This year, the average American worked 231 days just to support government, which consumes 63.41 percent of national income.
If anything, ATR underestimates the problem. Of those 231 days, 74 are taken up by regulatory costs. But that includes only the direct costs of new equipment and labor time required by government red tape. “Not counted are … hidden costs” (such as discouraging new business investment), according to ATR, that “may be as large as the direct compliance costs of regulation. Economists at Washington University in St. Louis, leaders in the study of regulation, estimated these costs to be over $1.5 trillion per year in 2009.”
Taxpayers foot the bill for an increasing number of government workers at outrageously growing wages. ATR reports that federal employment has increased by 230,000, or nearly 5 percent, in just the past year. USA Today reported Aug. 10 that federal pay and benefits per employee now average more than twice that of private workers: $123,049 compared to $61,051. Federal salaries outpaced inflation in the past decade by 33 percent.
The United States is headed toward financial collapse unless these trends are reversed. The radical change needed is not a government takeover, but a significant downsizing of government’s intrusion into our economy and daily lives.
We can’t afford this government
August 20, 2010Malaysian state introduces gold and silver Islamic currency
August 14, 2010Feds rethink policies that encourage home ownership
August 11, 2010Using guarantees and tax breaks, the government pushed homeownership past 69% in 2004. Then it all came crashing down.
Other critics say eliminating or overhauling Fannie and Freddie isn’t enough: The government must reconsider such bedrocks of housing policy as the mortgage interest deduction and the tax exemption of most capital gains from home sales.
They say these misguided or outdated government policies encourage the United States to massively overinvest in housing, shortchanging other parts of the economy. “There’s only so much subsidy to go around at the end of the day,” Katz says.
Fannie (established by Congress in 1938) and Freddie (1970) were private, profit-seeking companies, but they operated with the implicit understanding that taxpayers would bail them out if they ran into trouble. That assumption gave them access to low-cost financing. They made enormous profits, paid their top executives extravagant salaries and accumulated outsize influence in Washington. They used their clout to lobby for bare-minimum levels of capital to cushion against losses.
Just about everyone agrees that Fannie and Freddie, known as government-sponsored enterprises or GSEs, were built around a fatally flawed model — one in which investors and executives pocketed profits and taxpayers absorbed losses. “After reform, the GSEs will not exist in the same form as they did in the past,” Geithner told Congress in March. “Private gains will no longer be subsidized by public losses.”
One example: Freddie and Fannie, with their government backing, allowed the proliferation of 30-year, fixed-rate mortgages — a product that lenders would otherwise shun. Reason: Long-term, fixed-rate loans struggle in any interest rate scenario. If rates rise, banks are squeezed, because their revenue remains fixed even though they have to pay more for deposits and other funding. If rates fall, homeowners refinance. “No rational market participant is going to bear that risk,” Date says.
But what do politicians care about being rational with money… it isn’t their money but rather someone else’s… they get to play Santa Claus and hand it out to secure their seats in Washington and pass the bill on to taxpayers.
“Fannie Mae, Freddie Mac and other government entities guarantee more than 90% of newly originated mortgages. They are practically the only game in town.”
This is because everyone knows rates will go up so why would a lender lock themselves into a losing position. Only the idiot government politicians would do such a thing.
Democrats trying to buy some votes before the election
August 11, 2010How about some interest free money…
The Obama administration will offer $1 billion in zero-interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas.
The Root Of Good 
Overdose – The Next Financial Crisis
September 1, 2010Posted in Economic/Financial Commentary | Leave a Comment »