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On Bad Laws and Hard Rain
Bad Governance
The House finally passed the lousy two-month extension of payroll tax breaks. The CBO scored the Bill that is now law. The costs for 59 days (and annualized if extended for all of 2012):
Social Security....................$19.8B........Annualized $119.B
Extended Unemployment.....$8.4B........Annualized $50.4B
Medicare...............................$3.4B........Annualized $20.4B
Totals........(two months).....$31.2B........Annualized $181.8B
The total cost of $31B is paid for with an increase in mortgage fees to be charged by Fannie and Freddie. Given that these two are providing 90% of new mortgages, most folks who buy a home or refi an old mortgage will get hit with these fees. CBO estimates when these fees will come into the Treasury.
This information raises some questions. I posed them to CBO and did not hear back.
1) The bill sucks money out those who have a mortgage. But if this method of financing the stimulus were used to cover the other ten-months of 2012 it would but a monster bite in those homeowners. It is dumb economic policy to stick it to those who borrow money for the next ten years to pay for a two-month stimulus. It is insane to think that this could be expanded to cover a full years worth of stimulus.
My point is that there is a funding hole for expanding the stimulus beyond February. We can look forward to another stupid big fight. It will be interesting to see whose pockets get fleeced next. Maybe a levy on farmers, pro athletes or even the Boy Scouts will come up for considerations. Those options are no dumber than taxing mortgages.
2) Note that the revenue from the tax on mortgages is $1.3B in fiscal 2012. Fiscal 12 ends on 9/30, therefore the tax kicks in prior to 9/30. The 1.3b is at least three months worth of revenue (as compared to full year 2013 @4.6B). Based on this information I conclude that the start date for the mortgage tax is June 1, 2012.
We have seen in the past what happens when a subsidy for housing ends. The housing market reacts pre and post the ending of the stimulus in a predictable fashion. Buyers do what they can to get a deal done before the subsidy goes away. Demand is “borrowed” from the future.
The tax on mortgages will work in a similar manner. Post 5/30, a buyer who takes out a $600,000 mortgage will pay an extra $50 a month ($6,000 over ten years).
Will this influence demand on a short-term basis? I would expect so. The RE hucksters will be pushing this all spring:
“Buy Now! Close Quick! Avoid the Tax!
After 6/1 there will be a drop off in demand for housing. This seems particularly dumb to me as this will happen right in front of the election. Possibly the Republicans (the tax on mortgages was their idea) think that a weak housing market coming into November plays to their hand. I think they will end up with egg on their faces.
3) The Republican leaders hate Fannie and Freddie. The reason they insisted that the 2012 stimulus be paid for on the backs of mortgagors is that they want to force F/F out of business. I hate F/F too. But 2012 is not the time to make mortgages more expensive.
The Republican Party has been digging their heels in fighting against every form of tax increase. But what do they do to achieve their objectives? They raise taxes, just like the Democrats do.
I would give the Democrats a C- grade on how this worked out. The Republicans deserve a D-. America is suffering from bad governance.
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Bad Weather
Today there are reports of 1000+ deaths from flooding in the Philippines. Last week another 750 were killed from massive floods in southern Thailand. A month ago the Thai capitol, Bangkok was inundated for a month. Deaths by drowning and water borne illnesses are in the thousands. These hundred-year floods are the result of the same weather pattern that brought the floods to Australia a year ago. La Nina conditions have persisted in the Pacific Ocean.
The following chart looks at the long-term ENSO cycles. Below zero is La Nina, above brings El Nino conditions. The data shows that neutrality in ocean temperatures was achieved in September. But today we are rapidly turning back to strong La Nina conditions. The chart shows several occasions in the past where the ENSO cycle was negative then neutral and finally negative again. It’s more normal to see a cycle shift from a La Nina to a El Nino.
Both El and La conditions bring the potential for severe weather. When the cycle persists the damage that it brings is concentrated in the same parts of the globe. This slide looks at Asia today. There are severe storms all over the region. The rest of the globe has relatively tranquil conditions.
For the US, the return of a strong La Nina means that West Texas will stay dry, above average rain in the central part of the country is probable and the NE looks like it is going to get a miserable winter; Cold and snow.
