Dodd-Frank Bad for Consumers

One of the consequences of Congress passing the Dodd-Frank "reform" bill is that consumers are now finding themselves losing out as banks cut debit card rewards programs, increase consumer fees, can no longer serve young adults independently, and now are forced to tell people that their credit and debit cards can be declined by merchants who don't want to accept them for small purchases. Dodd-Frank was positioned as a way to curb so-called "abuse" by banks, but in reality it limits the free market and hurts consumers. 

Congress made mistakes, and they need to act to repeal these parts of Dodd-Frank. Here's why:

• With the interchange rate caps, banks are moving to eliminate rewards programs and incentives on debit cards, and to a lesser extend credit cards. Consumers in the past could get rewards points or cash back when using their debit cards. Now, many debit cards are eliminating the rewards offerings and some credit cards are reducing their programs as well. The result of this is that consumers lose out. The way that the free-market system worked is that debit and credit card processing firms set rates for debit card acceptance, and merchants who decided they wanted to accept the cards would find the processor that suited their needs and charged a price they were willing to pay. Some merchants decided they didn't want to pay, and thus decided to remain cash-free despite data that shows businesses that accept more forms of payment are actually more profitable.

• Since Dodd-Frank will curb the amount that banks can charge merchants for credit and debit card transactions, banks are now considering adding more fees to consumers to make up for the lost revenue. Imagine if you had to pay 50 cents every time you used a debit or credit card to your bank? That could add up to hundreds or thousands of dollars in a year. Some consumers would be forced to carry cash, increasing the opportunity for criminals to take advantage of them and losing out on consumer protections.

• Dodd-Frank limits access to credit for people age 18-21. As a result, these adults, who are of sufficient age to serve the country in combat in a place like Afghanistan, are unable to obtain credit cards or loans on their own. This reduces their ability to build a strong credit profile while in college or when starting out on their own. Additionally, it places an undue burden on young adults. Booking airline tickets, checking into a hotel, or renting a car is much more difficult or inconvenient when you don't have a credit card, for example. 

• One of the worst parts of Dodd-Frank is that it overrode the "no minimum" policies of Visa, MasterCard, and American Express. In the past, consumers knew their valid credit and debit cards had to be accepted by merchants whether it was a $0.49, $4.90, or $490 purchase. Now, merchants can set a minimum of as high as $10 to use a credit or debit card. This limits consumer choice in payment, and can force people to carry more cash making themselves a target for criminals.

All of the above make it more difficult for consumers to shop, and as a result consumers end up spending less leading to a negative impact on the economy. There are some ways that the American people can fight back against these portions of Dodd-Frank that hurt consumers:

• Switch to banks that continue to provide rewards programs and do not charge absurd fees. Unfortunately, many banks in order to remain competitive are going to "follow the leader," giving consumers fewer options. 

• Contact members of Congress and encourage them to repeal parts of Dodd-Frank that hurt consumers. Send letters, e-mails, tweets, and if you see your Congressperson talk to them.

• Boycot any merchant that imposes a minimum sale. Additionally, if you encounter a minimum sale amount that was not disclosed to you, such as if a bar tells you you have to buy more drinks to close a tab, refuse to do it. Do not sign the receipt, and if you are charged more than what you actually bought then report this is fraud to your credit or debit card issuer. If the place holds onto your credit or debit card, report it as stolen so your bank can close it and issue a new one.

Dodd-Frank is a prime example of how government regulation and interference run amuck hurts the American people. We can only hope that parts of it are repealed. 

Wisconsin's Options

Facing a $3.6 billion deficit, Wisconsin Governor Scott K. Walker proposed budget cuts that would balance the budget as well as a process to ensure that the people of Wisconsin are empowered to decide if state employees paid by their tax dollars would be able to receive pay hike beyond the consumer price index. As a result, big unions and public employees, focused on their own agenda and not that of the people of Wisconsin, began major protests in the state capitol of Madison. The protests have become national news, with national politicians such as President Barack Obama and Speaker John Boehner (R-Ohio) chiming in. Pundits all over the cable news networks and columnists at national newspapers have also chimed in on the situation.

