February 2008 capitol observations

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A Critical Look At The Two National Political Parties
Many believe the national Republican Party is falling apart and largely because of the intense efforts of the party bosses to distance GOP candidates from the Bush White House. As I have written in prior issues, I am not overly impressed with the men who are seeking the GOP nomination for President. After watching John McCain, who has emerged as the leading candidate for the party’s presidential nomination, read literally word-for-word a lengthy speech after his win in New Hampshire, I had to wonder if the Arizona Senator was really the best the GOP has to offer. My initial reaction to a man who wants to be president reading a speech – obviously written by somebody else – was absolute disbelief. When I realized the Senator was actually reading things like “God bless all of you,” from a script that made me wonder a little bit about his sincerity. In any event, the GOP seems to be trying to keep President Bush, who is still the leader of his party, under wraps and out of sight.
While the predictions of a Republican collapse may be accurate, the big question remains – will the Democratic Party take advantage of it? Based on early voting patterns, it’s obvious the mainstream Republican frontrunners are a rather weird collection. For example, Mike Huckabee, the former Arkansas Governor, actually talks more like a Democrat. Without money, and without staff, he suddenly became a contender in the primaries and now finds himself under attack. Senator McCain, who once was given up for dead politically, is trying hard to regain his former image and still be the Bush candidate. That’s a tough row-to-hoe even for the Senator. A fumbling Mitt Romney is still hanging on after his comeback in Michigan, but his chances at the nomination are still slim and none in my opinion. Fred Thompson never woke up and dropped out after the South Carolina vote. Then there’s Rudy – who is the most scary of all – putting all of his eggs in one basket, Florida. So far, none of the Republican candidates have seemed to excite the voters. I wonder why?
The thing that amazes me is that when you consider their messages, all of the Republican candidates are in round-about-ways promising four more years of the Bush Administration's failed policies. Those efforts range from continuing the President's war in Iraq, to pursuing his efforts to privatize Social Security, to extending his budget-busting handouts for his powerful corporate friends, to continuing the rape by the oil and drug industries of the American people. In my opinion, none of those messages will sell this year. I believe the American people want real change and the primary voters on Super Tuesday (February 5th) will determine who in each party can carry that banner. There’s one thing for certain – folks don’t want another four years of the Bush Administration’s policies.
I sincerely believe that George Bush has been the worst President whom I have witnessed over my years of observing national politics. Seven years after taking office, his approval rating is down around 25%, and two-thirds of the American people believe the country is on the wrong track. While the Democrat candidates collectively offer real solutions and new ideas to provide the American people with the change they want, the Republicans seem to offer only what amounts to a third Bush term. The Democratic Party has a real opportunity to take back the White House from the likes of Dick Cheney and Karl Rove and their corporate buddies. The winds of change – blowing very strong across the land – clearly indicate that no person identified with the Bush Administration will do well politically in the general election and that includes the GOP nominee for president. The real question is – will the National Democratic Party find a way to lose again?

U.S. Chamber Of Commerce Threatens Candidates
In years past, the American people have witnessed lots of arrogance on the political scene and they haven’t liked it very much. Recently, a man who has been a player on the political scene over the last few years has reached a new level on the arrogance meter. Tom Donohue, the president of the U.S. Chamber of Commerce, says he will spend millions of dollars this year to defeat candidates he deems to be unfriendly. In making his political plans known, Donohue boasted:
We plan to build a grass-roots business organization so strong that when it bites you in the butt, you bleed.
The arrogant warning from the nation's largest tort reform group came against a background of a growing fear by people over the condition of the U.S. economy. A recession on the horizon, a weak record of job creation, the sub-prime mortgage crisis, declining home values, and other fiscal problems have all helped make the economy the major campaign issue. All of this is really hurting candidates supported by Donohue and the U.S. Chamber, and that may account for his ill-advised threats.
It appears that Donohue is threatening presidential candidates like John Edwards, Hillary Clinton, and Barack Obama. Each of them has been calling for change on behalf of middle-class voters. On the Republican side, former Arkansas Governor Mike Huckabee -- emerging as a stronger-than-expected candidate – has used populist themes in his effort to attract independent voters. Huckabee, for example, has blasted bonus pay for corporate chief executives and the effect of unfettered globalization on workers. Donohue brags that his group will punish any candidates who target business interests with their rhetoric or policy proposals. He included congressional and state-level candidates, as well as those presidential candidates mentioned above in his announcement.
Donohue indicates that his organization will spend more than the $60 million it spent in the last presidential cycle. The Chamber president announced the broad outlines of the organization's plans for the 2008 election and beyond in a news conference. Donohue says he will be active in 140 congressional districts this year, as well as the presidential contest. At the state level, Donohue will be active in nearly four dozen contests for state Attorneys General and members of state supreme courts. Clearly, the Chamber has become a significant force in state and national politics under Donohue's control over the past decade. Clearly, the U.S. Chamber has been taken over by tort reformers and is now a strong political force. Since Donohue took over the Chamber, contributions by businesses have soared, often to pay for political advertising known as "issue ads," which are exempt from many of the Federal Election Commission limits. Under a system Donohue pioneered, corporations contribute money to the Chamber, which then finances attack ads targeting individual candidates without revealing the names of the businesses involved in the ads.
Source: Los Angeles Times

