Bob Dole's Heart-Rending Salute To President Bush

One of the most emotional moments of the memorials for President George Herbert Walker Bush so far was the video of former Senate Majority Leader Bob Dole (R-Kansas) paying his respects before the president’s flag-draped casket as it lay in state in the rotunda of the U.S. Capitol building.

Dole, who is 95-years-old, approached President Bush’s casket in a wheelchair. An aide helped the senator to stand and, as he stood shakily, still assisted by supporting arms, Dole gave the former commander-in-chief a salute. After holding the salute for a moment, his assistant eased Dole back into his chair as the Marine honor guard looked on. Dole gazed at the casket containing the remains of his friend and comrade-in-arms for a long moment before being wheeled away.

Bob Dole and George H.W. Bush were among the “greatest generation.” Before entering government service, both men were veterans of World War II. Where Bush was a Navy pilot in the Pacific, Dole fought the Germans as an infantryman. Originally an enlisted man, Dole was promoted to second lieutenant in the army’s 10^th Mountain Division. In April 1945, he was severely wounded in combat in Italy, leaving him with limited use of his right arm for the rest of his life.

After the war, Dole served in House of Representatives from 1960-1969 and the Senate from 1969 through 1996. During that time, he held the positions of both minority and majority leader as well as chairman of the Republican National Committee. In these roles, he worked closely with President Bush and the two became friends.

Dole’s tribute to his fallen comrade was touching on a number of levels. The gesture was difficult for the aged veteran and reflects not only professional respect for a fallen leader, but brotherly love for a comrade in arms and a departed friend. 

Two prominent Democrats contract foot-in-mouth disease

Yesterday was a bad day for Democrat oratory. Perhaps driven to mushmouthedness by the recent 24-hour talkathon in advance of yesterday’s confirmation vote on Betsy DeVos, two prominent Democratic congresswomen put their feet in their respective mouths on different subjects.

First, Nancy Pelosi apparently flashed back almost two decades to the year 2001. Rep. Pelosi (D-Cal.), speaking in a press conference covered by Fox News, said, “While it's only been a couple of weeks since the inauguration, we've seen nothing that I can work with President Bush on.”

While Ms. Pelosi may be confused about who the president is, she isn’t confused about her opposition to all things Republican. While some Democrats have hinted that they might be open to deals with Mr. Trump on infrastructure spending programs, for Ms. Pelosi, apparently the fact that President Trump has an (R) after his name is sufficient to merit total opposition, just as it was for President Bush.

In yesterday’s second example of a Democratic gaffe, Rep. Maxine Waters (D-Cal.) erroneously accused Vladimir Putin of making moves in Korea. “The fact that he [Trump] is wrapping his arms around Putin, while Putin is continuing to advance into [pause] Korea,” Waters said on CSPAN, “I think that he is leading himself into that kind of position where folks will begin to ask: 'What are we going to do?' and the answer is going to be, eventually, we've got to do something about him.”

Waters may have been thinking about Crimea or Ukraine, which are half a world away from Korea, but phonetically similar. Putin’s Russia has annexed Crimea and is sponsoring an insurgency in Ukraine. Of course, given Mr. Putin’s penchant for expansionism and the fact that North Korea considers Russia one of its best friends, maybe Waters knows something we don’t.

Pelosi and Waters continue in the grand tradition of congressional Democratic oratory that includes Rep. Hank Johnson (D-Ga.) who once expressed concern in a committee hearing that the large number of military personnel on Guam might cause the island to “tip over and capsize.” Johnson’s statement stands as the most amusing clips of a congressional hearing that I have ever seen.

Even with their misstatements, in deep blue California Pelosi and Waters probably don’t have to fear that their seats might be in jeopardy. Rep. Johnson made his statement, undoubtedly one of the dumbest things ever said in Congress, in 2010. He is still serving his district today.

Originally published on The Resurgent

Race, slavery and the Bible

Rev. Martin Luther King, Jr.

Georgia was at the center of America’s racial struggle, for good and bad.  From its colonial days, Georgia was a slave-owning colony and then state.  It stood in the heart of the Confederacy and, even after the abolition of slavery blacks were treated as less than equal.  A few miles from where I grew up and less than ten years before I was born, Lt. Col. Lemuel Penn, a black US Army veteran of WWII, was murdered by Klansmen in 1964.  Martin Luther King, Jr., an Atlanta native and pastor of Atlanta’s Ebenezer Baptist Church, became the face of the civil rights movement.  King represented a full circle between past attempts to use the Bible to justify racial discrimination.  King, and other Christians like him, was instrumental in banning slavery and segregation in the US.

