Posted in Bailout, Election, Financial Crisis, Politicians, Politics, Uncategorized, tagged Bailouts, Elections, Financial Crisis, Politicians, Politics on May 8, 2010|
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I shed no tears that incumbent Senator Robert Bennett lost his fight to get nominated for a fourth term. His support of the bailout and other big-government policies was a sign that he had become far too comfortable representing established interests and forgot that his job was to defend Utah taxpayers. I’ve received a couple of emails arguing that Bennett is being victimized because he was “brave” enough to support a bailout that “saved” us from another Great Depression. That is nonsense. Even if one believes that the banking system needed to be recapitalized with government money, it would have been far better to replicate what happened with the S&L bailout 20 years ago. That bailout also cost money, but at least insolvent institutions were shut down, managers were fired, and shareholders were wiped out. Unlike the recent bailout, which rewarded incompetence by propping up the people who made mistakes, the S&L bailout liquidated bankrupt firms and used the money to pay off depositors instead. Not a perfect approach, by any means, but at least it did not exacerbate the problems associated with moral hazard. By the way, I fully agree that the Fed, along with Fannie and Freddie, bear the blame for the financial crisis, but private sector institutions were not obliged to go along for the ride. Simply stated, capitalism without bankruptcy is like religion without hell. Bennett forgot that lesson, so let’s celebrate the news in this AP story:
Republican U.S. Sen. Bob Bennett of Utah has lost his bid to serve a fourth term after failing to advance past the GOP state convention. Attorney Mike Lee and businessman Tim Bridgewater are the remaining Republican candidates after Saturday’s vote. Bennett was a distant third in the voting among roughly 3,500 delegates. He garnered just under 27 percent of the vote. Bridgewater had 37 percent and Lee 35 percent. Bennett is the first incumbent to lose his seat in Washington this year, the victim of a conservative movement angered by rising taxes and the growth of government. Bennett was targeted by tea party activists and other groups for supporting a massive bailout of the financial industry, securing earmarks for his state and for co-sponsoring a bipartisan bill to mandate health insurance coverage.
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Only in the artificial bubble of Washington do you find people who are willing to make preposterous statements such as those contained in this David Ignatius column. He writes that we should adopt a value-added tax to avoid a Greek-style fiscal crisis, apparently oblivious to the fact that Greece adopted a VAT and still had a fiscal crisis:
The sensible real-world answer, many economists argue, is a value-added tax that would encourage saving at the same time it pays down the deficit to manageable levels. …A particularly dangerous example of this law of political inaction is the Greek debt catastrophe in Europe. Americans haven’t been paying much attention to this one (because . . . it’s Europe!), but it’s getting scary in financial markets.
He also does not understand how a VAT works. It does not encourage savings. Just the opposite. It doesn’t discourages savings as much as an income tax, to be sure, but it creates a larger wedge between income and consumption. The best that can be said is that the larger wedge applies equally to current consumption and future consumption.
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Here are some very depressing stories. The Daily Mail reports that a European Court has ruled that the U.K. no longer can impose restrictions on welfare payments to women married to suspected terrorists:
A European court has instructed Britain to drop restrictions which limit social security benefits paid to the wives of terror suspects. Ministers imposed tight rules on payouts to stop the money falling into the hands of alleged Al Qaeda fanatics. Under the restrictions, cash payments were strictly limited and families had to show receipts to justify every penny of spending. But yesterday the European Court of Justice said there was no danger of the handouts being used to fund terror and branded the measures unlawful.
Unfortunately, this story is not an isolated incident. Here’s a report from the Express about a Muslim cleric who collected welfare from the Brits while (to put it mildly) being a reprehensible slug: “The twisted cleric provoked outrage by comparing British troops to Nazi stormtroopers and telling parents of dead soldiers that their children had died in vain. …Choudary, a former lawyer…rakes in more than £25,000 a year in welfare handouts.” And CNN reports that, “Since the mid-90s, London has been a haven for foreign jihadi preachers, organizers, agitators and propagandists, many of them recipients of generous welfare benefits. And here’s a BBC report noting that: “In November 2000, Mr Kaplan was convicted for incitement to murder and sentenced to four years in jail. Since then, intelligence reports say his followers have become even more devoted to Mr Kaplan, considering him a martyr for the cause of Allah. …Mr Kaplan is believed to have a fortune worth millions. Nonetheless, he claimed social benefits in Cologne for many years until 2m Deutschmarks (1m euros, £700,000) in cash was found in his flat. This Mickey Kaus blog post has more nauseating details.
The most amazing story comes from Australia. Here’s a Youtube copy of a report showing that Aussie taxpayers gave $1 million of welfare over 19 years to an Islamic extremist who planned to kill thousands of innocent people.
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