A Happy New Year For The Oil Companies Will Be A Bad Year For Consumers
Economists in the year 2100 will look back and note that oil reached the price of $100 per barrel for the first time on January 2, 2008. It was obvious that the powerful oil companies were in for a real Happy New Year. But, individuals and businesses who have to buy their over-priced gas will suffer as a result. Standard & Poor's chief economist David Wyss pointed out that "the higher the oil price goes, the more likely recession becomes." In a recent note to investors, he put triple-digit crude in perspective with a comparison of 2007 energy costs to previous years. Putting the matter in perspective, Mr. Wyss observed:
The average American household will spend 5.7% of after-tax income on energy. That is up from 4.2% in 2002 and from the record low of 4.1% in 1998, but well below the 7.9% peak of 1981. But consumers are concerned only with the squeeze they have felt over the past few years, not their experience over a longer history. The higher cost of filling the gas tank means that less money is available to spend at the shopping mall.
Hopefully, the next president won’t be owned by the powerful oil industry and will be able to bring them under control. But, if the Republicans are able to win the presidency and regain control of Congress, the oil giants will continue to run roughshod over the American people. We badly need a president and a Congress willing and able to stand up to the giant oil companies and rein them in!

More On The Legacy To Be Left By The Bush White House
History won’t record the legacy left by George Bush as a good one. When this President leaves the White House next year, he will leave the federal government in sad shape in a number of important areas. Perhaps, the federal government’s total liabilities and unfunded commitments will be one of the worst things the President will leave behind. Currently, the total amounts to slightly more than $53 trillion. It’s estimated by the Government Accountability Office that the $53,000,000,000,000 will grow by $3 trillion each year unless the brakes are applied. It’s a sad commentary that during the Bush years in office our government has become totally addicted to debt. President Bush inherited a surplus when he came to Washington, and he will leave a staggering deficit for his successor. At last count it was over $250 billion and growing.
There has been a series of mishaps – some accidental and some intended – that have caused a fiscal mess. An example of the irresponsible leadership from the White House was the prescription drug benefit legislation pushed through Congress by the President and the lobby for health insurance industries. That alone represents about $8 trillion of Medicare’s $34 Trillion gap. Do you recall how much the White House projected the drug bill – if passed – would cost the taxpayers?
The tragic truth is that, as a result of that legislation, U.S. taxpayers are being taken to the cleaners while the drug companies, program benefit managers, and the health insurance companies are getting richer by the minute. Those who are supposed to be benefited by the drug program are caught in the middle and may wind up being as big losers as the folks who are paying the tab.
The fiscal mess that has resulted during the Bush years will take years to clean up. The President looks like a “deer-in-the-headlights” when he attempts to explain his fiscal policies and as a result even most Republicans have lost faith in him. But Congress also needs to get involved and start putting the brakes on the runaway train driven mainly by Vice President Cheney and Karl Rove.

U.S. Ruling Backs Benefit Cut At 65 In Retiree Plans
The Bush Administration has been great for the big bosses of large and powerful corporations. But the Bush years will go down in history as being the very worst for American workers since the Hoover days. A recent ruling by the Equal Employment Opportunity Commission is a prime example of how working folks are being treated. Employers can now reduce or eliminate health benefits for retirees when they turn 65 and become eligible for Medicare. The policy, set forth in a new regulation, allows employers to establish two classes of retirees, with more comprehensive benefits for those under 65 and more limited benefits — or none at all — for those older. More than 10 million retirees rely on employer-sponsored health plans as a primary source of coverage or as a supplement to Medicare. The AARP is opposing this rule. Christopher G. Mackaronis, a lawyer for AARP, which represents millions of people over the age of 50 or above, commented:
This rule gives employers free rein to use age as a basis for reducing or eliminating health care benefits for retirees 65 and older. Ten million people could be affected — adversely affected — by the rule.
The AARP has filed suit in an effort to block issuance of the final regulation. The new policy creates an explicit exemption from age-discrimination laws for employers that scale back benefits of retirees 65 and over. According to the AARP, the exemption was “in direct conflict” with the Age Discrimination in Employment Act of 1967. With huge companies in the oil and insurance industries making record profits, American working families are really hurting. Hopefully, we can survive until a new president is elected and takes over.
Source: New York Times

