Quick Thoughts on Mortgages

We all know that one of the major causes of the current economic situation is the decline of home values and the subsequent turmoil this reigns upon the financial system. I'm not going to quote any numbers here or research. If you want to read more details, then go read this.

I just wanted to share a few quick thoughts on this tonight while I'm thinking about it. The idea of home ownership and a mortgage has become incongruous with the natural evolution of the concepts. Home ownership used to mean just that: home ownership. While many people today still purchase a home for the purpose of long-term ownership, there are still many others who have no intention of truly owning the home for a lifetime (or at least a generation). I can say for a fact that the first two houses that I "owned" were never intended to be my home for any more than three to five years. I'd be somewhat surprised if I stay in my current home for more than seven years.

Mortgages are generally structured on a thirty year payment plan. Think about that for a second: thirty years! This loan structure is not natural for banks. Who would want to loan out money and have to wait thirty years to be paid back? We discussed this a while back when looking at Fannie Mae and Freddie Mac. The development of the secondary mortgage market allowed banks to make thirty year loans. The only reason that this happened is because the government wanted to create an environment more conducive to home ownership and thirty year loans helped spread repayment out over time keeping monthly payments relatively low.

This method of spreading out payments is done to keep home ownership rates high in the U.S. This essentially creates rates which are competitive with rent. As long as there is a healthy secondary market for mortgages, lenders have it in their best interest to create more exotic mortgages which enable lower monthly payments. With Americans viewing mortgages as housing rental plans with all the benefits of ownership (pride, ability to decorate and improve as desired, tax deductions on mortgage interest), both borrowers and lenders are more than happy to find ways to keep payments low. Think about it, for most people under forty in urban and suburban neighborhoods, home ownership is simply just glorified home renting.

So, I feel like I need to come to some conclusion here. Well, there is not a grand conclusion. Ownership has its privileges. I don't know if I'd be happy renting a home where I have to answer to a landlord when it comes to how I want to paint or otherwise improve the property. In fact, this allows me to take advantage of the improvements when I sell the house. But, doesn't that mean that I also have to take the downside risk of losing value? If I want to live in a house and be protected from a loss in value, then should I really benefit from an increase in value?

Now, there are certainly people who intend to live in a house for most of their lifetime. For them, the ups and downs in market conditions are immaterial. If and when they sell, it is after many years - and they probably own the property outright. It seems to me that this situation calls for one type of mortgage. People who only intend to rent with the benefits of ownership should probably have a different type of mortgage - one which more closely resembles rent, allows for the individual to make modifications to the property, yet protects the borrower from downside risk (while limited upside gains).

I'll give this some more thought... but, it seems to be that the mortgage industry needs to revisit its assumptions and the value proposition to the consumer. Low monthly payments can't be the only goal of a loan. We have learned that downside risk exists for property value which makes the grand idea of ownership a much scarier concept.

Economic Alchemy

When I got the idea to write this article, I thought it would be good to do a little research on alchemy. After a bit of reading from various Wikipedia entries, my favorite source for encyclopedic information, my ignorance on the subject was apparent. However, what I learned only reinforced my premise.

Alchemy was considered a serious science and was a forerunner to modern chemistry. Until my mini-education on the subject, I associated alchemy with the search to find ways to create gold from common metals - a practice called transmutation. However, alchemists also sought an "elixir of life" which would supposedly cure all disease and a universal solvent which would dissolve any material. Many believed that these goals could be achieved by discovering the philosopher's stone which has received new fame in the Harry Potter series. The common theme here is man's search for ways to get around the realities of life.

Sure, it would be really cool if we could take some copper and nickel, mix it up with some mysterious substance, and somehow create gold. This would be great - especially if a) no one else knew your secret and b) the mysterious substance cost substantially less than gold. Man has always tried ways to cure disease, feel younger, and even live forever. Many of the greatest minds in history spent their lives seeking these solutions. Today, we believe that these things do not exist and will not be found. It is safe to say that alchemists attempted to cheat some of the basic laws of humanity by artificially creating wealth and avoiding the inevitability of death.

