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Economy

Progressives’ new ‘state bank’ as the rocky road to serfdom

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Why does a bank robber rob banks?

“Because that’s where the money is.”

Or so goes the legendary response by the infamous bank robber Willie Sutton (who later denied ever saying it).

So why is the new progressive Governor-Elect of New Jersey (a former Obama Administration Ambassador to Germany and Goldman Sachs executive named Phil Murphy) proposing a “state bank”?

Why, maybe that’s because taxpayers are where the money is?

Can Gov.-Elect Murphy Make a Go of His Public Bank? – NJ Spotlight

http://www.njspotlight.com/stories/17/11/12/can-gov-elect-murphy-make-a-go-of-his-public-bank/Gov.-elect Phil Murphy often told a story on the campaign trail about how, as a relative newcomer to statewide politics, few people in New Jersey had even heard of him before he jumped into this year’s governor’s race. After his victory last week, the same could be said about one of Murphy’s core fiscal-policy proposals — a plan to launch a state-run public bank in New Jersey. The type of financial institution envisioned by Murphy would take state-government funds now deposited in accounts with large commercial banks, including those based overseas, and use them to back low-interest loans that would serve the public’s interest in New Jersey, including student debt, infrastructure investments, and small-business lending.

New Jersey already has the third-highest state and local taxes in the nation (behind only its neighbor New York and nearby Connecticut), thanks to a double whammy in an income tax and high property taxes generally credited with supporting the largesse of generous salaries and benefits for legions of public-sector employees.

One problem is where that state bank will get its money. The progressive Governor-Elect Murphy declares, “That’s our money!” Yet there is no thought to returning it to overtaxed taxpayers — not when there’s votes to buy and a money pot whose bottom is not yet visible. Because when Murphy and his progressive do-gooder allies use the first-person plural pronoun, they are referring to the government and not the people.

As politicians in the bluest of the blue states learn that promising endless “free” stuff, particularly when it’s paid for by political opponents and disfavored constituencies, is a recipe for getting elected, perhaps attacking liberals and progressives for wanting to raise taxes will no longer be a winning campaign argument. Not when many voters are net recipients of government monies, meaning, they simply don’t pay taxes. However, a “state bank” could cause numerous undesirable effects beyond taxes to infinity, beyond encouraging inflation.

Consider how banks work, and then consider the very premise of Murphy’s “state bank” is that it would step in where greedy conventional for-profit banks supposedly fail “to serve the community.” The suspicion here is that the state bank will be giving “low-interest” loans to people or businesses which otherwise are not getting loans on the terms they want, or at all.

When you seize the money earned and saved by the homeowner with an 800 FICO score, to underwrite a loan for his deadbeat neighbor in foreclosure who’s got a 520 FICO score, you aren’t being generous or compassionate. You are creating a moral hazard, and an immoral condition.

The second problem arises from a fundamental misunderstanding of — no, it is a fundamental disregard for — how a conventional bank works. A bank makes loans, because it makes money off the interest. It must put the capital to use. However, there’s the risk of nonpayment, of borrower defaults. Banks “fail” when they suffer too many nonperforming loans. No one wants to talk about this, because it involves acknowledging that the collateral is bad, that the bank made a mistake, that it issued a mortgage worth more than the underlying collateral to a bad credit risk on even worse terms (like the infamous no-income-no-assets-no-problem mortgages).

The lesson of the last decade’s housing bubble and nonperforming mortgages (of which many still are on the books of the largest lenders) apparently is going to be ignored for as long as there is a large supply of “marks” available to shoulder the eventual burden. So we can expect that the New Jersey state bank — and its copycats in other states, of that you can be certain — will soon start making bad lending decisions to borrowers of either questionable credit risk or otherwise connected to various “social justice” initiatives.

Then, when the loans start to “go bad” and go into default, you can expect the state bank to start playing “winners and losers” when deciding whose collateral to go after. Your car dealership may be seized, while the marijuana farm may be allowed forbearance on its defaulted loan. And just think what mischief can be made by politically-connected local prosecutors who can use their “discretion” to choose whom to investigate and prosecute, all to serve a progressive political agenda whose singular goal is to transform the society.

Taxpayers across America should shudder at the thought of government-run banks. Because those banks would be deploying our capital, raised from taxes and from government debt, often sold to foreign bond buyers like the Russians and Chinese. But without the nasty profit motive — which in plain English also amounts to old-fashioned accountability to savings account depositors like you and me — to ensure loan officers only make loans most likely to be repaid, the state bank is likely to accomplish only three things.

A new set of winners: tomorrow’s sellers of assets at inflated prices due to the availability of new credit for car loans, home loans, college loans and small business loans, often with no regard for the terms or creditworthiness of the borrower (and perhaps little to no expectation of repayment).

