisThis great nation of ours is facing the worst economic crisis in it's more than 200 year history. Our current recession, or depression, depending on who you talk to, threatens to overwhelm this country in a way that has not been seen since the Great Depression.
While many see this as a very complex issue, with multiple causes and related issues, this economic crisis can actually be attributed to one thing, plain and simple: personal and corporate irresponsibility. This wide-spread IRRESPONSIBILITY is seen in many ways. Failure to follow sound financial practice. No personal accountability for CEO's and officers of business giants. Rewards, bonuses, and perks for officers and CEO's and stockholders that were not in proportion to the success and growth of the business.
For some reason that escapes common sense, these companies now demand that our government shore them up and keep them operating, regardless of past performance. They assure us that the government must step in and bail them out, or it will mean far more jobs lost, and an even bleaker economic forecast.
And also for some reason that defies logic, the government sees it the same way. For that reason, in 2008 alone, our government saw fit to provide bailouts to the following privately owned companies:
Bear Stearns When the financial giant neared collapse, JP Morgan purchased it for $236 million; the Federal Reserve provided a $30 billion credit line to ensure the sale could move forward. Total cost: $30 billion
Fannie Mae / Freddie Mac At the near collapse of two of the nation's largest housing finance entities, the U.S. government seized control of Fannie Mae and Freddie Mac and guaranteed up to $100 billion for each company to ensure they would not fall into bankruptcy. Cost: $200 billion
American International Group (A.I.G.) When AIG was unable to secure a private-sector loan, the federal government intervened by seizing control of the insurance giant. Less than one month after the initial bailout and just days after AIG announced it had already drawn down $61 billion of its loan, the Fed stepped in with an additional $37.8 billion to bolster AIG's securities lending business. In November, with the insurance giant continuing to report heavy losses, the Feds revised the terms of the bailout and purchased $40 billion in AIG preferred shares. Cost: $150 billion (Note: Today, even as I write this, the current President has set aside ANOTHER $30 billion for AIG, bringing the total up to $180 billion.)
Auto Industry In late September 2008, Congress approved a more than $630 billion spending bill, which included a measure for $25 billion in loans to the auto industry. These low-interest loans are intended to aid the industry in its push to build more fuel-efficient, environmentally-friendly vehicles. The Detroit 3 -- General Motors, Ford and Chrysler - will be the primary beneficiaries. Cost: $25 billion
Troubled Asset Relief Program The Bush administration has proposed a rescue plan to ease the current crisis on Wall Street. If approved by Congress, the Treasury Department will be authorized to purchase up to $700 billion of distressed mortgage-backed securities and other assets and then resell the mortgages to investors. Cost: $700 billion
Citigroup After Citigroup lost half its value in the stock market, the government agreed to back roughly $306 billion in loans and securities and will inject about $20 billion in capital. This is in addition to the $25 billion the bank received not too long ago. The government could absorb up to $247.5 billion of Citigroup’s losses. Cost: $247.5 billion
Chrysler/G.M. Chrysler, General Motors and the Treasury Department have agreed upon terms for a bailout package to rescue the drowning automakers. The package consists of $13.4 billion in emergency loans; another $4 billion will be made available if needed. Cost: $17.4 billion
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective: Let's see if we can add up the cost of these "bailouts" to the American taxpayer. First, let's write the numbers out in long form, instead of using neat little abbreviations that also seem to minimize the enormity of these numbers.
For instance, $30 B just doesn't portray the same stark reality as $30,000,000,000, does it? So, let's add up the costs:
Good grief, Charlie Brown!!!!!! Even Monopoly™ money doesn't come in those denominations!
But unfortunately, this isn't a game, and this isn't Monopoly™ money ---
these are OUR tax dollars. You and I, and our children and grandchildren for generations to come, are the ones who will be
footing the bill for all these private industries that failed to exercise sound financial practice. The CEO's of these
companies, meanwhile, live in multi-million dollar mansions, with outrageous salaries and perks, "Golden Parachute"
retirement packages, private jets and limos, and more than the average taxpayer can even imagine. Why are these men NOT being held accountable for money and perks that they have bled from their companies, at the expense of the workers and taxpayers?
Simple, sound, tried and true financial principle is this:
You cannot spend money you do not have. If your outgo exceeds your income, then your upkeep will be your
downfall. Pretty simple, really. You cannot hope to get ahead on borrowed money. If you must borrow money, you should never borrow more than you can
reasonably expect to pay back, and you must pay it back; anything else is dishonest. You must have some reserves, save something for a "rainy day". It is not the responsibilty of the government to keep you afloat. Well, this country is facing not just a few "rainy days", but an absolute deluge! Not even a month in office, and our new
President has disdained sound financial principles in favor of an"economic stimulus" package.