Today, we have economists and politicians. It's hard to say which group is closer to being the modern day equivalent of the alchemists. Anyone who has taken the most basic of economics courses knows that there is no free lunch. Unfortunately, it takes effort to create value. There is a cost to everything. We cannot wave a magic wand and make all of our pain go away. Politicians use the pseudo-science of macroeconomics to help fulfill their collective desire to solve the problems of the collective (or, at least their constituencies). Economists are only happy to oblige them with more pseudo-science. This creates a reinforcing cycle of rhetoric and statistics which are used to support the politicians' goals and the economists' egos.

Now, clearly, there are exceptions to the rule. Not all politicians and (macro)economists are the same. In fact, some exhibit common sense and recognize that the basic laws of (micro)economics extend throughout an economic system. Alas, there is no free lunch even for the government, and not even the government can allow us to escape death and disease. No amount of hope and optimism will change this reality.

More Garbage Legislation

I have been wanting to write a post about a particular topic that I've been hearing a lot about lately, but I had something I wanted to include in it that I've not yet been able to get a hold of. So, that post will have to be postponed but hopefully only until tomorrow.

In the meantime, in the interest of posting something I thought I'd just give another short list of dumb legislation that has recently been introduced into the U.S. Congress. I have recently discovered the awesomeness that is Google Reader and through this have subscribed to the "Introduced Legislation" feed from GovTrack. So, practically every other day I'm treated to at least 50+ new pieces of legislation that our intrepid governmental representatives have introduced in the House or Senate. Here are a few that have popped up in the last week or so (yes, there is little that our federal government has not stuck its nose into)--

H.R. 1117: Medically Fragile Children's Act of 2009, introduced by Rep. Tammy Baldwin (D-WI)

H.R. 1124: Honoring Female Congressional Pioneers Act of 2009, introduced by Rep. Marcy Kaptur (D-OH)

H.R. 1137: Athletic Trainers' Equal Access to Medicare Act of 2009, introduced by Rep. Edolphus Towns (D-NY)

H.R. 1110: PHONE Act of 2009, introduced by Rep. Robert Scott (D-VA) **This is a really good one**

S. 456: A bill to direct the Secretary of Health and Human Services, in consultation with the Secretary of Education, to develop guidelines to be used on a voluntary basis to develop plans to manage the risk of food allergy and anaphylaxis in schools and early childhood education programs, to establish school-based food allergy management grants, and for other purposes, introduced by Sen. Chris Dodd (D-CT)

H.R. 1084: To require the Federal Communications Commission to prescribe a standard to preclude commercials from being broadcast at louder volumes than the program material they accompany, introduced by Rep. Anna Eshoo (D-CA)

S. 448: A bill to maintain the free flow of information to the public by providing conditions for the federally compelled disclosure of information by certain persons connected with the news media, introduced by Sen. Arlen Specter (R-PA) **Federally compelled disclosure?? Scary.**

H.Res. 169: Expressing the sense of the House of Representatives that Robert Burns was a true friend of the United States, that his work inspired the citizens of this Nation, as well as his native Scotland, and that the annual celebration of his birth is a tradition that transcends national boundaries, and as a result, should be observed in communities around the world, introduced by Rep. Mike McIntyre (D-NC) **If you aren't familiar with Robert Burns, take a look at his link and you'll discover the impetus behind the introduction of this bill "celebrating" his poetry**

S. 450: A bill to understand and comprehensively address the oral health problems associated with methamphetamine use, introduced by Sen. Max Baucus (D-MT)

H. Con. Res. 50: Honoring and saluting Motown Records of Detroit, Michigan, on its 50th anniversary, introduced by Rep. John Conyers (D-MI)

H. Res. 164: Condemning Pakistan's release of nuclear scientist Adbul Qadeer Khan from house arrest, introduced by Rep. Edward Royce (R-CA)

H. Res. 166: Recognizing the 450th birthday of the settlement of Pensacola, Florida and encouraging the people of the United States to observe the 450th birthday of the settlement of Pensacola, Florida, and remember how the rich history of Pensacola, Florida, has likewise contributed to the rich history of the United States, and for other purposes, introduced by Rep. Jeff Miller (R-FL)

Ok...so I didn't mean to post this many bills but as I scrolled through my list, there were so many good ones that I couldn't help it. So, enjoy this useless garbage being produced by our legislators...I'm going to go finish watching Obama's speech and Nancy Pelosi get whiplash leaping out of her chair every 15 seconds. (I can just hear Joe Biden whispering under his breath--"Damn it, Nancy! Quit standing up...you're making me look bad!")

