Wednesday, April 15, 2009

Tea Party Tax Protest

I was all set to write about the Tea Party Tax Protest that will be occurring today, and after a while, I thought, "Will it really matter?"

Right now, we are spending future generations into the poorhouse, and we really don't care as long as we have the cash to keep the cable on, pay for text messages, or purchase $600 shower curtains.

President Obama said something yesterday about us no longer being able to spend, spend, spend in government, but I guess that does not include the healthcare reform Obama wants, the stimulus package we "need" or else the Earth will start hurling into the sun, or for the US to either bail out or purchase the US automakers.

I look at things in simple terms, and here is how I see things:

Some people made some really foolish moves when purchasing homes – people who could not really afford homes purchased them on really shaky grounds because they figured that the housing market would go up 10% per year. Then when it looked like this was not going to happen, people started defaulting on loans, banks foreclosed on houses they did not really want to own, and property values fell in many areas of the country.

The government got involved because elected officials need to appear to be helpful. What I never understood was that some Federal oversight failed, regulators were sleeping at the wheel, so as rational beings we wanted the same people who made the mistakes to fix the problem. We did that because they have the expertise. I am still scratching my head on this one.

We passed a bunch of spending bills, and some of them did very little to help the economy. So our legislators decided to spend money in other ways. It reminds me of seeing someone on the side of the road, head bend, hood popped open, wondering why the car has stalled. He (face it, it would be a "he"; a "she" would call AAA) takes a monkey wrench (or other item in the toolbox) and whacks part of the car. If it doesn't fix the problem, he whacks another part of the engine. We are kinda doing the same thing right now, but our monkey wrench is 1 Trillion Dollar spending bills.

Here is what people are not talking about: (1) Unemployment is on the rise, but people are still making mortgage payments. What happens in several months when people start blowing through their emergency funds. (2) Most ARMs (adjustable rate mortgages) have not ratcheted up, yet. The first wave will hit in a year or so. What happens when this occurs.

Both of these events are what I like to call "Holy Cow" events. They are big, may affect housing prices and the economy, and will probably need our legislative bodies writing hundreds of billions of dollars in spending (because that's what legislatures do).

Part of me wants to dress like a native American and attend one of these tea party events – though I think dressing like Pocahontas is not really PC unless you are on a Disney property.

Me, I am looking at the stock market gain more than 1,000 points over the last month or two, and I still think about the bad news on the horizon. But stock brokers are smart, right? I mean, they are a bit smarter than mortgage brokers and bank regulators, right?

I have started thinking about this tea party tax protest some more. Why could it not have been some wine tasting tax protest instead? I mean, that would have more appeal to me, and after thinking about this, I could use a drink.

9 comments:

Grant said...

What does the government have to do with tea parties, and why didn't I get an invitation? Note - I'm assuming it will be green tea served by Asian hotties. If it's black tea, count me out.

Adrianne said...

I think I need to take a xanax now and hide under my covers. Its really sad when you read things like this to know this is actually happening to our country. Why because we are all so greedy!

Unknown said...

Some opinions on the "Holy Cow" events (which is also not a politically correct term because it could be considered demeaning to Hinduism; as if I cared about being PC) here are a couple of opinions:

1. I'm assuming there is substantial overlap between people who have lost their jobs and people who have already defaulted on their mortgage. If that's the case, then defaults may increase somewhat, but should not be devastating. Add to that opinion

2. A lot of the ARMs have been or will be modified prior to the rates being jacked up. I'd be willing to bet that most of the people who have any interest and ability to stay in their homes have already made arrangements, so the effect on the overall economy should be minor.

Again, these are opinions, but I believe they are reasonable. My thoughts on the "Holy Cow" events are

1. The year 2010+. My understanding is most of the tax increases planned by the Obama Administration will go into effect and the tax reductions that Bush pushed for will expire. This can't help but slow down the economy.

