Posted by brandonwbarrios on 05/12/10
Last updated 05/12/10

The case for a meaningful and recurring audit of the Federal Reserve, because we deserve an honest, transparent government.  The legislative and judicial battles to audit the Fed will go down in history as a textbook example of populism vs. corporatism.

It's official, Senator Sanders' financial reform amendment requesting a one-time disclosure of emergency lending by the Fed passed with a 96-0 vote.  Succumbing to pressure, Sanders' amendment is a gutted version of his bill S.604 The Federal Reserve Sunshine Act.  H.R.1207 The Federal Reserve Transparency Act, introduced by Congressman Ron Paul boasts 320 cosponsors and its recurring audit language passed in the House financial reform bill as the Paul-Grayson amendment.  The two amendments will meet in conference committee negotiations once the senate financial reform bill passes.  

Senator Vitter, an S.604 cosponsor, introduced the Paul-Grayson language as an amendment attempting to reinstate a recurring audit into the senate financial reform, but it was voted down 37-62.

This subject deserves attention, as President Obama, Wall Street, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner have effortlessly lobbied against a meaningful audit for several months through editorials, presence on the hill, etc.

The "Audit the Fed" movement has hardly lacked ammunition to build coalitions between the liberal left and conservative-libertarian right to battle the Fed.  The Fed failed to manage the economy and dismissed concerns of a housing bubble reported within their own FOMC meetings by regional bank presidents in 2004. Those meeting transcripts were released this past month.  FOMC transcripts are withheld from government-public review for five years with the excuse of market stability and political independence to control the debate on policy.

Certainly market stability was not present while the financial system collapsed neither was political independence shown when Fed and Treasury officials coerced our representatives to bailout their member banks lest stock markets collapse and martial law be declared.  Let's address the reasons for denying a recurring audit: political independence, market stability, policy effectiveness, etc.

Political Independence

The opposition argues an audit would strip the central bank's political independence of setting monetary policy, but would an audit interfere with their independence or setting monetary policy?  Jim Rogers, renowned American investor, says no.

"It cannot interfere with their independence at all.  Setting interest rates and looking after what happens in the bond market, and they are supposed to maintain a sound currency.  Why does auditing the fed affect that?  I've heard no explanation from them that has any credibility at all."

Executing an audit requires examining and reporting findings.  There is no dictation involved unless a law is found to be broken, upon which procedures initiate to correct the matter.  No entity of government should be exempted from our democratic form of government and the audits every individual and business in America are subject to. 

Although the cry for independence is heard often, they lack such independence due to the structure of our government and the objectives of monetary policy as expressed by Fed Chairman Bernanke on January 1, 2008 stating:

"With that objective, the FOMC implemented a sequence of rate increases, beginning in mid-2004 and ending in June 2006, at which point the target for the federal funds rate was 5.25 percent--a level that, in the judgment of the Committee, would best promote the policy objectives given to us by the Congress."

The Federal Reserve lacks political independence and their monetary policy is political in nature, as it must compliment fiscal policy and the overall economic policy objectives while accomplishing their dual mandate of maximum sustainable employment and price stability.  Which begs the question; do they ever accomplish their dual mandate?

In his own words Fed Chairman Bernanke confirms this complimentary relationship between policies.  On January 17, 2008 he stated:

"A number of analysts have raised the possibility that fiscal policy actions might usefully complement monetary policy in supporting economic growth over the next year or so.  I agree that fiscal action could be helpful in principle, as fiscal and monetary stimulus together may provide broader support for the economy than monetary policy actions alone.  But the design and implementation of the fiscal program are critically important."

If the design and implementation of fiscal policy are critically important in complimenting monetary policy it would require the Fed engage in the discussion to assure the effectiveness of their own monetary policy while being exposed to political pressure.  However, the argument for an audit can be more direct and simple.  As renowned economist Murray Rothbard put it:

"These are government agencies and operations...to say that government should be "independent of politics"...government can only be accountable to the public and to its representatives in the legislature."  A government independent of politics is an oligarchy, accountable to no one and would be more suitable for a dictatorship than for an allegedly democratic country.

