Congress Must Cut Off Bush Family War Profits
by Evelyn Pringle
Global Research, April 10, 2007
Countercurrents.org – 2007-04-11
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On Monday, April 9, 2007, the Boston Herald reported that the US military had announced the Easter weekend deaths of 10 more American soldiers, including six killed on Sunday. The Associated Press reports that, since the war began in March 2003, over 3,000 members of the US military have been killed in Iraq, as of April 8, 2007.
The military reported the deaths of four more US soldiers on Tuesday.
Its nearly impossible to estimate the number of deaths of civilians in Iraq, but the Herald reports that at least 47 people were killed or found dead in violence on Easter Sunday, including 17 execution victims dumped in the capital.
News releases out of Iraq also report that a woman wearing a black veil and strapped with explosives blew herself up outside a police station in Iraq on Tuesday, killing 16 people.
According to the January 14, 2007 LA Times, Steven Kosiak, director of budget studies at the Center for Strategic and Budgetary Assessments in Washington, says that, starting with the anti-terrorism appropriation a week after the 9/11 attacks, he estimates the US has spent $400 billion fighting terrorism through fiscal 2006, which ended on September 30, 2006.
In January 2007, Marine Corps spokeswoman, Lt Col Roseann Lynch, told Reuters that the war in Iraq is costing about $4.5 billion a month for military “operating costs,” which did not include new weapons or equipment.
Since this war on terror was declared following 9/11, the pay levels for the CEOs of the top 34 defense contractors have doubled. The average compensation rose from $3.6 million during the period of 1998-2001, to $7.2 million during the period of 2002-2005, according to an August 2006, report entitled, "Executive Excess 2006," by the Washington-based, Institute for Policy Studies, and the Boston-based, United for a Fair Economy.
This study found that since 9/11, the 34 defense CEOs have pocketed a combined total of $984 million, or enough, the report says, to cover the wages for more than a million Iraqis for a year. In 2005, the average total compensation for the CEOs of large US corporations was only 6% above 2001 figures, while defense CEOs pay was 108% higher.
But the last name of one family, which is literally amassing a fortune over the backs of our dead heroes, matches that of the man holding the purse strings in the White House. On December 11, 2003, the Financial Times reported that three people had told the Times that they had seen letters written by Neil Bush that recommended business ventures in the Middle East, promoted by New Bridges Strategies, a firm set up by President Bush’s former campaign manager, who quit his Bush appointed government job as the head of FEMA, three weeks before the war in Iraq began.
Neil Bush was paid an annual fee to "help companies secure contracts in Iraq," the Times said.
But Neil Bush is by no means the only Bush profiting from the war on terror. The first President Bush is so entangled with entities that have profited greatly that it’s difficult to even know where to begin. Bush joined the Carlyle Group in 1993, and became a member of the firm’s Asian Advisory Board.
The Carlyle Group was best known for buying defense companies and doubling or tripling their value and was already heavily supported by defense contracts. But in 2002, the firm received $677 million in government contracts, and by 2003, its contracts were worth $2.1 billion.
Prior to 9/11, some Carlyle companies were not doing so well. For instance, the future of Vought Aircraft looked dismal when the company laid off 20% of its employees. But business was booming shortly after the wars in Afghanistan and Iraq began, and the company received over $1 billion in defense contracts.
The Bush family’s connections to the Osama bin Laden’s family seem almost surreal. On September 28, 2001, two weeks after 9/11, the Wall Street Journal reported that, "George H.W. Bush, the father of President Bush, works for the bin Laden family business in Saudi Arabia through the Carlyle Group, an international consulting firm."
As a representative of Carlyle, one of the investors that Bush brought to Carlyle was the Bin Laden Group, a construction company owned by Osama’s family. The bin Ladens have been called the Rockefellers of the Middle East, and the father, Mohammed, has reportedly amassed a $5 billion empire. According the Journal, Bush convinced Shafiq bin Laden to invest $2 million with Carlyle.
The Journal found that Bush had met with the bin Ladens at least twice between 1998 and 2000. On September 27, 2001, the Journal reported that it had confirmed that a meeting took place between Bush Senior and the bin Laden family through Senior’s Chief of Staff, Jean Becker, but only after the reporter showed her a thank you note that was written and sent by Bush to the bin Ladens after the meeting.