Over the years, religion has been used to justify slavery and segregation as well as racial reconciliation.  Pastors and congregations have used Bible verses to support arguments on both sides of the racial and political spectrums.  What does the Bible really tell us?

Slavery has probably existed almost as long as human societies have.  The earliest mention of slavery in the Bible is in Genesis 9:25 in which Noah curses Canaan, the son of Ham and grandson of Noah, to live in slavery because Ham ridiculed Noah while he was drunk in the days after the Great Flood.  By the end of Genesis, the entire Hebrew clan was enslaved in Egypt.  The Bible repeatedly reminds the Jews that they were rescued from slavery by God (Exodus 2:23, 6:6, 20:2, Leviticus 26:13, Deuteronomy 5:6, 5:15, 16:12).

Slavery was not condemned by the Bible, but, beginning with Moses, God set down rules for the treatment of slaves.  An early rule regarding slaves is found in Exodus 20:21 which stipulates that a slave owner must be punished if a slave dies after being beaten.  Beating slaves was not forbidden in itself.

Slavery as we know it, based on race, was forbidden.  Slaves were typically taken as captives in wars, or in some cases sold themselves into slavery to pay their debts or provide for themselves.  The Bible did forbid the type of slavery in which slavers raided African villages and sold the inhabitants into slavery.  In Exodus 21:16, God, through Moses, forbade the kidnapping of people to sell into slavery. 

The law books of the Bible also address the treatment of slaves.  Leviticus 19:20 regulates sexual relations with slaves.  Leviticus 22:11 concerns the possession of slaves by priests.  Leviticus 25:42-44 forbids the sale of fellow Hebrews as slaves and stipulates that Jews had to buy slaves from the surrounding gentile nations.  In Deuteronomy 15:12-15, the Bible specifies that if a Jew sells himself into slavery, he must be offered freedom after six years.  If he elects to go free, the owner had to supply him with food and livestock.

The New Testament also addresses slavery.  The book of Philemon is a letter from Paul to the owner of an escaped slave, Onesimus.  Paul sent Onesimus back to Philemon, asking that he be treated not as a slave, but as a brother (v. 16).  Similarly, in Ephesians 6:9, Paul instructed slave owners not to threaten or harm their slaves, since both slave and master had the same Master in Heaven.  A similar statement in Colossians 4:1, instructs slave owners to give to their slaves what is “right and fair.” 

Paul did provide a condemnation of the slave trade, if not slavery itself.  In 1 Timothy 1:8-10, Paul listed slave traders in a list of sinners and lawbreakers, along with murders, adulterers, perverts, liars, and perjurers. 

To this point, the Bible has condemned the slave trade and instructed slave owners to treat their slaves humanely and fairly.  Paul went a step further, however.  In several passages, Paul implicitly states that slaves and owners, as well as Jews and gentiles, are equal in the eyes of God.  1 Corinthians 12:13 says that both slaves and freemen have been given the gift of the Holy Spirit.  Deuteronomy 32:36, Revelation 13:16, and Revelation 19:18 all point to the fact that God judges free and slave equally.

In case there is any doubt, Paul goes even further.  He states what for his time must have been a radical thought.  In both Galatians 3:28 and Colossians 3:11, Paul states explicitly that there is no slave or free.  Paul also points out that Jews and Greeks are equal as well, a notion that the leaders of God’s Chosen People would not have liked.  In God’s eyes, all people are equal.  None are superior and none are inferior.  In God’s eyes all people are sinners and are in need of the freedom from sin that Jesus offers (2 Peter 2:19).

These statements provide the basis for the eventual abolition of slavery.  Even though some nominal Christians taught that blacks were inferior descendents of Ham, there is no basis for this.  To the contrary, a close reading of the Bible shows just the opposite: that people should be treated as equal, regardless of race, creed, color, or nationality.

It would take hundreds of years, but Paul’s words would finally give birth to movement for the abolition of slavery.  The abolition movement began in colonial America.  The first resisters to slavery were members of the Society of Friends, a Christian sect also known as Quakers.  After the American Revolution, many free whites began to equate the plight of slaves with that of the former colonists. 

The ratification of the US Constitution in 1788 set the stage for the eventual abolition of slavery.  The constitution gave the federal government the power to ban the importation of slaves in 1808, which it did.  The 3/5 compromise, contrary to claims that it valued slaves and only 3/5 of a person, limited the political power of the slave states.  The Northwest Ordinance of 1787 also made slavery illegal in the Northwest Territory.  During this period, Northern states began to enact state laws banning slavery.