Market Stability

There's the argument an audit would reveal which banks accept money at the discount window and if not paid back in a timely manner, would be viewed as weak.  The banks would be reluctant to participate in the discount window, known as the 'stigma problem.'  It should be obvious in the case these institutions are unable to settle discount window or auction facility obligations in a timely manner they're indeed weak.  This problem is demonstrative of the dilemma faced by the fractional-reserve banker: the fear of being found insolvent otherwise known as the 'insolvent bank problem.'

If institutions like the FDIC or any consumer protection agencies are to protect banking customers it would require this vital information be available for anyone who desires to perform such due diligence.  After all, it is the customers' money in the banks.

More representative of the falsehood that secrecy at the discount window is the only solution for the 'stigma problem' are the words by Fed Chairman Bernanke himself identifying a rather new auction facility that seemed to alleviate such a stigma.  On January 10, 2008 Chairman Bernanke stated: 

"To address the limitations of the discount window, the Federal Reserve recently introduced a term auction facility, or TAF, through which pre-specified amounts of discount window credit can be auctioned to eligible borrowers...it appears that the TAF may have overcome the two drawbacks of the discount window, in that there appears to have been little if any stigma associated with participation in the auction." 

He went on to discuss the dilemma between banking reserves and the target federal funds rate.  While Mr. Bernanke recognized that restructuring facilities might address the stigma problem, near 80% of the banks' customers suggest honesty and transparency.

By denying outside analysis of discount window operations, the Fed shields its member banks, but what is the Federal Reserve System hiding, money or lack thereof?  Could it be the very nature of a fractional-reserve system, insolvent banks?  If this were the case, than a significant portion of FRB operations focuses on propagating recurring bailouts and the unsound banking practices of its member banks.  This arrangement of inadequate capital reserves is culpable for the housing and financial crisis according to former Fed Chairman Alan Greenspan.

An investigation into these matters is denied as the opposition argues without common sense and overlooks the current state of affairs with respect to the big picture.  While representing the White House's opposition to a Fed audit, Deputy Secretary of the U.S. Treasury, Neal Wolin said:

"We think that independence has served this country very well over a long period of time. We think that countries that have had either the reality or the perception of political influence in their central banks have had real problems, problems with respect to inflation, with respect to the cost and availability of credit including to consumers and to small businesses."

This simple thinking has plagued the opposition's arguments.  With all due respect the housing market crashed, financial markets crashed and unemployment ticked up to 9.9%.   Credit is hardly available unless you are a member bank of the Fed; to which trillions of dollars of credit is available backed by the taxpayers.  The American public in the beginning of this century were led to believe that the Federal Reserve System would prevent such crisis, but only since their creation have there been such events as a Great Depression or global economic crisis. 

Protection of Monetary Policy

The justification for gutting Bernie Sanders' amendment from an audit into a one-time disclosure of emergency lending was to guarantee monetary policy is not inspected.  However, by allowing an inspection of emergency lending facilities such as the TAF, the Fed has conceded such protection.  The TAF become an important supplemental tool to the discount window in facilitating monetary policy.

Federal Reserve Chairman Bernanke himself identifies this to be true.  On January 10, 2008 he stated:

"To address the limitations of the discount window, the Federal Reserve recently introduced a term auction facility, or TAF, through which pre-specified amounts of discount window credit can be auctioned to eligible borrowers. "

He followed by revealing the large amounts of taxpayer money passing through this supplemental facility of the discount window saying:

"In December 2007, the Fed successfully auctioned $40 billion through this facility...the European Central Bank and the Swiss National Bank lent an additional $24 billion. These two central banks obtained the dollars from the Federal Reserve through currency swaps...we will auction an additional $60 billion ...

Lack of transparency and honesty regarding the assets, securities and financial condition of various firms were significant factors of the uncertainty that plagued the financial markets most noticeable in the Fall of 2008.  Alongside this was something called "regime uncertainty" which prevented the execution of due diligence needed for major market participants to take a position.  How could they with the certainty that the Federal Reserve and Treasury would void such due diligence through market interventions?

