From the Desk of Joe Rollins
My last several posts have been critical of Congress’s inability to get the issue of offshore oil drilling to a vote. I’ve opined that the reason Democrats were unwilling to vote on the subject was because they didn’t want to want to take a position that would contradict the wishes of Barack Obama’s financial benefactors. My opinion has proven to have been correct, as nothing has actually happened since they’ve been back in session. In fact, Congress intends to adjourn within the next few days and will not be back in session until after the Presidential election.
As I predicted, the Democrats in Congress actually proposed a new bill that would allow oil drilling 50 miles off the U.S. coast, but with provisions that would essentially make the bill ineffective. Even if the bill were passed, the oil companies wouldn’t have exercised their right to drill since it would be financially imprudent.
However, something unusual happened on Tuesday that warrants your attention: The Democrats have completely dropped the 26-year oil drilling moratorium! I can only surmise that it was fairly clear to the Democrats in Congress that they wouldn’t win any Republican votes on the subject of oil drilling. Furthermore, they certainly weren’t willing to have Obama vote on the subject only six short weeks before the election and alienate his backers. To avoid the embarrassment of a defeated bill, or even worse, to put Obama in the predicament of having to vote on the proposed legislation, the Democrats allowed the oil drilling ban to expire!
Since Congress wouldn’t vote on extending the oil drilling ban off the U.S. coast, it was allowed to expire in the passage of the new budget under a continuing funding legislation. I suppose this is more than we could ever have expected to receive. In effect, Congress allowed a blank check to drill for oil off the coasts of nearly the entire United States with no restrictions. It’s absolutely stunning to me that the United States Congress would open the floodgates to oil drilling simply so they wouldn’t have to vote on a potentially detrimental subject to their Presidential candidate.
I’m sure Congressional Democrats will revisit this subject after the Presidential election and expect to have a mandate from the White House to defeat it. However, it appears that the states are quickly rallying to benefit from this oil drilling legislation. Virginia is already campaigning for oil drilling rights since they’d be sharing revenue with the Federal government on the subject. In an absolutely hysterical turn of events, even Santa Barbara County in California – where the infamous Union Oil spill of 1969 occurred which started the offshore drilling bans in the United States – is getting in on the action. Last month, their board of supervisors voted to support drilling.
It’s also somewhat surprising that Governor Arnold Schwarzenegger adamantly opposes offshore oil production. In spite of that, current polls reflect that the majority of Californians now support oil drilling off of California’s coastline. With California running a deficit approaching $100 billion, it seems that California citizens realize that the revenue sharing possibilities from offshore drilling could greatly help their budget deficit.
Congress allowing the oil drilling ban to expire will enhance offshore drilling in the United States, and I truly believe it will be difficult for Congress to reverse this blank check on offshore oil drilling. With most Americans supporting offshore oil drilling, it will be difficult – even for a new President – to sponsor legislation that is vastly out of sync with what most Americans want. If you’re looking for a positive regarding an end to our reliance on oil from the Middle East, this is it. Additionally, it’s definitely a positive for our economy, for the revenue to our states, and more importantly, for our National security.
On another matter, it appears now that Congress will approve the emergency fund for purchasing the toxic bonds sometime this weekend. After my last blog, I received a lot of questions and comments regarding the proposed financial plan, and it’s apparent to me that there’s a significant misunderstanding regarding who this legislation benefits.
Wednesday night, I heard Neal Boortz’s long dissertation on CNN concerning the financial plan, and while I generally like Neal’s creative thinking, I vehemently disagree with him on this matter. My disagreement with him on this issue isn’t philosophical or political in nature; rather, I feel he doesn’t understand what’s going on with this plan. Since I see Neal playing golf at my course on my weekly golf round, maybe I’ll pull him aside the next time and explain it to him.
First and foremost, $700 billion will not be spent like a normal budgetary expenditure. If you spend $700 billion for government employees, that money is gone, which immediately creates a deficit and can never be returned. However, this $700 billion will be used to buy assets, and therefore, it will not be “gone”, and it will be returned.
A better way to think of this transaction is to compare it to the carrying costs for bonds. If the U.S. government were to issue new 10-year bonds tomorrow to pay for this program, it would cost them approximately 3.8% in annual interest for 10 years. Therefore, it would cost the government approximately $27 billion in annual interest expenses to completely fund this program from beginning to end for a 10-year period. While $27 billion dollars is a whole lot of money to you and me, it’s peanuts (and a rounding error) to the annual Federal budget.
The media’s characterization of this program as a $700 billion expenditure has vastly misled the public into believing an inflated cost for this financial plan. If the government invests $700 billion dollars in securities and then resells them at a zero net profit, then the cost to our Federal budget is miniscule compared to the realized benefits.
