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It's the Debt, Stupid
Townhall.com ^ | October 16, 2008 | Victor Davis Hanson

Posted on 10/16/2008 5:35:19 AM PDT by Kaslin

Who caused the American financial panic and the wild swings in our financial system -- and what are we going to do about it in the long term after the markets settle down?

Republicans point to Fannie Mae and Freddie Mac. Politically wired executives at Fannie and Freddie cooked the books. They received mega-bonuses and took cover through campaign gifts to their Democratic supporters in Congress. Then almost everyone involved justified their scams by claiming that, as good liberals, they only wanted to help the poor buy homes.

Democrats counter that Republicans always pushed for more deregulation and, as good conservatives, kept quiet about multimillion-dollar CEO bonuses paid out from shaky Wall Street firms and passed off as good for business - rather than symptoms of suicidal greed.

Those in the present Bush administration blame the Clintonites for seeding the disaster; those in the last administration blame the present one for harvesting it.

Long ago, John McCain warned about the antics of Freddie and Fannie, and later charged that Barack Obama and some of his advisers received too much money from these agencies for looking the other way. Obama has countered that McCain was a reckless deregulator and that some on his staff were lobbyists for Wall Street firms.

The blame game goes on and on. But so far no one seems willing to tell the American people the truth: It is not just "they," but we, the people, who have recklessly borrowed to spend what we haven't yet earned.

Take energy. In recent years, we've borrowed trillions of dollars overseas to buy oil from foreign producers. Wind and solar may sound like neat and easy solutions. But for decades to come, Americans must drill more oil and natural gas of our own for transportation and heating; we must build more coal and nuclear power plants to power the electric grid; and we must conserve. Otherwise, we'll go broke before clean alternate fuels become accessible and affordable.

Our energy challenges do not just concern independence, natural security and global warming. They involve basic financial solvency as well. Yet so far, none of our public officials have warned us that the energy crisis is largely a money matter: We're borrowing too much to buy what we won't or can't produce at home.

Second, as a nation of debtors, we are renting money from Asia to buy its exports with our credit cards. Given our talents and natural wealth, we could easily consume more than others in the world and still balance the books. But Americans cannot charge all that we desire on unlimited credit. Surely one of our presidential candidates can warn the American people to save a little more, use our credit cards a little less and pay off what we already owe.

Third, the government can only hand out more entitlements by borrowing even more to pay for them. Raising taxes on anyone in a recession is insane. But even crazier is cutting them further at a time of skyrocketing national debt without commensurate reductions in spending.

So who will tell the people that we can't raise - or reduce - taxes and that we can't borrow for any more new programs until we first cut expenses and begin paying off the trillions we've already borrowed?

In a hugely productive economy that creates each year some $13 trillion of goods and services, the government has the resources to make real headway in paying down our $10 trillion national debt in relatively short order - if we have leaders brave enough to quit promising to spend a few more hundred billion here and there that we simply don't have.

Fourth, will some candidate explain to the wheeler-dealer public that most real estate is not going to double or triple in value every few years? Instead, houses should once again be seen as homes to live in, rather than investments to get rich from.

If 70 percent of the American people scrimp to buy a home, we can't endanger their financial solvency by waiving the rules for others, who can't or won't pay the mortgage debts they freely incurred. It's time to tell the public that you must budget to buy a house, see it as a place to raise a family and pay the mortgage you took on. And if that's not possible, then keep renting.

The problems on Wall Street, our energy woes, the election-year fight over taxes versus more programs, and the housing crash have one common denominator: massive debt. They are simply the collective reflections of our own spendthrift habits of buying things with borrowed money that we now either can't or don't want to pay back.

In this year's presidential race, the honest candidate who stops promising endless bailouts and has the guts to lead us out of debt could well end up winning.


TOPICS: Business/Economy; Editorial; Government; Politics/Elections
KEYWORDS: vdh; victordavishanson

1 posted on 10/16/2008 5:35:19 AM PDT by Kaslin
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To: Kaslin

” the honest candidate who stops promising endless bailouts and has the guts to lead us out of debt could well end up winning.”