Probably no man was as instrumental in the abolition of western slavery as William Wilberforce.  Wilberforce was a Christian and a prominent member of the British parliament who, influenced by slave trader turned evangelist John Newton, began a campaign to end the slave trade in 1798.  The campaign resulted in the end of the British slave trade in 1807 and the end of all slavery in England in 1833. 

American abolitionists too, were often inspired by their religious beliefs.  Frederick Douglass, a former slave, framed his arguments against slavery in religious terms, pointing out the hypocrisy of Christians owning slaves.  Sojourner Truth, a former slave born in New York, used the Bible to effectively argue for both women’s rights and the abolition of slavery.  Many other abolitionists opposed slavery on moral grounds derived from a Christian worldview.  Many put their beliefs into practice as conductors or station keepers on the Underground Railroad.  Harriet Tubman, “the Black Moses,” was one of the Underground Railroad’s most famous conductors, as well as a spy for the Union Army.

John Brown's execution day

One of the most infamous Christian abolitionists of the nineteenth century was John Brown.  Brown worked on the Underground Railroad in Pennsylvania before moving his family to Kansas, where he became known for his savage attacks on pro-slavery settlers.  Brown eventually was captured by US Marines under the command of Robert E. Lee and sentenced to hang.  Brown was executed on December 2, 1859.  His last words, in a note given to his jailer, foretold the wrath of God that was soon to be visited upon the United States for the evil of slavery:

I, John Brown, am now quite certain that the crimes of this guilty land will never be purged away but with blood. I had, as I now think vainly, flattered myself that, without very much bloodshed, it might be done.

Elected on the heels of John Brown’s hanging, Abraham Lincoln, the first Republican president, also framed his opposition to slavery in moralistic terms:  “Now I confess myself as belonging to that class in the country who contemplate slavery as a moral, social and political evil...” The Republican Party was created in 1854 specifically to oppose slavery. 

There is dispute over Lincoln’s religious beliefs.  Many believe that he was not a Christian because he never joined a church.  Nevertheless, he did often attend church and read the Bible regularly.  In his speeches and letters, he quoted from the Bible regularly and is said to have had large portions of it committed to memory.  He also grew up in a Baptist family.  Lincoln himself said, “That I am not a member of any Christian Church, is true; but I have never denied the truth of the Scriptures; and I have never spoken with intentional disrespect of religion in general, or any denomination of Christians in particular.”  Whatever his personal spiritual beliefs, Lincoln’s Christian background likely shaped his beliefs on the immorality of slavery.

Further, the Battle Hymn of the Republic was one of the most popular songs of the Civil War.  It became a popular marching song of the Union army.  Its lyrics, together with the tune of another popular song about John Brown, are unmistakably Biblical.  The words invoke the sacrifice of Christ as an inspiration for the Union struggle to abolish slavery.

After the abolition of slavery, the struggle started anew to gain full legal equality for all Americans regardless of race.  In the years after the Civil War, a system of “separate-but-equal” was established and black suffrage was discouraged in many areas.  Again, activists steeped in a Christian worldview led the movement for equality and civil rights.  As with slavery, however, people also used the Bible, mostly out of context, to support segregation as well.

Martin Luther King, Jr. was the symbol of the civil rights movement. King, his father and his grandfather were all Baptist preachers.  The Bible taught King that blacks were equal to whites and his faith in God gave him the strength to stand strong.  Alluding to Moses, King said, “I just want to do God's will. And He's allowed me to go up to the mountain. And I've looked over, and I've seen the Promised Land.” 

Another famous figure of the civil rights movement, Rosa Parks, was also a committed Christian.  Rosa Parks was not the first person to refuse to move to the back of the bus, but the quiet dignity that her faith instilled made her a sympathetic face for the Montgomery bus boycott and the civil rights movement as a whole.

Jackie Robinson

Jackie Robinson, the first black player in Major League Baseball, was also a Christian.  Robinson was given his chance by Brooklyn Dodgers general manager, Branch Rickey, also a Christian.  Many other rank-and-file Christians pushed for equality on the basis that no race was superior since all races were created by God and descended from Adam.

In other countries, a Christian worldview has also helped to bring about equality and freedom.  After years of apartheid, South Africa is now integrated.  In the aftermath of apartheid, many wanted to try the former leaders of the country for human rights abuses.  Instead, South Africa established a Truth and Reconciliation Committee that walks the line between mercy and justice.  Bishop Desmond Tutu was instrumental in establishing the process that is helping black and white South Africans to reconcile and face the future in peace.

It might have taken thousands of years, but we are as close to the full equality of the races, what was most likely God’s original intent, in modern America as anywhere in history.  There will always be racist fringe groups, but in modern America they are ostracized and not part of mainstream society.  We are very near to Martin Luther King’s colorblind society, but the next step is a difficult one to take.

