Thoughts on Prominent News of the Day

Today I find myself musing on several current issues. So I did some research that I thought would help as you evaluate these current issues that are dominating the news. As always I welcome comments and opposing views. I hope the information is helpful.

 

The Ownership of General Motors

As most of you know, we the American taxpayers, during the “bailout” purchased over 500 million shares of GM stock (at least that is our current holding). With this stock we also have a strong presence on the GM Board of Directors and for all intense and purpose the US government helps run GM. Recently this has become increasingly difficult for GM management and rumors are rampant that they have asked the administration to let them buy out the government shares (our shares). Naturally the administration has said no. Here are some facts to ponder:

 

If we sold our 500M shares at the current stock price of $23 we would lose about $15 billion dollars on our original investment. This would mean we made a very bad investment in bailing out GM. More interesting is that would have to get to $53 per share for taxpayers to just break even on their bailout investment. If you remember we were sold this bailout with the promise that we would make money on this investment. Today that seems unlikely since the last time GM stock was that high was in mid-2003 when GM was the largest auto maker in the world.

 

Analyst say GM wants the government out because to compete globally they need to get leaner and the government can’t afford to have any layoffs, as that was the deal they had with the unions. Ford, Toyota and Fiat, and Chrysler all have more flexibility to adjust to changing global markets and this gives them an advantage over GM. GM has also had some product issues. The Volt is selling way below projections and has had battery fire issues. While their Cadillac, Buick and Corvette divisions are doing well the others are struggling. Ford continues to outsell them in the truck market, they are not number one in the SUV market and their international sales are not growing as planned.

 

So the outlook for GM to even get our investment back to breakeven is not promising and this begs the question whether the bailout of the company was a sound fiscal decision? Many fiscal experts at the time argued GM should have gone through the normal bankruptcy process as it would have come out the other side much leaner and more competitive. Romney was one of those advocates but Mr. Obama felt tremendous pressure from the unions who had helped elect him and chose the bailout route. What is interesting to me is that he is campaigning around the country claiming he “saved GM”. Has GM really been saved yet? Was the bailout a good investment for the American people? You decide.

 

The Middle East Catastrophe

The violence and protests continue to rage in the Middle East. As I pointed out in my blog 9/13/12 this issue is much more endemic than we have been led to believe. I fear it will continue for some time and our ability to do commerce or diplomatic work will be stymied.

 

In a significant turn of events the administration that has been claiming since 9/11/12 that all the violence and protests were merely a reaction to the anti-Muslim movie that some crazy bigot put on YouTube, are now saying that it is self-evident that this was a terrorist attack. Actually the major press has been saying this for a while but Obama continued to disagree. Time did a complete expose last week showing it was terrorism that killed our ambassador. The latest news says that there may have actually been several attacks masked by the protests. As I stated on 9/13/12 the weapons used were definitely not ones protesters would have (RPG’s, Mortar’s etc.).

Sadly the violence is still so bad that as of today the FBI investigators still can’t get to the embassy scene. With time I hope the hypocrisy is brought to light and the terrorist brought to justice.

 

Sadly these events only serve as another reminder of why we need to be out of the Middle East with a few exceptions. Israel and a few other countries are allies and we should still provide aid and maintain diplomatic relations with. The rest of the Middle East offers no logical sustainable reason for our involvement. Here are some facts to consider:

 

While not all Muslim nations interpret Muslim law the same way most follow a code called Sharia. This is a doctrine that tells Muslims how to conduct their daily lives. It addresses everything from freedom of speech, women’s rights, marriage, law and sex.

 

There are two primary sources of sharia law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Where it has official status, sharia is interpreted by Islamic judges (qadis) with varying responsibilities for the religious leaders (imans). For questions not directly addressed in the primary sources, they extend the application of sharia through consensus of the religious scholars (ulama) thought to embody the consensus of the Muslim Community

They believe in the Sharia this is the cultural piece of the Muslim faith.

 

For example the Sharia addresses one of the cornerstones of the US constitution – freedom of speech

Qadi 'Iyad argues that insulting the Prophet Muhammad is prohibited. Such criticism is blasphemy and punishable by death.

Slander, gossip, and backbiting, or "ghiba" is regarded as a major sin in the Sharia law.

This explains why we are seeing some of the reactions to the stupid video since it clearly insults the prophet Muhammad.

At the same time I am confused about the conflict of Sharia and some of the actions in the recent violence. There are many reports that our Ambassador was sodomized by the attackers. This is in direct contradiction to Sharia law that states that sodomy (and homosexuality) is a sin and is actually punishable by death.

Sharia law involves some of the doctrines of Democracy such as electoral processes and some argue that it can be incorporated into Democracy as long as religious minorities are protected and the incumbent Islamic leadership remains committed to the right to recall. Others disagree and think that some of the radical doctrines contained in Sharia are just unacceptable in western Democracies. I agree with that analysis and feel that the two cultures have distinct and core beliefs that are so divergent it is impossible for them to be incorporated. While I believe some elements of Democracy are possible under Sharia law the implementation of such must be left to each individual state and its religious leaders. I am not convinced that all Middle Eastern countries want Democracy or have the will and public support to implement it.