The BS detector just got pegged.


2 posted on 10/16/2008 5:36:58 AM PDT by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: Kaslin
Only McCain gets it.

National debt -- spending freeze, cut spending, reforms

Trade deficit -- it's $60-70b a month! $50b of that is energy. If we eliminate that, we are down to $10-20b a month of Chinese toys, electronics -- and we can start to work on that.
3 posted on 10/16/2008 5:40:46 AM PDT by atomicweeder
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To: AppyPappy

Indeed. It is to laugh.


4 posted on 10/16/2008 5:45:25 AM PDT by Wolfie
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To: Kaslin

Franklin D. Raines, the former CEO of Fannie Mae is buying a house with an asking price of $7,595,000 in Forest Hills (DC neighborhood). He’s also purchased a $4.9 million conodminium at the Ritz-Carlton Residences in Gerogetown.

This was reported in a local Washington DC magazine. Who says cheaters never prosper?


5 posted on 10/16/2008 5:48:40 AM PDT by khnyny ("The demagogue is one who preaches doctrines he knows to be untrue to men he knows to be idiots.")
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To: AppyPappy
"the honest candidate who stops promising endless bailouts and has the guts to lead us out of debt could well end up winning."

"The BS detector just got pegged."

Yep. It was a good column until that point. How could Victor Davis Hansen be so naive? We are down to the point of promising bread and circuses to the masses, tax cuts to those who don't pay taxes, government programs(handouts)to those who want a risk free, womb to tomb society.

6 posted on 10/16/2008 5:54:50 AM PDT by Truth29
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To: atomicweeder
Only McCain gets it. National debt -- spending freeze, cut spending, reforms Trade deficit -- it's $60-70b a month! $50b of that is energy. If we eliminate that, we are down to $10-20b a month of Chinese toys, electronics -- and we can start to work on that.

Im not convinced...

Spending freeze......Dream on, it will never happen. Trade Deficit.......Energy, nope, Republicans will not take the steps required to achieve independence.

7 posted on 10/16/2008 6:20:37 AM PDT by Realism (Some believe that the facts-of-life are open to debate.....)
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To: khnyny

And Cuomo wants to go after Wall St. execs who went hunting.

I hope I live long enough to see some of these evil dems get their just deserts.


8 posted on 10/16/2008 6:25:48 AM PDT by Carley (she's all out of caribou.............but does have a bracelet!!!!)
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To: Kaslin

mark


9 posted on 10/16/2008 6:32:15 AM PDT by Christian4Bush (Country First*****McCain/Palin 08*********vs. CountryWIDE First [obama and the donks])
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To: Kaslin; neverdem; Lando Lincoln; quidnunc; .cnI redruM; SJackson; dennisw; monkeyshine; Alouette; ..


    Victor Davis Hanson Ping ! 

       Let me know if you want in or out.

Links:    FR Index of his articles:  http://www.freerepublic.com/focus/keyword?k=victordavishanson
                His website: http://victorhanson.com/
                NRO archive: http://www.nationalreview.com/hanson/hanson-archive.asp
                Pajamasmedia:
   http://victordavishanson.pajamasmedia.com/

10 posted on 10/16/2008 8:32:45 AM PDT by Tolik (2008: Maverick/Barracuda vs. Messiah/Mouth or The Hero vs. the Zero and "Our mama beats your Obama")
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To: Realism
Spending freeze......Dream on, it will never happen. Trade Deficit.......Energy, nope, Republicans will not take the steps required to achieve independence.

I am convinced that the type of change VH is looking for would only come after the citizens rise up in revolt against our government.

I do not know what the populace pain threshold is for our country before Americans activate. But I fear the apathy of 60% of citizens plays into the overwhelming ignorance of what is going on in politics these days in America.