More Than Half Of Americans Want Internet Regulation
With increasing levels of violence and sexual content in Internet videos, many Americans believe that the Internet needs a V-chip or some other form of content regulation. A Zogby poll reveals showed that more than half of U.S. residents want the government to regulate Internet video in some way. Twenty-nine percent of those surveyed said Internet video should be regulated just like television content, and another 24% said the government should institute an online rating system similar to the one used by the movie industry. Only 36% of respondents agreed that government regulation of Internet video would raise constitutional issues.
It should come as no surprise that Americans view Internet video as being as potentially dangerous and offensive as TV programming – especially since much TV programming ends up on the Internet. Movies are rated by the Motion Picture Association of America, and broadcast television programming – though rated by the networks that make it – must at least in theory adhere to indecency laws, which the Federal Communications Commission (FCC) and Congress can enforce. But on the Internet, there are literally millions of content producers. Of course, the real solution to Internet video indecency – like that in the movies or on TV – is for the program creators, and the advertisers who underwrite it, to act responsibly by choosing to produce clean, family-friendly entertainment free of sex, violence, and foul language.
Source: Parents Television Council

A Need To Control MySpace
It’s very easy for sexual predators to operate on MySpace which as you probably know is the most popular social networking site for younger teens and perhaps even pre-teens. Currently, there are more than 70 million users in the United States. Sadly, MySpace has been a virtual magnet for sexual predators for a number of years and I expect we only have seen the tip of the iceberg when you consider that many incidents go unreported. I believe we can all agree that we have a very serious problem on our hands. State Attorneys General and law enforcement agencies around the country have been working hard to make MySpace clean up its act. Their efforts need to the support of all Americans. Parents must get actively involved and force the politicians to also get involved and take all action necessary to protect our children and grandchildren.

DaimlerChrysler Gets Record $30 Million CAFE Fine
Corporate Average Fuel Economy (CAFE) regulations were instituted by Congress in the mid-seventies. The law included fines for automakers who failed to meet the standard. The National Highway Traffic Safety Administration is the agency that actually sets the rules for CAFE, calculates the averages and administers the fines. Over the years, carmakers have been fined a total of $735,422,635.50 for selling cars and trucks that use too much fuel. In December, NHTSA released the latest list of fines, including those for the 2006 model year. A record fine of $30,257,920 was levied against DaimlerChrysler for that model year, almost double the $16,895,472 the carmaker paid the previous year. The previous record was held by BMW, which paid almost $28 million in 2001. As the new standards increase over the next decade, companies that produce a lot of high performance cars like Mercedes and BMW will likely be paying a lot more in fines unless they start selling a lot of hybrids and diesels.
Source: Associated Press

The Cost Of Climate Change Is Huge
It’s being reported that natural disasters brought about by climate change carry a very large price tag. Unfortunately, according to the reports the cost is growing rapidly. Total economic losses from natural catastrophes in 2007 rose to $75 billion from $50 billion the year before, as extreme weather conditions driven by climate change wreaked havoc across the world. The economic losses include those not covered by insurance such as disruption to power supplies or transportation links, and those are most significant. The review of natural catastrophes is reported annually by Munich Re, the world's second-largest reinsurer. A disaster is defined as an event that results in more than 10 deaths or causes millions of dollars of losses.
Losses to the insurance industry doubled to $30 billion during the year, as the number of individual disasters rose to 950. This is the highest number since 1974, when Munich Re began its survey. The company says the trend with respect to weather extremes shows that climate change is already taking effect. According to Munich Re, more such extremes are to be expected in the future, which is not good news. The greatest losses to the insurance industry were sustained in Europe, which was hit by an unusually large number of extreme weather conditions throughout the year.
It’s obvious that the world is experiencing tremendous climate changes. Global warming is causing severe problems. All governments have a duty to take the steps necessary to deal with the problems. We can’t afford to sit back and do nothing in this country, as has been the policy during the Bush-Cheney years. Making fun of Al Gore – while it gets laughs – is certainly not the answer. It’s past time for our elected officials to get serious about climate change.
Source: Forbes

