It Can’t Happen Here
Thursday, August 25th, 2011
It can’t happen here…. Right?
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Posts Tagged ‘Vincent’
Capital Gains Scam
Wednesday, August 31st, 2011
In an August 14, 2011 New York Times
editorial entitled: “Stop Coddling the Super-Rich,” Warren Buffett called on Congress – pleaded actually – to raise taxes on the mega wealthy.
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
While on the surface this might seem like an admirable piece of altruism, Buffet’s call for higher taxes on the rich, as noble as it may be, does nothing to address the real problem in our society today: the inequities in our economic system that allow billionaires like Buffett to amass their phenomenal wealth in the first place. Raising taxes on the super rich, though it would help raise revenue and reduce the deficit, does nothing to change the rules of the game that give those same billionaires huge advantages over the average American.
In an August 30th 2011 piece in US News and World Report,
Tom Sightings presents as clear a summation as you will find of what I’m talking about. In examining Warren Buffet’s investment in Goldman Sachs for example Sightings notes:
You, too, could have invested in Goldman Sachs in 2008. But here’s the difference between you and Buffett. If you had an extra $12,000, you could have purchased 100 shares of Goldman common stock at $120 a share. Considering that Goldman had been worth over $200 a share the year before, you might have thought you were getting a pretty good discount. You also would be receiving the Goldman dividend of $1.40 a share, a rate of just over 1 percent.
But Buffett had more than $12,000 to invest. He had $5 billion. So he negotiated a much better deal. He bought preferred stock that came with a special dividend. Instead of 1 percent, he negotiated a 10 percent dividend. So now every year he receives a check for $500 million. Then, only after he gets paid, do common stockholders get their paltry 1 percent.
This is the real secret to the success of investors like Warren Buffett. With billions of dollars to throw around, they are able to negotiate sweetheart deals that not only guarantee them a high rate of return, it also guarantees that they will get paid before ordinary folks see a dime in dividends.
It’s almost as though you are playing Monopoly and as soon as one player begins to amass a fortune, the game board begins to actually tilt such that money, houses, and property deeds actually physically slide into their lap.
So now, three years later, how have we done? Goldman is selling at roughly $110 a share, slightly below its 2008 price. If you had invested with Buffett, you would have lost about $1,000. Buffett’s lost some capital too, but he’s collected $500 million a year in his special dividend.
Raising taxes on the super rich is itself a red herring. The real secret, the real scam behind modern Capitalism, is not whether the tax rate on capital gains is 15% or 20% (or even zero% as one republican presidential candidate has proposed). The real crime is that once you get to a certain level of capital accumulation, you are almost assured of amassing an even more staggering fortune by virtue of the fact that your vast wealth allows you to not only dictate to banks and corporations what your rate of return will be, but also to demand that you will be paid before ordinary shareholders thus reducing your risk to practically nothing.
The rigged nature of the game is even more insidious than it appears. As Sightings shows in his analysis of Buffett’s recent “investment” into Bank of America:
Now Buffett is investing in beleaguered Bank of America. He invested $5 billion in a special preferred stock and will be getting a 6 percent dividend, while the regular stock you can buy pays less than 1 percent. Now I don’t know whether Bank of America is a good deal at current prices. Maybe it is. But the point is, if you buy now, you’re not getting the same terms as Buffett. You’re just pumping money into his dividend payment and hoping for the best.
Think about that the next time you open the financial pages. If you’re fortunate enough to own stock in Bank of America, the fact that Warren Buffett pays a lower tax rate than his secretary should not be nearly as galling as the fact that he gets a 6 times higher rate of return as you do and is guaranteed to receive his money before you see a dime. Still having trouble with this? Consider the numbers in the BOA deal. The math here is not difficult. $5 billion at 6% means Warren is getting $300,000,000. If you invest even $10,000 at 1% you’ll only receive a whopping $100.00! Even after taxes (15%) Warren gets $255,000,000 to your rather pitiful $85 bucks!
This is not to say that Buffet’s plea for higher taxes on the rich is not valid. But where is Buffett’s call for fairness in the game of making money itself? It is certainly not fair that, as he has noted, his secretary pays a higher tax rate – and a higher percentage of her income – than he does. But I don’t hear Buffett – or any other billionaire – complaining about the fact that they are able to command six times the rate of return that ordinary investors receive and even less complaints that they get paid before everyone else.