The current President’s little publicized affiliation with the bin Laden family goes back to his days with Arbusto oil when Salem bin Laden funneled money through James Bath to bail out that particular failed company.
Probably the most eerie report about this strange group of bedfellows is that on 9/11, the day that served as a kick-off for the highly profitable war on terror, Shafiq bin Laden attended a meeting in the office of the Carlyle Group, and stood watching TV with other members of the firm as the WTC collapsed.
The fact that so many Saudis, including many bin Ladens, were allowed to fly out of the country right after 9/11, while Americans were still grounded, has always seemed a bit strange to most people also, especially when nobody in the Bush administration was able to explain who gave permission for the flights.
About a month after 9/11, in October 2001, the Carlyle Group severed its ties with the Bin Laden Group, but the Bush family did not. In January 2002, Neil Bush took a trip to Saudi Arabia that was sponsored by the Bin Laden Construction Company and Prince Alwaleed bin Talal, the same Prince who offered New York Mayor, Rudy Giuliani $10 million to help the 9/11 victims, a gesture that Rudy refused.
In the fall of 2003, Bush Senior finally resigned from the Carlyle Group as the accusations of family war profiteering grew louder. However, according to the Washington Post, he still retained stock in the firm and gave speeches on its behalf for a fee of $500,000.
Carlyle companies have also scored big in the Homeland Security bonanza. Federal Data Systems and US Investigations Services hold multi-billion- dollar contracts to provide background checks for airlines, the Pentagon, the CIA and the Department of Homeland Security. US Investigations used to be a federal agency, until it was privatized in 1996 and taken over by Carlyle.
Marvin and Jeb Bush are also highly successful members of the family war profiteering team. Marvin is a co-founder and partner in Winston Partners, a private investment firm, and Jeb is an investor in the Winston Capital Fund, which is managed by Marvin.
Winston Partners is part of the Chatterjee Group, which owned 5.5 million shares in a company called Sybase in 2001, a firm that had contracts worth $2.9 million with the Navy, $1.8 million with the Army and $5.3 million with the Department of Defense. All totaled, the federal procurement database listed the firm’s contracts that year as $14,754,000.
And, Sybase was not the only company delivering war profits to Marvin and Jeb. The portfolio of Winston Partners also included the Amsec Corp, which, in 2001, was awarded $37,722,000 in Navy contracts.
Marvin’s business partner, Scott Andrews, sat on the board of directors at AMSEC, and the company’s CEO was Michael Braham, who formerly worked for Paul Bremer, the leader of the Coalition Provisional Authority responsible for handing out contracts Iraq.
This is the same Paul Bremer who used Iraqi money from the Development Fund for Iraq to award 5 no-bid contracts to Dick Cheney’s cash cow, Halliburton, worth $222 million, $325 million, $180 million, and $194 million combined for the last two, according to a July 28, 2004, report by the CPA Inspector General Stuart Bowen, entitled, "Comptroller Cash Management Controls over the Development Fund for Iraq."
As it turns out, Halliburton received 60% of all contracts paid for with Iraqi money. In a January 2005 report, Inspector Bowen concluded that occupation authorities accounted poorly for $8.8 billion in Iraqi funds, and said, "The CPA did not implement adequate financial controls.”
The President’s uncle, William (Bucky) Bush, is the most visible war profiteer on the team. He sat on the board of a major military contractor called Engineered Support Systems. Six months before the war in Iraq began, on September 16, 2002, CNN/Money Magazine called ESS one of "seven defense stocks that fund managers like," and one fund manager said ESS was one of two companies that "would gain the most from a war from Iraq."
As a director, Uncle William received a monthly fee and held stock options. In January 2003, before the Iraq war began, he owned 33,750 shares of stock, but a year later, in January 2004, he owned 56,251.
The fact that Uncle William had an inside line to the White House can hardly be disputed. On March 25, 2003, Bush asked Congress for funding, "to cover military operations, relief and reconstruction activities in Iraq, and ongoing operations in the global war on terrorism," and the very next day, ESS announced a large order from the Army for its Chemical Biological Protected Shelter systems.
Uncle William has become a very rich man since his nephew took office. In January 2005, SEC filings show that he made about $450,000 by selling ESS stock. But he did even better the next year.