The Fed Fails

The Fed has failed to achieve their dual mandate of maximum sustainable employment and price stability.  Unemployment just ticked up to 9.9% and prices in housing, commodities like oil and gold, education and health care have been all but stable.  Prices go up when an economy is based on cheap money.

While evidence that dissent existed amongst the FOMC in 2004 has now been released in 2010, Chairman Bernanke downplayed the deteriorating condition of the housing market and financial industry as late as 2007 and 2008.  Most savvy investors understood the situation while Mr. Bernanke during a speech on the subprime mortgage market on May 17, 2007 stated:

"All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."

On January 10, 2008 months before our largest financial institutions like Bear Stearns, Countrywide, Washington Mutual and Lehman Bros. collapsed or sold themselves to avoid bankruptcy, Fed chairman Bernanke stated:

"Fortunately, after a number of years of strong earnings, most financial institutions entered the current episode in good financial condition. Thus, notwithstanding the effects of multi-billion dollar write-downs on the earnings and share prices of some large institutions, the banking system remains sound. Nevertheless, the market strains have been serious, and they continue to pose risks to the broader economy."

In the following months it was revealed, amongst others, that accounting tricks were used to mask massive debt, assets were more of liabilities and grossly overvalued, that the SEC-created cartel of credit-rating agencies failed to rate risk properly, that financial firms did not have adequate capital reserves to weather the financial storm and that the Federal Reserve still claims no one saw this coming.  

Our central planners at the Fed, with access to information so vital to our economic stability that it must be kept secret, were unable to foresee any of this with the likely exception that our fractional-reserve banking system is an insolvent system and provides cheap money.

Albert Einstein believed we still do not know one thousandth of one percent of what nature has revealed to us, yet we are to believe a room full of 24 is to centrally plan and regulate our economy in secrecy through the price control of money and whose operations deny the most vital foundation of a functional free society- honest banking and sound money.  The past century has been a history of stepping away from this foundation and has seen problems more severe and widespread.

With access to the most vital and secret of all information the Fed stressed the importance of secrecy.  During an FOMC meeting in 2004, Fed Chairman Alan Greenspan said:

"We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand."

Unfortunately they didn't understand the process at all.  Alan Greenspan wanted any dissent amongst the FOMC to be kept hidden.

Between the years 2000-2010, the FOMC swung the target federal funds rate down, up and back down again.  The rate has been held below 2% five of these years otherwise it's ranged between 6% and 0%.  No wonder markets are unstable.  While understanding that financial and economic conditions may change quickly and justify a change in policy, the point of the above is despite their actions the financial markets collapsed and economy crashed.  

Famed investor Jim Rogers has a simple understanding for it stating:

"This idea that the central bank is somehow smarter than the rest of us...they're nothing but government bureaucrats.  What suddenly made them so smart just because they went to work for the government?"

The Federal Reserve's Response

On November 2, 2009 8 Fed-sponsored economists circulated a letter to our representatives in Congress opposing an audit of the Federal Reserve.  The statement read:

"Subjecting central banks to short-run political pressure makes it more likely that the monetary policy authorities will pursue excessively expansionary monetary policy to lower unemployment in the short run, with an outcome of higher inflation, higher interest rates, and yet no better performance on the unemployment rate in the long-run.  This has happened over and over again in the past, not only in the United States but in many other countries throughout the world."

Let's consider the track record of the Federal Reserve in the past few years.  The Fed failed to manage and identify risks resulting from their monetary policy and failed to connect the dots of poor monetary, regulatory and fiscal policy.  Insult to injury their response taken to clean up the mess has been extending taxpayer-backed credit to facilitate distressed sales of financial firms, appropriating taxpayer-backed funds to purchase stocks of financial firms, and purchasing toxic assets that were bringing down financial firms using taxpayer-backed credit.  

What intelligent thought is required to spend trillions of dollars purchasing everything in sight and pursuing excessively expansionary monetary policy doubling the money supply in mere months, at a rate not even comparable to the previous years, in order to lower unemployment in the short run?  These actions result in the redistribution of income and wealth to the beneficiaries of such actions and will see no better performance on the unemployment rate in the long run.

