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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 passes tax cuts

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House passes tax cuts

By a 227 to 205 vote, the House passed the GOP’s tax cut package. That was the easy part. Now they have to try to pass a tax cut in the Senate.

If they can pull it off, it would be the first major piece of legislation Congress has been able to put on President Trump’s desk since he took office. After failures with Obamacare repeal, passing these tax cuts is an absolute must. It doesn’t matter whether it was rushed, sloppy, or directly contrary to many traditional Republican policies. They need a bill signed before heading into the 2018 midterm elections.

Watch Speaker of the House Paul Ryan make his plea before Congress:

Further Reading

BREAKING: Voting Results Are In From Tax Reform Bill Vote

http://www.dailywire.com/news/23678/breaking-voting-results-are-tax-reform-bill-vote-ryan-saavedraThe House of Representatives passed a massive tax reform bill on Thursday aimed at cutting taxes for businesses and individuals, which is a major step in the Trump administration’s effort to overhaul the tax system.

The bill, which passed with “227 votes in favor and 205 against,” had to survive opposition from several House Republicans as 13 of its members ultimately voted against the plan.

House Passes Tax Bill

http://www.nationalreview.com/corner/453803/house-passes-tax-billMinutes ago, the House passed its version of tax reform, which expands the standard deduction, shrinks the amount of individual tax brackets from seven to four, and cuts the corporate tax rate from 35 percent to 20 percent. The vote was 227–205, with 13 Republicans voting against the bill and no Democrats voting for it.

All but one of the Republicans who voted against the bill represent California, New York, or New Jersey, states with high income-tax rates whose residents could be affected by the elimination of the state-and-local-tax deduction. The onus now falls on the Senate to pass its version of tax reform, and on Republicans to negotiate the differences between the two bills.

House easily passes $1.4 trillion tax cut

https://www.washingtontimes.com/news/2017/nov/16/house-easily-passes-14-trillion-tax-cut/No Democrats backed the bill.

“This is the most irresponsible bill I will have been confronted with in 37 years,” said Rep. Steny H. Hoyer, a Maryland Democrat who said the massive deficits — as much as $2 trillion, when interest costs and other extensions are included — are a betrayed of what Republicans have long argued for

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Economy

Ron Johnson opposes tax plan, says it favors corporations over other businesses

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Ron Johnson opposes tax plan says it favors corporations over other businesses

Senator Ron Johnson has a point. He’s the first Republican to officially declare his opposition to the Senate’s tax plan, citing evidence the plan greatly favors corporations while continuing with oppressive taxes on sole proprietorships, limited liability companies, S corporations, and partnerships whose owners pay taxes based on individual income tax rates for the owners rather than the corporate rates.

In an interview with WSJ, Senator Johnson was clear with his opposition to the plan:

Republican Sen. Ron Johnson Opposes GOP Senate Tax Package

https://www.wsj.com/articles/republican-sen-ron-johnson-opposes-gop-senate-tax-package-1510777290“If they can pass it without me, let them,” Mr. Johnson said in an interview Wednesday, adding that the plan unfairly benefits corporations more than other types of businesses. “I’m not going to vote for this tax package.”

In addition to his concern about the details of the Republican proposal, he also complained about a process that he said has been closed to his input and also misleads the public about the nature of the tax overhaul.

“I don’t like that process,” Mr. Johnson said. “I find it pretty offensive, personally.”

The Senator from Wisconsin is correct in his assessment. This makes one wonder why GOP leadership didn’t take this into account before they started promoting it as a pro-growth plan. The majority of businesses in America will not qualify as true corporations and therefore will not receive the big tax breaks promised by its champions. In fact, many businesses will end up paying more under this plan.

Could it be that the GOP simply hoped nobody would call them out on this little detail? Yes. Though the number of businesses that qualify is lower than the number that don’t, the corporations that do qualify employ more total Americans. This means that when viewed through a lens of overall economic growth, it’s still a beneficial plan for most Americans in that it will increase the number of jobs available and make room for increased wages. Nevertheless, the millions of Americans who will be hurt by this are not an insignificant minority.

Can it be fixed? Probably not. To do so would mean reworking a huge chunk of the overall bill in order to keep it from being so massive of an overall revenue cut that the government would run into shortfalls. Of course, they could always cut expenses rather than passing a massive budget, but that doesn’t seem to be on the GOP’s agenda anymore. Perhaps it never was.

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Economy

By repealing individual mandate in tax bill, Senate rolls the dice on a big win

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By repealing individual mandate in tax bill Senate rolls the dice on a big win

2017 hasn’t been a good year for Republicans on Capitol Hill. They haven’t been able to accomplish anything of merit despite having a Republican in the White House. In fact, they’ve passed fewer bills of impact than they did when President Obama was in the Oval Office.

Tax cuts are a must as they head into a midterm election years. Now, they’re upping the ante in the Senate by proposing inclusion of individual mandate repeal on Obamacare.

“We’re optimistic that inserting the individual mandate repeal would be helpful and that’s obviously the view of the Senate Finance Committee Republicans as well,” Senate Majority Leader Mitch McConnell told reporters.

They aren’t just going up against push back in the Senate itself; no Democrats will support it, leaving only two Republicans who can object. They still have to get it through the House. If they can pull it off, this could be the momentum-builder they need to mitigate some of the damage the party’s been experiencing. If they can’t this will be another demerit that could sink them a year from now.

Further Reading

U.S. tax bill should include repeal of health insurance mandate: Senate Republican leader

https://www.reuters.com/article/us-usa-tax-senate/u-s-tax-bill-should-include-repeal-of-health-insurance-mandate-senate-republican-leader-idUSKBN1DE2QDWASHINGTON (Reuters) – Senate Republican leader Mitch McConnell on Tuesday threw his support behind including a repeal of the Obamacare mandate for individual health insurance in the Senate’s tax reform bill.

“We’re optimistic that inserting the individual mandate repeal would be helpful and that’s obviously the view of the Senate Finance Committee Republicans as well,” McConnell told reporters.

Senate GOP tax bill will include repeal of ObamaCare mandate

http://thehill.com/homenews/senate/360327-thune-senate-tax-bill-will-include-repeal-of-obamacare-mandateConservatives led by GOP Sens. Ted Cruz (Texas), Rand Paul (Ky.) and Tom Cotton (Ark.) pushed hard to include the provision, which would eliminate the federal penalty on people who do not buy health insurance. President Trump has also pushed for the provision to be part of the tax bill.

McConnell told reporters that adding the individual mandate repeal will make it easier to muster 50 votes to pass the bill.

Senate tax bill will include individual mandate repeal

https://www.axios.com/senate-tax-bill-will-include-individual-mandate-repeal-2509467417.htmlThe Senate plans to include a repeal of the Affordable Care Act’s individual mandate in its tax bill. As part of the deal, the bipartisan ACA stabilization bill introduced by Sens. Lamar Alexander and Patty Murray will get a separate vote on the Senate floor.

What to watch: Whether a tax bill that repeals the individual mandate can get 50 votes. If it’s part of the package, odds are the answer is yes. But this definitely escalates the tax bill’s drama — especially if and when the House and Senate must reconcile their versions.

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