According to the Excess Report, through a series of defense contracts, ESS earnings reached record levels and set the stage for the sale of the firm to another defense contractor, DRS Technologies, in January 2006, and among the beneficiaries of the deal was Uncle William, who cleared $2.7 million in cash and stock off the sale.
Its time for Congress to stop the direct deposits of tax dollars into the Bush bank accounts. Lawmakers need to notify the White House that all funding for Iraq is done, other than what is needed for the immediate removal of our troops from this disgusting war profiteering scheme.
Ahhh…now we understand that the president is not in iraq for us. He is there for something else. And why are our borders open when terrorists are supposed to attack any day now? We’ve been duped!
Democrats think they’re striking out at the rich, they’re actually jeopardizing the retirement portfolios of millions of middle-income Americans. Firemen, police officers, and teachers, to name a few, are all represented by the big state and city pension funds.
The latest assault comes courtesy of House Democrat Sander Levin. Late last week, he introduced a bill that essentially would abolish the 15 percent capital-gains tax preference for risk investing, and raise it by 20 percentage points to the 35 percent corporate and personal rate. This goes beyond an earlier tax attack on a public offering by the Blackstone Group, and would slam into all private partnerships, including buyout funds, hedge funds, venture-capital firms, real estate partnerships, and oil-and-gas deals.
Incidentally, while attacking capital gains, the congressional Democrats are killing initiatives for across-the-board cuts on wasteful appropriation bills. According to the Club for Growth, House Democrats defeated separate measures that would cut spending by 4 percent, 1 percent, and 0.5 percent.
Does this mean the Democrats favor tax hikes over real spending control? It appears so.
Washington economist Kevin Hassett says this is part of the Democrats’ “war against winners,” and he’s right on the money. In particular, these willy-nilly changes of the tax rules would have a chilling effect on capital formation, and could constitute the biggest attack on capital since the 1930s.
As mentioned, the lightning rod in this tax-hike endeavor was the Blackstone Group, the private-equity giant that went public last week. Blackstone’s investment-fund profits are taxed at the 15 percent cap-gains rate, and since these profits come from high-risk investments, that’s how it should be. But Democrats in Congress view these profits as plain income, and greedily want a higher take.
But plain ol’ income this is not. The recent crack up of two Bear Stearns sub-prime-mortgage hedge funds shows just how risky these ventures can be.
Yes, there’s big money to be made when these private partnerships click. But the economy at large also is a beneficiary. Private buyout funds often save highly troubled companies from bankruptcy. They insert skilled managers who streamline operations and make businesses more efficient, a process that can ultimately lead to greater profits and business expansion. You know a lot of these companies: Chrysler, Staples, Sears, Domino’s, Dunkin’ Donuts, Toys“R”Us, Clear Channel Communications, Hospital Corporation of America. All of these firms were brought back from the dead thanks to private partnerships.
Nobody knows for sure whether Congress will green-light the Democrats’ anti-growth agenda. The hope is that President Bush will veto any tax hike that lands on his desk. But the mere threat that Congress would embark on such a program of wealth destruction and economic impoverishment — all in the name of taxing “rich people” — has investors reeling.
Ironically, a lot of today’s anti-cap-gains momentum is the handiwork of former Clinton Treasury secretary Robert Rubin. He actually believes a low cap-gains tax has no economic growth impact at all. However, back when Clinton and Rubin were running things, the personal income-tax rate was lifted from 31 to 40 percent, while the cap-gains tax was reduced from 28 to 20 percent, making for a 20 percentage point tax advantage for cap-gains over regular income. Flashing forward, the current Bush administration lowered the income-tax rate to 35 percent and the cap-gains rate to 15 percent, preserving that 20 percent differential.
Hmm . . . Is Rubin saying the cap-gains tax advantage was good for the Clinton boom, but not the Bush boom?
Truth is, that differential provides a strong incentive for entrepreneurial risk taking and higher-risk, cutting-edge investment — both of which lend real torque to the economy.
Another unfortunate irony is that while Democrats think they’re striking out at the rich, they’re actually jeopardizing the retirement portfolios of millions of middle-income Americans. Firemen, police officers, and teachers, to name a few, are all represented by the big state and city pension funds. And these funds are heavily invested in the hedge and private-equity funds that the Democratic tax machine is targeting. Is this fact lost on the Democrats? And don’t they realize that two out of every three voters in recent elections owned stocks — either directly or indirectly? Are they attempting to commit political suicide?