Thus Warren Buffett, while he may seem altruistic, is really not saying a word about changing the rules of the game which give him an unfair advantage to amass a vast fortune in the first place.
Problems
Tuesday, July 26th, 2011
If there are two themes that have been central to my adult life, the first has to be that in order to come to any meaningful solution to a problem, one must first correctly identify the problem.
The second is that once correctly identified, most problems are really not all that difficult.
Regardless of how intractable and tough a quandary may seem, when you strip off all the non-essentials, when you lose the emotional baggage you bring to a problem, peel away the layers of “woulda, shoulda, coulda,” the essential nature of most of life’s dilemmas is usually pretty simple. Often, I have found, the difficulty of correctly identifying a problem far exceeds the difficulty of coming up with a fix. Moreover, when identified, it is uncanny how often the “problem” turns out to be not a problem after all.
Need an example?
Take the problem of getting to the moon. On the surface this problem might seem to be daunting in its complexity, requiring among other things, a prodigious amount of mathematics, physics, and engineering. (To say nothing of a mountain of cash.) In short, getting to the moon, really is rocket science.
But take a step back for a minute and ask yourself: is the question of how to get to the moon really a problem that needs solving? In retrospect, I am not at all certain. To be sure, our few trips to the moon took a herculean effort and were a monumental scientific achievement. However, if we really face the facts, our moon shots, indeed our entire space program, was motivated principally by a desire to win the cold war “space race,” by reaching the moon ahead of the Soviet Union. Thus we spent millions of dollars of tax payer money and years of research in what amounted to a politico/galactic pissing match that netted us little more than some cool photos and a handful of exotic rocks. When one considers the other uses that money could have been used for, other problems that could have been solved – oh, say, developing solar energy, or building up our infrastructure, or even educating our population in math and science such that we didn’t have large numbers of ignorant nut jobs wandering around who are so gullible to believe that a project as big as a moon shot could be faked – it’s enough to make one weep.
Thus, while the problem of how to get to the moon is undeniably complex, if one truly asks oneself why the problem needs to be solved, one might decide it simply wasn’t worth the effort. The issue would be moot.
Need a domestic example? Most of the few problems my wife and I had with our son when he was a teenager had more to do with our preconceptions of what was right and proper than they did with anything he did. His actions were rarely unsafe, or harmful to others. If he decided to dye his hair green like he did one Halloween was that really the end of the world? Nope. The obscenity laden graffiti drawn on his wall with a sharpie? Annoying, but not really life and death. Ultimately, the problems I had with most of my son’s acting out had more to do with me than to do with him. Thus, they were not really problems at all. Or they were not battles that needed to be fought.
And speaking of unnecessary battles, our current militaristic foreign policy is a classic example of a whole slew of problems that seem insurmountable, yet when you step back, they are not really problems that need solving. We didn’t have to invade Afghanistan or Iraq. We don’t need to be occupying those countries. Like most wars of aggression, the argument can be made that our entire foreign policy is nothing short of one big global pissing match. It’s tragic to think of what we could be accomplishing with the trillions of dollars and needless blood we are spilling in an effort to convince the world we are still a super power.
The debt ceiling? Another issue that seems to get more insurmountable every day. But is it really a problem? The congress rubber stamped increases in the debt ceiling as a matter of course for presidents from Regan on to Bush. Yet, somehow, the “debate” over the debt ceiling has taken on an ominous tone as the “tea party” branch of the republican party is stonewalling to get what they want on budget cuts and no taxes for the wealthy. As many have noted, they are holding the country hostage over an issue that is so obviously a political ploy that even rank and file republicans are starting to become disgusted. In short, they are making a problem where none exists.
“It’s embarrassing,” said a stock broker acquaintance of mine today. “The countries around the world are looking at the debt ceiling argument and shaking their heads in disbelief.” President Obama is fond of the phrase: “America’s vital interests.” If the threat of defaulting on our debts is not harmful to the nation’s vital interests I don’t know what is.
The Tea Party, anti-tax crowd is so bad at identifying what the problems in this country are it’s difficult not to come to the conclusion that they are actively trying to create problems instead of trying to solve them. I know that Eric Cantor and the other right wingers in the House of Representatives want to see Obama gone in 2012, but I think they really need to take a step back and ask themselves if they aren’t creating more problems for the country – and even for their rich constituents – than anything that could possibly occur if they just left well enough alone.
