© 2009, by John Butrus

CNN – Making News or Reporting It?

Shackled by Taxes

Against Socialism

© 2009, by John Butrus

In the 1960′s, conservative Texans were Democrats. After minorities were given the right to vote and the opportunity to vote, conservative Texans over time defected to the Republican party. (A change in political philosophy did not accompany this change in party affiliation.)

Throughout the 1990′s, in Dallas County local elections, the Republican primary winner would almost always win the general election. In many instances, the Republican candidate ran unopposed in the general election. Many elected politicians, including some minorities, changed their party affiliation from Democrat to Republican because they knew they would not win re-election unless they ran as a Republican.

Demographics in Dallas County changed significantly the last few years. In an election held two years ago, Democrats defeated Republicans in 42 out of 42 races in the general election. Since then, Republican elected politicians, and those who want to run for office, are changing their party affiliation from Republican to Democrat. One respected Dallas County Judge, was a Democrat when he took the bench approximately 15 years ago, became a Republican about ten years ago, and last year became a Democrat again.

Today, in Dallas County elections, the candidate on the Democratic ballot wins most elections. Keep in mind, politicians are changing parties for tactical reasons, not due to a change in philosophy or policy. My guess is that Republicans in other states, especially those in the northeast, may become Democrats.

Longtime Pennsylvania Senator Arlen Specter, a moderate republican, will face a strong challenge from the Democratic candidate in the 2010 election. Pennsylvania, once a battleground state, has become a Democratic state over the past four (4) years. Likely, in an effort to curry favor with Pennsylvania moderate Democrats and Independents, Senator Specter was one of only three (3) Republican Senators who voted for the recent stimulus package.

If Senator Specter must increasingly rely on Democrat and Independent voters to stay in office, he may benefit from changing his party affiliation. In any event, if current trends continue, in a few years no state in the northeast will have a Republican Senator.

If a Republican politicians defect en masse to the Democratic party, it will became increasingly important to know a candidate’s view on major issues irrespective of the candidates professed party affiliation. After all, a rose by any other name would smell as sweet.

For example, former Vice President Dick Cheney recently stated that the Obama administration’s policies are making Americans less safe. David Axelrod attacked Cheney personally, alleging Cheney did not behave like a statesman during the transition.  Axelrod never addressed Cheney’s proposition.  As such, the public gained no insight with respect to whether President Obama’s policies are making Americans less safe. The exchange between Cheney and Axelrod, however, received widespread media coverage.

As hominem arguments work well in politics for at least three (3) reasons.  First, ad hominem arguments persuade people. Second, it takes far less time and intellectual effort to attack the person who makes a proposition than it does to provide an intellectually sound response to the proposition itself.  Third, for political and other reasons, politicians do not want to address certain issues.  Ad hominem arguments provide a means for politicians to avoid addressing such issues while giving the appearance that they have addressed the issue.

Worst of all, fear of ad hominem attacks suppresses public debate related to controversial issues such as healthcare reform, stem cell research, gay marriage, and illegal immigration.  Understandably, many people prefer to remain silent than to subject themselves to being labeled a homophobe, left wing nut, right wing nut, racist, socialist, Nazi, religious zealot, terrorist sympathizer, baby killer, or some other pejorative term.

If you wish to entertain yourself, go to the Huffington Post website and post a factual comment such as, “I enjoy Fox News,” or “President Obama signed an executive order to close Guantanamo Bay, but has not explained what he intends to do with the prisoners held there.”  Your comment will generate a flurry of comments replete with abusive and insulting personal attacks.  Conservative blogs and websites are no better.

Ad hominem arguments polarize Americans, and impair our country’s ability to resolve important issues.  Hopefully, people will eventually become disenchanted with personal attacks, and come to expect substantive responses to issues.

© 2009, by John Butrus

The complexity related to loan modifications, made many homeowners easy prey for companies that offered to represent the homeowner in the modification process.  These companies obtained their fee from the homeowner upfront, and in many cases made little or no effort to modify the homeowner’s mortgage.  As a result, these homeowners did not obtain a mortgage modification, and lost their homes to foreclosure.

Today, Treasury Secretary Geithner announced a multi-agency plan to crackdown on companies and individuals who run foreclosure rescue scams, and otherwise defraud homeowners.  Federal and State prosecutors will coordinate their efforts as part of the plan.

Secretary Geithner’s initiative will not make the Obama administration’s program more likely to succeed, but it will prevent many financially distressed homeowners from losing money to unethical self-proclaimed modification specialists.

© 2009, by John Butrus, All Rights Reserved

The report also contains data that confirms mortgage loan modification programs will not significantly reduce the unprecedented number of nonperforming mortgage loans, or reduce the mortgage foreclosure rate. The Obama administration should abandon the Treasury Department’s mortgage modification plan.