So I contend, that with the exception of our allies we should withdraw from the Middle East as we will never be able to force our form of Democracy on them nor should we. They have a right to their culture as we do ours. We can be civil and in controlled circumstances even trade commercially but I think that is the extent to which we should play. Close our embassies in these militant countries limit our aid and remove all military immediately. I know to some this may sound isolationist but we have been trying for over 75 years to bring peace and Democracy to that region with absolutely no success. Our domestic problems are significant and our economic woes so great that we will be better served to adjust our policy in the Middle East. Let’s try this arm length relationship for a while and see how they sort things out amongst themselves. We might be pleasantly surprised. Sometimes having an outside presence in stressed situations creates more disruption than good. Remove “big bad America” from the equation and these nations might just find accommodation and compromise.

Romney’s Recent Comments

Romney is correct 47% of Americans pay no taxes. He is right the clear majority of folks in this group will vote for the Democratic candidate. He is just stating the facts. He obviously cares about the 47% but knows they won't vote for him. That was the point he was making. We can't have a society where that many people pay no taxes. The tax base is too small. We need to fix this. Of equal alarm is that nearly 50% of Americans are on some form of government assistance. They too will vote for Obama but again this is a number that is not sustainable. Romney clearly could have delivered this better but the fact is he is right. If people are so dumb that they think that Romney hates the poor, unemployed or elderly then they should not be allowed to vote. Americans are brighter than that.

 

Romney has apologized (on 60 Minutes) and he has stated clearly he will care for all Americans. I think the deeper concern should be on the other side. Obama wants to hurt the “rich”. Since this segment, which is not all rich, pays over 71% of all the tax revenue in the US, I think this is an ill-conceived policy. A family of four living in San Francisco or Chicago or Dallas and making $250,000 annually are NOT RICH! Sure they can pay their bills, live in a decent home, send their kids to school and perhaps save a bit but they are not rich. They are not driving around in Bentley’s; flying first class or wearing Rolex watches. As Americans we should not have any class segregation but if our President is going to create this let’s at least define it correctly.

 

So what is rich? We define poor by a number set by the government called the poverty line. Some say if you make 300% of the poverty line you are still poor. I think rich should be defined as millionaires - those that make $1 million or more a year not those with a net worth over a million. If we use this definition we are talking about a tiny segment of the population. According to the IRS, in 2008 there were 321,294 U.S. taxpayers with an adjusted gross income of $1,000,000 or more. Due to the recession that number has been declining for the last 3 years. That's 0.23% of all taxpayers in the United States. Yes, less than 1/4 of 1% of all taxpayers make more than $1 million dollars a year.

So despite what the president wants us to believe these folks cannot carry the burden of our revenue shortfall – no matter how much we tax them. The math just does not work let alone the insane discrimination involved. (Funny how discriminating against the “rich” is socially acceptable but asking illegal aliens not use our health system is unacceptable?)

Do you know that if you take all 400 of Forbes richest people (the really rich) they only have about $1.7 Trillion combined. So to keep things in perspective, if we took away all their money we would not even pay off 10% of our national debt. See the rich can’t solve this problem even with drastic taxation measures.

 

The President says the rich must do their fair share. What is a fair share? They already pay 71% of all the tax revenue in the country yet they do NOT control 71% of the country’s wealth. They give more in charity than any nation on earth. Bill gates and Warren Buffet gave over $28 billion just this past year. So what is a fair share? Should rich folks give away half their wealth/earnings? Or do they need to do more than that? Why? Did you know that 70% of the 400 richest Americans are self-made? That means they were middle class or poor when they started and now they are rich. And despite what Obama says the government did not make them rich. The good news is the American Dream is alive.  You can get very rich from humble beginnings.

 

Why should these hard working people be asked to give so much more? I agree that all citizens should pay some tax unless you are retired, totally disabled or below the poverty line. I don’t think the rich should pay percentages less than the middle class or poor. For example why did Mr. Obama make more money than me and paid 19% in taxes and I paid 35% (this federal taxes only). Why?

 

Also we need to look at motivation as we consider these draconian taxation policies. If we tax the rich unfairly what will be the motivation to get rich? Those 280 billionaires who are on the Forbes list might not have been motivated to go for the American Dream if they knew the government was going to take most of their wealth once they achieved it? Will the “rich” still want to hire people or will they be less motivated? Will they give as much to charity or will they just hold on to what the government leaves them with?

 

I believe we need a flat tax. This way no one cheats. The rich pay the same percentage as everyone else but as they get richer the amount of dollars they pay goes up. (We would eliminate nearly all tax deductions except charity, business and housing) I assure you the numbers work but we just need the will to do it. Stop this class warfare and do the right thing.

 

Here are the realities - we have to increase the US tax base, implement a flat tax; shrink government; sure-up our SS and Medicare programs; fix the healthcare system; grow the GDP; implement a fair immigration policy; create a strong domestic energy program and get unemployment below 5%. That’s how we fix this problem. Anything else is just rhetoric and political posturing!