In the past several weeks, I have had dozens of conversations with people about what caused the problem and how the government plans to spend our money. I have discovered just how woefully ignorant we are about the American economy. It is astonishing. These are smart people that are otherwise pretty up to speed on current events.

For instance: Taxes on "big business"....As an executive or an investor in a company, I do not want my companies profits to go down. Show me the money. If my cost of business goes up, and I know it is the same as my competitions, then the cost goes into the price of my product. The cost of taxes is more than just the amount "big business" pays. The consumer then unwittingly buys the product and pays the tax for the "big business" including the additional accounting and legal effort that goes into getting those taxes recorded and to the government.

But somehow we are all made to feel better because the media tells us the greedy rich folks are getting theirs.

11 posted on 10/16/2008 1:31:55 PM PDT by Tenacious 1 (Democrats are for Change - Let's run through a mine field at night wearing clown shoes!)
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To: Tenacious 1
But somehow we are all made to feel better because the media tells us the greedy rich folks are getting theirs.

So you would have me believe that when "big business" gets a tax break (gov't subsidy) that cost is passed on to the consumer? So whos paying on the budget in the end? I believe it should be the consumer not the taxpayer.

12 posted on 10/16/2008 2:17:06 PM PDT by Realism (Some believe that the facts-of-life are open to debate.....)
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To: Kaslin

One thng that is being ignored is that the Bubble in asset prices was almost world wide. Real Estate, stocks, CDOs, and commodities were soaring in value beyond any reasonable standard. It seems to me that we have witnessed a classic Bubble and Panic in an unregulated world wide market. This is exactly what is described in the classic, “Popular Delusions and the Madness of Crowds”. In other words, its not Bush’s fault. Panics are akin to strange animal behavior. BTW, Panics offer outstanding buying opportunities.


13 posted on 10/16/2008 3:09:41 PM PDT by darth
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To: Realism
So you would have me believe that when "big business" gets a tax break (gov't subsidy) that cost is passed on to the consumer? So whos paying on the budget in the end? I believe it should be the consumer not the taxpayer.

I am not sure, but I think we agree. I don't think businesses should pay taxes. It is added administrative, accounting and legal work that hinders commerce and creates legal liabilities and risk.

We consumers pay all taxes anyway. Taxes do not cost "big businesses" anything. A business pays no more taxes than a lawn chair. People pay taxes. Accountants just put the numbers on papers and tell the execs what their current cost of doing business is (taxes included). An executive considers the cost of doing business, the companies target profit and the price their market will bear for their product.

After all that is accomplished, you or I go purchase the product with the taxes already stirred in.

Raising taxes on businesses only discourages business. It is the #1 reason companies relocate to other countries. It is not usually a labor cost only issue.

Who should pay the taxes that businesses don't? We should. I don't think businesses should get a "tax break". They should not pay taxes at all. Go ahead tax the people. Show them what they are really paying. It makes no difference to me. Product cost would go down to a level that would reflect a revised cost of doing business after many accountants and lawyers were fired and that 30% tax burden were ripped out by the bloody guts. Businesses would flock to plant flags in the most robust economy of consumers on the planet.

14 posted on 10/16/2008 3:47:13 PM PDT by Tenacious 1 (Democrats are for Change - Let's run through a mine field at night wearing clown shoes!)
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To: Tenacious 1

if the economy is sooooooo bad that everything in America is going to fall apart and the rest of the world will fall like dominoes, and they need to do something, anything RIGHT now........ pass the FairTax.

it will solve a lot of the problems in the economy AND many other problems we have in the federal goverment.

Turn out all incombents and tell others to do so, that is a message that both Dems and Reps would finally understand.

Return to the Constitution or we will vote you OUT


15 posted on 10/16/2008 6:48:42 PM PDT by The Bat Lady (Dems believe in the American Dream but only up to $250,000.00)
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To: Kaslin
Second, as a nation of debtors, we are renting money from Asia to buy its exports with our credit cards. Given our talents and natural wealth, we could easily consume more than others in the world and still balance the books. But Americans cannot charge all that we desire on unlimited credit. Surely one of our presidential candidates can warn the American people to save a little more, use our credit cards a little less and pay off what we already owe.