Indeed the 8 Fed-sponsored economists are very wise in that there appears to be a force of political pressure subjecting our Federal Reserve Bank to pursuing an unsustainable, excessively expansionary monetary policy.  It is only necessary that such political pressure be revealed through an audit of the Federal Reserve.  So in light of this revelation and the Fed's response to the crisis the following words of Albert Einstein come to mind:

"We can't solve problems by using the same kind of thinking we used when we created them."

Recognizing that despite the Federal Reserve's oversight and interventionist management the financial markets crashed and the economy collapsed, consider the following question.  Is it possible that despite these interventions in the market, the economy could recover on its own?

Famed investor Jim Rogers puts this in perspective saying:

"America has had three central banks in our history, the first two disappeared...the world didn't come to an end.  America continued to become one of the great success stories of the last 200 years."  He asks, "What is this, the world would suffer badly if the Fed were audited?  Even if they found out horrible things, we should know, shouldn't we?  If the world finds great things, fine that would be wonderful."

Conclusion

Sustainable long-term employment and economic growth will be despite these interventions in the market.  Interest rate setting is a mere form of price control of our currency and cheap money doled out to fractional-reserve bankers combined with poor regulatory policy and government initiatives fuel misallocations of capital into unsustainable endeavors, as should be now obvious as experienced with the housing bubble and financial crisis.

The question remains however, does the financial reform in the House and Senate address the causes of the crisis?  The straight answer is no.  Effective reform needs all the vital information to understand the cause that needs to be reformed to prevent the effects.  An extensive and recurring audit of the Federal Reserve would provide this information.

Contact your Senator and Congressman this very second and tell them no excuses, no compromise you want them to demand an honest, extensive and recurring audit of the Federal Reserve in any financial reform bill being considered or even better a stand alone vote on HR 1207 and S604.

Posted by brandonwbarrios on 02/05/10
Last updated 02/07/10

No it was not to save the global economy, nor was it that the leader of the free world was needed to save the free market.  Most average Americans can cite a common phrase or paragraph on who they blame for the current financial crisis, less are able to on why our American economy entered the recession in late 2007  and supposedly ended with a rise in GDP at the end of 2009.

By the GDP definition this recession ended with a rise in GDP within the last few months or so.  There is debate on the calculation of this rise and the government spending and intervention in the market to achieve it. The generally accepted GDP definition of a recession is two down quarters of GDP.  There are several economic indicators that determine the health of the economy, GDP is just one of these indicators.  The GDP approach attempts to simplify the complex identification process due to the manipulative and deceptive nature of government data and statistics.

Although some media and many economists have been quick to announce the recession has ended and the economy's renewed path towards expansion, albeit modestly, none have taken the position that our systems are in the clear.  Even the authority for dating U.S. recessions, the Business Cycle Dating Committee of the National Bureau of Economic Research, has not noted this recession as having ended on their website.  Either their web master has been out of town or they aren't convinced the U.S. is out of the woods.

During the fall of 2008 President George W. Bush was quoted time and again with statements such as "I abandoned my free market principles to save the free market system."  In a movie this catchy phrase may have been cool, but this is not a movie and the majority of working class Americans live in reality.  If they weren't before, this recession has definitely forced it. 

The rhetoric and unprecedented actions taken by the supposed "laissez-faire, free market, conservative" Republican President Bush were precisely the opportunity needed for the Austrian school to correct the record on Keynesian policies and its offshoots.  Keynesian apologists advocate extreme fiscal and monetary intervention to palliate and reverse the short-term effects of business cycles, recessions and depressions, but disregard the mid- and long term consequences of their aspirations. 

The continuation of Keynesian policies by the Obama Administration better serves the Austrian cause.  All the economic Keynesian fallacies that dominate each administration need to be recognized for what they are- detrimental to our society and the cause of our current economic woes.  A "crisis" each presidential cycle is hardly indicative of a well functioning economic system no matter the number claiming pragmatism and empiricism.