2. A lot of what Obama is calling "tax reduction" is actually taking money away from earners and transferring it to non- or lower-tier earners (that which we call welfare by any other name...) Anyone who has ever studied economics or history has a good idea of how well this works. Expect major drops in investment and productivity. Add to that the reduction that the Obama admin has plans to reduce the deduction on charitable giving means that call for government services will increase.

3. Government run health care - As soon as that becomes a fact, the budget is toast. With a rapid expansion of retirees expected for the next few decades, they won't be able to print the money fast enough.

Okay, I'm ready to join you in that drink now...

Anonymous said...

This comment is for Grant if he ever comes to this blog again...free your mind and don't be stupid, a mind is a terrible thing to waste...what is similar between black or green tea...they're all tea!and furthermore more black tea is healthier for you

Malach the Merciless said...

Yeah, I got SCREWED royally by a mortgage broker on a ARM. Luckily I owed a lot less on the house that what is was worth cause of previous property sales.

btsea said...

One does wonder what the future holds for us. People took out loans they couldn't pay, but on the other hand, it was the banks (the financial experts) that gave them the loans. Doh! I don't think anyone has a clue as to how it will all work out. We're all holding our breaths and treading water hoping the waves don't get too high. In the old days you could hop on the Mayflower and sail to the New World and start over again. I feel kind of trapped in that respect! ;) I believe the Pope is in the process of writing an encyclical on the economy, and it has been delayed a bit to factor in the latest shennanigans. I'd be very curious to read is thoughts on the economy when it gets published. He seems to be extremely intelligent, and looks at things from a very unique vantage point. I think there is a lot of greed built into our system presently, and very little mercy.

LarryLilly said...

We have failed in personal responsability. Business people are in it for the short haul, we dont every expect to pay it out, ever. This quarter profits make or break my individual pay, my year end bonus, never mind the long term effects on the company. Politicians talking about 8 year budgets when they know they have 4 year terms, parents allowing their kids just this one more time, when its a string of just this one more time.

Leesa said...

Grant: Everyone that files a tax return should have received an invitation. Guess yours was lost in the Government-sponsored mail service.

SSC: I know, I know.

Gary: Thoughts on your thoughts: (1) When people loose their jobs, they generally are given a little severence, plus they have some cash in the bank - so there is a delay between loosing a job and paying a mortgage late. Plus there is not necessarily a good assumption that people with sucky mortgages are more likely to loose a job. (2) ARMs can't be modified if the person owes more than the house is worth.

And the Holy Cow events, yeah, they seem reasonable.

Jim: concise.

Anon: Grant is brilliant.

Malach: Sorry for the mortgage broker.

btsea: One thing you said summarizes all I had to say: "I don't think anyone has a clue as to how it will all work out."

Larry: when we have quarterly performance appraisals, should we expect anything less?

Unknown said...

Leesa,

Your points are reasonable. We are evaluating based on different assumptions. Time will show which of us was closer to correct. Of course, by then it won't really matter that much.

LarryLilly,

"We have failed in personal responsability."

To me, that statement hits the nail right on the head. I think it's a bigger "head" than most people are willing to acknowledge. Businesses certainly had their share of responsibility and so did government. A lot of people are skirting around a major part of the situation though: People were idiots for taking loans that they knew (or should have known) that they could not afford. Or, if not idiots, they were acting as parasites knowing that either the lenders or the taxpayers were going to get stuck with bad paper. Take your pick. Personal responsibility has to start at the bottom or it doesn't mean anything.

btsea,

If by the system you mean the government, I'm all in favor of leaving mercy out of the system. Don't misunderstand, I am all in favor of mercy, but think that it belongs in the realm of the personal. Generally, when government shows mercy to one group or individual, it's at the expense of another. I don't think that's proper. On the other hand, if my wife and I decide to show mercy (financial or otherwise), to people indebted to us, then we take the loss and no one else. I think that's the way to go.