The farmers say, "A drought will scare you to death, but too much rain will kill you." As usual, the farmers are right.
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Thank you, Mr. Krasting, for sharing your thoughts and time with us this year. You're always a great read.
Bruce, what does this do to the value of the Fannie/Freddie preferreds? I'll tell you - it makes them worthless. Cause any future gfee hikes will bypass Fannie/Freddie and go directly to Treasury.
Hope everybody is ready for a great Christmas and New Years!
Now, you gotta be kidding us Krasting. You're a bigger sell out than Obama if you think the democrats are better than the GOP at this point. They're both losers, but you sound like a wimpy suck-up to TPTB, ala CNBC, who doesn't want to get any club cards pulled.
The massive democratic welfare-state economic build up and TBTF bailouts have given TPTB sovereignty and control over all policy making via our indebtedness to them. And Obama alone got $20 million from the Wall Street squids. Corzine was a democrat whale -- Corzine should have been Time Magazine's Person of the Year because he is emblematic of the official arrival of the "Age of Banker Sovereignty" which has been handed over to them by the complicit democrat thugacracy.
Democrats: Doubled the national debt since they took over in 2006, complete with debt downgrade. A tax cheat is in charge of our Treasury Department. TARP? Undeclared wars in 6 countries, way more than Bush ever dreamed of. War against Iran has already commenced, and dems had vowed to stop Cheney/Bush going to war there. The Dems supported waterboarding and the Iraq war, before they were against it. Dems have expanded the homeland police state, and compliance has been ensured with a death-panel health care system. Socialism and the social welfare-state have expanded dramatically under democrats in the last 3 years empowering he bankers, just as the model has been discredited and is collapsing in Europe. How dumb and insane is that??
The Norwegian, Canadian, Australian social-welfare states muddle along because their small populations sell their natural resources. But how would Norway do if they had an EPA that waged war against their socialized North Sea oil production and their oil shipping industry? Why should we let the hypocrite Democrats euthanize the US economy, hence give more power to the banks? The dems only make global pollution worse by forcing US energy production to unregulated dirty places like the Niger Delta.
I'll gladly take:
Kyle Bass over Bruce Krasting on socioeconomic reality
Paul Ryan over Nancy Pelosi in the House of Reps
Rand Paul over Harry Reid in the Senate
Darrell Issa over Eric Holder on ethics and rule of law
Ron Paul over Barney Frank on monetary policy
Allen West over Maxine Waters on sanity
Anybody over Barrack Obama
Free market capitalism over marxism/socialism/banksterism
Lower taxes over exponential government spending and usury to banks
Energy and Oil independence over EPA shutdowns and Green Fascism
I realise a lot of digital ink is spent here telling us there is no difference between the two parties. I think I can agree with that in part ... there is no difference between the goals of the power-elite of the two parties, but there is still a difference between the rank-and-file politicos and the grass-roots of the two major parties. As Boehner and pals just showed us, the power-elite of the Repubes will cave on the principals of the rank-and-file and the grass-roots who entrusted them with the pinnacle of control. Who is worse ... the power elite for caving to save their own bacon, or the rest of us who keep entrusting them with protecting and advancing our principles.
We have a hard choice in front of us in November ... I have heard commentators say they would vote for a can of frozen orange juice before they would vote for Obama.
As for me, I am actually starting to see the possibility that I will vote for Obama. Not because I support his vision for the US, but because embracing it will be getting the inevitable pain of the coming collapse out of the way faster than if we are to entrust the administration of the state to a technocrat like Romney or Gingrich who will merely make the coming collapse drag on a few more years.
As 2008 showed us, taking some pain quickly and up front might saved us a lot of time, money, and pain than the band-aid-bailout approach that has left us twisting in the wind now for 3 years. Four more years of Obama and his posse will force the issue rather than leaving us like hanging zombies twisting in the wind as the last of our blood drains slowly from our living but dead and decaying bodies.
Medicare D is the single biggest recent addition to the deficit, and it was passed by a BARELY Republican Congress in '03.
The benefits didn't go into effect until 2006, so it's easy to understand why there'd be confusion about what changed and when.
