Do do that Voodoo that we do...not so well

No one will disagree that America is in the midst of an economic crisis but how we handle this crisis is the topic of much debate.

Crying "Socialist", it seems, has become the preferred soundbite of the conservative right, both in politics and in the media. Preying on the fears and insecurities of the ever dissolving middle class in America, the Republican party and its proponents have attempted to define President Obama's endeavor to drag our nation out of its current economic cesspool as a slow, steady march toward Socialism. As evidence of this administrations socialist agenda, R's point to the Health Care Reform Law, tax increases for the wealthiest 1%, big business bailouts, and various social welfare policies. But is this Socialism, or rather, a form of Protectionism? Capitalism and Protectionism are not mutually exclusive.

Protectionism has historically been defined as the policy of restraining trade between states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports. A country as innovative as the United States could certainly implement a retooled version of Protectionism where rather than placing tariffs or taxes on imported goods, we implement taxes on exported jobs. With a nearly 10% unemployment rate, discouraging companies from shipping jobs overseas could provide a significant boost to our economy by lowering the unemployment rate and putting cash in consumers pockets.

Founding Father Alexander Hamilton was an advocate of Protectionism, which supports government intervention in favor of business. Hamilton was firmly opposed to the British policy of Free Trade, which America didn't entirely adopt until the 1980's when Ronald Reagan instituted Supply-Side economic policies.

Those who subscribe to the idea of Free Trade generally believe that any business should sink or swim on its own merit. They believe that supply and demand should be the ultimate determining factor in the price of goods and services, therefore, if a company is sick it is because it failed to create enough demand, subsequently becomes irrelevant and should be allowed to die.

Good parents may say it is important for children to learn to be independent. Encouraging a child to solve their own problems allows them to take credit for their own accomplishments while learning from their mistakes. The "sink or swim" philosophy may be good parenting, still, any good parent would not hesitate to interfere if their child were actually drowning in a body of water. So the question remains: Though "sink or swim" may build strong character, does it build a strong economy? We are all the parents, in a sense, to our country. We created it, we love it, we nurture and protect it. Now that it is drowning, is it un-American to interfere?

Supporters of Supply-Side economics (sometimes known as "trickle down" or "voodoo" economics) believe that relaxing government regulations and lowering taxes for wealthy business owners creates an environment where businesses can more easily produce goods and services at a lower cost, which in turn, allows them to sell their goods at a more reasonable rate to the public and should increase sales and boost the economy. Opponents of this idea believe the policy doesn't take in to account human greed. Though it may cost you less to produce goods, there is no incentive to reduce the end price. Lower taxes and less government regulation combined with high prices allows the rich to get richer; which is why many believe that a more logical solution would be to focus on protecting consumers rights and lowering taxes for the lower and middle classes which would create more disposable income for consumers, increasing sales and boosting the economy.

Jean-Baptiste Colbert was famous for bringing the French economy back from the brink of bankruptcy by implementing Protectionism, encouraging the increased manufacture of goods, and creating consumer protection laws. Many economists have argued that a fatal flaw in the American economic system is that it failed to anticipate the current situation wherein our country, for the most part, no longer manufactures anything. We could kill two birds with one stone (those being our economic albatross and our fossil fuel dodo) by reducing our import of foreign oil with the creation of American made green energy. Getting America building, creating, and innovating once again would undoubtedly not only provide a boost to our economy, but a boost to our national self-esteem as well. New green energy jobs would put more Americans back to work and purchasing our energy locally rather than importing it from volatile foreign countries keeps American dollars in American pockets. With fossil fuels being an ever disappearing finite resource it makes sense to create alternatives now. And with the current situation in the middle east we can all agree that we would like to eliminate our dependency on relationships with oil producing countries.

It should be noted, however, that despite Jean-Baptiste Colbert's efforts, France ultimately became increasingly impoverished because of the King's excessive spending on wars. Unfortunately, our own war spending could be the determining nail in Americas economic coffin.

Show Us Your Papers

Once upon a time there was a state which suffered through a horrible economic recession. A major war had recently caused a large drain on the economy and, as with all wars many lives were lost. Those who had returned home from the war found themselves significantly under skilled and without a job. Employment was hard to find for anyone and a large percentage of the working poor were self employed small business owners without a social security net to rely on. Adding to the tension was a rise in crime, and a widely publicized immigrant population which was a perceived threat of competition in the job market as immigrants were willing to work longer hours for less pay. The citizens of this state were in an uproar, demanding that something be done! Then, one day, an elected official stepped up and signed into law a decree that police would require all people living within the state to show them papers proving that they were natural born, true citizens. The citizens were convinced that this law would bring about a new era of prosperity, as everyone knew it was these unlawful immigrants who were causing the rise in crime rates. And these immigrants too were to blame for the poor economy and lack of jobs. The only option was to identify and remove these immigrants from the state. The year was 1937. The state was Germany. And I think we all know this story did not have a happy ending.

The Spanish-American philosopher George Santayana famously remarked, “Those who cannot remember the past are condemned to repeat it.” Unfortunately, if Mr. Santayana were living in Arizona today, that remark would have been met with the response, “Show me your papers.” for apparently Governor Jan Brewer does not remember the holocaust.