Flashback: An opportunity to build perspective

Following the stock market crash of 1929 and the years leading up to the Great Depression, former Republican President Herbert Hoover was credited for "doing nothing" to address the sputtering economy.  Today, as some sort of learning lesson, interventionist apologists everywhere in the media and Washington argue or better yet "assert" President Hoover allowed the economy to freefall into oblivion.  Hoover's policies were hardly laissez-faire leading up to the stock market crash of 1929 and after, but that point has been well documented in numerous articles by Murray Rothbard.  Hoover's successor, President Franklin D. Roosevelt, is credited with rescuing the economy, placing it on government's shoulders while he expanded nearly every facet of government and the money supply with it. 

As President Obama has similarly declaimed during his own inaugural address and several instances thereafter, President Roosevelt during his own inaugural address on March 4, 1933 blamed the economic crisis on bankers, profits and the self-interest of capitalism:

"Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence....The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit."

During the 1930's President Roosevelt passed the Emergency Banking Act, National Industrial Recovery Act, Social Security Act, Glass-Steagall Act, Fair Labor Standards Act and the National Relations Act, among several others.   His administration created the Federal Emergency Relief Administration, National Recovery Administration, Civilian Conservation Corps, Agricultural Adjustment Administration, and Public Works Administration.  Let's not forget his creation of the Federal Deposit Insurance Corporation (FDIC) and Securities and Exchange Commission (SEC) which in the past two years have received significant recognition- all of it being bad.

Roosevelt's toughest opposition was the Supreme Court, which overturned some of his New Deal programs.  They were declared unconstitutional and in violation of the separation of powers between the legislative and executive branch.  In response, Roosevelt proposed a law to appoint five new justices in an effort to pack the court in his favor; it was defeated.  His own Vice-President John Garner, a conservative Democrat, former speaker of the house and staunch defender of the sovereignty of the three branches of government inevitably opposed Roosevelt's drastic power grabs and interventionist policies.  Vice-President Garner was the legislative brain of the FDR Administration.  Their relations soured after 1937 and the last New Deal program was passed soon after in 1938.

Most of the New Deal programs were smoke and mirror gimmicks, meant to mislead citizens into believing the banking system was fundamentally sound and not based on a fractional reserve system insolvent by nature.  Others were that price fixing, such as through the destruction of crops and cattle while citizens were starving on the streets or had empty dinner tables at home, was for the greater good of the majority of suffering Americans than the minute number of those whom actually benefited. 

During Roosevelt's term the economy's growth increased dramatically by GDP calculations.  The government spending variable in the GPD equation increased due to unprecedented spending on welfare programs and the warfare of World War II.  Despite this "growth" unemployment remained high fluctuating between percentages ranging from the high teens to low twenties with 5 million Americans jobless heading into WWII.  The only sustainable drop in unemployment was experienced after American industry focused a now impossible percentage of the nation's resources gearing for warfare as well as the decline of the labor force through conscription of 11 million Americans for World War II.  Millions were sent to fight and die in the trenches of some far away country- an unsustainable approach though we still seem to be trying to this day. 

Somehow the Roosevelt Administration's New Deal was declared successful after a decade of poverty and years of world warfare.  The Obama administration and its Keynesian economists rely on this flawed belief that government spending creates jobs, though history has proven otherwise.

The Hoover argument cannot be said of the Bush Administration, which from October 2007 to January 2009 intervened in the market in unprecedented fashion at least 28 times.  The Obama Administration continues the job.  The Bush Administration interventions in chronological order ranged from mortgage assistance modifications, term auction facilities, primary dealer credit facilities, term securities lending facilities, the Housing and Economic Recovery Act, nationalization of FNM and FRM, the AIG bailout, the SFP (supplementary financing program) for the Federal Reserve- an auction of U.S. treasury bills to provide the private bank with cash for its balance sheet, a short selling ban, the asset-backed commercial paper money market fund liquidity facility, commercial paper funding facilities, TARP (trouble assets relief program) known as the $700 billion bailout of Wall St., a "temporary" liquidity guarantee program, money market investor funding facilities, the second Citigroup bailout, term asset-backed securities loan facilities, the first auto bailout, the second Bank of America bailout, the second Chrysler bailout and lastly further extensions of six of the "facilities" listed above on 8 separate occasions. 