Maybe they knew no one would ever bother trying to understand the budget and would just blame whoever they hate more.
I don't know why on earth any American would choose to buy a house this year. If I was planning to buy one, I would just wait until 2013, at least. Everyone should know, by now, that house prices are being artificially inflated as these clows hope for the best.
You have to ask yourself, why would anyone set themselves up for this again? Have they learned nothing from watching the entire nation being underwater with their mortgages?
Things will certainly worsen after the elections. You just know, that a lot of crap, currently on the back burner, will be allowed to hit the fan after one of their 'chosen' leaders is safely in the WH.
But things can only continue to their downward spiral once the Euro nasties slow global demand even further that originally prognosticated, and with companies continuing to scale back, unemployment will undoubtedly keep rising. Inflation will take care of dampening the rest of the appetite and enthusiasm for new home purchases, renting, or staying put, will seem much more sane during these uncertain times.
Fun times ahead. It's a good time to go Buddhist.
bad is bad
Oh .. I give them all an F-
Bruce, I thought you were part Swiss? Why do you insist on that progressive line of thinking that the Federal government has some kind of role to play in mortgage finance? If Fannie and Freddie mortgages are made more expensive isn't that in reality just a decrease in their subsidy that will allow private finance to once again enter the market that your FDR and his new deal started socializing in the 1930's?
I would like to send my warmest greetings in this HollyDay season to my fine servants in Houses, Senates, and Parliaments around the globe. Thank you for another fine year of managing the babies under your supervision. Many of these babies are waking up to the structure of this Earth reality and it is due in no uncertain terms to your ever more overtly inept efforts that helps them break free.
Having served in my present capacity for many years and having been humilated at the altar of public service in almost every possible way I congratulate you on a job well done.
There are those who still don't get the joke and there are various levels of the joke, even the ones being played on myself at this moment. Knowing that I have no clue is just as much fun as having all the naughty and nice lists in my bag.
So once again in this 2011 HollyDay season I encourage you to congratulate yours(elves) on another fabulous year and I look forward to sending you this year's scripted pratfalls for the benefit of all.
- Your Saint Old Nick called Santa but that's an anagram -
Sorry to have to call bullshit, Bruce, but shake the R/D mindset. In the end, it's the same party with different personalities for the most part. Some exceptions, very few, however. The propaganda war is interesting, however.
First, they said not continuing the cut would cost the average family $1,000 a year. This did not seem to resonate.
Second, they changed it to $40 on the average two week paycheck, basically the same thing, a very few outlets I heard or saw called it $20 a week.
Third, after less than a day, they changed it to $40! They dropped the two week part! Now the voters think it's $40 a week. Nice propaganda I must say.
As for me, if I thought there was hope to save the system, then reducing the pay in to social security would be exactly the wrong move. Since I understand it's a tax, not a paid in defined benefit plan, I say reduce it to ZERO! Kill the puppy.
Bruce, here is a good blog by a UW professor of atmospheric sciences.
His latest entry deals with La Nina.
http://cliffmass.blogspot.com/2011/12/where-is-la-nina.html
I hate F/F too. But 2012 is not the time to make mortgages more expensive...
How much more expensive? FNM supposedly saves borrowers 7 bps, and that was the figure I reead b/f they got hit with all the defaults. Its time to start fixing the system - period! Vote out every encumbent in the next election - even if you like 'em... OUT!
a grade for bought and paid for stooges
best to slap their face .. 500 or so bickering laced with fraud sell outs who took freedoms away from the folks ..
are graded for kissing a toad but taking a ten pound sludge hammer and blasting away at the constitution .
A grade of treason would be more in the norm for someone with an oz of sense .
so to grade these slim sucking sell offs show a certain brain damaged bruce still living in some high school of popularity vote .
a grade of zero ,, to zero -minus 100 is more to the curve of mr bell .
I suggest you look at the fees on mortgage instead as something to start to pay for that first time home buyers credit or the massive losses at Fannie Mae and Freddie Mac.
I love this horse shit where "tax cuts" (decreased looting by the criminals) have to be "paid for", as if those receiving the plunder have some god given right to rob their fellows.
If you reduce stealing from Paul, you have to increase the theft from Peter. Isn't that the old saw?