ANOTHER $787,000,000,000 give-away, supposedly to stimulate the economy. However, a give-away by any other name is still... a giveaway. A government handout.
Where is all this money supposed to come from, Mr. President? You have never clearly showed us where this money is to come from. You talk a good game, and your speeches are indeed inspiring, but the numbers just do NOT add up, Mr. President.
It is interesting that President Obama appointed Timothy Geithner, former president and chief executive of the Federal
Reserve Bank, as Secretary Of The Treasury. Don't get me wrong, but is a man who has been both
delinquent and careless in his own financial matters REALLY the best person for the job?
Geithner did not pay $35,000 in self-employment taxes over several years, and deducted
the cost of his children's sleep-away camp as a dependent care expense, when only expenses for day care are eligible for
the deduction. He finally did pay the additional taxes he owed, with interest, but was not fined for late payment. Even this
was not done, however, until AFTER Obama appointed him to his current position. As former president and chief executive of
the Federal Reserve Bank of New York, Mr. Geithner played a leading role in trying to manage the financial crisis that has
engulfed Wall Street since 2007. Shouldn't we be asking, how has THAT crisis been going, under his leadership? As I write this, the market has fallen to it's lowest level in more than a dozen years, with no end in sight.
America must learn it is not the job of the government to subsidize private business. Simple economics decree that if a
business is poorly run, has a high level of inefficiency and waste, has become top-heavy, (i.e., more executives than
necessary), cannot remain competetive in the marketplace, can't or won't change to meet consumer needs, then that business
will fail. It's very simple, really. And it is a built-in incentive to succeed.
Bailouts of private business and industry are actually saying: "Regardless of your shoddy financial practices and failure to
remain competitive and profitable, we're going to take care of you." What kind of incentive is that? It is nothing more an a welfare system for big business. There is absolutely no reason, no incentive,
for a company to abide by sound economic principles. We have seen how the welfare system works in individual lives; is there any logical reason to suppose that it would work any better in businesses?
It is not the government's responsibilty to "bail out" failing private businesses. It is not the job of government to seize
interest in, or try to run, private business; in fact, that in itself, is kind of frightening, when you really stop to think about it.
Every time the government steps in, it increases government bureaucrasy, and the burden on the middle income
American taxpayer. Our government needs to learn to follow the simplest of all economic rules: You can't spend more than you've
got, or you're going to be in a mess!
One of the greatest Presidents of all time, Ronald Reagan, had a sound understanding of the necessity of sound fiscal practice,
and the danger of government interference in private businesses. Time has proven that his "trickle down' theory really DID
work. Under his leadership, America rose from a time of double digit inflation and record unemployment to
a new era of greatness. The man whose economic policies were ridiculed at the time as "voodoo economics" actually ushered
in an era of growth and personal prosperity lasting until the turn of the century. Our new president would do well to listen to and learn from the words of former President Ronald Reagan:
"Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other."
"No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a
government bureau is the nearest thing to eternal life we'll ever see on this earth!"
"Man is not free unless government is limited."
"Government does not solve problems; it subsidizes them."
"The problem is not that people are taxed too little, the problem is that government spends too much."
"There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right."
"To sit back hoping that someday, some way, someone will make things right, is to go on feeding the crocodile, hoping he
will eat you last - but eat you he will." President Obama will certainly face many more economic crises during his term. He will also have many more opportunities to
put this country under an even greater load of debt that we cannot possibly survive. We have to demand government accountability. It would behoove
all Americans to learn from the words of another great American president; one whom President Obama claims is a great hero of his.
President Abraham Lincoln said:
"You cannot strengthen the weak by weakening the strong.
"You cannot help small men by tearing down big men.
"You cannot help the poor by destroying the rich.
"You cannot lift the wage earner by tearing down the wage payer.
"You cannot keep out of trouble by spending more than your income.
"You cannot further the brotherhood of man by inciting class hatreds.
"You cannot establish security on borrowed money.
"You cannot build character and courage by taking away a man's initiative and independence.
"You cannot help men permanently by doing for them what they can and should do for themselves." To get America back on track, we have to return to personal and corporate responsibilty and accountability. Throwing countless billions of dollars at social problems does not "fix" the problem, as has been more than amply demonstrated in our public school systems, in our public transportation systems, in our welfare system. A "nanny" state, where everyone looks to the government to take care of them, only breeds more irresponsibility. And spending countless billions of dollars we do not have is not only ireesponsible, it is a sure-fire recipe for disaster and economic collapse.
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