To put these interventions in perspective, the TARP alone authorized the U.S. Treasury to purchase or insure tens of trillions of dollars of "troubled assets" all guaranteed by the fruits of American labor.  This is not an exaggeration.  It is crystal clear, that big government interventionists were busy patching holes of the system they took decades not deregulating or regulating but IRREGULATING.

It is overlooked the interventionist actions taken by President Hoover before and after the stock market crash of 1929 leading into the Great Depression.  Confusion persists on what the argument is- talking heads and politicos continue that his supposed inaction and free market policies failed to rescue the falling economy while Austrians argue that it was precisely Hoover's failure to adhere to the free market principle of nonintervention that led the economy to fall in the first place. 

Alas we are living in the present and presently the Austrian school would be better served bringing awareness to the corporatism and market interventionism inherent in the policies pursued for the past decades and their detriment to our society than to dwell on the past.  The common discussions of the Great Depression are not its causes, but what government policy actions addressed the effects.  If history repeats, the failure to accurately address the causes will continue and so will the shortsighted, irregulating patchwork addressing the effects.

History is in the making and we will witness its outcome.  We can thank George W. Bush the same argument of laissez-faire policy floundering to support a failing system in the early 1930's cannot be used this time around.

Posted by brandonwbarrios on 06/02/10
Last updated 06/02/10

Commenting on the European Debt Crisis, a WSJ opinion piece understands that the troubles of national insolvency compete with and threaten the same banks the U.S. and Europe recently bailed out.

According to the ECB's Financial Stability Review, European banks need to roll over some €800 billion in long-term debt in the next two and a half years, and to do so they'll have to compete with European governments that last year borrowed some €811 billion among them. This competition for capital between the private and public domains could drive up interest rates, or even lead to a liquidity squeeze for the banks or the public fisc, or both.

This situation illustrates the "crowding out" concept in action. Money backed by productivity and savings will sell to the highest bidder, but at what interest rate? Printing money is not free and issuing massive amounts of debt is not without consequence. Market forces can be ignored for only so long. Further...

The situation is made more dangerous by the rules on how bank capital is calculated. Under regulatory capital requirements, highly rated government debt owned by banks is generally considered nearly risk free, giving financial institutions a strong incentive to hold sovereign debt. According to the Bank of International Settlements, its member banks have some $2.1 trillion in total exposure to European sovereign debt. So a pan-European sovereign debt crisis would not only affect the ability of European capitals to pay their bills. It would pose a threat to the solvency of the private banking system itself.

Government manipulating law to favor its own debt. "The law piverted!" as Bastiat would likely say. This is obviously ironic considering over the past two years trillions of dollars worth of public funds, financed by sovereign debt instruments or the printing press, were to bailout these banks.

Although there are even unintended consequences to a government's non-intervention, Austrian professor Richard Ebeling hits the nail on the head noting that when governing authorities such as the European Central Bank or Federal Reserve Bank take action they grossly centralize and consequentially magnify problems.

Someone, somewhere will go bankrupt. The piper eventually must be paid, but I don't think even he will trust being paid with fiat money (debt) merely backed by the credit of a sovereign government reliant on issuing debt.

Posted by brandonwbarrios on 04/12/10
Last updated 04/09/10

Congressman to hold hearing into baseball and chewing tobacco

Washington, D.C. - Congressman Frank Pallone, Jr. (D-N.J.) announced on Wednesday a congressional hearing on the use of chewing tobacco by young people, the health problems it causes and the influence of professional baseball players who chew tobacco.  

"Just because there's no smoke doesn't mean there's no harm," said Pallone. "Young people should understand the consequences of chewing tobacco. The best way to protect them against health damage is to get a better understanding of the extent of its usage, the health problems it can cause and the factors that influence its usage." 

Read the rest here.

Sounds like a big waste of time and money.  I've never met anyone who is not aware chewing tobacco may cause cancer.  The concern is slapping a sticker on chewing tobacco like its done on cigarettes is not enough.  These extremists want more.  Next they should argue stickers be placed on donut boxes stating "May Cause Obesity", if they haven't already.