The next step on the road to equality is to attack what President George W. Bush called “the soft bigotry of low expectations.”  Preferential treatment for any race needs to be phased out.  Programs such as these had their place in the days of integration, but our society is fully integrated now.  People of all races have equal opportunity, as evidenced by the election of President Barack Obama, and there are laws to prevent discrimination (with the exception of discriminatory government programs and laws). 

To believe that any one race needs special government help to succeed is an inherently racist notion.  It is time to remove race-based programs.  If the government feels that it is necessary to provide entitlement programs (which it increasingly cannot afford to do anyway), then they should be administered on the basis of need, rather than race.

According to Joel Kotkin in his book The Next Hundred Million:  America in 2050, the population of the United States will grow by leaps and bounds in the coming decades.  Many new Americans will be immigrants and many will be born here.  True to the tradition of the American melting pot, they will come in a variety of races, creeds, and colors.  It is in our best interest to welcome them into our society and to help them assimilate. 

http://www.freedigitalphotos.net/images/view_photog.php?photogid=1722

As different races assimilate into our society, there will more intermarriage.  The races will blend.  This is a good thing.  I look forward to a day when the color of someone’s skin makes no more difference than the color of their hair or eyes.  When my children grow up, I will be far more concerned with the character and culture of their spouses than the color of their skin. 

If this was God’s intent from the beginning, then why does the Bible not prohibit slavery?  Why didn’t Moses tell the Jews in the wilderness that since they had known the evils of slavery in Egypt they were now forbidden from owning slaves themselves?

I believe that the answer can be found in Matthew 19:8.  In this passage, Jesus is asked about divorce by a group of Pharisees.  Jesus answered, “Moses permitted you to divorce your wives because your hearts were hard. But it was not this way from the beginning.”  Similarly, I believe that if we could talk to Jesus face-to-face and ask him why God did not prohibit slavery, He would say, “Moses permitted slavery because your hearts were hard.  But it was not this way from the beginning.”

The races may coexist peacefully and equally in the modern United States, but this is not the case for all parts of the world.  Harassment, persecution, and even genocide of people who look, speak, or think differently still happens all too often.  Likewise, slavery still exists in many parts of the world.   We should use our national influence to encourage equality and reconciliation around the world, while fighting to end slavery everywhere.

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(This article originally published Feb. 24, 2010.  It has been one of my most popular posts.)

Obama derangement syndrome

The Bushes with the Obamas in 2008.

Back in the days of George W. Bush’s presidency, Charles Krauthammer discovered a new mental illness:  Bush Derangement Syndrome.  Krauthammer defined the disease as “the acute onset of paranoia in otherwise normal people in reaction to the policies, the presidency -- nay -- the very existence of George W. Bush.”  It was characterized by the willingness to believe any outlandish theory or conspiracy about President Bush and the act of picking apart the president’s every utterance and action to find something to criticize or disagree with.  If President Bush had said the sky was up, his critics would have found reason to believe otherwise.

In the conservative state of Georgia, BDS was not as prevalent as it was in blue states such as California and New York.  Nevertheless, in the waning days of the Bush Administration, BDS sufferers even plagued the state that had voted for Dubya in both presidential elections.  As my parents, who run a small secondhand shop in Dewy Rose, Georgia told me, people discussing politics prior to the 2008 elections (and in the wake of record gas prices and the early days of the Great Recession) of  frequently held to the theory that “it can’t get any worse.”  Two years later, we have proved that it can always get worse.

Now, after almost two years of unemployment hovering just below ten percent (and higher in Georgia) and an unresponsive and hyper-partisan government, public opinion has come full circle.  At some point over the past several months, Obama Derangement Syndrome has become epidemic. 

Like Bush Derangement Syndrome before it, Obama Derangement Syndrome is characterized by a complete and utter inability to find (or even seek) common ground with the president, no matter how sensible his position might be.  Victims of OBS go beyond disagreement on mere matters of policy and move toward an intensely personal and visceral (and very unappealing) dislike for the man in the Oval Office.

The many conspiracy theories surrounding President Obama are a symptom of OBS.  One of the first was the idea that he was a closet Muslim.  Next came conspiracies that Obama’s health care reform law incorporated a requirement for rationing health care based on a person’s body mass index, that it requires Americans to have microchips implanted, and that it established a secret police force akin to the Gestapo.  These conspiracies are easily debunked with minimal research (and actually reading the law), so their persistence is only accounted for by willful ignorance.