Both parties deserve an F--.
but like the American school system, they kept moving the politicians up the grade level.
So let's graduate them and start fresh. We may do worse but what are the odds of that?
The CBO is being optimistic. The fee is an effective 0.1% interest rate increase, directly fighting The Bernanke. It will marginally depress home sales, or not matter based on recent senstivty of home sales to interest rates. Where is the CBO getting their projections into the next decade, rosy projections or from their arse?
Yes; most definitely the 2 parties are the same sides of the same shitcoin. But the Senate is the most corrupt and the obvious Bilderberg/CFR pipeline.
If I have a 30 year old horse, can I run him for the Senate, ala Caligula?
C-, D- ?????
For the wasted time politicking around trivial legislation?
Don’t be dazzled and diverted by the micro-management politics of pointless legislation.
BOTH parties deserve much worse than “F” because they have BOTH supported and colluded with all the miserable macro policies that have brought us to this sorry predicament. Namely, they BOTH support needless wars, needless militarism, financial plundering, and a “Homeland” police state.
Their grade does not go up from an “F” just for dancing around the inconsequential.
They deserve an "H"....
"H" is for hangin'
We can only hope that these asswipe congressmen never come back from holiday. After 230 years why do we need fulltime legislation - they only fuck it up more. I shouldn't be so negative - at least Barry Bonds is under house arrest for 30 days! Congress can be proud of that.
When Rick Perry first floated the idea of a National Part Time Legislature I thought he was over the top, despite the fact that's what we have in Texas. Now it is starting to look sane and sensible to me.
what's needed is over time legislature on the right issues....
What Rick Perry wants is Part Time Legislature when a country is in a depression looking at a lost decade for many and this is sane?
Big Oil elites do not care for a governing body over populace. They extract wealth out of the earth.....even African countries can do that with corrupt military dictatorships.
Bruce - if you weren't so libtard people would take you more seriously.
Ease up on him already. Here's part of what he prognosticated last year:
"The Chevy Volt will not sell well. Boeing will be unable to complete a single Dreamliner. GM will trade below $30, Boeing will hit the low $50's."
Fifty percent right. That's pretty good.
I think he's coming around to the truth, a truth that is so hideous, that it's very hard for most people to handle.
Hmmm, 50% wrong too....puts him in Paulson's league sort of. Lost 50%.
Bruce the weatherman? Bruce hate to tell you but I live in the Great White North and we are heading for a green x-mas. Winter has forgotten us this year......as for your political comments as an outsider I never thought there was a difference to begin with. Not many years ago and even possibly now, you could be denied entry to the US if you were a member of the communist party or a member of a trades union. There was never any true democracy in the states post '45 just the same quid pro.....Ron Paul, as they did with Ross Perot, will be destroyed because he dares challenge the established order.
"Meet the new boss...same as the old boss..." - The Who
Well, weather here in the MAtl has been balmy. I hesitate to challenge BK on matter SS or Fed, but the 1/12-3/12 according to Accuweather will be the same as now. Balmy.
IF there ever was any evidence there is no difference in the parties and their policies, FoxNews (the 'good guys'?) just this moment is reporting a) the tea party is irrelevant, has done nothing in congress and has made Oblunder even stronger for re-election and b) Ron Paul is a racist, crazy andirrelevant.
The five G's - Guns, Gold, Grain, Gas and GOD. The times they are a changin'...
Prof. Krasting, I detect some material grade inflation contained herein.
Unadjusted, the invertebrate and politically tone-deaf Republicans score an "F." Democrats also score an "F," as they -- ostensibly the champions of the "little guy" -- acquiesced with the Republican House majority and shafted said "little guy" but good, if he seeks a mortgage or a refi ( originated by either duopolist alphabet mortgaging agency, Fannie or Freddie ), anytime during or after 2012.
As Jim Rogers often imprecates, "A pox on both their houses." Little wonder public approval of Congress stands at 11%.
Bruce, this bill was entirely shaped by Obama and the democrats, and their media friends. Yes, all the provisions are bad and spendthrift, but you could hardly expect the republicans in an election year to stand up to the rampant demagoguery against them. The House bill was far superior, but Reid wouldn't even give it a hearing. Furthermore, as anyone who has worked for large corporations knows, temporary tax cuts, or anything else, are worthless as an incentive for business.