If anyone doubts that the debt ceiling is a bogus issue just consider the following: Suppose Obama holds a news conference tomorrow and says, “I’ve decided to replace Joe Biden with Eric Cantor. And I’m seriously considering packing it in in 2012 and turning the reins over to the Tea baggers.” If you think the debt ceiling would stay an issue for more than 2 seconds after that, then I have a conspiracy you’ll be sure to find interesting.
It involves the cover-up of a faked moon landing.
Arguing With Cats
Friday, July 15th, 2011
Well it happened again. I was talking with a friend the other day and she said something like: “I have to watch them (Limbaugh, Hannity, O’Reilly) so I know what the other side is thinking.”
I have heard this sentiment before from otherwise well-meaning liberals and progressives who are convinced that it is important to know “where they are coming from” before they can have a meaningful dialog with conservatives.
I believe this to be an error.
The moment you listen to Rush Limbaugh you have already lost the argument. The moment you start thinking in terms of giving the “other side” any kind of credit for having a valid position, you have conceded game set and match. Watching Fox News in order to win an argument with those who watch Fox news is like trying to argue with a roomful of cats. You can’t win. It is pointless to try.
Why?
Because the other side is not interested in meaningful dialog. They are not interested in being fair and balanced. They could care less about compromise. They are not interested in winning an argument with you. They view any exchange with you as a cage match knife fight and they have no intention of ceding that “you may have a valid point.” On anything.
Need an example?
Take the so called “birther” controversy. The whole notion that President Barrack Obama was not born in the United States and is thus not a legitimate president is ludicrous on its face. And while it may not have been started by mainstream republicans, the list of prominent political leaders – from Newt Gingrich to Sarah Palin – who jumped on this issue proves they are not interested in meaningful debate on what’s wrong with America and how to fix it. If they will hammer at the birther story, a crude attempt to win over converts by questioning the very origins of their opponent, and playing – not too subtly – on the predjudices and bigotry of the population, then it is obvious that they don’t care about fairness or logic or reason. They are only interested in winning.
Need further proof?
Consider the economy. On October 25, 2010 Senate Minority leader Mitch McConnell, (R-KY) in interview with the National Journal said:
“The single most important thing we want to achieve is for President Obama to be a one-term president.”
There it is. The most important item on the republican agenda, is not jobs, or war, or even balancing the budget. No, the number one priority is getting rid of Obama. When faced with this type of bald faced absolutist statement, what is there left to discuss? When your opponent won’t even start debating the issues until you leave the stage, what’s the point in trying to learn where they are coming from?
McConnell repeated this sentiment the other day. When speaking about the so called “negotiations” on the debt ceiling he said: “I have little question that as long as this president is in the Oval Office, a real solution is unattainable.”
These are not the words of someone who is interested in compromise. And anyone who parrots back incendiary language such as this is obviously not interested in compromise either. You don’t have to listen to Fox News analysis to understand where Mitch McConnell and the other republican leaders are coming from. They want Obama gone. Period. No discussion needed. It is useless to listen to the latest outrageous statement by Rush or Bill or any of the other talking heads. In their view, as long as Obama remains in office, there can be no discussion.
The main reason it is pointless to try and learn what the other side is thinking by listening to bloviators like Rush and company is that they are nothing more than tools. They are shills, hucksters, pitch-men. They are selling snake-oil from the back of a wagon. Listening to them in order to gain ammunition with which to do battle with your racist brother-in-law is like trying to figure out how to convince said brother-in-law Chevy trucks are no good by watching Chevy truck commercials.
The republican party is bankrupt of anything remotely resembling a plan for what to do to make the country better. Modern republicans are corrupt, and venal. Their “ideas” consist of warmed over Ayn Randianism that greed is good and that the wealthy deserve to amass as much wealth as they possibly can. And they hate anything that smacks of Government helping its citizens.
You can’t argue with this viewpoint. Understanding where they are coming from does you no good. You can’t win in a discussion because theirs is not a viewpoint so much as a belief system. Presenting evidence to support the validity of your viewpoint will not work against an evangelical zealot for free market capitalism. You will not win an argument against them and you will not be able to win an argument with anyone who listens to their Apostles.
Listening to right wing radio will not aid you in convincing anyone who listens to right wing radio that what they are hearing is bad. The mere fact that they are listening to Rush Limbaugh is proof they are not interested in debating you. They are already lost. You cannot save them.
Your only hope is to resist turning to the dark side yourself.