This type of willful ignorance was also exhibited by sufferers of Bush Derangement Syndrome.  Bush battled charges of complicity in the 9/11 attacks, faking intelligence about Iraq’s WMD programs, and even purposely allowing black Americans to suffer and die in the wake of Hurricane Katrina.  BDS in the media reached a zenith when CBS and Dan Rather rushed to air a story critical of President Bush’s Air National Guard service.  Unfortunately, the story was based on forged documents and ultimately cost Rather his job.  Military records ultimately showed that Bush fulfilled his obligation to the Air Force.  The facts show that the other Bush-era conspiracies are baseless as well.  Popular Mechanics published an in-depth investigation debunking 9/11 conspiracies.  Investigations into pre-war intelligence by the US Senate as well as by the British government failed to find any intent to mislead.

Finally, conservatives have criticized President Obama even when he continues Bush-era policies.  GOP chairman Michael Steele was among conservative critics of President Obama’s decision to delay his promised retreat from Afghanistan.  Continuing President Bush’s policy of actually trying to win the war should please conservatives, as well as anyone who thinks that Muslim radicals are a danger to the US.  Calling it “Obama’s war” misses the point that Afghanistan is America’s war against terrorists who are trying very hard to kill large numbers of us and topple our society.

More recently, many conservatives were critical of President Obama’s compromise with Republicans to extend the low Bush-era tax rates.  Dick Morris called the compromise a surrender by Obama akin to Appomattox, yet many conservatives, instead of saluting Obama for doing the right thing for the country found fault with the deal because the surrender was not total enough.  In view of the liberal ire raised for the temporary extension of the tax rates (which will be an issue in 2012) and the fact that Democrats still controlled both houses of Congress, a deal more generous to Republicans was unlikely to have passed.

Make no mistake (as the president might say), Obama Derangement Syndrome is on the rise.  Even as his approval ratings continue to fall, conservatives should judge his actions and policies based on their merits rather than a knee-jerk reaction to find fault with anything he does.  Such obviously partisan positions did not help the Democrats defeat Bush who won more total votes, a larger percentage of the popular vote, and more electoral votes in 2004 after suffering years of partisan attacks than he did in the election of 2000.  If conservatives want to defeat President Obama and his wrong-headed policies, then their opposition should be thoughtful and objective, not simply a matter of criticizing anything and everything.  When he does the right thing, he should be supported.

BONUS:  I can also support President Obama in his attempt at humor in a May 2010 speech at the White House Correspondent’s Association Dinner.  Presidents have a history of getting themselves into trouble when they try to tell jokes at this function.  Presidents Bush and Obama were no exceptions.  President Obama, speaking to the Jonas Brothers, said, "Sasha and Malia are huge fans, but boys, don't get any ideas. Two words for you: predator drones. You will never see it coming." 

Obama was immediately criticized by liberal anti-war bloggers for joking about Predators.  Conservative bloggers mostly pointed out the inconsistency of the mainstream media’s focus on Bush’s joke while giving Obama a pass.  Totally missed by everyone was the fact that Obama’s joke was a funny one.  Any father of a daughter can identify with wanting to protect her from teenage boys.  I am totally sympathetic and my daughter is only two-years-old. 

http://www.examiner.com/conservative-in-atlanta/obama-derangement-syndrome"> 

The looming Obama tax increases

Will the Bush tax cuts become the Obama tax increases?

There has been much talk recently of extending the Bush tax cuts.  These tax cuts were passed during President Bush’s administration in 2001 and 2003 to fight the recessions that resulted from the tech stock bubble and the 9/11 terror attacks.  To get the votes needed to pass the tax cuts, an expiration date of December 31, 2010 was written into the law.

These tax cuts are already established into law and taxation has been based on these rates since 2003.  Therefore, the discussion now is not about whether to cut taxes, but about whether to increase them.  If Congress fails to extend the tax cuts, then Georgians, like the rest of America, will receive a tax increase on January 1.  This will be approximately the same time that taxpayers will be receiving their Christmas credit card bills.

The effect of increasing taxes in an already slow and fragile economy is likely to be a double-dip recession.  As money leaves private hands to go into government coffers, people will have fewer dollars to save or spend.  Businesses will sell less and hiring will slow.  As more people become unemployed, spending and hiring will further slow in a vicious cycle.

The disagreement between the two parties is that Republicans want to extend all tax cuts while Democrats only want to extend the cuts for people who make less than $250,000 per year.  Republicans have threatened to block any legislation that does not extend the cuts for all taxpayers.

Democrats cite the need to raise tax to pay for the record-breaking spending spree of the last two years.  On the contrary, noted economist W. Kurt Hauser points out that regardless of tax rates, the government takes in about 19% of gross domestic product (GDP).  This is known as Hauser’s Law. 