I give ypu a c+ on this assignment.
I still can't believe that people still think that there is a difference between the parties. Isn't it obvious that this theatre, is just so they can work together to fleece the tax payers for their masters?
I know the sheeple Kool-aid on the infomercial media is strong, but come on! Wake up, people. Think for yourelves. Look, actually look, at how people vote on every issue that matters. Look at the NDAA. Look at how most of Congress pussyfooted around the questions about MF Global? Look at the way Congress is voting on their own insider trading. Look at the way all of congress voted for the Bail Outs.
The puppets, with few exceptions, vote as they are told to.
It's makes me sad when some of the most intelligent people I know can't break out of the left/right paradigm. No matter how hard I try, I cannot get them to think critically about our country and it's policies. They spout the latest catch phrase or idea from the MSM. Idiots like Limbaugh, Hannity, Matthews, etc. fill their heads with BS.
C- and a D? These motherfucker don't even get that from me.
I give them an "F" for Republicans.....and a "F" for Democrats.
With the "F" standing for: "Fuck You"
Congressional approval ratings strongly imply that both parties deserve an "F".
Even if they got the payroll tax thing right (as in not even proposing the bill in the first place), their overall grade is so in the hole, that both parties would be solidly in "F" territory.
The mental exercise is really fun, though.
Bruce Krasting MUST BE A DEMOCRAT to give grades like these..... I have no objection to giving the repubs a D- (or even an F)...... but to be fair the demos need to get an F, a BIG ONE, and the "F" doesn't stand for failing.... another commentor used another more appropriate term.
In the same fashion as taking the color Blue, making it theirs and sticking Red, the traditional color of the left, to the Repubes, the Dems have artfully taken something that they demagogued for nearly 80 years as "insurance contributions to fund your primary retirement vehicle" and turned it into a "tax break" for a large number of people who pay no other taxes other than the FICA and then, to ice the cake, made it perfectly clear that it would be the fault of the republicans if the stoppage of this lower "tax rate" were to occur, that it would be a tax-hike compliments of the Repubes. No C- there, my friend ... that is definitely A+ political manoeuvring by the Dems.
Repubes get an F for several reasons:
1) They caved, as always. Seriously, when in our lifetimes have Repubes not compromised their principles?
2) They have finally gotten the Dems to call Social Security a "Tax", so now it is acceptable to run it dry. Remember the screaming when Bush wanted to privatise? At least that would have kept money flowing in the direction of funding people's retirement ... now it is quite clear to see that Social Security is but another transfer program paid for by some mythical creature.
3) They are going along with a decidedly business-unfriendly move in the worst possible way ... it will cost billions to re-program payroll systems and ensure compliance with the new regs. Doing this for only 2 months practically ensures that that the costs of compliance might actually be higher than doing it for a full year, or, better yet, permanently.
4) In the process of aiding and abetting the Dems on #s 2 & 3 above, they have aided and abetted plugging more uncertainty ... therefore risk ... into the US economy. We already had a huge chunk of risk overhanging the economy in a severely under-funded Social Security system, and now they want to double down on the longer-term problem. Why is it that politicians seem to think that adding correlated risk is a prudent approach to risk-management?
It's an ill wind that blows no good ... this is an ill wind.
In answer to # 1 :
Republicans have always comprimised their principles, Democrats have none to comprimise.
I saw a small house go on the market in Tampa 3 days ago. It was listed 8 days ago ( short sale) and I called the broker to schedule a look. Broker called back and said there were 4 bids already. Brokers in Sarasota say the same thing. Lower end houses are being snapped up by investors for rentals. 4 month inventory of houses under $500k maybe a year's worth above that. MI tax isn't going to affect the low end but as you note an extra $50/month on a $600k house is going to hurt a already hurting segment of the market.
Wake up Bruce.
There is only one political party in the US and only fools fall for the Dem/Rep shadow puppet charade.
http://www.flickr.com/photos/azrainman/2074221914/
+1 and they are called Banksters..
The fools are also called voters.