Congressional Shenanigans: June 2010 Archives

As if the stock market downturn and declining home sales aren't enough, the so-called Frank-Dodd Financial Reform bill will make sure to kill off one thing that many of us depend upon - our local community banks.

The comprehensive financial reform agreed upon by the House and Senate on Friday, along with all the new regulations of the past year, could signal the end of community banking. The new reforms will give more power to the Federal Reserve to regulate how [small banks] do business.

What does all this mean for our customers? Less credit will be available, costs will increase, and we will be less able to make loans to regular people who were creditworthy in the past. This is the perfect storm for the small retail banking customer. We will start to see more small community bank failures and mergers because of voluminous regulation.

I thought financial reform was supposed to help both consumers and banks to survive. Instead it looks like it's designed to destroy small banks and make it very difficult to get loans of any type. How is this helping anyone except the banks that are too large to fail?

It has become increasingly apparent the Democrats in Congress are not friends of the American people. The only ones they're interested in helping are themselves...to our money.

You know it's bad when even CNN is dumping on ObamaCare.

The CNN report linked above covers the growing problems with Massachusetts health insurance program upon which ObamaCare has been modeled. None of the goals stated in the Massachusetts version have been met. The system is failing financially, with no control over costs, mandated coverage adding to health insurance premiums, subsidies for low/medium-income earners heading ever upwards, disincentives for people to work (higher income means paying a lot more for health insurance), and unintended incentives for businesses to drop their employees health insurance plans entirely.

The Massachusetts system is a preview of what we can expect as ObamaCare kicks in.

Already the the side effects of ObamaCare can be seen as the costs of it become more apparent. If most of the details of this bill had been made known to all of Congress before the vote it never would have passed. Anyone in Congress with a modicum of knowledge about business would have been able to see the negatives of ObamaCare far outweighed any perceived benefits.

With the unintended incentives ObamaCare gives businesses to drop employee health care, or worse, have all future hires brought on as temporary or contract employees, Obama's promise that we'd "be able to keep our present health insurance if we want to" rings hollow and shows he either doesn't truly understand the ramifications of health care reform, or doesn't care. The fact that he needs to spend $125 million of taxpayer funds to sell the idea that ObamaCare will be wonderful proves how bad it will be. If it was truly all that great it would sell itself. But the more he tries to push it on the American people the more they resist letting him destroy the imperfect but world class health care system we have.

Anyone with even a little math ability can figure out that the numbers don't add up, that they don't take into account real world conditions, and totally ignore the effects of the fiscal disincentives that will cause companies to drop health insurance for their employees and induce health care professionals to leave the medical field.

It was 80 years ago yesterday, June 17th, that President Herbert Hoover signed the Smoot-Hawley Tariff Act into law, which instantly turned the Great Recession into the Great Depression. It was an act of trade protectionism that had exactly the opposite effect from the one intended. Call it an example of the Law of Unintended Consequences writ large.

Hoover and his congressional allies thought that reducing imports would strengthen the economy. Instead, it contributed to a collapse in world trade and the spread of protectionism around the globe. The lessons from this policy mistake are unfortunately all too relevant today.

The Smoot-Hawley tariff, conceived as a Republican ploy to gain the farm vote in the 1928 election, was a bad idea from the start.

It was one of the biggest mistakes the Republican Party ever got involved with.

It seems modern day Democrats are now looking to make the same mistake as the Republicans did in Hoover's day and for the same reasons. Should they pull it off, the unintended consequences won't be the same as those back in 1930. Instead, they'll be far worse.

Perhaps it's time for Congress and the President to stop punishing American businesses for succeeding here. Who knows, maybe new jobs will be created here as a result.

Since it appears that Cap-And-Tax is moribund (for now), the Democrats are trying a different piece of legislation to achieve the same thing, only a bit more piecemeal this time around.

The so-called American Power Act seeks to tax carbon emissions from "coal-fired power plants and other large polluters."

A climate and energy bill being pushed in the Senate would cost American households 22 to 40 cents a day -- less than the cost of a first-class postage stamp, the Obama administration said Tuesday.

An analysis by the Environmental Protection Agency concluded that the Senate bill, sponsored by Sens. John Kerry, D-Mass., and Joe Lieberman, I-Conn., would cost households an average of $79 to $146 per year. A first-class postage stamp costs 44 cents.

Sounds great, doesn't it? But knowing government as we all do, we must ask about the hidden costs and the how the numbers were derived. As history has shown us again and again, government (and particularly Congress) have a tendency to underestimate the costs of new mandates and programs and overestimate the revenues or benefits derived from them. The fact that the cost estimates come from the EPA makes me skeptical the numbers are even close to being realistic. One must keep in mind that it will be the EPA regulating CO₂ emissions since it has now been erroneously classified a pollutant.