Since the government’s revenue rate will be approximately the same regardless of tax rates, the better option would be the policy that leads to economic growth.  Lower tax rates usually foster more growth that high ones.  Keeping tax rates low means that the government would be taking 19% of a larger economic pie and would actually take in more real dollars that with higher tax rates.

In the weeks remaining before Congress adjourns for the year, we can expect much maneuvering on the issue.  Republicans, who won the election, don’t have enough members of Congress to force passage of the tax cut extension but can block a tax increase with a filibuster.  On the other hand, Democrats, many of whom are lame ducks that will be leaving Congress, have no incentive, other than the greater good of the country, to work with Republicans.  It is likely that Congress will adjourn without having resolved the issue and leaving Americans with a New Year’s tax increase.  If this happens, it will be up to Republicans, including Georgia’s Representative-elect Austin Scott to work with a Democratic-controlled Senate to extend the lower rates retroactively to prevent a second recession.

Origins of the Subprime Crisis

Over the past few months, America’s financial sector has been hit with its largest crisis since the Great Depression. The crisis began with a rise in foreclosures and the failure of some small banks. The problem spread to investment company Bear Stearns failed in May 2008. Liquidation was avoided by a government-orchestrated takeover of the company by JP Morgan. Bailouts of Fannie Mae and Freddie Mac followed. Over the past week, two prominent companies failed. Lehman Brothers, another investment bank, was liquidated, while American International Group (AIG), an insurance conglomerate, was judged by the Federal Reserve to be too big to fail. This prompted the government to bail out AIG by purchasing an 80% interest in the company with taxpayer dollars.

As the crisis grows, there are more and more calls for increased regulation on Wall Street. To determine whether regulation will solve the problem, the cause of the problem must first be determined. If the source of the problem is not simply short selling, fraud, or basic greed, then new regulation might cause further problems instead of resolving our current ones.

When we delve deeply into the causes of the crisis, it is soon apparent that lack of regulation is not necessarily the problem. Along with healthcare and commercial aviation, finance is one of the most heavily regulated sectors of the US economy. The law of unintended consequences states that any purposeful action will produce unintended consequences. An example of unintended consequences is the passage of the Renewable Fuels Standard in 2007. This law was intended to lower fuel prices by mandating increased production of ethanol. Instead, the net result was that food prices almost doubled while oil prices kept rising. With that in mind, we should look at some of the regulations that the government has enacted on the banking industry.

Many point to the Community Reinvestment Act of 1977. This Carter-era law was intended to combat the practice of “redlining,” denying credit to people who live in certain areas. The law’s language was originally so vague that it only required banks to show a good faith effort. This began to change when the law was strengthened in amended in 1989 to grade banks on a four-point scale and to make these reviews public. In 1991, Congress passed the FDIC Improvement Act, allow regulators to consider a bank’s CRA performance when processing applications for FDIC services.

The law was strengthened yet again by President Clinton in 1995. The Clinton Administration changed compliance of the law from a matter of making an effort to one based on hard numbers of specific loans and specific levels of service. It also significantly stepped up enforcement of the law.

Since the passage of the CRA, the purchase of mortgages by minorities and in minority neighborhoods has risen sharply. The problem is that the underlying assumption that minority loans were denied on the basis of racism rather than credit turned out to be erroneous. According to a 1999 report by Freddie Mac, one of the mortgage companies now in dire straits, revealed that African-Americans have disproportionately large number of credit problems. For example, the report states that on average blacks with incomes of $65-70,000 per year have more credit problems than whites with an income of under $25,000. Consequently, as banks were pressured to make more loans to minorities and low-income borrowers, they were also making more loans to people who were poor credit risks.

A second possible root of the current crisis is the repeal of the Glass-Steagall Act. The Glass-Steagall Act was passed in 1933 during the height of the Great Depression. The banks of the era were accused of speculating in unsound investments. Banks would make loans to companies that were shaky, and would then recommend the same company’s stocks for their investment clients. The GSA established a wall between investment banks and commercial banks. The law was intended to prevent the use of deposit accounts to cover a bank’s investment losses.

In 1999, President Clinton signed the Gramm-Leach-Billey Act into law and repealed the GSA. This was done to make banks more competitive with foreign companies that offered a broader range of financial services. In addition to removing the barriers between banking and investing, the GLBA also allowed banks to offer insurance-related services. The predictable result of an increase in the number of sellers in the marketplace was more competition for the available investors.