Neal Boortz is a Libertarian – a member of the party whose platform favors less government. Who could argue with that philosophy?!?! Apparently 50% of those running for President, but I digress…. Boortz argues that government should never get involved in private industry, and as such, the endangered businesses should be allowed to fail instead of the government intervening and assisting them.
In the last few days, I’ve also heard hundreds of people question why the average taxpayer should bear the responsibility of bailing out the greedy Wall Streeters. I think those comments illustrate how totally misunderstood this whole financial plan is. The entities we are assisting in this matter have nothing whatsoever to do with the Wall Street brokerage firms.
We would be assisting Bank of America, Wachovia, Washington Mutual and the like. The individual brokers who completed these transactions and subsequently received millions in commissions are long gone. The public doesn’t seem to be grasping the fact that Wall Street no longer exists; brokers as we knew them ceased to exist on Sunday, September 21st when the last two converted to National banks.
There’s another completely wrong misconception that is being expressed by the public lately. I have heard over and over again – even from some of the candidates running for office – that none of this would’ve happened if there had been more governmental supervision of the banking industry. As has been documented ad nauseam over the last two weeks, this problem was created by the government, and happened under the close supervision of governmental agencies.
In the mid-1990’s, when the Clinton Administration decided that there was strong economic and humanitarian reasons for everyone to own real estate, the die was cast for abuse. There were many governmental agencies and quasi-governmental bodies overseeing this program. I’m not saying that the private sector would’ve done it better, but for anyone to argue that the problem was caused by a lack of governmental regulations once again illustrates a poor understanding of the facts in this complex matter.
At this point, this issue totally has to do with Main Street and has nothing to do with Wall Street. If we do not assist the banks in freeing-up these bonds, it will cost the United States an enormous amount of jobs. Banks loan money to companies that employ people. Without liquidity, these banks will be unable to loan money to companies. When companies cannot get bank loans, they can’t exist. Even the people who are expressing their extraordinary dislike for this proposed plan can’t seriously want our banking system to cease to exist. The economic ramifications of a major U.S. bank failing would have negative repercussions for decades to come.
For the cost of $27 billion per year, every American should stand up and say, “Heck, yeah! Let’s move on this financial plan already!!”
My last several posts have been critical of Congress’s inability to get the issue of offshore oil drilling to a vote. I’ve opined that the reason Democrats were unwilling to vote on the subject was because they didn’t want to want to take a position that would contradict the wishes of Barack Obama’s financial benefactors. My opinion has proven to have been correct, as nothing has actually happened since they’ve been back in session. In fact, Congress intends to adjourn within the next few days and will not be back in session until after the Presidential election.
As I predicted, the Democrats in Congress actually proposed a new bill that would allow oil drilling 50 miles off the U.S. coast, but with provisions that would essentially make the bill ineffective. Even if the bill were passed, the oil companies wouldn’t have exercised their right to drill since it would be financially imprudent.
However, something unusual happened on Tuesday that warrants your attention: The Democrats have completely dropped the 26-year oil drilling moratorium! I can only surmise that it was fairly clear to the Democrats in Congress that they wouldn’t win any Republican votes on the subject of oil drilling. Furthermore, they certainly weren’t willing to have Obama vote on the subject only six short weeks before the election and alienate his backers. To avoid the embarrassment of a defeated bill, or even worse, to put Obama in the predicament of having to vote on the proposed legislation, the Democrats allowed the oil drilling ban to expire!
Since Congress wouldn’t vote on extending the oil drilling ban off the U.S. coast, it was allowed to expire in the passage of the new budget under a continuing funding legislation. I suppose this is more than we could ever have expected to receive. In effect, Congress allowed a blank check to drill for oil off the coasts of nearly the entire United States with no restrictions. It’s absolutely stunning to me that the United States Congress would open the floodgates to oil drilling simply so they wouldn’t have to vote on a potentially detrimental subject to their Presidential candidate.
I’m sure Congressional Democrats will revisit this subject after the Presidential election and expect to have a mandate from the White House to defeat it. However, it appears that the states are quickly rallying to benefit from this oil drilling legislation. Virginia is already campaigning for oil drilling rights since they’d be sharing revenue with the Federal government on the subject. In an absolutely hysterical turn of events, even Santa Barbara County in California – where the infamous Union Oil spill of 1969 occurred which started the offshore drilling bans in the United States – is getting in on the action. Last month, their board of supervisors voted to support drilling.