If the Democrats get their way, job creation will be adversely affected, too. Clearly, you can’t create new jobs in the private sector unless there’s a new or expanding business to create those jobs. And since new and expanding businesses require capital for investment funding, if you tax that capital more, you get less investment and fewer jobs.
In short, you can’t have capitalism without capital. The process works for “rich people” and the middle class.
Whenever Democrats wage war against the rich, the middle class becomes the collateral damage. This may be the law of unintended consequences, but it is something this Congress fails to understand.
Writes a book, STILL wont include a source link…
What "Middle Class" are you talking about? The ones already completely broke and forgotten from when the Savings and Loans went belly up in the 90s?
Where was all this Rpeublican concern for the "Middle Class" when they were shutting down plants and outsourcing (but they call it "offshoring" now) millions of jobs, that of course had NOTHING to do with gutting pensions funds?
Were Enron’s employees’ pensions, the ones Kenneth Lay and a few others gutted, was their collapse due to Democratic "meddling"?
Whose pensions and 401Ks were enriched when Home Depot’s CEO posted losses of $210 million for 2006, laid off 12,000 people who no longer have health insurance or jobs, then wrote himself a $100 million dollar bonus check?
I personally, wouldn’t mind a federal mandate like the one in China stating that each family can have only one child. And they should fine people that have two or more children, like they do in China. That way people like Octomom will actually have to pay for their kids rather than expect someone else to pick up the tab. I’m from Texas. Here we’re in the middle of a phase two water shortage. Some people think it’s a climatic problem. Personally, I think it’s actually a population problem. When I was in middle school we surpassed New York State in population. We now have as many people as California did ten years ago. As the population continues to grow here by leaps and bounds, water is becoming a more scarce commodity. They’re having a lawsuit in Austin over the Edwards Aquifer right now. People are griping about the folks in San Antonio sucking it dry like racehorses. Now, some rich tycoons want it to irrigate a golf course. I believe California is having problems with water shortages because they are overpopulated. As we consume more as Americans, resources will become more scarce. We all saw the calamity of waiting until the last minute toward Hurricane Katrina. If we couldn’t even save New Orleans, what makes you think we’ll be able to save the planet. I think the problem with inflation in America, in fact, is more of a population problem rather than an economic problem. As our population continues to boom, more people will consume oil. It’s a very symbiotic process. So now that I’ve stated the facts, would you support birth control laws in America? Would you advocate this considering the fact that abortion is still a hot topic, and most people gripe about poor people living on welfare?
We’re already mandating what our children should read. That’s why they don’t teach sex ed in school. 1 in 5 women in America is uninsured. 40 percent of American women cannot afford to have prescriptions refilled. And if we’re talking about government staying out of our private lives, then maybe they should leave the abortion issue alone. America has the highest teenage pregnancy rate out of any First World nation on earth. We are in the midst of an economic crisis and what not like never before. We make up less than 5 percent of the world’s population, yet we consume more than 25 percent of the world’s resources. We need to try something because at the rate we’re going, our children may not have a future.
I agree, but I’d say that unlawful immigration is the main source of our overpopulation problem in the USA. The people having the most babies are the ones who expect the public taxpayer to support them. Children are only an asset in primitive societies, not in a First World Nation.
I remember about 2 or 3 billion people was the world population when I was a child. Now it’s more than doubled. We drained swamps, stamped out malaria, provided some basic medical care, and sent food overseas. And those peoples just kept on spawning more children.
At least our rate of consumption has declined over 40 years. In the Sixties, we 5% of the world controlled or consumed more like 40% of the resources. That’s why we feel poorer and our standard of living has declined a LOT.
Notice how some people continue to support "private decisions" and the vague "right to have children". They want to have people free to act stupid and irresponsibly.
The News pounds us on how the dollar is experiecing hard times because of the rising costs of oil; in turn, putting pressure on other american assets.
Our economy was booming before George W. Bush was put into office; and now economists fear it’s in shambles; thousands of jobs are being lost and mortgage costs are rising.
I just don’t understand how anyone would want to support these failed policies and a war that’s costing billions of dollars; putting the US into a deficit that’s unheard of.