**My husband just pointed out to me that my list might make it seem like I'm "picking on the Democrats." As I'm looking back at my list, there is indeed a disproportionate number of Democrat-introduced legislation but I swear I didn't do this on purpose. I just went down the list of titles and descriptions of the introduced bills and picked those that stood out the most; it's just a coincidence that the majority were from Democrats. Actually, I suppose this isn't exactly a true "coincidence"--the anthropologist in me cannot help but point out that the fact that I felt that more of the Democrat-sponsored bills could be classified as "frivolous" than the Republican-sponsored bills means something about me. This also likewise probably says something about the philosophical differences between Democrats and Republicans...even though I still think they're mostly the same.**

Obama's Budget Deficit Heroics

It has been widely reported today that President Obama plans to cut the budget deficit in half by 2013. On the surface, this sounds like a great accomplishment. In fact, if you read the remarks by Press Secretary Robert Gibbs or Obama's own message at the Fiscal Responsibility Summit, you would quickly conclude that this administration is committed to tight spending controls and economic conservatism. This is just spin.

While it is true that Obama and team have inherited the largest deficit in the history of the U.S., it is a slight stretch to believe that the $1.3T (that is $1,300,000,000,000.00) was entirely the fault of George W. Bush. Yes, Bush ran up huge deficits which has helped destroy the credibility of the Republican Party. But, the 2009 budget, which runs from October 1, 2008 to September 30, 2009, is largely under the control of Obama, Pelosi and Reid. This budget will include some of the expenditures of the EESA/TARP (not all $700B will be recognized as cost in this year's budget) and the ARRP (also known as the $787B Stimulus - which also impacts 2009 by "just" $185B) which were both supported by Obama and the Democratic Congress.

Here is a summary of the budget deficits from 1977 to 2013. The deficits from 2009 to 2013 are based on estimating 2009 at $1.3T and 2013 at $533B with a straight-line reduction in between (this is probably unlikely as 2010 will be much closer to $1T). Notice the highlighted area which corresponds to the projections for the Obama administration. The heroic 50% reduction of the deficit doesn't look so spectacular in the context of history.

Source: FY2009 Federal Budget

Some readers may be quick to point out that we need to look at this in the context of the greater economy... it is common to look at budget items relative to GDP. Here is that graph. Again, I made very simple estimates for GDP for 2009-2013: $14T for 2009 and a $500B increase annually through 2013. The picture is not much more fiscally conservative here as we barely get back to deficit levels of the Bush administration.

Source: FY2009 Federal Budget and Bureau of Economic Analysis

Loose Ends... Vol. XXXI

This is going to be an interesting week, I think. Usually, Loose Ends focuses on the past week. There was a lot of news this week - Roland Burris (D-IL) is beginning to look like just another dirty Illinois politician, Rick Santelli spouted off on CNBC regarding Obama's mortgage relief plan, and we continued to debate the economy as the stock market continued to drop. But, I want to look forward...

This will be an interesting week as Obama will hold his Fiscal Responsibility Summit - where an initial view of his budget will be delivered.

There is a lot more to watch this week both on the domestic and international stage. I hope to have an active week following and blogging.

New Government in Israel

Israel is in the process of forming a new government. The political structure in Israel is quite different than here in the U.S. The President, currently Shimon Peres of the Kadima Party, has limited and largely ceremonial authority. The more powerful political leader is the Prime Minister. On February 10, elections to the (unicameral) legislature, the Knesset, were held. Parties are elected via proportional representation and twelve different parties won at least one seat (there are 120 total seats).

Generally, the leader of the party who wins the most seats in the election is asked to be Prime Minister. The Prime Minister must then form a government by nominating a cabinet. The newly formed government must then be approved by a majority vote by the Knesset. Thus, when no party whens a majority of the seats, which is often the case, the Prime Minister must negotiate with other parties to form a coalition government. The President decides who will be asked to be Prime Minister.

The Kadima Party, who has Tzipi Livni as leader, won twenty-eight seats - one less than they previously held. However, Livni had been previously asked to form a coalition government due to the resignation of current Kadima leader and Prime Minister, Ehud Olmert, and failed. Thus, Peres asked Likud Party leader and former Prime Minister, Benjamin Netanyahu, to form a government. Likud won twenty-seven seats (up from twelve) to regain significant strength.