The extremists in our society are the statists of any political party that ignore our individual liberty while seeking ways to impose their beliefs and opinions on everyone.  They are proponents of a nanny state whose actions are outside the scope of law.  They ignore the natural rights outlined in our Declaration of Independence from the very aura they've come to represent - intrusive government.

Posted 04/09/10 LizLiz Brooklyn, NY

I have yet to meet any 'young' people who chew tobacco... oh, and I work in a pharmacy. I ring up people daily for cigarettes, but have yet to ring someone up for chewing tobacco. In fact, we hardly order the stuff because it DOESN'T sell. Maybe my store and location represent some weird magical place...

Posted 04/10/10 kpasa01 Charleston, SC

Actually, LizLiz, its not just "chewing" tobacco they are talking about. I'm pretty sure this includes snuff, dip and snus as well. Smokeless tobacco is the term that should have been used. However, do I think there should be a warning on a pack of a tobacco product? Sure, why not? How about doughnuts? Might as well. I work in health care I can tell you, it would simply amaze you how many people come into the hospital and do not realize their diet has contributed to their poor/extremely poor health. It's a shocker. Trust me. Can there be that many idiots out there? You bet ya. Might as well educate them somehow. And if that requires a sticker indicating that tobacco causes cancer or certain foods cause obesity and cardiovascular problems, go for it.

Posted 04/10/10 mlang52 Robinson, IL

When other people assume that those who chew tobacco don't know the risks, I think they are the ones that are delusional. Liz, I live live in a rural area now, and once lived in Arkansas, as well. There is plenty of that stuff sold at the convenience stores. It is sold to adults, that already have these facts. Why does the government assume we are all stupid? Well, maybe a few of us are. But, I think it would be a good guess that 95% or more of tobacco consumers know the harm it can cause to their bodies! The others must be retarded!

Posted 04/10/10 nkoscielniak Severn, MD

I played baseball from the time I was 7 years old all the way through college. Chewing tobacco, or "dip" as we called it, has always been a part of the baseball culture. I had coaches and teammates who "dipped" every practice and every game. To say they did not know the consequences, even as high school students, is completely ignorant. I could have easily succumbed to taking part in "dipping," however, I knew the consequences and therefore, I never "dipped." I am sure I am not alone. This is just another example of the government taking away our liberties that are our God given rights. Congress should let the MLB, NFL, NBA, and NHL govern themselves and stay out of their business. If they want to clean up the integrity of their respective sports, that is completely on them, not Congress. Personally, I would never "dip," however, I understand its place in the baseball culture and I would never dream of telling another human being what he can or cannot do, even if it may be hazardous to one's health.

Posted 04/10/10 brandonwbarrios new york, NY

Maybe something I should have focused on was that the meeting seeks to focus on factors that influence its usage. The question than will be, "What next?" Where will they stop?

Posted 04/11/10 Xedus129 Niskayuna, NY

No smoking.. now no dipping.. whats next chewing gum in public?

Posted by brandonwbarrios on 04/07/10
Last updated 04/07/10

Due to government intervention in private industry it is beneficial for corporations to waste billions of dollars lobbying government to protect or achieve profits or market share instead of earning it through the innovation of a product, service or any advancement that progresses our society.  Government intervention and its consequential lobbying is truly an enemy of progress.

As reported on Market Ticker:

On March 23, 2010, the President signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act (HR 3590).  Included among the major provisions of the law is a change in the tax treatment of the Medicare Part D subsidy.  AT&T Inc. ("AT&T") intends to take a non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change.  As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company.

Read the rest here. Consequences of Health Care: Valuations

The above article briefly sums up one of the ways the administration plans on paying for health care reform—redistributing wealth between private industries owned by private shareholders.  Inevitably, this redistribution will consequentially take wealth from an even greater number of citizens, employees or customers.