As I concluded in an earlier blog related to mortgage modification, the housing crisis will resolve itself the old-fashioned way. Delinquent borrowers will lose their houses through foreclosure. This will increase the housing inventory, which will cause housing prices to decline. At some point, prices will fall far enough for qualified borrowers to buy the houses.

Margaret Chadbourn and Kathleen Hayes published an article today on Bloomerg.com, which provides an excellent summary of The Office of the Comptroller of the Currency and Office of Thrift Supervision’s report (Link to Article).

© 2009, by John Butrus, All Rights Reserved

© 2009, by John Butrus, All Rights Reserved

President Obama has surrounded himself with highly intelligent, Ivy League educated, men and women.  Perhaps, the people responsible to fix the GM problem, are simply too smart for the job.  Highly intelligent people may possess a subconscious bias against simple solutions.  Politics aside, the GM solution may be less complicated than it seems.

Toyota, Honda, BMW, Audi, Volkswagen and other automakers provide excellent examples of viable automaker business models. The administration’s auto task force (“task force”) should study these companies, as a means to develop a business plan for GM that incorporates the structure and policies healthy automakers implement.

Next, the task force must take inventory of GM’s abundant resources.  Surprisingly, GM possesses nearly everything it needs to become viable.  Among other things, GM possesses sufficient auto plants and equipment to produce a large volume of automobiles, a productive, efficient, and experienced workforce, state-of-the-art technology, well-established distribution channels, a large dealer network, worldwide name recognition, and eleven profitable car models.

In addition, the task force must identify obstacles that prevent GM from becoming a viable automaker.  Primarily, unbearable debt service, untenable commitments to union legacy workers, and parts suppliers’ financial instability comprise the most formidable obstacles. The auto task force has a variety of options to resolve these problems. The auto task force must not, however, rely on GM, the UAW, and GM’s unsecured debt holders to resolve these obstacles through negotiation.

Undoubtedly, the solution will include some combination of government loans, government guarantees to parts suppliers, tax incentives, government aid to Delphi (a major GM parts supplier) to bring it out of Chapter 11 Bankruptcy, allowing GM to go through a government supported bankruptcy, government support to guarantee legacy workers’ pensions and health benefits, and continued government support for GMAC to enable consumers to obtain loans to purchase GM cars.  The solution will require a large public bailout, perhaps as much as $100 billion.  Americans have become disenchanted with expensive public bailouts.  Accordingly, it may be difficult to garner the American public’s to support for a  bailout of this magnitude.

Perhaps most important, GM must sell cars that consumers want to purchase (at present 11 of 20 GM models are profitable).  No company can survive absent consumer demand for its products.  This is where politics makes things dicey.

The administration must not use the GM bailout as a means to advance its “green” agenda.  In the near term, small fuel-efficient cars will not generate sufficient sales volume to sustain GM.  Americans do not identify with the small cars Europeans drive. Accordingly, for GM to succeed, the administration must allow it to produce cars and trucks that appeal to American car buyers, even if these vehicles do not fit within the administration’s objectives related to reducing carbon emissions.

The auto task force should follow Oscar Rodgers’ and Albert Einstein’s advice, namely,

‘KEEP IT SIMPLE, and “FIX IT.”

© 2009, by John Butrus, All Rights Reserved

Recent stimulus proposals excluded tax rebates on the assumption Americans who receive tax rebates would once again either save the money, or use it to reduce their debt.  Perhaps, the government should adopt a version of ATT’s successful rebate plan as a means to entice rebate recipients to spend the money.

Several months ago, I purchased a mobile phone at the ATT store.  The phone purchase entitled me to a $50 rebate.  I sent ATT the requisite paperwork and several weeks later I received the rebate in the form of a Visa debit card with a $50 credit balance.  I propose the government follow ATT’s method (with certain changes)  in providing taxpayers with rebates.

The government would use a debit card to distribute tax rebates.  Banks, other deposit institutions, and credit card companies would be prohibited from accepting the card as payment.  This would ensure that the rebate recipients would not use the rebate to add to their savings, or to reduce debt.  In most instances, I suspect rebate recipients would use the card to purchase consumer goods, go out for dinner, go to the movies, etc. This would inject stimulus directly into the economy and increase consumer demand.

Moreover, under this proposal, banks that issue the debit cards would profit from the fees they charge companies that accept debit cards as payment. Private companies (banks) would administer the program as opposed to creating another government bureaucracy, and retail stores would reduce inventory and increase their revenue.  Moreover, return visits to retail stores may rekindle consumers’ appetite for consumption.  Most importantly, unlike infrastructure projects, tax rebates distributed in this manner would immediately inject billions of dollars into the economy, and thereby immediately stimulate the economy.

© 2009, by John Butrus, All Rights Reserved