Ok - so why is this important? Netanyahu and the Likud Party tend to be much more hawkish on Middle East policy. In particular, they are less supportive of a potential two-state solution with Palestine and have already begun to increase anti-Iran rhetoric. For more details, I encourage readers to follow some of the links above to the various Wikipedia pages.

Individual Liberty and Local Government

I have searched for a term to describe my political ideology and have come to use the term "minarchist" as the best descriptor. According to Wikipedia, minarchism is the belief that the only proper role of government is to protect individuals from aggression. I would classify my beliefs to be generally consistent with this view; however, like some minarchists, I do believe that there is a proper role for government to deliver some additional services and infrastructure beyond merely a system of laws and defense. For more on this, please read my previous article on government spending - "To Spend of Not To Spend".

I bring this subject up tonight for a few reasons. First, I think philosophical essays like this are interesting and I hope you do too. I do not write these frequently enough (lately, I feel like I haven't been writing enough of anything). Second, the State of Indiana is currently in the midst of significant debate on the subject of local government reform - more on that later. Finally, in a time where government control continues to grow, and Barack Obama makes statements such as "[t]he question we ask today is not whether our government is too big or too small, but whether it works", I think it is important to get other points of view out there devoid of partisan rhetoric.

You may be surprised to hear me say that government, or more precisely the concept of governance, is not all bad. In fact, I believe it to be natural and fundamental to human life. Governance can be thought of as a method or system which regulates decision-making. I think of government as an entity which is established to provide governance to an individual or group of individuals. From this perspective, I think it can be appreciated that self-governance is naturally the most efficient and natural form of governance. It is the individual who knows what is best for the individual, and we should not underestimate the individual's ability to recognize and value the need for other individuals.

This is clearly evident in the family unit. I believe that the family unit is a natural extension of the individual. It is not uncommon for anyone to recognize the ability for an individual to value the needs and serve the interests of other members of the family unit. I think it is difficult even for the most hardcore communist to disagree with this fact. And, think about it, there is an implicit structure of governance - a government, if you will - in most households or family units. However, no matter how strong the governance or how much power resides in the head of the household for decision making, it is still the individual who has the greatest authority over oneself. I believe this is even true for young children.

For me, the next logical extension is the community. This is a bit of a nebulous term, but I believe it most accurately describes the next natural layer of governance. The family unit cedes some regulatory authority - often for the purpose of protection or even the "common good" - to the community. I think it is important for this to be a nebulous concept because this is the first significant threat to the destruction of individual liberty (although, there are legitimate arguments that this begins with the family unit). It is my view that a community is best defined as being a bigger family - where there is a strong and consistent commitment to the common good. Also, it is a concept which is independent of geo-political constructs for most people. Consider living in a hypothetical neighborhood where the U.S.-Canadian border divides residents. Who would you feel is more a member of your community... someone from the Canadian side of the neighborhood or someone in Alabama?

This naturally leaves us with the state and its many layers of structured governance, or, more commonly, government. The state ranges from municipalities and towns to states, provinces, nations, and even the United Nations. Generally, authorities in the state are strangers to the individual and, arguably, not members of the same community. It is for this reason that it is least natural for an individual to cede governance to the state. The state aims to model itself after the community to gain authority, but this is and always will be a failure in practice in that it will diminish individual liberty. No matter how much we hope and believe, neither the world nor any state can be one community. For proof, please revisit the hypothetical example above.

So, I'd like to introduce my pyramid of governance:

Now, to the practical section of this essay based upon the philosophy. The State of Indiana conducted a research effort led by former Lt. Governor Joe Kernan and Chief Justice Randall Shepard. The report, known as the Kernan-Shepard report, provides recommendations to streamline Indiana local government. This is a good thing. However, I find myself struggling with one aspect of the consequences. It seems to be that this will serve to consolidate more power at higher levels of government - in particular, the State of Indiana and its county governments. Indiana has a complex and inefficient system of local government which needs reform.

The dilemma is simple. Would I prefer fewer layers of government with power concentrated at higher levels of the state? Or would I prefer the existing system of complexity and higher costs to the taxpayer? Personally, I'd like to see a system which consolidates more power in lower levels of the state, something closer to the communities, where the power of the purse (and thus the potential for tyranny) is more locally accountable.