There Is Hope For The Future On The Corporate Front
Looking back on the past several years, it’s readily apparent that many bosses in the corporate world operated in such a manner as to bring disgrace on themselves and their companies. I hope a lesson was learned from the sad stories of those who led powerful corporations such as Enron, Tyco, and HealthSouth. All Americans should realize that “greed” by corporate bosses, unless recognized and controlled, will eventually destroy even the most powerful corporations. It’s my prayer that these lessons – even though painful for many – were learned and major changes in Corporate America will now take place. Honestly, integrity, and a sense of fair play must be restored in the corporate board rooms of America. I have to believe there is hope for this happening since the American people – including shareholders of publicly-traded corporations – are demanding an end to corporate greed and the corruption that accompanies it.

Corporate Meltdown On Several Fronts
There has been a corporate meltdown in the United States over the past several months and it is having a disastrous effect on our nation’s economy. The following are prime examples of what can happen when greed takes over in corporate boardrooms. A number of large companies are paying a heavy price for their involvement in highly questionable activities in the sub-prime mortgage field. For example, consider the current plight of these companies:

  • Morgan Stanley took a $9.4 billion hit for its fiscal fourth quarter, $5 billion more than most experts were expecting, even though the company aggressively wrote down its exposures to credit derivatives and mortgage securities. Morgan Stanley's write-down came as Wall Street was reeling due to the subprime mortgage crisis.

  • Bear Stearns, where fourth-quarter losses were $1.79 a share, is another company paying a heavy price for its corporate greed.

  • UBS has fourth-quarter write-downs of $10 billion and had to get an $11.5 billion infusion of capital from Singapore and an unnamed Middle Eastern investor.

  • Citigroup, as I understand it, had additional write-downs of $13 billion after receiving $7.5 billion from Abu Dhabi's investment fund.

  • Merrill Lynch had larger fourth-quarter write-downs than the $8.4 billion it estimated in November. The figure appears to be closer to $15 billion.

  • Bank of America had another $3.3 billion in write-downs and provisions.

  • Wachovia set aside $1 billion for expected credit costs.

It’s very clear that companies trying to take advantage of booming fixed income and equity markets got into big trouble. Buying up mortgage companies near the peak of the housing boom proved to be a mistake for a number of very strong companies. It’s being projected that the corporate meltdown has reduced the share value of all companies involved in the subprime lending industry. Consider that the loss of share value in just five major financial giants – Citigroup ($135 billion); Morgan Stanley ($40 billion); UBS ($40 billion); Merrill Lynch ($34 billion); and Bear Stearns ($10 billion) – cost investors $258 billion in 2007, and you can easily see the magnitude of the problem. These companies are among Wall Street's elite – employing some of the highest-paid individuals in the world, and perhaps some of the smartest and they each let greed at the top of their corporate structure get them into big time trouble.

Some of the business tactics employed by the bosses at these companies makes me wonder what in the world these “smart” folks were thinking. Unfortunately, these companies were given a green light with little if any oversight by the Federal Reserve Board and the U.S. Treasury. As a result, the subprime debacle has become a full-fledged credit crisis that is affecting our nation’s economy in a most adverse manner. In fact, the corporate meltdown – caused by the greed and arrogance of corporate bosses – is hurting lots of folks worldwide. The economies of our country – and those of numerous others around the globe – are in real trouble.
Source: Forbes

More Class Action Fraud Suits Result From The Credit Crisis
There has been a sharp increase in the number of class action lawsuits alleging that companies defrauded investors and that shouldn’t come as a surprise. The number increased more than 40% last year and without a doubt it is the result of the subprime credit crisis. Researchers in a recent study said the rise reflected a surge in lawsuits in the last six months of the year. Clearly, the credit crisis resulted in the increase in the number of class action cases. It was reported by Stanford University and Cornerstone Research that 166 companies were sued last year, including 47 financial services businesses, which have been among the hardest hit by losses in subprime mortgages. The 2007 tally contrasts with 116 cases during the comparable period a year earlier. A separate study by NERA Economic Consulting drew similar conclusions.
I am confident that there will be many more lawsuits filed as a result of the fraud and abuses in the subprime lending industry. Law enforcement authorities are currently investigating possible wrongdoing among brokers, lenders, credit-rating agencies, and financial institutions. Investigations of dozens of companies by officials in several states, the Securities and Exchange Commission and federal prosecutors are looking to see whether the companies failed to disclose mortgage losses or hid problems or risks from shareholders. In some cases, investigators are trying to determine whether corporate executives may have dumped their own stock when they knew of approaching problems.
Source: Washington Post

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