It would be a start...

16 posted on 10/16/2008 7:55:31 PM PDT by GOPJ (Theresa Collins...national coordinator of "Inmates to Support Barack Obama," ...)
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To: Tenacious 1
I am not sure, but I think we agree.

I don't think so. I believe that the tax should be on the companies, yes it will be passed on to the consumer, but the consumer has a choice. If the revenue is collected thru income tax the tax payer has no choice and less control over his or her income. So given the choice Id rather pull it coming out of my front pocket than have it picked out of my back pocket. I believe this country needs to pay down all of the debt we've accumulated over the past 10 years and and go back to becoming a wealthy nation again.

17 posted on 10/17/2008 4:56:06 AM PDT by Realism (Some believe that the facts-of-life are open to debate.....)
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To: Realism
Realism,

Do you understand that businesses do not pay taxes? The cost of taxes is included in the price of products you buy before any state sales tax is added. That is, they send money to the government after they have collected it from their customers. This includes payroll, gains, etc. It like soup, its in there.

I think we all pay too much in taxes and the government is 5X larger than it should be. The government spends recklessly and with no accountability. We citizens do not seem to care. Part of the reason for the apathy is the lack of understanding about taxes and how much they actually affect everything. Tax burdens influence individual lives as well as all business and commerce in this country and the world. It is one of, if not the largest, consideration when companies choose their geographic location.

I am in commercial development, I know.

Many large businesses decide on the location of their next capital construction project and business venture based on what city will give them the largest incentivised tax break.

Taxes are a burden on everything and everyone. We must have some taxes and the government must collect something. Unfortunately we the people have very little control. We, as a populace, seem to accept the tax hike government behaviors in our egregious apathy.

The reason I say, quit taxing the businesses and make the citizens bear the full burden is because it would (hopefully) shock Americans into realizing the extreme burden we are under. As you say, you would rather pull money from your front pocket rather than have it picked from your rear. I believe that to be naive. If there is a tax burden built into the price of goods you are purchasing, it is hidden from you and you have no idea what you are paying in taxes buried in the cost of the product. If you are paying attention, you do know what the government is taking from you in income taxes.

Again, taxing businesses is a way to make people feel better about what they pay in taxes. Most don't realize that they are the ones paying the taxes for the businesses every time they purchase product. Taxing businesses is a way to hide the tax burden heaped upon the people. Withholding taxes from your paycheck is another brilliant way to hide the tax burden from people.

Our government is all to happy to keep ignorant consumers and workers in the dark about what they are actually paying in taxes. We throw around numbers like 30% or 45%. Imagine if you will if at the end of every year, instead of withholding our taxes, we received a bill. I bet the government would have a hard time collecting and folks would be outraged. Look what happens already when folks have to pay $4,0000 property tax bills. Can you imagine at the end of the year receiving a $25,000 bill from the government for your income taxes? Some do, don't get me wrong. But these are the folks that are paying attention anyway.

18 posted on 10/17/2008 8:55:27 AM PDT by Tenacious 1 (Democrats are for Change - Let's run through a mine field at night wearing clown shoes!)
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To: Tenacious 1
Obviously the only compromise would be a national sales tax and get rid of the IRS and all State and Federal income taxes. The consumer would know exactly what they are being taxed and be in full control, other than the purchase of day to day necessities. Companies would promote lower gov’t spending to promote lower prices directly passed on to the consumer. There would be so many advantages to having a far more simplistic system and best of all it would be equal for everyone.
19 posted on 10/17/2008 9:27:39 AM PDT by Realism (Some believe that the facts-of-life are open to debate.....)
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To: Realism

I agree. I am a fairtax supporter too.


20 posted on 10/17/2008 9:35:29 AM PDT by Tenacious 1 (Democrats are for Change - Let's run through a mine field at night wearing clown shoes!)
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