What’s the relevance of John McCain’s candidacy when his policies coincide with the current administrations? If we vote John McCain president is the US signing it’s own death warrant? Where’s the sense in proceeding with failed policies when it’s obvious that they aren’t working?
Are conservatives in denial because your reputation and pride is at stake?
Furthermore, are you letting your personal vendetta of Obama get in the way of your decision to vote democrate, to vote a change on current american policies that are only hurting us?
Convince me otherwise, I’m open to your opinion and I also respect it. I’m not here to start a fight, I’m just stating the facts and being as objective as I can about it. Thanks.
McKenzie, I’m fairly aware of what’s going on in world via the news, however, I don’t actually resent or hate conservatives. Perhaps I’m just buying into what people want me to think, at least I’m aware enough to know that much. Thanks for your imput, I gave you a thumbs up.
Heisenburg, Right on. I think we need to get back to the way America used to be. Conservatives are important and so are their cause, perhaps we just got a bad apple this time around.
I think Democrats are in denial of their role in our economic slump.
Iraq policy
Afghanistan policy
Iran policy
Health Care
Giving tax incentives to companies to layoff americans and send jobs overseas
Record budget deficits are a sign of our booming economy
Record trade deficits are a sign of our booming economy
Deregulation over Regulation to protect consumers
Drilling for oil as the center piece of our 21st century energy stragegy and bold new step to the future.
Torture by CIA is ok
Guest workers with swipe cards to come and go as they wish between Mexico and USA
Low funding assistance for college students
Chilren Left behind program by cutting funds to the schools with the lowest test scores and who need help the most.
Not a lot of answers huh? Typical… ask if Obama is a muslim.. you’ll get at least 50 responses. Because, the truth is… McCain is just the same. & his supporters know it.
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IF YOU DONT WANT TO READ THE WHOLE THING DONT COMMENT ABOUT HOW YOU DONT WANT TO READ IT!
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This is somewhat of a rant, but please bear with me and just listen to what I have to say.
We all seem to be playing a massive blaming game. Liberals accuse Conservatives for the economic problems, Conservatives blaming the Liberals. But is it just me but are we not going anywhere???
I think the problem isen’t the politicians. Yes the have something to do with it, but I think we should all take time to finally point the finger at the man in the mirror. The people of America put ourselves in this situation. I know many of you are already screaming, “BUT I DIDENT CAUSE THIS!” and I understand and I feel the same way. I’m saying the United States as a whole.
Conservatives like to say that the housing boom and eventual bust was cause by Clinton… Yes and no. Clinton made it possible, but he didn’t force low income families to buy those houses they couldn’t afford. And I know personally that its not just low income families, Higher end families like some friends of mine over spent cause they were just hyped up by the good economy. Is it their fault? Yes, but understand it was just bad spending and I feel they have learned their lesson.
Liberals like to put all the blame on Bush. Did bush cause the economic problems we are facing… no. But did he help the situation, um… not. The war in AFGANASTAN was brought on by 9/11, but what caused us to go into Iraq, I think it was more than just simple oil. Bush’s deficit was $300 billion, which I’m sorry to say is a fraction of the 1.3 trillion brought on by a Democrat congress in mid 2008(I think it was 2008), in the form of the stimulus. Bush’s short coming was that he did nothing…and that’s it. Not saying he had to spend money, but it was a perfect opportunity to finally take charge and provide government jobs of giving the country a much needed facelift in the form of a redone interstate system.
And I’ll avoid the Obama situation for the most part, cause it is a touch subject for most. But I will say this. Liberals, you say you NEED a new healthcare system, You say we NEED cap and trade. No, those are things you WANT. America runs off a mob mentality. As long as 51% are happy, everything is peaches and cream. Im sorry if that is harsh, but only 48 million out of nearly 400 million people are uninsured. Besides, hospitals are not legally allowed to turn away serious medical attention. Should there be reform? To and extent, yes, but not this extreme. And Cap and Trade will cause more harm for the Earth than good. It will just run industry off to China where there are NO regulations.
My final statement is, things -should- turn out better at the end of this. I’d say 2018 or so this will clear up. We as Americans will come out of it stronger. Hopefully we will be able to revert from a importing country to and exporting country like we were before the 60’s.