When it comes down to it, Governor Walker has three options for fixing Wisconsin's budget woes:

1. Hike Taxes: Governor Walker could propose a tax hike to raise the $3.6 billion needed to balance out the budget. However, the people of Wisconsin sent a clear message last year that they would not accept tax hikes, and Governor Walker was elected on a promise to not raise taxes. In fact, many in Wisconsin elected Governor Walker because of his promises to reduce taxes, enabling the growth of small business and the creation of jobs. 
2. Add Debt: Governor Walker could propose simply borrowing more money to finance unsustainable spending. Unfortunately, such a concept was rejected by Wisconsin voters and would lead the state into an even worse long-term deficit problem, as the debt would need to be paid back. Wisconsin would simply end up in a worse situation, such as what California is in.
3. Curb Spending: Governor Walker could propose a budget that curbs spending, as he promised to do when running for office. In doing this, taxes would remain the same or be cut, and deficit would not grow. 

Obviously, Option #3 makes the most sense, and it is what the Governor is trying to pursue. The people of Wisconsin sent a message that new debt and new taxes were unacceptable, and Governor Walker must carry out the will of the people. Less than 10% of Wisconsin workers are members of unions. The interest of the over 90% Wisconsin workers who are non-union must be prioritized over the loud voices of the big unions.

Dear John, Where Are The Jobs in H. R. 3?

When the American people elected a majority Republican House of Representatives last November, they did so because they wanted representatives in Congress who would listen to the mandate of the people that long-term job creation was the most important thing to the American people. Additionally, the people mandated that they wanted the deficit to be reduced without hikes in taxes. The new Speaker, Rep. John Boehner (R-Ohio) said he would make job creation a priority. Even President Obama, in The Wall Street Journal and in his State of the Union address, championed supply-side economic principles with a strength not seen since the administration of Ronald Reagan in order to to reduce the deficit and create jobs.

The Republicans started out pretty well. They read the Constitution aloud to start the 112th Congress and implemented new rules to ensure bills have to be Constitutional to be brought before the House. H. R. 2 was a measure to repeal an act passed by the previous Congress that would kill jobs and was not wanted by a majority of the country.

H. R. 3 is the "No Taxpayer Funding for Abortion Act," and while it sounds like it would save tax dollars by preventing taxpayer funds from going to pay for abortions, it actually will cost the taxpayers more.

When a woman becomes pregnant, there are a few basic outcomes that can happen. The first possible outcome is that a woman carries the child for a period (usually around 9 months) and gives birth to a baby. The second possible outcome is a natural or unwanted failure of the pregnancy, such as a miscarriage. The third outcome is that the pregnancy is intentionally ended, which is known as an abortion.

While H. R. 3 would prohibit taxpayer funding for an abortion, it would still allow taxpayer funding for the labor and delivery of a baby. As illustrated below, using a low-range figure for the cost of labor and delivery, it is far cheaper for the taxpayers to fund a woman having an abortion, or even a dozen abortions, than to fund having a child:

From a pure economic sense, and for lowering the deficit, it seems that the government ought to actually encourage abortion instead of having children for people on government healthcare. It also is the case that many children who are born will have much of their costs not paid for by their parents, but paid for via government welfare programs, creating greater burden on the American taxpayer.

Worse, H. R. 3 does not create a single job. There is no mention of the word "job" or "jobs" in the bill. If anything, it kills jobs because a reduction in demand for abortions will put abortion doctors, nurses, and counselors out of business. Jobless, they'll also seek unemployment benefits that are funded by taxpayers.

At this point, with unemployment still over 9 percent, H. R. 3 just is not the type of bill that Congress needs to pass. The American people need Congress to focus on passing job-creating bills, not job-killing bills.

Back to December

Perhaps watching Taylor Swift's latest music video convinced the Republicans of a great idea -- go back to the good ol' days of December. No, not December 2010. Rather, a glorious December... a December before before Barack H. Obama was President of the United States: December 2008. By restoring December 2008 spending levels, the GOP says it can save the American people billions of dollars.

It is clear that government spending needs to be reduced. The American people want to see the deficit reduced, but have also rejected tax hikes as a means of reducing the deficit. The government has two choices:   (1) increase its revenue without tax hikes using supply-side economic concepts; or (2) cut spending. Recently, President Obama has suggested the idea #1, and the GOP took back the House of Representatives on promises to implement idea #2. There's a third option -- combine #1 and #2 to increase revenue and cut spending, providing greater ability to reduce the deficit.