It’s also somewhat surprising that Governor Arnold Schwarzenegger adamantly opposes offshore oil production. In spite of that, current polls reflect that the majority of Californians now support oil drilling off of California’s coastline. With California running a deficit approaching $100 billion, it seems that California citizens realize that the revenue sharing possibilities from offshore drilling could greatly help their budget deficit.
Congress allowing the oil drilling ban to expire will enhance offshore drilling in the United States, and I truly believe it will be difficult for Congress to reverse this blank check on offshore oil drilling. With most Americans supporting offshore oil drilling, it will be difficult – even for a new President – to sponsor legislation that is vastly out of sync with what most Americans want. If you’re looking for a positive regarding an end to our reliance on oil from the Middle East, this is it. Additionally, it’s definitely a positive for our economy, for the revenue to our states, and more importantly, for our National security.
On another matter, it appears now that Congress will approve the emergency fund for purchasing the toxic bonds sometime this weekend. After my last blog, I received a lot of questions and comments regarding the proposed financial plan, and it’s apparent to me that there’s a significant misunderstanding regarding who this legislation benefits.
Wednesday night, I heard Neal Boortz’s long dissertation on CNN concerning the financial plan, and while I generally like Neal’s creative thinking, I vehemently disagree with him on this matter. My disagreement with him on this issue isn’t philosophical or political in nature; rather, I feel he doesn’t understand what’s going on with this plan. Since I see Neal playing golf at my course on my weekly golf round, maybe I’ll pull him aside the next time and explain it to him.
First and foremost, $700 billion will not be spent like a normal budgetary expenditure. If you spend $700 billion for government employees, that money is gone, which immediately creates a deficit and can never be returned. However, this $700 billion will be used to buy assets, and therefore, it will not be “gone”, and it will be returned.
A better way to think of this transaction is to compare it to the carrying costs for bonds. If the U.S. government were to issue new 10-year bonds tomorrow to pay for this program, it would cost them approximately 3.8% in annual interest for 10 years. Therefore, it would cost the government approximately $27 billion in annual interest expenses to completely fund this program from beginning to end for a 10-year period. While $27 billion dollars is a whole lot of money to you and me, it’s peanuts (and a rounding error) to the annual Federal budget.
The media’s characterization of this program as a $700 billion expenditure has vastly misled the public into believing an inflated cost for this financial plan. If the government invests $700 billion dollars in securities and then resells them at a zero net profit, then the cost to our Federal budget is miniscule compared to the realized benefits.
Neal Boortz is a Libertarian – a member of the party whose platform favors less government. Who could argue with that philosophy?!?! Apparently 50% of those running for President, but I digress…. Boortz argues that government should never get involved in private industry, and as such, the endangered businesses should be allowed to fail instead of the government intervening and assisting them.
In the last few days, I’ve also heard hundreds of people question why the average taxpayer should bear the responsibility of bailing out the greedy Wall Streeters. I think those comments illustrate how totally misunderstood this whole financial plan is. The entities we are assisting in this matter have nothing whatsoever to do with the Wall Street brokerage firms.
We would be assisting Bank of America, Wachovia, Washington Mutual and the like. The individual brokers who completed these transactions and subsequently received millions in commissions are long gone. The public doesn’t seem to be grasping the fact that Wall Street no longer exists; brokers as we knew them ceased to exist on Sunday, September 21st when the last two converted to National banks.
There’s another completely wrong misconception that is being expressed by the public lately. I have heard over and over again – even from some of the candidates running for office – that none of this would’ve happened if there had been more governmental supervision of the banking industry. As has been documented ad nauseam over the last two weeks, this problem was created by the government, and happened under the close supervision of governmental agencies.
In the mid-1990’s, when the Clinton Administration decided that there was strong economic and humanitarian reasons for everyone to own real estate, the die was cast for abuse. There were many governmental agencies and quasi-governmental bodies overseeing this program. I’m not saying that the private sector would’ve done it better, but for anyone to argue that the problem was caused by a lack of governmental regulations once again illustrates a poor understanding of the facts in this complex matter.
At this point, this issue totally has to do with Main Street and has nothing to do with Wall Street. If we do not assist the banks in freeing-up these bonds, it will cost the United States an enormous amount of jobs. Banks loan money to companies that employ people. Without liquidity, these banks will be unable to loan money to companies. When companies cannot get bank loans, they can’t exist. Even the people who are expressing their extraordinary dislike for this proposed plan can’t seriously want our banking system to cease to exist. The economic ramifications of a major U.S. bank failing would have negative repercussions for decades to come.
For the cost of $27 billion per year, every American should stand up and say, “Heck, yeah! Let’s move on this financial plan already!!”
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