Ahhh… im sorry that dragged out, but I hope you got something out of it, if not, fine.
(I also will admit this is a copy post from something i posted late last night. So I’m posting it when more people are online.)
You make some good points. I do agree that there is way too much finger pointing and not enough responsibility.
I don’t agree about the "problem isn’t’t the politicians". It is the politicians, they’re the ones who job it is to run the country. They often put their own needs above ours. And they sure aren’t defending the Constitution.
Anyway, we should all be more active if we want desirable change.
If things are so bad, why are they so good?
With all the gloom coming out of Wall Street, the Democrats on the campaign trail, and the mainstream media, a remarkable thing just happened: Real gross domestic product, the best summary report of the American economy, came in at a breathtaking 3.9 percent annual rate for the third quarter. In fact, following the 3.8 percent growth rate for the second quarter, the U.S. economy has posted its strongest quarterly growth in four years. The economy actually appears to be speeding up, following the relatively sluggish performance of the prior 18 months.
On top of this, the inflation rate is actually slowing down. The consumer spending deflator is reading 2.1 percent for the past year, compared to over 3 percent six quarters ago. The core inflation rate is down to 1.9 percent, below the Fed’s 2 percent target.
Even employment is holding its own. According to Automatic Data Processing’s private employment survey, which showed its strongest gain in four months, October looks like it will produce about 125,000 new jobs.
Meanwhile, rising exports of American goods and services are booming to such an extent that the deep housing recession is being cancelled out. And while many continue to predict a consumer collapse because of falling home prices and tighter credit, after-tax inflation-adjusted income is 4.1 percent ahead of last year, for a $344 billion gain, while the purchase cost of energy prices are flat. The little noticed factoid is that consumer energy use per unit of GDP has actually fallen by more than 50 percent in recent decades.
Again: If things are so bad, why are they so good?
The stock market roared after the Federal Reserve cut its target rate on Wednesday by 25 basis points to 4.5 percent. The rate cut was a small insurance policy, just in case the subprime credit crunch and the housing downturn take a larger toll on the economy.
But listening to the Democratic presidential debate on Tuesday, you’d think it was 1929 all over again. The litany of scare-talk complaints includes China trade unfairness, globalization, immigration, income inequality, stagnant wages, a shrinking middle class, the sinking dollar, and high oil prices.
Yes, there is home deflation on Main Street and loan deflation on Wall Street. It will continue. But what about the rest of the story? When you listen to the hedge-fund short-sellers and the liberal politicians as they attempt to discredit the Bush economic boom, you could almost fall for their bear-market seduction. But the seductress turns out to be an economic harlot — not a beautiful woman.
The true message of the strong economy is that we’re virtually guaranteed of a Goldilocks soft landing or better — and certainly not a recession.
It’s interesting that while the Bush tax cuts of 2003 continue to encourage investment and entrepreneurship, expanding national income and higher tax collections have brought the big bad budget deficit down to $160 billion, or roughly 1 percent of GDP. Using something called the primary deficit — which extracts net interest on the debt and can be used to measure fiscal stimulus on the economy — we actually have a 70 billion surplus.
These are all reasons why it would be foolhardy to embrace large-scale tax-hikes to allegedly fight the budget gap.
House tax chief Charlie Rangel’s great idea to reduce the corporate income tax is the first pro-growth tax-cut measure from a Democrat in many years, and hopefully his effort will spur a discussion of full-scale tax reform by the Republican and Democratic candidates. But looking to the rest of Rangel’s plan, there are ways to eliminate the alternative minimum tax that do not require big tax hikes on the most successful earners and investors.
For example, the Bush administration’s tax-reform panel, chaired by former senators Connie Mack and John Breaux, proposed a growth-and-investment plan with only three income-tax brackets of 15, 25, and 30 percent. The plan would repeal the AMT and reduce the corporate tax to 30 percent. Capital gains and dividends would remain at 15 percent.
Or there’s the new plan from Wisconsin House member Paul Ryan that would move to a 10 and 25 percent tax system while also eliminating the dreaded AMT.
In other words, there are a lot of ways to gently nudge tax rates lower while broadening the tax base that would keep the Bush boom going well into the future.