At the same time, the United States was experiencing an economic boom. The Federal Reserve under Alan Greenspan was aggressively cutting interest rates. The inexpensive cost of borrowing money combined federal pressure for banks to lend to low-income borrowers. As the competition among lenders became fierce, banks began issuing loans that were more and more risky. Loans were made to borrowers without down payments, without income verification, or with poor credit records.

Borrowers who wanted more house than they could afford were sold Adjustable Rate Mortgages (ARMs). These loans had low interest rates and payments at inception, but since interest rates were at historic lows, both the rate on the mortgage and the mortgage payment had nowhere to go but up. In some loans, teaser rates were artificially low at first, and then adjusted sharply upward. In any case, as payments rose, borrowers found that they could no longer afford their homes. Tightening credit made it impossible to refinance into a fixed rate loan and falling real estate prices made it impossible to sell the home for enough money to pay off the loan. For many, the result was foreclosure.

Yet another commonly cited source of financial problems for companies is a change to arcane accounting rules that occurred over the past fifteen years. In the past, companies used cost accounting, which applies historical costs to a company’s their assets. More recently, the SEC and the Financial Accounting Standards Board have changed accounting rules to a method known as Fair Value Accounting. Assets are now valued at their market price. In other words, assets are valued not by their true economic value, but by what they can be bought or sold for on the current market.

The obvious problem is that when a market suffers a sharp decline, so does the value of the company’s assets. It doesn’t matter that the decline may only be temporary or that the company had planned to hold the assets for the long term. In effect a company’s holdings are required to be valued at an unrealistically low price. When the market was high, fair value accounting was one of the tools used to artificially inflate Enron’s bottom line.

In aviation, there is the concept of an accident chain. There are few instances in which an accident is caused by only factor. In most cases, there are multiple factors that link together to form an accident chain. If any of the factors are missing, the chain is broken and the accident does not occur.

The subprime mortgage crisis is also the result of numerous factors. Government pressure convinced banks to make risky loans. Low interest rates, deregulation, and increased competition all combined to fuel a housing bubble that eventually burst in 2007. When the bubble burst, fair value accounting principles exacerbated the problem by magnifying the decrease in value of the securities held by banks.

Old-fashioned greed also undoubtedly played a role. Some companies, such as Countrywide Financial, focused almost exclusively on the subprime market. Many of these companies did not service their loans, but instead immediately bundled them into mortgage-backed securities and sold them to other companies, such as Fannie Mae and Freddie Mac. In this way, the cancer of failing mortgages was metastasized throughout the financial community.

Some lenders engaged in predatory lending practices. Likewise some borrowers defrauded banks. For whatever reason, many borrowers were either misinformed or failed to care about the terms of the loans that they obtained. Bad loans were either sold off to other companies or the homeowner simply walked away from the house, leaving the bank to foreclose.

Hedge funds, aggressive funds that catered to limited numbers of ultra-wealthy clients, snapped up risky financial products in their attempt to boost returns. Naked shorting, selling short without having stocks to cover the position, occurred even though the SEC considered the practice fraud and attempted to rein it in.

The greed and fraud did not stop within the bounds of the financial community. Countrywide made loans with generous terms to VIP borrowers. The list of Friends of Anthony (Mozilo, Countrywide’s founder and CEO) is long and distinguished. Democratic Senators Chris Dodd, chairman of the Senate Banking Committee, and Kent Conrad received favorable loans from Countrywide. So did numerous members of the Clinton Administration such as cabinet members Alphonso Jackson and Donna Shalala, staffer Paul Begala, and Postmaster General John Potter. Henry Cisneros, Clinton’s secretary of Housing and Urban Development was a former Countrywide director. Franklin Raines and Jim Johnson, former CEOs of Fannie Mae as well as fundraisers and advisors to Barack Obama, also received preferential loans from Countrywide.

In 2003, three years before the crisis broke; President Bush did make an attempt at reforming Fannie Mae and Freddie Mac. The housing industry and realtors opposed the plan, which went nowhere.

Representative Barney Frank of Massachusetts, now chairman of the House Financial Services Committee said, “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

In 2005, John McCain sponsored the Federal Housing Enterprise Regulatory Reform Act. This law would have established a new independent regulatory agency to oversee Fannie Mae and Freddie Mac. Unfortunately, the bill was allowed to die in committee; the same committee headed by Friend of Anthony Chris Dodd.

There is another saying in aviation: “Don’t just do something. Sit there.” Hastily doing the wrong thing is often worse than doing nothing at all. Government pressures and corruption were largely responsible for the unfolding financial crisis. Hasty and ill-advised additional regulation is more likely to make the problem worse instead of resolving it.