A new set of losers: Since the premise of a state bank is, we are told, to serve the poor and often first-generation immigrants or members of traditionally-underserved “minority” communities, we can expect the debt and wrecked credit scores from defaulting loans to be shouldered by these same groups. Tomorrow’s college students may be in greater debt than the current generation’s. More people may end up renting, as bad credit is no guarantee of affordability against inflated and rising home prices.

The result? Another generation headed for practical indentured servitude. The difference? This time, the lender will be the government.

A second set of repeat losers: These will be the owners of anything which can be indirectly collateralized to cover those loans. We’re talking property owners and the middle-class income producers. Future tax streams can — and in all likelihood must — be “securitized” to cover delinquent loans.

Again, the party able to place liens on stressed property owners for unpaid taxes? The government.

The rich white guy ex-Goldman Sachs may be able to escape checking his privilege while playing Robin Hood. The reality is that he’s playing the Pied Piper, but only as long as he plays the tune called by his decidely unmerry band of progressive, envious knaves, rejects and scalawags who now threaten to turn New Jersey today — and your state tomorrow — into a land of serfs beholden to the do-gooder lords of the manor.

Conservative corporate lawyer, commentator, blockchain technology patent holder and entrepreneur. Headquartered in a red light district in the middle of a deep blue People's Republic.

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Economy

House bill will rein in Trump’s abuse of trade powers

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As much of the nation focused yesterday on the Supreme Court and who Trump would nominate to fill the seat being vacated by Anthony Kennedy’s retirement, Rep. Mike Gallagher (R-WI) was busy working on a bill that would limit Trump’s authority to levy tariffs.

Under Gallagher’s bill, Congress would reclaim its constitutional authority by requiring the president to obtain congressional approval before levying tariffs “in the interest of national security.” This bill is in response to Trump abusing his power to levy tariffs under a provision in the law that allows him to do so on an emergency basis when national security is threatened.

Gallagher’s measure is a companion bill to a Senate measure co-sponsored by Pat Toomey (R-PA) and Mike Lee (R-UT) designed to “rein in the executive branch’s power to impose (tariffs)” and to empower Congress to “assert its Constitutional responsibility and lead on trade policy.”

The recessionary/depressionary consequences of Trump’s self-declared trade war are beginning to take their toll. US companies in various industries are making plans to move operations overseas to avoid the financial impact of tariffs while others are laying off employees due to skyrocketing prices on steel.

To be fair, tariffs haven’t been all bad, especially if your name is Trump.

Trump managed to leverage his tariff threats against China to haul in over $500 million to finance Trump golf courses and hotels in Indonesia and secure trademarks for his and Ivanka’s business interests in China. And Ivanka’s questionably ethical payday has continued as we have just learned that her clothing empire—exclusively manufactured in various Asian countries because MAGA™–is exempt from Daddy’s recent 25 percent tariff on $34 billion worth of imported Chinese goods.

It looks like Trump won’t be backing down anytime soon. It was last week that we learned that Trump is working on a bill he hopes Congress will consider that would shift ALL tariff power from the legislative branch to the executive branch. Known as the U.S. Fair and Reciprocal Trade Act (FART Act), Trump’s proposal would give him Emperor-like power to levy tariffs anywhere anytime and for any reason.

Would Congress ever pass such a law? Who knows?

A few weeks ago, the Senate Finance Committee grilled Commerce Secretary Wilber Ross over Trump’s trade-war strategy in light of the administration’s kid-gloves handling of China and of retaliatory tariffs against the US by Canada, China, Mexico, and the EU. It’s tempting to get excited when Republicans get fired up and appear to be doing their job, unfortunately Mitch McConnell always shows up to throw water on the flames, turning the excitement into ashes.

As the election draws near and with the GOP officially rebranded as the Party of Trump, I find little reason to hope that efforts to rein in Trump’s abuse of power will succeed.

Originally posted on The Strident Conservative.

 


David Leach is the owner of The Strident Conservative. His daily radio commentary is distributed by the Salem Radio Network and is heard on stations across America.

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Economy

Emperor Palpatine would love Trump’s U.S. FART Act

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Ever since Trump officially launched his self-declared trade war earlier this year, countries around the world have been lining up to retaliate against his arbitrary use of tariffs—the Senate Finance Committee recently called it “knee-jerk impulses”—in his pursuit to advance his anti-free trade, protectionist agenda.

In January, Trump lobbed the first economy-killing grenade when he imposed tariffs on imported solar panels and residential washing machines. Weeks later Trump launched a second round of attacks with across-the-board tariffs of 25 percent on steel and 10 percent on aluminum.

Following the second round of attacks, Trump’s trade advisor Peter Navarro appeared on FOX Business Network to assure America that Trump knew what he was doing and that fears of a trade war were misplaced because no country would dare retaliate for Trump’s tariffs.