The print and broadcast media do not give President Bush much credit for his economic policies. But somehow I have to wonder whether low unemployment, strong growth, negligible inflation, and record stock markets do not deserve just a bit of praise.
It is still the greatest story never told.
Everywhere I go there are traffic jams, even on weekends (I work in a major city during the week and live at my beach house on weekends year round). If things were so bad, I would think people would at least cut back on going to the beach in the off season, but tomorrow there will be a traffic jam when I leave work at 2PM. And all the cars seem to be huge, not to mention all the RVs and boats being towed behind them.
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Washington’s ‘War Against Winners’
A cap-gains assault on private partnerships would strike a dagger into the heart of U.S. capital formation.
Last Friday’s precipitous stock-market plunge, with the Dow Jones dropping 185 points, is all about Washington’s continued war on prosperity.
The latest assault comes courtesy of House Democrat Sander Levin. Late last week, he introduced a bill that essentially would abolish the 15 percent capital-gains tax preference for risk investing, and raise it by 20 percentage points to the 35 percent corporate and personal rate. This goes beyond an earlier tax attack on a public offering by the Blackstone Group, and would slam into all private partnerships, including buyout funds, hedge funds, venture-capital firms, real estate partnerships, and oil-and-gas deals.
Incidentally, while attacking capital gains, the congressional Democrats are killing initiatives for across-the-board cuts on wasteful appropriation bills. According to the Club for Growth, House Democrats defeated separate measures that would cut spending by 4 percent, 1 percent, and 0.5 percent.
Does this mean the Democrats favor tax hikes over real spending control? It appears so.
Washington economist Kevin Hassett says this is part of the Democrats’ “war against winners,” and he’s right on the money. In particular, these willy-nilly changes of the tax rules would have a chilling effect on capital formation, and could constitute the biggest attack on capital since the 1930s.
As mentioned, the lightning rod in this tax-hike endeavor was the Blackstone Group, the private-equity giant that went public last week. Blackstone’s investment-fund profits are taxed at the 15 percent cap-gains rate, and since these profits come from high-risk investments, that’s how it should be. But Democrats in Congress view these profits as plain income, and greedily want a higher take.
But plain ol’ income this is not. The recent crack up of two Bear Stearns sub-prime-mortgage hedge funds shows just how risky these ventures can be.
Yes, there’s big money to be made when these private partnerships click. But the economy at large also is a beneficiary. Private buyout funds often save highly troubled companies from bankruptcy. They insert skilled managers who streamline operations and make businesses more efficient, a process that can ultimately lead to greater profits and business expansion. You know a lot of these companies: Chrysler, Staples, Sears, Domino’s, Dunkin’ Donuts, Toys“R”Us, Clear Channel Communications, Hospital Corporation of America. All of these firms were brought back from the dead thanks to private partnerships.
Nobody knows for sure whether Congress will green-light the Democrats’ anti-growth agenda. The hope is that President Bush will veto any tax hike that lands on his desk. But the mere threat that Congress would embark on such a program of wealth destruction and economic impoverishment — all in the name of taxing “rich people” — has investors reeling.
Ironically, a lot of today’s anti-cap-gains momentum is the handiwork of former Clinton Treasury secretary Robert Rubin. He actually believes a low cap-gains tax has no economic growth impact at all. However, back when Clinton and Rubin were running things, the personal income-tax rate was lifted from 31 to 40 percent, while the cap-gains tax was reduced from 28 to 20 percent, making for a 20 percentage point tax advantage for cap-gains over regular income. Flashing forward, the current Bush administration lowered the income-tax rate to 35 percent and the cap-gains rate to 15 percent, preserving that 20 percent differential.
Hmm . . . Is Rubin saying the cap-gains tax advantage was good for the Clinton boom, but not the Bush boom?
Truth is, that differential provides a strong incentive for entrepreneurial risk taking and higher-risk, cutting-edge investment — both of which lend real torque to the economy.
Another unfortunate irony is that while Democrats think they’re striking out at the rich, they’re actually jeopardizing the retirement portfolios of millions of middle-income Americans. Firemen, police officers, and teachers, to name a few, are all represented by the big state and city pension funds. And these funds are heavily invested in the hedge and private-equity funds that the Democratic tax machine is targeting. Is this fact lost on the Democrats? And don’t they realize that two out of every three voters in recent elections owned stocks — either directly or indirectly? Are they attempting to commit political suicide?