Friday, Governor Brewer signed Arizona SB1070 into law, which states: “WHERE REASONABLE SUSPICION EXISTS THAT THE PERSON IS AN ALIEN WHO IS UNLAWFULLY PRESENT IN THE UNITED STATES, A REASONABLE ATTEMPT SHALL BE MADE, WHEN PRACTICABLE, TO DETERMINE THE IMMIGRATION STATUS OF THE PERSON.” Aside from the obvious implications that this law promotes racial profiling, another aspect is the dangerously vague language of the law, both of which have civil rights groups up in arms. As anyone who has ever been awarded “reasonable visitation” in a custody dispute knows, the term “reasonable” is virtually undefined and unenforceable by the law.


Arizona officials have stated that it was a lack of federal immigration reform that provoked this new controversial law into being. In response to that I would have to quote my 7 year old daughter in saying, “Two wrongs don’t make a right.”

Will Wall Street Executives be Forced to Give A Portion of Their Bonus Back to the Treasury, or Just Leave it on the Nightstand?

President Obama plans to announce measures to recover taxpayer money used to bail out banks on Thursday. The as of yet unspecified plan could possibly include a tax on bank bonuses. The fee would be designed to bring in as much as $120 billion. Billions of taxpayer dollars were given to banks in 2008 in an attempt to recover from the devastating financial crisis.

What caused the financial crisis? In the early 1990's banks began issuing loans to people with poor credit ratings or limited credit history. The majority of the individuals receiving these loans were lower income people who believed housing was a good investment. Many of these loans were stated income loans, where the borrower did not need to provide proof of the income they alleged on the paperwork. In some cases the borrower could even get around making a down payment using seller funded down payment assistance programs. This may seem like a risky practice for lending institutions. One would think that people with poor credit, who aren't providing proof of income and did not have to give any money up front may not be the most likely to keep current on their payments. As most people know, banks make money from lending money with interest payments. When one makes a payment on their home mortgage, a portion of the total goes toward paying down their loan, and a portion goes back to the bank as a fee for the service of issuing the loan. If a bank loans money to someone who is unable to make their payments then not only does the bank fail to make a profit but it also loses the money it lent. So why would a lending institution do this? Because they could have cared less if the borrowers paid the money back. In most cases, the moment the paperwork was signed, the bank took that loan, bundled it with other loans, and sold the bundle as an investment to another company. Individually, the risky loan may have been worth nothing, but when bundled with many other risky loans it became a money making opportunity. Of course the purchasers of these loan bundles bought in to this philosophy, because as everyone knows a sack of crap has far more value than a single turd.

Wanting to live the American dream, many borrows bit off more than they could chew, purchasing houses they couldn't afford to maintain with loans they couldn't afford to pay back. Struggling to make ends meet, people began making their mortgage payments later and later, often going several months without making any payments at all. Most loans have a per diem, or daily interest rate, which means that if paid on time every time, your loan will be paid off in a set number of years. If you make your payment even one day late, then the the way your payment is allocated may change. The later a payment is made, the more of your payment is given to interest, and the less is used to repay your loan. Even if you made the payment before you incurred a late fee, you could still be adding to the length of your loan. If one managed to keep their home until the loan was paid off, in this manner you would end up paying far more for your loan than you borrowed, even more than your property is worth. Eventually, most of these sub prime loans ended up in default, causing thousands of Americans to be displaced from their homes with major damage to their credit rating and deep in debt.

The banking system that handed out billions of dollars in loans without asking any questions was now billions of dollars in debt and on the brink of collapse. How did the U.S. Government respond to this disaster? By handing out billions of dollars to the banks, without asking any questions. The U.S. Government created the Troubled Asset Relief Program (TARP) which used tax payer money to rescue the banks. Why did American tax payers hand over $700 billion of their hard earned money to the failings banks that caused the second worst financial crisis in U.S. History? Former Treasury Secretary Henry Paulson has said the bailout was necessary to protect the taxpayers. According to Paulson we needed the bailout to save us from the fragile market. Basically, we gave the money to the banks so that the banks could loan the money back to us. Only the banks didn't loan the money back to us. After all, we are in the middle of the worst recession since the Great Depression, and with no legal requirement to lend, the major banks have decided it might be best to hold on to their money for a change. In fact, rather than lending money to tax payers in order to boost the U.S. Economy, many of the banks who received tarp funds have begun raising interest rates on credit cards already issued to financially desperate Americans.

Bank of America, Citi Bank and Wells Fargo began raising interest rates up to as much as 30% for any card holder who misses a single payment. JP Morgan Chase imposed a $10 monthly fee for any card holder who has had a large balance for more than a couple of years. This is a smart way for banks to make money. Knowing so many of their customers have been struggling to pay back home loans the banks gave them that they couldn't afford, there is sure to be a lot of people behind on their credit card payments. It's behavior like this that spurred groups like the folks at moveyourmoney.info to recommended that Americans move their money to smaller local banks in protest.

The U.S. Labor Dept. reports the unemployment rate is remaining at 10% and 58,000 jobs were lost in the month of December. Even more frightening is the fact that 40% of the unemployed have been out of work for 2 years or more. Despite the dire situation American tax payers are in, tarp fund recipient Goldman Sachs reported a $12 billion profit for 2009 and bonuses for Wall St. executives are ranging between 6-8 figures. When questioned, Bill George of Goldman Sachs said the outrageous bonuses were necessary to keep from losing their employees. With more than 10 million people unemployed in the U.S., one would think they could easily be replaced.