Loose Ends... Vol. XXX

This week we celebrated the birthday of Abraham Lincoln. I intended to do significant research this week and write down some thoughts regarding Lincoln's presidency. I'm going to put this subject aside for now; however, I would like to share a few thoughts (somewhat disconnected).

Lincoln seems to be quite the skilled politician. He was our President during a very difficult time in history. Slavery is, of course, deplorable. Lincoln navigated through the issue as a politician. He is probably over-glorified. The act of ranking our Presidents is not necessarily bad, but it serves to create hero-worship. This has led to an enormous increase in executive power which is antithetical to the design of our country. Further, the Civil War reflects the conflict of State's Rights versus Federal power. When is secession acceptable? Did Lincoln go too far in asserting power to hold the Union together?

I know those are random thoughts, but that's all I've got on the subject for now.

*****

Judd Gregg (R-NH) has withdrawn his designation as Secretary of Commerce. This pick seemed sketchy from the beginning. Obama will have to go back to the drawing board again - he's 0/2 for this position.

*****

I don't have the details immediately available here, nor a good link for the readers on this... but, Indiana is considering a statewide smoking ban. I don't smoke (except about once a year), so this won't impact me personally. But, this is an affront on individual liberty and personal responsibility.

First Update On S&P Forecast

One month ago, I provided my predictions for the S&P 500 which can be reviewed here. According to data from S&P (available here in Excel), with 85% of earnings reports in for Q4 2008, the year did not end well. No surprises there. The estimated earnings for the S&P is coming in at $5.77. That puts the earnings for 2008 at $55.37. That is about $10 less than what was forecast for 2008 just one month ago. The current estimate for 2009 is $67.55. One month ago, I was predicting a range of $55-$60 while the S&P was reporting a bottoms-up forecast of $81.80.

While the market had a rough month in January, it did maintain levels above the lows set on November 20th. So, my first prediction milestone, Valentine's Day, has come and gone without new lows. However, I still think we are well on our way to my target range of 600-640 based on the earnings estimates. My predictions from just one month ago have already turned out to be much better than what was provided by S&P. I think it could get uglier than I thought.

The following chart shows the quarterly breakdown of earnings with annualized totals. The values from Q4 2008 on are estimates (from S&P).

Notice the optimism still coming from the estimates beginning in Q3 of this year. In fact, the rolling 12-month estimates throughout this year are near my target range (mostly due to the horrible Q4 2008 numbers). I still believe that the earnings will come in lower than these numbers for each and every quarter in 2009. I also believe that we will see the P/E ratio decrease during the same time.

The Senator From Massachusetts

From the floor debate in the Senate on February 7 regarding the American Recovery and Reinvestment Act:

Incidentally, let me share with a few of my colleagues why this is sort of this old ideology versus new. The Senator talked about the tired ideology of the past. What is it? Well, I think today Michael Steele, the new chairman of the Republican National Committee, made a statement on behalf of the Republican Party. He said:

For the last 2 weeks, we have been trying to force a massive spending bill through Congress under the guise of economic relief.

Well, we are having votes. This is a democracy. We are not forcing anything. We are trying to get the job done because there is an urgency to getting it done.

But then he says:

The fastest way to help those families is by letting them keep more of the money they earn. Individual empowerment, that is how you stimulate the economy.

That is a big ideological/philosophical difference about how you most rapidly stimulate the economy. Let's think about it for a minute, the individual empowerment. OK, we turn around and we give every family in America the great big tax cut that the Republicans are talking about. Here is what he says: We want to give--the first 16,000 bucks you make, you are going to be taxed at a lower percentage.

Terrific. We lose revenue at the Federal level that we could put into schools, fire, police, education, energy investment, investment in airports, rail, all of those things for which we do not have enough money. But we give it back to the people.

Then he says: They will go out and buy things. They probably will. Some of them may save it. What are they going to buy? Is there a guarantee they are going to go out and buy energy-efficient materials? No. Is there a guarantee they will go out and buy an American car that is a hybrid, that actually does better? No.