The perfect place to start on reducing spending is with Congress' salaries. Members of Congress received $169,300 in base pay in 2008. However, Congress took a raise of $4,700 to $174,000 in base pay for 2009. While millions of Americans were facing unemployment and tough economic times, Congress members ended up with a raise of over 2.7%. If Congress wants to cut spending, they can roll back their paychecks to December 2008 levels. Perhaps members of Congress will have to make tough choices like many Americans, and cancel, or give up buying a new television, or downgrade from buying a luxury foreign car to a Ford Focus.

An even better idea, Congress should make itself more representative of the average American by passing legislation setting its salary equal to what the average American made the last year - roughly $51,000. This system would provide monetary incentive to members of Congress to create jobs, since people who are unemployed have lower income and bring down the average for the entire country.

Change We Can Believe In

In 2008, Barack Hussein Obama, then just a candidate for United States President put forth a "plan to renew America's promise." For $13.95, you can actually buy the book with the plan for the so-called "change we can believe in." If this was real change that America could believe in, and Mr. Obama wanted the American people to truly read and understand his agenda, it might have been a good idea to just post it to the internet where people can download and read it without paying up. After all, there was (and still is) a recession with high unemployment at the time.

The true change that the American people can believe in is the change that future Speaker of the House John Boehner wants to bring to Congress. The Ohio Republican looks to implement major changes that would provide greater transparency and accountability to Congress. Instead of selling a book about the ideas, Mr. Boehner instead tweeted about them today. Some of these amazing ideas are below:

• Constitutional Authority Statements: Every bill would require a "constitutional authority statement" which indicates what section of the United States Constitution authorizes Congress to enact the legislation. This will ensure that Congress does not exert authority that it does not truly have. 

• Posting All Bills and Votes Online: Three days prior to a bill being voted on, it would be posted to the internet so that the American people can read the bill with ease. This would ensure that Congress acts in a transparent manner, giving the American people at a minimum, three days to express their support or outrage over a bill that Congress is considering. There would be no more last-minute bills created behind closed doors and passed without the public having a chance to review the bill. The three day rule would also apply to committees looking at bills. Additionally, committee votes would be posted online, enabling the American people to keep their representatives in check. 

• No Taxes Hikes to Fund Spending: While the two aforementioned rule changes will likely be acceptable to Democrats, those on the far-left won't be happy that raising taxes to pay for new spending and earmarks wouldn't be allowed. Mr. Boehner's proposal is that new spending should be offset by cuts elsewhere. This would ensure the American people would not be faced with a greater gap between government spending and government revenue each year. 

As Mr. Boehner said on 60 Minutes earlier this month, "Washington does not have a revenue problem; Washington has a spending problem." By following the Constitution, embracing transparency, and not simply hiking taxes to pay for new spending, Congress can come closer to solving its spending problems and Congress will better serve the American people.

Think Washington Needs More Money?

Instead of fighting for higher taxes, those on the far-left, or anyone else who feels generous and wants to give the government more money to spend should simply mail a check or money order payable to "The United States Treasury" to:

Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782

The government made it possible to give them extra money in 1843 so that individuals could "express their patriotism to the United States," through monetary giving. With a substantial deficit, the government is more than happy to cash your check or money order. According to the Treasury Department, the money given is "for general use by the federal government," can "be available for budget needs," and is considered "an unconditional gift to the government."

Personally, I agree with the comments made on 60 Minutes by future Speaker of the House John Boehner (R-OH) that Washington doesn't have a revenue problem, but instead has a spending problem. I'll use my money as I see fit, spending it at American businesses that create American jobs instead of wasting it away like the federal government often does. But, for those of you that think the government can do a better job spending your money than you can, put your check in the mail. In fact, if you think the government urgently needs money, send it via Express Mail.

Bernanke Admits More Quantitative Easing Could Happen

On November 15th, I wrote about how if the economy didn't improve, the government would probably just go forward with more "quantitative easing," figuring that if the 2nd round of $600B didn't do the job, more money would.