Sources:
http://www.answers.com/topic/community-reinvestment-act-of-1977
http://www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
“How To Save the Financial System,” William M. Isaac, Wall St. Journal, September 19, 2008
http://www.nysscpa.org/cpajournal/2006/1106/infocus/p14.htm
http://www.investopedia.com/articles/03/071603.asp
http://www.investopedia.com/terms/g/glba.asp
http://www.prospect.org/cs/articles?article=the_conservative_origins_of_the_subprime_mortgage_crisis
http://www.portfolio.com/news-markets/national-news/portfolio/2008/07/16/Countrywide-Deals-Exposed
http://sweetness-light.com/archive/bush-mccain-tried-to-reform-housing-finance
http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190

Why Soaking the Rich is a Bad Idea

I am a pilot for a fractional jet company. My company supplies private jet shares to the rich and famous. The public perception is that these airplanes are toys that the rich buy so that they won’t have to rub shoulders with the masses. Liberals believe that the government should increase taxes on the rich, such as my company’s customers. The idea of taxing the rich is a tempting one, but in reality it is counter productive.

When taxes are increased on the rich, the rich obviously have less money to spend on items like shares of our corporate jets. Perhaps, they will put more of their money into tax shelters or foreign investments where tax laws are more favorable.

If a rich businessman doesn’t get to buy his jet, who is hurt? The most obvious answer is my company and its employees. If my company doesn’t sell a jet share, then the salesman does not get a commission, additional pilots are not hired, and jobs for support employees such as dispatchers, schedulers, maintenance coordinators, and administrative workers are not created.

Equally obvious is the loss to the aircraft manufacturer. Manufacturing jobs may be lost as aircraft orders dwindle. This also applies to subcontractors who work sheet metal, electricians who build avionics, craftsmen who work wood and leather for aircraft interiors, and the manufacturers of the thousands of parts that are assembled together to create a working airplane.

The damage does not stop there, however. The rich guy will not fly his jet around the country. When he does not visit local airports, local businesses called Fixed Base Operators (FBOs) don’t sell him fuel. Local businesses do not sell him catered food for his trips. Local aircraft mechanics miss out on the opportunity to work on the airplane. Local and state governments lose tax revenue from the lost fuel sales and airport fees.

Because the non-owner may never visit many places that he would otherwise see, other local businesses will also lose revenue. Cars will not be rented or hired, hotel rooms will not be rented, and restaurants will not be patronized. Tourism will suffer as museums and other tourist attractions are not visited.

Because many trips on private jets are business trips and not pleasure trips, investment in local businesses may suffer also, especially in areas not served by airlines. A deal that would be made in person may not be consummated over the telephone. Difficulty in obtaining outside investment may cause local businesses to stagnate and not create new jobs, causing small towns to go into further decline.

The jobs that are lost or are never created are not the end. As each person loses his job or cannot find a new one, their troubles spread to others. As one person runs out of money, his inability to pay his bills or buy new products affects other people and businesses down the line. Businesses are forced to write off bad debt that they could have collected from an employed person. Sales fall because unemployed workers have less money to spend, causing businesses to cut back and hire fewer workers.

Ironically, as the economy slows in the aftermath of tax increases, the government takes in less tax revenue. This is because the slowing economy is shrinking. Revenues for businesses and incomes for individuals are falling, so a tax, even at a higher percentage, yields a smaller total revenue.

The good news is that, as we learn from the past, the opposite is also true. If we reduce taxes, then the economy grows and businesses thrive. When business thrives, jobs are created and incomes rise. This, in turn, leads to higher tax revenues for the government in spite of the fact that the government takes a smaller percentage of each American’s paycheck. This process has worked four times in the past hundred years during the 1920s (under Secretary of the Treasury Andrew Mellon), the 1960s (President Kennedy), the 1980s (President Reagan), and the 2000s (President George W. Bush).

Additionally, President Bush’s tax cuts had the effect of shifting more of the tax burden to upper income taxpayers. The top one percent of income earners currently pays about 33% of all income taxes versus 32% before. This is because the tax rates were lowered for Americans of all tax brackets with lower income tax payers realizing a larger percentage decrease than higher income taxpayers. The top 50% of income earners pay 96% of income taxes. On the other hand, the bottom 50% of income earners pay only about 3% of income taxes.

As President John F. Kennedy said, “a rising tide lifts all boats.” Tax increases, even on only one segment of the country, slow the economy and take money out the pockets of all Americans, even those not taxed directly. On the other hand, a tax code that allows Americans to keep more of what they earn helps us all.

Source:
http://www.ustreas.gov/press/releases/reports/factsheetwhopaysmostindividualincometaxes.update.pdf
http://www.heritage.org/Research/Taxes/wm327.cfm