They could go out and buy a car made in China or Japan or Germany. That does not help us a lot. Or what if they pay off their credit card bill because it is so big that they need the money to pay the bill? That is just paying for past things already purchased, for services already given. It does not stimulate the economy. Please. And if they do have some money to invest, there is no guarantee they will choose to invest it in the United States of America. They might think it is much better to invest it in some international mutual fund that is investing in a country that has a better economy right now.

So that is a tired old philosophy. That is what we did in the 1980s and many of us opposed it. I voted against that tax cut. You know what. We took the deficit of this country to an unprecedented level, crowding out the private marketplace in terms of borrowing, and we did not invest in the things in which we needed to invest in the country.

From thomas.loc.gov

These are the words of John Kerry (D-MA). He does not trust you - the average American. He does not believe that you - the average American - are smart enough to manage your own money. He does not think that you - the average American - have any idea as to what is in your best interest.

No. He believes that 535 members of Congress (or at least the 311 who have a "D" after their name) are smarter than you. He believes that they know what's best for you. He believes that you should not spend your own money...

In the immortal words of Owen Hart: "Enough is enough and it's time for a change."

Loose Ends... Vol. XXIX

Ok. First the good news: I am not traveling this week - my trip was canceled. So, I will be writing and posting this week. The bad news: I am more tired than usual on a Sunday night. There are several topics which I was planning on writing about, but I have been pretty busy all weekend.

A few quick thoughts (without the benefit of links if you care...)

Judd Gregg (R-NH) as Commerce Secretary? I first heard about him from a documentary about an old lady running for Senate against him. He seemed a bit slimy then, but that was the intention of the filmmaker. But, I have come to dislike him more over the last few months as he has been an unapologetic supporter of the Wall Street bailouts. There's a lot more to this story, but the one thing that irks me the most is that there is apparently some sort of deal which has been reached so that the Democratic governor replaces him with another Republican in the Senate. I don't like "deals".

The Senate is still debating the stimulus package. Obama is going to use the bully pulpit tomorrow night on national TV to garner public support. This is not yet over, but it will pass. It is an a"bama"nation. ;) - sorry for the bad joke.

There's so much more to talk about, but I have to get some rest... Until next time...

Groundhogs in Congress?

This is something I've wanted to write about for a long time now but I had wanted to take the time to do some research; well, I've not had enough time to really "research" and was prompted earlier in the week to write something about this after seeing some of the Senate floor debate on the stimulus bill. Maybe this is just a weird pet peeve of mine but I really get angry when watching House and Senate floor debate or speeches (of course, most normal people don't watch these at all I suppose) and see the endless parade of silly, pointless charts and signs that congressmen use as "props" when speaking.

For a long time, I've wanted to try and find out just how much the government spends on producing all of these giant charts in both materials/printing and labor to design them. I suppose that compared to other types of government spending, this would be a drop-in-the-bucket so to speak but it seems just so wasteful and ineffective. Often, the signs/charts are simply comprised of large amounts of text that are kept up on the easel for so short of a period of time that no one would be able to read it, and this is apart from the fact that the text would most certainly be too hard to read from a distance. I am constantly wondering why they don't just invest in a nice projector and screen, a few laptops and some laser pointers and learn how to use Powerpoint! This would certainly save tons of ink and cardboard at the very least. What gets me the most though is how such a large proportion of these charts are either very poorly designed (to the point that they are laughable and thus completely ineffective) or just plain silly.

Here is my example from earlier in the week--Senator Chuck Grassley, R-Iowa, was giving a speech on the Senate floor about his opposition to the economic stimulus package. I had it streaming from C-SPAN on my computer but was not paying full attention; I happened to glance up a minute or two after Sen. Grassley had started speaking and managed to take the following screenshots:

Yes, a cartoon drawing of a groundhog followed by Bill Murray from the movie "Groundhog Day" in the scene where he abducts the groundhog to "free' him (the groundhog appears to be steering the car in the photo). Granted, Sen. Grassley was somehow using a groundhog day analogy in relation to the stimulus but c'mon? Not only are these charts just silly, but they were only up on display for 30 seconds at most. I wonder what happens to them afterwards...does the government have a big storage area for these things where a congressman can send an aide to look for a picture of a groundhog to use in a speech? Do they get thrown away? Recycled? I'd really be curious to know. Here are a few others, just for fun. I could find a million others...