Little did I know that less than three weeks later, Federal Reserve Chairman Ben Bernanke would admit that the government might spend more money if the economy doesn't improve or unemployment doesn't fall. Bernanke made these comments on CBS's 60 Minutes. Bernanke also said that what the Federal Reserve was doing wasn't printing money. While technically true, quantitative easing does increase the supply of money, thereby devaluing the American dollar. Money, as anyone who has used a credit card, debit card, or direct deposit has experienced, can be created and move without actual dollar bills (cash) being used. The Federal Reserve may not be printing up c-notes, but through "quantitive easing" they Federal Reserve is creating money. This cartoon provides a more in-depth, easy to understand explanation of "quantitive easing."

Creating more money isn't the solution to our country's economic woes. The solution lies in creating jobs. The private sector, not the government, can best create more jobs and job creation should be incentivized. Additionally, the American people need the ability to spend money in a way that will benefit American business. A tax hike next month will hurt business and cost jobs, as the American people will have less money to spend. The poorest Americans are facing a 50% tax hike on January 1st, and the middle class is facing a tax hike of more than 20%. Ben Bernanke needs to get real and next time he appears on TV he should state the true solutions to the country's economic woes: job creation and a reduction in taxation. More "quantitative easing" isn't going to fix the economy.

Republicans Out of Line on Tax Relief

Last night I wrote about how Democrats in Congress were out of line when it came to tax relief. Today, the House of Representatives passed a bill that would prevent a tax hike for Americans earning under $250,000 a year. While this isn't an ideal bill, as it will still give some Americans a tax hike next year, it is certainly better than what would happen with no legislation where every American sees their taxes go up, including a 50% tax hike for the lowest earning Americans. House Democrats have somewhat redeemed themselves for past failures to pass tax relief, in that they've at least put forward and passed a bill that will prevent a majority of Americans from seeing a tax hike in 29 days.

Unfortunately, now many Republicans are out of line and are opposing this bill. Tax relief for a majority of Americans is clearly a step above tax relief for no Americans. The Republicans must get in-line and get pass this partial tax relief through the Senate. The middle class needs tax relief, and the Democrats are willing to give it. It is now the Republicans who are holding up tax relief. The Republican Party is now positioning itself against its own base and against the American people by opposing a bill that will provide tax relief.

The American people are becoming frustrated with Congress. The Democrats refused to support tax relief, so the Republicans told them that the only legislation they would allow through the Senate was tax relief. Now that such legislation is going to the Senate, Republicans may stop it. Any member of Congress opposed to middle class tax relief does not deserve to be re-elected the next time they come up for election. In fact, I call on any Congress member who blatantly defies the will of the people by voting against a middle class tax relief bill to announce their resignation so that more competent person can fill the seat.

Democrats Completely Out of Line on Tax Relief

The American people need tax relief, and they need it now. We are thirty days away from a hike in taxes unless Congress acts. On January 1st, 2011, every American will see their income taxes increase. The hardest hit will be Americans with the lowest incomes, where those earning under $8,000 a year would see their income taxes go up fifty percent. In the middle class, income tax hikes of over 21% are coming in 30 days. With the United States still feeling the effects of recession, and more unemployment over 9%, the #1 priority of Congress must be tax relief for the American people.

By increasing taxes, the federal government will be taking away money from Americans. This will limit the American people's spending power, and when the American people spend less, American businesses suffer. Businesses then look to reduce production and/or cut costs, including labor costs. This leads to a vicious cycle where more Americans become unemployed and the loss of income leads to less spending, leading to even more Americans becoming unemployed.

Ideally, Congress would act to provide the American people with tax cuts, giving every American more money to use as they see fit. Unfortunately, instead of supporting job creation, Democrats have continually supported the concept of greater income redistribution where the American people are forced to pay the government and the government then spends their hard-earned money. Some of this hard-earned money goes towards useful efforts, such as defense or infrastructure-building. A large portion, however, is wasted on pet projects and earmarks. The Democrats rejected a ban on earmarks this week, despite the American people expressing their opposition to earmarks and wasteful government spending.