If the Democrats get their way, job creation will be adversely affected, too. Clearly, you can’t create new jobs in the private sector unless there’s a new or expanding business to create those jobs. And since new and expanding businesses require capital for investment funding, if you tax that capital more, you get less investment and fewer jobs.
In short, you can’t have capitalism without capital. The process works for “rich people” and the middle class.
Whenever Democrats wage war against the rich, the middle class becomes the collateral damage. This may be the law of unintended consequences, but it is something this Congress fails to understand.
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I think you might have already answered your own question, so why are you asking us? Do you want to know if we agree with you? I personally do not exactly agree. The greatest growth occurred in the U S during a time when taxes on the rich were relatively high, about 90% if I recall correctly. There was a time when the tax code was used to redistribute the wealth of the nation more or less. With 1% of the population owning 90% of the wealth, there is not a lot of potential for continued growth, only potential for a society of very rich and very poor. It is more of a society associated with those of the middle east rather than the democrocies that GWB is trying to pedal on the world. As an example for the world the U S currently is falling short in more categories than this one.
Did it go into Bushes own personal account, did he and McCain divide the loot? What? Whatever happened to the spoils of war? Aren’t the American people supposed to get something out of this? Gas in Iraq is 10 cents a gallon, shouldn’t we be paying 10 cents a gallon? Shouldn’t our economy be booming? What went wrong? What’s the deal?
People are dying every day, and for what? My little brothers best friend just came back from Iraq in a wooden box, don’t tell me, I’ve met several people who have been over there, this is all a crock.
My grandpa served in WWII, 6 of my uncles served in Vietnam, my dad served during Vietnam, several of my cousins have been to Iraq, my family’s kind of old fashioned, the males don’t seem to think its necessary for me to join as they say they’ve already paid my dues for me, I don’t need to join, that’s what I was told.
I guess most of it is still in the ground because the Iraqis and Kurds can’t agree on a division of the spoils.
But take heart. I’m sure the likes of Bush & Cheney will manage to get their piece of the cake in one way or another.
1.Key features of the Republican administrations of the 1920s included
a. reduction of quotas
b. expansionism and business regulation.
c. build up of armaments and armed forces.
d. isolationism and laissez faire business policy.
2.Why did many Americans fear Vladimir I. Lenin and his followers, the Bolsheviks?"
a. They promoted a system that was hostile to American values.
b. They refused to pay back Russia’s war debt.
c. They had encouraged other countries to reject socialism.
d. They had abolished the Russian monarchy.
3. Which caused labor unrest in the United States after World War I?
a. Returning veterans refused to work in low-paying factory jobs.
b. The cost of living rose significantly.
c. Cosumer demands outstripped factory production.
d. International trade collapsed.
4. How did installment plans affect the American economy in the 1920s?
a. They inspired Americans to cut back on luxury items.
b. The reinforced the demand for lower tariffs.
c. They fueled the growth of the consumer economy.
d. They led to a sharp decline in average wages.
5. Which was a result of the boom in the automobile industry?
a. New roads were built.
b. Gasoline had to be rationed.
c. The tourist industry declined
d. Workers in Ford plants recieved low wages.
6. Many Americans believed Sacco and Vanzetti were executed because they were
a. subversives trying to overthrow the government.
b. responsible for setting off bombs that damaged A. Mitchell Palmer’s home.
c. immigrants with radical beliefs during the red scare.
d. Communisits agitators who helped organize strikes
7. The industry that did hte most to boost other industries in the 1920’s was
a. oil refining.
b. automobile making.
c. steel production.
d. aviation.
8. Uneven prosperity, personal debt, and overproduction were all warning signs of an unsound economy. Another danger sign was
a. frequent strikes by unions.
b. stock market speculation.
c. welfare capitalism.
d. isolationism.
9. The red scare was in response to
a. the Teapot Scandal.
b. Prohibition.
c. the Russian Revolution.
d. the Kellog-Briand Pact.
10. The economy grew in the 1920s as consumers
a. learned to ignore advertisements.
b. began to buy goods on credit.
c. carefully conserved electricity.
d. invested most of their money in government bonds
1. a
2. c
3. c
4. d
5. b
6. a
7. d
8. a
9. b
10. c