It would not surprise me to see all kinds of amendments to this bill, most of them intended to turn it into a stealth Cap-And-Tax law.

It doesn't help that the White House is using the oil spill in the Gulf as a rallying cry to choke off the supply of oil and other fossil fuels "for our own good." Not that this bill will have any effect on the oil spill or its side effects. All it's designed to do is make energy more expensive all in the name of saving the planet even though no one can rightfully prove it needs saving. But that's never stopped the Left from doing it anyway.

Just when I think Obama and/or Congress couldn't come up with any more ways to delay or destroy economic recovery, he proves me wrong.

First, there was the stimulus. Then Cash for Clunkers, followed by ObamaCare. Cap and Trade still lurks, waiting to make energy cost skyrocket. (Like that will help the economy). Then there was the first time home buyers tax credit, followed by a modified version that covered anyone buying a home. Now, to kill off the housing market entirely, they're looking to do away with the mortgage interest tax deduction, which will add thousands of dollars per year to the taxpayer's tax burden.

Do they really think this will help anything? Estimates predict elimination of the tax deduction will bring in $208 billion over the next ten years, but at what cost? What will the actual revenues be when all factors are taken into consideration?

Frankly, I doubt they'll collect anywhere near what they expect to because a lot of people that might have otherwise bought homes will decide it's no longer financially attractive to do so. What will that do to the housing values and the housing market? Two things that I can see.

First, housing values will drop, making an already shaky housing market even more so as an increasing number of homeowners will see their equity disappear. Some of those will find themselves upside down on their mortgages. This in turn means we'll probably see an increase in foreclosures and 'walk-aways', where people abandon their homes because they can no longer justify paying the mortgages even if they do have the money to pay them. Why should they when they'll end up with far less than they started with when they first bought their home? It will make more sense to let the home go into foreclosure rather than to keep paying for housing guaranteed to depreciate greatly in value. (In effect, it's like having your mortgage rate increase from 5.5% to 20%. Even if you can afford to pay it, you're really getting little in return for tall he money you spend.)

Second, the housing market will shrink even more than it has since the home buyer tax credits ended this past April. The only difference will be that the effect on the market will be semi-permanent. It could take decades for the market to recover and even when it does, there will a large stock of homes looking for buyers that don't exist.

In turn, all of this could affect the financial industry as people won't be taking out mortgages or equity loans. The banks won't be making any money because of the dearth of loans (and likely a large supply of foreclosed homes they can't sell at any price).

Again, Congress is getting ready to shoot itself (and the economy) in the foot by proposing legislation that will have the unintended consequence of killing off yet another part of the economy and ending up with even less revenue than they started with. If they really want to help reduce the deficit, then perhaps they should stop spending money we don't have.

If Congress were really interested in generating a little more revenue, then perhaps they could do away with the interest deduction for second homes. It's been done before and had little overall effect on the housing market as most activity on the market is for primary homes.

But they won't do that because, after all, it makes sense.

One thing that has always bothered me about the folks in Congress is their incredible ignorance and arrogance when it comes to technology and science. Very few members of Congress have the background or expertise to make law or policy on science and technology matters. Far too often they get it wrong, meaning the nation and the economy suffer for it. After all, what do they know?

The answer, in a word, is obvious: they know pretty much nothing. What's worse is that they don't feel that ignorance should preclude them from talking until there is an initial technical investigation, done by some technically qualified people (from various reputable organizations). (We saw this same rush to judgment by the know-nothings after the Space Shuttle Challenger explosion in 1986.)

To me, all this is just another manifestation of the sad, ironic reality that engineers have made the incredibly difficult look way too easy. Everyone thinks it's all no big deal and not very hard, so it's easy to be an expert. It's happened in nearly all engineering and scientific disciplines.

People in general have little or no understanding of the technology they use every day, but at least they know they don't understand it and are willing to admit they don't understand it. All they know is that they can use it. Unfortunately Congress doesn't know that they don't know, and that's the problem. This false belief means they will, more often than not, come to the wrong conclusions about some scientific or technological issue. It also means that the rest of us will pay the price for their decisions, one way or another.

I'm not saying that Congress shouldn't get involved with such issues. But they should be more willing to take the time to learn about them well before deciding anything. There are very few science or technology issues that require immediate action by Congress. Unfortunately Congress doesn't realize this, or worse, they don't care. It's all about posturing and politics and power and not about the actual issues.