Welcome To Opposite World
Local Realtors in Springfield Illinois have posted the fifth consecutive month over month increase in the number of home sales June through October
. Good news. Or is it? Has the local housing market returned to normal, or is it a false market driven by financial incentives provided by the government with your tax dollars?
Unemployment jumped in September in Springfield to 7.9% the highest in decades and about 3% higher than one year ago. This means we can rule out job expansion adding home buyers to the market explaining the jump in home sales.
What has caused home sales to increase? Financial incentives through the first time home buyer tax credit. This produces sales that would not have occurred without the incentive, and therefore is a false market.
Don't over look the role record low interest rates have played in the number of home sales. Why are interest rates so low? The federal reserve during the financial meltdown crafted a plan to purchase $1.3 trillion in bonds at artificially low rates, not market driven rates, to keep interest on consumer loans low. Hence not normal market rates driving home sales, artificial rates adding to the false market.
It was reported early in the week that the GDP grew by 3.5%. The stock market boomed. Then it was reported that consumer spending fell .5% in September for the first time in five months, and the most since last December when the country was in the grips of uncertainty. The stock market crashed.
Why did consumer spending fall in September? Declining auto sales led the way. Why? Financial incentives offered through the cash for clunkers program in August drove car sales up, but it was a false market that was robbing future demand as witnessed in September.
Wall Street figured this out when it was reported the cash for clunkers represented 1.6% of the growth in GDP. The real growth turns out to be 1.9% which is too anemic for businesses to start hiring. It followed that it was no surprise when first time claims for unemployment did not decline as predicted.
Welcome to opposite world. Short term solutions result in long term opposite effect. The good intentions of the government (incentives) only help short term, but doesn't have staying power, and in the long term creates weaker demand. Unless government makes the incentives using your tax dollars permanent.
Regarding taxes the opposite is true in the real world. More means less, and less means more. Just ask New York who raised taxes on the quote wealthy, those earning over $200,000 a year. Revenue projections are running 20% below expectations, while thousands are leaving the state, meaning fewer tax payers in the future. More means less.
Maryland imposed a millionaires tax. The year prior 3000 filers reported that level of income. The first year of the tax intended to raise revenues? Only 2000. Rich people can afford to move. The opposite has resulted as there are now fewer rich to tax, and revenues fell $650 million below projections requiring massive spending cuts. More means less.
California and New Jersey have had the same results. Raise taxes with the expectation of more revenue, only to find tax collections running billions below projections and people leaving their states that will leave them fewer tax payers. The opposite result once again, more means less.
Illinois Governor Quinn wants to raise income taxes by 50%? His opponent Hynes wants to impose a progressive tax? Hynes claims only the 'rich' earning over $200,000 will have their taxes increased. Hynes better check with New York and Maryland officials to see where all their high income earners have moved, so he can send Illinois' rich a post card when they leave. More means less.
Indiana cut taxes and are running a billion dollar surplus. Indiana figured out the more people working the more people paying taxes, and the fewer collecting unemployment. Less means more.
JFK, Reagan, and W. all cut taxes resulting in revenues increasing to the government as millions of jobs were created. Regrettably it only fed the insatiable spending habits of congress as the money was squandered. But the principle holds true regarding taxes, less means more.
The health care reform bill proposed this week by Pelosi and the progressives is a stellar example of opposite world. Within the bowels of this nearly 2000 page monster are mandates to purchase insurance, penalties for those who don't, hundreds of billions in tax increases on businesses, including small businesses, a massive half trillion dollar cut in Medicare, with taxes to be implemented in 2010.
But the health care plan doesn't start until 2013. Why? So the disastrous opposite results won't be realized by voters until after the presidential election. Opposite world (on purpose).
What will result from this reform if passed? The opposite of the stated goal to get health care costs down. Health care costs will go up, your taxes will go up, and millions will lose their jobs so businesses can afford to pay the tax. Opposite world.
What if cap and trade passes? The cost of living will go up for every man, women, and child in the country. Millions of jobs will be lost beyond any green jobs created. In the name of saving the planet based upon disproved/faulty science. The economic superpower of the world, America is brought to its economic knees causing financial pain and misery for those it intended to save. Opposite world.
The same flawed logic regarding climate change is used for energy independence. The Obama administration prohibits the expansion of drilling for oil offshore or capturing oil from shale in the Rockies. The result? The highest gas prices of the year, which will further diminish consumer spending heading into the Christmas season, and creates more dependence upon foreign oil. Opposite world.
Incentives for home sales now, means fewer to come. Health care reform to keep costs down increases costs. Economic policies to help the economy hurts the economy. Stimulus to create jobs diminishes the number of jobs. Transparency means blackout. Higher taxes to raise revenues decreases revenues. Lower taxes increases revenues. Climate change bill to save people hurts people. Deficit spending to spur the economy drags down the economy. Policies for energy independence creates greater dependence. Government meant to protect liberty denies liberty.
Welcome to "opposite world" where "hope and change" means "nope and misery".
by: Fritz Pfister
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