The nature of these charges relates to previous federal subsidies that will be prohibited starting in 2011.  As noted in the article they must be accounted when realized per GAAP.  The subsidy covered a portion of the cost of their retirees' prescription drug coverage and also allowed these costs to be deducted from the companies' income tax.  It encouraged companies to continue providing this coverage to retirees in order to keep them off of government-funded Medicare Part D.  Due to the change in tax treatment of this subsidy, over a dozen corporations have announced charges ranging from $10 million by Goodrich Corp. to $1 billion by AT&T.  Other companies reporting such charges include Boeing, Caterpillar, Deere, Prudential Financial, 3M, Honeywell, AK Steel Holding, Valero and Allegheny Technologies.  The Obama Administration and Congress must not have received the memo informing them the U.S. economy isn't exactly a winner. 

The proponents of this reform argue for the closing of a tax loophole, among which group of beneficiaries these newly acquired taxes will be redistributed and what intention they aspire to achieve.  It would be difficult to argue the merits of the reform and what interests they serve, as an equal argument can be made on behalf of the previous arrangement.  What is certain though is that government subsidies to private industry always involve conflicts of interest, special interests and unintended consequences.  Government intervention breeds further government intervention.  For example, the growth of an employer-based health care system should be credited to the federal government and their encouraging it through changes to the tax code.  Any criticism of this system's failures should be credited to its creator and cheerleader, interventionist government.  It is also important to realize who these interventions and subsidies affect: everyone.

Any immediate or future negative effects of these costs on the companies' earnings and therefore stock valuation hit the investment portfolios of the thousands of shareholders invested in these companies.  Why defend shareholders? Well, it shouldn't be hard to understand that these shareholders are affected negatively and are now that much poorer.  Whatever the future scenario, an economic opportunity has been reduced and/or redistributed.  Should they have chosen to utilize this now-lost portion of their wealth to consume or pursue some form of entrepreneurial aspiration, those that suffer would be anyone who would have benefited from this now-impossible purchase, job creation, service or product.  Had the shareholder opted to store this wealth in the bank, our gracious fractional-reserve banking system would have lent that amount of savings many times, financing the purchase of a home or the creation of a business venture by another party.  It also isn't difficult to understand that although a significant number of companies will be paying higher costs, there is certainly an industry that benefits from this reform: the pharmaceutical companies and their shareholders.

Due to the higher costs yet unchanged output, any sustainable profit-maximizing business will seek further efficiency and greater output per worker to recoup the costs.  Burdened with these additional per year costs, cuts will be made to reduce labor costs.  Indirect losses to private employees will be realized through the loss of one's job, cuts to their employment benefits or retirement packages.  This is a measure currently underway as briefly reported to the SEC by AT&T.  Found here.  

There may even be the loss of technological advancements that will never be realized due to a lesser amount of capital being allocated to the research & development areas of these businesses than would have otherwise been the case before the reform bill.  The $1 billion charge by AT&T is a hefty chunk of change, to say the least.

These opportunities and benefits have now been transferred to the demographic and industry that stand to benefit from this reform.  No surprise, government will surely claim any new opportunities, benefits or "job creation" as their own while ignoring what was lost in the process.  To reiterate, so long as government intervenes in private industry through subsidies and special favors, special interest lobbying will remain a dominating influence within the beltway.  Due to government intervention in private industry it is beneficial for corporations to waste billions of dollars lobbying government to protect or achieve profits or market share instead of earning it through the innovation of a product, service or any advancement that progresses our society.  Government intervention and its consequential lobbying are truly an enemy of progress.

The government granting subsidies to one demographic or private industry at the expense of others is really the business of picking winners and losers, a business it should have no part in.  The government needs to get it right, or get out.  I advocate the latter.

Posted 04/08/10 AnthonyC Oneida, NY

Thank you for the insight. Too many of my colleagues think that the believe that the Health Care law will have little or economic impact as Pres. Obama said it would not increase the deficit but decrease it! I still can't understand how they bought it.

Posted 04/08/10 MichaelBarry Sebring, FL

Every major successful business in the United States today receives a subsidy either directly or indirectly.

Posted 04/08/10 brandonwbarrios new york, NY

Exactly the point. That's why there are lobbyists, yet so many in DC pretend they can change this.