Obviously, with retaliatory tariffs being leveled by Canada, China, Mexico, and the EU, Navarro was not only wrong in his conclusion, but we now find ourselves in the throes of a trade war, with casualties here at home such as we witnessed recently with Harley Davidson’s announcement to move some production overseas to avoid tariffs.

Additionally, the price of steel has doubled, causing layoffs and possible business closures for smaller businesses. For example, last week Mid-Continent Nail announced layoffs for 60 of its 500 employees and may be forced to relocate to Mexico to survive Trump’s trade war.

But don’t worry. Trade wars are “good” and “easy to win.”

Already guilty of abusing his authority to level tariffs—he can only do so as a matter of national security—and in true “Damn the torpedoes! Full speed ahead!” fashion, Trump is working on a bill he hopes Congress will consider that would shift tariff powers from the legislative branch to the executive branch.

The U.S. Fair and Reciprocal Trade Act would give the president power to level tariffs anywhere, anytime, and for any reason. Former White House Communications Director Anthony Scaramucci refers to Trump’s proposal acrostically, calling it the U.S. FART Act because it “stinks.”

Personally, I think a better nickname for it is the Emperor Palpatine Act because it gives Trump…

I would like to believe, as the editorial board of National Review does, that Congress would never consider surrendering its Article 1, Section 8 power to “lay and collect Taxes, Duties, Imports, and Excises” to any president, especially Trump. But when you consider that they already allow Trump to abuse his authority to impose tariffs—national security, remember?—not to mention that efforts to rein him in have been shot down by Mitch McConnell and other Republicans sold out to Trumpism, I’m not so sure FART wouldn’t fly if given its wings.

Case in point: We need only remember how Sen. Bob Corker (R-TN) successfully led the charge to surrender the Senate’s Constitutional authority to approve treaties to Obama during the Iran deal to know just how feckless Republicans can be when dealing with unpopular issues.

Originally posted on The Strident Conservative.

 


David Leach is the owner of The Strident Conservative. His daily radio commentary is distributed by the Salem Radio Network and is heard on stations across America.

Follow the Strident Conservative on Twitter and FacebookSubscribe to receive podcasts of radio commentaries: iTunes | Stitcher | Tune In | RSS

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Economy

What do Democrats and Obamacare have in common with Republicans and tax cuts?

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During the Obama administration, the most obvious example of the disastrous consequences of making laws in this fashion is Obamacare—legislation negotiated behind closed doors and so full of special interests that Nancy Pelosi famously stated that Congress had to pass the bill before we could find out what was in it. Obama also provided cover for Obamacare before and after its passage with his now-famous repeated lie: “If you like your plan, you can keep your plan.”

Trump and the GOP have created an Obamacare moment of their own with the Tax Cuts and Jobs Act (TCJA).

Like Obamacare, TCJA was so massive and contained so many special interest considerations—mostly to corporations and donors—that it was hammered out behind closed doors, and under McConnell’s Pelosi-inspired instructions, TCJA could not be read by Senators until after it passed the Senate. And just like Obama before him with Obamacare, Trump kept the details of the tax cut plan hidden while spreading the lie that it would provide “the biggest tax cuts in history.”

The folks at InfoWars.com said that Trump’s promise had an Obama-esque “if you like your money, you can keep your money” ring to it.

The similarities between Obamacare the Trump tax cuts don’t end there. In the same way that much of the damage from Obamacare wasn’t known until after it became law, the damage from Trump’s tax cuts are now being revealed.

A previously unnoticed change to the tax code included in the TCJA has been discovered that imposes newly created taxes on churches, synagogues, and other non-profit organizations of 21 percent on employee benefits like meals and parking, forcing these organizations, regardless of size, to pay taxes for the first time ever. This is a costly burden when you consider that many nonprofit organizations operate with small and/or volunteer staff.

Rep. Michael Conaway (R-TX), who is apparently one of those who didn’t read TCJA before voting for it, is trying to fix this “oops” moment, but House Ways and Means Chairman and Trump loyalist Kevin Brady (R-TX) is defending the stealth-like tax grab because it will provide “parity”—GOP-speak for fairness—regarding taxing employee compensation.

Parity has nothing to do with it. From day one, Republicans targeted charitable deductions as a source of income to offset the massive tax breaks they were giving big business and special interests. Failing to get as much as they had hoped from adjusting deductions, the GOP went after the recipients of those donations.

This is why the Tax Cuts and Jobs Act was created behind closed doors, why nobody could read it before voting, and why Trump lied to protect it. It’s also a sign that our great Republic is quickly approaching its end.

Originally posted on The Strident Conservative.

 


David Leach is the owner of The Strident Conservative. His daily radio commentary is distributed by the Salem Radio Network and is heard on stations across America.

Follow the Strident Conservative on Twitter and FacebookSubscribe to receive podcasts of radio commentaries: iTunes | Stitcher | Tune In | RSS

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