This one was used by Representative Peter DeFazio, D-Oregon, during a 1-minute House floor speech on offshore drilling on September 16, 2008. He was using this picture to show President Bush with his Saudi Arabian "buddy," King Abdullah.

Here's one from Senator Byron Dorgan, D-North Dakota, used in a speech about the lack of transparency from the Fed and Treasury about the first bailout. Toward the middle of the speech, he used this poster for about a minute to compare the "old" economy to a house of cards with, literally, a house on top to stand for the mortgage crisis that triggered the rest of the house to fall down.

What Is Going On Here??!!

I've become convinced that in order to be selected for a high-level position in the U.S. government, you must check the yes box on the candidate questionnaire (yes, I know this doesn't really exist but I think you can follow me) when it asks "Ever engaged in tax evasion?" Today, President Obama's choice for the positions of both deputy director of the Office of Management and Budget and the "chief performance officer" for the entire federal government, Nancy Killefer, withdrew herself from consideration due to personal tax issues resulting from neglecting to pay unemployment taxes for household help during 2005 and 2006. After Ms. Killifer failed to make the required payments for a year and a half, the IRS placed a lien for $946.69 on her home in Washington D.C.

Hey, I'm starting to sense a pattern here!! Now-confirmed Treasury Secretary Timothy Geithner neglecting to pay $35,000 in self-employment taxes. I actually just started here to write a statement about the nominee to be the Secretary for Health and Human Services, Tom Daschle, and in the process of searching for a citation link have discovered that just about an hour ago he has also withdrawn his nomination because of his tax issues ($120,000 in unpaid taxes).

I just don't get it--am I the jerk here? I don't agree with the current U.S. system of taxation nor do I enjoy giving the government my own money so it can spend it on stupid things, but I have no interest in being charged thousands in fines and penalties or even thrown into jail for failing to do so. It seems like these high-level political functionaries have no such qualms and are content with being willfully dishonest (no, I don't believe any of their "it was an honest mistake" rubbish) up until the last possible second, when they are forced to act apologetic or else be denied their plum government position. It's really disgusting. I suppose there's something to be said for the fact that these nominees withdrew themselves but I can't help but assume that it wasn't because they truly felt unfit after some reflection but rather because they didn't want to be grilled in confirmation hearings.

This sort of blatant disrespect, along with years of similar situations, leads me to what seems a logical conclusion (if a bit of an exaggeration) that the people actually involved in our government do not take paying taxes seriously. I then begin to wonder why I even bother; why should I continue to dutifully pay my taxes so that the government can toss it immediately out the window, when so many of their own don't bother? Yeah, it's easy to cook up $900 billion "stimulus" bills using taxpayer funds when you yourself aren't putting in what you should. It's just this kind of idiocy that really makes me honestly consider tax resistance. This reminds me of a Latin quote that I heard some time back, I can't remember where: "Qui vult dare parva non debet magna rogare." Translation: "He who wishes to give little shouldn't ask for much."

I think it's kinda funny how at the very end of today's press conference announcing Judd Gregg as President Obama's choice for Commerce Secretary, a reporter shouts a question to Obama about why his nominees seem to have so much trouble paying their taxes. Check out the last 10 seconds of the video.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Loose Ends... Vol. XXVIII

I don't have a lot to talk about tonight. It's getting late, and I'm getting tired. I'll be traveling the next two weeks, but I'll do my best to check in and keep posts going...

This week, the Bureau of Economic Analysis released the statistics on GDP for the last quarter of 2008. GDP declined in the U.S. in both real and nominal dollars. It was a bad quarter. I am closer to formulating some alternate measures to the GDP - that will be the subject of some upcoming post. In the meantime, it is important to remember that politicians and economists use GDP as the key measure of "the economy". GDP is essentially spending. If we spend more, then GDP goes up and politicians can claim success in "growing" the economy.

Stimulus, spending, multipliers, ... all of these things are aimed to grow GDP - which, as you may recall, according to Okun's (so-called) Law, is linked to unemployment. These two simple measures have the eyes of Washington. So, as we watch the Senate debate and edit the American Recovery and Reinvestment Act, remember that spending - even when we don't have any money or when the spending produces nothing - will be the key measure of success.

If the government borrows money to pay someone to dig a hole and fill it up... unemployment will decrease and GDP will go up. I hardly see this as economic growth.