The Democrats who oppose job creation and tax relief are so out of line that they are an embarrassment to the constituents who made the mistake of electing them.  On November 2nd, the Democrats were sent a strong message by voters when many in their party lost their seats in Congress. Yet, some Democrats still continue to ignore the will of the American people by refusing to abolish earmarks and refusing to pass tax relief. Today, the situation got so bad that following negotiations at the White House Republican Senate Minority Leader Mitch McConnell publicly issued a letter to Democratic Senate Majority Leader Harry Reid informing him that, basically, if the Democrats are going to pass any legislation it either needs to be tax relief or fund the government. "We cannot agree to prioritize any matters above the critical issues of funding the government and preventing a job killing tax-hike," read the letter. Essentially, Republicans by banding together in the Senate are able to prevent the Democrats from calling a vote (cloture) on legislation. 60 votes are needed for cloture, the Republicans can limit the Democrats to only 58.

So out of line are Democrats in Congress, including Senator Reid himself, that the Republicans cited President Obama in their letter as a voice of reason:

President Obama in his first speech after the November election said "we owe" it to the American people to "focus on those issues that affect their jobs." He [Obama] went on to say that Americans "want jobs to come back faster." 

Now, I'm not one to always agree with President Obama. In fact, it seems that most of the time, I disagree with him. But this is one time when President Barack Hussein Obama has it right. The American people want jobs, and they want Congress to act in a manner consistent with job creation. One thing Americans certainly do not want is a tax hike. If the Republicans have to stop everything but tax relief in order to get tax relief, then so be it. Their tactics may seem like childish shenanigans, but the ends justify the means -- the American people want results.

The ball is in Congress' court, and for the time being, a majority of players on the court are Democrats. I hope they wise up ann follow the will of the people by working with Republicans who want to bring immediate tax relief and create conditions that will lead to a reduction in unemployment in the United States through the creation of jobs. If the Democrats thought they lost a lot of seats last month, they'll be in for a shock when they lose even more in 2012 should they continue to defy the American people by getting nothing positive done.

Waiting for QE3

A couple weeks ago, the Federal Reserve under Chairman Ben Bernanke announced plans for a second round of "quantitative easing," which quickly became known as "QE2" for short. The plan involved pumping $600 billion into the economy. The idea behind "quantitative easing," officially, is to lower interest rates for two purposes:

1. To promote job growth, something that the United States desperately needs and that the Obama administration has continually failed to deliver;
2. To avoid deflation

I won't argue with the concept of job growth. We need jobs here in the United States. Unemployment remains above 9%, and many unemployed will soon reach the end of extended unemployment benefits. However, the concept of avoiding deflation is absolutely absurd. Has anyone noticed any real deflation in this country? I constantly see prices going up. It costs more to travel, it costs more to eat, and it costs more to buy clothes. And just look at precious metals. The price of gold, silver, and platinum have skyrocketed. (On a stock / finance note -- if you're NOT invested in precious metals, you've been missing out.) For many, we are paying more than ever before in taxes. Sure, some products have come down in price, but this is limited to technology products which are introduced at high prices and then come down to more "mainstream" prices as newer technologies come out.

If you go out on the street (and I'm talking Main Street, not Wall Street) and ask people what "quantitative easing" is, most people don't know. The Federal Reserve is using complicated financial terminology in order to hide what "QE2" really is: the printing of more money, which devalues the U.S. dollar, and makes the money that Americans have worked hard to save worth less.

It seems that whenever times are tough, the government moves forward with plans that involve pumping in more money. If the $600B doesn't do the job, then their next idea will probably be to move forward with "QE3" and pump another $600B (or more) into the economy, devaluating the American people's savings even more.

You cannot solve all problems by simply throwing money at them. Zimbabwe tried this. They ended up with, according to their own government, over 230,000,000% inflation. (Forbes estimated the inflation to be so much that to express the figure, you need to use scientific notation - 6.5x10^108%.) Using the government's numbers, that means that a person with $2,300,000 ended up with their millions being worth just $1 in a matter of a few years. Do I think the Federal Reserve would be as irresponsible as Zimbabwe's Central Bank? No. Do I think President Obama is as foolish as Zimbabwe's Robert Mugabe? No. But simply printing money up isn't a long-term solution that can solve our country's economic problems.